~~NOTICE IS HEREBY GIVEN~~ that the 2009 Annual Meeting of Shareholders (the “Annual Meeting”) of McGrath RentCorp, a California corporation (the “Company”), will be held at the Company’s principal executive offices located at 5700 Las Positas Road, Livermore, California 94551, on Thursday, June 4, 2009, at 2:00 p.m., local time. Shareholders who are unable to attend may listen to a live webcast of the Annual Meeting on the Company’s website at www.mgrc.com under the Investor Relations section. The Annual Meeting will be held for the following purposes:

~~1. To elect six (6) directors of the Company to serve until the 2010 annual meeting of shareholders or until their successors are elected and qualified;~~

2. To approve and adopt an amendment and restatement of the Company’s 2007 Stock Incentive Plan (the “2007 Plan”) to increase the number of shares of common stock reserved for issuance thereunder from 1,875,000 to 2,690,000 shares and to decrease the maximum term of future awards granted under the 2007 Plan from ten years to seven years;

~~3. To ratify the appointment of Grant Thornton LLP as the independent auditors for the Company for the year ending December 31, 2009; and~~

~~4. To transact such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof.~~

~~The foregoing items of business are more fully described in the proxy statement which is attached and made a part hereof.~~

The Board of Directors of the Company has fixed the close of business on April 8, 2009 as the record date for determining the shareholders entitled to notice of and to vote at the Annual Meeting and any adjournment or postponement thereof.

Shareholders are cordially invited to attend the Annual Meeting in person. Whether or not you expect to attend the Annual Meeting, please complete, date, sign and return the enclosed proxy card using the enclosed return envelope, as promptly as possible in order to ensure your representation at the Annual Meeting. Even if you have voted by proxy, you may still vote in person if you attend the Annual Meeting. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the Annual Meeting, you must obtain a proxy card issued in your name from such broker, bank or other nominee.

NOTICE IS HEREBY GIVEN that the 2012 Annual Meeting of Shareholders (the “Annual Meeting”) of McGrath RentCorp, a California corporation (the “Company”), will be held at the Company’s principal executive offices located at 5700 Las Positas Road, Livermore, California 94551, on Wednesday, June 6, 2012 at 2:00 p.m., local time. Shareholders who are unable to attend may listen to a live webcast of the Annual Meeting on the Company’s website at www.mgrc.com under the Investor Relations section. The Annual Meeting will be held for the following purposes:

1. To elect seven (7) directors of the Company to serve until the 2013 annual meeting of shareholders or until their successors are elected and qualified;

2. To ratify the appointment of Grant Thornton LLP as the independent auditors for the Company for the year ending December 31, 2012;

3. To hold a non-binding, advisory vote to approve the compensation of the Company’s named executive officers;

4. To approve an amended and restated 2007 Stock Incentive Plan (the “2007 Plan”) to: (i) increase the number of authorized shares of the Company’s Common Stock issuable under the 2007 Plan by 1,500,000 shares; (ii) approve the Internal Revenue Code Section 162(m) performance criteria and award limits; (iii) permit the use of shares withheld to satisfy tax obligations for future issuance under the 2007 Plan; (iv) extend the plan term by ten years from the date of shareholder approval; and (v) make other non-substantive changes.

5. To transact such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof.

The foregoing items of business are more fully described in the proxy statement which is attached and made a part hereof.

The Board of Directors of the Company has fixed the close of business on April 16, 2012 as the record date for determining the shareholders entitled to notice of and to vote at the Annual Meeting and any adjournment or postponement thereof.

If you hold your shares in a brokerage account, your shares will not be voted in the election of directors, the non-binding, advisory vote on the compensation of the Company’s named executive officers or the amendment and restatement of the Company’s 2007 Plan unless you provide explicit instructions to your broker as to how you wish to vote your shares. Under the New York Stock Exchange rules governing discretionary voting of proxies by the exchange’s members, your broker is not permitted to vote shares with respect to non-routine matters such as the election of directors, the vote on compensation or the amendment and restatement of the Company’s 2007 Plan without voting instructions from the beneficial owner of such shares.

This proxy statement (this “Proxy Statement”) is made available to the shareholders of McGrath RentCorp, a California corporation (the “Company”, “we”, “us”, or “our”), in connection with the solicitation by the Board of Directors of the Company (the “Board of Directors” or the “Board”) of proxies in the accompanying form for use in voting at the ~~annual meeting~~2012 Annual Meeting of ~~shareholders~~Shareholders of the Company (the “Annual Meeting”) to be held on ~~Thursday,~~Wednesday, June ~~4, 2009,~~6, 2012, at 2:00 p.m., local time, at the Company’s principal executive offices located at 5700 Las Positas Road, Livermore, California 94551, and any adjournment or postponement thereof. The shares represented by the proxies received, properly marked, dated, executed and not revoked will be voted at the Annual Meeting.

The Company expects to mail this Proxy Statement and the enclosed form of proxy to shareholders on or about April ~~24, 2009.~~30, 2012.

The rules of the Securities and Exchange Commission (the “SEC”) require us to notify our shareholders of the availability of our proxy materials through the Internet.

for the Shareholder Meeting to be held on ~~Thursday,~~Wednesday, June ~~4, 2009~~6, 2012

Our Proxy Statement and ~~2008~~2011 Annual Report to Shareholders are available at

The following questions and answers provide important information about the Annual Meeting and this Proxy Statement:

Where are the Company’s principal executive offices located and what is the Company’s main telephone number?

The Company’s principal executive offices are located at 5700 Las Positas Road, Livermore, California 94551. The Company’s main telephone number is (925) 606-9200.

the election as directors of the ~~six (6)~~seven (7) nominees named in this Proxy Statement (Proposal No. 1);

an amendment and restatement of the Company’s 2007 Stock Incentive Plan (the “2007 Plan”) to increase the number of shares of common stock (“Common Stock”) reserved for issuance thereunder from 1,875,000 to 2,690,000 shares and to decrease the maximum term of future awards granted under the 2007 Plan from ten years to seven years (Proposal No. 2);

the ratification of the appointment of Grant Thornton LLP as the independent auditors for the Company for the year ending December 31, ~~2009~~2012 (Proposal No. 2);

the approval, with a non-binding, advisory vote, of the compensation of the Company’s named executive officers (Proposal No. 3);

the amendment and restatement of the 2007 Stock Incentive Plan (the “2007 Plan”) to: (i) increase the number of authorized shares of the Company’s Common Stock issuable under the 2007 Plan by

such other business that may properly come before the Annual Meeting and any adjournment or postponement thereof.

How does the Board of Directors recommend that shareholders vote on these matters?

The Board of Directors believes that the election of the nominated directors, the ratification of the appointment of Grant Thornton LLP, the approval on an advisory basis of the compensation of the Company’s named executive officers and the amendment and restatement of the 2007 Plan ~~and the ratification of the appointment of Grant Thornton LLP~~ are in the best interests of the Company and its shareholders and, accordingly, recommends a vote “FOR” the approval of each of these proposals.

The SEC ~~has~~ adopted amendments to the proxy rules that change how companies must provide proxy materials. These rules are often referred to as “Notice and Access.” Under the Notice and Access model, a company may select either of the following two options for making proxy materials available to shareholders:

the full set delivery option; or

the notice only option.

Under the full set delivery option, a company delivers all proxy materials to its shareholders as it would have done prior to the change in the rules. This can be by mail or, if a shareholder has previously agreed, by e-mail. In addition to delivering proxy materials to shareholders, a company must post all proxy materials on a publicly-accessible website and provide information to shareholders about how to access that website. The Company’s proxy materials are available on the following website: https://materials.proxyvote.com/580589.

Under the notice only delivery option, a company must post all its proxy materials on a publicly accessible website. However, instead of delivering its proxy materials to shareholders, the company instead delivers a one-page notice of internet availability of proxy materials which includes, among other matters:

information regarding the date, time and ~~time~~location of the annual meeting of shareholders as well as the items to be considered at the meeting;

information regarding the website where the proxy materials are posted; and

various means by which a shareholder may request paper or e-mail copies of the proxy materials.

A company may use a single method for all its shareholders, or use full set delivery for some while adopting the notice only option for others. The Company is required to comply with these Notice and Access rules in connection with its Annual Meeting, and has elected to use the full set delivery option under the rules for all shareholders in connection with ~~both its 2008 annual meeting of shareholders and~~ this year’s Annual Meeting.

Although the Company has elected to use the full set delivery option for the Annual Meeting, we may choose to use the notice only option in the future. By reducing the amount of materials that a company needs to print and mail, the notice only option provides an opportunity for cost savings as well as conservation of natural

resources. However, many companies that have used the notice only option have also experienced a lower participation rate—meaning that fewer shareholders voted at these companies’ annual meetings. The Company plans to continue to evaluate the ~~future~~ possible cost savings and environmental impact as well as the potential impact on shareholder participation in its consideration of the notice only option in the future.

What is the difference between a shareholder of record and a beneficial owner of shares held in street name?

Shareholder of Record. If your shares are registered directly in your name with the Company’s transfer agent, Computershare Trust Company, N.A. (“Computershare”), you are considered the shareholder of record with respect to those shares, and the proxy materials were sent directly to you by the Company.

Beneficial Owner of Shares Held in Street Name. If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name,” and the proxy materials were forwarded to you by that organization. The organization holding your account is considered the shareholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account.

You may vote by signing and dating each paper proxy card you received and returning it in the prepaid envelope. The enclosed proxy will be voted in accordance with the instructions thereon. Unless otherwise stated, all shares represented by such proxy will be voted as instructed. Proxies may be revoked in the manner described below.

If you received more than one proxy card, it may mean that you hold shares registered in more than one account. If you received more than one paper proxy card, sign and return each proxy card you received to ensure that all of your shares are voted. If you have any questions regarding your share information or address appearing on the paper proxy card you may call Computershare, the Company’s transfer agent, at (800) 962-4284 if you are a shareholder of record, or contact your brokerage firm, bank, broker-dealer or other similar organization if you are a beneficial owner of shares held in “street name.”

You may revoke your proxy and change your vote at any time before the final vote at the Annual Meeting. You may vote again on a later date by signing and returning a new proxy card with a later date or by attending the Annual Meeting and voting in person. However, your attendance at the Annual Meeting will not automatically revoke your proxy unless you vote again at the Annual Meeting or specifically request that your prior proxy be revoked by delivering a written notice of revocation to the Company’s Corporate Secretary at 5700 Las Positas Road, Livermore, California 94551 prior to the Annual Meeting. See “May I vote my shares in person at the Annual Meeting?” below.

The close of business on April ~~8, 2009~~16, 2012 has been fixed as the record date (the “Record Date”) for determining the holders of shares of ~~Common Stock~~common stock of the Company (“Common Stock”) entitled to notice of and to vote at the Annual Meeting.

As of the close of business on the Record Date, ~~the Company had 23,726,568~~there were 24,761,334 shares of Common Stock outstanding and entitled to vote at the Annual Meeting. The presence at the Annual Meeting of a majority of these shares of Common Stock, either in person or by proxy, will constitute a quorum for the transaction of business at the Annual Meeting.

Each outstanding share of Common Stock on the Record Date is entitled to one vote on each ~~matter.~~matter properly brought before the Annual Meeting. However, every shareholder voting for the election of directors may cumulate such shareholder’s votes and give one candidate a number of votes equal to the number of directors to be elected ~~(six)~~(seven) multiplied by the number of shares held, or may distribute such shareholder’s votes on the same principle among as many candidates as the shareholder may select. However, no shareholder shall be entitled to cumulate votes for any candidate unless the

candidate’s name has been placed in nomination prior to the voting and the shareholder, or any other shareholder, has given notice at the Annual Meeting prior to the voting of the intention to cumulate such shareholder’s votes. The proxy holders are given discretionary authority, under the terms of the proxy, to cumulate votes represented by shares for which they are named in the proxy. In electing directors, the ~~six~~seven candidates receiving the highest number of affirmative votes shall be elected.

An automated system administered by Computershare will tabulate votes cast by proxy and Randle F. Rose, the Company’s Secretary, will act as the inspector of elections to tabulate votes cast in person at the Annual Meeting.

Proxy instructions, ballots and voting tabulations that identify individual shareholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed either within the Company or to third parties, except:

as necessary to meet applicable legal requirements;

to allow for the tabulation and certification of votes; and

to facilitate a successful proxy solicitation.

Occasionally, shareholders provide written comments on their proxy cards, which may be forwarded to the Company’s management and the Board of Directors.

Under the General Corporation Law of the State of California, an abstaining vote and a broker “non-vote” are counted as present and are, therefore, included for purposes of determining whether a quorum is present at the Annual Meeting. However, abstentions are not included in determining the number of shares voting on the proposals submitted to shareholders. AGenerally, a broker “non-vote” occurs when a nominee (such as a brokerage firm, bank, broker-dealer, or other similar organization) holding shares for a beneficial owner in “street name” does not vote on a particular matter because the nominee does not have discretionary voting power with respect to that matter and has not received voting instructions from the beneficial owner. Broker “non-votes,” and shares as to which proxy authority has been withheld with respect to any matter, are not deemed to be entitled to vote for purposes of determining whether shareholders’ approval of that matter has been obtained.

With respect to Proposal No. 1 of this Proxy Statement, a plurality of the votes cast is required for the election of directors. This means that the director nominee with the most votes for a particular slot is elected for

that slot. You may vote ~~“for”~~“FOR” or ~~“withheld”~~“WITHHELD” with respect to the election of directors. Only votes ~~“for”~~“FOR” or ~~“withheld”~~“WITHHELD” are counted in determining whether a plurality has been cast in favor of a director. Abstentions and broker “non-votes,” if any, will have no effect on ~~such~~this proposal. ~~As nominees (such as brokerage~~Brokerage firms, banks, broker-dealers orand other ~~similar organizations)~~nominees holding shares for holders who have not given specific voting instructions are not permitted to vote in their discretion with respect to Proposal No. ~~1, there will~~1. If you do not ~~be any~~instruct your broker ~~“non-votes”~~how to vote, your broker may not vote with respect to ~~such~~this proposal and these votes will be counted as broker “non-votes,” as is described in “What happens if I do not give specific voting instructions?” below. Our Corporate Governance Guidelines, as amended and restated by the Board of Directors on ~~March~~December 9, ~~2007,~~2010, set forth our procedures if a director-nominee is elected, but receives a majority of ~~“withheld”~~“WITHHELD” votes. In an uncontested election, any director nominee who receives a greater number of votes ~~“withheld”~~“WITHHELD” from his or her election than votes ~~“for”~~“FOR” such election is required to tender his or her resignation following certification of the shareholder vote. The Corporate Governance and Nominating Committee is required to make recommendations to the Board of Directors with respect to any such letter of resignation. The Board of Directors is required to take action with respect to this recommendation within 90 days following certification of the shareholder vote and to disclose its decision-making process.

With respect to Proposal No. 2 of this Proxy Statement, the affirmative vote of a majority of the ~~outstanding~~ shares of Common Stock ~~entitled~~represented and voting at the Annual Meeting is required for ratification of the independent auditors. Abstentions will have the same effect as voting against this proposal. Broker “non-votes,” if any, will have no effect on this proposal. Although certain brokerage firms, banks, broker-dealers and other nominees holding shares for holders who have not given specific voting instructions are permitted to vote ~~is required~~in their discretion with respect to approve and adopt an amendment and restatement of the 2007 Plan to increase the number of shares of Common Stock reserved for issuance thereunder from 1,875,000 to 2,690,000 shares and to decrease the maximum term of future awards granted under the 2007 Plan from ten years to seven years. A brokerage firm, bank, broker-dealer or other nominee cannot vote without instructions on non-routine matters, and therefore there may be broker “non-votes” on Proposal No. ~~2. See~~2, those institutions which are not governed by New York Stock Exchange (“NYSE”) Rule 452, are not permitted to vote in their discretion with respect to such proposal. If you do not instruct your broker how to vote, and your broker is not governed by NYSE Rule 452, your broker may not vote with respect to this proposal and these votes will be counted as broker “non-votes,” as is described in “What happens if I do not give specific voting instructions?” below.

With respect to Proposal No. 3 of this Proxy Statement, the affirmative vote of a majority of the shares of Common Stock represented and voting at the Annual Meeting is required for ~~ratification~~approval, on an advisory basis, of the ~~independent auditors.~~compensation of the Company’s named executive officers. You may vote “FOR” or “AGAINST” with respect to approval of the compensation of the Company’s named executive officers. Abstentions will have the same effect as voting against this proposal. Broker “non-votes,” if any, will have no effect on ~~such~~this proposal. ~~As brokerage~~Brokerage firms, banks, broker-dealers and other nominees holding shares for holders who have not been given specific voting instructions are not permitted to vote in their discretion with respect to Proposal No. 3. If you do not instruct your broker how to vote, your broker may not vote with respect to this proposal and these votes will be counted as broker “non-votes,” as is described in “What happens if I do not give specific voting instructions?” below.

With respect to Proposal No. 4 of this Proxy Statement, the affirmative vote of a majority of the shares of Common Stock represented and voting at the Annual Meeting is required for approval of the amendment and restatement of the 2007 Plan. You may vote “FOR” or “AGAINST” with respect to the amendment and restatement of the 2007 Plan. Abstentions will have the same effect as voting against this proposal. Broker “non-votes,” if any, will have no effect on this proposal. Brokerage firms, banks, broker-dealers and other nominees holding shares for holders who have not given specific voting instructions are not permitted to vote in their discretion with respect to Proposal No. ~~3, there will~~4. If you do not ~~be any~~instruct your broker ~~“non-votes”~~how to vote, your broker may not vote with respect to ~~such proposal. See~~this proposal and these votes will be counted as broker “non-votes,” as is described in “What happens if I do not give specific voting instructions?” below.

For Shares Directly Registered in the Name of the Shareholder: If you return your signed proxy but do not indicate your voting preferences, the Company will vote on your behalf “FOR” the election of the nominated

directors, ~~“FOR” the adoption of the amendment and restatement of the 2007 Plan and~~ “FOR” the ratification of the appointment of Grant Thornton ~~LLP.~~LLP, “FOR” approval of the compensation of the Company’s named executive officers, and “FOR” the amendment and restatement of the Company’s 2007 Plan. If any other matter properly comes before the shareholders for a vote at the Annual Meeting, the proxy holders will vote your shares in accordance with their best judgment.

For Shares Registered in the Name of a Brokerage Firm, Bank, Broker-Dealer or Other Similar Organization: If your shares are held in street name, your brokerage firm, bank, broker-dealer or nominee will ask you how you want your shares to be voted. If you provide voting instructions, your shares must be voted as you direct. If you do not furnish voting instructions with respect to shares registered in the name of organizations that are not governed by NYSE Rule 452, those shares will not be voted at the meeting because such organizations do not have discretionary voting power. If you do not furnish voting instructions to brokerage firms that are governed by NYSE Rule 452, one of two things can happen, depending upon whether a proposal is “routine.” Under ~~the rules that govern~~NYSE Rule 452, brokerage firms, banks, broker-dealers and other ~~nominees that have record ownership of shares beneficially owned by their clients, brokerage firms, banks, broker-dealers, and other nominees~~similar organizations have discretion to cast votes on routine matters, such as the ~~election of directors and~~ ratification of the appointment of an independent ~~registered public accounting firms,~~auditor, without voting instructions from their clients. Brokerage firms, banks, broker-dealers and other ~~nominees~~similar organizations are not permitted, however, to cast votes on “non-routine” matters, such as the ~~adoption~~election of directors, votes on the compensation of the Company’s named executive officers or votes on the amendment and restatement of the Company’s 2007 Plan, without such voting instructions. A “broker non-vote” occurs when a brokerage firm, bank, broker-dealer or other nominee holding shares for a beneficial owner does not vote on a particular proposal because the brokerage firm, bank, broker-dealer or other nominee does not have discretionary voting power for that proposal and has not received voting instructions from the beneficial owner.

For Shares Directly Registered in the Name of the Shareholder: Yes. However, we encourage you to vote by proxy card even if you plan to attend the Annual Meeting. If you wish to give a proxy to someone other than the individuals named as proxies on the enclosed proxy card, you may cross out the names appearing on the enclosed proxy card, insert the name of some other person, sign the card and give the proxy card to that person for use at the Annual Meeting.

For Shares Registered in the Name of a Brokerage Firm or Bank: Yes, but in order to do so you will first have to ask your bank, broker or other intermediary to furnish you with a legal proxy. You will need to bring the legal proxy with you to the Annual Meeting and hand it in with a signed ballot that you can request at the Annual Meeting. You will not be able to vote your shares at the Annual Meeting without a legal proxy and a signed ballot.

Your attendance at the Annual Meeting in and of itself will not automatically revoke a proxy that was submitted earlier by mail.

The preliminary voting results will be announced at the Annual Meeting. The final voting results will be tallied by the inspector of elections and ~~published~~reported in ~~the Company’s Quarterly Report~~a current report on Form ~~10-Q for the fiscal quarter ending on June 30, 2009, which~~8-K to be filed by the Company ~~is required to file with~~within four business days after the ~~SEC by August 10, 2009.~~end of the Annual Meeting.

The Company will bear the entire cost of soliciting proxies, including the costs of preparing, assembling, printing and mailing this Proxy Statement, the proxy and any additional soliciting material furnished to shareholders. Arrangements will be made with brokerage firms, banks, broker-dealers, nominees and fiduciaries to send proxies and proxy materials to the beneficial owners of ~~stock,~~our Common Stock, and these entities may be reimbursed by the Company for their expenses. Proxies may be solicited by directors, officers or employees of the Company in person or by telephone, e-mail or other means. No additional compensation will be paid to such individuals for these services.

~~Requirements for Shareholder Proposals to be Brought before an Annual Meeting~~. To be considered for presentation to the annual meeting of the Company’s shareholders to be held in 2010, a shareholder proposal must be received by Randle F. Rose, Compliance Officer, McGrath RentCorp, 5700 Las Positas Road, Livermore, California 94551, no later than December 23, 2009.

Requirements for Shareholder Proposals to be Considered for Inclusion in the Company’s Proxy Materials. Shareholder proposals submitted pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and intended to be presented at the annual meeting of the Company’s shareholders to be held in ~~2010~~2013 must be received by the Company no later than ~~December 23, 2009~~January 1, 2013 in order to be considered for inclusion in the Company’s proxy materials for that meeting.

Discretionary Authority. The proxies to be solicited by the Board of Directors for the ~~2010~~2013 annual meeting of the Company’s shareholders will confer discretionary authority on the proxyholders to vote on any shareholder proposal presented at such annual meeting if the Company fails to receive notice of such proposal by March ~~9, 2010.~~15, 2013.

Some brokerage firms, banks, broker-dealers, or other nominees who are record holders may participate in the practice of “householding” proxy statements and their accompanying documents. This means that only one copy of the proxy materials will be sent to your household regardless of the number of shareholders who reside there. We will promptly deliver a separate copy of these documents without charge to you upon written request to McGrath RentCorp, 5700 Las Positas Road, Livermore, California 94551, Attn: Investor Relations. If you want to receive separate copies of our proxy materials in the future, or if you are receiving multiple copies and would like to receive only one copy per household, you should contact your brokerage firm, bank, broker-dealer or other nominee who is a record holder, or you may contact us at the address and phone number listed above.

We are required to file annual, quarterly and current reports, proxy statements and other reports with the SEC. Copies of these filings are available through our Internet website at www.mgrc.com under the Investor Relations section or the SEC’s website at www.sec.gov. We will furnish copies of our SEC filings (without exhibits), including our annual report on Form 10-K for the ~~2008~~fiscal year ended December 31, 2011 and filed with the SEC on February 29, 2012 (the “2011 Annual ~~Report,~~Report”), without charge to any shareholder upon written request to McGrath RentCorp, 5700 Las Positas Road, Livermore, California 94551, Attn: Investor Relations.

The Company’s bylaws authorize the number of directors to be not less than five (5) and not more than nine (9). The number of directors on the Board of Directors is currently fixed at ~~six (6)~~seven (7). Each director serves a one-year term. The Board of Directors is currently composed of the following ~~six (6)~~seven (7) directors whose terms will expire upon the election and qualification of directors at the Annual Meeting: William J. Dawson, Robert C. Hood, Dennis C. Kakures, Robert P. McGrath, M. Richard Smith, Dennis P. Stradford and Ronald H. Zech. At each annual meeting of shareholders, directors will be elected for full terms of one year to succeed those directors whose terms are expiring.

At the Annual Meeting, the shareholders will elect ~~six (6)~~seven (7) directors. Messrs. Dawson, Hood, Kakures, McGrath, Smith, Stradford and Zech have each been nominated to serve a one-year term, until the annual meeting of shareholders to be held in ~~2010,~~2013, until their successors are elected or appointed and qualified, or until their earlier death, resignation or removal. The Board of Directors has no reason to believe that any of Messrs. Dawson, Hood, Kakures, McGrath, Smith, Stradford or Zech will be unable or unwilling to serve as a nominee or as a director if elected.

The names of the nominees and certain information about them are set forth below.

William J. Dawson was elected a director of the Company in 1998. Mr. Dawson ~~joined~~served as Chief Financial Officer at Catalyst Biosciences, Inc., a privately-held biotechnology company for two years from 2010 to 2012. He was Vice President, Finance and Chief Financial Officer with Cerus Corporation, a publicly held biopharmaceutical company infrom August 2004 ~~as Vice President, Finance and Chief Financial Officer. In March 2009,~~to April 2009. At Cerus, Mr. Dawson ~~announced his decision~~completed two rounds of equity financing, helped spin-off a non-strategic asset to ~~leave~~a syndicate of venture capital firms, and guided financial aspects of the company’s commercial expansion in Europe, while building an international finance and accounting organization and leading an upgrade of the corporate accounting system, SEC reporting, and compliance with the Sarbanes-Oxley Act. Prior to joining Cerus, ~~Corporation on April 30, 2009 to pursue other professional interests. From 2002 until August 2004,~~ he ~~was Vice President, Finance & Operations,~~spent a total of 26 years in senior financial positions at companies in biotechnology, healthcare services and Chief Financial Officer of Dynavax Technologies Corporation, a publicly held biopharmaceutical company. From 1998 through 2001, he was Corporate Senior Vice President, Business Development, for McKesson Corporation,information technology, investment banking, energy and transportation, where he was responsible for strategic, business and financial planning, SEC reporting, investor relations, and numerous equity, debt and structured financings, mergers and acquisitions, and ~~venture capital investing~~advisory assignments. As an investment banker, Mr. Dawson assisted in three public equity offerings for ~~the San Francisco-based healthcare services company.~~McGrath RentCorp, beginning with its initial public offering in 1984. He ~~was also acting Chief Financial Officer of iMcKesson, a wholly-owned e-health subsidiary of McKesson. Mr. Dawson~~ also serves on the board of directors of Wellington Trust Company, a subsidiary of Wellington Management Company, LLP, a private institutional ~~fund~~investment management company. With his wealth of experience in financial and strategic transactions, Mr. Dawson provides significant value to the Board of Directors. Mr. Dawson received an A.B. in ~~mechanical engineering~~Mechanical Engineering from Stanford University and an M.B.A. from Harvard Business School.

Robert C. Hood was elected a director of the Company in 1999. Since 1999, he has been an independent investor. From 1996 to 1999, Mr. Hood was Executive Vice President and Chief Financial and Administrative Officer ofat Excite, Inc., ~~an Internet~~one of the early internet portal ~~company.~~companies. At Excite, Mr. Hood ~~received a B.A.~~helped guide the company through its substantial growth phase, was responsible for all financial and administrative functions, spearheaded several rounds of equity financing and helped negotiate and integrate eight acquisitions. Prior to working at Excite, Mr. Hood accumulated over thirty years of business and senior-level financial experience, in both large-scale multi-national and fast growth technology companies. This experience included SEC reporting, legal affairs, human resource administration, investor relations, large-scale information systems, controllership and internal control functions, debt and equity financing, international operations, budgeting and strategic planning, acquisitions and mergers. Company affiliations included companies engaged in equipment leasing, electronic test equipment manufacturing and financial services. With his many years of senior-level business and financial experience, Mr. Hood provides valued perspective on numerous financial, administrative and strategic issues facing public companies. Mr. Hood holds an A.B. in Economics from Bates College and an M.B.A. from ~~the Amos~~The Tuck ~~Graduate~~ School, ~~of Business at~~ Dartmouth College.

Dennis C. Kakures was elected a director of the Company in 2003 and became the Chief Executive Officer of the Company in 2003. Mr. Kakures has been the President of the Company since 1995. Prior to becoming Chief Executive Officer, he served as Chief Operating Officer from 1989 to 2003 and Executive Vice President from 1993 to 1995. Having started his career with McGrath RentCorp in sales in 1982, and having held roles of increasing managerial responsibility over his 29 years with the Company, Mr. Kakures provides unique insight and perspective on the Company’s business on a day-to-day basis. Mr. Kakures has been instrumental in developing and driving the strategic product and geographic expansion of the Company’s varied rental businesses since he became Chief Executive Officer in 2003. He is uniquely qualified to serve as Chief Executive Officer and as a member of the Board of Directors. Mr. Kakures received a B.S. in Marketing from California State University at ~~Hayward.~~Hayward.

Robert P. McGrath is the founder of the Company and Chairman Emeritus of the Board of Directors. He has been a director since the Company’s formation in 1979 and served as Chairman of the Board of Directors ~~since 1988.~~from 1988 until he elected to step down from that role in June 2009. From March 2003 to July 2004, Mr. McGrath served as Executive Chairman. From 1979 to March 2003, he also served as the Company’s Chief Executive Officer. He served as President from 1979 to 1994 and Chief Financial Officer from 1979 to 1993. Mr. McGrath ~~received~~provided the leadership to the Company that drove it from a start-up to a diversified business-to-business rental company. This includes his work on a stock underwriting and secondary offerings plus several successful acquisitions. He is intimately familiar with the business, structure, history and culture of the Company and offers insights that only this experience can provide. Mr. McGrath holds a B.S. in Electrical Engineering from the University of Notre Dame.

M. Richard Smith was elected a director of the Company in 2010. Mr. Smith served as Senior Vice President of Bechtel Group, Inc. and President of its fossil power business unit, where he managed Bechtel’s global fossil power engineering and construction activities, until 2007. His service in this position culminated a 26-year career with Bechtel. During that tenure, he also served as Chief Executive Officer of Intergen, a joint venture between Shell and Bechtel. From 1992 to 2000, Mr. Smith served at a Bechtel/PG&E joint venture and at PG&E Corporation where he was responsible for all corporate development activities. Mr. Smith also serves as a member of the Board of Directors of Aegion Corporation (NASDAQ:AEGN), a leading provider of pipeline rehabilitation products and services, USEC Inc. (NYSE:USU), a major supplier of enriched uranium fuel for commercial nuclear power plants, and Sithe Global Power, LLC, an international power development company. With his extensive experience serving as a board member and in executive management roles for a number of public companies, Mr. Smith brings to the Board of Directors a valuable perspective on issues facing public companies as well as considerable guidance on corporate development, business operations and the energy industry. Mr. Smith received a B.S. in Aerospace Engineering from Auburn University, a M.S. in Mechanical Engineering from Northeastern University and a M.B.A. from Golden Gate University.

Dennis P. Stradford was elected a director of the Company in 2002. ~~Mr. Stradford served on the Company’s Audit Committee from November 2002 until November 2003.~~ Mr. Stradford joined Nomis Solutions, Inc., a provider of price optimization solutions to the financial services industry, as its Chairman, President and Chief Executive Officer in January 2004. He served as Chief Executive Officer until July 2009 and Chairman until February 2010. Mr. Stradford was the Chief Executive Officer of CascadeWorks, Inc., a provider of e-procurement

software to Fortune 1000 companies, from 2000 to 2003. From 1998 to 2000, he was Chief Executive Officer of SupplyBase, Inc. a provider of web-based supply-chain management software and services. From 1985 to 1997, Mr. Stradford was with Flextronics International, Ltd., a publicly traded company, and served as its Senior Vice President, Sales and Marketing. He previously held executive and sales positions with Zehntel, Inc. and International Business Machines Corp. With his wealth of experience in senior management, Mr. Stradford brings to the Board of Directors considerable expertise on strategic, operational, and sales and marketing issues. Mr. Stradford holds a B.A. from San Jose State University and an M.A., M. Div. from St. ~~Patricks Theolgaite.~~Patrick’s University.

Ronald H. Zech was elected a director of the Company in ~~1989. Mr. Zech retired in 2005 as~~1989 and elected to the position of non-executive Chairman of the Board of Directors in June 2009. He is also Chairman of our Corporate Governance and Nominating Committee and a member of our Audit Committee. He retired in 2005 as Chairman and Chief Executive Officer of GATX Corporation, ~~which provides specialized finance~~a NYSE listed company and ~~leasing solutions for~~leading provider of lease financing and related services to customers operating rail, marine, and ~~partners worldwide. He had 28 total years of service with GATX Corporation.~~other targeted assets. Mr. Zech was elected Chairman of GATX Corporation in April 1996, Chief Executive Officer in January 1996, and President in July 1994. Prior to that time he had served both as President and Chief Financial Officer of GATX Capital Corporation and as an officer with a major international bank. He also serves on the board of ~~directors of~~ The PMI Group, ~~Inc.,~~ a ~~domestic and international~~leading provider of mortgage insurance, where he is Vice Chair of both the Compensation and Governance and Nominating Committees. His experiences in these senior management and financial ~~guarantee products. Mr. Zech received~~roles have included a wide range of activities associated with the management of a public company. Accordingly, he brings to the Board of Directors a valued perspective on many issues faced by the Company. He holds a B.S. in Electrical Engineering from Valparaiso University and an M.B.A. from the University of Wisconsin.

The nominees will be elected by a plurality of the votes cast. Abstentions and broker ~~“non-votes”~~“non-votes,” if any, will not be counted toward the nominees’ total. However, under our Corporate Governance Guidelines, in an uncontested election, any nominee for director who receives a greater number of votes ~~“withheld”~~“WITHHELD” from his or her election than votes ~~“for”~~“FOR” such election (a “Majority Withheld Vote”) is required to tender his or her resignation following certification of the shareholder vote.

~~The~~If a nominee for director is required to tender his or her resignation pursuant to our Corporate Governance Guidelines, then the Corporate Governance and Nominating Committee shall consider the tendered resignation ~~offer~~ and recommend to the Board of Directors whether to accept it. The Board of Directors will act on the Corporate Governance and Nominating Committee’s recommendation within 90 days following certification of the shareholder vote. The Board of Directors will promptly disclose ~~their~~its decision whether to accept or reject the director’s resignation offer (and the reasons for rejecting the resignation offer, if applicable) in a current report on Form 8-K ~~furnished to~~filed by the Company with the SEC.

Any director who tenders his or her resignation pursuant to this provision shall not participate in the Corporate Governance and Nominating Committee recommendation or the Board of Directors’ action regarding whether to accept the resignation offer.

If all members of the Corporate Governance and Nominating Committee receive a Majority Withheld Vote at the same election, then the independent directors who did not receive a Majority Withheld Vote shall appoint a committee among themselves to consider the resignation offers and recommend to the Board of Directors whether to accept them; provided, however, that if the only directors who did not receive a Majority Withheld Vote in the same election constitute three or fewer directors, then all directors may participate in the action regarding whether to accept the resignation offers.

Each nominee elected as a director will continue in office until his or her successor has been elected and qualified, or until his or her earlier death, resignation or retirement.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTEFOR THE ELECTION OF EACH OF THE NOMINEES NAMED ABOVE.

The following table sets forth certain information with respect to the executive officers and directors of the Company as of March 31, ~~2009:~~2012:

Robert P. McGrath, Dennis C. Kakures, William J. Dawson, Robert C. Hood, M. Richard Smith, Dennis P. Stradford and Ronald H. Zech are nominees to the Board of Directors and their descriptions appear under“Proposal No. 1: Election of Directors—Nominees.”

Joseph F. Hanna was appointed Chief Operating Officer in June 2007. Prior to that, he served as Senior Vice President of Operations of the Company starting in January 2005, and he served as Vice President of Operations since joining the Company in 2003. Mr. Hanna has extensive sales and operations experience, including 12 years at SMC Corporation of America (a subsidiary of SMC Corporation, Tokyo, Japan) where he served in various leadership positions. His prior experience also includes serving as an officer in the United States Army. Mr. Hanna received a B.S. in Electrical Engineering from the United States Military Academy, West Point, New York.

Keith E. Pratt was appointed Senior Vice President of the Company in June 2007. He joined the Company in January 2006 as Vice President and was appointed Chief Financial Officer in March 2006. ~~Most recently,~~Prior to joining the Company, he was most recently with Advanced Fibre Communications (AFC), a public telecommunications equipment company in Petaluma, California, where he served as Senior Vice President and Chief Financial Officer. Mr. Pratt served as Chief Financial Officer from 1999 until AFC was acquired by Tellabs, Inc. at the end of 2004. He also served as Director of Corporate Development at AFC from 1997 to 1999 prior to becoming Chief Financial Officer. Prior to Mr. Pratt joining AFC, he served as Director, Strategy & Business Development Group at Pacific Telesis Group, Inc. from 1995 to 1997. Mr. Pratt has an undergraduate degree from Cambridge University in Production Engineering and an M.B.A. from Stanford University.

Randle F. Rose was appointed Senior Vice President and Chief Administrative Officer of the Company in June 2007. He joined the Company in 1997 as its Vice President of Administration and was elected Secretary of

the Company in 1999. Prior to joining the Company, he served in a variety of senior finance and general management roles with Silicon Valley real estate development companies. Mr. Rose received a B.S. in ~~Business~~ Finance from San Jose State University.

David M. Whitney joined the Company as its Corporate Controller in 2000 and was elected Vice President and Principal Accounting Officer in March 2006. Previously he was Manager of Regional Accounting for The Permanente Medical Group in Oakland, California. Mr. Whitney holds a B.S. in Accounting from California State University at Hayward, and is a Certified Public Accountant.

Kay Dashnerjoined the Company in 2005 as the Director of Human Resources and was promoted to Vice President, Human Resources in June 2008. Previously, she held various HR leadership positions in the retail, insurance and software industries, most recently at NetSuite from April 2005 to July 2005 and BMC Software, Inc. from March 1999 to April 2005. Ms. Dashner graduated from Santa Clara University with a B.S. in Management.

~~Richard G. Brown~~Philip B. Hawkins was appointed Vice President ~~of the Company~~ and Division Manager of Mobile Modular in ~~January 2005.~~November 2011. He previously served as Division Manager of the Company’s modular division from July 2002 to January 2005. He joined the Company in 1992 and has served in both sales and branch management positions for the Company’s modular division. He received a B.A. in Speech Communication from California State University, Northridge in 1992 and an M.B.A. from Azusa Pacific University in 1998.

~~Philip B. Hawkins~~ ~~was appointed~~ Vice President ~~of the Company~~ and Division Manager of TRS-RenTelco infrom June ~~2007. He previously served as~~2007 to November 2011 and also held the role of Manager, Corporate Financial Planning and Analysis from June 2004 to June 2007. Mr. Hawkins was a Senior Business Analyst for Technology Rentals and Services (TRS), an electronics equipment rental division of CIT Technologies Corporation from December 2003 until TRS was acquired by the Company in June 2004. He previously served as Director of Portfolio Management and held other leadership roles with Dell Financial Services from April 1999 to December 2003. Mr. Hawkins received B.S. degrees in Accounting, Finance and Computer Information Systems from Arizona State University.

John P. Skenesky was appointed Vice President and Division Manager of TRS-RenTelco in November 2011. He previously served as the division’s Director of Sales and Product Management from June 2007 to November 2011 and Director of Operations and Product Management from June 2004 to June 2007. Mr. Skenesky joined the Company in 1995 and served in branch management and sales roles for the RenTelco division. Prior to joining the Company, Mr. Skenesky served in lab and product management roles at Genstar Rentals from 1991 to 1994. He also served in the United States Navy from 1984 to 1990 as an electronics technician on submarines. Mr. Skenesky received an M.B.A. from Texas Christian University in 2007.

Steven H. ~~Adle~~Adlerr was appointed President of Adler Tank Rentals, LLC in December 2008. In 1998, Mr. Adler founded Adler Tank Rentals, LLC which ~~was~~assets were acquired by the Company in December 2008. He also founded Adler Industrial Services, a roof vacuum services business, in 1993, and Sabre Manufacturing, which manufactures liquid and solid containment ~~products.~~products, in 2005. Mr. Adler received a B.S. in Business Administration from Alfred University in New York, and ~~a Masters Degree~~an M.B.A. in International Business from Thunderbird School of Global Management in Arizona.

Kristina VanTreasewas appointed Vice President of the Company and Division Manager of Mobile Modular Portable Storage in June 2009. She previously served as Director of Corporate Development from July 2007 to June 2009. She joined the Company in 1992 and has served in corporate management roles as well as sales and management positions for the Company’s TRS-RenTelco division. Ms. VanTrease received a B.S. in Business Administration from San Jose State University.

Each executive officer of the Company serves at the pleasure of the Board of Directors.

The Board of Directors has determined that ~~five~~the six non-employee directors on the Board of Directors, consisting of Messrs. Dawson, Hood, McGrath, Smith, Stradford, and Zech are “independent” as defined in the listing standards of the NASDAQ Stock Market, regulations of the SEC ~~(“SEC regulations”)~~ and any other laws applicable to the Company. Mr. Kakures, as an executive officer of the Company, is not considered independent. In making these determinations, our Board of Directors considered transactions and relationships between each director and his or her immediate family and the Company and our subsidiaries, including those reported in the section below captioned “Certain Relationships and Related Transactions.” The purpose of this review was to determine whether any such relationships or transactions were material and, therefore, inconsistent with a determination that such director is independent. As a result of this review, the Board of Directors affirmatively determined, based on its understanding of such transactions and relationships, that ~~five of our~~the six non-employee directors are independent of the Company and, therefore, a majority of the members of our Board of Directors is independent, under the applicable listing standards of the NASDAQ Stock Market.

At last year’s annual meeting, approximately 22 percent of shareholders voted “WITHHOLD” for Mr. McGrath (which percentage did not represent a Majority Withheld Vote). The Company believes that these votes were likely cast as a result of, and in accordance with, a report by Institutional Shareholder Services (“ISS”), which included a recommendation of a “WITHHOLD” vote for Mr. McGrath. This recommendation was based on ISS’ determination that Mr. McGrath was an “affiliated outside director” because he is the founder of the Company and formerly served as the Company’s Chief Executive Officer until March 2003. It is ISS’ policy that affiliated outsiders should not serve on the Company’s independent board committees. However, the Board of Directors has determined that Mr. McGrath is “independent” as defined in the listing standards of the NASDAQ Stock Market and the regulations of the SEC and the Company believes that he continues to contribute significant value as a member of the Audit and Corporate Governance and Nominating Committees.

Our Board of Directors is currently comprised of six independent directors and one management director. Our Corporate Governance Guidelines state that the Board of Directors should remain free to decide whether the Chairman and CEO positions should be held by the same person. This allows the Board of Directors to determine the best arrangement for the Company and its shareholders, given changing circumstances of the Company and the composition of the Board of Directors. Currently the positions are separated. Mr. Zech, our non-executive chairman, has extensive knowledge and experience in a similarly complex industry from his 29 years with GATX, has a significant understanding of the Company based on his 23 years on the Board of Directors, and has a solid relationship with the other directors and management. Mr. Kakures, our Chief Executive Officer, is a seasoned leader with over 29 years of management and operational experience in the Company, clearly understands and drives its strategic growth, and interacts well with Mr. Zech and the other directors. We believe our current leadership structure is optimal at this time.

During ~~2008,~~2011, the Board of Directors met nine times. No director attended fewer than 75% of ~~the aggregate of~~ either (i) the total number of meetings of the Board of Directors held ~~during the period for which he was a~~

~~director,~~in 2011, or (ii) the total number of ~~committee~~ meetings of the committees of the Board of Directors held in ~~2008~~2011 on which he served. All ~~six~~seven directors attended the ~~2008~~2011 annual meeting of shareholders. All directors are expected to attend the Annual Meeting. The standing committees of the Board of Directors currently ~~include~~consist of the Compensation Committee, the Audit Committee and the Corporate Governance and Nominating Committee.

The Compensation Committee held ~~five~~three meetings in ~~2008.~~2011. The Compensation Committee currently consists of Messrs. Dawson, Hood, Smith and Stradford; Mr. Dawson serves as its Chairman. The Board of

Directors has determined that all current members of the Compensation Committee are “independent” as defined in the listing standards of the NASDAQ Stock Market, SEC regulations and any other laws applicable to the Company. In addition, the Board of Directors has determined that all current members of the Compensation Committee ~~shall~~ qualify as “non-employee directors” within the meaning of SEC Rule 16b-3 as promulgated under the Exchange Act, and as “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).

The Board of Directors adopted and approved a charter for the Compensation Committee, which was most recently amended and restated on December ~~12, 2008.~~9, 2010. A copy of this charter is posted on our website at www.mgrc.com under the Investor Relations section. The functions of the Compensation Committee, which are discussed in detail in its charter, are to (a) evaluate executive officer and director compensation policies, goals, plans and programs; (b) determine the cash and non-cash compensation of the executive officers of the Company; (c) review and administer the Company’s equity-based and other incentive compensation plans for employees; (d) evaluate the performance of the Company’s ~~Chief Executive Officer;~~executive officers; and (e) produce any reports required by the applicable rules and regulations of the ~~SEC and SEC regulations.~~SEC.

Compensation decisions for the executive officers of the Company are made by the Compensation Committee. The Compensation Committee directs the Chief Executive Officer to develop the incentive compensation guidelines for the other executive officers and to determine the incentive compensation bonuses for each of the other executive officers. Compensation decisions for directors are made by the Board of Directors after recommendations by the Compensation Committee.

The Audit Committee held five meetings in ~~2008.~~2011. The Audit Committee currently consists of Messrs. Dawson, Hood, McGrath and Zech; Mr. Hood serves as its Chairman. After considering transactions and relationships between each member of the Audit Committee or his immediate family and the Company and its subsidiaries and reviewing the qualifications of the members of the Audit Committee, the Board of Directors has determined that all current members of the Audit Committee are “independent,” as defined in the listing standards of the NASDAQ Stock Market, SEC regulations and any other laws applicable to the Company. The Board of Directors has also determined that all current members of the Audit Committee are financially literate and have the requisite financial sophistication as required by the listing standards of the NASDAQ Stock Market. Furthermore, the Board of Directors has determined that Messrs. Dawson, Hood, McGrath and Zech each qualify as an Audit Committee financial expert, as defined by the applicable SEC rules, ~~of the Exchange Act,~~ pursuant to the fact that, among other things, Mr. Hood is the former Executive Vice President and Chief Financial Officer of Excite, Inc., Mr. Dawson is the ~~Vice President and~~ Chief Financial Officer of ~~Cerus Corporation~~Catalyst Biosciences, Inc., Mr. McGrath was former Chairman and Chief Executive Officer of the Company, and Mr. Zech is the former Chief Executive Officer of GATX Corporation, and in those respective capacities each has acquired the relevant experience and expertise and has the attributes set forth in the applicable rules as being required for an Audit Committee financial expert.

The Board of Directors adopted and approved a charter for the Audit Committee, which was most recently amended and restated on December ~~12, 2008.~~9, 2010. A copy of this charter is posted on our website at www.mgrc.com under the Investor Relations section. The functions of the Audit Committee, which are discussed in detail in its charter, are to (a) oversee the engagement, replacement, compensation, qualification, independence and

performance of the Company’s independent auditors; (b) oversee the conduct of the Company’s accounting and financial reporting processes and the integrity of the Company’s audited financial statements and other financial reports; (c) oversee the performance of the Company’s internal accounting, financial and ~~financial~~disclosure controls function; and (d) oversee the Company’s compliance with its policies and other legal requirements as such compliance relates to the integrity of the Company’s financial reporting. The Audit Committee has also established procedures for (a) the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters, and (b) the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing ~~materials.~~matters. The Audit Committee also

oversees the preparation of a report for inclusion in our annual proxy statements and is charged with the other duties and responsibilities listed in its charter. The Audit Committee’s report is included in this Proxy Statement on page ~~48.~~45. The Audit Committee is a separately designated standing audit committee as defined in Section 3(a)(58)(A) of the Exchange Act.

The Corporate Governance and Nominating Committee held two meetings in ~~2008.~~2011. The Corporate Governance and Nominating Committee consists of Messrs. Stradford, ~~Hood~~McGrath, Smith and Zech; Mr. Zech serves as its Chairman. Our Board of Directors has determined that all current members of the Corporate Governance and Nominating Committee are “independent,” as defined in the listing standards of the NASDAQ Stock Market, SEC regulations and any other laws applicable to the Company.

The Board of Directors adopted and approved a charter for the Corporate Governance and Nominating Committee, which was most recently amended and restated on ~~February 2, 2007.~~December 6, 2011. A copy of this charter is posted on our website at www.mgrc.com under the Investor Relations section. The functions of the Corporate Governance and Nominating Committee, which are discussed in detail in its charter, are to assist the Board of Directors in all matters relating to (a) the establishment, implementation and monitoring of policies and processes regarding the recruitment and nomination of candidates to the Board of Directors and committees of the Board of Directors; (b) the review and making of recommendations to the Board of Directors regarding the composition and structure of the Board of Directors and committees of the Board of Directors; (c) the development, evaluation and monitoring of the Company’s corporate governance processes and principles; (d) the development and implementation of, and monitoring of compliance with, the Company’s Code of Business Conduct and Ethics and making recommendations to the Board of Directors of revisions to the Code of Business Conduct and Ethics from time to time as appropriate; and (e) the administration of the Board of Directors’ annual self-evaluation process and the sharing of the results thereof with the Board of Directors for discussion and deliberation.

While Company management is primarily responsible for managing risk, the Board of Directors and each of its committees plays a role in overseeing the Company’s risk management practices. The full Board of Directors is ultimately responsible for risk oversight, and it discharges this responsibility by, among other things, receiving regular reports from Company management concerning the Company’s business and the material risks facing the Company. Each of the Board’s committees also plays a role in risk oversight as follows:

Audit Committee. Under its charter, the Audit Committee plays a key role in the Board of Directors’ risk oversight process. The Audit Committee’s duties include discussing the Company’s guidelines and policies with respect to risk assessment and risk management with Company management and the Company’s independent auditors. The Audit Committee also receives regular reports from Company management and discusses with management the steps taken to monitor and control risk exposures. In addition, the Audit Committee reviews all of the Company’s quarterly financial reports, including any disclosure therein of risk factors affecting the Company and its businesses. The Audit Committee regularly receives reports from, among others, the Company’s Chief Financial Officer, Principal Accounting Officer, and its compliance officer. The Audit Committee provides regular reports to the full Board of Directors on its risk oversight activities and any issues identified.

Compensation Committee. Under its charter, the Compensation Committee reviews with its independent compensation consultant and management, as appropriate, the Company’s compensation plans, policies and practices. The Compensation Committee also sets performance goals under the Company’s annual bonus and long-term incentive plans. In setting the performance targets and overseeing the Company’s compensation plans, policies and practices, the Compensation Committee considers the risks that may be created and whether any

such risks are reasonably likely to have a material adverse impact on the Company. The Compensation Committee considers the overall mix of compensation for all employees as well as the various risk control and mitigation features of its compensation plans, including appropriate performance measures and targets and incentive plan payout maximums. The Compensation Committee provides regular reports to the full Board of Directors on the Company’s compensation plans, policies and practices and the Compensation Committee’s oversight of compensation-related risks.

Corporate Governance and Nominating Committee. Under its charter, the Corporate Governance and Nominating Committee is responsible for, among other things, developing and recommending to the Board of Directors a set of effective corporate governance guidelines and procedures designed to assure compliance with applicable governance standards. The Corporate Governance and Nominating Committee provides regular reports to the Board of Directors.

Through the activities of the Audit, Compensation and Corporate Governance and Nominating Committees, as well as the full Board of Directors’ interactions with management concerning the Company’s business and the material risks that may impact the Company, the independent directors on the Board of Directors are able to monitor the Company’s risk management process and offer critical insights to Company management.

The Corporate Governance and Nominating Committee will consider for nomination all bona fide candidates proposed by management or shareholders and will nominate directors that it believes will serve the best interests of the Company and its shareholders. Candidates must have the education, business or organizational experience and skills that will enable them to excel in carrying out their responsibilities on the Board of Directors. Candidates must possess and have demonstrated in professional ~~endeavor~~endeavors the highest personal and professional ethics, integrity and values, and be committed to representing the long-term best interests of shareholders. Further, candidates must have an inquisitive and objective perspective, practical wisdom and mature judgment, and be willing and able to challenge management in a constructive manner. Candidates will also be judged on their ability to work in a collegial manner with a sense of common purpose, energy, industry knowledge, business sense and trust with other members of the Board of Directors and management, as one group acting in unison to solve difficult problems as they may arise. The candidate’s specific knowledge of the Company, its markets, and its strategy will also be considered. When evaluating candidates, the Corporate Governance and Nominating Committee considers the diversity of the backgrounds, experience and skills of the current directors on the Board of Directors, including their gender, age, ethnic and cultural backgrounds, the long-term needs of the Company based on its strategic direction and responsible succession planning for all Board positions, and selects the candidates who will provide the most value to the Board of Directors, management and shareholders. The Corporate Governance and Nominating Committee monitors its assessment of diversity as part of the annual self-evaluation process.

The Board of Directors’ recommendations for inclusion in the slate of directors at an annual or special meeting of shareholders, or for appointment by the Board of Directors to fill a vacancy, are based on its determination, after reviewing recommendations from the Corporate Governance and Nominating Committee, as to the suitability of each recommended individual.

The Corporate Governance and Nominating Committee will apply its director candidate selection criteria described above, including a director’s past contributions to the Board of Directors, prior to recommending a director for re-election to another term. Directors ~~should~~may not ~~expect to~~ be re-nominated annually as a matter of course. Once the Corporate Governance and Nominating Committee evaluations are completed and the Corporate Governance and Nominating Committee has considered all other potential director candidates, it recommends the best slate of candidates for approval by the full Board of Directors.

Generally, once a need to add a new member to the Board of Directors is identified, the Corporate Governance and Nominating Committee will initiate a search by working with staff support, seeking input from members of the Board of Directors and senior management and hiring a consultant or search firm, if necessary. After a slate of possible candidates is identified, certain members of the Corporate Governance and Nominating Committee, other members of the Board of Directors and senior management have the opportunity to interview the prospective ~~candidates(s)~~candidate(s). The remaining members of the Board of Directors who do not interview the prospective candidate(s) are kept informed. ~~The~~After completing its selection process, the Corporate Governance and Nominating Committee ultimately determines and recommends the best candidate(s) ~~after completing its selection process~~ for approval by the full Board of Directors.

A description of the procedure to be followed by security holders in submitting director recommendations is set forth in “—Shareholder ~~Proposals~~Recommendations for Membership on our Board of Directors” below. The director candidate selection criteria will be equally applied to both continuing directors and shareholder-submitted director candidates.

The Compensation Committee reviews director compensation every two years. In ~~December 2006,~~October 2010, the Compensation Committee engaged Compensia, Inc., an independent compensation consulting firm (“Compensia”), to conduct a review of its ~~2007~~2011-2012 total compensation program for its non-employee directors. Compensia provided an analysis with relevant market data and alternatives to consider when making compensation decisions for the non-employee directors. The analysis compared each element of total compensation against a peer group of publicly-traded companies against which we compete in recruiting qualified managers and directors, and for shareholder investment. These companies ~~consist~~consisted of a combination of primarily technology companies of comparable size based in the San Francisco Bay Area, and national rental, leasing and equipment finance ~~companies.~~companies, which are listed in“Compensation Consultant and Peer Group Selection”on page 22 of this Proxy Statement. The Compensation Committee generally sets the total compensation for non-employee directors at or slightly above the median (the 50^th percentile) of compensation paid to non-employee directors of similarly situated peer group ~~non-employee directors.~~companies. The ~~2008~~2011 and 2012 compensation described below was approved by the Board of Directors based on Compensia’s analysis and recommendations of the Compensation Committee.

For the year ended December 31, ~~2008,~~2011, each non-employee director ~~who was not also an executive officer or employee~~ of the Company ~~other than the Chairman of the Board of Directors,~~ was compensated for his ~~or her~~ services as a director with an annual retainer of $34,000. ~~The Chairman of the Board of Directors received an annual retainer of $60,000.~~ In addition to the annual retainers, the Chairs of the Board of Directors, Audit Committee, Compensation Committee, and Corporate Governance and Nominating Committee received an additional annual retainer of $20,000, $18,000, ~~$9,000~~$9,500 and ~~$5,000~~$7,500 respectively. Each other member of the Audit Committee, Compensation Committee, and Corporate Governance and Nominating Committee ~~who is not an employee of the Company~~ received an annual retainer of $8,000, ~~$4,000~~$5,000 and ~~$2,000~~$4,000 respectively. Messrs. Dawson, Hood, McGrath, Smith, Stradford and Zech received ~~$51,000, $58,000, $60,000, $40,000~~$51,500, $57,000, $46,000, $43,000, $43,000 and ~~$47,000~~$69,500 respectively, ~~and Ms. McGrath received $17,000,~~ for each of their services as a director of the Company during ~~2008.~~2011. All directors, including those who are executive officers or employees of the Company, were reimbursed for expenses incurred in connection with attending Board of Directors or ~~Committee~~committee meetings.

In October 2008, consistent with the compensation review schedule every two years for non-employee directors, the Compensation Committee engaged Compensia to conduct a review of its 2009 total compensation program for its non-employee directors. The 2009 compensation described below was approved by the Board of Directors based on Compensia’s analysis and recommendations of the Compensation Committee.

For fiscal year ~~2009, consistent with the previous two years,~~2012, each director who is not also an executive officer or employee of the Company, other than the Chairman of the Board of Directors, will receive an annual retainer of $34,000. ~~The Chairman of the Board of Directors will receive an annual retainer of $60,000.~~ In addition to the annual retainers, the Chairs of the Board of Directors, Audit Committee, Compensation Committee, and Corporate Governance and Nominating Committee will receive an additional annual retainer of $20,000, $18,000, ~~$9,000~~$9,500 and ~~$5,000~~$7,500 respectively. Each other member of the Audit Committee, Compensation Committee, and Corporate Governance and Nominating Committee who is not an employee of the Company will receive an annual retainer of $8,000, $5,000 and $4,000 ~~and $2,000~~ respectively. These annual retainers will be included in the 2012 Director Compensation Table in next year’s proxy statement.

In addition to cash compensation, each of the non-employee directors of the Company has historically received an annual ~~stock option grant near the end of each year at the last regularly scheduled meeting of the Board of Directors.~~equity grant. On February 2, 2007, the Board of Directors adopted an equity granting methodology (part of the 2007 Plan) whereby there ~~will be~~is one annual equity grant date, which ~~will be~~is the date when the blackout window opens after the year-end earnings are released. All designated non-employee directors, executive officers and employees ~~will~~are eligible to receive an equity grant on the annual equity grant date with an exercise price (for stock ~~options)~~options or stock appreciation rights (“SARs”)), or grant price (for restricted stock units (“RSUs”)), equal to the NASDAQ Stock Market close price on that day.

Prior to 2009, our practice had been to grant annual stock options to non-employee directors with a one-year vesting period. When granting stock options, we first established a dollar value of the total equity compensation to be awarded for each non-employee director position based on Compensia’s analysis and the Compensation Committee’s recommendation. On the date of the grant, we divided that total stock option fair value dollar amount by the per share fair value, calculated using the Black Scholes Option pricing model, and generally rounded up to the nearest 1,000 shares to determine the number of options to award. Although we used what we considered to be a reasoned approach in determining the number of options to award our non-employee directors using a formula that was based on a widely accepted option-pricing model, the ultimate value of the options issued only would become clear when they were exercised. The stock options may not realize any value, or they may be worth much more than the fair value initially estimated. As a result, we do not consider realizable gains from prior stock option grants or existing levels of share ownership when setting new grant amounts.

As reflected in the table below, for ~~2009,~~2011, based on Compensia’s analysis, ~~and~~ the ~~recommendations~~recommendation of the Compensation Committee, and consistent with our equity granting policy, on February 25, 2011, the Board of Directors reduced the total equity compensation amount awarded to non-employee directors from $102,080 to $62,480 to reflect expected changes in the practices of the designated peer group of publicly-traded companies as a result of the general decline in equity values (the total equity compensation values listed are approximate and represent a range that can fluctuategranted each year due to rounding). In addition, it was determined a grant of RSUs would better align the interests of directors and shareholders. Consistent with the equity granting policy date, on February 27, 2009, each non-employee director received a RSU grant under the 2007 Plan. Each of Messrs. Dawson, Hood, McGrath, Smith, Stradford and Zech ~~received 4,000~~ RSUs ~~to purchase 4,000~~under the 2007 Plan for 2,300 shares of the Company’s Common Stock with a vesting date of ~~March 31, 2010, which~~April 1, 2012. Each of these grants represented an equivalent total equity compensation of ~~$62,480~~$64,377 based on the NASDAQ Stock Market close price of ~~$15.62~~$27.99 on February ~~27, 2009.~~25, 2011 (the total equity compensation values can fluctuate slightly each year due to rounding). The Board of Directors believes equity grants of RSUs best align the interests of non-employee directors and shareholders.

Based on Compensia’s analysis, the recommendation of the Compensation Committee, and consistent with our equity granting policy, on March 2, 2012, the Board of Directors granted each non-employee director RSUs under the 2007 Plan for 2,100 shares of the Company’s Common Stock with a vesting date of April 1, 2013. Each of these grants represented an equivalent total equity compensation of $65,835 based on the NASDAQ Stock Market close price of $31.35 on March 2, 2012 (the total equity compensation values can fluctuate slightly each year due to rounding). These 2012 RSU grants will be included in the 2012 Director Compensation Table in next year’s proxy statement.

The table below summarizes the compensation paid by the Company to its directors for the fiscal year ended December 31, ~~2008 and estimates the compensation expected to be paid by the Company to its directors for the fiscal year ended December 31, 2009.~~2011.

The Board of Directors believes that, in order to align the interests of directors and shareholders, directors should have a significant financial (equity) stake in the Company. Each director has a target ownership level of 5,000 shares of Common Stock to be achieved by each director within five years of joining the Board of Directors or as soon thereafter as practicable. In evaluating whether the Common Stock value ownership guideline has been met, all Common Stock owned and 50% of the value (market price less ~~strike~~stock price) of all vested unexercised stock options ~~will be~~is considered. As of March 31, ~~2009~~2012, all directors were in compliance with the stock ownership ~~requirements.~~requirements, with the exception of Mr. Smith, who joined the Board in 2010 and has five years after that date to accumulate 5,000 shares of Common Stock.

The volatility in the global economic environment over the past few years has presented many challenges for McGrath RentCorp. Despite these headwinds, we continued to execute on our product and geographic diversification plans through new rental product investment and entering new markets, while maintaining a strong balance sheet. We believe the Company ~~achieved 92.7%~~is well-positioned to execute on our long-term strategic objectives in the future.

In late 2010, the Board of ~~its~~Directors approved a 2011 Business Plan that reflected the expectations for the Company’s financial performance in 2011. The 2011 pre-tax income ~~goals~~goal was set at $63,739,000. The actual pre-tax income achieved in ~~2008. This section has been expanded to provide more detail for the 2008 compensation profitability components and personal annual priorities~~2011 was $81,058,000, which was 127% of the ~~named~~goal. This success was due primarily to returns on continued investment in, and expansion of, Adler Tank Rentals, as well as the strength of TRS-RenTelco’s industry leadership position and healthy test equipment market conditions.

In 2009 and 2010, base salaries for executive ~~officers. Due~~officers were frozen at 2008 levels and cash bonuses and equity compensation opportunity levels were each reduced by 25%. These reductions in remuneration were among a number of austerity measures implemented by the Company in 2009 and 2010 to address the impact of the ~~economic~~Great Recession. Based on a more promising 2011 outlook, the Compensation Committee engaged its compensation consultant Compensia to update the Company’s compensation peer group and to review the 2011 compensation program for its executive officers. As a result of this review, the Compensation Committee approved modest base salary increases for 2011, restored full cash bonus opportunity levels and tied a greater portion of the potential cash bonus to be earned by each executive officer to the financial ~~downturn,~~performance of the Company, ~~implemented~~and fully restored equity grant opportunity levels, all based on alignment with peer group companies. For 2012, the Compensation Committee did not engage Compensia to perform a ~~number~~full compensation peer group and compensation review; however, the Compensation Committee approved executive officer base salary increases for 2012 consistent with Compensia’s guidance on relevant market data.

In 2011, a new cost control metric was added to our compensation program, which measures sales, general and administrative expenses as a percentage of ~~2009 austerity measures affecting~~rental revenue. Also, division executive officers’ three-year equity target was shifted from a three-year cumulative earnings per share (“EPS”) target to a three-year cumulative earnings before interest and taxes (“EBIT”) target, in each case tied to the performance of their respective divisions. This divisional target allows divisional leaders to be measured in areas over which they have more direct control and responsibility.

Also in 2011, the Company adopted a 10% holdback provision to executive officers’ RSU equity grant settlements to facilitate earlier achievement of stock ownership under the Company’s stock ownership guidelines. The Company also adopted a clawback policy requiring current and former executive officers to reimburse any excess value received if the Company is required to restate its financial statements.

We believe these modifications to our compensation practices have enhanced our corporate governance and executive compensation policies to the benefit of our shareholders. We also would like to acknowledge the hard work by the Company’s executive team and all employees ~~including executive officers. These measures include salary freezes, furloughs, reductions in vacation accruals and contributions to retirement benefits,~~during a particularly difficult three years. We have stronger organizational bench strength than ever before and a ~~25% reduction~~more robust succession plan in ~~2009 target cash bonuses and grant date value of~~place for key leaders throughout the ~~2009 equity grants.~~Company.

The purpose of the Company’s executive compensation program is ~~designed~~ to ~~align~~attract and retain exceptional talent and reward performance by establishing measurable objectives to drive future performance, thus aligning our executive officers’ interests with those of our shareholders. ~~Its purpose is to attract and retain exceptional talent, reward past performance, and establish and reward measurable objectives for future performance.~~ We believe the most effective compensation program is one that is designed to reward the achievement of specific annual, long-term and strategic goals of the Company. Our primary objective is to align our executive officers’ interests with the interests of our shareholders

by rewarding ~~achievements~~achievement of established goals that contribute to increased long-term shareholder value. To that end, part of our executive officers’ compensation is directly tied to identifiable, objective goals by which performance can be measured. In addition, in structuring our executive compensation program, we set the compensation of our executive officers to be competitive relative to the compensation paid to similarly situated executives of our peer group ~~companies.~~companies and the broader general market.

As part of designing and implementing the compensation programs for all employees, the Company considers the risks that may be created and whether any such risks may have an adverse impact on the Company, and whether, overall, the Company’s compensation programs are reasonably likely to have a material adverse impact on the Company. In making this determination, the Company considers the specific design of each element of compensation and the overall mix of compensation for employees, as well as the various risk control and mitigation features of our compensation plans, including appropriate performance measures and targets and incentive plan payout maximums.

We conducted our first advisory vote on executive compensation last year at our 2011 annual meeting of shareholders (the “2011 Annual Meeting”). This vote was non-binding on the Company, its Board of Directors or Compensation Committee; however, we believe that it is important for our shareholders to have an opportunity to vote on executive compensation on an annual basis. The advisory vote provides shareholders with the opportunity to express their views regarding our executive compensation philosophy, policies, programs, and decisions, as disclosed in our proxy statement for the applicable year. Our Board of Directors and Compensation Committee value the opinions of our shareholders, and to the extent there is any significant vote against our compensation practices for executive officers, we will consider our shareholders’ concerns and assess whether any actions will be taken. In addition ~~part~~to our annual advisory votes on executive compensation, we are committed to ongoing engagement with our shareholders on executive compensation and corporate governance issues. These dialogue opportunities take place throughout the year through meetings, telephone calls and correspondence involving our senior management, directors and representatives of our shareholders.

At the 2011 Annual Meeting, more than 98% of the shares of Common Stock represented and voting on the advisory vote on executive ~~officers’~~ compensation ~~is directly tied~~proposal (Proposal 3) were in favor of our named executive officer compensation as disclosed in our 2011 proxy statement. The Board of Directors and Compensation Committee reviewed these final vote results and determined that given the significant level of support, the changes to ~~identifiable objective goals~~our executive compensation policies and decisions discussed in this Compensation Discussion and Analysis were appropriate to achieve our objectives.

We have determined that our shareholders should vote on a say-on-pay proposal each year, consistent with the preference expressed by ~~which performance can be measured.~~our shareholders at the 2011 Annual Meeting. Accordingly, our Board of Directors recommends that you vote FOR Proposal 3 at the Annual Meeting. For more information, see “Proposal 3—Non-Binding Advisory Vote To Approve the Compensation of the Company’s Named Executive Officers” in this Proxy Statement.

The Compensation Committee (for purposes of this analysis, the “Committee”) of the Board of Directors has the responsibility for establishing, implementing and continually monitoring the compensation of ~~its~~the Company’s executive officers. The Committee ~~designed~~oversees and approves the design of the executive compensation program to ensure that the total compensation paid to our executive officers is fair, reasonable, competitive, and is aligned with the goals and objectives of the Company. For the fiscal year ended December 31, ~~2008,~~2011, the principal components of compensation for executive officers were:

~~2. Non-equity annual performance-based incentive compensation (“Annual Bonuses”); and~~

The Committee determined that these ~~three~~four elements, with a significant percentage of total compensation allocated to “at-risk” performance-based incentives, best ~~aligns~~align the interests of our executive officers with our ~~shareholders.~~shareholders and achieve our overall goals for executive compensation. The Annual Bonus rewards achievement of annual incentive goals and the long-term equity incentive compensation rewards achievement of ~~long term~~long-term growth in shareholder value and sustained financial health of the Company. There is no pre-established policy or target for the allocation between either cash and non-cash or short-term and long-term incentive compensation. Rather, the Committee reviews relevant market compensation data from its compensation consultant and other sources, and uses its judgment to determine the appropriate level and mix of incentive compensation on an annual basis.

To ensure that our executive compensation is competitive, the Committee directly engaged Compensia to provide ~~updated~~ information to assist in determining the ~~2008~~ total compensation program for its executive officers.

In November 2010, Compensia provided an analysis with relevant market data and alternatives to consider when making

compensation decisions for our non-employee directors and executive officers. The analysis compared each element of total compensation against a peer group of publicly-traded ~~companies (collectively,~~companies. The Committee used this peer group in 2011 for purposes of assessing our total compensation program. Accordingly, we refer to this peer group as the ~~“Compensation~~“2011 Compensation Peer ~~Group”).~~Group.” We believe that the 2011 Compensation Peer Group ~~consists~~consisted of companies against which we ~~compete in~~competed for recruiting qualified managers and directors and for shareholder investment. These companies ~~consist~~consisted of a combination of primarily technology companies of comparable size based in the San Francisco Bay Area, business services companies, and national rental, leasing and equipment finance companies.

In December 2008, Compensia revised the Compensation Peer Group for its review of 2009 total compensation for the non-employee directors and executive officers. The changes from the 2007-2008 Compensation Peer Group were to remove companies that no longer appeared comparable based on our peer group selection criteria. For the most part, the companies deleted from the 2007-2008 Compensation Peer Group were replaced with companies that better met our peer group selection criteria. Overall, the number of peer companies decreased from 32 to 27 from the 2007-2008 Compensation Peer Group to the 2009 Compensation Peer Group. However, the Compensation Committee believed that there were still a sufficient number of companies to determine competitive market practices. The companies comprising the 2009 Compensation Peer Group are:

~~Since~~Because the Company is headquartered in the San Francisco Bay Area, the Bay Area companies were ~~averaged~~pooled with the business services companies and the national industry comparables to better approximate the competitive recruiting and retention environment influencing compensation levels for each executive officer. In addition to the 2011 Compensation Peer Group, other compensation data sources that were consulted included the 2010 Radford Executive Survey, 2010 Mercer Executive Benchmark Survey, and the 2010/2011 Towers Watson Survey.

The Committee generally targets the total compensation for executive officers at or slightly above the median (the 50^thth percentile) of compensation paid to similarly situated executives of the companies in the ~~Compensation Peer~~

~~Group.~~applicable year’s compensation peer group. If an executive officer was located in an area outside of the San Francisco Bay Area, a geographic adjustment was made. Actual compensation for our executive officers may vary from the target amounts based on the experience level of the individual, market factors, differences in make-up of responsibilities and workload relative to comparative compensation peer group titled positions, and other considerations the Committee may deem appropriate.

Process of Setting and Approving Executive Compensation; Role of Chief Executive Officer

The Committee approves annual compensation levels and equity awards to all of our executive officers. The process is described below:

a.1. Annually, the Committee reviews an independent compensation consultant’s analysis to evaluate for each executive officer (1) a target total compensation amount, (2) the appropriate allocation of base salary, Annual ~~Bonuses~~Bonus and long-term equity incentive compensation, (3) risk of any compensation element that could have an adverse impact on the Company, and ~~(3)~~(4) if there should be any change to the forms of compensation to better align our executive officers’ interests with those of our shareholders.

b.2. For the Chief Executive Officer, the allocation of base salary, Annual ~~Bonuses~~Bonus and long term equity incentive compensation and the applicable performance target levels are determined by the Committee, in consultation with the Chairman of the Board of Directors and separately with all of the independent directors. The Chief Executive Officer has no role in setting his compensation.

c.3. For the other executive officers, the Chief Executive Officer ~~will determine~~recommends the allocation ~~between~~of base salaries, ~~non-equity performance based compensation~~Annual Bonuses and ~~long term~~long-term equity incentive compensation, and ~~determine~~ the applicable performance target levels for each of the other executive officers. ~~The resulting~~These recommendations are presented to the Committee for the Committee’s consideration and, if appropriate, approval.

d.4. Shortly after the end of the year, the Chief Executive Officer reviews the performance of each executive officer ~~other~~(other than ~~himself.~~himself) against his or her established personal objectives for the year and general management responsibilities. The conclusions reached and recommendations based on these reviews are presented by the Chief Executive Officer to the Committee for consideration. The Committee can exercise its discretion in modifying any recommended adjustments or awards. The Committee then approves, as presented or modified, all earned compensation for these executive officers. ~~The~~

5. Shortly after the end of the year, the Committee reviews the Chief Executive Officer’s ~~performance is reviewed by the Committee.~~performance. The Committee then determines, based on the market data and the Chief Executive Officer’s performance, and after consultation with the Chairman of the Board of Directors and ~~then~~ separately with all independent directors, the compensation of the Chief Executive Officer.

The Company provides its executive officers and other employees with a base salary to compensate them for services rendered in the fiscal year. Base salary ranges for executive officers are determined for each executive based on his or her position ~~and responsibility by~~ using ~~market data.~~

~~During its review of base salaries for executives,~~ the ~~Committee primarily considers:~~following criteria:

Salary levels are typically considered as part of the Company’s performance review process on an annual basis as well as upon promotion or other change in job responsibility. Merit increases to salaries of each executive officer are based on the Chief Executive Officer and Committee’s assessment of the individual’s performance in his or her annual ~~performance review.~~performance.

The table below sets forth the annual base salary of each of our named executive officers in 2011. Based on the performance results of 2011, the outlook for the Company in 2012, and Compensia’s analysis, the Committee considered and approved the increased base salaries for the named executive officers in 2012 shown in the table below.

In fiscal year ~~2008,~~2011, each executive officer had non-equity performance-based incentive awards as described below:

The ~~Non-Equity Performance-Based Incentive~~Bonus Plan ~~(the “Bonus Plan”)~~ is comprised of two components. The first component compensates the executive for his or her efforts leading to the Company’s success at meeting its annual profitability goals. The second component measures the executive officer’s success at accomplishing his or her personal annual priorities. These two components are used to assure an emphasis on annual profitability and to define each executive officer’s specific role with measurable goals to achieve annual and ~~long term~~long-term increases in shareholder value.

Most of our executive officers receive a cash bonus based upon the Company’s success at meeting certain annual profitability goals. The profitability goal of the Company for most of its executive officers (including four of its named executive officers) has two components—80% is based on the Company’s pre-tax income (“PTI”) and 20% is based on the Company’s rental return on rental equipment (“RRRE”). The profitability goal for any Vice President & Division Manager (including one of its named executive officers, Mr. Hawkins, who holds a divisional officer position) is based 60% on their respective divisional profitability, defined as gross ~~margin~~profit (“DGP”) less direct ~~SG&A profitability~~selling, general and administrative expenses (“~~DGM”~~DSG&A”), ~~20% on divisional RRRE and~~ 20% on the Company’s ~~PTI.~~PTI and 20% on divisional RRRE.

PTI is calculated from results reported on the Company’s income statement. ~~DGM profitability~~DGP is calculated at a ~~division~~divisional (or business segment) level. The calculation adds gross ~~margin~~profit from rental operations, sales and other revenues and then subtracts ~~direct selling, general and administrative (“SG&A”)~~DSG&A costs that are incurred by the division (or business segment), but excludes corporate overhead costs incurred that are allocated to the division (or business segment). RRRE is calculated by taking gross profit ~~on rents~~ and subtracting ~~direct SG~~DSG&A, then dividing the result by the monthly average original acquisition cost of equipment (including held-for-resale equipment and accessories).

In addition, the Committee added a new metric to the profitability component for 2011, which measures sales, general and administrative expenses as a percentage of rental revenue (“SGAR”). For corporate executive officers, the measure will be based on total Company sales, general and administrative expenses as a percentage of total Company rental revenue (“TSGAR”). For divisional executive officers, the measure will be based on divisional sales, general and administrative expenses as a percentage of divisional rental revenue (“DSGAR”).

The Company believes these are the most appropriate metrics to support the long-term financial health of the Company. We use a collaborative process between our Chief Executive Officer, Chief Financial Officer and various other executive officers to determine the annual profitability goal for each of the executive officers of the

Company, which goals are then recommended to the Committee. The Committee then reviews each executive officer’s compensation history and performance before determining final ~~grant~~ levels for such profitability goals.

The annual profitability ~~goal will be~~goals for each division and the Company are established based upon a “realistic stretch” philosophy. The Company’s management ~~will determine~~determines the potential annual financial performance offor each division and the Company based upon its outlook for the opportunity levels in the markets in which it operates, strategic and tactical initiatives and other key factors and special circumstances, applying a “realistic stretch” view to what potentially can be accomplished. It is expected that although it ~~will~~would take a significant amount of effort on the part of each individual, 100% of the target annual profitability level ~~will~~can be achieved for the year. It is assumed any amount in excess of the target annual profitability goal ~~will~~would be difficult to achieve unless extraordinary efforts ~~are made.~~

or events occur. Each executive officer has a designated percentage of ~~W-2~~ base salary for the calendar year that can be earned for achieving 100% of ~~their~~his or her respective annual profitability goal. For levels achieved between 80% and 99% of the profitability goal, a rapidly reducing scale ~~will be~~is utilized to determine bonus percentage amounts of ~~W-2~~ base salary as shown in the table below:

No amount is paid for levels below 80% of the profitability goal. For each 1% increase achieved above 100% of the profitability goals for PTI and ~~DGM,~~DGP, an additional 2% of ~~W-2~~ base salary ~~will be~~is awarded. For each 1% achieved above 100% of the profitability goal for RRRE, up to a maximum increase of 15% above the 100% target level, an additional 2% of ~~W-2~~ base salary ~~will be~~is awarded, ~~times~~multiplied by the profitability goal percentage bonus amount. The maximum overage percentage of ~~W-2~~ base salary that can be earned by an executive officer cumulatively for all profitability goals is the individual executive officer’s maximum profitability percentage at 100% of achievement of the goal, as listed below for the named executive officers under ~~“Bonus~~“Bonus Plan ~~Percentages.~~Percentages,” so that the maximum he or she can earn is two times the target bonus percentage for profitability.

The second component for the Bonus Plan measures each executive officer’s success at accomplishing his or her personal annual priorities. Final determination of the personal annual priorities for each executive officer rests with the Chief Executive Officer (other than the personal annual priorities of the Chief Executive Officer, which are determined by the Committee, after consultation with the Chairman of the Board of Directors and separately with all independent directors). These personal annual priorities are measured periodically throughout the year and paid annually, using a collaborative process between the Chief Executive Officer or a Senior Vice

President and each executive officer. Final determination of the personal annual priorities for each executive officer will rest with the Chief Executive Officer (other than the Chief Executive Officer priorities which are determined by the Committee, after consultation with the Chairman of the Board of Directors, and then separately with all independent directors). The personal annual priorities for each executive officer generally are comprised of a maximum of four items deemed to be the most critical priorities that require action to be taken for the current evaluation period. Each priority ~~will be~~is weighted according to (1) the critical nature of the priority relative to other priorities, and (2) the amount of time and effort involved in accomplishing the priority relative to other priorities.

Listed below under ~~the “Bonus~~“Bonus Plan ~~Percentages” section~~Percentages” is a schedule identifying each named executive officer and the percentage amounts of ~~W-2~~ base salary for the calendar year ~~2008~~2011 that ~~can be~~could have been earned under this component for achieving a 100% rating for all personal priorities. In the event of truly outstanding achievement under an individual personal annual priority, an executive officer may receive up to a maximum score of 125%. Although infrequent, it is possible for an executive officer to achieve 125% in each of his or her personal annual priorities. Each personal annual priority goal represents a challenge and complete success is not always solely in the control of the executive officer. There are factors that may affect the outcome, including changes in market conditions

and unanticipated variables. ~~In fact, no executive officer has achieved 100% on all of his or her personal annual priority goals in any of the past three years. Typically, each~~Each personal annual priority is measured and the overall weighted average of achievement for all personal annual priorities is multiplied by the total percentage of base salary allotted to personal annual priorities available to each executive officer. Annually, the Committee uses its discretion to allocate specific percentages of profitability and personal annual priorities for each executive officer.

Percentages of calendar year ~~2008 W-2~~2011 base salary amounts for ~~both~~ the profitability goal and the personal annual priorities components ~~per~~for each named executive officer ~~position~~ are listed ~~below:~~in the table below (which includes percentages applicable if the target is met for each goal, as well as the maximum percentages applicable if the target is exceeded for each goal).

The Company’s ~~2008~~2011 annual PTI profitability goal was ~~$73,022,000.~~$63,739,000. The actual ~~2008~~2011 annual PTI achieved was ~~$67,702,000~~$81,058,000, or ~~92.7%~~127% of the goal. ~~Based on the profitability table above, each executive officer received 60% of their designated PTI bonus amount.~~

Mr. Kakures achieved ~~75%~~93% of his ~~2008 Personal Annual Priorities~~2011 personal annual priorities goals, consisting of managing strategic growth initiatives, ~~succession planning, information system upgrades~~SG&A expense control, continued expansion of Adler Tank Rentals’ activities, and ~~corporate overhead review.~~other strategic and tactical initiatives. Mr. ~~Pratt~~Hanna achieved ~~96%~~94% of his ~~2008 Personal Annual Priorities~~2011 personal annual priorities goals, consisting of strategic growth initiatives, corporate and divisional finance support, capital structure including renewing long-term debt facility, enhanced investor relations and information system upgrades. Mr. Hanna achieved 83% of his 2008 Personal Annual Priorities goals consisting of leadership development,the success of new initiatives, ~~rental asset deployment,~~go-to-market strategies, and ~~integration~~other leadership and sales development activities. Mr. Pratt achieved 95% of ~~subsidiaries.~~his 2011 personal annual priorities goals, consisting of strengthening long-term capital structure, implementing a new enterprise financial system, continued investor relations activities, SG&A expense control, and other strategic initiatives. Mr. Rose achieved ~~88%~~82% of his ~~2008 Personal Annual Priorities~~2011 personal annual priorities goals, consisting of success of real estate and facility development, enterprise risk management, information ~~system upgrades, leadership development,~~technology and safety initiatives, and corporate ~~overhead review, and upgrades to retirement plan diversification.~~succession planning. Mr. ~~Brown~~Hawkins achieved ~~98%~~91% of his ~~2008 Personal Annual Priorities~~2011 personal annual priorities goals, consisting of ~~leadership development, success~~sales and asset management initiatives, environmental sector growth, and strategic initiatives.

The Annual Bonus amounts under the Bonus Plan paid to each of ~~new modular initiatives, rental asset deployment, and support~~the named executive officers are listed in column (g) in the“Summary Compensation Table” on page 31 of ~~information system upgrades.~~this Proxy Statement.

~~2009 Changes to Components for~~2012 Non-Equity Performance-Based Incentive ~~Plan~~Compensation

~~For fiscal~~The percentages of calendar year ~~2009,~~2012 base salary amounts for the profitability goal and the personal annual priorities components for each named executive officer are the same as ~~part of management’s expense reduction efforts due to~~ the ~~current and forecasted economic conditions, a 25% reduction of 2009 bonus target~~ percentages ~~has been implemented. The 2009~~ listed above under “Bonus Plan ~~percentages are as follows:~~Percentages”.

InUnder the terms of the Bonus Plan, in the event of a named executive officer’s termination with the Company, voluntarily or involuntarily, with or without cause, which occurs prior to the end of the fiscal year, his or her cash bonus shall be prorated accordingly and distributed to such named executive officer upon termination.

~~We believe that the use~~Historically, we had a practice of stock options is the best “performance-based” equity vehicle because of our focus on long-term sustained growth in earnings per share, accomplished through net income growth, efficient use of capital and optimizing strategic growth opportunities. Our intent is that our executive officers be rewarded when our shareholders realize long-term growth in the price appreciation of our stock. Unless our financial performance over a long-term period drives an increase in our stock price, the options granted provide little or no value to our executive officers.

~~Our practice has been to grant~~granting annual stock options to executive officers with a five-year vesting period (20% per year)~~. When granting~~, based on our philosophy of rewarding our executive officers when our shareholders realized long-term growth in the appreciation of our stock.

In the second half of 2009, the Committee directed management and Compensia to evaluate a variety of equity grant alternatives allowed under the 2007 Plan, including stock options, SARs and RSUs. Criteria considered included the direct correlation between the financial performance of the Company, the employee’s profit and loss domain and the grant level earned, the dilutive impact of stock option grants to earnings per share (“EPS”), and the employee’s ability to increase his or her personal holdings of the Company’s shares. Based on this evaluation, the Committee concluded it would be in the best interest of the Company and its shareholders to modify its equity granting approach beginning in 2010 to 50% personal merit/service-based equity awards and 50% EPS performance-based awards. The goal was to increase the employee’s focus on long-term EPS financial performance, decrease the share dilution impact of stock option grants, and increase the likelihood of employees holding more shares over time.

For designated employees, including executive officers, the new approach approved by the Committee is to grant 50% of the established Black-Scholes value as SARs vesting over five (5) years. In effect, the SARs are merit/service-based equity remuneration. The other 50% of the Black-Scholes value are granted as RSUs and earned based upon achievement of a three-year cumulative EPS goal with 60% vesting upon meeting the EPS target at the end of year three and subsequent vesting of 20% per year over next two years.

In 2010, the Committee approved a change for divisional officer positions, including Mr. Hawkins, for the 50% RSU equity grant to be earned based upon a three-year cumulative EBIT performance of their respective division rather than a three-year cumulative Company EPS target. By having each divisional officer’s performance tied directly to his or her respective division’s performance, it allows for that officer to be measured without the influence, positive or negative, of any other division’s performance.

In addition, the Committee approved a change to the settlement requirements of the RSUs granted in 2011 and later, such that for all RSU grants settled in net shares (after the Company withholds shares in connection with the individual employee’s tax liability), a minimum of 10% of those net shares must be retained by the executive officer until they have met the stock ownership levels described in “Executive Officer Stock Ownership Guidelines” below.

Consistent with the Company’s Equity Granting Policy, as described under that heading below, in February 2011, designated employees, including executive officers, received equity grants, the amounts of which that were granted to our named executive officers are listed in the “2011 Grant of Plan-Based Awards” table on page 32 of this Proxy Statement.

When making equity grants, we first establish a dollar value of the total equity compensation to be awarded ~~for~~to each executive officer ~~position~~ based on Compensia’s analysis. On the date of the grant, we divide that total ~~stock option~~equity fair value dollar amount by the per share fair value, calculated using the ~~Black Scholes Option~~Black-Scholes option pricing model, and generally round up to the nearest ~~1,000~~100 shares to determine the number of shares underlying options to ~~award.~~be awarded. Although we use what we consider to be a reasoned approach in determining the number of ~~options~~underlying shares to award our executive officers ~~using~~with a formula that is based on a widely accepted option-pricing model, the ultimate value of the ~~options~~equity issued only becomes clear when ~~they~~underlying shares vest and are ~~exercised.~~sold. The ~~stock options~~SARs may not realize any value, or they may be worth much more than the fair value initially estimated. As a result, we do not consider realizable gains from prior stock option or other types of equity grants or existing levels of share ownership when setting new grant amounts.

The Board of Directors believes that, in order to better align the interests of management and shareholders, executive officers should have ~~historically granted~~a significant financial (equity) stake in the Company. Each executive officer has a target level of Company Common Stock value to achieve within seven (7) years of the later of his or her date of hire or March 1, 2007. The target level of Common Stock value to be achieved is a multiple of each executive officer’s base salary. The multiples of executive officer base salary are four (4) times for the Chief Executive Officer and two (2) times for all other executive officer positions. In evaluating whether the Common Stock value ownership guideline has been met, all shares of Common Stock owned, Employee Stock Ownership Plan (“ESOP”) shares and 50% of the value (market price less strike price) of all vested unexercised stock options ~~with the belief that stock options better align our~~are considered. The Board of Directors evaluates whether exceptions should be made for any executive ~~officers’ interests with shareholders’ long term interests. The 2007 Plan allows for~~officer on whom this requirement would impose a ~~variety of equity grants and the Committee may determine other methods that more closely align our executive officers’ interests with our shareholders’ interests.~~financial hardship.

~~On February 2,~~In 2007, the Board of Directors adopted an equity granting methodology for all designated directors, executive officers and key employees whereby there will be one annual equity grant date. This date ~~will be~~is the date when the blackout window opens after the Company’s year-end earnings are released. All designated directors, executive officers and employees ~~will~~are eligible to receive an equity grant on the annual equity grant date with an exercise price (for stock ~~options)~~options and SARs), or grant price (for RSUs), equal to the NASDAQ Stock Market close price on that day. The Board of Directors ~~will convene~~convenes a meeting on this date after the NASDAQ Stock Market closes to determine the number of shares to be granted. ~~If the~~The Board of Directors ~~grants~~may grant to the Chief Executive Officer an additional ~~“bucket”~~allotment of options or shares to be granted at his discretion to new hires and promotion candidates over the course of the following year, with the grant date and exercise or grant price ~~will be~~ based on the last trading day of each month of the employment event. This ~~“bucket” will~~allotment is not be available to executive officers, as all grants to executive officers must be made by the Committee.

~~Executive Officer Stock Ownership Guidelines~~Compensation Recoupment Policy

~~The~~In 2011, the Board of Directors adopted a Compensation Recoupment Policy that applies to executive officers if the Company is required to restate its financial statements. The Board believes it is desirable and in the best interests of the Company and its shareholders to maintain and enhance a culture that is focused on integrity and accountability and believes that ~~in order~~this policy discourages conduct detrimental to ~~better align~~ the ~~interests of management and shareholders,~~Company’s sustained growth. This Compensation Recoupment Policy requires any current or former executive ~~officers should have a significant financial (equity) stake~~officer, in the ~~Company. Each executive officer has a target level~~event of Company Common Stock value to achieve within seven (7) years of the later of his or her date of hire or January 1, 2007. The target level of Common Stock value to be achieved will be a multiple of each executive officer’s base salary. The multiples of executive officer base salary will be four (4) times for the Chief Executive Officer and two (2) times for all other executive officer positions. In evaluating whether the Common

Stock value ownership guideline has been met, all common shares owned, Employee Stock Ownership Plan (“ESOP”) shares and 50% of the value (market price less strike price) of all vested unexercised stock options will be considered. The Board of Directors will evaluate whether exceptions should be made for any executive officer on whom this requirement would impose a financial ~~hardship.~~restatement, to reimburse the Company with respect to any incentive compensation received during the past three years that is in excess of that which would have been received if such compensation had been based upon the financial statements as so restated.

Pursuant to the Company’s Insider Trading Policy, which was most recently amended and restated on December 9, 2010, executives of the Company are prohibited from engaging in certain transactions with respect

to the Company’s Common Stock, such as puts, calls and other exchange-traded derivatives, without prior consent of the Company’s compliance officer. These transactions reduce or cancel the risk of an investment in the Common Stock, particularly in the short-term. Therefore, they may create the appearance that the executives are trading on inside information. Additionally, certain forms of hedging or monetization transactions allow a shareholder to lock in much of the value of his or her stock holdings, often in exchange for all or part of the potential for upside appreciation in the stock. These transactions allow the holder to continue to own the covered securities, but without full risks and rewards of ownership. Therefore, executives are also prohibited from hedging transactions without prior consent of the Company’s compliance officer. No executive has been approved for any transaction described in this paragraph.

Executive officers are entitled to and eligible only for the same fringe benefits for which all of our employees are eligible. We do not have programs in place to provide personal perquisites for any employee. Our healthcare and other insurance programs, including the ~~program’s~~programs’ participation costs, are the same for all eligible employees, except that any executive officer employed with the Company for at least 20 years may remain on the Company’s health insurance policy after retiring from the Company, provided that such executive officer pays 100% of the ~~premiums after retiring from the Company.~~premiums. Our annual discretionary ~~contribution~~contributions to the Company’s ESOP, expressed as a percentage of eligible wages, are also the same for all eligible employees, including each named executive officer, subject to all applicable Internal Revenue Service contribution limits and formulas for plans of these types.

We do not have special severance or change in control arrangements with our executive team; however, our equity compensation plans provide for full acceleration of equity awards upon a qualifying termination after a change in control for all employees of the Company. The Committee believes that providing this vesting acceleration assists us in attracting and retaining key employees, including our executives, and promotes stability and continuity of our key employees, which we believe is in the best interests of our shareholders. For details, see “Potential Payments upon Termination or Change-in-Control” on page 36 of this Proxy Statement.

Section 162(m) of the Code limits the corporate deduction for compensation paid to executive officers to $1 million unless such compensation qualifies as “performance-based compensation.” Among other things, Section 162(m) requires approval of the performance-based compensation by our shareholders. The Compensation Committee intends to maximize our ability to deduct executive compensation for tax purposes to the extent structuring our executive compensation for tax purposes is in alignment with our compensation philosophy. With respect to the compensation paid to our named executive officers in ~~2008,~~2011, the ~~cash~~ compensation was below the $1 million limit for all of our named executive officers, ~~and~~except Mr. Kakures with compensation of $414,154 above the ~~equity grants have been structured to qualify as performance-based compensation under~~ Section 162(m) ~~of the Code.~~limit.

We accrue our named executive officers’ salaries and incentive awards as an expense when earned. For our stock ~~options, Statement of~~based compensation, the Financial Accounting Standards Board’s Accounting Standards Codification Topic 718,Compensation—Stock Compensation(“~~SFAS”~~ASC 718”) ~~No. 123R,~~~~Share-Based Payment~~, requires us to recognize compensation expense within our income statement for all share-based payment arrangements, which includes employee stock option plans. The expense is based on the grant-date fair value of the options granted, and is recognized ratably over the requisite service period. We adopted SFAS No. 123R under the modified prospective method. Under the modified prospective method, SFAS No. 123R applies to new awards and to awards modified, repurchased, or cancelled after January 1, 2006, as well as to the unvested portion of awards outstanding as of January 1, 2006. Our stock options are accounted for as equity awards. The ~~Compensation~~ Committee considers the expense of equity awards as part of its overall evaluation of our equity compensation program.

Notwithstanding anything to the contrary set forth in any of the Company’s previous filings under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, that might incorporate future filings, including this Proxy Statement, with the SEC, in whole or in part, the following report shall not be deemed to be incorporated by reference into any such filings, nor shall the following report be deemed to be incorporated by reference into any future filings under the Securities Act or the Exchange Act, unless specifically stated to be incorporated by reference therein.

The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis ~~Required~~required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

The following table provides summary information concerning the compensation earned during the fiscal years ended December 31, 2011, December 31, 2010 and December 31, 2009 by our Chief Executive Officer, our Chief Financial Officer and each of our three most highly compensated executive officers during our last completed fiscal year whose total salary, bonus and other compensation exceeded ~~$100,000 during the fiscal years ended December 31, 2008, December 31, 2007 and December 31, 2006.~~$100,000. The executive officers listed below are referred to in this Proxy Statement as the “named executive officers.”

~~Our shareholders have approved the 2007 Plan and the 1998 Stock Option Plan.~~ The following table provides information regarding our equity compensation plans as of December 31, ~~2008:~~2011:

The ESOP is intended to qualify as an employee stock ownership plan as defined in Section 4975(e)(7) of the Code, and as a stock bonus plan under Section 401(a) of the Code. The Company created a trust under the ESOP to hold plan assets, with Union Bank of California, N.A. acting as trustee. The Company may amend or terminate the ESOP at any time. In September 2003, the Company amended the ESOP to name North Star Trust Company as ~~Trustee~~trustee in place of Delight Saxton and Thomas J. Sauer. The ESOP was amended and restated on January 1, 2008 to amend certain definitions and to provide the Company with the option to establish a policy under which employees may elect voluntarily to not participate in the ESOP, among other amendments. All assets acquired by the trust are administered by a plan committee (the “Plan Committee”) composed of long-term Company employees Deborah Barbe, Kay Dashner, Brian Jensen, Tony Moton and Garni Thomas for the exclusive benefit of employees who are participants in the ESOP and their designated beneficiaries.

Employees who are 21 years or older are entitled to participate in the ESOP when they have completed one year of service to the Company by June 30 of any year. As of December 31, ~~2008, 478~~2011, 514 employees of the Company were participants in the ESOP. Allocations to each eligible participant’s trust account are made each year from Company contributions, trust income or loss and re-allocations of forfeited ESOP benefits if the

participant remains employed throughout the year and has worked a minimum number of hours or his or her employment has terminated due to death, disability or Normal Retirement (as that term is defined in the ESOP) during that year. Allocations are made based upon each participant’s compensation ~~from the Company~~ and time employed by the Company. As provided by the ESOP, a participant’s interest in the ESOP becomes 20% vested after two years of service and will continue to vest at 20% per year thereafter until it is fully vested after the sixth year, or upon death, disability or Normal Retirement. The vesting schedule will be accelerated and the Company’s contributions and ESOP allocations will be modified if the ESOP becomes a “top heavy plan” under federal tax laws.

ESOP benefits fully vest upon a participant’s death, disability or Normal Retirement. In the case of a participant’s termination with the Company, voluntary or involuntary, for cause or not for cause, such participant shall receive any and all ESOP benefits which have vested as of the date of termination.

In general, Company contributions are immediately tax deductible by the Company, but participants do not recognize income for tax purposes until distributions are made to them. The Company’s Board of Directors determines the amount of Company contributions to the ESOP to be made each year in cash, Company Common Stock, by forgiveness of indebtedness owed by the ~~Trust~~trust to the Company or any Affiliated Company (as that

term is defined in the ESOP) or by the Company’s or an Affiliated Company’s payment of indebtedness owed by the ~~Trust~~trust to any third party, with consideration for federal tax laws. The Company ~~made~~did not make a ~~$700,000~~ cash contribution to the ESOP for the ~~2008~~2011 plan year, and the Company made cash contributions totaling ~~$4,975,000 for~~$2,100,000 during the four years prior to ~~that.~~the 2011 plan year. Employees may not make contributions to the ESOP. Contributions in cash are used to purchase Company Common Stock. However, other investments may be made and loans may be incurred by the ESOP for the purchase of Company Common Stock.

The Plan Committee has determined that cash dividends paid by the Company on shares of the Company’s Common Stock held by the ESOP shall be paid out to the participants. The ~~plan committee~~Plan Committee has the right to revoke this decision at any time.

~~The purpose~~A general description of ~~the~~our 2007 Plan is ~~to retain key employees, consultants~~set forth below in the section entitled “General Description of our 2007 Plan” and ~~directors~~is qualified in its entirety by the terms of the ~~Company having experience~~proposed amended and ability, to attract new employees, consultants and directors whose services are considered valuable, to encourage the sense of proprietorship and to stimulate the active interest of such persons in the development and financial success of the Company and its subsidiaries. All of our employees, consultants and directors are eligible to participate in the 2007 Plan. The Board of Directors believes that grants of options and other forms of equity participation is an increasingly important means to retain and compensate employees, consultants and directors. The 2007 Plan provides for the grant of stock options, restricted stock, RSUs, and stock appreciation rights (collectively referred to as “awards”). Stock options granted under the 2007 Plan may be either incentive stock options under the provisions of Section 422 of the Code, or nonqualified stock options. Incentive stock options may be granted only to employees. Awards other than incentive stock options may be granted to employees, directors and consultants of the Company and its related entities. To the extent that the aggregate fair market value of shares of the Company’s Common Stock subject to options designated as incentive stock options which become exercisable for the first time by a participant during any calendar year exceeds $100,000, such excess options shall be treated as nonqualified stock options. Under the 2007 Plan, awards may be granted to such employees, directors or consultants who are residing in non-U.S. jurisdictions as the administrator may determine from time to time. Each award granted under the 2007 Plan shall be designated in an award agreement.

As of March 31, 2009, options for an aggregate of 1,549,000 shares have been granted to 50 key employees at exercise prices ranging between $15.62 and $34.28 per share; and of such options granted, no options have been exercised for the purchase of shares, options for 21,000 shares have been terminated, and options for 1,528,000 shares remain outstanding. In addition to these options to key employees, options for an aggregate of 154,000 shares have been granted to non-employee directors of the Company at an exercise price of $20.71 per share; no options have been exercised, options to purchase 22,000 shares have been terminated, and options for 132,000 shares remain outstanding.

As of March 31, 2009, RSUs for an aggregate of 20,000 shares have been granted to 7 key employees; and of such RSUs granted, no RSUs have vested, and no RSUs have been terminated. In addition to these RSUs to key employees, RSUs for an aggregate of 20,000 shares have been granted to non-employee directors of the Company; and of such RSUs granted, no RSUs have vested and no RSUs have been terminated.

~~As of March 31, 2009, a total of 545,050 shares remain available in the 2007 Plan for future grants.~~

~~If there is a “corporate transaction” of the Company (as defined in the~~restated 2007 Plan, a ~~“Corporate Transaction”), all outstanding awards will terminate if not assumed~~copy of which is attached to this Proxy Statement asAppendix A and is incorporated herein by the successor entity. In addition and except as otherwise provided in an individual award agreement, assumed or replaced awards will automatically become fully vested if a participant is terminated by the acquirer without cause within 12 months after a Corporate Transaction. In the event of a Corporate Transaction where the acquirer does not assume or replace awards, all of these awards become fully vested immediately prior to the consummation of the Corporate

Transaction. In the event of a “change in control” of the Company (as defined in the 2007 Plan, a “Change in Control”) and except as otherwise provided in an individual award agreement, outstanding awards will automatically become fully vested if a participant is terminated by the acquirer without cause within 12 months after such Change in Control.

In the event an option holder ceases to be employed by the Company (either voluntarily or involuntarily without cause), outside the context of a Change in Control, the exercise rights under his or her option will not accelerate and will not become fully vested and the option holder may exercise his or her option before the earlier of (1) 190 days after the date he or she ceases to be an employee of the Company or its subsidiaries and (2) the normal expiration date of the option. In the event an option holder is terminated by the Company with cause, the exercise rights under his or her option terminate on the date he or she ceases to be an employee of the Company or its subsidiaries, except as otherwise determined by the Company. In the event an option holder ceases to be employed by the Company by reason of disability or death, the exercise rights under his or her option do not accelerate and do not become fully vested and the option holder may exercise his or her option before the earlier of (1) 12 months after the date he or she ceases to be an employee of the Company or its subsidiaries (or in the case of death which occurs three months after termination of employment, 12 months after the date of death) and (2) the normal expiration date of the option.

~~With the exception of the information set forth above, none of the named executive officers exercised or held an option during 2008 under the 2007 Plan.~~reference.

The 2007 Plan replaced the Company’s 1998 Stock Option Plan (as amended, the “1998 Plan”) and no further options will be granted under the 1998 Plan. As of March 31, ~~2009,~~2012, options for an aggregate of 3,622,500 shares of Common Stock have been granted to 144 key employees at exercise prices ranging between $7.81 and $31.67 per share; and of such options granted, options have been exercised for the purchase of ~~1,471,958~~1,915,167 shares, options for ~~540,550~~619,250 shares have been terminated, and options for ~~1,589,992~~1,088,083 shares remain outstanding. In addition to these options to key employees, options for an aggregate of 528,000 shares have been granted to non-employee directors of the Company at exercise prices ranging between $7.97 and $31.14 per share; and of such options granted, ~~134,000~~189,000 shares have been exercised, options for 20,000 shares have been terminated, and options for ~~374,000~~319,000 shares remain outstanding.

If there is an “acquisition” of the Company (as defined in the 1998 Plan, an “Acquisition”), the acquirer may assume the options or replace the options for new options under the acquirer’s plan. If the options are not assumed or replaced, options will automatically become fully vested and exercisable as of the date of the Acquisition. In the event of ~~an Acquisition where the acquirer does not assume or replace the options, the options become fully vested immediately prior to the consummation of the Acquisition. In the event of~~ a “change in control” (as defined in the 1998 Plan) of the Company, outstanding options will automatically become fully vested if the option holder’s employment is terminated other than by the option holder with or without cause within two years after such change in control.

Except as described below, in the event an option holder ceases to be employed by the Company for any reason (either ~~voluntary~~voluntarily or ~~involuntary,~~involuntarily, for cause or not for cause), outside the context of a change in control, the exercise rights under his or her option will not accelerate and will not become fully vested and the option holder may exercise his or her option before the earlier of (1) three months after the date he or she ceases to be an employee of the Company or its subsidiaries and (2) the normal expiration date of the option. In the event an option holder ceases to be employed by the Company by reason of disability or death, the exercise rights under his or her option do not accelerate and do not become fully vested and the option holder may exercise his or her option before the earlier of (1) 12 months after the date he or she ceases to be an employee of the Company or its subsidiaries (or in the case of death which occurs within three months after termination of employment, 12 months after the date of death) and (2) the normal expiration date of the option.

~~With the exception of the information set forth above, none of the named executive officers exercised or held an option during 2008 under the 1998 Plan.~~

In 1995, the Company established a contributory retirement plan, the McGrath RentCorp 401(k) Plan, as amended (the “401(k) Plan”), covering eligible employees of the Company with at least three months of service. The 401(k) Plan provides that each participant may annually contribute an elected percentage of his or her salary, not to exceed the statutory limit. The Company, at its discretion, may make matching contributions. ~~The~~Due to austerity measures, the Company made no contributions in ~~2007~~2010 and ~~made an employer profit sharing contribution~~nonelective contributions of ~~$700,000~~$1,019,903 in ~~2008.~~2011.

Under the terms of our Bonus Plan, 1998 Plan, 2007 Plan, and ESOP, payments may be made to each of our named executive officers upon his or her termination of employment or a change in control (as defined in each plan) of the Company. See “Compensation Discussion and Analysis” and “Equity Compensation Plan Information” for a description of, and an explanation of the specific circumstances that would trigger payments under, each plan.

The following table sets forth the estimated payments that would be made to each of our named executive officers upon voluntary termination, involuntary termination—not for cause, ~~—for~~for cause, or ~~—as~~as a qualifying termination in connection with a change in control (as defined in each plan),—and death or permanent disability. The payments would be made pursuant to the plans identified in the ~~preceding~~above paragraph. The information set forth in the table below assumes the termination event occurred on December 31, ~~2008.~~

2011. The actual amounts to be paid out can only be determined at the time of ~~such~~an executive’s separation from the Company and may differ materially from the amounts set forth in the table below. The amounts set forth in the table below do not reflect the withholding of applicable state and federal taxes.

Executive Severance Policy. We do not have employment agreements or an executive severance policy.

Pension Benefits. All employees who participate in our ESOP are entitled to ~~these~~their vested amounts upon termination of their employment.

Health and Welfare ~~Benefit~~Benefits and Executive Benefits and Perquisites Continuation. An executive officer is not entitled to any continuation of his or her health and welfare benefits, executive benefits or perquisites (other than pursuant to COBRA) following the termination of his or her employment, except that any executive officer employed with the Company for at least 20 years may remain on the Company’s health insurance policy after he or she retires from the Company, provided he or she pays 100% of the ~~premiums after he or she retires from the Company.~~premiums.

Long-Term Incentives.��Except in the circumstances discussed below, an executive officer forfeits his or her stock options to the extent they are unvested and is not entitled to any continuation of vesting or acceleration of vesting with respect to his or her options. Such executive is entitled to exercise any vested options for a period of 90 days after termination and is entitled to continue to hold his or her shares of unrestricted stock after termination in the same manner as any other employee of the Company. In the event of a qualifying termination following a change in control, an executive officer is entitled to the acceleration of vesting with respect to all of his or her stock options, in the same manner as any other employee of the Company.

There are no family relationships among any of the directors or executive officers of the ~~Company.~~Company, except that David M. Whitney and Kristina VanTrease are husband and wife.

The Compensation Committee of the Company during ~~2008~~2011 consisted of Messrs. Dawson, Hood, Smith and Stradford. No member of the Compensation Committee is a present or former executive officer or employee of the Company or any of its subsidiaries. No executive officer of the Company has served on the board of directors or compensation committee of any entity which has one or more executive officers serving as a member of the Company’s Board of Directors or Compensation Committee. See “Certain Relationships and Related Transactions” below for discussions about related transactions regarding the Compensation Committee members.

The Company has entered into ~~Indemnification Agreements~~indemnification agreements with each of our directors and executive officers. These agreements require the Company to indemnify our executive officers or directors against expenses and, in certain cases, judgments, settlements or other payments incurred by an executive officer or director in suits brought by the Company, derivative actions brought by our shareholders and suits brought by other third parties. Indemnification has been granted under these agreements to the fullest extent permitted under California law in situations where an executive officer or director is made, or threatened to be made, a party to the legal proceeding because of his or her service to the Company.

In connection with the completion of the acquisition of substantially all of the assets of the liquid and solid tanks and boxes rental business of Adler Tank Rentals, LLC on December 11, 2008, we hired Steven Adler, who, prior to the closing, owned 75% of Adler Tank Rentals, LLC (“Former Adler Tanks”). Mr. Adler currently holds the position of President of our ~~wholly owned~~wholly-owned subsidiary, Adler Tank Rentals, LLC (“Adler Tanks”), which owns and operates the Adler Tanks business. Mr. Adler has a number of relationships with entities that conduct business with Adler Tanks which are described below.

Prior to the closing of the acquisition of substantially all of the assets of Former Adler Tanks, and the real estate transactions consummated in 2011, the Audit Committee and the Board of Directors reviewed and granted waivers under the Company’s ~~code~~Code of ~~business conduct~~Business Conduct and ~~ethics~~Ethics with respect to the conflicts of interest and related party transactions and relationships described above under ~~“Adler~~“Adler Tank ~~Rentals.”~~Rentals”.

Pursuant to the Audit Committee charter, the Audit Committee is responsible for reviewing and discussing with management and the Company’s independent auditors any transactions or courses of dealing with related parties. The Audit Committee considers the following factors in determining whether to approve or disapprove (with referral to the Board of Directors) any such related party transaction or course of action: (i) the financial accounting accorded the transaction or course of action; (ii) whether the terms or other aspects differ from those that would likely be negotiated with independent parties; and (iii) whether the proposed disclosure of the transaction or course of dealing, if any, is in accordance with generally accepted accounting principles and SEC regulations.

The following table sets forth certain information known to the Company with respect to beneficial ownership of our Common Stock as of ~~March 31, 2009,~~April 16, 2012, by (i) each shareholder known to the Company to own beneficially more than 5% of our Common Stock; (ii) each of our directors; (iii) each executive officer named in the Summary Compensation Table above; and (iv) all directors and executive officers of the Company as a group:

Our Board of Directors believes that full and open communication between shareholders and members of our Board of Directors is in the best interests of our shareholders. Shareholders may contact any director or committee of the Board of Directors by writing to the Compliance Officer, c/o McGrath RentCorp, 5700 Las Positas Road, Livermore, California 94551. The compliance officer will review all such communications for relevance to activities of the Board of Directors and will promptly forward all relevant written communications to the Board of Directors. Comments or complaints relating to our accounting, internal accounting controls, auditing matters, corporate fraud or violations of federal or state laws may be referred directly to our Audit Committee by writing to the Chairman of the Audit Committee, c/o Compliance Officer, McGrath RentCorp, 5700 Las Positas Road, Livermore, California 94551. Further details can be found in ~~our~~ “Reporting Questionable Account and Auditing Practices and Policy Prohibiting Retaliation Against Reporting ~~Employees Policy”~~Employees” and “Corporate Governance Guidelines” found on our website at www.mgrc.com under the Investor Relations section.

Shareholder ~~Proposals~~Recommendations for Membership on our Board of Directors

The Corporate Governance and Nominating Committee will consider shareholder ~~proposals properly submitted to us, including~~ recommendations of ~~qualified~~ director nominee(s), in accordance with the procedures set forth below. In order to have a proposal considered by the Corporate Governance and Nominating Committee for the 2010 annual meeting, a shareholder must submit its proposal and other relevant information in writing to the attention of the compliance officer at our principal executive offices no later than December 23, 2009. The shareholder must submit the following relevant information: (1) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting; (2) the name and address, as they appear on our books, of the shareholder proposing such business; (3) a signed

certificate providing the class and number of shares of our Common Stock which are beneficially owned by the shareholder; (4) any material interest of the shareholder in such business; and (5) any other information that is required to be provided by the shareholder pursuant to Regulation 14A under the Exchange Act, in the shareholder’s capacity as a proponent to the proposal.

~~With respect to recommendations of~~nominees. To recommend director nominee(s), a shareholder must submit the following relevant information in writing to the attention of the compliance officer at our principal executive ~~offices no later than December 23, 2009:~~offices: (1) the name, age, business and residence address of the prospective candidate; (2) a brief biographical description of the prospective candidate, including employment history for the past five years, and a statement of the qualifications of the prospective candidate; (3) the class and number of shares of our Common Stock, if any, which are beneficially owned by the prospective candidate; (4) a description of all arrangements or understandings between the shareholder and the prospective candidate pursuant to which the nomination is to be made by the shareholder if the shareholder and the prospective candidate are different individuals; (5) the candidate’s signed consent to

serve as a director if elected and to be named in ~~the~~our proxy statement; (6) a signed certificate providing the class and number of shares of our Common Stock which are beneficially owned by the shareholder; and (7) any other information that is required to be provided by the shareholder pursuant to Regulation 14A under the Exchange Act. Once the Corporate Governance and Nominating Committee receives the shareholder recommendation, it may deliver to the prospective candidate a questionnaire that requests additional information about the candidate’s independence, qualifications and other matters, including a possible interview, that would assist the Corporate Governance and Nominating Committee in evaluating the candidate, as well as certain information that must be disclosed about the candidate in our proxy statement or other regulatory filings, if nominated.

The Corporate Governance and Nominating Committee will not evaluate candidates differently based on who has made the ~~proposal.~~recommendation. The Corporate Governance and Nominating Committee will consider candidates from any reasonable source, ~~including~~in addition to shareholder recommendations. The Corporate Governance and Nominating Committee has the authority under its charter to hire and pay a fee to consultants or search firms to assist in the process of identifying and evaluating candidates. No such consultants or search firms were used for the slate of director nominees up for election at the Annual Meeting since all directors nominated are for re-election, and, accordingly, no fees have been paid to consultants or search firms in the ~~past~~2011 fiscal year.

We have not received a director nominee recommendation from any shareholder (or group of shareholders) that beneficially owns more than five percent of our Common Stock.

Section 16(a) of the Exchange Act requires our directors, executive officers and persons who own more than 10% of our Common Stock (collectively, “Reporting Persons”) to file initial reports of ownership and changes in ownership of our Common Stock with the SEC and the NASDAQ Stock Market. Copies of these reports are also required to be delivered to us. See “Security Ownership of Certain Beneficial Owners and Management” above for identification of those persons who qualify as “Reporting Persons.”

We believe, based solely on our review of the copies of such reports received or written representations from certain Reporting Persons, that during the fiscal year ended December 31, ~~2008,~~2011, all Reporting Persons complied with all applicable filing requirements.

Our Board of Directors adopted a ~~code~~Code of ~~business conduct~~Business Conduct and ~~ethics,~~Ethics, which was most recently amended and restated on ~~February 2, 2007.~~December 9, 2010. This code applies to all of our employees and our non-employee directors and is posted on our website at www.mgrc.com under the Investor Relations section. The code satisfies the “Code of Ethics” requirements under the Sarbanes-Oxley Act of 2002 as well as the “Code of Conduct” requirements under the Market Place Rules of the NASDAQ Stock Market. The code, among other things, addresses issues relating to conflicts of interests, including internal reporting violations and disclosures, and compliance with

applicable laws, rules and regulations. The purpose of the code is to promote, among other things, honest and ethical conduct, full, fair, accurate, timely and understandable public disclosures, compliance with applicable laws or regulations and to ensure to the greatest possible extent that our business is conducted in a legal and ethical manner. Any waivers or approvals granted under this code with respect to our executive officers and directors may be granted only by the Board of Directors. In addition, any waivers or approvals relating to the principal executive officer, the principal financial officer, the principal accounting officer or controller, or any person performing similar functions, must also be obtained from the Audit Committee. Any waivers or approvals to the code with respect to the remainder of the employees may be granted by our compliance officer, who is currently Randle F. Rose. Any amendments to the code will be promptly disclosed to our shareholders. Our Audit Committee has also established procedures for (a) the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters, and (b) the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters.

Grant Thornton LLP has been selected by the Audit Committee to be the Company’s independent auditors for the Company’s fiscal year ending December 31, 2012. Under the Sarbanes-Oxley Act of 2002 and the rules of the SEC promulgated thereunder, the Audit Committee is solely responsible for the appointment, compensation and oversight of the work of our independent auditors and shareholders are not required to ratify the selection of Grant Thornton LLP. However, we are submitting the selection of Grant Thornton LLP as our independent auditors to our shareholders for ratification as a matter of good corporate practice. In the event that ratification of this selection of independent auditors is not approved by a majority of the shares of Common Stock voting at the Annual Meeting in person or by proxy, the Audit Committee will review our future selection of independent auditors. Even if the appointment of Grant Thornton LLP is ratified by our shareholders, the Audit Committee, in its discretion, may direct the appointment of a different independent auditor at any time during the year if the Audit Committee determines that such a change is in the best interests of the Company and our shareholders.

A representative of Grant Thornton LLP is expected to be present at the Annual Meeting. The representative will have an opportunity to make a statement and will be available to respond to appropriate questions.

Grant Thornton LLP performed services for the Company in fiscal years 2010 and 2011 related to financial statement audit work, quarterly reviews, quarterly earnings release reviews and tax services. Fees related to services rendered by Grant Thornton LLP for fiscal years 2010 and 2011 were as follows:

Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by Grant Thornton LLP, the Company’s independent registered public accounting firm, must be approved in advance by the Audit Committee to assure that such services do not impair the auditors’ independence from the Company. In April 2004, the Audit Committee adopted an Audit and Non-Audit Services Pre-Approval Policy which sets forth the procedures and conditions pursuant to which audit and non-audit services to be performed by the independent auditors are to be pre-approved. Pursuant to the policy, certain services or categories of services described in detail in the policy may be pre-approved generally on an annual basis together with pre-approved maximum fee levels for such services. The services eligible for annual pre-approval consist of audit services, audit-related services, tax services and other services. If not pre-approved on an annual basis, proposed services must

otherwise be separately approved prior to being performed by the independent auditors. The Audit Committee may also pre-approve particular services on a case-by-case basis. In addition, any services that receive annual pre-approval but exceed the pre-approved maximum fee level also will require separate approval by the Audit Committee. The Audit Committee may delegate authority to pre-approve audit and non-audit services to any member of the Audit Committee, but may not delegate such authority to management. The Company’s independent auditors and Chief Financial Officer are required to periodically report to the Audit Committee regarding the extent of services provided by the independent auditors in accordance with the pre-approval policy and the fees for the services performed to date. The Audit Committee pre-approved all of the audit, audit-related, tax and all other services described as Audit Fees in the table above.

Notwithstanding anything to the contrary set forth in any of the Company’s previous filings under the Securities Act or the Exchange Act, that might incorporate future filings, including this Proxy Statement, with the SEC, in whole or in part, the following report shall not be deemed to be incorporated by reference into any such filings, nor shall the following report be deemed to be incorporated by reference into any future filings under the Securities Act or the Exchange Act, unless specifically stated to be incorporated by reference therein.

The Audit Committee currently has four members, consisting of four independent directors, William J. Dawson, Robert C. Hood, Robert P. McGrath and Ronald H. Zech. The Company’s management is responsible for the Company’s internal controls, financial reporting, compliance with laws and regulations and ethical business standards. The Company’s independent registered public accounting firm, Grant Thornton LLP, is responsible for performing an independent audit of the Company’s consolidated financial statements and internal controls over financial reporting in accordance with generally accepted auditing standards of the Public Company Accounting Oversight Board (“PCAOB”) (United States) and to issue reports thereon. The Audit Committee’s responsibility is to monitor and oversee these processes as well as the independence and performance of the Company’s independent registered public accounting firm. However, the members of the Audit Committee are not professionally engaged in the practice of accounting or auditing and are not experts in the fields of accounting or auditing. They rely, without independent verification, on the information provided to them and on the representations made by management and the independent auditors.

The affirmative vote of the holders of a majority of the shares of the Company’s Common Stock present or represented at the Annual Meeting is required to approve the ratification of the selection of Grant Thornton LLP as our independent auditors for the year 2012. Abstentions will have the same effect as a vote against this proposal and broker “non-votes,” if any, will have no effect on this proposal.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTEFOR THE RATIFICATION OF THE SELECTION OF GRANT THORNTON LLP.

The recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“the Dodd-Frank Act”) added Section 14A to the Exchange Act, which requires that we provide our shareholders with the opportunity to vote to approve, on an advisory, non-binding basis, the compensation of our named executive officers as disclosed in this Proxy Statement in accordance with the SEC’s compensation disclosure rules.

As described in detail under the heading “Executive Compensation and Other Information—Compensation Discussion and Analysis,” our executive compensation program is designed to attract and retain exceptional talent, reward past performance and establish and reward measurable objectives for future performance. Our primary objective is to align our executive officers’ interests with the interests of our shareholders by rewarding achievement of established goals that contribute to increased long-term shareholder value. Please read the “Compensation Discussion and Analysis” beginning on page 20 of this Proxy Statement for additional details about our executive compensation programs, including information about the fiscal year 2011 compensation of our named executive officers.

As part of designing and implementing the compensation programs for all employees, the Company considers the risks that may be created and whether any such risks may have an adverse impact on the Company, and whether, overall, the Company’s compensation programs are reasonably likely to have a material adverse impact on the Company. In making this determination, the Company considers the overall mix of compensation for employees as well as the various risk control and mitigation features of our compensation plans, including appropriate performance measures and targets and incentive plan payout maximums.

The Compensation Committee continually reviews the compensation programs applicable to our named executive officers to ensure they achieve the desired goals of aligning our executive compensation structure with our shareholders’ interests and current market practices. As a result of its review process, the Compensation Committee made the following changes to our executive compensation practices:

Reevaluated and updated the 2011 Compensation Peer Group;

Added a new profitability metric for the Annual Bonus, which measures Company and divisional sales, general and administrative expenses as a percentage of rental revenue;

Added a new performance metric for equity compensation, which measures three-year cumulative EBIT performance by division;

A 10% holdback provision was added to executive officers’ RSU settlements to facilitate earlier achievement of stock ownership guidelines for executive officers; and

A clawback policy was adopted, which requires reimbursement by current and former executive officers if a restatement of our financial statements is required.

A more complete explanation of these changes is included in the “Compensation Discussion and Analysis” section of this Proxy Statement.

We are asking our shareholders to indicate their support for our named executive officer compensation as described in this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives our shareholders the opportunity to indicate whether they approve of our named executive officers’ compensation. This vote is not intended to address any specific element of compensation, but rather relates to the overall compensation of our named executive officers and the philosophy, policies and practices described in this Proxy Statement in accordance with the SEC’s compensation disclosure rules. Accordingly, we will ask our shareholders to vote “FOR” the following resolution at the Annual Meeting:

“RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s Proxy Statement for the 2012 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosure.”

The say-on-pay vote is advisory, and therefore not binding on the Company, the Compensation Committee or the Board of Directors. The Board of Directors and our Compensation Committee value the opinions of our shareholders and to the extent there is any significant vote against the named executive officer compensation as disclosed in this Proxy Statement, we will consider our shareholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.

The affirmative vote of the holders of a majority of the shares of the Company’s Common Stock present or represented at the Annual Meeting is required to approve, on an advisory basis, the compensation of the Company’s named executive officers. Abstentions will have the same effect as a vote against this proposal and broker “non-votes,” if any, will have no effect on this proposal.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTEFOR THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SECURITIES AND EXCHANGE COMMISSION.

AMENDMENT AND RESTATEMENT OF THE COMPANY’S 2007 STOCK INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER FROM 1,875,000 TO 2,690,000 SHARES AND TO DECREASE THE MAXIMUM TERM OF FUTURE AWARDS GRANTED UNDER THE 2007 PLAN FROM TEN YEARS TO SEVEN YEARS

On ~~February 27, 2009,~~March 9, 2007, the Board of Directors approved ~~an amendment~~the original McGrath RentCorp 2007 Stock Incentive Plan (the “2007 Plan”) in order for the Company to grant a broader range of equity based awards by replacing the 1998 Plan, which only provided for the grant of stock options, and the 2000 Long-Term Bonus Plan (the “2000 Plan”), which only provided for the grant of stock bonuses to officers and key employees. The 2007 Plan was amended and restated effective June 4, 2009, subject to shareholder approval, in order to increase the maximum aggregate number of shares which could be issued pursuant to all awards thereunder and to decrease the maximum term of awards which may be issued under the 2007 Plan. In February 2012, the Board of Directors unanimously approved amendments to the 2007 Plan, ~~to:~~effective as of and subject to shareholder approval, in order to make certain changes described below under the caption “Proposed Amendments.”

The purpose of the 2007 Plan is to retain key employees, consultants and directors of the Company having experience and ability, to attract new employees, consultants and directors whose services are considered valuable, and to encourage the sense of proprietorship and to stimulate the active interest of such persons in the development and financial success of the Company and its subsidiaries. All of our employees, consultants and directors are eligible to participate in the 2007 Plan. The Board believes that grants of options and other forms of equity participation may become an increasingly important means to retain and compensate employees, consultants and directors. The Board of Directors believes that the proposed amendment and restatement to the 2007 Plan is in the best interests of the Company, consistent with our compensation strategy and essential to the Company’s continued success. The proposed amendments to the 2007 Plan will enable the Company to provide retention incentives to existing personnel and to be flexible and opportunistic in hiring additional personnel that can contribute to the successful development of the Company’s business.

~~If the shareholders do not approve this proposal, the 2007 Plan will remain in effect, and awards may continue to be granted pursuant to its prior provisions.~~

~~The principal purpose of the proposed amendment is to provide the Company with additional shares of Common Stock~~Shares Available under the 2007 Plan

As of December 31, 2011, options and stock appreciation rights covering 3,086,019 shares were outstanding with a weighted average exercise price of $23.52 per share and a weighted average remaining contractual term of 3.51 years, and 187,810 RSUs were outstanding. As of December 31, 2011, 547,834 shares remained available for ~~grants to employees, consultants and directors.~~future grant under the 2007 Plan.

The general description of ~~the principal terms of the~~our 2007 Plan ~~is set forth below. This description~~below is qualified in its entirety by the terms of the proposed amended and restated 2007 Plan, a copy of which ~~reflecting the amendment referenced herein~~ is attached to this Proxy Statement asAppendix A and is incorporated herein by reference.

Since 1982, we have made periodic grants of stock awards to eligible employees. Equity awards, and stock options in particular, have been and continue to be important hiring and retention tools for us. We believe that it is critical to our ability to retain our employees, and to hire new employees, that we continue to have the ability to grant equity awards and that we will be at a competitive disadvantage in the market for key employees if we do not have this ability.

~~We believe that approval of the amendment and restatement of the 2007 Plan will:~~

~~1. Help us retain and attract top talent and focus employees.~~ We believe our practice of granting stock options, and other stock awards, has been a strong contributor in attracting and retaining key employees. Approval of the amendment and restatement of the 2007 Plan will position us to continue to attract and retain the key employees that we need.

~~2. Focus employees on the enhancement of shareholder value.~~ Equity awards link the opportunity to receive competitive levels of compensation with enhancement of shareholder value. Consequently we believe that it is important that a portion of the compensation available to our key employees consist of such awards to focus our employees on increasing the return to shareholders. Approval of the amendment and restatement of the 2007 Plan will enable us to continue to use our equity as an important element of compensation.

~~RSUs to purchase 40,000 shares of Common Stock were unvested and outstanding, all of which had been granted under the 2007 Plan;~~

~~in total, options to purchase 3,643,992 shares of Common Stock were outstanding, of which options to purchase 1,660,000 shares of Common Stock had been granted under the 2007 Plan;~~

~~we had a maximum of 545,050 shares of Common Stock available for future awards (all of these shares were under the 2007 Plan as we do not have the ability to grant stock awards under any other plans;~~

~~no option shares had been exercised and no RSUs had yet vested under the 2007 Plan; and~~

~~for our outstanding options, the weighted average exercise price was $21.94 and the weighted average remaining life was 6.09 years.~~

As of the Record Date, the fair market value of one share of Common Stock as reported on the NASDAQ Stock Market was $16.97. As of the Record Date, there were approximately 660 employees and five non-employee directors eligible to participate in the 2007 Plan and 50 employees (7.6% of our employees) had outstanding equity awards. Capitalized terms used but not defined in this Proposal No. 2 shall have the same meaning as in the 2007 Plan unless otherwise indicated.

A general description of the principal terms of the 2007 Plan is set forth below. This description is qualified in its entirety by the terms of the 2007 Plan, a copy of which reflecting the amendment referenced herein is attached to this Proxy Statement as~~Appendix A~~ ~~and is incorporated herein by reference.~~

Purpose. The purpose of the 2007 Plan, as stated above, is to provide the Company’s employees, consultants and directors, whose present and potential contributions are important to the success of the Company, an incentive, through ownership of the Company’s Common Stock, to continue in service to the Company, and to help the Company compete effectively with other enterprises for the services of qualified individuals. ~~The 2007 Plan was adopted by the Board of Directors on March 9, 2007 and approved by the Company’s shareholders on June 6, 2007.~~

~~Shares Available for Grant.~~ ~~After approval of~~Stock Subject to the proposed amendment, the 2007 Plan provides that a total of 2,690,000 shares of Common Stock are reserved for issuance under the 2007 Plan (which includes shares that have already been issued, as well as shares subject to outstanding awards), plus thePlan.The maximum aggregate number of shares ~~of Common Stock~~which may be issued pursuant to all awards is four million one hundred ninety thousand (4,190,000) shares, plus shares that remained available for grants of awards under the 1998 Plan as of the date the 2007 Plan was originally approved ~~which is equal to 342,800 shares,~~by the Company’s shareholders, plus any shares ~~of Common Stock~~ that would otherwise return to the 1998 Plan as a result of forfeiture, termination or expiration of awards previously granted under the 1998 Plan ~~(had~~(ignoring the ~~1998 Plan not terminated), which number is equal to 67,250 shares as of March 31, 2009, plus any shares of Common Stock that would otherwise return to the 2007 Plan as a result of forfeiture,~~ termination or expiration of ~~awards previously granted;~~the 1998 Plan for the purpose of determining the number of shares available for the 2007 Plan); provided, however, that the maximum aggregate number of shares ~~of Common Stock~~ that may be issued pursuant to incentive stock options is ~~2,690,000~~four million one hundred ninety thousand (4,190,000) shares.

Notwithstanding the foregoing, ~~each one share of Common Stock~~any shares issued ~~pursuant to an award of restricted stock or RSUs counts as two shares of Common Stock under~~in connection with awards other than options and SARs will be counted against the ~~2007 Plan (and is counted~~limit set forth above as two shares for every one share issued in connection with such award.

Any shares covered by an award which is forfeited, canceled or expires shall be deemed not to have been issued for purposes of determining the maximum aggregate number of shares which may be issued under the 2007 Plan. Shares that actually have been issued pursuant to an award shall not be returned to the 2007 Plan and shall not become available for future issuance, except that if unvested shares are forfeited or ~~deemed~~repurchased by the Company at the lower of their original purchase price or their fair market value, such shares shall become available for future grant. However, (i) shares tendered or withheld in payment of an option exercise price shall not ~~issued from~~be returned to the 2007 ~~Plan).~~Plan and shall not become available for future issuance; (ii) shares withheld by the Company to satisfy any tax withholding obligation in connection with the exercise of an option or SAR shall not be returned to the 2007 Plan and shall not become available for future issuance; and (iii) all shares covered by the portion of a SAR that is exercised (whether or not shares are actually issued upon exercise of the SAR) shall be considered issued pursuant to the 2007 Plan. Shares withheld by the Company to satisfy any tax withholding obligation in connection with the vesting or settlement of an award other than a stock option or SAR shall be returned to the 2007 Plan and become available for future issuance.

Annual Limits on Certain Awards. The maximum number of shares ~~of Common Stock~~ with respect to which options and stock appreciation rights may be granted to a participant during a calendar year is 1,500,000 shares. For awards of restricted stock and ~~RSUs~~restricted stock units that are intended to be performance-based compensation under Section 162(m) of the Code, the maximum number of shares subject to such awards that may be granted to a participant during a calendar year is 1,000,000 shares. The foregoing limitations shall be adjusted proportionately by the Administrator ~~(as defined below)~~ in connection with any change in the Company’s capitalization due to a stock split, stock dividend or similar event affecting the Common Stock of the Company and its determination shall be final, binding and conclusive.

Administration. The 2007 Plan is administered, with respect to grants to employees, directors, ~~executive~~ officers, and consultants, by the plan administrator (the “Administrator”), defined as the Board ~~of Directors~~ or

one or more committees designated by the ~~Board of Directors.~~Board. The 2007 Plan iswill be administered by the Compensation Committee. With respect to grants to ~~executive~~ officers and directors, the Compensation Committee shall be constituted in such a manner as to satisfy applicable laws, including Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, and Section 162(m) of ~~the~~ Code.

Terms and Conditions of Awards. The 2007 Plan provides for the grant of stock options, restricted stock, ~~RSUs,~~restricted stock units, and stock appreciation rights (collectively referred to as “awards”). Stock options granted under the 2007 Plan may be either incentive stock options under the provisions of Section 422 of the Code, or nonqualified stock options. Incentive stock options may be granted only to employees. Awards other than incentive stock options may be granted to employees, directors and consultants of the Company and its related entities. To the extent that the aggregate fair market value of shares of the Company’s Common Stock subject to

options designated as incentive stock options which become exercisable for the first time by a participant during any calendar year exceeds $100,000, such excess options shall be treated as nonqualified stock options. If the Code or regulations promulgated thereunder are amended after the date of the 2007 Plan and provide for a different limit on the fair market value of shares permitted to become incentive stock options, such different limit will be automatically incorporated into the 2007 Plan. Under the 2007 Plan, awards may be granted to such employees, directors or consultants who are residing in non-U.S. jurisdictions as the Administrator may determine from time to time. Each award granted under the 2007 Plan shall be designated in an award agreement.

The Administrator may issue awards under the 2007 Plan in settlement, assumption or substitution for outstanding awards or obligations to grant future awards in connection with the Company or a related entity acquiring another entity, or an interest in another entity or an additional interest in a related entity whether by merger, stock purchase, asset purchase or other form of transaction. Subject to applicable laws, the Administrator has the authority, in its discretion, to select employees, consultants and directors to whom awards may be granted from time to time, to determine whether and to what extent awards are granted, to determine the number of shares of the Company’s Common Stock or the amount of other consideration to be covered by each award, ~~(subject to the number of shares reserved for issuance under the 2007 Plan),~~ to approve award agreements for use under the 2007 Plan, to determine the terms and conditions of any award (including the vesting schedule applicable to the award), to amend the terms of any outstanding award granted under the Plan (except for certain amendments that require shareholder approval, as described below), to construe and interpret the terms of the 2007 Plan and awards granted, to establish additional terms, conditions, rules or procedures to accommodate the rules or laws of applicable non-U.S. jurisdictions and to take such other action not inconsistent with the terms of the 2007 Plan, as the Administrator deems appropriate.

~~After~~ Additionally, the ~~approval~~2007 Plan provides that dividends payable with respect to all awards of restricted stock that are subject to performance vesting shall be held subject to the vesting of the ~~proposed amendment, the~~underlying shares of restricted stock.

The term of any ~~future~~ award granted under the 2007 Plan may not be for more than seven (7) years (or five (5) years in the case of an incentive stock option granted to any participant who owns stock representing more than 10% of the combined voting power of the Company or any parent or subsidiary of the Company), excluding any period for which the participant has elected to defer the receipt of the shares or cash issuable pursuant to the award pursuant to a deferral program the Administrator may establish in its discretion.

The 2007 Plan authorizes the Administrator to grant incentive stock options and ~~nonqualified~~non-qualified stock options at an exercise price not less than 100% of the fair market value of the Common Stock on the date the option is granted (or 110%, in the case of an incentive stock option granted to any employee who owns stock representing more than 10% of the combined voting power of the Company or any parent or subsidiary of the Company). In the case of stock appreciation rights, the base appreciation amount shall not be less than 100% of the fair market value of the Common Stock on the date of grant. In the case of awards intended to qualify as performance-based compensation, the exercise or purchase price, if any, shall be not less than 100% of the fair market value per share on the date of grant. In the case of all other awards granted under the 2007 Plan, the exercise or purchase price shall be determined by the Administrator. The exercise or purchase price is generally payable in cash, check, shares of Common Stock or with respect to options, payment through a broker-dealer sale and remittance procedure or a “net exercise” procedure.

not be treated as adversely affecting the rights of the participant. The 2007 Plan also provides that shareholder approval is required in order to (i) reduce the exercise price of any option or the base appreciation amount of any stock appreciation right awarded under the 2007 Plan or (ii) cancel any option or stock appreciation right awarded under the 2007 Plan in exchange for another award or for cash at a time when exercise price exceeds the fair market value of the underlying shares unless the cancellation and exchange occurs in connection with a Corporate ~~Transaction.~~Transaction; provided that canceling an option or SAR in exchange for another award with an exercise price, purchase price or base appreciation amount (as applicable) that is equal to or greater than the exercise price or base appreciation amount (as applicable) of the original option or SAR and with a term no longer than that of the original option or SAR shall not be subject to shareholder approval.

Under the 2007 Plan, the Administrator may establish one or more programs under the 2007 Plan to permit selected participants the opportunity to elect to defer receipt of consideration payable under an award. The Administrator also may establish under the 2007 Plan separate programs for the grant of particular forms of awards to one or more classes of participants.

Termination of Service. An award may not be exercised after the termination date of such award as set forth in the award agreement. In the event a participant in the 2007 Plan terminates continuous service with the Company, an award may be exercised only to the extent provided in the award agreement. Where an award agreement permits a participant to exercise an award following termination of service, the award shall terminate to the extent not exercised on the last day of the specified period or the last day of the original term of the award, whichever comes first. Any award designated as an incentive stock option, to the extent not exercised within the time permitted by law for the exercise of incentive stock options following the termination of employment, shall convert automatically to a nonqualified stock option and thereafter shall be exercisable as such to the extent exercisable by its terms for the period specified in the award agreement.

Transferability of Awards. Under the 2007 Plan, incentive stock options may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised during the lifetime of the participant only by the participant. Other awards shall be transferable only by will and by the laws of descent and distribution and during the lifetime of a participant, to the extent and in the manner authorized by the Administrator, but only to the extent such transfers are made to family members, to family trusts, to family controlled entities, to charitable organizations, and pursuant to domestic relations orders or agreements, in all cases without payment for such transfers to the participant. The 2007 Plan permits the designation of beneficiaries by holders of awards, including incentive stock options.

Section 162(m) of the Code. The maximum number of shares ~~of Common Stock~~ with respect to which options and stock appreciation rights may be granted to a participant during a calendar year is 1,500,000 shares. The foregoing limitation shall be adjusted proportionately by the Administrator in connection with any change in the Company’s capitalization due to a stock split, stock dividend or similar event affecting the ~~Common Stock~~common stock of the Company and its determination shall be final, binding and conclusive. Under Code Section 162(m) ~~of the Code,~~ no deduction is allowed in any taxable year of the Company for compensation in excess of ~~$1,000,000~~$1 million paid to the Company’s “covered employees.” An exception to this rule applies to compensation that is paid to a covered employee pursuant to a stock incentive plan approved by shareholders and that specifies, among other things, the maximum number of shares with respect to which options and stock appreciation rights may be granted to eligible participants under such plan during a specified period. Compensation paid pursuant to options or stock appreciation rights granted under such a plan and with an exercise price equal to the fair market value of the Company’s Common Stock on the date of grant is deemed to be inherently performance-based, since such awards provide value to participants only if the stock price appreciates. To the extent required by Section 162(m) of the Code or the regulations thereunder, in applying the foregoing limitation, if any option or stock appreciation right is canceled, the ~~cancelled~~canceled award shall continue to count against the maximum number of shares of Common Stock with respect to which an award may be granted to a participant.

For awards of restricted stock and ~~RSUs~~restricted stock units that are intended to be performance-based compensation under Section 162(m) of the Code, the maximum number of shares ~~of Common Stock~~ subject to such awards that may be granted to a participant during a calendar year is 1,000,000 shares. The foregoing limitation shall be adjusted proportionately by the Administrator in connection with any change in the Company’s capitalization due to a stock split, stock dividend or similar event affecting the ~~Common Stock~~common stock of the Company and its determination shall be

final, binding and conclusive. In order for restricted stock and ~~RSUs~~restricted stock units to qualify as performance-based compensation, the Administrator must establish a performance goal with respect to such award in writing not later than 90 days after the commencement of the services to which it relates and while the outcome is substantially uncertain. In addition, the performance goal must be stated in terms of an objective formula or standard.

Under ~~the current version of~~Code Section 162(m) ofas currently interpreted by the ~~Code,~~Internal Revenue Service, a “covered employee” is the Company’s Chief Executive Officer and the three other most highly compensated ~~executive~~ officers of the Company, ~~(excluding~~other than the Chief Financial ~~Officer).~~Officer.

The 2007 Plan includes the following performance criteria that may be considered by the Administrator when granting performance-based awards: (i) increase in or maintenance of share price, (ii) earnings per share, (iii) total shareholder return, (iv) operating margin, (v) gross margin, (vi) return on equity, (vii) return on assets, (viii) return on investment, (ix) operating income, (x) net operating income, (xi) ~~pre-tax profit,~~recruitment or retention of personnel, (xii) cash flow, (xiii) gross or net revenue, (xiv) expenses, (xv) earnings (including earnings before taxes; earnings before interest and taxes; earnings before interest, taxes and depreciation; earnings before interest, taxes and amortization; or earnings before interest, taxes, depreciation and amortization) (xvi) economic value added, (xvii) market share, (xviii) profit (including gross profit, operating profit or pre-tax profit); (xix) costs, (xx) expenses, (xxi) funds from operations, (xxii) working capital, (xxiii) market share, (xxiv) debt levels or reduction, (xxv) customer retention, (xxvi) sales, (xxvii) operating efficiency, (xxviii) customer satisfaction and/or growth, (xxix) employee satisfaction, (xxx) financing and ~~(xviii) gross profit.~~other capital-raising transactions, and (xxxi) year-end cash. In addition, the performance criteria shall be calculated in accordance with generally accepted accounting principles, but excluding the effect of any change in accounting standards and any extraordinary, unusual or nonrecurring item occurring after the establishment of the performance criteria applicable to the award. Each such adjustment, if any, shall be made solely for the purpose of providing a consistent basis from period to period for the calculation of performance criteria in order to prevent the dilution or enlargement of the rights with respect to an award.

Change in Capitalization. Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by outstanding awards, the number of shares of Common Stock that have been authorized for issuance under the 2007 Plan, the exercise or purchase price of each outstanding award, the maximum number of shares of Common Stock that may be granted subject to awards to any participant in a calendar year, and the like, shall be proportionally adjusted by the Administrator in the event of (i) any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, stock dividend, recapitalization, combination or reclassification or similar event affecting the Common Stock of the Company, (ii) any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company or (iii) any other transaction with respect to Common Stock including a corporate merger, consolidation, acquisition of property or stock, separation (including a spin-off or other distribution of stock or property), reorganization, liquidation (whether partial or complete), distribution of cash or other assets to shareholders other than a normal cash dividend, or any similar transaction; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” In the event of any distribution of cash or other assets to stockholders other than a normal cash dividend, the Administrator shall also make such adjustments or substitute, exchange or grant awards to effect such adjustments. Any such adjustments to outstanding awards will be effected in a manner that precludes the enlargement of rights and benefits under such awards.

Corporate Transaction. Effective upon the consummation of a Corporate Transaction, all outstanding awards shall terminate. However, all such awards shall not terminate to the extent the contractual obligations represented by the awards are assumed by the successor entity. Except as provided in an individual award agreement, for the portion of each award that is assumed by the successor corporation, such portion of the award will automatically vest and become exercisable and be released from any repurchase or forfeiture rights immediately upon termination of a participant’s continuous service if terminated without “cause” (as defined in the 2007 Plan) within 12twelve (12) months after such Corporate Transaction. For the portion of each award that is not assumed by the successor corporation, such portion of the award will automatically vest and become exercisable and be released from any repurchase or forfeiture rights immediately prior to the effective date of the Corporate Transaction. For awards that have an exercise feature, the portion of the award that is not assumed will terminate if not exercised prior to the Corporate Transaction.

Change in Control. Except as provided in an individual award agreement, following a Change in Control (other than a Change in Control that is also a Corporate Transaction) and upon a participant’s termination of continuous service without cause within 12twelve (12) months after such Change in Control, each outstanding award of such participant will automatically become fully vested and exercisable and be released from any repurchase or forfeiture rights immediately upon such termination.

an acquisition of 50% or more of the Company’s stock by any individual or entity including by tender offer;

a reverse merger in which 40% or more of the Company’s stock by any individual or entity including by tender offer is acquired;

a sale, transfer or other disposition of all or substantially all of the assets of the Company;

a merger or consolidation in which the Company is not the surviving entity; or

a complete liquidation or dissolution.

an acquisition of 50% or more of the Company’s stock by any individual or entity which a majority of the ~~members of the~~Company’s Board ~~of Directors~~members (who have served on the Company’s Board ~~of Directors~~ for at least 12twelve (12) months) do not recommend the Company’s shareholders accept, or

a change in the composition of the Company’s Board ~~of Directors~~ over a period of 12twelve (12) months or less such that a majority of the ~~members of the~~ Board ~~of Directors~~members ceases, by reason of one or more contested elections for Board ~~of Directors’~~ membership, to be comprised of individuals who have either been ~~members of the~~ Board ~~of Directors~~members continuously for a period of at least 12twelve (12) months or have been ~~members of the~~ Board ~~of Directors~~members for less than 12twelve (12) months and were elected or nominated for election by at least a majority of ~~the~~Board members ~~of the Board of Directors~~ who have served on the Company’s Board ~~of Directors~~ for at least 12twelve (12) months.

Amendment, Suspension or Termination of the 2007 Plan. The Board ~~of Directors~~ may at any time amend, suspend or terminate the 2007 Plan. The 2007 Plan, ~~shall terminate on June 6, 2017~~as proposed to be amended and restated, will have a term of ten (10) years from the date in 2012 that the shareholders approve the amendment and restatement, unless sooner terminated by the ~~Board of the Directors.~~Board. To the extent necessary to comply with applicable provisions of federal securities laws, state corporate and securities laws, the Code, the rules of any applicable stock exchange or national market system, and the rules of any non-U.S. jurisdiction applicable to awards granted to residents therein, the Company shall obtain shareholder approval of any such amendment to the 2007 Plan in such a manner and to such a degree as is required.

Nonexclusivity of the Plan. Neither the adoption of the 2007 Plan by the Board of Directors, the submission of the 2007 Plan to the shareholders of the Company for approval, nor any provision of the 2007 Plan will be construed as creating any limitations on the power of the Board of Directors to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of awards otherwise than under the 2007 Plan, and such arrangements may be either generally applicable or applicable only in specific cases.

~~Certain Federal Tax Consequences~~RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS

~~The following summary~~Grant Thornton LLP has been selected by the Audit Committee to be the Company’s independent auditors for the Company’s fiscal year ending December 31, 2012. Under the Sarbanes-Oxley Act of 2002 and the rules of the ~~principal federal income tax consequences~~SEC promulgated thereunder, the Audit Committee is solely responsible for the appointment, compensation and oversight of the ~~2007 Plan~~work of our independent auditors and shareholders are not required to ratify the ~~awards granted thereunder is based upon federal income tax laws in effect on~~selection of Grant Thornton LLP. However, we are submitting the ~~date~~selection of Grant Thornton LLP as our independent auditors to our shareholders for ratification as a matter of good corporate practice. In the event that ratification of this ~~Proxy Statement. This summary does~~selection of independent auditors is not ~~purport to be complete, and does not discuss non-U.S., state or local tax consequences.~~

~~Nonqualified Stock Options.~~ ~~The grant of~~approved by a nonqualified stock option under the 2007 Plan will not result in any federal income tax consequences to the option holder or to the Company. Upon exercise of a nonqualified stock option, the option holder is subject to income taxes at the rate applicable to ordinary compensation income on the difference between the option exercise price and the fair market value of the shares on the date of exercise. This income is subject to withholding for federal income and employment tax purposes. The Company is entitled to an income tax deduction in the amount of the income recognized by the option holder, subject to possible limitations imposed by Section 162(m) of the Code and so long as the Company withholds the appropriate taxes with respect to such income (if required) and the option holder’s total compensation is deemed reasonable in amount. Any gain or loss on the option holder’s subsequent dispositionmajority of the shares of Common Stock voting at the Annual Meeting in person or by proxy, the Audit Committee will ~~receive long or short-term capital gain or loss treatment, depending on whether~~review our future selection of independent auditors. Even if the ~~shares are held for more than one~~appointment of Grant Thornton LLP is ratified by our shareholders, the Audit Committee, in its discretion, may direct the appointment of a different independent auditor at any time during the year ~~following exercise.~~if the Audit Committee determines that such a change is in the best interests of the Company and our shareholders.

A representative of Grant Thornton LLP is expected to be present at the Annual Meeting. The ~~Company does not receive~~representative will have an opportunity to make a ~~tax deduction for any such gain.~~statement and will be available to respond to appropriate questions.

The ~~Company~~say-on-pay vote is advisory, and therefore not ~~entitled to any deduction under these circumstances.~~

If the option holder fails to satisfy either of the foregoing holding periods, he or she must recognize ordinary income in the year of the disposition (referred to as a “disqualifying disposition”). The amount of such ordinary income generally is the lesser of (i) the difference between the amount realizedbinding on the ~~disposition~~Company, the Compensation Committee or the Board of Directors. The Board of Directors and our Compensation Committee value the ~~exercise price or (ii) the difference between the fair market value~~opinions of ~~the stock on the exercise date~~our shareholders and the exercise price. Any gain in excess of the amount taxed as ordinary income will be treated as a long or short-term capital gain, depending on whether the stock was held for more than one year. The Company, in the year of the disqualifying disposition, is entitled to a deduction equal to the amount of ordinary income recognized by the option holder, subject to possible limitations imposed by Section 162(m) of the Code and so long as the option holder’s total compensation is deemed reasonable in amount.

The “spread” under an incentive stock option—i.e., the difference between the fair market value of the shares at the time of exercise and the exercise price—is classified as an item of adjustment in the year of exercise for purposes of the alternative minimum tax. If an option holder’s alternative minimum tax liability exceeds such option holder’s regular income tax liability, the option holder will owe the larger amount of taxes. In order to avoid the application of alternative minimum tax with respect to incentive stock options, the option holder must sell the shares within the same calendar year in which the incentive stock options are exercised. However, such a sale of shares within the same year of exercise will constitute a disqualifying disposition, as described above.

In the event an incentive stock option is amended, such option may be considered deferred compensation and subject to the rules of Section 409A of the Code. An option subject to Section 409A of the Code which fails to comply with the rules of Section 409A can result in the acceleration of income recognition, a 20% additional tax obligation, plus penalties and interest. In addition, the amendment of an incentive stock option may convert the option from an incentive stock option to a nonqualified stock option.

~~Restricted Stock.~~ The grant of restricted stock will subject the recipient to ordinary compensation income on the difference between the amount paid for such stock and the fair market value of the shares on the date that the restrictions lapse. This income is subject to withholding for federal income and employment tax purposes. The Company is entitled to an income tax deduction in the amount of the ordinary income recognized by the recipient, subject to possible limitations imposed by Section 162(m) of the Code and so long as the Company withholds the appropriate taxes with respect to such income (if required) and the recipient’s total compensation is deemed reasonable in amount. Any gain or loss on the recipient’s subsequent disposition of the shares will receive long or short-term capital gain or loss treatment depending on how long the stock has been held since the restrictions lapsed. The Company does not receive a tax deduction for any such gain.

Recipients of restricted stock may make an election under Section 83(b) of the Code (a “Section 83(b) Election”) to recognize as ordinary compensation income in the year that such restricted stock is granted, the amount equal to the spread between the amount paid for such stock and the fair market value on the date of the issuance of the stock. If such an election is made, the recipient recognizes no further amounts of compensation income upon the lapse of any restrictions and any gain or loss on subsequent disposition will be long or short-term capital gain to the recipient. A Section 83(b) Election must be made within 30 days from the time the restricted stock is issued.

~~Stock Appreciation Rights.~~ Recipients of stock appreciation rights (“SARs”) generally should not recognize income until a SAR is exercised (assuming there is no ceiling on the value of the right). Upon exercise, the recipient will normally recognize taxable ordinary income for federal income tax purposes equal to the amount of cash and fair market value of the shares, if any, received upon such exercise. Recipients who are employees will be subject to withholding for federal income and employment tax purposes with respect to income recognized upon exercise of a SAR. Recipients will recognize gain upon the disposition of any shares received on exercise of a SAR equal to the excess of (i) the amount realized on such disposition over (ii) the ordinary income recognized with respect to such shares under the principles set forth above. That gain will be taxable as long or short-term capital gain depending on whether the shares were held for more than one year. The Company will be entitled to a tax deduction to the extent ~~and~~there is any significant vote against the named executive officer compensation as disclosed in the year that ordinary income is recognized by the recipient, subject to possible limitations imposed by Section 162(m) of the Code and so long as the Company withholds the appropriate taxes with respect to such income (if required)this Proxy Statement, we will consider our shareholders’ concerns and the ~~recipient’s total compensation is deemed reasonable in amount.~~

~~In the event a SAR is amended, such SAR may be considered deferred compensation and subject~~Compensation Committee will evaluate whether any actions are necessary to the rules of Section 409A of the Code, which provide rules regarding the timing of payment of deferred compensation. A SAR subject to Section 409A of the Code which fails to comply with the rules of Section 409A may result in the acceleration of income recognition, a 20% additional tax obligation, plus penalties and interest.

~~Restricted Stock Units.~~ Recipients of RSUs generally should not recognize income until such units are converted into cash or shares of stock. Upon conversion, the recipient will normally recognize taxable ordinary income for federal income tax purposes equal to the amount of cash and fair market value of the shares, if any, received upon such conversion. Recipients who are employees will be subject to withholding for federal income and employment tax purposes with respect to income recognized upon conversion of the RSUs. Participants will recognize gain upon the disposition of any shares received upon conversion of the RSUs equal to the excess of (i) the amount realized on such disposition over (ii) the ordinary income recognized with respect to such shares under the principles set forth above. That gain will be taxable as long or short-term capital gain depending on whether the shares were held for more than one year. The Company will be entitled to a tax deduction to the extent and in the year that ordinary income is recognized by the recipient, subject to possible limitations imposed by Section 162(m) of the Code and so long as the Company withholds the appropriate taxes with respect to such income (if required) and the recipient’s total compensation is deemed reasonable in amount.

RSUs also can be considered nonqualified deferred compensation and subject to the Section 409A of the Code. A grant of RSUs that does not meet the requirements of Section 409A of the Code will result in the acceleration of income recognition, a 20% additional tax obligation, plus penalties and interest.

~~Because the Administrator will make future awards at its discretion, the Company cannot determine the number of options and other awards that may be awarded in the future to eligible participants.~~address those concerns.

The ~~proposal to amend~~affirmative vote of the ~~Company’s 2007 Plan to (i) increase the number~~holders of shares of Common Stock reserved for issuance thereunder, including pursuant to incentive stock options, from 1,875,000 to 2,690,000 shares, and (ii) decrease the maximum term of future awards granted under the 2007 Plan from ten years to seven years, must be approved by a majority of the ~~outstanding~~ shares of ~~voting stock~~the Company’s Common Stock present or represented at the Annual Meeting is required to approve, on an advisory basis, the compensation of the ~~Company.~~Company’s named executive officers. Abstentions will have the same effect as a vote against this proposal and broker ~~“non-votes”~~“non-votes,” if any, will have no effect on this proposal.

AMENDMENT AND RESTATEMENT OF THE COMPANY’S 2007 STOCK INCENTIVE PLAN ~~TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER FROM 1,875,000 TO 2,690,000 SHARES AND TO DECREASE THE MAXIMUM TERM OF FUTURE AWARDS GRANTED UNDER THE~~

On March 9, 2007, ~~PLAN FROM TEN YEARS TO SEVEN YEARS~~.the Board of Directors approved the original McGrath RentCorp 2007 Stock Incentive Plan (the “2007 Plan”) in order for the Company to grant a broader range of equity based awards by replacing the 1998 Plan, which only provided for the grant of stock options, and the 2000 Long-Term Bonus Plan (the “2000 Plan”), which only provided for the grant of stock bonuses to officers and key employees. The 2007 Plan was amended and restated effective June 4, 2009, subject to shareholder approval, in order to increase the maximum aggregate number of shares which could be issued pursuant to all awards thereunder and to decrease the maximum term of awards which may be issued under the 2007 Plan. In February 2012, the Board of Directors unanimously approved amendments to the 2007 Plan, effective as of and subject to shareholder approval, in order to make certain changes described below under the caption “Proposed Amendments.”

The general description of our 2007 Plan below is qualified in its entirety by the terms of the proposed amended and restated 2007 Plan, a copy of which is attached to this Proxy Statement asAppendix A and is incorporated herein by reference.

~~PROPOSAL NO. 3~~Purpose. The purpose of the 2007 Plan, as stated above, is to provide the Company’s employees, consultants and directors, whose present and potential contributions are important to the success of the Company, an incentive, through ownership of the Company’s Common Stock, to continue in service to the Company, and to help the Company compete effectively with other enterprises for the services of qualified individuals.

Stock Subject to the Plan.The maximum aggregate number of shares which may be issued pursuant to all awards is four million one hundred ninety thousand (4,190,000) shares, plus shares that remained available for grants of awards under the 1998 Plan as of the date the 2007 Plan was originally approved by the Company’s shareholders, plus any shares that would otherwise return to the 1998 Plan as a result of forfeiture, termination or expiration of awards previously granted under the 1998 Plan (ignoring the termination or expiration of the 1998 Plan for the purpose of determining the number of shares available for the 2007 Plan); provided, however, that the maximum aggregate number of shares that may be issued pursuant to incentive stock options is four million one hundred ninety thousand (4,190,000) shares. Notwithstanding the foregoing, any shares issued in connection with awards other than options and SARs will be counted against the limit set forth above as two shares for every one share issued in connection with such award.

Any shares covered by an award which is forfeited, canceled or expires shall be deemed not to have been issued for purposes of determining the maximum aggregate number of shares which may be issued under the 2007 Plan. Shares that actually have been issued pursuant to an award shall not be returned to the 2007 Plan and shall not become available for future issuance, except that if unvested shares are forfeited or repurchased by the Company at the lower of their original purchase price or their fair market value, such shares shall become available for future grant. However, (i) shares tendered or withheld in payment of an option exercise price shall not be returned to the 2007 Plan and shall not become available for future issuance; (ii) shares withheld by the Company to satisfy any tax withholding obligation in connection with the exercise of an option or SAR shall not be returned to the 2007 Plan and shall not become available for future issuance; and (iii) all shares covered by the portion of a SAR that is exercised (whether or not shares are actually issued upon exercise of the SAR) shall be considered issued pursuant to the 2007 Plan. Shares withheld by the Company to satisfy any tax withholding obligation in connection with the vesting or settlement of an award other than a stock option or SAR shall be returned to the 2007 Plan and become available for future issuance.

Annual Limits on Certain Awards. The maximum number of shares with respect to which options and stock appreciation rights may be granted to a participant during a calendar year is 1,500,000 shares. For awards of restricted stock and restricted stock units that are intended to be performance-based compensation under Section 162(m) of the Code, the maximum number of shares subject to such awards that may be granted to a participant during a calendar year is 1,000,000 shares. The foregoing limitations shall be adjusted proportionately by the Administrator in connection with any change in the Company’s capitalization due to a stock split, stock dividend or similar event affecting the Common Stock of the Company and its determination shall be final, binding and conclusive.

Administration. The 2007 Plan is administered, with respect to grants to employees, directors, officers, and consultants, by the plan administrator (the “Administrator”), defined as the Board or one or more committees designated by the Board. The 2007 Plan will be administered by the Compensation Committee. With respect to grants to officers and directors, the Compensation Committee shall be constituted in such a manner as to satisfy applicable laws, including Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, and Section 162(m) of Code.

Terms and Conditions of Awards. The 2007 Plan provides for the grant of stock options, restricted stock, restricted stock units, and stock appreciation rights (collectively referred to as “awards”). Stock options granted under the 2007 Plan may be either incentive stock options under the provisions of Section 422 of the Code, or nonqualified stock options. Incentive stock options may be granted only to employees. Awards other than incentive stock options may be granted to employees, directors and consultants of the Company and its related entities. To the extent that the aggregate fair market value of shares of the Company’s Common Stock subject to

The Administrator may issue awards under the 2007 Plan in settlement, assumption or substitution for outstanding awards or obligations to grant future awards in connection with the Company or a related entity acquiring another entity, or an interest in another entity or an additional interest in a related entity whether by merger, stock purchase, asset purchase or other form of transaction. Subject to applicable laws, the Administrator has the authority, in its discretion, to select employees, consultants and directors to whom awards may be granted from time to time, to determine whether and to what extent awards are granted, to determine the number of shares of the Company’s Common Stock or the amount of other consideration to be covered by each award, to approve award agreements for use under the 2007 Plan, to determine the terms and conditions of any award (including the vesting schedule applicable to the award), to amend the terms of any outstanding award granted under the Plan (except for certain amendments that require shareholder approval, as described below), to construe and interpret the terms of the 2007 Plan and awards granted, to establish additional terms, conditions, rules or procedures to accommodate the rules or laws of applicable non-U.S. jurisdictions and to take such other action not inconsistent with the terms of the 2007 Plan, as the Administrator deems appropriate. Additionally, the 2007 Plan provides that dividends payable with respect to all awards of restricted stock that are subject to performance vesting shall be held subject to the vesting of the underlying shares of restricted stock.

The term of any award granted under the 2007 Plan may not be for more than seven (7) years (or five (5) years in the case of an incentive stock option granted to any participant who owns stock representing more than 10% of the combined voting power of the Company or any parent or subsidiary of the Company), excluding any period for which the participant has elected to defer the receipt of the shares or cash issuable pursuant to the award pursuant to a deferral program the Administrator may establish in its discretion.

The 2007 Plan authorizes the Administrator to grant incentive stock options and non-qualified stock options at an exercise price not less than 100% of the fair market value of the Common Stock on the date the option is granted (or 110%, in the case of an incentive stock option granted to any employee who owns stock representing more than 10% of the combined voting power of the Company or any parent or subsidiary of the Company). In the case of stock appreciation rights, the base appreciation amount shall not be less than 100% of the fair market value of the Common Stock on the date of grant. In the case of awards intended to qualify as performance-based compensation, the exercise or purchase price, if any, shall be not less than 100% of the fair market value per share on the date of grant. In the case of all other awards granted under the 2007 Plan, the exercise or purchase price shall be determined by the Administrator. The exercise or purchase price is generally payable in cash, check, shares of Common Stock or with respect to options, payment through a broker-dealer sale and remittance procedure or a “net exercise” procedure.

The 2007 Plan provides that any amendment that would adversely affect the participant’s rights under outstanding awards shall not be made without the participant’s written consent, provided, however, that an amendment or modification that may cause an incentive stock option to become a non-qualified stock option shall not be treated as adversely affecting the rights of the participant. The 2007 Plan also provides that shareholder approval is required in order to (i) reduce the exercise price of any option or the base appreciation amount of any stock appreciation right awarded under the 2007 Plan or (ii) cancel any option or stock appreciation right awarded under the 2007 Plan in exchange for another award or for cash at a time when exercise price exceeds the fair market value of the underlying shares unless the cancellation and exchange occurs in connection with a Corporate Transaction; provided that canceling an option or SAR in exchange for another award with an exercise price, purchase price or base appreciation amount (as applicable) that is equal to or greater than the exercise price or base appreciation amount (as applicable) of the original option or SAR and with a term no longer than that of the original option or SAR shall not be subject to shareholder approval.

Section 162(m) of the Code. The maximum number of shares with respect to which options and stock appreciation rights may be granted to a participant during a calendar year is 1,500,000 shares. The foregoing limitation shall be adjusted proportionately by the Administrator in connection with any change in the Company’s capitalization due to a stock split, stock dividend or similar event affecting the common stock of the Company and its determination shall be final, binding and conclusive. Under Code Section 162(m) no deduction is allowed in any taxable year of the Company for compensation in excess of $1 million paid to the Company’s “covered employees.” An exception to this rule applies to compensation that is paid to a covered employee pursuant to a stock incentive plan approved by shareholders and that specifies, among other things, the maximum number of shares with respect to which options and stock appreciation rights may be granted to eligible participants under such plan during a specified period. Compensation paid pursuant to options or stock appreciation rights granted under such a plan and with an exercise price equal to the fair market value of the Company’s Common Stock on the date of grant is deemed to be inherently performance-based, since such awards provide value to participants only if the stock price appreciates. To the extent required by Section 162(m) of the Code or the regulations thereunder, in applying the foregoing limitation, if any option or stock appreciation right is canceled, the canceled award shall continue to count against the maximum number of shares of Common Stock with respect to which an award may be granted to a participant.

For awards of restricted stock and restricted stock units that are intended to be performance-based compensation under Section 162(m) of the Code, the maximum number of shares subject to such awards that may be granted to a participant during a calendar year is 1,000,000 shares. The foregoing limitation shall be adjusted proportionately by the Administrator in connection with any change in the Company’s capitalization due to a stock split, stock dividend or similar event affecting the common stock of the Company and its determination shall be final, binding and conclusive. In order for restricted stock and restricted stock units to qualify as performance-based compensation, the Administrator must establish a performance goal with respect to such award in writing not later than 90 days after the commencement of the services to which it relates and while the outcome is substantially uncertain. In addition, the performance goal must be stated in terms of an objective formula or standard.

Under Code Section 162(m) as currently interpreted by the Internal Revenue Service, a “covered employee” is the Company’s Chief Executive Officer and the three other most highly compensated officers of the Company, other than the Chief Financial Officer.

The 2007 Plan includes the following performance criteria that may be considered by the Administrator when granting performance-based awards: (i) increase in or maintenance of share price, (ii) earnings per share, (iii) total shareholder return, (iv) operating margin, (v) gross margin, (vi) return on equity, (vii) return on assets, (viii) return on investment, (ix) operating income, (x) net operating income, (xi) recruitment or retention of personnel, (xii) cash flow, (xiii) gross or net revenue, (xiv) expenses, (xv) earnings (including earnings before taxes; earnings before interest and taxes; earnings before interest, taxes and depreciation; earnings before interest, taxes and amortization; or earnings before interest, taxes, depreciation and amortization) (xvi) economic value added, (xvii) market share, (xviii) profit (including gross profit, operating profit or pre-tax profit); (xix) costs, (xx) expenses, (xxi) funds from operations, (xxii) working capital, (xxiii) market share, (xxiv) debt levels or reduction, (xxv) customer retention, (xxvi) sales, (xxvii) operating efficiency, (xxviii) customer satisfaction and/or growth, (xxix) employee satisfaction, (xxx) financing and other capital-raising transactions, and (xxxi) year-end cash. In addition, the performance criteria shall be calculated in accordance with generally accepted accounting principles, but excluding the effect of any change in accounting standards and any extraordinary, unusual or nonrecurring item occurring after the establishment of the performance criteria applicable to the award. Each such adjustment, if any, shall be made solely for the purpose of providing a consistent basis from period to period for the calculation of performance criteria in order to prevent the dilution or enlargement of the rights with respect to an award.

Corporate Transaction. Effective upon the consummation of a Corporate Transaction, all outstanding awards shall terminate. However, all such awards shall not terminate to the extent the contractual obligations represented by the awards are assumed by the successor entity. Except as provided in an individual award agreement, for the portion of each award that is assumed by the successor corporation, such portion of the award will automatically vest and become exercisable and be released from any repurchase or forfeiture rights immediately upon termination of a participant’s continuous service if terminated without “cause” (as defined in the 2007 Plan) within twelve (12) months after such Corporate Transaction. For the portion of each award that is not assumed by the successor corporation, such portion of the award will automatically vest and become exercisable and be released from any repurchase or forfeiture rights immediately prior to the effective date of the Corporate Transaction. For awards that have an exercise feature, the portion of the award that is not assumed will terminate if not exercised prior to the Corporate Transaction.

Change in Control. Except as provided in an individual award agreement, following a Change in Control (other than a Change in Control that is also a Corporate Transaction) and upon a participant’s termination of continuous service without cause within twelve (12) months after such Change in Control, each outstanding award of such participant will automatically become fully vested and exercisable and be released from any repurchase or forfeiture rights immediately upon such termination.

acquisition of 50% or more of the Company’s stock by any individual or entity including by tender offer;

a reverse merger in which 40% or more of the Company’s stock by any individual or entity including by tender offer is acquired;

a sale, transfer or other disposition of all or substantially all of the assets of the Company;

a merger or consolidation in which the Company is not the surviving entity; or

a complete liquidation or dissolution.

acquisition of 50% or more of the Company’s stock by any individual or entity which a majority of the Company’s Board members (who have served on the Company’s Board for at least twelve (12) months) do not recommend the Company’s shareholders accept, or

a change in the composition of the Company’s Board over a period of twelve (12) months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who have either been Board members continuously for a period of at least twelve (12) months or have been Board members for less than twelve (12) months and were elected or nominated for election by at least a majority of Board members who have served on the Company’s Board for at least twelve (12) months.

Amendment, Suspension or Termination of the 2007 Plan. The Board may at any time amend, suspend or terminate the 2007 Plan. The 2007 Plan, as proposed to be amended and restated, will have a term of ten (10) years from the date in 2012 that the shareholders approve the amendment and restatement, unless sooner terminated by the Board. To the extent necessary to comply with applicable provisions of federal securities laws, state corporate and securities laws, the Code, the rules of any applicable stock exchange or national market system, and the rules of any non-U.S. jurisdiction applicable to awards granted to residents therein, the Company shall obtain shareholder approval of any such amendment to the 2007 Plan in such a manner and to such a degree as is required.

Grant Thornton LLP has been selected by the Audit Committee to be the Company’s independent auditors for the Company’s fiscal year ending December 31, ~~2009.~~2012. Under the Sarbanes-Oxley Act of 2002 and the rules of the SEC promulgated thereunder, the Audit Committee is solely responsible for the appointment, compensation and oversight of the work of our independent auditors and shareholders are not required to ratify the selection of Grant Thornton LLP. However, we are submitting the selection of Grant Thornton LLP as our independent auditors to our shareholders for ratification as a matter of good corporate practice. In the event that ratification of this selection of independent auditors is not approved by a majority of the shares of Common Stock voting at the Annual Meeting in person or by proxy, the Audit Committee will review our future selection of independent auditors. Even if the appointment of Grant Thornton LLP is ratified by our shareholders, the Audit Committee, in its discretion, may direct the appointment of a different independent auditor at any time during the year if the Audit Committee determines that such a change is in the best interests of the Company and our shareholders.

A representative of Grant Thornton LLP is expected to be present at the Annual Meeting. The representative will have an opportunity to make a statement and will be ~~able~~available to respond to appropriate questions.

Grant Thornton LLP performed services for the Company in fiscal years ~~2007~~2010 and ~~2008~~2011 related to financial statement audit work, quarterly reviews, quarterly earnings release reviews and tax services. Fees related to services rendered by Grant Thornton LLP infor fiscal years ~~2007~~2010 and ~~2008~~2011 were as follows:

pre-approval but exceed the pre-approved maximum fee level also will require separate approval by the Audit Committee. The Audit Committee may delegate authority to pre-approve audit and non-audit services to any member of the Audit Committee, but may not delegate such authority to management. The Company’s independent auditors and Chief Financial Officer are required to periodically report to the Audit Committee regarding the extent of services provided by the independent auditors in accordance with the pre-approval policy and the fees for the services performed to date. The Audit Committee pre-approved all of the audit, audit-related, tax and all other services described as Audit Fees in the table above.

Notwithstanding anything to the contrary set forth in any of the Company’s previous filings under the Securities Act ~~of 1933, as amended (the “Securities Act”)~~ or the Exchange Act, that might incorporate future filings, including this Proxy Statement, with the SEC, in whole or in part, the following report shall not be deemed to be incorporated by reference into any such filings, nor shall the following report be deemed to be incorporated by reference into any future filings under the Securities Act or the Exchange ~~Act.~~Act, unless specifically stated to be incorporated by reference therein.

The Audit Committee currently has ~~three~~four members, consisting of ~~three~~four independent directors, William J. Dawson, Robert C. Hood, Robert P. McGrath and Ronald H. Zech. The Company’s management is responsible for the Company’s internal controls, financial reporting, compliance with laws and regulations and ethical business standards. The Company’s independent registered public accounting firm, Grant Thornton LLP, is responsible for performing an independent audit of the Company’s consolidated financial statements and internal ~~control~~controls over financial reporting in accordance with generally accepted auditing standards of the Public Company Accounting Oversight Board ~~of Directors’~~(“PCAOB”) (United States) ~~generally accepted auditing standards~~ and to issue reports thereon. The Audit Committee’s responsibility is to monitor and oversee these processes as well as the independence and performance of the Company’s independent registered public accounting firm. However, the members of the Audit Committee are not professionally engaged in the practice of accounting or auditing and are not experts in the fields of accounting or auditing. They rely, without independent verification, on the information provided to them and on the representations made by management and the independent ~~accountants.~~auditors.

The affirmative vote of the holders of a majority of the shares of the Company’s Common Stock present or represented at the Annual Meeting is required to approve the ratification of the selection of Grant Thornton LLP as our independent auditors for the year ~~2009.~~2012. Abstentions will have the same effect as a vote against this proposal and broker ~~“non-votes”~~“non-votes,” if any, will have no effect on this proposal.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTEFOR THE RATIFICATION OF THE SELECTION OF GRANT THORNTON LLP.

As part of designing and implementing the compensation programs for all employees, the Company considers the risks that may be created and whether any such risks may have an adverse impact on the Company, and whether, overall, the Company’s compensation programs are reasonably likely to have a material adverse impact on the Company. In making this determination, the Company considers the overall mix of compensation for employees as well as the various risk control and mitigation features of our compensation plans, including appropriate performance measures and targets and incentive plan payout maximums.

Reevaluated and updated the 2011 Compensation Peer Group;

Added a new profitability metric for the Annual Bonus, which measures Company and divisional sales, general and administrative expenses as a percentage of rental revenue;

Added a new performance metric for equity compensation, which measures three-year cumulative EBIT performance by division;

A 10% holdback provision was added to executive officers’ RSU settlements to facilitate earlier achievement of stock ownership guidelines for executive officers; and

A clawback policy was adopted, which requires reimbursement by current and former executive officers if a restatement of our financial statements is required.

A more complete explanation of these changes is included in the “Compensation Discussion and Analysis” section of this Proxy Statement.

On March 9, 2007, the Board of Directors approved the original McGrath RentCorp 2007 Stock Incentive Plan (the “2007 Plan”) in order for the Company to grant a broader range of equity based awards by replacing the 1998 Plan, which only provided for the grant of stock options, and the 2000 Long-Term Bonus Plan (the “2000 Plan”), which only provided for the grant of stock bonuses to officers and key employees. The 2007 Plan was amended and restated effective June 4, 2009, subject to shareholder approval, in order to increase the maximum aggregate number of shares which could be issued pursuant to all awards thereunder and to decrease the maximum term of awards which may be issued under the 2007 Plan. In February 2012, the Board of Directors unanimously approved amendments to the 2007 Plan, effective as of and subject to shareholder approval, in order to make certain changes described below under the caption “Proposed Amendments.”