Exhibit 10.14

 

INDEMNITY, CONTRIBUTION AND SUBORDINATION AGREEMENT

 

This INDEMNITY, CONTRIBUTION AND SUBORDINATION AGREEMENT (this “Agreement”),
dated as of June 2, 2004, is entered into among Enviroplex, Inc., a California
corporation, Mobile Modular Management Corporation, a California corporation,
and such other Persons who from time to time become parties hereto in accordance
with Section 9 of this Agreement, collectively, the “Guarantors” and
individually, a “Guarantor”) and McGrath RentCorp, a California corporation (the
“Company”). The Company and the Guarantors are sometimes referred to herein as
the “Credit Parties”.

 

Reference is made to the Note Purchase and Private Shelf Agreement, dated as of
June 2, 2004 (as the same from time to time may be amended, supplemented or
otherwise modified, the “Note Agreement”), by and between the Company, on the
one hand, and Prudential Investment Management, Inc. (“PIM”), each of the Series
A Purchasers and such other Prudential Affiliates as may become bound by certain
provisions thereof, on the other hand, pursuant to which, subject to the terms
and conditions set forth therein, (i) the Company has agreed to issue and sell
to the Series A Purchasers, and the Series A Purchasers have agreed to buy from
the Company, its 5.08% Series A Senior Notes due June 2, 2011 in the initial
aggregate principal amount of $60,000,000 (the “Series A Notes”) and (ii) PIM
and Prudential Affiliates are willing to consider, in their sole discretion and
within limits which may be authorized for purchase by them from time to time,
the purchase of the Company’s additional senior secured promissory notes in the
aggregate principal amount of up to $20,000,000 (the “Shelf Notes” and, together
with the Series A Notes, the “Notes”). Capitalized terms not otherwise defined
herein shall have the meanings given to such terms in the Note Agreement.

 

Each Guarantor is a Subsidiary or other Affiliate of the Company, and the
proceeds from the issuance and sale of the Notes will be used, in part, to
enable the Company and the Guarantors to make transfers amongst themselves in
connection with their respective operations.

 

Pursuant to the Transaction Documents, the Credit Parties are jointly and
severally liable for all obligations (the “Obligations”) of the Company
evidenced by the Notes and under the Note Agreement and the other Transaction
Documents. Each Credit Party acknowledges that it has received and expects to
receive financial and other support, directly or indirectly, from the other
Credit Parties (including, without limitation, in the form of existing liquidity
provided to the Credit Parties by the extension of credit from the issuance and
sale of Notes under the Note Agreement); accordingly, each Credit Party has
determined that it is in its interest and to its financial benefit to execute
and deliver an agreement in the form hereof.

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Accordingly, the Credit Parties agree as follows:

 

SECTION 1. INDEMNITY AND CONTRIBUTION.

 

A. Definitions. The following defined terms are used in this Section 1:

 

“Claiming Credit Party” shall mean any Credit Party which has made an Excess
Payment, until the amount thereof has been reduced to zero through
reimbursements to such Credit Party hereunder or otherwise.

 

“Excess Payment” shall mean, with respect to any payment made by a Credit Party
to any holder of a Note pursuant to the terms of the Note Agreement, the Notes,
the Multiparty Guaranty or any other Transaction Documents on or after any
Payment Date, the amount by which such payment exceeds the aggregate amount of
proceeds of the Notes received, directly or indirectly, by such Credit Party as
of such Payment Date as a result of the credit provided from the issuance and
sale of the Notes. For purposes of this definition of “Excess Payment”, the
amount of any payment made by a Credit Party shall include an amount equal to
the gross proceeds from any sale of such Credit Party’s assets pursuant to the
Transaction Documents to which such Credit Party is a party to satisfy all or
any part of the Obligations.

 

“First Round Contributing Credit Party” shall mean each Credit Party as to which
a Payment Deficiency exists.

 

“Net Worth” shall mean the difference between the following: (1) the aggregate
value of all assets (including contingent assets) of a Credit Party (at fair
valuation and present fair saleable value), less (2) the aggregate amount of all
liabilities (including contingent liabilities) of that Credit Party. Net Worth
shall be measured, in the case of each Credit Party, as of the date of this
Agreement, subject to adjustment in accordance with the provisions of Sections
1C and/or 1D below. In the event that the Net Worth of any Credit Party is less
than zero, the Net Worth of such Credit Party shall be zero for purposes of any
computation pursuant to Section 1C and/or 1D below.

 

“Payment Date” shall mean the maturity date of any of the Notes or the date of
any notice of acceleration delivered by any holder of the Notes to the Company
pursuant to paragraph 7A of the Note Agreement with respect to any of the Notes.

 

“Payment Deficiency” shall mean, with respect to any Credit Party as of any
Payment Date, the amount by which the aggregate amount of proceeds of the Notes
received by such Credit Party, directly or indirectly, from the issuance and
sale of the Notes as of such Payment Date exceeds the payments made by such
Credit Party under the Note Agreement, the Notes, the Multiparty Guaranty or any
other Transaction Documents as of such Payment Date.

 

“Second Round Contributing Credit Party” shall mean each Credit Party having a
positive Net Worth after giving effect to payments made or received by that
Credit Party pursuant to Section 1B below.

 

B. First Round Contributions. Each Credit Party agrees (subject to Section 3
hereof) that in the event a payment shall be made by any other Credit Party
under any

 

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of the Transaction Documents or assets of any other Credit Party shall be sold
pursuant to any mortgage, security agreement or similar instrument or agreement
to satisfy any Obligations at any time on or after a Payment Date, each First
Round Contributing Credit Party shall be responsible, by way of contribution,
for the reimbursement to the Claiming Credit Parties of an amount equal to the
Excess Payment of each Claiming Credit Party; provided that the aggregate amount
owed by any First Round Contributing Credit Party shall not exceed the Payment
Deficiency of such First Round Contributing Credit Party. The aggregate amounts
so reimbursed by all First Round Contributing Credit Parties shall be allocated,
among all Claiming Credit Parties, in proportion to the Excess Payment made by
each such Claiming Credit Party as compared to the aggregate Excess Payments
made by all such Claiming Credit Parties.

 

C. Second Round Contributions. In the event that an Excess Payment made by a
Claiming Credit Party is not completely reimbursed pursuant to Section 1B above,
and such Claiming Credit Party has a negative Net Worth after giving effect to
such prior reimbursements (but without giving effect to any other reimbursement
right under this Section 1), then there shall be a second contribution round for
the benefit of that Claiming Credit Party in accordance with this Section 1C.
The Second Round Contributing Credit Parties shall reimburse, to such Claiming
Credit Parties, an aggregate amount equal to the total remaining Excess Payments
of such Claiming Credit Parties; provided, however, that in no event shall the
amount so paid by any Second Round Contributing Credit Party exceed the amount
of its Net Worth (before giving effect to the contribution made by such party
under this Section 1C). Subject to the foregoing proviso, the amount so
contributed by each Second Round Contributing Credit Party shall be equal to
such total remaining Excess Payments multiplied by a fraction, the numerator of
which is the Net Worth of such Second Round Contributing Credit Party, and the
denominator of which is the aggregate Net Worth of all Second Round Contributing
Credit Parties. The aggregate amount of such contributions under this Section 1C
shall, in turn, be allocated among such Claiming Credit Parties in proportion to
the remaining Excess Payment of each.

 

D. Subsequent Round Contributions. In the event that an Excess Payment made by a
Claiming Credit Party pursuant to Section 1C above is not completely reimbursed
pursuant thereto (or pursuant to any subsequent round of contribution payments
made under this Section 1D), then there shall be a further contribution round in
which each Credit Party which made a contribution in the immediately preceding
round and continues to have a positive Net Worth after giving effect thereto
shall be responsible, by way of contribution, for its pro rata share of such
remaining unreimbursed Excess Payments. The calculation of such further pro rata
contribution obligations as between such contributing Credit Parties, and the
allocation of such contributions among such Claiming Credit Parties, shall
proceed in each such subsequent round in accordance with the respective
proration and allocation provisions generally set forth in Section 1C. Nothing
in this Section 1 shall affect any Credit Party’s joint and several liability
for all Obligations.

 

SECTION 2. No Waiver of Other Rights. All rights of each Credit Party under
Section 1 shall be in addition to and not in derogation of any and all other
rights of

 

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indemnity, contribution, reimbursement or subrogation which such Credit Party
may have under applicable law in respect of the Note Agreement, the Notes, the
Multiparty Guaranty or any other Guarantee, as applicable, but in all events
subject to the subordination provisions in Section 3. However, such Credit Party
shall be entitled to only a single satisfaction of any claim giving rise to any
rights under Section 1 and applicable law in respect of the Transaction
Documents to which such Person is a party, and any such other rights of
indemnity, contribution, reimbursement or subrogation shall be expressly
subordinate (in time and right of payment) to the contractual rights of each
Credit Party under Section 1.

 

SECTION 3. Subordination. Each Credit Party (i) subordinates all present and
future indebtedness owing to it from any of the other Credit Parties (including,
without limitation, under Section 1 and under such Credit Party’s rights of
indemnity, contribution, reimbursement or subrogation under applicable law) to
the indefeasible payment in full in cash of all of the Obligations, (ii) agrees
that it will not accelerate, or make a claim in respect of, such indebtedness or
otherwise attempt to enforce any of its right under Section 1 until all
Obligations have been indefeasibly paid in full in cash and (iii) agrees that it
will not assign or pledge to any Person all or any part of such indebtedness.
If, notwithstanding the foregoing, any Credit Party shall collect, enforce or
receive any amounts in respect of such indebtedness, such amounts shall be
collected, enforced and received by such Credit Party as trustee for the holders
of the Notes, and shall promptly be paid over to the holders of the Notes for
application to the Obligations in accordance with the terms of the Note
Agreement, without affecting in any manner the liability of the other Credit
Parties to such Credit Party hereunder. Notwithstanding anything to the contrary
in this Section 3, any Credit Party may make payments to any other Credit Party
in respect of indebtedness owing by such Credit Party to any such other Credit
Party during such times as no Event of Default has occurred and is continuing.

 

SECTION 4. Waivers.

 

A. Each of the Credit Parties waives any right to require a Claiming Credit
Party to: (i) proceed against any Person, including another Credit Party; (ii)
proceed against or exhaust any collateral held from another Credit Party or any
other Person; (iii) pursue any other remedy in the Claiming Credit Party’s
power; or (iv) make any presentments, demands for performance, or give any
notices of nonperformance, protests, notices of protests or notices of dishonor
in connection with any of the payments required under this Agreement.

 

B. Each of the Credit Parties waives any defense arising by reason of: (i) any
disability or other defense of, any other Credit Party or any other Person; (ii)
the cessation from any cause whatsoever, other than payment in full, of any
liability of any Credit Party or any other Person; (iii) any act or omission by
a Claiming Credit Party which directly or indirectly results in or aids the
discharge of a Credit Party from the obligation to make payments required by
this Agreement by operation of law or otherwise; and (iv) any modification of
the obligations, in any form whatsoever, including any modification made after
revocation hereof to any obligations incurred prior

 

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to such revocation, and including without limitation the renewal, extension,
acceleration or other change in time for payment of the obligations, or other
change in the terms of the obligations or any part thereof, including increase
or decrease of the rate of interest thereon.

 

C. Each of the Credit Parties waives all rights and defenses arising out of an
election of remedies by a Claiming Credit Party, even though that election of
remedies, might prejudice the Credit Party’s rights of subrogation and
reimbursement against another Credit Party.

 

SECTION 5. Termination. This Agreement shall survive and remain in full force
and effect so long as any part of the Obligations has not been paid in full in
cash, and shall continue to be effective or be reinstated, as the case may be,
if at any time any part of a payment of the Obligations is rescinded or must
otherwise be restored by any holder of Notes or any Credit Party upon the
bankruptcy or reorganization of any Credit Party, or otherwise.

 

SECTION 6. No Waiver. No failure on the part of any Credit Party to exercise,
and no delay in exercising, any right, power or remedy under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or remedy by any Credit Party preclude any other or further
exercise or the exercise of any other right, power or remedy. All remedies under
this Agreement are cumulative and are not exclusive of any other remedies
provided by law. No Credit Party shall be deemed to have waived any rights under
this Agreement unless the waiver is in writing and signed by the party or
parties affected.

 

SECTION 7. Binding Agreement. Whenever in this Agreement any of the parties is
referred to, the reference shall include the successors and assigns of the
party; and all covenants, promises and agreements by or on behalf of the parties
that are contained in this Agreement shall bind and inure to the benefit of
their respective successors and assigns. This Agreement shall not be amended or
terminated, nor any provision herein waived, and no Credit Party may assign or
delegate any of its obligations under this Agreement (and any attempted
assignment or delegation shall be void), without in each case the prior written
consent of the Required Holders. Each Credit Party acknowledges and agrees that
the holders from time to time of Notes are intended indirect beneficiaries of
the benefits created in favor of each Credit Party by the indemnification and
contribution provisions of this Agreement.

 

SECTION 8. Severability. To the extent that any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, no party shall be required to comply with the provision for so long
as the provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained in
this Agreement shall not in any way be affected or impaired. The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

 

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SECTION 9. Additional Credit Parties. From time to time subsequent to the date
hereof, additional Persons may become parties hereto as Guarantors. Each such
Person shall become a party to this Agreement by executing and delivering to the
holders of the Notes, with a copy to the other parties hereto, a counterpart of
this Agreement and, thereupon, shall be deemed a Guarantor for all purposes
hereunder with the same force and effect as if originally named as a Guarantor
herein. The addition of any new Guarantor as a party to this Agreement shall not
require the consent of any other Credit Party hereunder.

 

SECTION 10. Counterparts. This Agreement may be executed in two or more
identical counterparts, each of which shall be deemed an original, but all of
which, when taken together, shall constitute but one instrument. The counterpart
signature pages may be detached and assembled to form a single original
document. This Agreement shall be effective with respect to any Credit Party
when a counterpart bearing the signature of such Credit Party shall have been
executed and delivered to all parties. In the event that any Person shall become
a Credit Party after the date hereof, that Person may become a party to this
Agreement by executing and delivering to all parties a counterpart of this
Agreement. Upon execution and delivery of the counterpart, such Person shall be
a Credit Party for purposes of this Agreement.

 

SECTION 11. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCLUDING CHOICE OF LAW
PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRED THE APPLICATION OF THE
LAWS OF A JURISDICTION OTHER THAN SUCH STATE.

 

[Remainder of Page Intentionally Blank]

 

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The parties have caused this Agreement to be duly executed as of the date
hereof.

 

McGRATH RENTCORP, a California corporation

By:

 

 

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Thomas J. Sauer

   

Vice President and Chief Financial Officer

ENVIROPLEX, INC., a California corporation

By:

 

 

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Thomas J. Sauer

   

Vice President and Chief Financial Officer

 

MOBILE MODULAR MANAGEMENT CORPORATION, a California corporation

 

By:

 

 

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Thomas J. Sauer

   

Chief Financial Officer

 

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Exhibit “A”

 

FORM OF

 

COMPLIANCE CERTIFICATE

 

This Compliance Certificate is furnished pursuant to Section 7.3(d) of that
certain Third Amended and Restated Credit Agreement dated as of May 7, 2004,
among the Borrower, certain Banks parties thereto and Union Bank of California,
N.A., as Agent for the Banks, as from time to time modified, supplemented or
amended (the “Agreement”). Unless otherwise defined, all capitalized terms used
in this Compliance Certificate have the respective meanings ascribed to them in
the Agreement.

 

Borrower hereby represents and warrants as follows:

 

1. I am familiar with the Agreement and the business and operations of Borrower.

 

2. Except as otherwise specifically indicated, the information contained in this
Certificate is true and accurate on and as of                             ,     
(the “Certification Date”).

 

3. As of the Certification Date and at all times during the quarter ending on
the Certification Date, Borrower has performed all obligations to be performed
by it under (a) the Agreement, (b) any instrument or agreement to which Borrower
is a party or under which Borrower is obligated, and (c) any judgment, decree,
or order of any court or governmental authority binding on Borrower. No Default
or Event of Default has occurred, whether or not the same was cured, during such
quarter.

 

4. As of the Certification Date, the information set forth below is true,
accurate and complete:

 

(a)

  

Section 7.11(a): Tangible Net Worth

           

Tangible Net Worth

   $            

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Minimum Tangible Net Worth calculation:

           

Base amount

   $ 127,500,000          

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Plus: Fifty percent of Net Income (without reduction for Net Loss) after
December 31, 2003

   $            

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     Plus: 90% of the gross proceeds from stock issuance (excluding the first
$2,000,000 of proceeds from the exercise of stock options after December 31,
2003)    $            

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            Minimum Tangible Net Worth Total

   $            

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(b)

  

Section 7.11(b): Funded Debt to EBITDA

           

This calculation is also used for Determination of

           

Applicable Margin (Section 2.3.2) and Commitment

           

Fee Percentage (Section 3.7)

           

Funded Debt (A)

   $            

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EBITDA (B)

   $            

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Ratio of A to B

                

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Maximum permitted from Effective Date through December 31, 2004: 2.50 to 1.00

           

Maximum permitted from January 1, 2005 through December 31, 2005: 2:25 to 1:00

           

Maximum permitted from and after January 1, 2006: 2:00 to 1:00

      

 

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(c)

  

Section 7.11(c): Fixed Charge Coverage Ratio

           

1. EBITDA (A)

   $                               

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2. Interest expense for the 4 fiscal quarter periods immediately ending on the
date hereof

   $                               

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3. Borrower’s current portion of long term debt (as determined in accordance
with GAAP)

   $                               

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4. Cash dividends paid for the 4 fiscal quarter periods immediately ending on
the date hereof

   $                               

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5. Cash taxes paid for the 4 fiscal quarter periods immediately ending on the
date hereof

   $                               

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6. Sum of 2 through 5 (B)

   $                               

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        Ratio of A to B

                

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        Minimum required from Effective Date through December 31, 2004: 1.50 to
1

           

        Minimum required from January 1, 2005 to December 31, 2005: 1.75 to 1

           

        Minimum required from and after January 1, 2006: 2.00 to 1

           

        Executed this              day of             ,     .

      

    

By:

 

 

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Name:

 

 

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Title:

 

 

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EXHIBIT “B”

 

FORM OF

 

LOAN REQUEST

 

[Date]

 

Union Bank of California, N.A., as Agent

East Bay Commercial Banking Group

Two Walnut Creek Center

200 Pringle Avenue, Suite 260

Walnut Creek, CA 94596-3570

 

Attention: Buddy Montgomery, Vice President

 

  Re:   Third Amended and Restated Credit Agreement dated as of May 7, 2004
among McGrath RentCorp, a California corporation (“Borrower”), certain Banks
parties thereto, and Union Bank of California, N.A., as Agent for the Banks, as
from time to time modified, supplemented or amended (the “Agreement”). (Terms
defined in the Agreement shall have the same meanings herein).

 

Dear Mr. Montgomery:

 

1.   The Borrower hereby gives notice that it requests a Loan under the
Agreement, as follows:

 

  (a)   The Funding Date is                                         .

 

  (b)   The amount is $                     .

 

  (c)   The Rate Option selected is:

 

  (    )   Eurodollar Loan

  (    )   Reference Rate Loan

 

(d) The Eurodollar Period selected (if applicable) is
                            .

 

2.   The Borrower hereby gives notice that it requests continuation of an
existing Eurodollar Loan as follows:

 

  (a)   The Funding Date is                                         .

 

  (b)   The amount of the Loan to be continued is:

 

                      Original   amount:                    
$                    

 

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                      Increase   (Decrease) being requested:    
$                            

                      Amount   to be continued:                         
$                            

  (c)   The Eurodollar Period selected is:
                                        .

 

3.   The Borrower hereby gives notice that it requests a conversion from one
Rate Option to another Rate Option, as follows:

 

  (a)   The Funding Date is                                              .

 

  (b)   The aggregate amount to be converted is $
                                        .

 

  (c)   Convert the Rate Option:

 

From:

  

To:

(    )  Eurodollar Loan

  

(    )  Eurodollar Loan

(    )  Reference Rate Loan

  

(    )  Reference Rate Loan

 

  (d)   The new Eurodollar Period selected (if applicable) is
                            .

 

Borrower hereby represents and warrants that each of the conditions precedent
set forth in Section 5.2 of the Agreement will be satisfied on and as of the
Funding Date of such Loan and, specifically:

 

  (a)   There exists no Default or Event of Default;

 

  (b)   The representations and warranties contained in Article 6 of the
Agreement will be true and correct as of the Funding Date of the Loan, except to
the extent that changes in the facts and conditions on which such
representations and warranties are based are required or permitted under the
Agreement.

 

Very truly yours,

McGRATH RENTCORP,

a California corporation

By:

 

 

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Name:

 

 

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Title:

 

 

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EXHIBIT “C”

 

FORM OF

 

OFFICER’S CERTIFICATE

 

[Borrower’s Letterhead]

 

May     , 2004

 

Union Bank of California, N.A., as Agent

East Bay Commercial Banking Group

Two Walnut Creek Center

200 Pringle Avenue, Suite 260

Walnut Creek, CA 94596-3570

 

Attention: Buddy Montgomery, Vice President

 

Dear Mr. Montgomery:

 

Terms not otherwise defined herein shall have the meanings ascribed to them in
the Third Amended and Restated Credit Agreement dated as of May 7, 2004 (the
“Agreement”). In connection with the Agreement, the undersigned hereby certifies
that:

 

  1.   The representations and warranties of the Borrower contained in Article 6
of the Agreement are true and correct on and as of the date of this certificate
with the same effect as though such representations and warranties had been on
and as of such date.

 

  2.   The Borrower has performed and complied with all agreements and covenants
contained in the Agreement required to be performed and complied with by it
prior to or on the date of this certificate.

 

  3.   No proceedings looking toward the dissolution or liquidation of the
Borrower have been commenced and no such proceedings are contemplated.

 

  4.   Attached is a true and correct copy of certain resolutions, which comply
with the requirements of Section 5.1(a)(v) of the Agreement, duly adopted by the
Board of Directors of the Borrower at a duly authorized meeting, duly held at
the office of the Borrower on                     , 2004 at which meeting a
quorum of directors was present in person throughout and voted in favor thereof,
and such resolutions have not been in any way modified, amended, rescinded or
revoked and remain on the date hereof in full force and effect.

 

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  5.   The Borrower is duly incorporated, validly existing and in good standing
under the laws of the State of California and no provision in the Articles of
Incorporation or By-laws of the Borrower, or any shareholder agreement, limits
the power of the Board of Directors to pass the foregoing resolutions, that such
resolutions are in conformity with the provisions of said Articles of
Incorporation and Bylaws and that no approval of the shareholders or of the
outstanding shares of the borrower is required with respect to the matters which
are the subject of the foregoing resolutions.

 

  6.   Attached hereto is an incumbency certificate which complies with the
requirements of Section 5.1(a)(vi) of the Agreement.

 

  7.   The copies of the Articles of Incorporation and By-laws of the Borrower
delivered to Agent in connection with the Agreement pursuant to Section
5.1(a)(iv) of the Agreement, are true, accurate and complete copies of such
Articles and By-laws of Borrower and such documents remain in effect and have
not been modified.

 

  8.   Agent is hereby authorized to rely on this Certificate until a new
Certificate certified by the Secretary (or Assistant Secretary) of the Borrower
is received by the Agent, even in the event that one or more of the foregoing
individuals ceases to act in such capacity.

 

IN WITNESS WHEREOF, we have hereto set our hand this                      day of
May, 2004.

 

McGrath RentCorp

By:

 

 

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Name:

 

 

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Title:

 

 

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EXHIBIT “D”

 

FORM OF

 

REVOLVING NOTE

 

NOT TO EXCEED

    

$35,000,000.00

   San Francisco, California      May 7, 2004

 

FOR VALUE RECEIVED, the undersigned, McGrath RentCorp, a California corporation
(“Borrower”), promises to pay to UNION BANK OF CALIFORNIA, N.A. (the “Bank”, or
order, on or before the Revolving Loan Termination Date, or as otherwise
provided in the Third Amended and Restated Credit Agreement dated as of May 7,
2004, among the Borrower, certain banks parties thereto, and Union Bank of
California, N.A., as Agent for the Banks, as from time to time modified,
supplemented or amended, (the “Agreement), the lesser of (i) the principal sum
of THIRTY FIVE MILLION DOLLARS ($35,000,000) or (ii) the aggregate unpaid
principal amount of all Revolving Loans made by the Bank to Borrower pursuant to
the Agreement. Terms defined in the Agreement have the same meanings herein.

 

Borrower further promises to pay to the Bank, or order, interest on the unpaid
principal amount hereunder from time to time outstanding from the date hereof
until such amount shall have become due and payable (whether at the stated
maturity, by acceleration, or otherwise) at the rate(s) of interest and at the
times provided in the Agreement. Borrower further promises to pay interest on
any overdue payment of principal and (to the extent permitted by law) interest
as set forth in the Agreement.

 

Bank is authorized, but not required, to record the date, amount, type, interest
rate and Eurodollar Period (if applicable) of each Loan made by the Bank to
Borrower, and each payment made on account thereof, on its books and records or
on the schedule annexed hereto, and, in the absence of manifest error, such
recordation shall constitute prima facie evidence of the accuracy of the
information so recorded; provided, however, that failure by the Bank to make any
such recordation shall not affect any of the Obligations of Borrower.

 

All payments of principal, interest, fees, or other amounts due from Borrower
hereunder, shall be in Dollars and in immediately available funds, without
setoff, counterclaim or other deduction of any nature, and shall be made to
Agent, at its address set forth on the signature pages of the Agreement, prior
to 10:00 a.m., San Francisco time, on the last date permitted therefor.

 

Except as otherwise provided in the Agreement, if any payment of principal or
interest hereunder shall become due on a day which is not a Business Day, such
payment shall be made on the next following Business Day and such extension of
time shall be included in computing interest in connection with such payment.

 

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This Revolving Note is one of the “Revolving Notes” referred to in, evidences
obligations of Borrower under, and is entitled to the benefits of, the
Agreement, which, among other things, provides for the acceleration of the
maturity hereof upon the occurrence of certain circumstances and upon certain
terms and conditions.

 

Borrower hereby expressly waives presentment, demand, notice of dishonor,
protest, as such terms are defined in Division 3 of the California Commercial
Code, and all other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of this Revolving Note and the
Agreement.

 

This Revolving Note shall be governed by, construed and enforced in accordance
with the laws of the State of California.

 

MCGRATH RENTCORP

By:

--------------------------------------------------------------------------------

Name:

 

Thomas J. Sauer

Title:

 

Vice President and Chief Financial Officer

 

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SCHEDULE OF LOANS

 

This Revolving Note evidences Loans made, continued or converted under the
Agreement to Borrower, on the dates, in the principal amounts, of the types,
bearing interest at the rates and having Eurodollar Periods (if applicable) set
forth below, subject to the payments, prepayments, continuations and conversions
of principal set forth below:

 

Date

Made,

Continued

or

Converted

--------------------------------------------------------------------------------

 

Principal
Amount

of

Loan

--------------------------------------------------------------------------------

 

Type

of

Loan

--------------------------------------------------------------------------------

 

Interest

Rate

--------------------------------------------------------------------------------

 

Duration

of

Eurodollar
Period

--------------------------------------------------------------------------------

 

Amount

Paid

Prepaid
Continued

Or

Converted

--------------------------------------------------------------------------------

 

Unpaid
Principal
Amount

--------------------------------------------------------------------------------

 

Notation
Made By

--------------------------------------------------------------------------------

 

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EXHIBIT “E”

 

Form of

 

CONTINUING GUARANTY

 

1. Obligations Guarantied. For consideration, the adequacy and sufficiency of
which is acknowledged, [ENVIROPLEX, INC. / MOBILE MODULAR MANAGEMENT
CORPORATION], a California corporation (“Guarantor”), hereby unconditionally
guaranties and promises: (a) to pay to UNION BANK OF CALIFORNIA, N.A., as agent
(“Agent”), for the ratable benefit of the lending banks under the Credit
Agreement hereinafter defined (“Banks”) on demand, in lawful United States
money, all Obligations to Agent and Banks of McGRATH RENTCORP, a California
corporation (“Borrower”); and (b) to perform all undertakings of Borrower in
connection with the Obligations. “Obligations” is used herein in its most
comprehensive sense and includes any and all debts, liabilities, rental
obligations, and other obligations and liabilities of every kind of Borrower to
Agent and to the Banks signatory from time to time to that certain Third Amended
and Restated Credit Agreement dated as of May 7, 2004 (the “Credit Agreement,”
the terms defined therein and not otherwise defined herein being used herein as
therein defined), by and among Borrower, Agent and such Banks, whether made,
incurred or created previously, concurrently or in the future, whether voluntary
or involuntary and however arising, whether incurred directly or acquired by
Banks by assignment or succession, whether due or not due, absolute or
contingent, liquidated or unliquidated, legal or equitable, whether Borrower is
liable individually or jointly or with others, whether incurred before, during
or after any bankruptcy, reorganization, insolvency, receivership or similar
proceeding (“Insolvency Proceeding”), and whether recovery thereof is or becomes
barred by a statute of limitations or is or becomes otherwise unenforceable,
together with all expenses of, for and incidental to collection, including
reasonable attorneys’ fees. Guarantor is a subsidiary of Borrower and will
derive substantial direct and indirect economic benefit if Agent and Banks enter
into the Credit Agreement, and Banks and Agent are willing to do so, but only
upon the condition, among others, that Guarantor shall have executed and
delivered this Guaranty.

 

2. Limitation on Guarantor’s Liability. Although this Guaranty covers all
Obligations, Guarantor’s liability under this Guaranty for Borrower’s
Obligations shall not exceed at any one time the sum of the following (the
“Guarantied Liability Amount”): (a) One Hundred Thirty Million Dollars
($130,000,000.00) for Obligations representing principal (“Principal Amount”),
(b) all interest, fees like charges owing and allocable to the Principal Amount
as determined by Bank, and (c) without allocation in respect of the Principal
Amount all costs, attorneys’ fees, and expenses of Agent and Banks relating to
or arising out of the enforcement of the Obligations and all indemnity
liabilities of Guarantor under this Guaranty. The foregoing limitation applies
only to Guarantor’s liability under this particular Guaranty. Unless Banks
otherwise agree in writing, every other guaranty of any Obligations previously,
concurrently, or hereafter given to Banks by Guarantor is independent of this
Guaranty and of every other such guaranty. Without notice to Guarantor, Banks
may permit the Obligations to, exceed the Principal Amount and may apply or
reapply any amounts received in respect of the Obligations from any source other
than from Guarantor to that portion of the Obligations not included within the
Guarantied Liability Amount.

 

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3. Continuing Nature/Revocation/Reinstatement. This Guaranty is in addition to
any other guaranties of the Obligations, is continuing and covers all
Obligations, including those arising under successive transactions which
continue or increase the Obligations from time to time, renew all or part of the
Obligations after they have been satisfied, or create new Obligations.
Revocation by one or more signers of this Guaranty or any other guarantors of
the Obligations shall not (a) affect the obligations under this Guaranty of a
non-revoking Guarantor, (b) apply to Obligations outstanding when Banks receive
written notice of revocation, or to any extensions, renewals, readvances,
modifications, amendments or replacements of such Obligations, or (c) apply to
Obligations, arising after Banks receive such notice of revocation, which are
created pursuant to a commitment existing at the time of the revocation, whether
or not there exists an unsatisfied condition to such commitment or Banks have
another defense to its performance. All of Agent’s and Banks’ rights pursuant to
this Guaranty continue with respect to amounts any Obligations which are
thereafter restored or returned by any Bank, whether in an Insolvency Proceeding
of Borrower or for any other reason, all as though such amounts had not been
paid to such Bank; and Guarantor’s liability under this Guaranty (and all its
terms and provisions) shall be reinstated and revived, notwithstanding any
surrender or cancellation of this Guaranty. Each Bank, at its sole discretion,
may determine whether any amount paid to it must be restored or returned;
provided, however, that if such Bank elects to contest any claim for return or
restoration, Guarantor agrees to indemnify and hold Bank harmless from and
against all costs and expenses, including reasonable attorneys’ fees, expended
or incurred by Bank in connection with such contest. No payment by Guarantor
shall reduce the Guarantied Liability Amount hereunder unless, at or prior to
the time of such payment, Banks receive Guarantor’s written notice to that
effect. If any Insolvency Proceeding is commenced by or against Borrower or
Guarantor, at the election of Banks, Guarantor’s obligations under this Guaranty
shall immediately and without notice or demand become due and payable, whether
or not then otherwise due and payable.

 

4. Authorization. Guarantor authorizes Agent and Banks, without notice and
without affecting Guarantor’s liability under this Guaranty, from time to time,
whether before or after any revocation of this Guaranty, to (a) renew,
compromise, extend, accelerate, release, subordinate, waive, amend and restate,
or otherwise amend or change, the interest rate, time or place for payment or
any other terms of all or any part of the Obligations; (b) accept delinquent or
partial payments on the Obligations; (c) take or not take security or other
credit support for this Guaranty or for all or any part of the Obligations, and
exchange, enforce, waive, release, subordinate, fail to enforce or perfect,
sell, or otherwise dispose of any such security or credit support; (d) apply
proceeds of any such security or credit support and direct the order or manner
of its sale or enforcement as Banks, at their sole discretion, may determine;
and (e) release or substitute Borrower or any guarantor or other person or
entity liable on the Obligations .

 

5. Waivers. To the maximum extent permitted by law, Guarantor waives (a) all
rights to require Agent or Banks to proceed against Borrower, or any other
guarantor, or proceed against, enforce or exhaust any security for the
Obligations or to marshal assets or to pursue any other remedy in Agent’s or any
Bank’s power whatsoever; (b) all defenses arising by reason of any disability or
other defense of Borrower, the cessation for any reason of the liability of
Borrower, any defense that any other indemnity, guaranty or security was to be
obtained, any claim that Agent or any Bank has made Guarantor’s obligations more
burdensome or more burdensome than Borrower’s obligations, and the use of any
proceeds of the Obligations other than as

 

2

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intended or understood by Agent, such Bank or Guarantor; (c) all presentments,
demands for performance, notices of nonperformance, protests, notices of
dishonor, notices of acceptance of this Guaranty and of the existence or
creation of new or additional Obligations, and all other notices or demands to
which Guarantor might otherwise be entitled; (d) all conditions precedent to the
effectiveness of this Guaranty; (e) all rights to file a claim in connection
with the Obligations in an Insolvency Proceeding filed by or against Borrower;
(f) all rights to require Agent or any Bank to enforce any of its respective
remedies; and (g) until the Obligations are satisfied or fully paid with such
payment not subject to return: (i) all rights of subrogation, contribution,
indemnification or reimbursement, (ii) all rights of recourse to any assets or
property of Borrower, or to any collateral or credit support for the
Obligations, (iii) all rights to participate in or benefit from any security or
credit support Banks may have or acquire, and (iv) all rights, remedies and
defenses Guarantor may have or acquire against Borrower.

 

6. Guarantor to Keep Informed. Guarantor warrants having established with
Borrower adequate means of obtaining, on an ongoing basis, such information as
Guarantor may require concerning all matters bearing on the risk of nonpayment
or nonperformance of the Obligations. Guarantor assumes sole, continuing
responsibility for obtaining such information from sources other than from Agent
or any Bank. Neither Agent nor any Bank has any duty to provide any information
to Guarantor until Agent or such Bank receives Guarantor’s written request for
specific information in Bank’s possession and Borrower has authorized Agent or
such Bank, as applicable, to disclose such information to Guarantor.

 

7. Subordination. All obligations of Borrower to Guarantor which presently or in
the future may exist (“Guarantor’s Claims”) are hereby subordinated to the
Obligations. At Agent’s request, Guarantor’s Claims will be enforced and
performance thereon received by Guarantor only as a trustee for Banks, and
Guarantor will promptly pay over to Agent, for the ratable benefit of Banks, all
proceeds recovered for application to the Obligations without reducing or
affecting Guarantor’s liability under other provisions of this Guaranty.

 

8. Security. To secure Guarantor’s obligations under this Guaranty, Guarantor
grants Bank a security interest in all moneys, general and special deposits,
instruments and other property of Guarantor at any time maintained with or held
by Agent and/or any Bank, and all proceeds of the foregoing.

 

9. Authorization. Neither Agent nor any Bank need inquire into or verify the
powers of Guarantor or authority of those acting or purporting to act on behalf
of Guarantor, and this Guaranty shall be enforceable with respect to any
Obligations Banks grant or create in reliance on the purported exercise of such
powers or authority.

 

10. Assignments. This Guaranty shall be binding upon Guarantor, its successors
and assigns and shall inure to the benefit of and be enforceable by Agent and
the Banks and their successors, transferees and assigns.

 

11. Counsel Fees and Costs. The prevailing party shall be entitled to attorneys’
fees (including a reasonable allocation for Agent’s and Banks’ internal counsel)
and all other costs and expenses which it may incur in connection with the
enforcement or preservation of its rights under, or defense of, this Guaranty or
in connection with any other dispute or proceeding relating

 

3

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to this Guaranty, whether or not incurred in any Insolvency Proceeding,
arbitration, litigation or other proceeding. Without limitation on any other
Obligations or remedies of the Agent or the Banks under this Guaranty, Guarantor
shall, to the fullest extent permitted by law, indemnify, defend and save and
hold harmless the Agent and each Bank from and against, and shall pay on demand,
any and all losses, liabilities, damages, costs, expenses and charges (including
the fees and disbursements of the Agent’s and such Bank’s legal counsel)
suffered or incurred by the Agent and such Bank as a result of any failure of
any Obligations to be the legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their terms.

 

12. Integration/Severability/Amendments. This Guaranty is intended by Guarantor
and Agent as the complete, final expression of their agreement concerning its
subject matter. It supersedes all prior understandings or agreements with
respect thereto and may be changed only by a writing signed by Guarantor and
Agent. No course of dealing, or parole or extrinsic evidence shall be used to
modify or supplement the express terms of this Guaranty. If any provision of
this Guaranty is found to be illegal, invalid or unenforceable, such provision
shall be enforced to the maximum extent permitted, but if fully unenforceable,
such provision shall be severable, and this Guaranty shall be construed as if
such provision had never been a part of this Guaranty, and the remaining
provisions shall continue in full force and effect.

 

13. Notice. Any notice, including notice of revocation, given by any party under
this Guaranty shall be effective only upon its receipt by the other party and
only if (a) given in writing and (b) personally delivered or sent by United
States mail, postage prepaid, and addressed to Agent or Guarantor at their
respective addresses for notices indicated below. Guarantor and Agent may change
the place to which notices, requests, and other communications are to be sent to
them by giving written notice of such change to the other.

 

14. Choice of Law. The Loan Documents (other than those containing a contrary
express choice of law provisions) shall be construed in accordance with the
internal laws (and not the law of conflicts) of the State of California, but
giving effect to federal laws applicable to national banks.

 

15. CONSENT TO JURISDICTION. GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR CALIFORNIA STATE
COURT SITTING IN SAN FRANCISCO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO ANY LOAN DOCUMENTS AND GUARANTOR HEREBY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE
AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH COURT OR
THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT
OF THE AGENT OR ANY BANK TO BRING PROCEEDINGS AGAINST GUARANTOR IN THE COURTS OF
ANY OTHER JURISDICTION.

 

16. JURY TRIAL WAIVER. EACH PARTY TO THIS AGREEMENT HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY
LOAN DOCUMENT OR IN ANY WAY CONNECTED

 

4

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WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF
THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT
ANY SUCH CLAIM, DEMAND ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

IN WITNESS WHEREOF, Guarantor and Agent have caused this Guaranty to be duly
executed on this      day of May, 2004.

 

[ENVIROPLEX, INC. / MOBILE MODULAR MANAGEMENT CORPORATION]

 

BY:

--------------------------------------------------------------------------------

TITLE:

--------------------------------------------------------------------------------

 

Address for notices to Guarantor:

 

5700 Las Positas Road

Livermore, California 94550

Attention: Mr. Thomas Sauer, Chief Financial Officer

 

UNION BANK OF CALIFORNIA, N.A., as Agent

 

BY:

--------------------------------------------------------------------------------

TITLE:

--------------------------------------------------------------------------------

 

Address for notices to Agent:

 

Union Bank of California, N.A., as Agent

East Bay Commercial Banking Group

Two Walnut Creek Center

200 Pringle Avenue, Suite 260

Walnut Creek, CA 94596-3570

 

Attention:        Buddy Montgomery, Vice President

 

5