RENTAL SERVICE CORP, DEF 14A, 1997-03-26

RENTAL SERVICE CORP
DEF 14A, 1997-03-26
EQUIPMENT RENTAL & LEASING, NEC

Previous: DIAL CORP /NEW/, 10-K, 1997-03-26

Next: GRAND COURT LIFESTYLES INC, SC 13G, 1997-03-26

<PAGE>

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF
1934

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] CONFIDENTIAL, FOR USE OF THE
[_] Preliminary Proxy Statement COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))

[X] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12

RENTAL SERVICE CORPORATION
-----------------------------------------------------
(Name of Registrant as Specified In Its Charter)

-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

Notes:
<PAGE>

RENTAL SERVICE CORPORATION

14505 N. HAYDEN ROAD, SUITE 322
SCOTTSDALE, ARIZONA 85260
(602) 905-3300

March 26, 1997

Dear Stockholder:

It is my pleasure to invite you to attend your Company's Annual Meeting of
Stockholders. The meeting will be held at the Phoenecian Hotel, 6000 East
Camelback Road, Scottsdale, Arizona 85251 at 10:00 a.m. on April 28, 1997.

At this meeting you will be asked to (i) elect Directors for the ensuing
year, (ii) approve the Company's Employee Qualified Stock Purchase Plan and
(iii) ratify the selection of the Company's independent auditors for 1997.

If you cannot attend the meeting in person, please be sure to vote your
shares by proxy. Just mark, sign and date the enclosed proxy card and return
it in the enclosed postage-paid envelope. By promptly returning the card, you
will help your Company avoid additional solicitation costs. In person or by
proxy, your vote is important.

I hope you can join us at the Annual Meeting.

Sincerely,

/s/ Martin R. Reid

Martin R. Reid
Chairman and Chief Executive Officer
<PAGE>

RENTAL SERVICE CORPORATION

14505 N. HAYDEN ROAD, SUITE 322
SCOTTSDALE, ARIZONA 85260
(602) 905-3300

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 28, 1997

To Our Stockholders:

The Annual Meeting of Stockholders (the "Annual Meeting") of Rental Service
Corporation, a Delaware corporation (the "Company"), will be held at the
Phoenecian Hotel, 6000 East Camelback Road, Scottsdale, Arizona 85251 at 10:00
a.m. on April 28, 1997, for the following purposes:

1. to elect eight directors for the ensuing year to serve until their
successors are elected and have been qualified;

2. to approve the Company's Employee Qualified Stock Purchase Plan;

3. to ratify the selection of Ernst & Young LLP as independent auditors for
the Company for 1997; and

4. to transact such other business as may properly come before such meeting
or any adjournment thereof.

The Company's Board of Directors (the "Board") intends to present for
election as Directors the nominees named in the accompanying proxy statement,
whose names are incorporated herein by reference.

The Board has fixed the close of business on March 14, 1997 as the record
date for the determination of stockholders entitled to notice of and to vote
at the Annual Meeting and any adjournments thereof.

All stockholders are cordially invited to attend the Annual Meeting.

By Order of the Board of Directors

/s/ Douglas A. Waugaman

Douglas A. Waugaman
Secretary

Scottsdale, Arizona
March 26, 1997

IN ORDER TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, IF YOU CANNOT
BE PRESENT, YOU ARE REQUESTED TO SIGN AND DATE THE ENCLOSED PROXY AS
PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED ENVELOPE (TO WHICH NO
POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES). IF YOU ATTEND THE
ANNUAL MEETING AND WISH TO VOTE IN PERSON, YOUR PROXY WILL NOT BE USED.

<PAGE>

RENTAL SERVICE CORPORATION
14505 N. HAYDEN ROAD, SUITE 322
SCOTTSDALE, ARIZONA 85260
(602) 905-3300
PROXY STATEMENT

INTRODUCTION

This Proxy Statement ("Proxy Statement") is furnished to the stockholders,
and the enclosed proxy is being solicited, by the Board of Directors (the
"Board") of Rental Service Corporation, a Delaware corporation (the
"Company"), for solicitation of proxies for use at the Company's Annual
Meeting of Stockholders (the "Annual Meeting") to be held at 10:00 a.m. local
time at the Phoenecian Hotel, 6000 East Camelback Road, Scottsdale, Arizona
85251, on Monday, April 28, 1997, and at any and all adjournments thereof. At
the Annual Meeting, the holders of the Company's Common Stock, $.01 par value
per share ("Common Stock"), will be asked to vote to:

1. elect eight directors for the ensuing year to serve until their
successors are elected and have been qualified;

2. approve the Company's Employee Qualified Stock Purchase Plan;

3. ratify the selection of Ernst & Young LLP as independent auditors for
the Company for 1997.

As of the date of this Proxy Statement, the Board knows of no other business
that will be presented for consideration at the Annual Meeting. If, however,
any such other business shall properly come before the Annual Meeting, votes
will be cast pursuant to said proxies in respect of any such other business in
accordance with the judgment of the persons acting under said proxies.

Expenses incident to the preparation and mailing of this Proxy Statement and
accompanying notice of meeting and form of proxy are to be paid by the
Company. Following the initial mailing of this Proxy Statement and form of
proxy, the Company and its agents may also solicit proxies by mail, telephone,
facsimile or in person; employees of the Company who assist in such activities
will not receive additional compensation in connection therewith. The Company
has also engaged ChaseMellon Shareholder Services, L.L.C. to assist in
contacting shareholders whose stock is held in the names of brokers or other
custodians and will pay approximately $3,500 plus out-of-pocket expenses for
these services. Upon request, brokerage firms and other custodians, nominees
and fiduciaries will be reimbursed by the Company for their reasonable
expenses incurred in sending proxy materials to beneficial owners of Common
Stock.

It is anticipated that the mailing to stockholders of this Proxy Statement
and the enclosed proxy will commence on or about March 26, 1997.

A stockholder giving a proxy pursuant to the present solicitation may revoke
it at any time before it is exercised by giving a subsequent proxy or by
delivering to the Company's Secretary a written notice of revocation prior to
the voting of the proxy at the Annual Meeting. No proxy will be used if the
stockholder is personally present at the Annual Meeting and informs the
Secretary in writing that he or she wishes to vote his or her shares in
person.
<PAGE>

GENERAL INFORMATION

VOTING SHARES AND VOTING RIGHTS

Only stockholders of record at the close of business on March 14, 1997 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting
of Stockholders. On the Record Date, there were 11,376,378 shares of Common
Stock issued and outstanding. Votes may be cast in person or by proxy and each
share of Common Stock is entitled to one vote. All shares represented by the
accompanying proxy, if the proxy is properly executed, returned and not
revoked, will be voted as specified by the stockholder. If no contrary
instructions are given, such shares will be voted "FOR" each proposal (i.e.,
for the election of each of the eight director nominees named herein, for the
approval of the Employee Qualified Stock Purchase Plan and for the
ratification of Ernst & Young LLP as independent auditors for the Company).

A quorum comprising the holders of a majority of the outstanding shares of
Common Stock on the Record Date must be present or represented in order to
transact business at the Annual Meeting. Abstentions and "broker non-votes"
(i.e., shares held by a broker or nominee which are represented at the
meeting, but with respect to which such broker or nominee is not empowered to
vote on a particular proposal or proposals) will be counted in establishing
the quorum. Directors will be elected by a favorable vote of a plurality of
the votes of the shares of Common Stock present and entitled to vote, in
person or by proxy, at the meeting. Accordingly, neither abstentions nor
broker non-votes will affect the election of candidates receiving the
plurality of votes. In addition, because there is no cumulative voting for
directors, each share of Common Stock has one vote for each position to be
filled. Therefore, a simple majority of the shares voting may elect all of the
directors. Approval of the adoption of the Employee Qualified Stock Purchase
Plan, the ratification of the independent accountants for the Company and any
other proposals to come before the Annual Meeting, must receive the
affirmative votes of the holders of a majority of the shares of Common Stock
present and entitled to vote at the Annual Meeting. In connection with each
such proposal, proxies that reflect abstentions as to a particular proposal
will be treated as voted for purposes of such proposal and will have the same
effect of votes against such proposal, while broker non-votes will be treated
as unvoted for purposes of determining approval of such proposal and will not
be counted as votes for or against such proposal.

The beneficial ownership of the Company's Common Stock by certain beneficial
owners and by each of the Company's directors, certain of its most highly-
compensated executive officers and all executive officers and directors as a
group is set forth below under "Security Ownership of Certain Beneficial
Owners and Management."

2
<PAGE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information as of March 14, 1997 regarding
beneficial ownership of the Common Stock of the Company by (i) each person
known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of the Company's Common Stock, (ii) each director and named
executive officer (as defined herein) of the Company and (iii) the Company's
executive officers and directors as a group. Except as otherwise indicated,
each stockholder listed below has informed the Company that such stockholder
has (a) sole voting and investment power with respect to such stockholder's
shares of stock, except to the extent that authority is shared by spouses
under applicable law, and (b) record and beneficial ownership with respect to
such stockholder's shares of stock.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP(2) CLASS
- --------------------------------------- ----------------------- ----------
<S> <C> <C>
Brentwood RSC Partners, L.P.(3)............. 3,731,715 32.8%
William M. Barnum, Jr.(3)(4)................ 3,731,715 32.8
Frederick J. Warren(3)(4)................... 3,731,715 32.8
David H. Wong(3)............................ 3,731,715 32.8
John G. Quigley(4)(5)....................... 711,045 6.3
Nassau Capital Partners, L.P.(5)............ 707,220 6.2
Martin R. Reid(4)(6)........................ 160,022 1.4
Douglas A. Waugaman(4)(6)................... 58,806 *
Ronald Halchishak(4)........................ 13,180 *
David G. Ledlow(4).......................... 13,080 *
James R. Buch(4)............................ 1,800 *
Christopher A. Laurence(3)(4)............... -- --
Eric L. Mattson(4)(7)....................... -- --
Britton H. Murdoch(4)(8).................... 1,000 *
All directors and executive officers as a
group (11 persons)(3)(4)(5)(6)............. 4,690,648 41.2
</TABLE>
- --------
*Less than 1%

(1) Unless otherwise indicated, the address for each named person is c/o
Rental Service Corporation, 14505 N. Hayden Road, Suite 322, Scottsdale,
Arizona 85260.

(2) A person is deemed as of any date to have "beneficial ownership" of any
security that such person has a right to acquire within 60 days after such
date. Shares which each identified stockholder has the right to acquire
within 60 days of the date of the table set forth above are deemed to be
outstanding in calculating the percentage ownership of such stockholder,
but are not deemed to be outstanding as to any other person.

(3) Messrs. Barnum and Warren, directors of the Company, and Mr. Wong are
general partners of Brentwood Buyout Partners, L.P. ("BBP"), the general
partner of Brentwood RSC Partners, L.P. ("Brentwood RSC Partners");
accordingly Messrs. Barnum, Warren and Wong may be deemed to be the
beneficial owners of such shares and for purposes of this table they are
included. Messrs. Barnum, Warren and Wong disclaim beneficial ownership of
such shares. The address of Brentwood RSC Partners, Mr. Barnum,
Mr. Warren, Mr. Wong and Mr. Laurence is 11150 Santa Monica Boulevard,
Suite 1200, Los Angeles, California 90025.

(4) Excludes shares issuable upon exercise of options which are not
exercisable within 60 days of the date of the table set forth above, as
follows: Mr. Barnum--10,000 shares; Mr. Buch--8,200 shares; Mr.
Halchishak--74,910 shares; Mr. Laurence--10,000 shares; Mr. Ledlow--74,910
shares; Mr. Mattson--10,000 shares; Mr. Murdoch--10,000 shares; Mr.
Quigley--10,000 shares; Mr. Reid--200,000 shares; Mr. Warren--10,000
shares and Mr. Waugaman--100,000 shares.

(5) Mr. Quigley, a director of the Company, is a member of Nassau Capital,
L.L.C., the general partner of Nassau Capital Partners L.P.; accordingly,
Mr. Quigley may be deemed to be the beneficial owner of such

3
<PAGE>

shares and for purposes of this table they are included. Mr. Quigley is
also a member of NAS Partners I L.L.C. which owns 3,825 shares of Common
Stock; accordingly Mr. Quigley may be deemed to be the beneficial owner of
such shares and for purposes of this table they are included. Mr. Quigley
disclaims beneficial ownership of all such shares. The address of Nassau
Capital Partners L.P., NAS Partners I L.L.C. and Mr. Quigley is 22 Chambers
Street, Princeton, New Jersey 08542.

(6) Includes shares subject to vesting which may be repurchased by the Company
if they fail to vest.

(7) The address of such person is c/o Baker Hughes Incorporated, 3900 Essex
Lane, Suite 1200, Houston, Texas 77027.
(8) The address of such person is c/o Wendover Corporation, 354 W. Lancaster
Avenue, Havenford, PA 19041.

4
<PAGE>

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table provides certain summary information concerning
compensation paid or accrued by the Company to or on behalf of the Company's
Chief Executive Officer and each of the Company's other executive officers
other than the Chief Executive Officer who earned more than $100,000 for all
services rendered in all capacities to the Company and its subsidiaries during
the fiscal years ended December 31, 1996, 1995 and 1994 (collectively, the
"named executive officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
--------------------- ------------
NAME AND PRINCIPAL ALL OTHER
POSITION YEAR SALARY($) BONUS($)(3) OPTIONS(#) COMPENSATION($)
- ------------------ ---- --------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Martin R. Reid
Chairman and Chief
Executive Officer(1).. 1996 294,231 84,375 -- 5,641(4)
1995 220,674 140,625 -- --
1994 59,976 -- -- --
Douglas A. Waugaman
Vice President, Chief
Financial Officer,
Secretary and
Treasurer(1).......... 1996 155,923 42,900 -- 7,149(2)
1995 139,550 48,050 -- 126,940(2)
1994 115,200 11,250 -- 4,074(2)
Ronald Halchishak
Senior Vice President--
Operations(1)......... 1996 150,000 100,000 71,250 910(4)
1995 147,115 26,520 16,740 --
1994 97,517 10,791 -- --
David G. Ledlow
Senior Vice President--
Operations............ 1996 117,692 36,709 71,250 4,200(5)
1995 85,827 38,472 16,740 --
1994 72,918 14,145 -- --
</TABLE>
- --------
(1) Includes amounts paid by an entity acquired by the Company in September
1995.

(2) Consists of an automobile allowance ($2,175) and insurance premiums paid
by the Company ($4,974) for life insurance and disability policies
covering Mr. Waugaman for 1996. Consists of relocation expenses reimbursed
by the Company ($19,598), a relocation bonus ($100,000) and insurance
premiums paid by the Company ($7,342) for life insurance and disability
policies covering Mr. Waugaman for 1995. Consists of insurance premiums
paid by the Company for life insurance and disability policies covering
Mr. Waugaman for 1994.

(3) The amount of bonus earned in each fiscal year is paid, and accounted for
in this table, in the next succeeding fiscal year. Bonuses earned with
respect to fiscal 1996 were as follows: Mr. Reid, $300,000, Mr. Waugaman,
$200,000, Mr. Halchishak, $75,000 and Mr. Ledlow, $75,000. Such bonuses
were paid during March 1997.

(4) Consists of an automobile allowance.

(5) Consists of relocation expenses reimbursed by the Company.

5
<PAGE>

STOCK OPTIONS GRANTED IN FISCAL 1996

The following table sets forth information concerning individual grants of
stock options made by the Company during the fiscal year ended December 31,
1996 to each of the named executive officers.

OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
NUMBER OF PERCENT OF TOTAL APPRECIATION FOR
SECURITIES OPTIONS GRANTED EXERCISE OR OPTION TERM
UNDERLYING TO EMPLOYEES BASE PRICE EXPIRATION ---------------------
NAME OPTION GRANTS(#) IN FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ---------------- ---------------- ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Martin R. Reid
Chairman and Chief
Executive Officer...... -- -- -- -- -- --
Douglas A. Waugaman
Vice President, Chief
Financial Officer,
Secretary and
Treasurer.............. -- -- -- -- -- --
Ronald Halchishak
Senior Vice President--
Operations............. 11,250(1) 5.4% $14.11 2006 $ 99,829 $ 252,987
60,000(2) 28.7% $21.00 2006 $792,407 $2,008,115
David G. Ledlow
Senior Vice President--
Operations............. 11,250(1) 5.4% $14.11 2006 $ 99,829 $ 252,987
60,000(2) 28.7% $21.00 2006 $792,407 $2,008,115
</TABLE>
- --------
(1) Such options vest equally over three years on April 1, 1997, 1998 and
1999.

(2) Such options vest equally over four years on October 22, 1997, 1998, 1999
and 2000.

6
<PAGE>

AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES

The following table sets forth information (on an aggregated basis)
concerning each exercise of stock options during the year ended December 31,
1996, by each of the named executive officers and the year-end value of
unexercised options.

AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED "IN-THE-MONEY"
OPTIONS AT FISCAL OPTIONS/SARS AT FISCAL
YEAR-END(#) YEAR-END($)(1)
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Martin R. Reid
Chairman and Chief
Executive Officer...... -- -- -- -- -- --
Douglas A. Waugaman
Vice President, Chief
Financial Officer,
Secretary
and Treasurer.......... -- -- -- -- -- --
Ronald Halchishak
Senior Vice President--
Operations............. 5,580 -- -- 82,410 -- $847,426
David G. Ledlow
Senior Vice President--
Operations............. 4,725 -- 855 82,410 $23,504 $847,426
</TABLE>
- --------
(1) Options are "in-the-money" at the fiscal year-end if the fair market value
(based on the closing price of the Company's Common Stock on the Nasdaq
National Market System on December 31, 1996 of $27.50 per share, less the
exercise price) of the underlying securities on such date exceeds the
exercise or base price of the option.

COMPENSATION OF DIRECTORS

The Company did not pay any fees or remuneration to directors for their
service on the Board or any Board committee in 1996, however, the Company
reimbursed directors for their out-of-pocket expenses incurred in connection
with attending meetings of the Board. In addition, during 1996, James R. Buch
was granted stock options under the 1995 Plan (as defined) in connection with
his election to the Board.

Effective January 1, 1997, in addition to reimbursement for out-of-pocket
expenses, all non-employee members of the Board will receive $10,000 per year
(payable $2,500 per quarter) as compensation for serving on the Board, plus
$1,500 for attendance at each Board meeting and $500 for attendance at each
committee meeting. In addition, each committee chairman will receive an
additional $1,500 per year. All non-employee directors receive non-qualified
stock options under the 1996 Plan (as defined) as described below under
"Equity Participation Plans."

TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS

The Company and Mr. Waugaman are parties to a Separation and Stock Purchase
Agreement dated July 25, 1995 (the "Waugaman Purchase Agreement"). Pursuant to
the Waugaman Purchase Agreement, if Mr. Waugaman's employment is terminated
without cause or if he is not offered a substantially similar position as
Chief Financial Officer with a successor entity following a change of control,
he will be entitled to severance pay equal to nine months' base salary. Mr.
Waugaman has agreed that in consideration of such severance

7
<PAGE>

benefits, he will not compete with the Company for a period of nine months if
his employment is terminated other than for cause. In addition, pursuant to an
oral arrangement supplementing the Waugaman Purchase Agreement, the Company
has purchased a $500,000 life insurance policy under which Mr. Waugaman's wife
is the beneficiary and a disability policy for Mr. Waugaman.

The Company has entered into a severance agreement with each of Messrs.
Halchishak and Ledlow providing for certain benefits upon termination of
employment either by the Company without cause or by such executive officer
due to a reduction in base salary and benefits (other than across-the-board
salary cuts for employees at such executive officer's level or changes in
benefits). These benefits include a lump sum severance payment equal to 100%
of such executive officer's base salary, plus a pro rata portion of the
current-year bonus opportunity, plus life, disability, accident and group
health insurance benefits substantially similar to those received by such
executive officer immediately prior to termination for a twelve (12) month
period. In addition, all stock options granted prior to 1996, all stock
options that are scheduled to vest in the year of termination and one-third of
all other stock options held by him, if any, shall become vested and
exercisable effective as of the day immediately prior to the date of
termination of such executive officer. As consideration for these benefits,
each of Messrs. Halchishak and Ledlow agreed that during the term of the
severance agreement and for twenty-four (24) months after termination of
employment for any reason they would not solicit any customers of the Company
or hire or offer employment to any employee of the Company. The severance
agreements with Messrs. Halchishak and Ledlow will continue in effect through
December 31, 2001.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Prior to December 5, 1996, the Company had no compensation committee or
other committee of the Board performing similar functions. Accordingly,
decisions concerning compensation of executive officers in 1996 were made by
the entire Board. Other than Martin R. Reid, there were no officers or
employees of the Company who participated in deliberations concerning such
compensation matters. Mr. Reid was, until April 1996, an executive officer of
Tuboscope Vetco International Corporation ("Tuboscope") and he currently
serves, and during 1996 he served, on the Executive Committee of the Board of
Directors of Tuboscope, which is responsible for Tuboscope's compensation
policies. Eric L. Mattson is, and was during 1996, a director of Tuboscope.

On December 5, 1996, the Board established a compensation committee (the
"Compensation Committee") to establish remuneration levels for executive
officers of the Company and implementation of the Company's stock option plans
and any other incentive programs. On such date, James R. Buch and Eric L.
Mattson were appointed as the members of the Compensation Committee.

COMPENSATION COMMITTEE REPORT

The Company's executive compensation policies are designed to develop a high
quality management team and to motivate this team to achieve the Company's
short-term and long-term goals. With this in mind, the Company seeks to
develop overall compensation programs that provide the competitive
compensation levels necessary to attract and retain experienced, innovative,
and well-qualified executives. The Company then seeks to provide such
executives with performance bonuses closely linked to their achievement of
objective financial goals, such as growth in operating income and a favorable
return on equity, and to more subjective goals, such as organizational
development and corporate efficiency.

Within this framework, the Company's Compensation Committee is responsible
for determining all aspects of the compensation, including stock options or
other awards, for each of the Company's executive officers.

As one of the factors in its review of compensation matters, the
Compensation Committee considers the anticipated tax effect on the Company and
executives of various payments and benefits. Section 162(m) of the Internal
Revenue Code generally disallows the Company's deduction for compensation in
excess of $1,000,000 paid to the Company's chief executive officer (the "CEO")
or to any of the four other most highly compensated

8
<PAGE>

executive officers, unless such excess compensation qualifies as "performance-
based compensation." The Compensation Committee will not necessarily limit
executive compensation to that which is deductible by the Company under
Section 162(m), but believes that Section 162(m) will not limit the
deductibility of any compensation granted to date.

The three key components of the Company's compensation programs are base
salary, performance bonuses and stock options and other awards.

Base Salary

Base salary levels for all executive officers are reviewed annually. As part
of this review, the Company takes into account the compensation packages
offered by other companies in the equipment rental industry, as well as other
consolidators comparable in size to the Company. The Company also gives
consideration to the experience, responsibilities, management and leadership
abilities of its individual executive officers and their actual performance on
behalf of the Company.

Performance Bonuses

The Compensation Committee also sets the bonuses of the executive officers
and consults with the CEO regarding the Company's bonus policies. Currently,
the Company maintains certain bonus programs for key corporate employees and
for operations management employees. The purpose of these programs are (1) to
offer incentives to key management of the Company so as to (i) reward them for
achieving financial goals and (ii) further the alignment of interests of key
management with the Company's stockholders and (2) to provide incentives to
operations management to maintain a high level of profitability and asset
utilization and to achieve the Company's financial goals in individual
markets. Bonuses for key corporate employees are based on the Company's
achieving certain earnings per share objectives and each participant's bonus
award is calculated as a percentage of base salary, and generally ranges from
20% to 30% of base salary. Bonuses for operations management employees are
based on the degree to which region or individual location operating profit
objectives are met and generally range from 20% to 75% of the participant's
base salary if financial targets are achieved. If financial targets are
exceeded, participants may receive an additional bonus based on incremental
regional or store profit.

Stock Options and Other Awards

The Compensation Committee utilizes stock options, restricted stock and
other equity awards as a key incentive because they provide executives with
the opportunity to become stockholders of the Company and thereby share in the
long-term appreciation in value of the Company's Common Stock. The
Compensation Committee believes that such awards are beneficial to the Company
and its stockholders because they directly align the interests of the
Company's executives with those of its other stockholders.

The Compensation Committee determines the awards, if any, to be granted from
time to time to executive officers pursuant to the Stock Option Plan for Key
Employees of Acme Acquisition Holdings Corp. (the "1995 Plan") and the 1996
Equity Participation Plan of Rental Service Corporation (the "1996 Plan").
Substantially all of the awards are incentive stock options which are granted
at no less than the prevailing market value. Accordingly, such awards will
only benefit executives if the price of the Company's Common Stock increases
over the term of the applicable option.

The number of shares of Common Stock subject to individual options is
usually based on the performance of the executive team as a group, as well as
on departmental and individual contributions. Options are granted as
compensation for performance and as an incentive to promote the future growth
and profitability of the Company. In determining the number of shares of
Common Stock subject to such awards, the Committee considers the option and
other compensation policies of the industry. It also takes into account the
outstanding options already held by each individual executive officer, and the
projected value of the options based on historical and assumed appreciation
rates of the Company's Common Stock.

9
<PAGE>

CEO Compensation

As is the case for the other executive officers, the CEO's compensation
package consists of base salary, performance bonus and stock options and other
awards.

The CEO's base compensation for fiscal 1996 was set by the Board in November
1995. In determining the CEO's compensation, the Board considered the overall
compensation packages of other chief executive officers in other companies in
the equipment rental industry. In addition, the Board considered the Company's
performance and its achievement of its financial and business goals and
evaluated the CEO's overall individual performance in the prior fiscal year.
The Board did not assign relative weights or ranking to each of these factors,
but instead made a subjective determination based on consideration of all such
factors.

COMPENSATION COMMITTEE

James R. Buch
Eric L. Mattson

10
<PAGE>

PERFORMANCE GRAPH

The following line graph compares cumulative total stockholder return,
assuming reinvestment of dividends, for: (i) the Company's Common Stock; (ii)
the Standard & Poor's 500 Stock Index; and (iii) the Russell 2000 Index.
Because the Company did not pay dividends on its Common Stock during the
measurement period, the calculation of the cumulative total return
stockholders' return did not include dividends. The Russell 2000 Index is
included because it is comprised of publicly traded issuers with total market
capitalization of between approximately $160,000,000 and $1,000,000,000, which
is similar to the Company's total market capitalization. Because of the small
number of publicly-traded companies in the Company's peer group, the Company
does not believe it can reasonably identify a group of peer issuers. The graph
assumes that $100 was invested on September 18, 1996 (the date on which the
Company consummated its initial public offering and was registered under
Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act").

PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
RENTAL
SERVICE S&P 500 RUSSELL 2000
Measurement Period CORP. INDEX INDEX
- --------------------- -------- ------- ------------
<S> <C> <C> <C>
Measurement Pt- 9/18/96 $100 $100 $100
9/30/96 $ 99.43 $100 $100
10/31/96 $105.75 $102.76 $ 98.46
11/29/96 $118.39 $110.53 $102.52
12/31/96 $126.44 $108.34 $105.20
</TABLE>

EQUITY PARTICIPATION PLANS

The Company currently maintains two plans, the 1995 Plan and the 1996 Plan,
pursuant to which certain employees or directors may obtain options or other
awards that enable them to participate in the Company's equity. The Board
adopted the 1996 Plan on December 5, 1996, and the 1996 Plan was approved by
the Company's stockholders on February 5, 1997. The principal purposes of the
1996 Plan are to provide incentives for officers, directors, key employees and
consultants of the Company and its subsidiaries through granting options,
restricted stock and other awards, thereby stimulating their personal and
active interest in the Company's development and financial success, and
inducing them to remain in the Company's service. In addition to awards made
to officers, key employees or consultants, the 1996 Plan provides for the
granting of options ("Director Options") to the Company's independent non-
employee directors pursuant to a formula. The 1995 Plan is maintained for the
benefit of certain employees of the Company for similar purposes.

11
<PAGE>

The 1995 Plan provides that the Board or a committee appointed by the Board
(in either case, the "1995 Plan Committee") may grant non-transferable
incentive stock options ("ISOs") and non-qualified stock options ("NQSOs") to
key employees. The 1995 Plan Committee has the full authority and discretion,
subject to the terms of the 1995 Plan, to determine those individuals who are
eligible to be granted options and the amount and type of such options. Terms
and conditions of options are set forth in written option agreements. An
aggregate of up to 324,000 shares of Common Stock are issuable under the 1995
Plan, however, as of March 14, 1997, only 1,860 of these shares were available
for future stock option grants.

The 1996 Plan is administered by the Compensation Committee or a
subcommittee thereof (the "Committee") with respect to grants to employees or
consultants of the Company and by the full Board with respect to Director
Options. Subject to the terms and conditions of the 1996 Plan, the Committee
or the Board, as applicable, has the authority to select the persons to whom
awards are to be made, to determine the number of shares to be subject thereto
and the terms and conditions thereof, and to make all other determinations and
to take all other actions necessary or advisable for the administration of the
1996 Plan.

The 1996 Plan provides that the Committee may grant or issue stock options,
stock appreciation rights ("SARs"), restricted stock, deferred stock, dividend
equivalents, performance awards, stock payments, other stock related benefits
and other awards (collectively, "Awards"), or any combination thereof. Each
Award will be set forth in a separate agreement with the person receiving the
Award. Under the 1996 Plan, not more than 1,000,000 shares of Common Stock (or
the equivalent in other equity securities) are authorized for issuance upon
exercise or vesting of any Awards. Furthermore, the maximum number of shares
which may be subject to options or SARs granted under the 1996 Plan to any
individual in any calendar year cannot exceed 200,000.

Awards under the 1996 Plan may be granted to (i) individuals who are then
officers or other employees of the Company or any of its present or future
subsidiaries who are determined by the Committee to be key employees and (ii)
consultants of the Company selected by the Committee for participation in the
1996 Plan. Approximately 60 officers and other employees are currently
eligible to participate in the 1996 Plan. On February 26, 1997, Martin R. Reid
was granted options to purchase 200,000 shares and Douglas A. Waugaman was
granted options to purchase 100,000 shares. In addition, non-employee
directors of the Company are granted NQSOs by the Board under the 1996 Plan.
On February 26, 1997, Director Options to purchase an aggregate of
61,000 shares were granted to the Company's non-employee directors. During the
term of the 1996 Plan and pursuant to a formula, (a) each non-employee
director is automatically granted an option to purchase 10,000 shares of
Common Stock on the date of his initial election and (b) each then-current
non-employee director is automatically granted a NQSO to purchase 2,500 shares
of Common Stock at each subsequent annual meeting at which he is reelected to
the Board.

EXECUTIVE INCENTIVE BONUS PLAN

The Company maintains a Corporate Management Bonus Plan (the "Management
Bonus Plan") for key corporate employees. The purpose of the Management Bonus
Plan is to offer incentives to key management of the Company so as to (i)
reward them for achieving financial goals and (ii) further the alignment of
interests of key management with the Company's stockholders. Bonuses under the
Management Bonus Plan are based on achieving certain earnings per share
objectives. Each participant's bonus award is calculated as a percentage of
base salary, and generally ranges from 20% to 30% of base salary.

In addition, the Company maintains Region Manager and General Manager Bonus
Plans (the "Operations Bonus Plan"). The Operations Bonus Plan is designed to
provide incentives to operations management to maintain a high level of
profitability and asset utilization and to achieve the Company's financial
goals in their individual market. Bonuses under the Operations Bonus Plan are
based on the degree to which region or individual location operating profit
objectives are met and generally range from 20% to 75% of the participant's
base salary if financial targets are achieved. If financial targets are
exceeded, participants may receive an additional bonus based on incremental
regional or store profit.

12
<PAGE>

Bonuses under the Management Bonus Plan and the Operations Bonus Plan are
paid semi-annually. The first payment is made after finalization of the first
six months results, and the amount of the first payment is 50% of the bonus
earned for that six months, with the remainder of the bonus to be paid at year
end. The second payment is calculated after year end audited financial
statements are finalized, and the amount of the second payment is the total
bonus paid less the amount paid for the first six-month period.

ELECTION OF DIRECTORS (PROXY ITEM 1)

The Company's Bylaws provide that the Board shall consist of no fewer than
four and no more than sixteen directors, with the exact number to be fixed by
the Board. Pursuant to a resolution adopted by the Board, the authorized
number of members of the Board has been set at eight. All eight directors are
to be elected at the 1997 Annual Meeting and will hold office until the 1998
Annual Meeting or until their successors are elected and have qualified. It is
intended that the persons named in the enclosed proxy will, unless such
authority is withheld, vote for the election of the eight nominees proposed by
the Board of Directors. In the event that any of them should become
unavailable prior to the Annual Meeting, the proxy will be voted for a
substitute nominee or nominees designated by the Board of Directors, or the
number of directors may be reduced accordingly. Set forth below is information
regarding the name and age of each of the nominees for election to the Board
of Directors, the principal occupation or employment of each such nominee
during the past five years and at present, the name and principal business of
the corporation or other organization, if any, in which such occupation or
employment is or was carried on, directorships of other public companies held
by each such nominee, the present position of such nominee with the Company,
and the period during which such nominee has served as a director of the
Company. All of the nominees named below have consented to being named herein
and to serve if elected.

THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES OF THE COMPANY'S COMMON
STOCK VOTING FOR THE ELECTION OF DIRECTORS AT THE ANNUAL MEETING WILL BE
REQUIRED TO ELECT EACH DIRECTOR. THE BOARD RECOMMENDS A VOTE "FOR" THE
ELECTION OF THE NOMINEES NAMED BELOW OR THEIR SUBSTITUTES AS DESCRIBED ABOVE.

<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE POSITIONS AND OFFICES WITH THE COMPANY
---- --- -------- --------------------------------------
<S> <C> <C> <C>
Martin R. Reid.......... 54 1994 Chairman of the Board and Chief Executive Officer
William M. Barnum, Jr. . 42 1992 Director
James R. Buch........... 43 1995 Director
Christopher A. Laurence. 29 1995 Director
Britton H. Murdoch...... 39 1997 Director
Eric L. Mattson......... 46 1996 Director
John G. Quigley......... 43 1996 Director
Frederick J. Warren..... 57 1995 Director
</TABLE>

The principal occupations and positions for the past five years and, in
certain cases prior years, of the directors and executive officers named above
are as follows:

MARTIN R. REID was elected as a Director and Chief Executive Officer of the
Company in June 1994 and became Chairman of the Board in October 1995. Mr.
Reid is a director of Tuboscope, a provider of oilfield-related inspection and
coating services. Mr. Reid served as Chief Executive Officer of Tuboscope from
May 1991 to October 1993 and as Chairman of the Board of Directors from
October 1990 to April 1996. From September 1986 to June 1990, Mr. Reid was
Chief Executive Officer of Eastman Christensen Co., a provider of oil and gas
drilling systems. Mr. Reid was also Vice Chairman of Eastman Christensen Co.
from August 1989 to June 1990. Mr. Reid is a director of Cobblestone Holdings,
Inc. and Cobblestone Golf Group, Inc.

13
<PAGE>

WILLIAM M. BARNUM, JR. has served as a director of the Company since its
formation in 1992 and served as Chairman of the Board from June 1993 through
October 1995. Mr. Barnum is a general partner of BBP, the general partner of
Brentwood RSC Partners. Brentwood RSC Partners is a significant stockholder of
the Company. See "Security Ownership of Certain Beneficial Owners and
Management." Mr. Barnum was an associate at Morgan Stanley & Co. Incorporated
from October 1981 until joining Brentwood Associates, an affiliate of
Brentwood RSC Partners, in July 1984. Mr. Barnum is a director of Quicksilver,
Inc., Horizon Cellular Telephone Company, L.P. and several privately held
companies.

JAMES R. BUCH has served as a director of the Company since October 1995.
From October 1990 through May 1996, Mr. Buch served as President and Chief
Executive Officer of Evans Rents, Inc. Previously, he served as Director of
U.S. Operations for Brittania Security Group.

CHRISTOPHER A. LAURENCE has served as a director of the Company since
October 1995. Mr. Laurence is a Principal of Brentwood Associates. Prior to
joining Brentwood Associates in 1991, Mr. Laurence was an analyst at Morgan
Stanley & Co. Incorporated.

ERIC L. MATTSON has served as a director of the Company since December 1996.
Mr. Mattson is and has been Vice President and Chief Financial Officer of
Baker Hughes Incorporated ("BHI") since July 1993. For more than five years
prior to 1993, Mr. Mattson was Vice President and Treasurer of BHI. Mr.
Mattson is also a director of Tuboscope.

BRITTON H. MURDOCH has served as a director of the Company since January
1997. Mr. Murdoch is and has been Managing Director of Wendover Corp., a
privately held company, since October 1996. From 1990 to 1996, Mr. Murdoch was
Vice President and Chief Financial Officer of Airgas, Inc., an industrial gas
distribution and manufacturing company, and from 1987 to 1990 he was Vice
President of Corporate Development of Airgas, Inc.

JOHN G. QUIGLEY has served as a director of the Company since January 1996.
Mr. Quigley is a founding member of Nassau Capital, L.L.C., the general
partner of Nassau Capital Partners L.P. ("Nassau Capital"). Nassau Capital is
a significant stockholder of the Company. See "Security Ownership of Certain
Beneficial Owners and Management." From 1992 to January 1995, Mr. Quigley was
a partner of Clipper Capital Partners. Mr. Quigley was a partner at Adler &
Shaykin from 1984 to 1989. From 1980 to 1984, Mr. Quigley was an attorney with
the law firm of Kirkland & Ellis in Chicago. Mr. Quigley was selected as a
director pursuant to the terms of a Preferred Stock and Common Stock Purchase
Agreement.

FREDERICK J. WARREN has served as a director of the Company since October
1995. Mr. Warren co-founded Brentwood Associates in 1972 and is a general
partner of BBP. See "Security Ownership of Certain Beneficial Owners and
Management." Mr. Warren is a director of Digital Sound Corporation, a supplier
of high-capacity network-based message processing systems and applications,
Horizon Cellular Telephone Company, L.P., Cobblestone Holdings, Inc.,
Cobblestone Golf Group, Inc. and several privately held companies.

Messrs. Reid, Warren and Barnum were also directors or executive officers of
Acme Holdings, Inc. ("Holdings"), an equipment rental business the Company
acquired in September 1995. In 1994, due to a downturn in business conditions,
combined with Holdings' highly leveraged capital structure, Holdings faced
liquidity constraints and was unable to service its debt. In response,
Holdings brought in a new management team and hired Mr. Reid as its Chief
Executive Officer in June 1994. This new management team initiated
restructuring discussions with the holders of Holdings' debt, culminating in
the prepackaged bankruptcy of Holdings and its subsidiaries. On September 12,
1995, the effective date of the prepackaged bankruptcy plan, Messrs. Reid,
Warren and Barnum, along with Douglas A. Waugaman, an executive officer of the
Company, were directors or executive officers of Holdings.

During 1996, the Board of Directors of the Company held five meetings
inclusive of telephonic meetings. Each director attended at least 75% of the
total number of meetings of the Board and of committees of the Board on which
he served held during the year.

14
<PAGE>

COMMITTEES OF THE BOARD OF DIRECTORS

The Board has the following standing committees: the Audit Committee and the
Compensation Committee. The Audit Committee was established to make
recommendations concerning the engagement of independent public accountants,
review with the independent public accountants the scope and results of the
audit engagement, approve professional services provided by the independent
public accountants, review the independence of the independent public
accountants, consider the range of audit and non-audit fees and review the
adequacy of the Company's internal accounting controls. The Audit Committee
consists of Messrs. Buch, Laurence and Quigley. The Compensation Committee was
established on December 5, 1996 to establish remuneration levels for executive
officers of the Company and implementation of the Company's stock option plans
and any other incentive programs. The Compensation Committee consists of
Messrs. Buch and Mattson. The Audit Committee and the Compensation Committee
each met one time during 1996. The Company has no nominating committee.

COMPENSATION OF DIRECTORS

Effective January 1, 1997, in addition to reimbursement for out-of-pocket
expenses, all non-employee members of the Board will receive $10,000 per year
(payable $2,500 per quarter) as compensation for serving on the Board, plus
$1,500 for attendance at each Board meeting and $500 for attendance at each
committee meeting. In addition, each committee chairman will receive an
additional $1,500 per year. In addition, pursuant to the 1996 Plan, all non-
employee directors will receive non-qualified stock options.

CERTAIN INFORMATION WITH RESPECT TO EXECUTIVE OFFICERS

Set forth below is certain information regarding each of the executive
officers of the Company. Further information about Mr. Reid is presented under
"Election of Directors." Officers are appointed by, and serve at the
discretion of, the Board.

<TABLE>
<CAPTION>
NAME AGE POSITIONS AND OFFICES WITH THE COMPANY
---- --- --------------------------------------
<S> <C> <C>
Martin R. Reid.......... 54 Chairman of the Board and Chief Executive Officer
Douglas A. Waugaman..... 38 Vice President, Chief Financial Officer, Secretary and Treasurer
Ronald Halchishak....... 49 Senior Vice President of Operations
David G. Ledlow......... 38 Senior Vice President of Operations
</TABLE>

The principal occupations and positions for the past five years and, in
certain cases prior years, of the executive officers, other than Mr. Reid (for
whom such information is provided above under "Election of Directors"), named
above are as follows:

DOUGLAS A. WAUGAMAN has served as Vice President, Chief Financial Officer,
Secretary and Treasurer of the Company since January 1994. From June 1993
until joining the Company, Mr. Waugaman served as Operations Manager for
Plastiglide Manufacturing Corporation, a subsidiary of Illinois Tool Works.
From September 1991 until June 1993, Mr. Waugaman was Vice President of
Finance for Knapp Communications Corporation, a magazine publisher. From
September 1989 until September 1991, Mr. Waugaman was Controller for
Plastiglide Manufacturing Corporation. Mr. Waugaman's experience also includes
public accounting experience with Arthur Andersen and Co. Mr. Waugaman is a
certified public accountant.

RONALD HALCHISHAK joined the Company in October 1991 as Vice President of
Purchasing and Director of Safety and became Region Manager for California in
1994. He was appointed Regional Vice President of

15
<PAGE>

Operations in January 1995 and was promoted to Senior Vice President of
Operations in December 1996. Prior to joining the Company, Mr. Halchishak
worked for 13 years at Hertz Equipment Corporation in various positions
including Director of European Operations and Region Manager of the Midwest
Division.

DAVID G. LEDLOW joined the Company in conjunction with the acquisition of
Walker Jones Equipment in 1992. Mr. Ledlow had been employed by Walker Jones
Equipment since 1982, serving most recently as its Vice President of
Marketing. Mr. Ledlow was promoted to Regional Vice President of Operations of
the Company in February 1993 and to Senior Vice President of Operations in
December 1996.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

MANAGEMENT AGREEMENT

Pursuant to a Corporate Development and Administrative Services Agreement
(the "Services Agreement"), the Company, prior to its initial public offering
which was completed on September 18, 1996, paid BBP a monitoring fee in
connection with management, consulting and financial advisory services equal
to one percent (1%) per annum of the aggregate amount of debt and equity
investment in the Company of or by BBP and any persons or entities associated
with BBP (collectively, the "Brentwood Entities"), and investors in any of the
Brentwood Entities, plus reimbursement of customary costs and expenses. In
1996, the Company paid BBP a monitoring fee of $235,000 pursuant to the
Services Agreement. From time to time, BBP has also received investment
banking fees from the Company in connection with the Company's acquisitions,
calculated at 1.5% of the total of the purchase price plus acquisition costs
and net capital expenditures. Investment banking fees paid to BBP during 1996
totaled $388,000. The Company's obligation to pay such monitoring and
investment banking fees terminated upon completion of the Company's initial
public offering, although the Company anticipates utilizing BBP's investment
banking services from time to time in connection with future transactions.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company's officers, directors
and persons who own more than ten percent of a registered class of the
Company's equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and to furnish the
Company with copies of such reports. To the Company's knowledge, based solely
on the Company's review of the copies of those reports and written
representations that it has received, the Company believes that all such
filings have been made in a timely manner, except that David H. Wong, a
general partner of BBP, filed his Form 3 and one Form 4 late, and Eric L.
Mattson filed his Form 3 late.

EMPLOYEE QUALIFIED STOCK PURCHASE PLAN (PROXY ITEM 2)

On February 26, 1997, the Board adopted, subject to stockholder approval,
the Company's Employee Qualified Stock Purchase Plan (the "Q.S.P. Plan"). The
stockholders are asked to approve the adoption of the Q.S.P. Plan. In general,
the Q.S.P. Plan authorizes employees of the Company and its subsidiaries to
purchase shares of the Company's Common Stock, through payroll deductions, at
a purchase price of 85% of the fair market value of such shares. The Board of
Directors believes that it is in the best interests of the Company and its
stockholders to approve the Q.S.P. Plan because the ability to sell shares of
the Company's Common Stock to employees at a discount from the then-current
market price and without commissions and other charges will help the Company
attract and retain experienced and capable persons who can make significant
contributions to the further growth and success of the Company. Moreover, the
Board believes that offering the employees of the Company and its subsidiaries
the opportunity to become owners of the Company's Common Stock will help to
align further their interests with those of the Company's stockholders
generally.

16
<PAGE>

THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES OF THE COMPANY'S COMMON
STOCK REPRESENTED AND ENTITLED TO VOTE AT THE ANNUAL MEETING WILL BE REQUIRED
FOR APPROVAL OF THE Q.S.P. PLAN. THE BOARD RECOMMENDS A VOTE "FOR" APPROVAL OF
THE Q.S.P. PLAN.

The following is a description of the material provisions of the Q.S.P.
Plan. A copy of the proposed Q.S.P. Plan is set forth in "Annex A" to this
Proxy Statement. The summary that follows is not intended to be complete, and
reference should be made to the Q.S.P. Plan for a complete statement of its
terms and provisions.

The Q.S.P. Plan authorizes the granting of purchase rights ("Options") to
eligible employees in six-month offering periods, pursuant to a plan intended
to qualify as an "employee stock purchase plan" under Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code"). The Q.S.P. Plan is not
subject to the provisions of ERISA, and is not a qualified plan under Section
401(a) of the Code. Proceeds received by the Company from the sale of Common
Stock pursuant to the exercise of Options under the Q.S.P. Plan will be used
for general corporate purposes.

SECURITIES SUBJECT TO THE Q.S.P. PURCHASE PLAN

The Q.S.P. Plan provides that an aggregate of up to 250,000 shares of the
Company's Common Stock may be issued thereunder. The Q.S.P. Plan also provides
for appropriate adjustments in the number and kind of shares subject to the
plan and to outstanding Options in the event of a stock split, stock dividend
or certain other similar changes in the Company's Common Stock and in the
event of a merger, reorganization, consolidation or certain other types of
recapitalizations of the Company. The Company, acting through its CEO or his
delegate (the "Administrator"), shall make appropriate adjustments to the
aggregate number of shares of Common Stock subject to the Q.S.P. Plan, the
number of shares of Common Stock subject to outstanding Options and the price
per share thereof if there is any merger, consolidation, reorganization,
recapitalization, stock dividend (in excess of 2%), stock split or other
change in the corporate structure of the Company. If, however, the Company is
not the surviving corporation in any such merger or reorganization, every
Option under the Q.S.P. Plan shall terminate upon the consummation of such
merger or reorganization, unless the surviving corporation shall issue a new
Option in substitution thereof or assume the Option then existing under the
Q.S.P. Plan. Options terminating upon the consummation of a merger or
reorganization shall be exercisable prior to or concurrently with such
consummation.

ELIGIBILITY TO PARTICIPATE

Each employee of the Company who has been employed by the Company for not
less than one year, who is customarily employed by the Company for more than
20 hours per week and is customarily employed by the Company for more than
five months per calendar year is eligible to participate in the Q.S.P. Plan.
The Company presently has approximately 700 employees who are eligible to
participate in the Q.S.P. Plan. Directors who are not employees of the Company
are not eligible to participate in the Q.S.P. Plan. The named executive
officers named above under "Executive Compensation" are among those eligible
to participate in the Q.S.P. Plan.

No Option may be granted under the Q.S.P. Plan to an employee who
immediately after the granting of the Option would own stock (including stock
which the individual may purchase under outstanding options) possessing more
than 5% of the total voting power or value of all classes of stock of the
Company, or any parent or subsidiary corporation. In addition, no employee may
be granted an Option that would permit his rights to purchase stock under all
Code Section 423 employee stock purchase plans of the Company, or any parent
or subsidiary corporation to accrue at a rate which exceeds $25,000 of the
fair market value of such stock (as of the time the Option is granted) for
each calendar year in which such Option is outstanding.

ELECTION TO PARTICIPATE; GRANT AND EXERCISE OF OPTIONS

Each eligible employee participates in the Q.S.P. Plan by means of payroll
deductions. To start the appropriate deductions, an eligible employee submits
a completed and executed authorization card to the

17
<PAGE>

Company during the two-week period commencing one month prior to the first day
of the first semi-annual period or any subsequent semi-annual period
("Offering Period") and ending two weeks prior to the first day of the
Offering Period. Once an employee indicates his or her interest in
participating in the Q.S.P. Plan, the Company reduces that employee's cash
compensation through payroll deductions expressed as a whole percentage of
such employee's base pay, not to exceed 15% of base pay, as elected by the
employee. Such payroll deductions are contributed to the Company upon the
exercise of an employee's Option. Under no circumstances shall an employee
receive any interest on payroll deductions credited to his or her account
under the Q.S.P. Plan.

Subject to limitations contained in the Q.S.P. Plan, participating employees
are granted non-transferable Options. Each participating employee's Option
will be exercised in semi-annual installments on the last day of each Offering
Period during which the eligible employee is participating in the Q.S.P. Plan.
The number of shares of Common Stock subject to each Option shall be equal to
the quotient of the total payroll deductions made for the eligible employee
during the Offering Period divided by the Option Price (as defined), excluding
fractional shares of Common Stock; provided, however, that the number of
shares of Common Stock subject to each Option shall not exceed 1,500 shares.

Exercise of a semi-annual installment of an Option is automatic unless, at
least two weeks prior to the last day of such Offering Period, the employee
instructs the Company in writing that such Option installment is not to be
exercised or the employee files a new authorization card reducing his or her
percentage of payroll deduction to zero percent (0%). As soon as practicable
after receipt of such notice or such authorization card, the Company shall pay
to such eligible employee in cash in one lump sum the balance of payroll
deductions credited to such eligible employee's account under the Q.S.P. Plan,
without the payment of any interest thereon.

No fractional shares of stock shall be purchased upon exercise of Option
installments, and any funds credited to an employee's account remaining after
purchases of whole shares of stock upon exercise of an Option installment
shall remain credited to such employee's account and carried forward for
purchase of whole shares of stock pursuant to the exercise of an installment
of the Option on the last day of the next following Offering Period.

OPTION PRICE

The per share exercise price of each Option shall be an amount equal to the
lesser of 85% of the fair market value of a share of Common Stock on the first
day of the Offering Period in which the eligible employee began participating
in the Q.S.P. Plan or 85% of the fair market value of a share of Common Stock
on the date of exercise of an installment of the Option (the "Option Price").
For purposes of the Q.S.P. Plan, the fair market value of the shares of Common
Stock on any date is considered to be (i) the closing price of a share of
Common Stock on the principal exchange on which shares of the Company's stock
are then trading, if any, on such date, or if shares were not traded on such
date, then on the next preceding trading day during which a sale occurred;
(ii) if such Stock is not traded on an exchange but is quoted on Nasdaq or a
successor quotation system, the last sales price (if the Stock is then listed
as a National Market issue under the Nasdaq National Market System) or the
mean of the closing representative bid and asked prices (in all other cases)
for the Stock of such date as reported by Nasdaq or a successor quotation
system; (iii) if the Stock is not publicly traded on an exchange and not
quoted on Nasdaq or a successor quotation system, the mean between the closing
bid and asked prices for the Stock on such date as determined in good faith by
the Administrator; or (iv) if the Stock is not publicly traded, the fair
market price established by the Administrator acting in good faith. The
closing price of the Company's Common Stock reported by the Nasdaq National
Market System on March 14, 1997 was $18.50.

CESSATION OF PARTICIPATION

An employee shall cease to participate in the Q.S.P. Plan when (i) the
Administrator receives written instructions from the eligible employee to
terminate such employee's participation in the Q.S.P. Plan or to reduce his or
her payroll deductions to zero percent (0%), (ii) the eligible employee
resigns or is discharged from

18
<PAGE>

employment by the Company or any subsidiary corporation, or has a leave of
absence (other than leaves of absence meeting certain criteria specified in
the Q.S.P. Plan) from the Company or any subsidiary corporation, or (iii) the
employee dies. As soon as practicable after cessation of participation, all
funds credited to such employee's account under the Q.S.P. Plan will be paid
to such employee in cash in one lump sum, without payment of any interest
thereon.

An eligible employee shall not be eligible to participate in the Q.S.P. Plan
during the Offering Period which immediately follows the Offering Period
during which such employee ceased to participate in the Q.S.P. Plan.

RESTRICTIONS ON TRANSFER

Options granted under the Q.S.P. Plan are not transferable, other than by
will or the laws of descent and distribution. Each director, executive officer
or any person who beneficially owns 10% or more of the Company's Common Stock
is required under federal securities laws not to sell his or her shares
acquired under the Q.S.P. Plan for at least six months following the date on
which such shares were acquired.

ADMINISTRATION, AMENDMENT AND TERMINATION OF PLAN

The Q.S.P. Plan is administered by the Company, acting through the
Administrator. All costs of administering the Q.S.P. Plan and of granting and
exercising Options under the Q.S.P. Plan are paid by the Company. The Q.S.P.
Plan provides for the indemnification of the Administrator for liability,
loss, costs, damages, attorneys' fees and other expenses the Administrator may
sustain or incur in connection with the administration of the Q.S.P. Plan,
except for liability, loss, costs, damages, attorneys' fees and other expenses
caused by the negligence of the Administrator or his agent.

Although the Company expects to continue the Q.S.P. Plan until all shares of
the Company's Common Stock reserved for issuance under the Q.S.P. Plan have
been so issued, the Board may terminate the Q.S.P. Plan at any time with
respect to any shares not then subject to Options under the Q.S.P. Plan and,
except as indicated below, may modify the Q.S.P. Plan from time to time.

The Board may not, without prior stockholder approval, amend the Q.S.P. Plan
so as to increase the maximum number of shares of Common Stock subject to the
Q.S.P. Plan, change the designation or class of employees eligible to receive
Options under the Q.S.P. Plan, materially increase the benefits accruing to
employees under the Q.S.P. Plan or amend the Q.S.P. Plan in any manner that
would cause the Q.S.P. Plan to cease to be an "employee stock purchase plan"
under Section 423 of the Code.

FEDERAL INCOME TAX CONSEQUENCES

The income tax consequences of the Q.S.P. Plan under current federal law are
summarized below. The discussion is intended to provide only general
information. State and local income tax consequences are not discussed. The
Q.S.P. Plan is intended to qualify as an "employee stock purchase plan," as
defined in Section 423 of the Code.

If an Option is granted to an employee under the Q.S.P. Plan, no taxable
income will result to such employee on the date the Option is granted or on
any date that a semi-annual installment of the Option is exercised. If the
employee does not dispose of the shares of Common Stock purchased upon any
exercise of the Option within two years after the date on which the Option was
granted or within one year after the transfer of the shares of such Common
Stock to the employee (the "Holding Period"), or the employee dies while
owning the shares, the employee will be taxed in the year in which the shares
are disposed of, or the year closing with the employee's death, as follows:

(a) The employee will be subject to ordinary income tax on an amount
equal to the lesser of (i) the excess, if any, of the fair market value of
the shares on the date on which they were disposed of over the

19
<PAGE>

amount paid for the shares, or (ii) the excess, if any, of the fair market
value of the shares on the date the Option was granted over the Option
Price; and

(b) Any further gain realized by the employee on the disposition of the
shares (after increasing the basis of these shares by the amount of
ordinary income realized as described in (a) above) will be taxed as
capital gain.

If the employee disposes of the shares of Common Stock purchased upon
exercise of the Option before the expiration of the Holding Period, the
employee will realize ordinary income, reportable for the year of the
disposition of such shares, to the extent of the excess of the fair market
value of such shares on the date on which the Option was exercised, over the
Option price for such shares. Any additional gain realized will be taxable as
capital gain. If the Common Stock is disposed of before the expiration of the
Holding Period and the amount realized is less than the fair market value of
the Common Stock at the time of exercise, the employee will realize (i)
ordinary income to the extent of the excess of the fair market value of such
Common Stock on the date on which the Option was exercised, over the Option
price for such Common Stock and (ii) capital loss to the extent the fair
market value of such Common Stock on the exercise date exceeds the amount
realized on the sale. If the employee realizes ordinary income as a result of
a disposition before the expiration of the Holding Period, the amount of such
ordinary income would be deductible by the Company for Federal income tax
purposes provided such amount constitutes an ordinary and necessary business
expense.

RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS (PROXY ITEM 3)

The Board has appointed Ernst & Young LLP, certified public accountants, as
independent auditors for the Company for 1997. The Company's stockholders are
being asked to ratify this selection at the Annual Meeting. Ernst & Young LLP
has served as the independent auditors for the Company since 1992. Neither
Ernst & Young LLP nor any of its members has any relationship with the Company
or any of its affiliates except in the capacity as the Company's independent
auditor.

A representative of Ernst & Young LLP will be present at the Annual Meeting.
He will have an opportunity to make a statement if he so desires and will be
available to respond to appropriate questions.

THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES OF THE COMPANY'S COMMON
STOCK REPRESENTED AT THE ANNUAL MEETING WILL BE REQUIRED FOR RATIFICATION OF
THE BOARD'S APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR THE
COMPANY. THE BOARD RECOMMENDS A VOTE "FOR" RATIFICATION OF SUCH APPOINTMENT.

DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
FOR 1998 ANNUAL MEETING

Any stockholder intending to submit to the Company a proposal for inclusion
in the Company's proxy materials relating to the annual meeting to be held in
1998 must submit such proposal so that it is received by the Company no later
than November 26, 1997.

20
<PAGE>

ANNUAL REPORT

The Annual Report to Stockholders covering the Company's fiscal year ended
December 31, 1996 is being mailed to stockholders of record at the same time
this Proxy Statement is being mailed.

The Company will provide without charge to each person who is a beneficial
owner of Common Stock, on written request of such person, a copy of the
Company's annual report on Form 10-K filed with the Securities and Exchange
Commission (not including exhibits). Written requests for such copies should
be addressed to Douglas A. Waugaman, Secretary, Rental Service Corporation,
14505 Hayden Road, Suite 322, Scottsdale, Arizona 85260.

ALL STOCKHOLDERS ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE
ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE.

By Order of the Board of Directors

/s/ Douglas A. Waugaman

Douglas A. Waugaman
Secretary

Scottsdale, Arizona
March 26, 1997

21
<PAGE>

ANNEX A

RENTAL SERVICE CORPORATION

EMPLOYEE QUALIFIED STOCK PURCHASE PLAN

Rental Service Corporation, a Delaware corporation (the "Company"), hereby
adopts this Employee Qualified Stock Purchase Plan (the "Q.S.P. Plan").

1. PURPOSE. The purpose of the Q.S.P. Plan is to assist employees of the
Company in acquiring stock ownership interests in the Company, pursuant to a
plan which qualifies as an "employee stock purchase plan" under Code Section
423. The Q.S.P. Plan is intended to help employees provide for their future
security, and to encourage then to remain in the employ of the Company.

2. DEFINITIONS. Whenever one of the following terms is used in the Q.S.P.
Plan with the first letter or letters capitalized, it shall have the following
meaning, unless the context clearly indicates to the contrary (such
definitions to be equally applicable to the singular and plural forms of the
terms defined):

(a) "Administrator" shall mean the Company, acting through its chief
executive officer or his or her delegate.

(b) "Authorization Card" shall mean the form prescribed by the
Administrator, which shall include a form of stock purchase agreement pursuant
to which an Eligible Employee shall purchase shares of Stock under the Q.S.P.
Plan and a form of payroll deduction authorization pursuant to which such
Eligible Employee shall authorize the Company to deduct such Eligible
Employee's contributions under the Q.S.P. Plan.

(c) "Base Pay" shall mean gross pay received by an Employee on each Payday
as cash compensation for services to the Company, excluding overtime payments,
sales commissions, incentive compensation, bonuses, and other special-
payments, except to the extent that the inclusion of any such item is
specifically designated by the Administrator.

(d) "Board of Directors" shall mean the Board of Directors of the Company.

(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.

(f) "Company" shall mean Rental Service Corporation, a Delaware corporation.

(g) "Eligible Employee" shall mean any Employee who satisfies the
requirements of Section 4.

(h) "Employee" shall mean any person who renders services to the Company in
the status of an employee within the meaning of Code Section 3121(d).
"Employee" shall not include any director of the Company who does not render
services to the Company in the status of an employee within the meaning of
Code Section 3121(d).

(i) "Enrollment Period" shall mean the two week period preceding each
Offering Period determined in accordance with Subsection 6(b).

(j) "Offering Period" shall mean each six month period as provided in
Section 5. Options shall be granted on the first day of an Offering Period and
exercised on the last day of such Offering Period, as provided in Section 8.

(k) "Option" shall mean an option granted to an Eligible Employee to
purchase shares of Stock under the Q.S.P. Plan.

(l) "Option Price" shall mean the per share exercise price of shares of
Stock to be purchased pursuant to an Option, as provided in Section 9.

A-1
<PAGE>

(m) "Parent Corporation" shall mean any corporation, other than the Company,
in an unbroken chain of corporations ending with the Company if, at the time
of the granting of the Option, each of the corporations other than the Company
own stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.

(n) "Payday" of an Employee shall mean the regular and recurring established
day for payment of cash compensation to Employees in the same classification
or position.

(o) "Q.S.P. Plan" shall mean this Rental Service Corporation Employee
Qualified Stock Purchase Plan.

(p) "Subsidiary Corporation" shall mean any corporation, other than the
Company, in an unbroken chain of corporations beginning with the Company if,
at the time of the granting of the Option, each of the corporations other than
the last corporation in the unbroken chain owns stock possessing 50% or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.

(q) "Stock" shall mean the shares of the Company's Common Stock, $.01 par
value.

3. STOCK SUBJECT TO THE Q.S.P. PLAN.

(a) Subject to Section 14, the shares of Stock which may be sold pursuant to
Options granted under the Q.S.P. Plan shall not exceed 250,000 shares.

(b) The Company shall reserve for issuance under the Q.S.P. Plan 250,000
shares of either the Company's authorized but unissued Stock or Stock held in
the Company's treasury.

(c) Any adjustment to the number of shares of Stock reserved for issuance
under the Q.S.P. Plan shall be made only in accordance with Sections 14
(relating to recapitalization) and 17 (relating to amendments of the Q.S.P.
Plan).

4. ELIGIBILITY. Each Employee of the Company who on the first day of any
Enrollment Period:

(a) has been employed by the Company for not less than one (1) year;

(b) is customarily employed by the Company for more than twenty (20) hours
per week; and

(c) is customarily employed by the Company for more than five (5) months per
calendar year, shall become an Eligible Employee on such day.

5. OFFERING PERIODS.

Options shall be granted under the Q.S.P. Plan in successive six month
Offering Periods until the earlier of the maximum number of shares subject to
sale pursuant to Options have been sold, or the Q.S.P. Plan is terminated. The
Administrator shall determine, in its discretion, the date of commencement of
each Offering Period; provided, that no Offering Period shall commence during
any other Offering Period.

6. PARTICIPATION IN THE Q.S.P. PLAN.

(a) Each Eligible Employee may elect to participate in the Q.S.P. Plan for
an Offering Period by submitting to the Administrator a completed and executed
Authorization Card in accordance with subsection (b). An Eligible Employee who
elects to participate in the Q.S.P. Plan for an Offering Period shall elect on
such Authorization Card a whole percentage of Base Pay (such percentage not to
exceed 15% of Base Pay) to be withheld by payroll deduction, which upon the
exercise of the Option granted to such Eligible Employee with respect to such
Offering Period, shall be contributed to the Company as payment for shares of
Stock purchased pursuant to the Option.

A-2
<PAGE>

(b) The Authorization Card must be submitted to the Administrator during the
two-week period commencing one month prior to the first day of the Offering
Period and ending two weeks prior to the first day of the Offering Period in
order to participate in the Q.S.P. Plan during such Offering Period.

(c) Except as otherwise provided in subsection (b) and Section 11, an
Employee's Authorization Card shall operate with respect to each Offering
Period commencing after delivery of the Authorization Card to the
Administrator for which such Employee is an Eligible Employee.

7. PAYROLL DEDUCTIONS.

(a) Cash compensation payable to an Eligible Employee who elects to
participate in the Q.S.P. Plan for an Offering Period shall be reduced each
Payday through payroll deductions by an amount equal to the whole percentage
of Base Pay payable on such Payday elected by the Eligible Employee under
Section 6.

(b) The amount of each Eligible Employee's payroll deduction shall be held
by the Company and credited to an account established for such Eligible
Employee. The Company shall not pay any interest on the funds credited to an
Eligible Employee's account under the Q.S.P. Plan.

(c) An Eligible Employee participating in the Q.S.P. Plan may change his or
her payroll deduction percentage for any Offering Period by submitting a new
Authorization Card to the Administrator during the Enrollment Period for such
Offering Period. Such change in payroll deduction percentage shall become
effective on the first day of the Offering Period.

(d) During a leave of absence from the Company which is approved by the
Company and which meets the requirements of Treasury Regulation Section 1.421-
7(h)(2), an Eligible Employee may continue to participate in the Q.S.P. Plan
by making cash payments to the Company on each Payday equal to the dollar
amount of the payroll deduction made for such Eligible Employee for the Payday
next preceding the first day of such Eligible Employee's leave of absence.

8. GRANT OF OPTIONS; EXERCISE OF OPTIONS.

(a) Each Eligible Employee participating in the Q.S.P. Plan shall be granted
an option on the first day of the Offering Period for each Offering Period for
which such Eligible Employee elects to participate. The term of each Option
shall end on the last day of the Offering Period for which the Option is
granted, and such Option shall expire immediately thereafter. The number of
shares of Stock subject to each Option shall be the quotient of the total
payroll deductions made for the Eligible Employee during the Offering Period,
divided by the Option Price, excluding fractional shares of Stock; provided,
however, that the number of shares of Stock subject to each Option shall not
exceed 1,500 shares.

(b) Except as otherwise provided in subsection (c), each Eligible Employee
participating in the Q.S.P. Plan shall be deemed to have exercised his or her
Option on the last day of the Offering Period, to the extent that the balance
of payroll deductions credited to such Eligible Employee's account under the
Q.S.P. Plan is sufficient to purchase, at the Option Price, whole shares of
Stock. No fractional shares of Stock shall be purchased upon the exercise of
the Option and any funds credited to such Eligible Employee's account,
remaining after the purchase of whole shares of Stock upon exercise of an
option, shall remain credited to such Eligible Employee's account and carried
forward for purchase of shares of Stock pursuant to the Option, if any,
granted to such Eligible Employee for the next following offering Period.

(c) An Eligible Employee's Option shall not be exercised on the last day of
the offering Period if such Eligible Employee instructs the Administrator in
writing at least two weeks prior to the last day of the Offering Period that
such Option is not to be exercised. As soon as practicable after receipt of
such instruction, the Administrator shall pay to such Eligible Employee in
cash in one lump sum the balance of payroll deductions credited to such
Eligible Employee's account under the Q.S.P. Plan, without the payment of any
interest thereon.

A-3
<PAGE>

(d) If the total number of shares of Stock for which options are to be
exercised on any date exceeds the number of shares remaining unsold under the
Q.S.P. Plan (after deduction of all shares for which Options have theretofore
been exercised), the Administrator shall make a pro rata allocation of the
available remaining shares in as nearly a uniform manner as shall be
practicable and any balance of payroll deductions credited to the accounts of
Eligible Employees which have not been applied to the purchase of shares of
Stock shall be paid to such Eligible Employees in cash in one lump sum as soon
as practicable, without payment of any interest thereon.

(e) Notwithstanding any provision in this Section to the contrary, an
Eligible Employee shall not be granted an Option:

(i) if, immediately after the Option is granted, such Employee would own
stock possessing 5% or more of the total combined voting power or value of
all classes of stock of the Company, any Parent Corporation or any
Subsidiary Corporation. For purposes of determining stock ownership under
this paragraph, the rules of Code Section 424(d) shall apply and stock
which an Eligible Employee may purchase under outstanding options held by
such Eligible Employee shall be treated as stock owned by such Eligible
Employee; or

(ii) which permits such Eligible Employee's rights to purchase stock
under all employee stock purchase plans of the Company, any Parent
Corporation or any Subsidiary Corporation, which qualify under Code Section
423, to accrue at a rate which exceeds $25,000 of the fair market value of
such stock (determined at the time such option is granted) for each
calendar year in which such option is outstanding at any time. For purpose
of the limitations imposed by this paragraph, the right to purchase stock
under an option accrues when the option (or any portion thereof) first
becomes exercisable during the calendar year, the right to purchase stock
under an option accrues at the rate provided in the option (but in no case
may such rate exceed $25,000 of fair market value of such stock determined
at the time such option is granted for any one calendar year), and a right
to purchase stock which has accrued under the option may not be carried
over to any other option.

9. OPTION PRICE.

(a) The per share exercise price of each option (the "Option Price") shall
be an amount equal to the lesser of:

(i) 85% of the fair market value of a share of Stock on the date the
Option is granted (the first day of the Offering Period); or

(ii) 85% of the fair market value of a share of Stock on the date such
option is exercised (the last day of the Offering Period).

(b) For purposes of subsection (a), the fair market value of a share of
Stock as of a given date shall be:

(i) the closing price of a share of Stock on the principal exchange on
which shares of Stock are then trading, if any, on such date, or, if shares
were not traded on such date, then on the next preceding trading day during
which a sale occurred;

(ii) if such Stock is not traded on an exchange but is quoted on Nasdaq
or a successor quotation system, the last sales price (if the Stock is then
listed as a National Market issue under the Nasdaq National Market System)
or the mean between the closing representative bid and asked prices (in all
other cases) for the Stock of such date as reported by Nasdaq or a
successor quotation system;

(iii) if such Stock is not publicly traded on an exchange and not quoted
on Nasdaq or a successor quotation system, the mean between the closing bid
and asked prices for the Stock on such date as determined in good faith by
the Committee; or

(iv) if the Stock is not publicly traded, the fair market value
established by the Administrator acting in good faith.

A-4
<PAGE>

10. ISSUANCE OF CERTIFICATES.

(a) The Administrator shall, as soon as practicable after the exercise of
any Option, deliver to the Eligible Employee exercising the Option a
certificate evidencing the whole shares of Stock purchased by such Eligible
Employee under the Q.S.P. Plan from funds credited to such Eligible Employee's
account.

(b) In the event the Administrator is required to obtain authority to issue
certificates for any shares of Stock purchased by an Eligible Employee under
the Q.S.P. Plan from any commissioner or agency, the Administrator will seek
to obtain such authority. If the Administrator in unable, after reasonable
efforts, to obtain such authority, the Administrator and the Company shall be
relieved from all liability and shall pay to each such Eligible Employee the
balance of payroll deductions credited to each such Eligible Employee's
account under the Q.S.P. Plan in cash in one lump sum as soon as practicable,
without the payment of any interest thereon.

11. CESSATION OF PARTICIPATION.

(a) Except as otherwise provided in Subsection 7(d), an Eligible Employee
shall cease to participate in the Q.S.P. Plan in the event that:

(i) the Administrator receives written instructions from the Eligible
Employee to terminate such Eligible Employee's participation in the Q.S.P.
Plan;

(ii) the Eligible Employee resigns or is discharged from employment by
the Company, or has a leave of absence from the Company; or

(iii) the Employee dies.

(b) Upon cessation of participation by an Eligible Employee, such Eligible
Employee's payroll deductions shall cease. If such cessation of participation
occurs during the last two weeks of an Offering Period, such Eligible
Employee's Option shall be exercised on the last day of the Offering Period in
accordance with Section 8(b). Upon cessation of participation at any other
time, any balance of payroll deductions credited to such Eligible Employee's
account under the Q.S.P. Plan shall be paid to the Employee in cash in one
lump sum as soon as practicable after cessation of participation, without
payment of any interest thereon.

(c) An Eligible Employee shall not be eligible to participate in the Q.S.P.
Plan during the Offering Period which immediately follows the Offering Period
during which such Employee voluntarily terminated participation in the Q.S.P.
Plan under paragraph (a)(i).

12. TRANSFER OF OPTION. Options granted pursuant to the Q.S.P. Plan shall
not be transferable by an Eligible Employee, other than by will or the laws of
descent and distribution, and shall be exercisable during the Eligible
Employee's lifetime only by such Eligible Employee.

13. BENEFICIARY.

(a) Each Eligible Employee shall designate on his or her Authorization Card
a beneficiary or beneficiaries and may, without such beneficiaries consent,
change such designation. Any designation shall be effective only after it is
received by the Administrator and shall be controlling over any disposition by
will or otherwise. Upon the death of an Eligible Employee, the balance of
payroll deductions credited to such Eligible Employee's account shall be paid
or distributed to the designated beneficiary or beneficiaries, or in the
absence of such designation, to the executor or administrator of the Eligible
Employee's estate, and in either event the Administrator and the Company shall
not be under any further liability to anyone.

14. RECAPITALIZATION. If there shall be any change in the Stock subject to
the Q.S.P. Plan or the Stock subject to any Option, through merger,
consolidation, reorganization, recapitalization, reincorporation, stock split,
stock dividend (in excess of 2% of the fair market value of the Stock) or
other change in the corporate structure of the Company, appropriate
adjustments shall be made by the Administrator to the aggregate number of
shares subject to the Q.S.P. Plan and the number of shares and the price per
share subject to outstanding

A-5
<PAGE>

Options in order to preserve, but not to increase, the benefits of the
Eligible Employees hereunder; provided, however, that subject to any required
action by the stockholders, if the Company shall not be the surviving
corporation in any such merger, consolidation or reorganization, every Option
outstanding shall terminate, unless the surviving corporation shall (subject
to applicable provisions of the Code) issue a new option therefor or assume
(with appropriate changes) the existing Option. If the Option shall terminate
by reason of such merger, consolidation, or reorganization, then any provision
herein to the contrary notwithstanding, any option held by an Eligible
Employee may be exercised, in whole or in part, by such Eligible Employee at
any time prior to or concurrently with consummation of such merger,
consolidation or reorganization.

15. RIGHTS AS A STOCKHOLDER. An Eligible Employee shall have no rights as a
stockholder with respect to any shares of Stock covered by Options until the
date of the issuance of a certificate for such shares of Stock. No adjustments
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights for which the
record date is prior to the date such certificate is issued, except as
otherwise expressly provided herein.

16. COSTS; INDEMNIFICATION.

(a) All costs and expenses incurred in administering the Q.S.P. Plan shall
be paid by the Company.

(b) In addition to such other rights of indemnification as the Administrator
may have as a director or officer of the Company, the Company shall indemnify
and hold the Administrator harmless against any and all liability, loss,
costs, damages, attorneys' fees and other expenses the Administrator may
sustain or incur in connection with administration of the Q.S.P. Plan, except
for liability, loss, costs, damages, attorneys' fees and other expenses caused
by the negligence of the Administrator or his agent; provided, that within 60
days after the institution of any action, suit or proceeding the Administrator
shall in writing offer the Company the opportunity to handle, prosecute or
defend the same, at the Company's own expense. The Administrator shall have
the right, but not the obligation, to adjust, settle, or compromise any claim,
obligation, debt, demand, suit or judgment against the Administrator, and if
such settlement is approved by independent legal counsel selected by the
Company then the Company shall reimburse the Administrator for all sums of
money the Administrator may pay or become liable to pay against which the
Administrator is indemnified hereunder.

17. AMENDMENT OR TERMINATION OF THE Q.S.P. PLAN. The Board of Directors may
at any time, with respect to any shares of Stock not then subject to Options
suspend or terminate the Q.S.P. Plan, and may amend the Q.S.P. Plan from time
to time as the Board of Directors may deem advisable; provided, however, that
except as provided in Section 14 hereof, the Board of Directors shall not
amend the Q.S.P. Plan in the following respects without the affirmative vote
of approval by a majority of the outstanding shares of Stock of the Company:

(a) To increase the maximum number of shares of Stock subject to the Q.S.P.
Plan;

(b) To change the designation or class of employees eligible to receive
Options under the Q.S.P. Plan; or

(c) In any manner which would cause the Q.S.P. Plan to no longer be an
employee stock purchase plan under Code Section 423.

18. APPLICATION OF FUNDS. The proceeds received by the Company from the sale
of Stock pursuant to the exercise of Options shall be deposited in the account
of the general corporate funds of the Company.

19. APPROVAL OF STOCKHOLDERS. The Q.S.P. Plan shall become effective on the
date of the affirmative vote by a majority of the outstanding shares of Stock
of the Company approving the Q.S.P. Plan (which approval must occur within 12
months before or after the date the Q.S.P. Plan is adopted by the Board of
Directors).

20. NO RIGHTS AS AN EMPLOYEE. Nothing in the Q.S.P. Plan shall be construed
to give any person the right to remain in the employ of the Company or to
affect the right of the Company to terminate the employment of any person at
any time with or without cause.

A-6
<PAGE>

21. TITLES. Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of the Q.S.P. Plan.

22. CONFORMITY TO SECURITIES LAWS. The Plan is intended to conform to the
extent necessary with all provisions of the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, and any and all
regulations and rules promulgated by the Securities and Exchange Commission
thereunder, including without limitation Rule 16b-3. Notwithstanding anything
herein to the contrary, the Plan shall be administered, and Options shall be
granted and may be exercised, only in such a manner as to conform to such
laws, rules and regulations. To the extent permitted by applicable law, the
Q.S.P. Plan and Options granted hereunder shall be deemed amended to the
extent necessary to conform to such laws, rules and regulations.

* * * * *

I hereby certify that the foregoing Q.S.P. Plan was adopted by the Board of
Directors of Rental Service Corporation on the 26th day of February, 1997.

-------------------------------------
Douglas A. Waugaman, Secretary

A-7
<PAGE>

- --------------------------------------------------------------------------------
PROXY RENTAL SERVICE CORPORATION

ANNUAL MEETING OF STOCKHOLDERS APRIL 28, 1997

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned stockholder of Rental Service Corporation does hereby
nominate, constitute and appoint Douglas A. Waugaman, the true and lawful
proxy, agent and attorney of the undersigned, with full power of substitution,
to vote for the undersigned all of the common stock of said corporation in the
name of the undersigned on its books at the close of business on March 14, 1997
at the Annual Meeting of Stockholders to be held at the Phoenician Hotel, 6000
East Camelback Road, Scottsdale, Arizona 85251 at 10:00 a.m. on April 28, 1997,
or at any adjournment thereof, with all of the power which would be possessed
by the undersigned if personally present as follows:

IF NO CONTRARY INSTRUCTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF MANAGEMENT'S EIGHT NOMINEES AS DIRECTORS, FOR APPROVAL OF THE
EMPLOYEE QUALIFIED STOCK PURCHASE PLAN OF RENTAL SERVICE CORPORATION AND FOR
RATIFICATION OF MANAGEMENT'S SELECTION OF AUDITORS.

1. Election of Directors
Martin R. Reid Christopher A. Laurence John G. Quigley
William M. Barnum, Jr. Britton H. Murdoch Frederick J. Warren
James R. Buch Eric L. Mattson

[_] FOR all nominees listed above (except as marked to the contrary below).

[_] WITHHOLD AUTHORITY to vote for all nominees listed above.

(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)

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

2. Approval of Employee Qualified Stock Purchase Plan

[_] FOR [_] AGAINST [_] ABSTAIN
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
3. Ratification of the selection of Ernst & Young LLP as the Company's auditors
for 1997.

[_] FOR [_] AGAINST [_] ABSTAIN

The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders dated March 26, 1997 and the Proxy Statement of the same date
furnished therewith.

Dated: ________________________

Signature(s)___________________

_______________________________
NOTE: Please sign name exactly
as your name (or names) appear
on the stock certificate. When
signing as attorney, executor,
administrator, trustee or
guardian please give full
title. If more than one
trustee, all should sign. All
joint owners must sign.
- --------------------------------------------------------------------------------