NATIONAL EQUIPMENT SERVICES INC, PRE 14A, 1999-05-05

NATIONAL EQUIPMENT SERVICES INC
PRE 14A, 1999-05-05
EQUIPMENT RENTAL & LEASING, NEC

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [x]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

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

[_] Definitive Proxy Statement

[_] Definitive Additional Materials

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

National Equipment Services, Inc.
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(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:

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

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(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):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[_] 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:

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

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(3) Filing Party:

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(4) Date Filed:

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Notes:
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NATIONAL EQUIPMENT SERVICES, INC.

NOTICE OF 1999 ANNUAL MEETING
AND PROXY STATEMENT

<PAGE>

NATIONAL EQUIPMENT SERVICES, INC.
1603 Orrington Avenue, Suite 1600
Evanston, Illinois 60201

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders of
National Equipment Services, Inc. (the "Company"), which will be held on
Thursday, June 17, 1999, at 1:00 p.m., local time, at the Company's
headquarters at 1603 Orrington Avenue, Suite 1600, Evanston, Illinois 60201.

The Notice of Meeting, Proxy Statement and Proxy Form are included with
this letter. The matters listed in the Notice of Meeting are more fully
described in the Proxy Statement.

It is important that your shares are represented and voted at the Annual
Meeting, regardless of the size of your holdings. Accordingly, please mark,
sign and date the enclosed Proxy Form and return it promptly in the enclosed
envelope. If you attend the Annual Meeting, you may, of course, withdraw your
proxy should you wish to vote in person.

Sincerely,

/s/ Paul R. Ingersoll

Paul R. Ingersoll
Senior Vice President and Secretary

<PAGE>

NATIONAL EQUIPMENT SERVICES, INC.
1603 Orrington Avenue, Suite 1600
Evanston, Illinois 60201

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

The Annual Meeting of Stockholders of National Equipment Services, Inc.
(the "Company") will be held on Thursday, June 17, 1999, at 1:00 p.m., local
time, at the Company's headquarters at 1603 Orrington Avenue, Suite 1600,
Evanston, Illinois 60201 to consider and take action with respect to the
following matters:

1. The election of one director to hold office for a term of three years;

2. The approval of the issuance of up to 100,000 shares of Senior
Redeemable Convertible Preferred Stock, Series A and the issuance of
shares of Common Stock upon conversion thereof;

3. The ratification of the appointment of PricewaterhouseCoopers LLP as
the Company's independent public accountants for the fiscal year ending
December 31, 1999; and

4. The transaction of such other business as may properly come before the
Annual Meeting and any adjournments or postponements thereof.

Holders of record of the Company's Common Stock at the close of business on
May 12, 1999 are entitled to receive notice of and to vote on all matters
presented at the Annual Meeting and at any adjournments or postponements
thereof. A list of such stockholders will be available for examination by any
stockholder for any purpose germane to the meeting during normal business
hours at the Company's principal executive offices, 1603 Orrington Avenue,
Suite 1600, Evanston, Illinois 60201, and at the location of the meeting set
forth above, in each case for a period of 10 days prior to the meeting.

By Order of the Board of Directors

/s/ Paul R. Ingersoll
Paul R. Ingersoll
Senior Vice President and Secretary

May , 1999

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON AND REGARDLESS
OF THE NUMBER OF SHARES YOU OWN, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY
FORM AND MAIL IT PROMPTLY IN THE ENVELOPE PROVIDED TO ENSURE THAT YOUR SHARES
WILL BE REPRESENTED. YOU MAY NEVERTHELESS VOTE IN PERSON IF YOU ATTEND THE
ANNUAL MEETING. IN ADDITION, YOUR PROXY IS REVOCABLE AT ANY TIME BEFORE IT IS
VOTED BY WRITTEN NOTICE TO THE SECRETARY OF THE COMPANY OR BY DELIVERY OF A
LATER-DATED PROXY.

<PAGE>

NATIONAL EQUIPMENT SERVICES, INC.
1603 Orrington Avenue, Suite 1600
Evanston, Illinois 60201

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PROXY STATEMENT

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Annual Meeting of Stockholders
to be held on
June 17, 1999

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This proxy statement (this "Proxy Statement") is being furnished to the
holders of common stock, par value $0.01 per share (the "Common Stock"), of
National Equipment Services, Inc. (the "Company") in connection with the
solicitation of proxies by and on behalf of the Board of Directors of the
Company (the "Board of Directors" or the "Board") for use at the annual
meeting of stockholders to be held on June 17, 1999 at 1:00 p.m., local time,
and at any adjournments or postponements thereof (the "Annual Meeting"). The
purpose of the Annual Meeting is to elect one director to the Board, to
approve the issuance of up to 100,000 shares of Senior Redeemable Convertible
Preferred Stock, Series A, par value $0.01 per share (the "Preferred Stock"),
and the issuance of shares of Common Stock upon conversion thereof and to
ratify the appointment of PricewaterhouseCoopers LLP as the Company's
independent public accountants for the 1999 fiscal year.

The Notice of Meeting, this Proxy Statement and the Proxy Form are being
mailed on or about May 17, 1999 to holders of record of the Common Stock at
the close of business on May 12, 1999. The Company's Annual Report to
Stockholders, which includes portions of the Company's Annual Report on Form
10-K for the Fiscal Year ended December 31, 1999, were mailed to stockholders
on or about April 14, 1999.

If the enclosed proxy form (the "Proxy Form") is properly signed, dated and
returned to the Company, the individuals identified as proxies thereon will
vote the shares represented by the Proxy Form in accordance with the
directions noted thereon. If no direction is indicated, the proxies will vote
FOR the election of the nominee named herein as director, FOR the issuance of
up to 100,000 shares of Preferred Stock to investors in a private placement
and the issuance of shares of Common Stock upon conversion thereof and FOR the
ratification of the appointment of PricewaterhouseCoopers LLP as the Company's
independent public accountants for the 1999 fiscal year. The Company's
management does not know of any matters other than those discussed in this
Proxy Statement that will be presented at the Annual Meeting. If other matters
are presented, all proxies will be voted in accordance with the
recommendations of the Company's management.

Returning your completed Proxy Form will not prevent you from voting in
person at the Annual Meeting if you are present and wish to vote. In addition,
you may revoke your proxy any time before it is voted by written notice to the
Secretary of the Company prior to the Annual Meeting at the Company's
principal executive offices at the address above or by submission of a later-
dated proxy.

Each outstanding share of Common Stock entitles the holder thereof to one
vote on each matter to come before the Annual Meeting. As of May 12, 1999,
there were shares of Common Stock outstanding. The presence in
person or by proxy of a majority of the shares of Common Stock outstanding
will constitute a quorum for the transaction of business. Pursuant to Delaware
law, abstentions are treated as present and entitled to vote, and therefore
are counted in determining the existence of a quorum and will have the effect
of a vote against any matter requiring the affirmative vote of a majority of
the shares present and entitled to vote at the Annual Meeting. Under Delaware
law, broker "non-votes" are considered present but not entitled to vote, and
thus will be counted in determining the existence of a quorum but will not be
counted in determining whether a matter requiring approval of a majority of
the shares present and entitled to vote has been approved or whether a
plurality of the vote of the shares present and entitled to vote has been
cast.
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PROPOSAL 1

ELECTION OF DIRECTOR

The Company's by-laws provide that the size of the Board shall be fixed
from time to time by resolution of the Board and that vacancies on the Board
may be filled by the remaining directors. The Board currently consists of five
directors, who are divided into three classes, each consisting of one or two
directors, who serve staggered three-year terms. Ronald St. Clair's term will
expire at the 1999 Annual Meeting. Kevin Rodgers' and William Kessinger's
terms will expire at the 2000 Annual Meeting. Carl Thoma's and John Grove's
terms will expire at the 2001 Annual Meeting. Each director is elected to
serve for the remaining term of any vacancy filled by the director or until
the third succeeding annual meeting of stockholders (if elected at an annual
meeting of stockholders) or until a successor is duly elected.

Mr. St. Clair has been nominated for re-election at the Annual Meeting. See
"Management--Nominee for Director" and "Management--Continuing Directors" for
information with respect to Mr. St. Clair and the continuing directors of the
Company. The Company believes that the nominee is willing to be elected and to
serve. In the event that the nominee is unable to serve or is otherwise
unavailable for election, which is not now contemplated, the incumbent Board
may or may not select a substitute nominee. If a substituted nominee is
selected, all proxies will be voted for the person selected.

A director will be elected at the Annual Meeting by a plurality of the
votes cast at the meeting by the holders of shares represented in person or by
proxy. There is no cumulative voting as to any matter, including the election
of directors.

The Board of Directors recommends a vote "FOR" the election of the nominee.

PROPOSAL 2

ISSUANCE OF UP TO 100,000 SHARES OF SENIOR REDEEMABLE CONVERTIBLE PREFERRED
STOCK, SERIES A

The following summary of Proposal 2 is qualified in its entirety by
reference to the provisions of that certain Purchase Agreement dated April 27,
1999 (the "Purchase Agreement"), including, without limitation, the form of
Certificate of Designation attached as an exhibit to the Purchase Agreement
(the "Certificate of Designation"), and the term sheet for Registration Rights
attached as an exhibit to the Purchase Agreement (the "Registration Rights
Term Sheet"), each of which are incorporated herein by reference. Stockholders
may obtain a copy of the Purchase Agreement, the Certificate of Designation,
the Registration Rights Term Sheet and the Registration Rights Agreement (as
defined) by writing or calling Mr. Paul Ingersoll, Senior Vice President and
Secretary, National Equipment Services, Inc., 1603 Orrington Avenue, Suite
1600, Evanston, Illinois 60201, telephone: (847) 733-1000.

General Description of the Transaction

Pursuant to the Purchase Agreement by and among the Company, The 1818 Fund
III, L.P. ("The Fund"), Co-Investment Partners, L.P., ("CIP"), Erie Indemnity
Company ("Erie Indemnity"), Erie Insurance Exchange ("Erie Exchange") and
Aquila Limited Partnership ("Aquila" and together with The Fund, CIP, Erie
Indemnity and Erie Exchange, the "Purchasers"), the Company will issue up to
100,000 shares of its new class of Preferred Stock to the Purchasers (the
"Preferred Shares") in exchange for an aggregate amount in cash of up to
$100,000,000 (the "Transaction"). The Transaction will take place in two
separate phases. Upon consummation of the first closing, the Company will
issue 60,000 Preferred Shares to the Purchasers in exchange for $60,000,000 in
cash ("Phase I"). Upon consummation of the second closing, the Company will
issue up to 40,000 additional Preferred Shares to the Purchasers in exchange
for up to $40,000,000 in additional cash ("Phase II").

2
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The Preferred Shares will be unregistered and, in addition to any resale
limitations imposed by the Securities Act of 1933, as amended (the "Securities
Act"), will be subject to certain restrictions on transfer. Pursuant to an
Amended and Restated Registration Agreement between the Company, the
Purchasers and certain other stockholders of the Company (the "Registration
Rights Agreement"), to be effective upon consummation of Phase I of the
Transaction, the Purchasers will be granted certain rights to require the
Company to register their shares in the future. See "--The Registration Rights
Agreement."

Consummation of Phase II of the Transaction is conditioned on the approval
by the Company's stockholders at the Annual Meeting of the issuance of up to
100,000 shares of Preferred Stock and the issuance of shares of Common Stock
upon conversion thereof. See "--The Purchase Agreement--Conditions to the
Obligation of the Company to Close at the Second Closing." Based on its
evaluation of the Transaction, the Board of Directors has recommended that the
Company's stockholders vote in favor of the issuance of up to 100,000 shares
of Preferred Stock and the issuance of shares of Common Stock upon conversion
thereof. In the event that the Company does not obtain such stockholder
approval, the Company may still consummate Phase I of the Transaction but will
not consummate Phase II.

Background to the Transaction

A core component of the Company's business strategy is the acquisition of
complimentary businesses and assets, principally for cash. The Company's
management has determined that, in order to successfully proceed with this
business strategy, it is critical that the Company increase its available
sources of cash. Additionally, the Board of Directors believes that it is
important to improve the Company's balance sheet (and, in particular, its
current assets and cash) and to raise additional capital as quickly as
possible. The Board of Directors has concluded that a public offering would
take too much time to complete and would be too costly. Accordingly, the Board
of Directors has determined that it would be advisable to raise the additional
capital through consummation of the Transaction.

The issue price for the Preferred Shares ($1,000 per share, which
constitutes 100% of the principal amount of the issue)(the "Stated Value") and
the initial conversion price of the Preferred Shares ($13.00 per share) were
determined through negotiations between the Company and the Purchasers and
were based upon the fair market value of the Company's Common Stock as
reported by the New York Stock Exchange. The Board of Directors accepted an
initial conversion price of $13.00 per share because it was greater than the
fair market value of the Company's Common Stock throughout April 1999.

The Board of Directors is authorized by the Company's Certificate of
Incorporation, without any action of the stockholders, to issue one or more
classes and series of preferred stock with respect to which the Board of
Directors may determine voting, conversion, redemption and other rights which
could adversely affect the rights of holders of Common Stock. The rights of
the holders of Common Stock generally are subject to the prior rights of any
preferred stock issued by the Company with respect to dividends, liquidation
preferences and other matters. Among other things, preferred stock can be
issued by the Company to raise capital or to finance acquisitions. The
issuance of preferred stock under certain circumstances can have the effect of
delaying or preventing a change of control of the Company.

Notwithstanding provisions of the Company's Certificate of Incorporation
permitting the issuance of preferred stock without stockholder approval, the
rules of the New York Stock Exchange ("NYSE Guidelines") require stockholder
approval prior to the issuance by the Company of securities convertible into
Common Stock, in any transaction or series of related transactions, if the
number of shares of Common Stock into which such securities may be convertible
equals 20% or more of the Company's Common Stock outstanding before the
issuance of such securities. As a result, the Company is seeking stockholder
approval of the issuance of up to 100,000 shares of Preferred Stock and the
issuance of shares of Common Stock upon conversion thereof.

3
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Terms of the Senior Redeemable Convertible Preferred Stock, Series A

The Preferred Stock to be issued to the Purchasers in connection with the
Transaction will have the following designations, preferences and rights:

Dividends

Each holder of shares of Preferred Stock will be entitled to receive
dividends and other distributions on a parity with each holder of Common
Stock. Such dividends and distributions will be payable on each share of
Preferred Stock in an amount equal to the dividends per share payable on the
number of shares of Common Stock into which such share of Preferred Stock
would be convertible on the record date for determining eligibility to receive
such dividends or, if no record date is established, on the date such
dividends are actually paid.

Optional Conversion

Any holder of Preferred Stock will have the right to convert, subject to
certain terms and provisions set forth in the Certificate of Designation, any
or all of such holder's shares of Preferred Stock into such number of fully
paid and non-assessable shares of Common Stock as is equal to the product of
the number of shares of Preferred Stock being so converted multiplied by the
quotient of (i) the Stated Value divided by (ii) the Conversion Price (as
defined below) then in effect, except that with respect to any shares which
are called for redemption, such right will terminate at the close of business
on the date of redemption for such shares, unless in any such case the Company
defaults in payment due upon redemption thereof.

The "Conversion Price" shall be $13.00, subject to adjustment on a weighted
average basis upon an issuance of Common Stock at a price per share below the
then current Conversion Price. Notwithstanding the foregoing, no such
adjustment will be made (x) upon the sale or grant of shares of Common Stock
or options to acquire shares of Common Stock in an aggregate amount not to
exceed 3,181,419 shares (adjusted for subsequent stock splits, stock
combinations, stock dividends and recapitalizations) of Common Stock to
employees or directors of the Company or to other service providers, or upon
the issuance of shares of Common Stock upon exercise of any such options, if
the sales price or exercise price thereof was not less than the market price
of the Common Stock on the date such shares of Common Stock or options were
sold or granted, provided that in the case of options, the market price will
be measured as of the time any such option was granted, not at the time of
exercise, or (y) upon any adjustment in the Conversion Price itself. The
Conversion Price is further subject to standard anti-dilution adjustments in
the case of stock dividends, stock splits, reclassifications of stock and
other similar transactions.

Mandatory Conversion

If at any time after one year from the issue date of such Preferred Stock,
the arithmetic average of the closing market price of the Company's Common
Stock over a 60 consecutive trading day period equals or exceeds $20.00
(adjusted for subsequent stock splits, stock combinations, stock dividends and
recapitalizations), then on the business day specified by the Company
occurring no more than 60 days after the end of such 60 trading day period
(the "Mandatory Conversion Date") the Company will have the right to require
all the holders of Preferred Stock to covert all (but not less than all) of
their shares of Preferred Stock into such number of fully paid and non-
assessable shares of Common Stock as is equal to the product of the number of
shares of Preferred Stock being so converted multiplied by the quotient of (i)
the Stated Value per share divided by (ii) the Conversion Price in effect on
the date of conversion (the "Mandatory Conversion").

Redemption

On April 30, 2009 (the "Redemption Date"), the Company will redeem all of
the shares of Preferred Stock then outstanding, at a price per share (the
"Redemption Price") equal to the Stated Value plus an amount per share equal
to all declared and unpaid dividends thereon.

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Change of Control Offer

If a Change of Control (as defined in the Purchase Agreement) occurs, then
the Company will within 5 business days thereafter offer to purchase from each
holder of Preferred Shares (a "Change of Control Offer") all (but not less
than all) outstanding Preferred Shares then held by such holder at a purchase
price equal to the greater of: (A) the amount, if any, that each holder of
shares of Preferred Stock would be entitled to receive per share of Common
Stock in connection with such Change of Control if such holder of Preferred
Stock had converted its shares or (B) $20.00 in cash per share of Common Stock
assuming such holder of Preferred Stock had converted its shares of Preferred
Stock. For the purposes of clause (A) of the preceding sentence, if, in
connection with a Change of Control, the holders of shares of Common Stock are
to receive securities of another entity that are listed or admitted to trading
on a national securities exchange or quoted in the over-the-counter market,
the amount that a holder of shares of Preferred Stock would be entitled to
receive per share of Common Stock in connection with such Change of Control
will be deemed to be equal to an amount which is 95% of the Market Price (as
defined in the Purchase Agreement) of the securities to be received per share
of Common Stock calculated as of the trading day immediately preceding the
occurrence of the Change of Control.

Voting Rights

In addition to any voting rights provided by law, so long as the Preferred
Stock is outstanding, each share of Preferred Stock shall entitle the holder
thereof to vote on all matters voted on by holders of Common Stock voting
together as a single class with other shares entitled to vote thereon. With
respect to any such vote, each share of Preferred Stock will entitle the
holder thereof to cast that number of votes per share as is equal to the
number of votes that such holder would be entitled to cast had such holder
converted his shares of Preferred Stock into Common Stock.

The affirmative vote of the holders of at least 51% of the outstanding
shares of Preferred Stock, voting separately as a single class, will be
necessary to increase the authorized number of shares of Preferred Stock,
authorize, adopt or approve an amendment to the Company's Certificate of
Incorporation that would increase or decrease the par value of the shares of
Preferred Stock, or alter or change the powers, preferences or special rights
of the shares of Preferred Stock, or otherwise adversely affect the rights of
the shares of the Preferred Stock.

Liquidation Preference

In the event of any dissolution, liquidation or winding-up of the Company
other than a Change of Control transaction (a "Liquidation"), no distribution
will be made to the holders of shares of any class of junior stock unless,
prior thereto, the holders of shares of Preferred Stock have received an
amount per share of Preferred Stock equal to the greater of (A) the Stated
Value, plus all declared and unpaid dividends to the date of distribution, and
(B) the proceeds in Liquidation that the holders of Preferred Stock would have
received in respect of all shares of Common Stock issuable to such holders
upon conversion.

The Purchase Agreement

Pursuant to the Purchase Agreement, the Company has agreed to issue at the
First Closing (as defined) 36,000 shares of Preferred Stock to The Fund,
15,000 shares of Preferred Stock to CIP, 1,800 shares of Preferred Stock to
Erie Indemnity, 4,200 shares of Preferred Stock to Erie Exchange and 3,000
shares of Preferred Stock to Aquila (collectively, the "First Preferred
Shares") for a cash purchase price of $36,000,000 from the Fund, $15,000,000
from CIP, $1,800,000 from Erie Indemnity, $4,200,000 from Erie Exchange and
$3,000,000 from Aquila (collectively, the "First Purchase Price"). In
addition, subject to the terms and conditions set forth in the Purchase
Agreement, the Company has agreed to issue at the Second Closing (as defined)
24,000 shares of Preferred Stock to the Fund, 10,000 shares of Preferred Stock
to CIP, 1,200 shares of Preferred Stock to Erie Indemnity, 2,800 shares of
Preferred Stock to Erie Exchange and 2,000 shares of Preferred Stock to Aquila
(collectively, the "Second Preferred Shares") for a cash purchase price of
$24,000,000 from the Fund, $10,000,000 from CIP, $1,200,000 from Erie
Indemnity, $2,800,000 from Erie Exchange and $2,000,000 from Aquila
(collectively, the "Second Purchase Price" and together with the First
Purchase Price, the "Purchase Price").

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Closings

The purchase and issuance of the First Preferred Shares will take place at
the closing (the "First Closing") to be held on May 14, 1999, or such later
date on or prior to June 18, 1999 as the parties may agree (the "First Closing
Date"). At the First Closing, subject to the terms and conditions set forth in
the Purchase Agreement, the Company will deliver to each Purchaser the First
Preferred Shares to be purchased by it in exchange for the First Purchase
Price.

The purchase and issuance of the Second Preferred Shares will take place at
the closing (the "Second Closing") to be held on the next business day after
the Annual Meeting or on such later date on or prior to June 18, 1999 (or,
under certain circumstances, July 31, 1999) as the parties may agree (the
"Second Closing Date"). At the Second Closing, subject to the terms and
conditions set forth in the Purchase Agreement, the Company will deliver to
each Purchaser the Second Preferred Shares to be purchased by it in exchange
for the Second Purchase Price.

Board Representation and Visitation Rights

The Company will, at or prior to the First Closing Date, cause one person
designated by the Fund to be elected to its Board of Directors. Such designee
will serve until the next succeeding annual meeting of stockholders of the
Company to be held after such election.

Commencing with the next succeeding annual meeting of stockholders of the
Company, and at each annual meeting of stockholders of the Company thereafter,
so long as The Fund holds 20% of the shares of Common Stock issued or issuable
upon conversion of the Preferred Shares acquired by The Fund in the
Transaction, The Fund will be entitled to designate one director to the Board
of Directors. The Company will cause such designee of The Fund to be included
in the slate of nominees recommended by the Board to the Company's
stockholders for election as directors, and the Company will use its
reasonable best efforts to cause the election of such designee.
Notwithstanding the foregoing, if The Fund has not designated a person and is
entitled to do so, The Fund will be entitled to receive all notices and
materials distributed to the members of the Board, and to designate one person
who shall be entitled to attend all meetings of the Board and committees
thereof and to receive minutes of all such meetings upon preparation thereof.

In addition to the rights granted above, (i) so long as The Fund holds 20%
of the shares of Common Stock issued or issuable upon conversion of the
Preferred Shares acquired by The Fund in the Transaction, The Fund will have
the right to have a representative attend all regular and special meetings of
the Board and (ii) so long as CIP holds 20% of the shares of Common Stock
issued or issuable upon conversion of the Preferred Shares acquired by CIP in
the Transaction, CIP will have the right to have a representative attend all
regular and special meetings of the Board of Directors. These visitation
rights shall include the right to receive the same notice and materials
provided to the Board at the same time as provided to the Board.

Standstill Provisions

Each Purchaser has agreed that for a period of three years from the First
Closing Date it will not acquire any Voting Stock (as defined in the Purchase
Agreement) of the Company if as a result of such acquisition, the Purchasers
and their affiliates will beneficially own in the aggregate in excess of 49%
of the Voting Stock of the Company. Notwithstanding the foregoing, Brown
Brothers Harriman & Co. ("BBH&Co.") will be entitled to process any
unsolicited orders to buy any Voting Stock of the Company and BBH&Co. will be
entitled to solicit orders to purchase or recommend that persons purchase
Voting Stock of the Company.

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Transfer Restrictions

The Preferred Shares will not be registered under Federal or state
securities laws and will bear a legend to such effect. Under such laws, the
Preferred Shares may not be offered, sold or transferred except (i) pursuant
to an exemption from registration under the Securities Act and such other
applicable laws, or (ii) pursuant to an effective registration statement under
the Securities Act. The Purchasers will be granted certain rights to require
the Company to register the Preferred Shares in the future in accordance with
the Registration Rights Agreement.

Indemnification

The Company has agreed to indemnify and hold harmless each Purchaser and
its affiliates and their respective agents and controlling persons (each, an
"Indemnified Party") to the fullest extent permitted by law from any and all
losses, expenses or other liabilities ("Liabilities") resulting from any
breach of any covenant, agreement, representation or warranty of the Company
or any other action, or written threat thereof, relating to the transactions
contemplated by the Purchase Agreement as long as a written claim thereof is
made before the expiration of the relevant survival period set forth in the
Purchase Agreement. However, the Company will not be liable for any amount
paid in settlement of claims without the Company's consent or to the extent
that it is finally judicially determined that such Liabilities resulted
primarily from the willful misconduct, bad faith or gross negligence of such
Indemnified Party or any affiliate.

The representations and warranties of the Company will expire and terminate
upon the earlier of (i) the conversion of all of the Preferred Shares into
Common Stock and (ii) ninety (90) days after the filing of the Company's Form
10-K for the fiscal year ended December 31, 1999.

Conditions to the Purchasers Obligation to Close at the First Closing

The obligation of each Purchaser to purchase the First Preferred Shares to
be purchased by it, to pay the First Purchase Price and to perform any related
obligations under the Purchase Agreement is subject to, among other
conditions, the satisfaction or waiver of the following conditions on or
before the First Closing Date:

1. The representations and warranties of the Company shall be true and
correct in all material respects;

2. The Company shall have performed and complied with all of its
agreements and conditions set forth or contemplated in the Purchase
Agreement;

3. Phase I of the Transaction (a) shall not be prohibited by any
applicable law or governmental regulation, (b) shall not subject such
Purchaser to any penalty or, in its reasonable judgment, other onerous
condition under or pursuant to any applicable law or governmental
regulation and (c) shall be permitted by the laws and regulations of
the jurisdictions to which it is subject;

4. All actions by, notices to, or filings with, governmental authorities
and other persons necessary or required in connection with the
Transaction shall have been obtained and be in full force and effect;

5. Since December 31, 1998, there shall have been no material adverse
change, nor shall any such change be threatened, in the condition of
the Company;

6. The Company shall have conducted its business in the ordinary course
from April 27, 1999 to the First Closing Date, and no extraordinary or
other material transactions not in the ordinary course of business
shall have occurred without such Purchaser's consent; provided,
however, that the acquisition by the Company of (i) all of the shares
of capital stock of another entity or (ii) all or substantially all of
the assets of another entity shall, if such transaction (or series of
transactions) is approved by the Board of Directors, be considered to
be a transaction conducted in the ordinary course of business for the
purposes of this condition;

7. Between April 27, 1999 and the First Closing Date, (a) trading in the
Common Stock shall not have been suspended by the Commission or by the
New York Stock Exchange (the "NYSE"), (b) trading in securities
generally on the NYSE shall not have been suspended or limited or
minimum or

7
<PAGE>

maximum prices shall not have been generally established on such
exchange, or additional material governmental restrictions, not in
force on April 27, 1999 shall not have been imposed upon trading in
securities generally by such exchange or by order of the Commission or
any court or other governmental authority, (c) a general banking
moratorium shall not have been declared by either Federal or New York
State authorities and (d) any material adverse change in the financial
or securities markets in the United States or in political, financial
or economic conditions in the United States or, other than relating to
Iraq or Kosovo, any outbreak or material escalation of hostilities or
declaration by the United States of a national emergency or war or
other calamity or crisis shall not have occurred;

8. No action, suit, proceeding, claim or dispute shall have been brought
or otherwise arisen against the Company or any of its subsidiaries
which would reasonably be expected to (i) have a material adverse
effect on the condition of the Company or (ii) have a material adverse
effect on the ability of the Company to perform its obligations under
the Purchase Agreement, the Preferred Shares or the Registration Rights
Agreement;

9. The waiting period under the Hart-Scott-Rodino Act (the "HSR Act") with
respect to the First Preferred Shares to be acquired by such Purchaser
shall have expired or been terminated; and

10. The Fund shall simultaneously be purchasing all the First Preferred
Shares to be purchased by it under the Purchase Agreement.

Conditions to the Obligation of the Company to Close at the First Closing

The obligations of the Company to issue and sell the First Preferred Shares
to each Purchaser on the First Closing Date, shall be subject to, among other
conditions, the satisfaction or waiver of the following conditions on or
before the First Closing Date:

1. The representations and warranties of such Purchaser shall be true and
correct in all material respects;

2. Such Purchaser shall have performed and complied with all of its
agreements and conditions set forth or contemplated in the Purchase
Agreement;

3. Phase I of the Transaction (a) shall not be prohibited by any applicable
law or governmental regulation, (b) shall not subject the Company to any
penalty or, in its reasonable judgment, other onerous condition under or
pursuant to any applicable law or governmental regulation and (c) shall
be permitted by the laws and regulations of the jurisdictions in which
it is subject;

5. The waiting period under the HSR Act with respect to the First Preferred
Shares to be acquired by such Purchaser shall have expired or been
terminated.

Conditions to the Purchasers Obligation to Close at the Second Closing

The obligation of each Purchaser to purchase the Second Preferred Shares to
be purchased by it, to pay the Second Purchase Price and to perform any
related obligations under the Purchase Agreement is subject to, among other
conditions, the satisfaction or waiver of the following conditions on or
before the Second Closing Date:

1. The representations and warranties of the Company shall be true and
correct in all material respects;

2. The Company shall have performed and complied with all of its
agreements and conditions set forth or contemplated in the Purchase
Agreement;

3. Phase II of the Transaction (a) shall not be prohibited by any
applicable law or governmental regulation, (b) shall not subject such
Purchaser to any penalty or, in its reasonable judgment, other onerous
condition under or pursuant to any applicable law or governmental
regulation and (c) shall be permitted by the laws and regulations of
the jurisdictions to which it is subject;

8
<PAGE>

5. Since December 31, 1998, there shall have been no material adverse
change, nor shall any such change be threatened, in the condition of
the Company;

6. The Company shall have conducted its business in the ordinary course
from the date of the Purchase Agreement to the Second Closing Date, and
no extraordinary or other material transactions not in the ordinary
course of business shall have occurred without such Purchaser's
consent; provided, however, that the acquisition by the Company of (i)
all of the shares of capital stock of another entity or (ii) all or
substantially all of the assets of another entity shall, if such
transaction (or series of transactions) is approved by the Board of
Directors, be considered to be a transaction conducted in the ordinary
course of business for the purposes of this condition;

7. Between the First Closing Date and the Second Closing Date, (a) trading
in the Common Stock shall not have been suspended by the Commission or
by the NYSE, (b) trading in securities generally on the NYSE shall not
have been suspended or limited or minimum or maximum prices shall not
have been generally established on such exchange, or additional
material governmental restrictions, not in force on April 27, 1999,
shall not have been imposed upon trading in securities generally by
such exchange or by order of the Securities and Exchange Commission or
any court or other governmental authority, (c) a general banking
moratorium shall not have been declared by either Federal or New York
State authorities and (d) any material adverse change in the financial
or securities markets in the United States or in political, financial
or economic conditions in the United States or, other than relating to
Iraq or Kosovo, any outbreak or material escalation of hostilities or
declaration by the United States of a national emergency or war or
other calamity or crisis shall not have occurred;

9. The waiting period under the HSR Act with respect to the Second
Preferred Shares to be acquired by such Purchaser shall have expired or
been terminated;

10. The Fund shall simultaneously be purchasing all the Second Preferred
Shares to be purchased by it under the Purchase Agreement; and

11. The stockholders of the Company shall have duly approved at the Annual
Meeting the issuance of the Second Preferred Shares pursuant to the
Purchase Agreement.

Conditions to the Obligation of the Company to Close at the Second Closing

The obligations of the Company to issue and sell the Second Preferred
Shares to each Purchaser on the Second Closing Date, shall be subject to,
among other conditions, the satisfaction or waiver of the following conditions
on or before the Second Closing Date:

1. The representations and warranties of such Purchaser shall be true and
correct in all material respects;

2. Such Purchaser shall have performed and complied with all of its
agreements and conditions set forth or contemplated in the Purchase
Agreement;

3. Phase II of the Transaction (a) shall not be prohibited by any
applicable law or governmental regulation, (b) shall not subject the
Company to any penalty or, in its reasonable judgment, other onerous
condition under or pursuant to any applicable law or governmental
regulation and (c) shall be permitted by the laws and regulations of the
jurisdictions in which it is subject;

9
<PAGE>

5. The waiting period under the HSR Act with respect to the Second
Preferred Shares to be acquired by such Purchaser shall have expired or
been terminated; and

6. The stockholders of the Company shall have duly approved at the Annual
Meeting the issuance of the Second Preferred Shares pursuant to the
Purchase Agreement.

Purchasers Fee

The Company will pay to the Purchasers at the First Closing a facility fee
equal to 5% of the aggregate First Purchase Price and at the Second Closing a
facility fee equal to 5% of the aggregate Second Purchase Price.

Expenses

The Company has acknowledged and agreed that if the transactions
contemplated by the Purchase Agreement are consummated as to any particular
Purchaser, the Company will reimburse such Purchaser for all (i) reasonable
out-of-pocket expenses and all consulting and legal fees and expenses and other
charges of such Purchaser in connection with the negotiation, execution and
delivery of the Purchase Agreement, the Preferred Shares and the Registration
Rights Agreement and (ii) reasonable fees and expenses of accountants for the
Purchasers in connection with accounting due diligence, and (iii) the
reasonable expenses incurred by the Purchasers in connection with consulting
services. Notwithstanding the foregoing, the maximum amount of expenses to be
reimbursed by the Company will not exceed $250,000 (exclusive of any HSR Act
filing fees). The Company will pay the reasonable fees, out-of-pocket expenses
and all expenses and other charges of each Purchaser incurred in connection
with any amendment to this Agreement, the Certificate of Designation or the
Registration Rights Agreement.

The Registration Rights Agreement

In connection with the Transaction, the Company and the Purchasers will,
prior to the First Closing Date, enter into the Registration Rights Agreement.
Pursuant to the Registration Rights Agreement, the Purchasers will be entitled
to certain demand and piggyback registration rights with respect to the
Preferred Shares and any other shares of Common Stock owned or acquired by the
Purchasers, so long as they were not acquired in violation of the standstill
provisions contained in the Purchase Agreement (the "Co-investor Registrable
Securities").

Demand Rights

At any time, subject to certain limitations and conditions set forth in the
Registration Rights Agreement, (i) the holders of a majority of the Co-investor
Registrable Securities may request registration under the Securities Act of all
or any portion of their registrable securities on Form S-1 or any similar long-
form registration ("Long-Form Registrations"), (ii) the holders of a majority
of the Co-investor Registrable Securities may request registration under the
Securities Act of all or any portion of their registrable securities on Form S-
2 or S-3 or any similar short-form registration ("Short-Form Registrations") if
available, and (iii) The Fund and CIP may request registration under the
Securities Act of all or any portion of its registrable securities (an
"Independent Demand Registration"). All registrations requested pursuant to
this paragraph are referred to as "Demand Registrations." Demand Registrations
will be made on a short form whenever the Company is permitted to do so. A
Demand Registration may not be requested by the holders of Co-investor
Registrable Securities unless the Co-investor Registrable Securities to be
included in any such request exceeds the minimum aggregate offering value set
forth in the Registration Rights Agreement.

The holders of Co-investor Registrable Securities, as a group (the "Co-
investor Group"), will each be entitled to request (i) four Long-Form
Registrations in which the Company will pay all registration expenses
("Company-paid Long-Form Registrations") and (ii) an unlimited number of Long-
Form Registrations in which the Co-investor Group will pay their share of the
registration expenses. A registration will not count as one of the Co-investor
Group's permitted Long-Form Registrations until it has become effective and no
Company-paid

10
<PAGE>

Long-Form Registration will count as one of the Co-investor Group's permitted
Long-Form Registrations unless the Co-investor Group is able to register and
sell at least 90% of the registrable securities requested to be included by
the Co-investor Group in such registration. In addition to the Long-Form
Registrations, the members of the Co-investor Group will each be entitled to
request an unlimited number of Short-Form Registrations in which the Company
will pay all registration expenses. Finally, The Fund and CIP (each a
"Qualified Holder") will each be entitled to request one Independent Demand
Registration in which the Company will pay all Registration Expenses. A
registration will not count as such holder's permitted Independent Demand
Registration until it has become effective and unless such holder is able to
register and sell at least 50% of the Registrable Securities requested to be
included by such holder in such registration.

"Piggyback" Rights

Whenever the Company proposes to register any of its securities under the
Securities Act (other than pursuant to a Demand Registration) and the
registration form to be used may be used for the registration of registrable
securities (a "Piggyback Registration"), the Company will give prompt written
notice to all holders of registrable securities, including holders of Co-
investor Registrable Securities, of its intention to effect such a
registration and will include in such registration all registrable securities
with respect to which the Company has received written requests for inclusion
therein within 20 days after the receipt of the Company's notice.

Reasons for Submitting Phase II of Transaction to a Shareholder Vote

Although the Company's Certificate of Incorporation permits the issuance of
preferred stock without stockholder approval, the NYSE Guidelines require
stockholder approval prior to the issuance by the Company of securities
convertible into Common Stock, in any transaction or series of related
transactions, if the number of shares of Common Stock into which such
securities may be convertible equals 20% or more of the Company's Common Stock
outstanding before the issuance of such securities. As a result, the Company
is seeking stockholder approval of the issuance of up to 100,000 shares of
Preferred Stock and the issuance of shares of Common Stock upon conversion
thereof in order to satisfy the NYSE Guidelines. In the event that the Company
does not obtain such stockholder approval, the Company may still consummate
Phase I of the Transaction but will not consummate Phase II.

The Board of Directors has determined that the entire Transaction
(including both Phase I and Phase II) is in the best interests of the Company
and its stockholders and has approved the Transaction and recommends a vote
"FOR" the issuance of up to 100,000 shares of Preferred Stock and the issuance
of shares of Common Stock upon conversion thereof.

PROPOSAL 3

RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors, upon recommendation of its Audit Committee, has
selected the accounting firm of PricewaterhouseCoopers LLP to serve as
independent auditors of the Company with respect to the 1999 fiscal year to
examine the financial statements of the Company for the fiscal year ending
December 31, 1999 and to perform other appropriate accounting services.

Representatives of PricewaterhouseCoopers LLP are expected to be present at
the Annual Meeting to respond to questions and to make a statement if they
desire to do so. If the stockholders do not ratify this appointment by the
affirmative vote of a majority of the shares represented in person or by proxy
at the Annual Meeting, other independent public accountants will be considered
by the Board of Directors upon recommendation by the Audit Committee.

The Board of Directors recommends a vote "FOR" ratification of the appointment
of PricewaterhouseCoopers LLP as the Company's independent public accountants
for fiscal 1999.

11
<PAGE>

MANAGEMENT

The following sets forth certain information as of April 30, 1999, with
respect to the Company's nominee for director, the Company's continuing
directors, and the executive officers of the Company. The Board has the power
to appoint the officers of the Company. Each officer will hold office for such
term as may be prescribed by the Board and until such person's successor is
chosen and qualified or until such person's death, resignation or removal.

Nominee for Director

Ronald St. Clair Age: 61

Mr. St. Clair has served as a director of the Company since October
1997. Mr. St. Clair founded High Reach Equipment, an aerial platform rental
company headquartered in Baton Rouge, Louisiana. In 1993, Mr. St. Clair
sold High Reach Equipment to Brambles Equipment Services, Inc. In 1994, Mr.
St. Clair retired from High Reach Equipment.

Continuing Directors

Kevin Rodgers Age: 48

Mr. Rodgers has been President, Chief Executive Officer and a director
of the Company since he founded the Company with Golder, Thoma, Cressey,
Rauner Fund V, L.P. in June 1996. Prior thereto, Mr. Rodgers served as
Chief Executive Officer of Brambles Equipment Services, Inc. and Brambles
Records Management, Inc. from 1991 to June 1996. From 1991 to 1996, Mr.
Rodgers also held the position of Executive Director of Brambles USA, a
subsidiary of Brambles Industries Limited, an Australian public company
with worldwide revenues of over US $2.5 billion. From 1979 to 1990, Mr.
Rodgers held several positions at Morgan Equipment Company, a privately
held heavy equipment dealership with worldwide sales of approximately $300
million, including Chief Executive Officer of Morgan Equipment's Australian
operations from 1986 to 1990.

Carl Thoma Age: 50

Mr. Thoma is Chairman of the Board of the Company and has served as a
director of the Company since its founding in June 1996. Mr. Thoma is the
Managing Partner of Thoma Cressey Equity Partners, a private equity
investment company in Chicago, Illinois, Denver, Colorado and San
Francisco, California formed in December 1997 as a successor to Golder,
Thoma, Cressey, Rauner, Inc. He also co-founded and has been a Managing
Director of Golder, Thoma, Cressey, Rauner, Inc., the general partner of
Golder, Thoma, Cressey, Rauner Fund V, L.P. and its predecessor funds, in
Chicago, Illinois since 1980. Mr. Thoma is also a director of Global
Imaging, Inc., Outsource Partners, Inc. and Paging Network, Inc.

William Kessinger Age: 32

Mr. Kessinger has served as a director of the Company since its founding
in June 1996. Mr. Kessinger is a Principal of GTCR Golder Rauner, LLC, a
private equity investment company in Chicago, Illinois formed in January
1998 as a successor to Golder, Thoma, Cressey, Rauner, Inc. Mr. Kessinger
joined Golder, Thoma, Cressey, Rauner, Inc. in May 1995 and has been a
Principal since September 1997. Prior thereto, Mr. Kessinger was a
Principal with The Parthenon Group from July 1994 to May 1995. From August
1992 to June 1994, Mr. Kessinger attended Harvard Business School and
received his MBA. Prior to that time, Mr. Kessinger served as an Associate
with Prudential Asset Management Asia from August 1988 to June 1992. Mr.
Kessinger is also a director of Answerthink Consulting Group, Inc.,
Excaliber, Inc., Global Imaging, Inc., National Computer Print, Inc. and
Users, Inc.

12
<PAGE>

John Grove Age: 79

Mr. Grove has served as a director of the Company since May 1998. Mr.
Grove co-founded JLG Industries, Inc., a manufacturer of hydraulically-
operated machinery specializing in aerial work platforms, in 1969 and
served as Chairman and Chief Executive Officer until his retirement in
1993. Prior to 1969, Mr. Grove co-founded Grove Manufacturing Co. and
developed the modern hydraulic crane. Mr. Grove is also a director of
Falling Spring Corp., Truckcraft Corporation, Sentry Trust, Inc. and Zefer
Operations, Inc.

Officers (Other Than Those who are Directors and Listed Above)

Dennis O'Connor Age: 49

Mr. O'Connor has been Chief Financial Officer of the Company since
August 1996. Prior thereto,
Mr. O'Connor served as Chief Financial Officer of Brambles Equipment
Services, Inc. from November 1991 to August 1996, where Mr. O'Connor
directed the financial and administrative functions for its seven operating
divisions and assisted in operations management. From May 1986 to May 1990,
Mr. O'Connor held various positions at Morgan Equipment Company, including
Chief Financial Officer and General Manager.

James O'Neil Age: 54

Mr. O'Neil has been Chief Operating Officer of the Company since
September 1998. Prior thereto, Mr. O'Neil served as President of the
Company's Sprintank division from the date of the Company's acquisition of
Sprintank in July 1997 to September 1998 and had also served as President
of Sprintank from January 1996 to the date of such acquisition. From
November 1992 to December 1995, Mr. O'Neil served as President and Chief
Operating Officer of Encycle/Texas, Inc., a metal concentrate and waste
recycling company. Previously, Mr. O'Neil held various senior executive
management positions with Laidlaw Environmental Services, Inc. and Tricil
Environmental Response, Inc.

Paul Ingersoll Age: 33

Mr. Ingersoll has been Senior Vice President of the Company since
February 1999 and Secretary of the Company since June 1996. From June 1996
to February 1999, Mr. Ingersoll also served as Vice President of Corporate
Development of the Company. Prior thereto, Mr. Ingersoll served as
Assistant to the Executive Director of Brambles USA from March 1992 to May
1996 and as Financial Analyst from November 1989 to March 1992. During his
tenure at Brambles, Mr. Ingersoll closed 19 acquisitions related to
equipment services and records management.

Information About the Board of Directors

The Board of Directors met three times during fiscal 1998. The Board of
Directors has an Audit Committee and a Compensation Committee. The Board of
Directors may also create other committees, including an executive committee
and a nominating committee. Each director attended 75% or more of the meetings
of the Board of Directors and any committees on which such director served
during fiscal 1998.

Audit Committee. The Audit Committee of the Board of Directors is composed
of three directors (currently Messrs. Thoma, Kessinger and Grove). The Audit
Committee makes recommendations to the Board of Directors regarding the
selection of independent auditors, reviews the independence of such auditors,
approves the scope of the annual audit activities of the independent auditors
and reviews such audit results. The Audit Committee did not meet during fiscal
1998.

13
<PAGE>

Compensation Committee. The Compensation Committee is composed of three
directors (currently Messrs. Thoma, Kessinger and St. Clair). The Compensation
Committee makes recommendations regarding the Incentive Plan and decisions
concerning salaries and incentive compensation for executive officers, key
employees and consultants of the Company. The Compensation Committee met once
during fiscal 1998.

Compensation of Directors

Directors of the Company currently do not receive a salary or an annual
retainer for their services, except for (i) Mr. St. Clair, who receives an
annual fee of $40,000 and (ii) Mr. Grove, who receives an annual fee of $8,000
and fees of $1,500 for each Board meeting (or $500 if such Board meeting is
telephonic) and $500 for each Board committee meeting Mr. Grove attends. The
Company expects that new non-employee directors not otherwise affiliated with
the Company or its stockholders will be paid an annual cash retainer. All
directors are reimbursed for out-of-pocket expenses related to their service as
directors, including expenses incurred in connection with attending meetings.
Directors may also be issued options pursuant to the National Equipment
Services, Inc. Long Term Incentive Plan (the "Incentive Plan").

In connection with the Company's initial public offering of Common Stock
(the "Initial Stock Offering"), the Company granted each of Mr. Grove and Mr.
St. Clair, under the Incentive Plan, an option to acquire 10,000 shares of
Common Stock that will vest in equal daily installments over the five year
period ending July 13, 2003. The Company granted such options at an option
price equal to the public offering price. In addition, at each anniversary of
the Initial Stock Offering, the Company intends to grant each of Mr. Grove and
Mr. St. Clair, under the Incentive Plan, an option to acquire 2,000 shares of
Common Stock that will vest in equal daily installments over the five year
period commencing on the date of grant. The Company intends to grant such
options at an option price equal to the fair market value of the Common Stock
on the date of grant.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers, directors and persons who beneficially own more than
ten percent of a registered class of the Company's equity securities to file
reports of securities ownership and changes in such ownership with the SEC.
Certain officers, directors and greater than ten percent beneficial owners also
are required by rules promulgated by the SEC to furnish the Company with copies
of all Section 16(a) forms they file.

Based solely upon a review of the copies of such forms furnished to the
Company, or written representations that no Form 5 filings were required, the
Company believes that each of its officers, directors and greater than ten
percent beneficial owners complied with all Section 16(a) filing requirements
applicable to them during fiscal 1998.

14
<PAGE>

SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of March 31, 1999 by (i)
each stockholder known by the Company to own beneficially five percent or more
of the outstanding shares of the Company's Common Stock, (ii) each current
director of the Company, (iii) each Named Executive Officer (as defined) of the
Company and (iv) all directors of the Company and executive officers of the
Company as a group. As of March 31, 1999, there were 24,123,387 shares of
Common Stock outstanding. To the knowledge of the Company, each stockholder has
sole voting and investment power with respect to the shares indicated as
beneficially owned, unless otherwise indicated in a footnote. Unless otherwise
indicated, the business address of each person is the Company's corporate
address.

<TABLE>
<CAPTION>
Number of
Shares(1) Percent(2)
---------- ----------
<S> <C> <C>
Golder, Thoma, Cressey, Rauner Fund V, L.P.(3).......... 13,861,142 57.5%
Kevin Rodgers(4)........................................ 1,112,100 4.6
Dennis O'Connor(5)...................................... 285,057 1.2
James O'Neil(6)......................................... 45,398 *
Paul Ingersoll(7)....................................... 152,057 *
Carl Thoma(8)........................................... 13,861,142 57.5
William Kessinger(8).................................... 13,861,142 57.5
John Grove(9)........................................... 11,759 *
Ronald St. Clair(10).................................... 73,140 *
All Directors and Executive Officers as a Group (8
persons)(8)............................................ 15,540,653 64.4
</TABLE>
- --------
*Less than one percent.

(1) The number of shares includes shares of Common Stock subject to options
exercisable within 60 days of March 31, 1999.

(2) Shares subject to options exercisable within 60 days of March 31, 1999 are
considered outstanding for the purpose of determining the percentage of
the class held by the holder of such option, but not for the purpose of
computing the percentage held by others.

(3) Includes 24,287 shares of Common Stock held by GTCR Associates V, a
partnership affiliated with Golder, Thoma, Cressey, Rauner Fund V, L.P.
The address of each of Golder, Thoma, Cressey, Rauner Fund V, L.P. and
GTCR Associates V is 6100 Sears Tower, Chicago, Illinois 60606.

(4) Includes 1,112,000 shares of Common Stock owned by Mr. Rodgers' family
limited partnership, Rodgers Investment Partners, L.P., as to which he
disclaims beneficial ownership.

(5) The shares of Common Stock beneficially owned by Mr. O'Connor include
7,057 shares subject to options.

(6) The shares of Common Stock beneficially owned by Mr. O'Neil include 17,589
shares subject to options.

(7) The shares of Common Stock beneficially owned by Mr. Ingersoll include
7,057 shares subject to options.

(8) Includes 13,836,855 shares of Common Stock held by Golder, Thoma, Cressey,
Rauner Fund V, L.P., of which GTCR V, L.P. is the general partner, and
also includes 24,287 shares of Common Stock held by GTCR Associates V.
Each of Messrs. Thoma and Kessinger is a principal of Golder, Thoma,
Cressey, Rauner, Inc., the general partner of GTCR V, L.P. and the
managing general partner of GTCR Associates V, and therefore may be deemed
to share investment and voting control over the shares of Common Stock
held by Golder, Thoma, Cressey, Rauner Fund V, L.P. and GTCR Associates V.
Each of Messrs. Thoma and Kessinger disclaims beneficial ownership of the
shares of Common Stock owned by Golder, Thoma, Cressey, Rauner Fund V,
L.P. and GTCR Associates V. The address of each of these holders is 6100
Sears Tower, Chicago, Illinois 60606.

(9) The shares of Common Stock beneficially owned by Mr. Grove include 1,759
shares subject to options.

(10) The shares of Common Stock beneficially owned by Mr. St. Clair include
1,759 shares subject to options.

15
<PAGE>

EXECUTIVE COMPENSATION

The compensation of executive officers of the Company will be determined by
the Board of Directors of the Company. The following table sets forth
information regarding the compensation paid or accrued by the Company to the
Chief Executive Officer and each of the Company's other executive officers (the
"Named Executive Officers") for services rendered to the Company in all
capacities during fiscal years 1998, 1997 and 1996.

Summary Compensation Table

<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------------- ---------------------------------
Awards Payouts
----------------------- -------
Securities
Other Annual Restricted Underlying LTIP All Other
Name and Salary Bonus Compensation Stock Options/SARs Payouts Compensation
Principal Position Year ($) ($) ($) Awards (#) (#) ($) ($)
- ------------------------ ---- ------- ------- ------------ ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kevin Rodgers(1)........ 1998 250,000 150,000 -- -- -- -- 8,216(2)
President, Chief 1997 225,000 112,500 -- -- -- -- 10,125(3)
Executive Officer 1996 131,250(4) -- -- -- -- -- --
and Director
James O'Neil(5)......... 1998 146,667 79,235 -- -- 100,000(6) -- 8,216(7)
Chief Operating 1997 55,684 7,500 -- -- -- -- 1,675(8)
Officer 1996 -- -- -- -- -- -- --
Dennis O'Connor(9)...... 1998 159,261 82,500 -- -- 40,000(10) -- 7,358(11)
Chief Financial 1997 125,000 62,500 -- -- -- -- 4,545(12)
Officer 1996 44,015(13) -- -- -- -- -- 30,741(14)
Paul Ingersoll(15)...... 1998 113,507 62,500 -- -- 40,000(16) -- 6,192(17)
Senior Vice 1997 80,000 40,000 -- -- -- -- 3,200(18)
President and Secretary 1996 52,464(19) -- -- -- -- -- --
</TABLE>
- --------
(1) Mr. Rodgers became an employee of the Company effective June 4, 1996.
(2) The amount shown includes $4,000 of Company 401(k) matching contributions
under the Savings Plan (as defined), a $4,000 profit sharing contribution
under the Savings Plan and a $216 life insurance policy premium payment.
(3) The amount shown includes $4,500 of Company 401(k) matching contributions
under the Savings Plan and a $5,625 profit sharing contribution under the
Savings Plan.
(4) The amount shown includes $43,750 of accrued salary paid in 1997 pursuant
to Mr. Rodgers' employment agreement upon the Company's acquisition of
equipment rental businesses meeting certain financial criteria.
(5) Mr. O'Neil became an employee of the Company effective July 1, 1997 and
became an executive officer of the Company effective September 10, 1998.
(6) Options become exercisable in equal daily installments over the five year
period ending July 13, 2003, and were granted pursuant to the Incentive
Plan.
(7) The amount shown includes $4,000 of Company 401(k) matching contributions
under the Savings Plan, a $4,000 profit sharing contribution under the
Savings Plan and a $216 life insurance policy premium payment.
(8) The amount shown includes $838 of Company 401(k) matching contributions
under the Savings Plan and an $837 profit sharing contribution under the
Savings Plan.
(9) Mr. O'Connor became an employee of the Company effective August 19, 1996.
(10) Options become exercisable in equal daily installments over the five year
period ending July 13, 2003, and were granted pursuant to the Incentive
Plan.

16
<PAGE>

(11) The amount shown includes $3,571 of Company 401(k) matching contributions
under the Savings Plan, a $3,571 profit sharing contribution under the
Savings Plan and a $216 life insurance policy premium payment.
(12) The amount shown includes $2,045 of Company 401(k) matching contributions
under the Savings Plan and a $2,500 profit sharing contribution under the
Savings Plan.
(13) The amount shown includes $10,909 of accrued salary paid in 1997 pursuant
to Mr. O'Connor's employment agreement upon the Company's acquisition of
equipment rental businesses meeting certain financial criteria.
(14) The amount shown represents reimbursement for relocation and moving
expenses.
(15) Mr. Ingersoll became an employee of the Company effective June 4, 1996.
(16) Options become exercisable in equal daily installments over the five year
period ending July 13, 2003, and were granted pursuant to the Incentive
Plan.
(17) The amount shown includes $2,988 of Company 401(k) matching contributions
under the Savings Plan, a $2,988 profit sharing contribution under the
Savings Plan and a $216 life insurance policy premium payment.
(18) The amount shown includes $1,600 of Company 401(k) matching contributions
under the Savings Plan and a $1,600 profit sharing contribution under the
Savings Plan.
(19) The amount shown includes $13,116 of accrued salary paid in 1997 pursuant
to Mr. Ingersoll's employment agreement upon the Company's acquisition of
equipment rental businesses meeting certain financial criteria. In
addition, the amount shown includes $5,797 of salary paid by the Company
for work Mr. Ingersoll performed for Golder, Thoma, Cressey, Rauner, Inc.
prior to June 4, 1996 to prepare for the organization and formation of the
Company.

The following tables set forth, for the Named Executive Officers,
information regarding stock options granted or exercised during, or held at the
end of, fiscal 1998.

Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annual
Rates of Stock
Price Appreciation
Individual Grants for Option Term
------------------------------------------- -------------------
Number of % of Total
Securities Options
Underlying Granted to
Options/SARs Employees Exercise
Granted in Fiscal Price Expiration 5%
Name (#)(1) Year ($/Sh) Date ($)(2) 10% ($)(2)
- ---- ------------ ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Kevin Rodgers........... -- -- -- -- -- --
James O'Neil............ 100,000 10.7% $13.50 7/13/08 $849,008 $2,151,552
Dennis O'Connor......... 40,000 4.3 13.50 7/13/08 339,603 860,621
Paul Ingersoll.......... 40,000 4.3 13.50 7/13/08 339,603 860,621
</TABLE>
- --------
(1) Options to acquire these shares become exercisable in equal daily
installments over the five year period ending July 13, 2003, and were
granted pursuant to the Incentive Plan. In order to prevent dilution or
enlargement of rights under the options, in the event of a reorganization,
recapitalization, stock split, stock dividend, combinations of shares,
merger, consolidation, distribution of assets or other change in the
corporate structure of shares of the Company, the type and number of shares
available upon exercise and the exercise price will be adjusted
accordingly.
(2) Amounts reflect assumed rates of appreciation from the fair market value on
the date of grant as set forth in the SEC's executive compensation
disclosure rules. Actual gains, if any, on stock option exercises depend on
future performance of the Common Stock and overall stock market conditions.
No assurance can be made that the amounts reflected in these columns will
be achieved.

17
<PAGE>

Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values

<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Value Options/SARs at Fiscal In-the-Money Options/SARs
Acquired Realized Year End (#) at Fiscal Year End ($)
Name on Exercise(1) ($)(1) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- -------------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Kevin Rodgers........... -- -- -- --
-- --
James O'Neil............ -- -- 9,425 $ 0
90,575 0
Dennis O'Connor......... -- -- 3,770 0
36,230 0
Paul Ingersoll.......... -- -- 3,770 0
36,230 0
</TABLE>
- --------
(1) As of the end of the fiscal year, none of the options held by the Named
Executive Officers had been exercised.

Management Employment Agreements

Kevin Rodgers. Mr. Rodgers is party to a senior management agreement with
the Company dated as of June 4, 1996, as amended. Under the agreement, Mr.
Rodgers will receive an annual base salary of $250,000, which amount shall be
reviewed (but not reduced) annually by the Board in its sole discretion. Mr.
Rodgers' current annual base salary is $350,000. Mr. Rodgers will be eligible
for a bonus of up to 50% of his base salary, which the Board anticipates
awarding if Mr. Rodgers meets or exceeds annual operational and financial
objectives agreed to by the Board and Mr. Rodgers. If the Company has not met
or exceeded its financial or operational objectives, the Board in its
discretion may award Mr. Rodgers a bonus of less than 50% of his base salary.
Mr. Rodgers will also be entitled to all other benefits as are approved by the
Board and made available to the Company's senior management.

Under the agreement, Mr. Rodgers purchased 96 shares of Class B Common Stock
at a price of $10 per share. In addition, under the agreement, Mr. Rodgers
agreed to purchase (upon consummation of certain additional investments by
Golder, Thoma, Cressey, Rauner Fund V, L.P. in the Company) up to an additional
7,904 shares of Class B Common Stock at a price of $10 per share; provided that
Mr. Rodgers was entitled to purchase all or any portion of such shares at a
price of $10 per share at such earlier time as Mr. Rodgers determined. Mr.
Rodgers purchased all 7,904 of such additional shares in January 1997. All
shares of Class B Common Stock owned by Mr. Rodgers will vest over a five-year
period beginning March 1997. In connection with and immediately prior to the
consummation of the Initial Stock Offering each share of Class B Common Stock
owned by Mr. Rodgers was converted into Common Stock. Upon completion of the
Initial Stock Offering, the portions of the agreement which restrict the
transfer of the Company's securities were terminated.

Mr. Rodgers' employment with the Company will continue until terminated by
the resignation, death or disability of Mr. Rodgers or by the Board in its good
faith judgment that termination of Mr. Rodgers' employment is in the best
interests of the Company. In the event Mr. Rodgers' employment is terminated
(i) by the Company without cause, (ii) by Mr. Rodgers with good reason or (iii)
as a result of Mr. Rodgers' death or disability, until the end of the six-month
period commencing on the date of his termination, the Company shall pay to Mr.
Rodgers (or his estate) his annual base salary and allow Mr. Rodgers to
continue to participate in all of the Company's medical, disability and life
insurance plans to the extent permitted by the Company's insurance carriers at
a cost not materially in excess of the Company's cost for such insurance
immediately prior to the date of termination. In addition, the Company shall
have the option to extend the severance period to the second anniversary of the
date of termination, during which period the Company shall pay to Mr. Rodgers
(or his estate) his annual base salary and allow Mr. Rodgers to continue to
participate in all of the Company's medical, disability and life insurance
plans to the extent permitted by the Company's insurance carriers at a cost not

18
<PAGE>

materially in excess of the Company's cost for such insurance immediately prior
to the date of termination. Mr. Rodgers has agreed not to compete with the
Company during the term of his employment and for six months thereafter and
during the extended period (if any) and has agreed not to solicit any employees
or customers of the Company during the two years following the date of
termination of his employment.

Dennis O'Connor. Mr. O'Connor is party to a senior management agreement with
the Company dated as of December 31, 1996, as amended. Under the agreement, Mr.
O'Connor will receive an annual base salary of $165,000, which amount shall be
reviewed (but not reduced) annually by the Company's Chief Executive Officer
with the approval of the Board in its sole discretion. Mr. O'Connor's current
annual base salary is $225,000. Mr. O'Connor will also be entitled to all other
benefits as are approved by the Board and made available to the Company's
senior management.

Under the agreement, Mr. O'Connor purchased 24 shares of Class B Common
Stock at a price of $10 per share. In addition, under the agreement, Mr.
O'Connor agreed to purchase (upon consummation of certain additional
investments by Golder, Thoma, Cressey, Rauner Fund V, L.P. in the Company) up
to an additional 1,976 shares of Class B Common Stock at a price of $10 per
share; provided that Mr. O'Connor was entitled to purchase all or any portion
of such shares at a price of $10 per share at such earlier time or times as Mr.
O'Connor determined. Mr. O'Connor purchased all 1,976 of such additional shares
in January 1997. All shares of Class B Common Stock owned by Mr. O'Connor will
vest over a five-year period beginning March 1997. In connection with and
immediately prior to the consummation of the Initial Stock Offering, each share
of Class B Common Stock owned by Mr. O'Connor was converted into Common Stock.
Upon completion of the Initial Stock Offering, the portions of the agreement
which restrict the transfer of the Company's securities were terminated.

Mr. O'Connor's employment with the Company will continue until terminated by
the resignation, death or disability of Mr. O'Connor or by the Board in its
good faith judgment that termination of Mr. O'Connor's employment is in the
best interests of the Company. In the event Mr. O'Connor's employment is
terminated (i) by the Company without cause, (ii) by Mr. O'Connor with good
reason or (iii) as a result of Mr. O'Connor's death or disability, until the
end of the six-month period commencing on the date of his termination, the
Company shall pay to Mr. O'Connor (or his estate) his annual base salary and
allow Mr. O'Connor to continue to participate in all of the Company's medical,
disability and life insurance plans to the extent permitted by the Company's
insurance carriers at a cost not materially in excess of the Company's cost for
such insurance immediately prior to the date of termination. In addition, the
Company shall have the option to extend the severance period to the second
anniversary of the date of termination, during which period the Company shall
pay to Mr. O'Connor (or his estate) his annual base salary and allow Mr.
O'Connor to continue to participate in all of the Company's medical, disability
and life insurance plans to the extent permitted by the Company's insurance
carriers at a cost not materially in excess of the Company's cost for such
insurance immediately prior to the date of termination. Mr. O'Connor has agreed
not to compete with the Company during the term of his employment and for six
months thereafter and during the extended period (if any) and has agreed not to
solicit any employees or customers of the Company during the two years
following the date of termination of his employment.

James O'Neil. Mr. O'Neil is party to an employment agreement with the
Company dated as of September 12, 1998. Under the agreement, Mr. O'Neil will
receive an annual base salary of $200,000, which amount shall be reviewed
annually. Mr. O'Neil will be eligible for a bonus of up to 50% of his base
salary, based on certain annual performance targets. For the first year of the
agreement, Mr. O'Neil is guaranteed a bonus of $100,000. Mr. O'Neil will also
be entitled to the same health, profit sharing and retirement benefits as other
similarly-situated employees. In connection with his relocation to Chicago,
Illinois, Mr. O'Neil is entitled to temporary living expenses, commuting
expenses and moving expenses. Mr. O'Neil also received options to purchase
80,000 shares of Common Stock at the Initial Stock Offering price of $13.50 per
share under the Incentive Plan. The options vest over a period of five years
and are exercisable for a period of ten years.

19
<PAGE>

Each of the Company and Mr. O'Neil may terminate the agreement at any time.
If the Company terminates the agreement, the Company will pay to Mr. O'Neil
severance equal to 18 months of his then current base pay. In addition, upon
certain changes of control, Mr. O'Neil may be entitled to a payment equal to
$250,000 if he does not remain employed with the Company following the change
of control.

Paul Ingersoll. Mr. Ingersoll is party to a senior management agreement with
the Company dated as of June 4, 1996, as amended. Under the agreement, Mr.
Ingersoll will receive an annual base salary of $120,000, which amount shall be
reviewed (but not reduced) annually by the Company's Chief Executive Officer
with the approval of the Board in its sole discretion. Mr. Ingersoll's current
annual base salary is $175,000. Mr. Ingersoll will also be entitled to all
other benefits as are approved by the Board and made available to the Company's
senior management.

Under the agreement, Mr. Ingersoll purchased 12 shares of Class B Common
Stock at a price of $10 per share. In addition, under the agreement, Mr.
Ingersoll agreed to purchase (upon consummation of certain additional
investments by Golder, Thoma, Cressey, Rauner Fund V, L.P. in the Company) up
to an additional 988 shares of Class B Common Stock at a price of $10 per
share; provided that Mr. Ingersoll was entitled to purchase all or any portion
of such shares at a price of $10 per share at such earlier time or times as Mr.
Ingersoll determined. Mr. Ingersoll purchased all 988 of such additional shares
in January 1997. All shares of Class B Common Stock owned by Mr. Ingersoll will
vest over a five-year period beginning March 1997. In connection with and
immediately prior to the consummation of the Initial Stock Offering, each share
of Class B Common Stock owned by Mr. Ingersoll was converted into Common Stock.
Upon completion of the Initial Stock Offering, the portions of the agreement
which restrict the transfer of the Company's securities were terminated.

Mr. Ingersoll's employment with the Company will continue until terminated
by the resignation, death or disability of Mr. Ingersoll or by the Board in its
good faith judgment that termination of Mr. Ingersoll's employment is in the
best interests of the Company. In the event Mr. Ingersoll's employment is
terminated (i) by the Company without cause, (ii) by Mr. Ingersoll with good
reason or (iii) as a result of Mr. Ingersoll's death or disability, until the
end of the six-month period commencing on the date of his termination, the
Company shall pay to Mr. Ingersoll (or his estate) his annual base salary and
allow Mr. Ingersoll to continue to participate in all of the Company's medical,
disability and life insurance plans to the extent permitted by the Company's
insurance carriers at a cost not materially in excess of the Company's cost for
such insurance immediately prior to the date of termination. In addition, the
Company shall have the option to extend the severance period to the second
anniversary of the date of termination, during which period the Company shall
pay to Mr. Ingersoll (or his estate) his annual base salary and allow Mr.
Ingersoll to continue to participate in all of the Company's medical,
disability and life insurance plans to the extent permitted by the Company's
insurance carriers at a cost not materially in excess of the Company's cost for
such insurance immediately prior to the date of termination. Mr. Ingersoll has
agreed not to compete with the Company during the term of his employment and
for six months thereafter and during the extended period (if any) and has
agreed not to solicit any employees or customers of the Company during the two
years following the date of termination of his employment.

Compensation Committee Interlocks and Insider Participation

On May 14, 1998, the Board of Directors established the Compensation
Committee and appointed Messrs. Thoma, Kessinger and St. Clair to the
Compensation Committee. Messrs. Thoma, Kessinger and St. Clair served as
members of the Compensation Committee during the remainder of fiscal 1998.

Prior thereto, the Company had no compensation committee or other committee
of the Board performing similar functions. Accordingly, decisions concerning
compensation of executive officers were made by the entire Board. Other than
Kevin Rodgers, there were no officers or employees of the Company who
participated in deliberations concerning such compensation matters.

See "Certain Relationships and Related Transactions" for information
regarding certain transactions between the Company and each of Messrs. Thoma,
Kessinger and Rodgers.

20
<PAGE>

Compensation Committee Report on Executive Compensation

The Compensation Committee makes determinations regarding salaries,
compensation and benefits of executive officers of the Company and develops and
administers the Incentive Plan. This Compensation Committee report documents
the components of the Company's executive officer compensation programs and
describes the bases upon which compensation will be determined by the
Compensation Committee with respect to the executive officers of the Company.

This Compensation Committee report shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.

Compensation of Executive Officers Generally. The compensation philosophy of
the Company is to link executive compensation to continuous improvements in
corporate performance and increases in stockholder value. The goals of the
Company's executive compensation programs are as follows:

. To establish pay levels that are necessary to attract and retain highly
qualified executives in light of the overall competitiveness of the
market for high quality executive talent.

. To recognize superior individual performance, new responsibilities and
new positions within the Company.

. To balance short-term and long-term compensation to complement the
Company's annual and long-term business objectives and strategy and to
encourage executive performance in furtherance of the fulfillment of
those objectives.

. To provide variable compensation opportunities based on the Company's
performance.

. To encourage stock ownership by executives.

. To further align the interests of executives with the interests of
stockholders.

Components of Fiscal 1998 Compensation. The Compensation Committee reviews
the Company's compensation program to ensure that pay levels and incentive
opportunities are competitive with the market and reflect the performance of
the Company. The particular elements of the compensation program for executive
officers are further explained below.

Base Salary. The base pay level for each of Messrs. Rodgers, O'Connor,
O'Neil and Ingersoll is set forth in each such executive's senior management or
employment agreement. In determining and reviewing base salary levels, the
Compensation Committee considers the size and responsibility of the
individual's position, the individual's overall performance, the base salaries
paid by competitors for comparable positions and, in the case of new hires and
in order to help induce the individual to enter the employ of the Company, the
individual's compensation history.

Annual Incentives. The Company utilizes annual bonuses to focus corporate
behavior on the achievement of goals for growth, financial performance and
other items. Annual bonuses for executive officers are determined by the
Compensation Committee based on the achievement of certain operational and
financial objectives determined by it and in accordance with such executive
officer's senior management or employment agreement. See "--Management
Employment Agreements." The operational and financial objectives considered
include overall Company performance and the executive's individual performance.
Messrs. Rodgers and O'Neil are eligible for a bonus amount up to 50% of their
base salary. When Mr. O'Neil was hired by the Company as Chief Operating
Officer, he was given a commitment that his bonus payment with respect to his
first year of employment as Chief Operating Officer would be $100,000.

Stock Ownership. The Compensation Committee believes that by providing
executive officers with an opportunity to establish a meaningful ownership
position in the Company, it can help further align the interests

21
<PAGE>

of those persons who have substantial responsibility over the management and
growth of the Company with the stockholders of the Company. Under the Incentive
Plan, the Compensation Committee awarded options to acquire an aggregate of
937,000 shares of Common Stock in fiscal 1998, including a grant of 100,000
options to Mr. O'Neil, 40,000 options to Mr. O'Connor, 40,000 options to Mr.
Ingersoll. See "--Option/SAR Grants in Last Fiscal Year."

Chief Executive Officer Compensation. The base pay level and annual
incentive bonus compensation for Mr. Rodgers, the Company's Chief Executive
Officer, are determined by the Compensation Committee based on achievement of
operational and financial objectives determined by it and in accordance with
his employment agreement. The Compensation Committee has set Mr. Rodgers' base
salary for 1999 at $350,000. Mr. Rodgers' bonus eligibility amount continues to
be 50% of base salary.

Certain Tax Considerations. Section 162(m) of the Internal Revenue Code of
1986, as amended, limits the deductibility on the Company's tax return of
compensation over $1 million to any of the Named Executive Officers unless, in
general, the compensation is paid pursuant to a plan which is performance-
based, is non-discretionary and has been approved by the Company's
stockholders. The Company's policy with respect to Section 162(m) is to make
reasonable efforts to ensure that compensation is deductible without limiting
the Company's ability to attract and retain qualified executives.

Summary. After its review of all existing programs, the Compensation
Committee believes that the total compensation program for executives of the
Company is focused on increasing values for stockholders and enhancing
corporate performance. The Compensation Committee currently believes that the
compensation of executive officers is properly tied to stock appreciation
through stock options or stock ownership. The Compensation Committee believes
that executive compensation levels at the Company are competitive with the
compensation programs provided by other corporations with which the Company
competes. The foregoing report has been approved by all members of the
Compensation Committee.

Submitted by the Compensation
Committee of the Board of Directors

Carl D. Thoma, Chairman
William C. Kessinger
Ronald St. Clair

401(k) Profit Sharing Plan

The Company maintains a savings plan (the "Savings Plan") qualified under
Section 401(a) and 401(k) of the Internal Revenue Code. Generally, all
employees of the Company in the United States who are at least 21 years of age
and who have completed six months of service are eligible to participate in the
Savings Plan. For each employee who elects to participate in the Savings Plan
and makes a contribution thereto, the Company makes a matching contribution of
50% of the first 5% of annual compensation contributed. In addition, the
Company may make discretionary profit sharing contributions under the Savings
Plan. The maximum contribution for any participant for any year is the maximum
amount permitted under Internal Revenue Code.

Long Term Incentive Plan

The Company has established the National Equipment Services, Inc. Long Term
Incentive Plan (the "Incentive Plan"). A maximum of 2,200,000 shares of Common
Stock, subject to adjustment, have been initially authorized for the granting
of stock options under the Incentive Plan. Options granted under the Incentive
Plan may be either "incentive stock options," which qualify for special tax
treatment under the Internal Revenue Code, or nonqualified stock options. The
purposes of the Incentive Plan are to advance the interests of the Company and
stockholders by providing Company employees with an additional incentive to
continue their efforts on behalf of the Company, as well as to attract to the
Company people of experience and ability. The Incentive Plan is intended to
comply with Rule 16b-3 of the Exchange Act.

22
<PAGE>

All officers, directors and other key employees and consultants of the
Company or its subsidiaries are eligible to participate under the Incentive
Plan, as deemed appropriate by the Compensation Committee of the Board of
Directors. Eligible employees will not pay any cash consideration to the
Company to receive the options. The Incentive Plan is administered by the
Compensation Committee of the Board of Directors. The exercise price for the
incentive stock options must be no less than the fair market value of the
Common Stock on the date of grant. The exercise price of nonqualified stock
options is not subject to any limitation based upon the then current market
value of the Common Stock. Options will expire no later than the tenth
anniversary of the date of grant. An option holder will be able to exercise
options from time to time, subject to vesting. Options will vest immediately
upon death or disability of a participant. Upon termination for cause or at
will by the Company, the unvested portion of the options will be forfeited.
Subject to the above conditions, the exercise price, duration of the options
and vesting provisions will be set by the Compensation Committee of the Board
of Directors in its discretion.

In connection with the Initial Stock Offering, the Company granted stock
options to purchase 912,000 shares of Common Stock to certain directors and
members of management, including Messrs. O'Connor, O'Neil and Ingersoll who
received options to purchase 40,000, 100,000 and 40,000 shares of Common
Stock, respectively, at the initial public offering price. Such options vest
in equal daily installments over the five year period ending July 13, 2003.
The options have a term of ten years.

23
<PAGE>

PERFORMANCE GRAPH

The following graph compares the Company's cumulative total stockholder
return on an investment of $100 since July 14, 1998, the Company's initial
trading date, with that of the S&P Smallcap 600 Index and that of a peer group
of selected companies that the Company believes are most comparable to the
Company. The peer group is comprised of the following companies: NationsRent
Inc., Neff Corp., Rental Service Corp. and United Rentals Inc.

[GRAPH APPEARS HERE]

COMPARISON SINCE JULY 14, 1998 CUMULATIVE TOTAL RETURN
AMONG NATIONAL EQUIPMENT SERVICE, INC., PEER GROUP AND S&P SMALLCAP 600 INDEX
<TABLE>
<CAPTION>
NATIONAL
Measurement Period EQUIPMENT S&P SMALLCAP
(Fiscal Year Covered) SVCS., INC. PEER GROUP 600 INDEX
- --------------------- ----------- ---------- ------------
<S> <C> <C> <C>
7/14/98 $100 $100 $100
FYE 9/30/98 $ 40.83 $ 53.22 $ 78.28
FYE 12/31/98 $ 76.67 $ 62.98 $ 92.04
</TABLE>

24
<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Reclassification and Stock Split

Immediately prior to the consummation of the Initial Stock Offering, each
outstanding share of the Company's Class B Common Stock was converted into one
share of Common Stock and each outstanding share of the Company's Class A
Common Stock (the "Old Preference Stock") was converted into a number of shares
of Common Stock based on a specified formula. Each share of Old Preference
Stock was converted into approximately 1,040 shares of Common Stock. Each share
of Common Stock was then split into 139 shares of Common Stock.

Certain Loans to Executives

The Company loaned $64,000 to Mr. Rodgers, $20,000 to Mr. O'Connor and
$10,000 to Mr. Ingersoll pursuant to promissory notes (the "Executive Notes")
to finance their purchase of the Company's securities. See "Management--
Management Employment Agreements." Each of the Executive Notes is secured by a
pledge of the securities purchased with such Executive Note pursuant to an
Executive Stock Pledge Agreement between the Company and each of Messrs.
Rodgers, O'Connor and Ingersoll. The Executive Notes bear interest at a rate
per annum equal to the applicable federal rate as set forth in Section 1274(d)
of the Internal Revenue Code of 1986, as amended. The principal amount of the
Executive Notes and all interest accrued thereon mature in part on June 4,
2006, with the remainder maturing on January 6, 2007. The Executive Notes may
be prepaid in full or in part at any time.

Professional Services Agreement

In connection with the formation of the Company, the Company entered into a
Professional Services Agreement (the "Professional Services Agreement") with
Golder, Thoma, Cressey, Rauner, Inc. pursuant to which Golder, Thoma, Cressey,
Rauner, Inc. provided financial and management consulting services to the
Company. Under the Professional Services Agreement, Golder, Thoma, Cressey,
Rauner, Inc. received an annual management fee of $200,000 (plus reimbursement
of out-of-pocket expenses) and a fee of 1% of the amount of debt or equity
capital raised by the Company from any source, for their assistance in
obtaining such capital. For the years ended December 31, 1997 and 1998, the
Company had paid or accrued $1,047,238 and $817,000, respectively, in fees
under the Professional Services Agreement. The agreement was terminated upon
the consummation of the Initial Stock Offering, and no fee was paid with
respect to the issuance of Common Stock in the Initial Stock Offering.

Stockholders Agreement and Registration Agreement

In connection with the formation of the Company, the Company and its
stockholders entered into a Stockholders Agreement dated as of June 4, 1996
(the "Stockholders Agreement") which (i) provided for the designation of the
Board of Directors of the Company, (ii) imposed certain restrictions on the
transfer of shares of the Company, (iii) required the stockholders to take
certain actions upon the approval by a majority of the stockholders in
connection with an initial public offering or a sale of the Company, (iv)
required the Company to offer to sell shares to the stockholders under certain
circumstances upon authorization of an issuance or sale of additional shares
and (v) granted certain of the stockholders certain participation rights in
connection with a sale of shares by other stockholders. The Stockholders
Agreement was terminated upon consummation of the Initial Stock Offering.

In connection with the formation of the Company, the Company and its
stockholders entered into a Registration Agreement dated as of June 4, 1996
(the "Registration Agreement") pursuant to which the Stockholders have the
right in certain circumstances and, subject to certain conditions, to require
the Company to register shares of the Company's Common Stock held by them under
the Securities Act. Under the Registration Agreement, except in limited
circumstances, the Company is obligated to pay all expenses in connection with
such registration.

25
<PAGE>

SOLICITATION AND EXPENSES OF SOLICITATION

The solicitation of proxies will be made initially by mail. The Company's
directors, officers and employees may also solicit proxies in person or by
telephone without additional compensation. In addition, proxies may be
solicited by certain banking institutions, brokerage firms, custodians,
trustees, nominees and fiduciaries who will mail material to or otherwise
communicate with the beneficial owners of shares of the Company's Common Stock.
All expenses of solicitation of proxies will be paid by the Company.

ANNUAL REPORT AND FORM 10-K

Copies of the Company's Annual Report to Stockholders, which includes
portions of the Company's Annual Report on Form 10-K for the Fiscal Year ended
December 31, 1998, were mailed to stockholders on or about April 14, 1999. Any
stockholder entitled to vote at the Annual Meeting who did not receive a copy
of the Annual Report may obtain one by writing or calling Mr. Paul Ingersoll,
Senior Vice President and Secretary, National Equipment Services, Inc., 1603
Orrington Avenue, Suite 1600, Evanston, Illinois 60201, telephone (847) 733-
1000.

SUBMISSION OF STOCKHOLDER PROPOSALS
FOR THE 2000 ANNUAL MEETING

Stockholder proposals for inclusion in the Proxy Statement to be issued in
connection with the 2000 Annual Meeting of Stockholders must be mailed to the
Corporate Secretary, National Equipment Services, Inc., 1603 Orrington Avenue,
Suite 1600, Evanston, Illinois 60201, and must have been received by the
Corporate Secretary on or before December 15, 1999. The Company will consider
only proposals meeting the requirements of applicable SEC rules.

The Board of Directors

May , 1999

26
<PAGE>

NATIONAL EQUIPMENT SERVICES, INC.
1603 Orrington Avenue, Suite 1600
EVANSTON, ILLINOIS 60201

PROXY

SOLICITED BY THE BOARD OF DIRECTORS

The undersigned hereby appoints Kevin P. Rodgers and Paul R. Ingersoll, and
each of them, proxies, with power of substitution and revocation, acting
together or, if only one is present and voting, then that one, to vote the stock
of National Equipment Services, Inc. which the undersigned is entitled to vote
at the Annual Meeting of Stockholders to be held on June 17, 1999 and at any
adjournments or postponements thereof, with all the powers the undersigned would
possess if personally present, as designated herein and authorizes the proxies
to vote in accordance with the recommendations of the Company's management upon
such other business as may properly come before the Annual Meeting of
Stockholders.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1, 2 AND 3.

1. Election of director.
[_] FOR THE NOMINEE [_] WITHHOLD AUTHORITY
TO VOTE FOR THE
NOMINEE
Nominee: Ronald St. Clair

2. Approval of the issuance of up to 100,000 shares of Senior Redeemable
Convertible Preferred Stock, Series A and the issuance of shares of Common
Stock upon conversion thereof.

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

3. Ratification of the appointment of PricewaterhouseCoopers LLP as the
Company's independent public accountants for the fiscal year ending
December 31, 1999.

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

(Continued and to be signed and dated on the reverse side.)
<PAGE>

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE NOMINEE LISTED IN ITEM 1 AND FOR ITEMS 2 AND 3.

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<S> <C>
Please date and sign exactly as names appear
on this Proxy. Joint owners should each sign.
Trustees, executors, etc. should indicate the
capacity in which they are signing.

DATED:_________________________, 1999

SIGNATURE(S):_________________________________
[_] CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL ______________________________________________
MEETING.

[_] CHECK HERE FOR ADDRESS CHANGE.

NEW ADDRESS
</TABLE>