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:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
McGrath Rentcorp
- - --------------------------------------------------------------------------------
(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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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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/ / 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,
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[ LOGO ]
MCGRATH RENTCORP
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 13, 1996
Notice is hereby given that the 1996 Annual Meeting of Shareholders of
McGrath RentCorp, a California corporation, will be held at McGrath RentCorp's
Corporate Headquarters located at 2500 Grant Avenue, San Lorenzo, California
94580, on Thursday, June 13, 1996, at 2:00 p.m., local time, for the following
purposes:
1. To elect five directors to serve until the next annual meeting of
shareholders and until their respective successors are duly
elected;
2. To approve the action of the Board of Directors in appointing
Arthur Andersen LLP as McGrath RentCorp's independent public
accountants for the fiscal year ending December 31, 1996; and
3. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
Shareholders of record at the close of business on April 22, 1996 are
entitled to notice of, and to vote at, the Meeting or any adjournment thereof.
All shareholders are cordially invited to attend the Meeting in person.
However, to insure your representation at the Meeting, you are urged to mark,
sign and return the enclosed Proxy as promptly as possible in the accompanying
postage-prepaid envelope. Any shareholder attending the Meeting may vote in
person even if he or she has returned the Proxy.
BY ORDER OF THE BOARD OF DIRECTORS
April 23, 1996 DELIGHT SAXTON, SECRETARY
MCGRATH RENTCORP
-----------------------
PROXY STATEMENT
-----------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
McGrath RentCorp (the "Company") to be voted at the 1996 Annual Meeting of
Shareholders to be held on Thursday, June 13, 1996, at 2:00 p.m., local time,
and at any adjournment thereof, for the purposes set forth in the accompanying
Notice of Annual Meeting of Shareholders. The Annual Meeting will be held at
the Company's Corporate Headquarters located at 2500 Grant Avenue, San Lorenzo,
California 94580.
These proxy materials were mailed on or about April 25, 1996, to all
shareholders entitled to vote at the Meeting.
RECORD DATE AND OUTSTANDING SHARES
Shareholders of record at the close of business on April 22, 1996, are
entitled to notice of, and to vote at, the Meeting. At the record date,
7,585,675 shares of the Company's Common Stock were issued and outstanding.
VOTING
In order to conduct business at the Meeting, a quorum must be established.
The presence in person or by proxy of shareholders entitled to vote a majority
of the Company's outstanding Common Stock will constitute a quorum for the
transaction of business at the Meeting.
Every shareholder voting for the election of directors may cumulate such
shareholder's votes and give one candidate a number of votes equal to the number
of directors to be elected (five) multiplied by the number of shares held, or
may distribute such shareholder's votes on the same principle among as many
candidates as the shareholder may select. However, no shareholder shall be
entitled to cumulate votes for any candidate unless the candidate's name has
been placed in nomination prior to the voting and the shareholder, or any other
shareholder, has given notice at the Meeting prior to the voting of the
intention to cumulate the shareholder's votes. The proxy holders are given
discretionary authority, under the terms of the Proxy, to cumulate votes
represented by shares for which they are named in the Proxy. In electing
directors, the candidates receiving the highest number of affirmative votes, up
to the number of directors to be elected (five) shall be elected.
Unless otherwise noted herein, each of the Company's proposals (other than
the election of directors) described in this Proxy Statement requires the
affirmative vote of the holders of a majority of the shares of the Company's
Common Stock represented and voting at the Meeting if a quorum is present.
Unless otherwise instructed, each valid returned Proxy which is not revoked will
be voted in the election of directors "FOR" the nominees of the Board of
Directors and "FOR" Proposal No. 2 described in this Proxy Statement, and at the
proxy holders' discretion, on such other matters, if any, which may come before
the Meeting (including any proposal to adjourn the Meeting).
SOLICITATION
The cost of this solicitation will be borne by the Company. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
material to such beneficial owners. Proxies may also be solicited by certain of
the Company's directors, officers and regular employees, without additional
compensation, personally or by telephone or telegram.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the Meeting and voting in person.
PROPOSAL NO. 1: ELECTION OF DIRECTORS
NOMINEES
Directors of the Company are elected annually by the shareholders. The
Board has nominated for election as directors the five persons named in the
table below to serve until the next annual meeting of shareholders and until
their respective successors are duly elected. Vacancies which may occur on the
Board of Directors prior to an annual meeting of shareholders may be filled by
the remaining Directors. Unless otherwise instructed, the proxy holders will
vote the Proxies received by them for the Company's nominees named below, all of
whom are presently directors of the Company. In the event that any nominee is
unable or declines to serve as a director at the time of the Meeting, the
Proxies will be voted for any nominee who shall be designated by the present
Board of Directors to fill the vacancy. It is not expected that any nominee
will be unable, or will decline, to serve as a director. In the event that
additional persons are nominated for election as directors, the proxy holders
intend to vote all Proxies received by them in such a manner in accordance with
cumulative voting as will assure the election of as many of the nominees listed
below as possible, and, in such event, the specific nominees to be voted for
under the Proxies will be determined by the proxy holders.
The names of the nominees and certain information about them are set forth
below.
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
--------------- --- -------------------- --------
Bryant J. Brooks 69 Independent Financial Consultant 1989
Joan M. McGrath 59 Businesswoman 1982
Robert P. McGrath 62 Chairman of the Board and Chief 1979
Executive Officer of the Company
Delight Saxton 50 Chief Financial Officer, Vice President of 1982
Administration and Secretary of the Company
Ronald H. Zech 52 President and Chief Executive Officer of 1989
GATX Corporation
DESCRIPTION OF NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
BRYANT J. BROOKS was elected a director of the Company in 1989, and he
serves on its Audit and Executive Compensation Committees. Since 1975, Mr.
Brooks has been an independent financial consultant in San Francisco,
California, specializing in valuation of securities of privately held companies.
Mr. Brooks received a BS in economics from Yale University in 1950 and an MBA
from Harvard University in 1955. He serves as a director of Fair, Isaac and
Company, Incorporated, a public corporation engaged in the development and sale
of business decision-making systems and software.
JOAN M. MCGRATH joined the Company in 1980 and has been a director since
1982. Ms. McGrath served as a Vice President of the Company from 1982 through
1994, at which time she resigned that position. She continues to be an employee
of the Company with responsibilities in training sales, supervisory and
management personnel and general management. She graduated from Marymount
College in 1961 with a degree in English literature, received a Master of Arts
degree in theology from the University of San Francisco in 1969, and then
completed her doctoral studies in philosophy at Fordham University in 1971.
ROBERT P. MCGRATH is the founder of the Company. He has been a director
and its Chief Executive Officer since the Company's formation in 1979, and its
Chairman of the Board since 1988. He also served as the Company's President
through 1994 and as its Chief Financial Officer until 1993. He is a member of
the Executive Compensation Committee of the Company's Board of Directors. Mr.
McGrath graduated from the University of Notre Dame in 1955 with a BS in
electrical engineering.
DELIGHT SAXTON has been with the Company since its inception in 1979. She
has been a director and the Secretary of the Company since 1982, its Vice
President of Administration since 1989, and its Chief Financial Officer since
1993. Ms. Saxton also served as the Company's Treasurer from 1982 until 1989.
She is responsible for administration of personnel and all corporate compliance
requirements, monitors the auditing function, and is responsible for the
Company's relationships with its bankers and auditors. Ms. Saxton is a member
of the Audit Committee of the Company's Board of Directors.
RONALD H. ZECH was elected a director of the Company in 1989, and he serves
on its Audit and Executive Compensation Committees. In 1994, Mr. Zech was
elected President and Chief Operating Officer of GATX Corporation, a New York
Stock Exchange listed company, and in 1995, he was elected Chief Executive
Officer of that corporation. He also serves as a director of GATX Corporation.
GATX is engaged in the business of providing transportation and distribution
equipment and related services. For the ten years prior to 1994, Mr. Zech had
been the President and Chief Executive Officer of GATX's wholly owned
subsidiary, GATX Capital Corporation. GATX Capital provided lease and loan
financing for aircraft, rail and other equipment. Mr. Zech received a BS in
electrical engineering from Valparaiso University in 1965, and an MBA from the
University of Wisconsin in 1967.
BOARD MEETINGS
The Board of Directors of the Company held four meetings and took corporate
action by unanimous written consent another five times during the year ended
December 31, 1995; and at each meeting and on each corporate action, all members
of the Board of Directors participated, with the exception of one director who
was unable to attend one Board meeting.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a three-member Audit Committee consisting of
Directors Bryant J. Brooks, Delight Saxton and Ronald H. Zech. The Audit
Committee exercises the following powers: (1) nominates the independent auditors
of the Company to be approved by the Board of Directors; (2) meets with the
independent auditors to review the annual audit; (3) assists the full Board in
evaluating the auditors' performance; and (4) reviews internal control
procedures, related party transactions and, where appropriate, potential
conflict of interest situations. The Audit Committee met two times during 1995;
and at each meeting, all members of the Committee participated.
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The Board of Directors also has a three-member Executive Compensation
Committee consisting of Directors Bryant J. Brooks, Robert P. McGrath and Ronald
H. Zech. The Executive Compensation Committee establishes the general
compensation policies of the Company for its executive officers and sets the
actual compensation plans and specific compensation levels for the individual
officers. The Executive Compensation Committee held one meeting during 1995;
and at that meeting, all members of the Committee participated.
The Board has a Long-Term Stock Bonus Plan Committee. All members of the
Board of Directors, except a Director who was a participant in the Long-Term
Stock Bonus Plan at any time within the preceding twelve months, are
automatically members of this Committee. At the present time, all five
directors of the Company are members of the Long-Term Stock Bonus Plan
Committee. The Long-Term Stock Bonus Plan Committee administers the Company's
Long-Term Stock Bonus Plan. The Long-Term Stock Bonus Plan Committee held one
meeting during 1995; and at that meeting, all members of the Committee
participated, with the exception of one director who was unable to attend the
meeting.
COMPENSATION OF DIRECTORS
Each director who is not also an officer or employee of the Company is
compensated for his or her services as a director at the rate of $11,000 per
annum. An additional fee of $600 per meeting is paid to each outside director
for attendance at the meetings of the Board of Directors or one of its
Committees (in the event a Committee meeting is held in conjunction with a Board
meeting, only one $600 fee is paid to the Director). Pursuant to the foregoing,
Mr. Brooks received $13,400, and Mr. Zech received $12,800, for their services
as directors of the Company during 1995. All directors, including those who may
also be officers or employees of the Company, are reimbursed for expenses
incurred in connection with attending Board or Committee meetings.
PROPOSAL NO. 2: RATIFICATION OF APPOINTMENT
OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company, with the approval of its Audit
Committee, has appointed Arthur Andersen LLP to audit the books and records of
the Company for fiscal year ending December 31, 1996. A resolution will be
offered at the Meeting to approve the appointment of Arthur Andersen LLP as the
Company's independent public accountants.
Representatives of the accounting firm are expected to be present at the
Meeting with the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions.
The Board of Directors recommends a vote "FOR" such proposal. In the event
of a negative vote on such ratification, the Board of Directors will reconsider
its selection.
OTHER MATTERS
The Company knows of no other matters to be submitted to the Meeting. If
any other matters properly come before the Meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the Board of Directors may recommend.
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STOCK PRICE PERFORMANCE GRAPH
The following graph compares the Company's stock price since December 31,
1990 against (1) the S&P 500 Index and (2) the composite prices of the companies
listed by Value Line, Inc. in its Industrial/Business Services Industries Group
("Peer Group").
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
MCGRATH RENTCORP, Standard & Poors 500 and Value Line Industrial Serv. Index
(Perfomance Results Through 12/31/95)
1990 1991 1992 1993 1994 1995
------- ------- ------- ------- ------- -------
MCGRATH RENTCORP...................... $100.00 $112.76 $ 90.14 $117.13 $141.22 $162.32
Standard & Poors 500.................. $100.00 $130.55 $140.72 $154.91 $157.39 $216.42
Industrial Serv. ..................... $100.00 $125.68 $151.73 $185.00 $181.22 $219.89
Assumes $100 invested at the close of trading 12/90 in MCGRATH RENTCORP
common stock, Standard & Poors 500, and Industrial Serv.
*Cumulative total return assumes reinvestment of dividends.
Source: Value Line, Inc.
Factual material is obtained from sources believed to be reliable, but the
publisher is not responsible for any errors or ommisions contained herein.
The graph assumes an investment of $100 on December 31, 1990 and monthly
reinvestment of dividends thereafter, and is based upon information provided to
the Company by Value Line, Inc.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information regarding the executive
officers of the Company.
NAME AGE POSITION HELD WITH THE COMPANY
------ --- ------------------------------
Robert P. McGrath 62 Chairman of the Board and
Chief Executive Officer
Dennis C. Kakures 39 President and Chief Operating Officer
Delight Saxton 50 Chief Financial Officer, Vice President
of Administration and Secretary
Thomas J. Sauer 39 Vice-President and Treasurer
Robert P. McGrath and Delight Saxton are also directors of the Company and
descriptions of them appear under "Proposal No. 1: Election of Directors --
Description of Nominees for Election to the Board of Directors" above.
DENNIS C. KAKURES joined the Company in 1982 as Sales and Operations
Manager of the Company's Northern California office. He became a Vice President
of the Company in 1987, Chief Operating Officer in 1989, Executive Vice
President in 1993, and President in 1995. He is responsible for the sales and
operations of the Company. He earned a BS in marketing at California State
University at Hayward in 1978.
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THOMAS J. SAUER joined the Company in 1983 as its Accounting Manager,
became its Controller in 1987, Treasurer in 1989, and a Vice-President in 1995.
Mr. Sauer is responsible for accounting, financial reporting and corporate
taxes. Mr. Sauer is a Certified Public Accountant, and he had been employed by
Arthur Andersen LLP, the Company's auditors, from 1980 to 1983. He earned a BS
degree in business at the University of California at Berkeley in 1978 and an
MBA in accounting at Golden Gate University, San Francisco in 1980.
Each executive officer of the Company serves at the pleasure of the Board
of Directors.
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the Company's other executive officers for services
rendered in all capacities to the Company for each of the last three fiscal
years.
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------- -------------------------
NAME AND ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS AWARDS (1) PAYOUT (2) COMPENSATION (3)
------------------ ------ -------- ------- ---------- ---------- ----------------
Robert P. McGrath 1995 $336,000 $87,494 -- -- $13,018
CHAIRMAN AND CHIEF 1994 320,000 167,910 -- -- 11,228
EXECUTIVE OFFICER 1993 392,700 -- -- -- 26,222
Dennis C. Kakures 1995 192,000 50,938 $24,681 $30,803 15,138
PRESIDENT AND CHIEF 1994 160,000 100,746 13,430 34,921 14,395
OPERATING OFFICER 1993 160,000 40,000 -- 34,443 30,000
Delight Saxton 1995 134,400 35,656 -- -- 15,138
CHIEF FINANCIAL OFFICER, 1994 128,000 67,164 -- -- 14,395
VICE PRESIDENT OF 1993 157,300 -- -- -- 23,597
ADMINISTRATION AND
SECRETARY
Thomas J. Sauer 1995 117,100 31,067 16,796 19,671 15,138
VICE-PRESIDENT AND 1994 108,900 61,445 9,656 20,121 14,395
TREASURER 1993 108,900 27,225 -- 19,846 22,421
- - ---------------
1 Upon an award of stock bonus shares under the Company's Long Term
Stock Bonus Plan, 20% of such shares are vested in the participant and
the remaining 80% vest over the next four years contingent upon the
participant remaining in the employ of the Company. See "Long Term
Stock Bonus Plan" below. The figures shown in the column designated
"Awards" are the values of the vested 20% shares of the Company's
Common Stock earned by the executive officers under the Plan,
calculated based on the market value of the Common Stock as of the end
of the respective years. Dividends are paid to the officer with
respect to shares earned by him, whether or not vested. As the
unvested shares subsequently vest, their values are shown in the
column designated "Payout."
2 The figures shown in the column designated "Payout" are the values of
the shares of the Company's Common Stock previously earned by the
executive officers under the Company's Long-Term Stock Bonus Plan in
a prior year which vested during the year shown. The values are
calculated based on the market value of the Common Stock as of the end
of the year in which it was originally earned.
3 The figures shown in the column designated "All Other Compensation"
represent the executive officer's share of the allocation of the
Company's contribution to the Company's Employee Stock Ownership Plan
for 1995, and his or her share of any re-allocations of forfeited
benefits in 1995. See "Employee Stock Ownership Plan" below.
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EMPLOYEE STOCK OWNERSHIP PLAN
The Employee Stock Ownership Plan ("ESOP") was adopted by the Company's
Board of Directors and approved by the shareholders, effective January 1, 1985.
The ESOP is intended to qualify as an employee stock ownership plan, as defined
in Section 4975(e)(7) of the Internal Revenue Code, and as a stock bonus plan
under Section 401(a) of the Internal Revenue Code. Under the ESOP, a trust was
created by the Company to hold plan assets, with The Bank of California, N.A.
acting as trustee. The Company may amend or terminate the ESOP at any time.
All assets acquired by the trust are administered by a Plan Committee appointed
by the Board of Directors composed of Edward Diaz, Gary Gibson, Thomas Sauer,
Delight Saxton and Nanci Clifton (all Company employees) for the exclusive
benefit of employees who are participants in the ESOP and their designated
beneficiaries.
Employees, who are 21 years or older, are entitled to participate in the
ESOP when they have completed one year of service to the Company by June 30 of
any year. As of December 31, 1995, 140 employees of the Company were
participants in the ESOP. Allocations to each eligible participant's trust
account are made each year from Company contributions, trust income or loss and
re-allocations of forfeited ESOP benefits if the participant remains employed
throughout the year and has worked a minimum number of hours or his employment
has terminated due to death or retirement (as that term is defined in the ESOP),
during that year. Allocations are made based upon each participant's
compensation from the Company and time employed by the Company. As provided by
law, a participant's interest in the ESOP becomes 20% vested after three years
of service and will continue to vest at 20% per year thereafter until it is
fully vested after the seventh year or upon death or total disability. The
vesting schedule will be accelerated and the Company's contributions and ESOP
allocations will be modified if the ESOP becomes a "top heavy plan" under
federal tax laws.
In general, Company contributions are immediately tax deductible by the
Company, but participants do not recognize income for tax purposes until
distributions are made to them. The amount of Company contributions to the ESOP
in cash, Company stock or other property is determined by the Company's Board of
Directors each year with consideration for federal tax laws. The Company's cash
contribution to the ESOP for the 1995 plan year is $550,000, and it had made an
aggregate of $2,375,000 in cash contributions for the five prior years.
Employees may not make contributions to the ESOP. Contributions in cash are
used to purchase Company stock; however, other investments may be made and loans
may be incurred by the ESOP for the purchase of Company stock.
The Plan Committee has determined that cash dividends paid by the Company
on shares of the Company's Common Stock held by the ESOP shall be paid out to
the participants. The Plan Committee has the right to revoke this decision at
any time.
INCENTIVE STOCK OPTION PLAN
The Company has a 1987 Incentive Stock Option Plan under which options have
been granted to key employees of the Company for the purchase of its Common
Stock. Options granted under this Plan are intended to qualify as incentive
stock options as that term is defined in Section 422A of the Internal Revenue
Code of 1986, as amended. The Plan authorizes the issuance of an aggregate of
1,000,000 shares of the Company's Common Stock under options. Options for an
aggregate of 346,000 shares have been granted to 15 key employees at exercise
prices of $6.13 or $13.88 per share. Of these options granted, options have
been exercised for the purchase of 118,850 shares, options for 10,840 shares
have been terminated, and options for the remaining 216,310 shares are still
outstanding. A balance of 664,840 shares remain available for future option
grants under the Plan.
No options were granted under the Plan to any of the Company's executive
officers during 1995; and no options under the Plan were exercised by any of the
Company's executive officers during 1995. Thomas J. Sauer is the only executive
officer of the Company who holds an option under the Plan as of December 31,
1995. Mr. Sauer was granted an option in 1987 for the purchase of 75,000 shares
at an exercise price of $6.125 per share. As of December 31, 1995, Mr. Sauer
had the right to exercise that option as to 65,250 shares, and the remaining
9,750 shares had not yet become exercisable. Based upon a market price of the
Company's Common Stock of
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$19.00 on December 31, 1995, the exercisable portion of Mr. Sauer's option had a
value of $840,094 as of that date, and the unexercised portion had a value of
$125,531.
LONG-TERM STOCK BONUS PLAN
In 1991, the Company's Board of Directors adopted and the Company's
shareholders subsequently approved, a Long-Term Stock Bonus Plan under which
200,000 shares of the Company's Common Stock were reserved for bonuses to be
granted to officers and other key employees to provide incentives for high
levels of performance and unusual efforts to improve the financial performance
of the Company. The Plan was effective retroactively to January 1, 1990, and
all then-existing Long-Term Stock Bonus Plan Agreements were amended to conform
to the Plan.
Eight separate Long-Term Stock Bonus Agreements have been entered into with
each of Dennis C. Kakures, the Company's President and Chief Operating Officer,
and Thomas J. Sauer, the Company's Vice-President and Treasurer. Each Agreement
provided for a stock bonus to the officer dependent upon the return on equity
realized for the Company's shareholders, with the right to receive any stock
bonus earned being subject to vesting over a four-year period contingent upon
the officer remaining in the employ of the Company. The first Agreement for
each officer was based upon the performance of the Company for the year 1990,
the second Agreement was based upon the performance of the Company over the two
years 1990-91, and the third and subsequent Agreements were each based upon the
performance of the Company over successive three-year periods ending December
31, 1992, 1993, 1994, 1995, 1996 and 1997.
The following table sets forth certain information with respect to shares
of the Company's Common Stock under the first, second, fifth and sixth Long-Term
Stock Bonus Agreements entered into by the Company with Messrs. Kakures and
Sauer. (The Company did not meet the long-term financial goals pre-set in the
third and fourth Agreements for the periods ended December 31, 1992 or December
31, 1993, thus no stock bonuses were awarded under those Agreements; and the
conclusion of the performance periods for the seventh and eighth Agreements have
not yet been reached.) To date, Messrs. Kakures and Sauer are the only persons
who have received Long-Term Stock Bonus Agreements under the Plan. The "values"
in the table are calculated based on the market value of the shares of Common
Stock as of the end of the year in which they were earned.
AS OF 12/31/95 WILL VEST IN
-------------- ------------------------------
NAME EARNED VESTED 1996 1997 1998 1999
---- ------ ------ ---- ---- ---- ----
Dennis C. Kakures SHARES 22,711 15,151 2,088 2,087 2,087 1,298
VALUE $365,079 $226,173 $38,094 $38,075 $38,075 $24,662
Thomas J. Sauer SHARES 14,330 9,092 1,452 1,452 1,451 883
VALUE $232,858 $136,744 $26,452 $26,452 $26,433 $16,777
REPORT BY THE EXECUTIVE COMPENSATION COMMITTEE
The Company has a three-member Executive Compensation Committee, consisting
of its two outside directors, Bryant J. Brooks and Ronald H. Zech, as well as
its Chairman of the Board and Chief Executive Officer, Robert P. McGrath. The
Committee establishes the general compensation policies of the Company for its
executive officers and sets the actual compensation plans and specific
compensation levels for the individual officers.
COMPENSATION PHILOSOPHY -- The Company's executive compensation philosophy
is to pay for performance. The Executive Compensation Committee believes that
executive compensation should be reflective of the executive's, as well as the
Company's, current and long-term performance, and that any management
compensation program should be structured to attract, motivate and retain
qualified personnel by providing attractive compensation incentives consistent
with Company performance. The executive
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compensation program is intended to provide an overall level of compensation
opportunity that the Committee believes, based upon its own judgment and
experience and upon periodic studies by independent executive compensation
consultants, is competitive with other, comparable companies. The Committee
also believes that management should have significant equity participation
through the ownership of Common Stock of the Company so as to align the
interests of executives with those of the Company's other shareholders in an
effort to achieve long-term shareholder returns.
COMPONENTS OF EXECUTIVE COMPENSATION -- In addition to the return which
executives receive along with other shareholders through their individual
ownership of shares of the Company's Common Stock, there are currently three
components of executive compensation: base salary, annual cash incentive bonus
and long-term stock ownership incentives.
BASE SALARIES -- The Executive Compensation Committee establishes the
base salaries of each of the Company's executive officers after considering a
variety of factors including the executive's level of responsibility and
individual performance, the executive's contributions to the success of the
Company, internal equities among the salaries of other officers and key
personnel of the Company, the salaries of executive officers in similar
positions in comparable companies, and the Company's financial performance.
ANNUAL CASH INCENTIVE BONUS -- The Executive Compensation Committee
had adopted a formula for calculating a cash incentive bonus for the Company's
chief executive officer based solely upon the Company achieving certain levels
of pre-tax profit for the year, and for calculating cash incentive bonuses for
the other executive officers of the Company based upon a combination of the
level of the Company's pre-tax profit for the year (75%) and the extent to which
each executive officer achieves his or her own individual performance goals as
determined by the chief executive officer (25%). The executives were eligible
to receive bonuses ranging from zero up to a maximum of 56% of their base
salary. The aggregate of the cash incentive bonuses earned by the Company's
executives for 1995 were an average of 26% of their base salaries.
For 1996, the Executive Compensation Committee has again adopted
a similar formula for the payment of cash incentive bonuses to the Company's
executive officers. However, in order to make the compensation of the chief
executive officer and the president/chief operating officer more dependent upon
the success of the Company, their base salaries were not increased above 1995
levels, but the range of bonuses for which these two top officers are eligible
has been increased to a maximum of 70% of those salaries.
LONG-TERM STOCK OWNERSHIP INCENTIVES -- The Company has two long-term
stock ownership incentive programs for its executives and other key personnel:
The Long-Term Stock Bonus Plan and the 1987 Incentive Stock Option Plan.
By the terms of the Company's Long-Term Stock Bonus Plan, as
approved by its shareholders, the grant of stock bonuses is determined by the
Company's Long-Term Stock Bonus Plan Committee (see "Long-Term Stock Bonus Plan"
above). The Executive Compensation Committee may make recommendations to the
Long-Term Stock Bonus Plan Committee with respect to the granting of stock
bonuses under the Plan to executive officers. The Long-Term Stock Bonus Plan
has been used to reward the achievement of pre-set, long-term financial goals;
and stock bonuses have been awarded for achieving pre-set goals with respect to
the average return on equity realized by the Company over successive three-year
periods.
By the terms of the Company's 1987 Incentive Stock Option Plan,
as approved by its shareholders, the grant of incentive stock options is
determined by the Company's Board of Directors (see "Incentive Stock Option
Plan" above). The Executive Compensation Committee may make recommendations to
the Board of Directors with respect to the granting of incentive stock options
under the Plan to executive officers. The Board has granted incentive stock
options from time to time to executive officers and other key personnel of the
Company because the Board believed that such grants would be an effective part
of the particular executive officer's overall compensation package and that an
increase in his or her equity participation in the Company would be appropriate.
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CHIEF EXECUTIVE OFFICER'S COMPENSATION -- Throughout 1995, Robert P.
McGrath was the Chief Executive Officer of the Company, as well as the Chairman
of its Board of Directors. Mr. McGrath was the founder of the Company, and he
still owns a significant percentage of its Common Stock (see "Security Ownership
of Management and Principal Shareholders" below).
BASE SALARY -- Mr. McGrath's 1995 base salary was set by the Executive
Compensation Committee at $336,000 after consultation with an independent,
professional compensation expert, after a review of the compensation paid to
chief executive officers of comparable companies, and in consideration of Mr.
McGrath's level of responsibility, performance and contributions to the
Company's success.
ANNUAL CASH INCENTIVE BONUS -- Mr. McGrath earned a cash incentive
bonus of $87,494 for 1995 (26% of his base salary). This bonus was calculated
as a function of the extent to which the Company achieved its goal for pre-tax
profits in 1995, in accordance with the formula which had been established by
the Executive Compensation Committee.
LONG-TERM STOCK OWNERSHIP INCENTIVES -- Mr. McGrath has not
participated in any of the various long-term stock ownership incentive plans
offered by the Company to its officers and employees (except that, as an
employee, he has participated in the Company's Employee Stock Ownership Plan
("ESOP") on the same basis as other employees). The Board of Directors believes
that Mr. McGrath's existing ownership of a substantial portion of the Company's
Common Stock has been sufficient to provide the incentive and alignment of
interest with the Company's other shareholders that are the goals of the
Company's long-term stock ownership incentive plans.
Executive Compensation Committee:
BRYANT J. BROOKS
ROBERT P. MCGRATH
RONALD H. ZECH
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
No member of the Company's Executive Compensation Committee has a
compensation committee interlocking relationship (as defined by the Securities
and Exchange Commission). One member of the Committee, Robert P. McGrath, is an
employee and officer of the Company, and he has participated in deliberations of
the Committee concerning executive officer compensation; and as noted below, he
has also participated in investor-owned relocatable modular office programs with
the Company.
There are 86 investor-owners who have purchased relocatable modular offices
and placed them in the Company's rental fleet for management by it, including
three limited partnerships formed in 1980 and 1981 of which Robert P. McGrath is
the general partner (with an aggregate of 24 limited partners) and three limited
partnerships formed in 1984 of which the Company is the general partner (with an
aggregate of 9 limited partners). The units still in the Company's rental fleet
which are owned by the three limited partnerships of which Mr. McGrath is the
general partner had an original aggregate purchase price of $1,410,477. Mr.
McGrath has a 1% profits interest and a 14% contingent, subordinated profits
interest in the three limited partnerships. The cumulative profits of these
three partnerships was sufficient in 1995 that Mr. McGrath began receiving his
contingent, subordinated profits interest, and he was allocated an aggregate of
$171,351 of profits from these three limited partnerships during 1995. Mr.
McGrath is also entitled to receive an annual partnership management fee equal
to 2% of the original cost of the units purchased; Mr. McGrath in turn has
engaged the Company to perform these management services for the identical fee.
In addition, Mr. McGrath in his individual capacity purchased relocatable
modular offices prior to 1983 directly from the Company and placed those units
under the Company's management in its rental fleet on the same terms and
conditions as units placed in the fleet by other investor-owners. The units
still in the Company's rental fleet which are owned by Mr. McGrath individually
had an original cost to the Company of $162,416. His share of rental revenues
from these
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units for the year ended December 31, 1995 was $37,735 and his share of
operating expenses, management fees and incentive fees paid to the Company for
the year was $25,926.
SECURITY OWNERSHIP OF MANAGEMENT
AND PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding each person
who is known by the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock of the Company, each of the directors and officers of
the Company, and all officers and directors as a group as of April 22, 1996.
The table is presented in accordance with the rules of the Securities and
Exchange Commission and, accordingly, in several instances beneficial ownership
of the same shares is attributed to more than one person.
BENEFICIAL OWNERSHIP
--------------------
NUMBER OF PERCENTAGE OF
NAME ADDRESS SHARES OUTSTANDING
---- ------- --------- -------------
Robert P. McGrath(1),(2),(3) McGrath RentCorp 1,203,501 15.87%
AND Joan M. McGrath(1),(2),(3) 2500 Grant Avenue
San Lorenzo, CA 94580
T. Rowe Price Associates, 100 E. Pratt Street
Inc.(4) Baltimore, MD 21202 796,200 10.50%
Oppenheimer Group, Inc.(5) Oppenheimer Tower 525,500 6.93%
World Financial Center
New York, NY 10281
Sanford C. Bernstein & Co., One State Street Plaza
Inc. New York, NY 10004 427,350 5.63%
Delight Saxton(1),(3) McGrath RentCorp 168,703 2.22%
2500 Grant Avenue
San Lorenzo, CA 94580
Dennis C. Kakures(3),(6) McGrath RentCorp 163,006 2.15%
2500 Grant Avenue
San Lorenzo, CA 94580
Thomas J. Sauer(3),(6),(7) McGrath RentCorp 132,283 1.73%
2500 Grant Avenue
San Lorenzo, CA 94580
Ronald H. Zech(1) GATX Corporation 3,500 0.05%
500 West Monroe
Chicago, IL 60661
Bryant J. Brooks(1) Sansome Street Appraisers 1,000 0.01%
114 Sansome Street
San Francisco, CA 94104
All Executive Officers and Directors as a group
(7 PERSONS)(2),(3),(6),(7) 1,671,993 21.84%
- - ---------------
-11-
1 Currently a director of the Company.
2 Includes 199,503 shares held by two organizations controlled by Mr.
and Mrs. McGrath; however, they disclaim any beneficial interest in
such shares.
3 Includes the shares held by the McGrath RentCorp Employee Stock
Ownership Plan for benefit of the named individual. The number of
shares included are 25,319 shares for Mr. McGrath, 15,054 shares for
Ms. McGrath, 18,703 shares for Ms. Saxton, 21,548 shares for Mr.
Kakures, 15,578 shares for Mr. Sauer, and 96,202 shares for all
executive officers and directors as a group. These shares are
included because beneficiaries under the Plan hold sole voting power
over the shares (whether or not rights to the shares have vested).
4 These securities are owned by various individual and institutional
investors for which T. Rowe Price Associates, Inc. ("Price
Associates") serves as investment adviser with power to direct
investments and/or sole power to vote the securities. For purposes of
the reporting requirements of the Securities Exchange Act of 1934,
Price Associates is deemed to be a beneficial owner of such
securities; however, Price Associates expressly disclaims that it is,
in fact, the beneficial owner of such securities.
5 Oppenheimer Group, Inc. is a holding company which owns directly and
indirectly a variety of subsidiary companies. The shares referred to
above are held by a combination of Oppenheimer Group, Inc., its
affiliates and subsidiaries, and/or investment advisory clients or
discretionary accounts of one or more of such subsidiaries; and
accordingly, Oppenheimer Group, Inc. disclaims that it is, in fact,
the beneficial owner of all such securities.
6 Includes unvested shares issued to the named individual under the
McGrath RentCorp Long-Term Stock Bonus Plan, which shares are subject
to return to the Company under certain circumstances. The number of
shares included are 7,560 shares for Mr. Kakures, 5,238 shares for Mr.
Sauer, and 12,798 shares for all executive officers as a group.
7 Includes 69,375 shares which are the portion of an outstanding stock
option held by Mr. Sauer which will be exercisable over the next 60
days.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
COMPLIANCE WITH Section16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The members of the Board of Directors, the executive officers of the
Company, and persons who hold more than 10% of the Company's outstanding Common
Stock are subject to the reporting requirements of Section16(a) of the
Securities Exchange Act of 1934 which require them to file reports with respect
to their ownership of the Company's Common Stock and their transactions in such
Common Stock. Based upon (i) the copies of the Section16(a) reports which the
Company received from such persons during or with respect to 1994, and (ii)
written representations received from all such persons that no annual Form 5
reports were required to be filed by them with respect to 1995, the Company
believes that all reporting requirements under Section16(a) for 1995 and prior
years were met in a timely manner by its directors, executive officers and
greater than 10% shareholders, with the following exceptions. Dennis C. Kakures
and Thomas J. Sauer were late in reporting to the Securities and Exchange
Commission the receipt by them of shares of the Company's stock awarded to them
in 1995 under the Company's Long-Term Stock Bonus Plan. Joan M. McGrath was
late in filing her own report of one sale of the Company's stock in 1995 by her
and her husband; her husband had already made a timely report of the sale.
PARTICIPATION IN INVESTOR-OWNED RELOCATABLE MODULAR OFFICE PROGRAMS
Please refer to the material appearing under "Compensation Committee
Interlocks and Insider Participation in Compensation Decisions" above for a
description of Robert P. McGrath's involvement in the Company's investor-owned
relocatable modular office programs.
INDEMNIFICATION AGREEMENTS
The Company has entered into Indemnification Agreements with each of its
directors and executive officers. These Agreements require the Company to
indemnify its officers or directors against expenses and, in certain cases,
judgment, settlement or other payments incurred by the officer or director in
suits brought by
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the Company, derivative actions brought by shareholders and suits brought by
other third parties. Indemnification has been granted under these Agreements to
the fullest extent permitted under California law in situations where the
officer or director is made, or threatened to be made, a party to the legal
proceeding because of his service to the Company. At present, there is no
pending litigation or proceeding where indemnification would be required or
permitted under these Agreements; nor is the Company aware of any threatened
litigation or proceeding which might result in such a claim for indemnification.
CONTROL
By virtue of their positions in the Company and ownership of the Company's
Common Stock, Robert P. McGrath and Joan M. McGrath may be deemed "control
persons" of the Company as that term is defined under the Securities Act of
1933, as amended.
FAMILY RELATIONSHIPS
There are no family relationships between any director or executive officer
of the Company except that Robert P. McGrath and Joan M. McGrath are husband and
wife.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company which are intended to be presented
at the Company's 1997 Annual Meeting must be received by the Company no later
than December 26, 1996, in order that they may be included in the proxy
statement and form of proxy relating to that meeting.
Dated: April 23, 1996 THE BOARD OF DIRECTORS
-13-
MCGRATH RENTCORP
PROXY
THE BOARD OF DIRECTORS SOLICITS THIS PROXY FOR THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD ON THURSDAY, JUNE 13,
1996 AT 2:00 P.M., LOCAL TIME, AT THE MCGRATH RENTCORP
CORPORATE HEADQUARTERS LOCATED AT 2500 GRANT AVENUE, SAN
LORENZO, CALIFORNIA 94580.
The undersigned hereby constitutes and appoints Robert P. McGrath and Delight
Saxton, or each of them, with full power of substitution and revocation,
attorneys and proxies of the undersigned at the Annual Meeting of Shareholders
of McGrath RentCorp or any adjournments thereof, and to vote, including the
right to cumulate votes (if cumulative voting is required), the shares of Common
Stock of McGrath RentCorp registered in the name of the undersigned on the
record date for the Meeting.
/ / FOR the election of Bryant J. Brooks, Joan M. McGrath, Robert P.
McGrath, Delight Saxton and Ronald H. Zech as directors (TO
WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME);
OR
/ / TO WITHHOLD AUTHORITY to vote for any of the nominees for
director listed above.
Approval of the appointment of Arthur Andersen LLP as McGrath
RentCorp's independent public accountants for the fiscal year ending
December 31, 1996.
/ / FOR / / AGAINST / / ABSTAIN
The Board of Directors recommends a vote FOR the nominees named in Proposal 1
and FOR Proposal 2. The shares represented by this Proxy will be voted as
directed above; IF NO SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR SAID
PROPOSALS AND NOMINEES. In their discretion, the proxies are authorized to vote
upon such other business as may properly come before the Meeting to the extent
authorized by Rule 14a-4(c) promulgated by the Securities and Exchange
Commission.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders, the Proxy Statement and the 1995 Annual Report to Shareholders
furnished with this Proxy.
Dated: , 1996
--------------------------------
----------------------------------------
SIGNATURE
----------------------------------------
SIGNATURE
Signature should agree with name
printed hereon. If stock is held in
the name of more than one person,
EACH joint owner should sign.
Executors, administrators, trustees,
guardians, and attorneys should
indicate the capacity in which they
sign. Attorneys should submit
powers of attorney.
PLEASE RETURN THIS SIGNED AND DATED PROXY
IN THE ACCOMPANYING ADDRESSED ENVELOPE
