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
MCGRATH RENT CORP
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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)(1)
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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(4) Date Filed:
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[ LOGO ] MCGRATH RENTCORP
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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JUNE 5, 1997
Notice is hereby given that the 1997 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 5, 1997, 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 an amendment to the Bylaws of McGrath RentCorp to
increase the authorized number of directors.
3. To approve the appointment of Arthur Andersen LLP as McGrath
RentCorp's independent public accountants for the year ending
December 31, 1997; and
4. 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 15, 1997 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 24, 1997 DELIGHT SAXTON, SECRETARY
MCGRATH RENTCORP
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PROXY STATEMENT
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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 1997 Annual Meeting of
Shareholders to be held on Thursday, June 5, 1997, 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 28, 1997, to all
shareholders entitled to vote at the Meeting.
RECORD DATE AND OUTSTANDING SHARES
Shareholders of record at the close of business on April 15, 1997, are
entitled to notice of, and to vote at, the Meeting. At the record date,
15,008,518 shares of the Company's Common Stock were issued and outstanding.
THE COMPANY'S OUTSTANDING COMMON STOCK WAS SPLIT 2-FOR-1 ON APRIL 15,
1997 (THE "RECORD DATE"). ON APRIL 25, 1997 (THE "PAYMENT DATE"), NEW STOCK
CERTIFICATES WILL BE MAILED TO EACH SHAREHOLDER OF RECORD AS OF THE RECORD
DATE (APRIL 15) TO EVINCE ONE ADDITIONAL SHARE FOR EACH SHARE HELD ON THE
RECORD DATE. THEREFORE, FOR EACH SHARE OF THE COMPANY'S COMMON STOCK HELD BY
A SHAREHOLDER IMMEDIATELY PRIOR TO APRIL 15, THE SHAREHOLDER BECAME THE
HOLDER OF TWO SHARES OF COMMON STOCK AND WILL BE ENTITLED TO VOTE BOTH SHARES
AT THE ANNUAL MEETING OF SHAREHOLDERS.
ANY PERSON WHO BOUGHT A SHARE OF THE COMPANY'S COMMON STOCK BETWEEN APRIL
15 AND APRIL 25, 1997 IS ENTITLED TO RECEIVE THE ADDITIONAL SHARE BEING
MAILED ON APRIL 25, 1997. THE COMPANY'S COMMON STOCK IS TRADED ON THE NASDAQ
NATIONAL MARKET SYSTEM UNDER THE SYMBOL "MGRC," AND PRICES ON NASDAQ WILL BE
ADJUSTED ON APRIL 28, 1997 (THE "EX DATE," THE FIRST BUSINESS DAY AFTER THE
PAYMENT DATE) TO REFLECT THE STOCK SPLIT.
ALL SHARE AND PER SHARE NUMBERS IN THIS PROXY STATEMENT REFLECT THIS
2-FOR-1 STOCK SPLIT; HOWEVER, THE SHARE AND PER SHARE NUMBERS PRINTED IN THE
COMPANY'S 1996 ANNUAL REPORT TO SHAREHOLDERS (ACCOMPANYING THIS PROXY
STATEMENT) DO NOT REFLECT THE STOCK SPLIT.
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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 not revoked
will be voted in the election of directors "FOR" the nominees of the Board of
Directors and "FOR" Proposals Nos. 2 and 3 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.
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PROPOSAL NO. 1: ELECTION OF DIRECTORS
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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
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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 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 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 70 Independent Financial Consultant 1989
Joan M. McGrath 60 Businesswoman 1982
Robert P. McGrath 63 Chairman of the Board and Chief
Executive Officer of the Company 1979
Delight Saxton 51 Chief Financial Officer, Vice President of
Administration and Secretary of the Company 1982
Ronald H. Zech 53 Chairman of the Board, President and Chief
Executive Officer of GATX Corporation 1989
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
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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. In 1995, he was elected Chief Executive
Officer of that corporation, and in 1996 was elected its Chairman of the
Board. 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 five meetings and took
corporate action by unanimous written consent another five times during the
year ended December 31, 1996. All members of the Board of Directors
participated at each meeting and on each corporate action.
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 1996, and all members of the Committee participated at each meeting.
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 1996,
and all members of the Committee participated at that meeting.
The Board has a Long-Term Stock Bonus Plan Committee which administers
the Company's Long-Term Stock Bonus Plan. 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 held no meetings but took action by
unanimous written consent one time during 1996.
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 plus an additional fee of $600 per meeting 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). Mr. Brooks and Mr. Zech each received $13,400
for their services as directors of the Company during 1996. All
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directors, including those who are officers or employees of the Company, are
reimbursed for expenses incurred in connection with attending Board or
Committee meetings.
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PROPOSAL NO. 2: AMENDMENT OF BYLAWS
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The Board of Directors is submitting to the shareholders for their
approval a proposal to amend the Bylaws of the corporation to increase the
authorized number of persons to sit as directors on the Company's Board.
The Company's Bylaws currently provide that the number of directors of
the corporation shall be between three (3) and five (5) with the exact number
to be set by either the Board or the shareholders. The exact number has been
set at five (5) directors since 1989. Since 1989, the Company's business has
more than doubled to annual revenues of over $89 Million. The Board of
Directors believes that the Company would be well served by augmenting the
Board with additional, qualified directors. The Board requests the
shareholders approve a change in the authorized number of directors to a
variable number between four (4) and seven (7), with the exact number
remaining at five (5) until changed at some time in the future by either the
Board or the shareholders. It is the Board's intention to increase its size
at such time one or more new, qualified directors are selected and agree to
serve. At this point, no candidates to become new members of the Board of
Directors have been identified.
The Board of Directors has unanimously recommended that the shareholders
approve amending Section 3.2 of the Bylaws of the Company so the section will
read as follows:
"3.2 NUMBER OF DIRECTORS. The number of directors of the
corporation shall be not less than four (4) nor more than seven (7).
The exact number of directors shall be five (5) until changed, within
the limits specified above, by an amendment to this Section 3.2 duly
adopted by either the Board of Directors or the shareholders. The
indefinite number of directors may be changed, or a definite number
fixed without provision for an indefinite number, by an amendment to
this Section 3.2 duly adopted by the vote or written consent of a
majority of the outstanding shares entitled to vote."
The Board of Directors recommends a vote "FOR" such proposal.
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PROPOSAL NO. 3: 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 year ending December 31, 1997. A resolution will be
offered at the Meeting to approve the appointment of Arthur Andersen LLP as
the Company's independent public accountants.
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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.
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OTHER MATTERS
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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.
STOCK PRICE PERFORMANCE GRAPH
The following graph compares the Company's stock price since December 31,
1991 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").
[PERFORMANCE GRAPH]
The graph assumes an investment of $100 on December 31, 1991 and monthly
reinvestment of dividends thereafter, and is based upon information provided
to the Company by Value Line, Inc.
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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 63 Chairman of the Board and
Chief Executive Officer
Dennis C. Kakures 40 President and Chief Operating Officer
Delight Saxton 51 Chief Financial Officer, Vice President
of Administration and Secretary
Thomas J. Sauer 40 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.
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.
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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
years.
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
NAME AND ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS AWARDS(1) PAYOUT(2) COMPENSATION(3)
------------------ ---- -------- -------- --------- --------- ---------------
ROBERT P. MCGRATH 1996 $336,000 $201,449 -- -- $12,571
CHAIRMAN AND CHIEF 1995 336,000 87,494 -- -- 13,018
EXECUTIVE OFFICER 1994 320,000 167,910 -- -- 11,228
DENNIS C. KAKURES 1996 192,000 115,114 $42,900 $38,094 14,732
PRESIDENT AND CHIEF 1995 192,000 50,938 24,681 30,803 15,138
OPERATING OFFICER 1994 160,000 100,746 13,430 34,921 14,395
DELIGHT SAXTON 1996 141,120 65,149 -- -- 14,732
CHIEF FINANCIAL OFFICER, 1995 134,400 35,656 -- -- 15,138
VICE PRESIDENT OF ADMIN- 1994 128,000 67,164 -- -- 14,395
ISTRATION AND SECRETARY
THOMAS J. SAUER 1996 125,297 58,595 29,201 26,452 14,732
VICE-PRESIDENT AND 1995 117,100 31,067 16,796 19,671 15,138
TREASURER 1994 108,900 61,445 9,656 20,121 14,395
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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 1996, and his or her share of any re-allocations of forfeited
benefits in 1996. See "Employee Stock Ownership Plan" below.
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. A trust was
created by the Company under the ESOP to hold plan assets, with Union Bank of
California, N.A. acting as trustee. The Company may amend or terminate the
ESOP at any time. All assets acquired by the trust are administered by a Plan
Committee composed of Nanci Clifton, Edward Diaz, Brian Jensen, Thomas Sauer,
Delight Saxton and Sandy Waggoner (all Company employees) for the exclusive
benefit of employees who are participants in the ESOP and their designated
beneficiaries.
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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, 1996, 153 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 contributed $650,000 cash to the ESOP for the 1996 plan year, and it
had made an aggregate of $2,525,000 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 2,000,000 shares of the Company's Common Stock under
options. As of April 15, 1997, options for an aggregate of 852,000 shares
had been granted to 28 key employees at exercise prices ranging between $3.06
and $10.75 per share; and of such options granted, options have been
exercised for the purchase of 446,068 shares, options for 25,580 shares have
been terminated, and options for the remaining 380,352 shares are still
outstanding. A balance of 1,173,580 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 1996, and no options under the Plan were exercised by any of
the Company's executive officers during 1996. Thomas J. Sauer is the only
executive officer of the Company who held an option under the Plan as of
December 31, 1996. Mr. Sauer was granted an option in 1987 for the purchase
of 150,000 shares at an exercise price of $3.06 per share. As of December
31, 1996, Mr. Sauer had the right to exercise that option as to 147,000
shares, and the remaining 3,000 shares had not yet become exercisable. Based
upon a market price of the Company's Common Stock of $12.88 on December 31,
1996, the exercisable portion of Mr. Sauer's option had a value of $1,893,360
as of that date, and the unexercised portion had a value of $38,640. (Mr.
Sauer exercised this option and purchased the 150,000 shares in April 1997.)
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
400,000 shares of the Company's Common Stock
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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.
Nine 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, 1997 and 1998.
The following table sets forth certain information with respect to shares
of the Company's Common Stock under the first seven Long-Term Stock Bonus
Agreements entered into by the Company with Messrs. Kakures and Sauer. The
conclusion of the performance periods for the eighth and ninth 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 12/31/96 WILL VEST IN
---------------- --------------
NAME EARNED VESTED 1997 1998 1999 2000
- ---- -------- --------- ------ ------ ------ ------
DENNIS C. KAKURES SHARES 62,082 37,810 7,506 7,506 5,928 3,332
VALUE $579,576 $307,166 $80,975 $80,975 $67,562 $42,900
THOMAS J. SAUER SHARES 40,000 23,356 5,172 5,170 4,034 2,268
VALUE $378,861 $192,397 $55,653 $55,634 $45,978 $29,201
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 executive compensation should be reflective of the executive's, as
well as the Company's, current and long-term performance, and 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 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
management should have significant equity participation through the ownership
of Common Stock of the
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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
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 for 1996 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 Chief Executive Officer and the President/Chief Operating Officer
were eligible to receive bonuses ranging from zero up to a maximum of 70% of
their base salaries. The other executive officers of the Company were
eligible to receive bonuses ranging from zero up to a maximum of 56% of their
base salaries. The aggregate cash incentive bonuses earned by all the
Company's executives for 1996 was 55% of their base 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 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.
CHIEF EXECUTIVE OFFICER'S COMPENSATION -- Throughout 1996, 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).
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BASE SALARY -- After a review in early 1996 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, the Executive Compensation Committee decided to make
Mr. McGrath's compensation more dependent upon the success of the Company by
holding his salary at its 1995 level of $336,000, but increasing the maximum
amount of incentive bonus which he could earn.
ANNUAL CASH INCENTIVE BONUS -- Mr. McGrath earned a cash incentive
bonus of $201,449 for 1996 (60% 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 1996 in accordance with the formula which had been
established by the Executive Compensation Committee early in that year.
LONG-TERM STOCK OWNERSHIP INCENTIVES -- Mr. McGrath did not
participate 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).
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 40 investor-owners who had 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 $1,406,569. Mr. McGrath has a 1% profits
interest and a 14% contingent, subordinated profits interest in the three
limited partnerships. Mr. McGrath was allocated an aggregate of $157,520 of
profits from these three limited partnerships during 1996. 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 units for the year ended December 31, 1996 was
$45,574 and his share of operating expenses, management fees and incentive
fees paid to the Company for the year was $27,178.
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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 15
1997. 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 2,321,414 15.47%
AND Joan M. McGrath(1, 2, 3) 2500 Grant Avenue
San Lorenzo, CA 94580
T. Rowe Price Associates, Inc.(4) 100 E. Pratt Street 1,592,400 10.61%
AND T. Rowe Price Small Cap Baltimore, MD 21202
Value Fund, Inc.
Granahan Investment Manage- 275 Wyman Street 805,800 5.37%
ment, Inc.(5) Waltham, MA 02154
Sanford C. Bernstein & Co., Inc. One State Street Plaza 796,700 5.31%
New York, NY 10004
Vanguard Explorer Fund, Inc.(6) Vanguard Financial Center 779,800 5.20%
Valley Forge, PA 19482
Delight Saxton(1, 3) McGrath RentCorp 338,958 2.26%
2500 Grant Avenue
San Lorenzo, CA 94580
Dennis C. Kakures(3, 7) McGrath RentCorp 320,226 2.13%
2500 Grant Avenue
San Lorenzo, CA 94580
Thomas J. Sauer(3, 7) McGrath RentCorp 258,708 1.72%
2500 Grant Avenue
San Lorenzo, CA 94580
Ronald H. Zech(1) GATX Corporation 7,000 0.05%
500 West Monroe
Chicago, IL 60661
Bryant J. Brooks(1) Sansome Street Appraisers 2,000 0.01%
114 Sansome Street
San Francisco, CA 94104
All Executive Officers and Directors as a group (7 PERSONS)(2, 3, 7) 3,248,306 21.64%
-------------------------------
1 Currently a director of the Company. (NOTES CONTINUED . . . . )
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2 Includes 239,006 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 51,938 shares for Mr. McGrath, 30,220 shares for
Ms. McGrath, 38,958 shares for Ms. Saxton, 44,650 shares for
Mr. Kakures, 32,708 shares for Mr. Sauer, and 198,474 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, including T. Rowe Price Small Cap Value Fund, Inc. which
owns 1,174,400 shares, 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 Granahan Investment Management, Inc. is an institutional investment
firm which disclaims beneficial ownership in these shares. Some of
these shares may be the same as those reported above for Vanguard
Explorer Fund, Inc.
6 Some of these shares may be the same as those reported above for
Granahan Investment Management, Inc.
7 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 24,272 shares for Mr. Kakures, 16,644 shares for
Mr. Sauer, and 40,916 shares for all executive officers as a group.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
COMPLIANCE WITH SECTION 16(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 Section 16(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 Section
16(a) reports the Company received from such persons during or with respect
to 1996, 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
1996, the Company believes that all reporting requirements under Section
16(a) for 1996 and prior years were met in a timely manner by its directors,
executive officers and greater than 10% shareholders.
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 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.
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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 1998 Annual Meeting must be received by the
Company no later than December 29, 1997, in order that they may be included
in the proxy statement and form of proxy relating to that meeting.
Dated: April 24, 1997 THE BOARD OF DIRECTORS
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MCGRATH RENTCORP
PROXY
THE BOARD OF DIRECTORS SOLICITS THIS PROXY FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON THURSDAY, JUNE 5, 1997 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.
PROPOSAL NO.2: Approval of amending McGrath RentCorp's Bylaws to
increase the authorized number of directors to a variable number not
less than four (4) nor greater than seven (7).
/ / FOR / / AGAINST / / ABSTAIN
PROPOSAL NO.3: Approval of the appointment of Arthur Andersen LLP as
McGrath RentCorp's independent public accountants for the year ending
December 31, 1997.
/ / FOR / / AGAINST / / ABSTAIN
The Board of Directors recommends a vote FOR the nominees named above and FOR
Proposals Nos. 2 and 3. The shares represented by this Proxy will be voted
as directed above; IF NO SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR
SAID NOMINEES AND PROPOSALS. The proxies are authorized to vote in their
discretion 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 1996 Annual Report to
Shareholders furnished with this Proxy.
Dated: , 1997
-------------
-------------------------------------------
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
