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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 Rule 14a-11(c) or Rule 14a-12
McGrath RentCorp
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(Name of Registrant as Specified In Its Charter)
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(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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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McGRATH LOGO MCGRATH RENTCORP
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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May 30, 2001
Notice is hereby given that the 2001 Annual Meeting of Shareholders of
McGrath RentCorp, a California corporation, will be held at McGrath RentCorp's
Corporate Headquarters located at 5700 Las Positas Road, Livermore, California
94550, on Wednesday, May 30, 2001, at 2:00 p.m., local time, for the following
purposes:
1. To elect six directors to serve until the next annual meeting
of shareholders and until their respective successors are duly
elected;
2. To approve the appointment of Arthur Andersen LLP as McGrath
RentCorp's independent public accountants for the year ending
December 31, 2001; 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 13, 2001 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 26, 2001 RANDLE F. ROSE, SECRETARY
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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 2001 Annual Meeting of
Shareholders to be held on Wednesday, May 30, 2001, 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 5700 Las Positas Road, Livermore,
California 94550.
These proxy materials were mailed on or about April 27, 2001, to all
shareholders entitled to vote at the Meeting.
RECORD DATE AND OUTSTANDING SHARES
Shareholders of record at the close of business on April 13, 2001, are
entitled to notice of, and to vote at, the Meeting. At the record date,
12,170,046 shares of the Company's Common Stock were issued and outstanding. The
Company has no other class of voting securities issued or 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 (six) 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 (six), 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" Proposal No. 2 described in this Proxy Statement. If any other matters
come before the Meeting of which the Company was not aware by March 13, 2001,
the proxy holders will vote on such matters in their discretion. The Company
does not anticipate, as of this date, that any matters other than as set forth
in this Proxy Statement will come before the Meeting.
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SOLICITATION; REVOCABILITY OF PROXIES
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. Certain of the Company's directors, officers
and regular employees, without additional compensation, may also solicit proxies
personally or by telephone or telegram. 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
The shareholders elect directors of the Company annually. The Board has
nominated the six persons named in the table below for election as directors to
serve until the next annual meeting of shareholders and until their respective
successors are duly elected. The remaining directors may fill vacancies that may
occur on the Board of Directors prior to an annual meeting of shareholders.
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 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 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.
Name of Nominee Age Principal Occupation Director Since
--------------- --- -------------------- --------------
William J. Dawson 46 Corporate Senior Vice President, Business 1998
Development of McKesson HBOC, Inc.
Robert C. Hood 60 Investor, retired executive 1999
Joan M. McGrath 64 Businesswoman 1982
Robert P. McGrath 67 Chairman of the Board and Chief Executive 1979
Officer of the Company
Delight Saxton 55 Senior Vice President of the Company 1982
Ronald H. Zech 57 Chairman of the Board, President and Chief 1989
Executive Officer of GATX Corporation
DESCRIPTION OF NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
WILLIAM J. DAWSON was elected a director of the Company in 1998, and he
serves on its Audit and Executive Compensation Committees. From 1993 through
1998, Mr. Dawson was a Managing Director of Volpe Brown Whelan, LLC, an
investment banking firm, where he was responsible for corporate finance
activities in the healthcare industry. In August 1998, Mr. Dawson joined
McKesson HBOC, Inc., a large healthcare services company, as Corporate Senior
Vice President, Business Development, with responsibility for mergers &
acquisitions and venture capital investments.
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ROBERT C. HOOD was elected by the Board of Directors to fill a vacancy on
the Board in December 1999. Mr. Hood serves on the Board's Audit and Executive
Compensation Committees. From 1996 to 1999, Mr. Hood was Executive Vice
President and Chief Financial and Administrative Officer of Excite, Inc., an
Internet portal company. Mr. Hood is now retired.
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.
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 through 1993. He is a member of
the Executive Compensation Committee of the Company's Board of Directors.
DELIGHT SAXTON has been with the Company since its inception in 1979, and a
director since 1982. She served as Secretary of the Company from 1982 to 1999,
its Treasurer from 1982 to 1989, its Vice President of Administration from 1989
to 1997, and its Chief Financial Officer from 1993 to 1999. She has been a
Senior Vice President of the Company since 1997. She is responsible for facility
development and general management.
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
provides specialized finance and leasing solutions for customers and partners
worldwide. Mr. Zech also serves on the Board of Directors of The PMI Group,
Inc., a New York Stock Exchange listed company engaged in the business of
providing private mortgage insurance.
BOARD MEETINGS
The Board of Directors of the Company held five meetings and took corporate
action by unanimous written consent another seven times during the year ended
December 31, 2000.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an Audit Committee consisting of Directors
William J. Dawson, Robert C. Hood and Ronald H. Zech. The Audit Committee, among
other things, nominates the independent auditors of the Company to be approved
by the Board of Directors and the shareholders, and meets with the independent
auditors and the financial staff of the Company to review audits, financial
reporting and internal controls. A more detailed description of the Audit
Committee's responsibilities is set forth in the Audit Committee Charter
attached hereto as Appendix A. The Audit Committee met four times during 2000.
The Board of Directors also has a four-member Executive Compensation
Committee consisting of Directors William J. Dawson, Robert C. Hood, 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 2000.
COMPENSATION OF DIRECTORS
Each director who is not also an officer or employee of the Company was
compensated for his services as a director at the rate of $16,000 per annum plus
an additional fee of $750 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
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conjunction with a Board meeting, only one $750 fee is paid to the director).
Mr. Dawson and Mr. Zech each received $21,250 for his services as a director of
the Company during 2000, and Mr. Hood received $22,000 for his services as a
director during 2000. All directors, including those who are officers or
employees of the Company, are reimbursed for expenses incurred in connection
with attending Board or Committee meetings.
In addition to cash compensation, the three outside directors of the
Company during 2000 (Messrs. Dawson, Hood and Zech) each received a
non-qualified stock option under the Company's 1998 Stock Option Plan for the
purchase of 4,000 shares of the Company's common stock at an exercise price of
$15.938 per share. See "Executive Officers of the Company -- 1998 Stock Option
Plan" below.
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 the year ending December 31, 2001. A resolution will be offered
at the Meeting to approve the appointment of Arthur Andersen LLP as the
Company's independent public accountants.
The Company incurred fees with Arthur Andersen LLP for the audit of the
books and records of the Company for the year ending December 31, 2000 and for
quarterly financial reviews during that year in the amount of $125,000, and fees
for other services during 2000 in the amount of $24,500.
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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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 67 Chairman of the Board and Chief Executive
Officer
Dennis C. Kakures 44 President and Chief Operating Officer
Delight Saxton 55 Senior Vice President
Thomas J. Sauer 44 Vice President and Chief Financial Officer
Scott A. 40 Vice President
Alexander
Randle F. Rose 43 Vice President of Administration and Secretary
Laura C. Cissell 36 Vice President
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.
THOMAS J. SAUER joined the Company in 1983 as its Accounting Manager,
served as its Controller from 1987 to March 1999, became Treasurer in 1989, a
Vice President in 1995, and Chief Financial Officer in 1999. Mr. Sauer is
responsible for accounting, financial reporting, corporate taxes, and the
Company's relationships with its bankers and auditors.
SCOTT A. ALEXANDER joined the Company in 1982 as a sales representative,
became a Branch Manager in 1990, and a Vice President in 1997. Mr. Alexander is
responsible for the operation of the Mobile Modular Division.
RANDLE F. ROSE joined the Company in 1997 as its Vice President of
Administration, and was elected Secretary of the Company in 1999. Mr. Rose is
responsible for administration of human resources, risk management, MIS, real
estate and facilities. For the three years prior to joining the Company, Mr.
Rose was Vice President, Finance of Ardenbrook, Inc., a real estate company.
LAURA C. CISSELL joined the Company in 1988 as a marketing representative,
became Marketing Manager in 1994, and received several promotions thereafter
culminating in being elected a Vice President in November 2000. Ms. Cissell is
responsible for the operations of the RenTelco Division.
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 four most highly compensated
executive officers for services rendered in all capacities to the Company for
each of the last three years.
Long-Term
Annual Compensation Compensation
Name and ------------------- ------------ All Other
Principal Position Year Salary Bonus Awards(1) Payout(2) Compensation(3)
------------------ ---- ------ ----- --------- --------- ---------------
Robert P. McGrath 2000 $424,000 $295,663 -- -- $12,473
Chairman and Chief 1999 385,000 111,024 -- -- 12,579
Executive Officer 1998 370,440 130,225 -- -- 13,274
Dennis C. Kakures 2000 280,000 192,442 $11,606 $299,569 12,473
President and Chief 1999 250,000 70,481 55,388 268,864 12,579
Operating Officer 1998 221,760 72,598 89,166 193,111 13,274
Thomas J. Sauer 2000 185,000 101,973 7,576 191,912 12,473
Vice President and 1999 165,000 35,560 36,155 172,547 12,579
Chief Financial 1998 144,718 38,130 58,190 124,013 13,274
Officer
Scott A. Alexander 2000 145,000 51,500 -- -- 12,473
Vice President 1999 133,000 22,085 -- -- 12,579
1998 125,000 48,061 -- -- 13,274
Thomas L. Sanders(4) 2000 145,000 52,020 -- -- 12,473
Vice President 1999 133,000 21,973 -- -- 12,579
1998 125,000 46,659 -- -- 13,274
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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 that year, and his share of any re-allocations of forfeited
benefits during that year (see "Employee Stock Ownership Plan" below).
4 Mr. Sanders resigned from the Company in January 2001.
EMPLOYEE STOCK OWNERSHIP PLAN
The Company's Employee Stock Ownership Plan ("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. The Company created a trust 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 J. Sauer, Delight Saxton and Sandy Waggoner (all Company
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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, 2000, 193 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 Company's Board of Directors determines the
amount of Company contributions to the ESOP in cash, Company stock or other
property each year with consideration for federal tax laws. The Company's Board
of Directors has authorized an $800,000 cash contribution to the ESOP for the
2000 plan year, and the Company had made an aggregate of $2,900,000 cash
contributions for the four years prior to that. 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.
1987 INCENTIVE STOCK OPTION PLAN
The Company has a 1987 Incentive Stock Option Plan (the "1987 Plan") under
which options have been granted to key employees of the Company for the purchase
of its Common Stock. Options granted under the 1987 Plan are intended to qualify
as incentive stock options as that term is defined in Section 422 of the
Internal Revenue Code of 1986, as amended. The 1987 Plan authorized the issuance
of an aggregate of 2,000,000 shares of the Company's Common Stock under options.
As of April 13, 2001, 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 633,828 shares, options for 60,162 shares have been terminated, and
options for 158,010 shares remain outstanding. The 1987 Plan is now terminated
by its terms, and no further options will be granted under it; however, the
options held by key employees for 158,010 shares still outstanding remain
exercisable in accordance with the terms of those options. The following table
sets forth certain information with respect to an option held by one of the
Company's officers during 2000. With the exception of the information set forth
below, none of the Company's executive officers listed in the "Summary
Compensation Table" above exercised or held an option during 2000 under the 1987
Plan.
Number of Shares Underlying Value of Unexercised In-the-
Shares Acquired Value Unexercised Options at Year End Money Options at Year End
Name on Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
---- --------------- -------- ------------------------------- ----------------------------
Thomas L. Sanders 2,750 $27,501 10,250 / 0 $127,484 / 0
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1998 STOCK OPTION PLAN
The Company has a 1998 Stock Option Plan (the "1998 Plan") that authorizes
the issuance of an aggregate of 2,000,000 shares of the Company's Common Stock
under options to officers, key employees, directors and other persons who
provide valuable services to the Company or its subsidiaries. Options granted
under the 1998 Plan may be either incentive stock options as defined in Section
422 of the Internal Revenue Code of 1986, as amended, or options which are not
incentive stock options ("non-qualified options"). As of April 13, 2001, options
for an aggregate of 552,000 shares have been granted to 63 key employees at
exercise prices ranging between $15.625 and $20.81 per share; and of such
options granted, no options have been exercised, options for 60,500 have been
terminated, and options for 491,500 shares remain outstanding. In addition to
these options to key employees, options for an aggregate 60,000 shares have been
granted to outside directors of the Company at exercise prices ranging between
$15.938 and $21.6875 per share; and of such options granted, no options have
been exercised, options for 10,000 shares have been terminated, and options for
50,000 remain outstanding. No options have been granted under the 1998 Plan to
any of the Company's executive officers listed in the "Summary Compensation
Table" above. 1,458,500 shares remain available in the 1998 Plan for future
option grants.
LONG-TERM STOCK BONUS PLANS
The Company's [1990] Long-Term Stock Bonus Plan reserved 400,000 shares of
the Company's Common Stock 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. This Plan
terminated on December 31, 1999. Last year, the Board of Directors and
shareholders of the Company adopted the McGrath RentCorp 2000 Long-Term Stock
Bonus Plan to replace the prior plan, and under which another 400,000 shares of
the Company's Common Stock are reserved for bonuses to be granted to officers
and key employees under conditions substantially the same as the prior plan.
Stock Bonus Agreements have been entered into with Dennis C. Kakures, the
Company's President and Chief Operating Officer, and Thomas J. Sauer, the
Company's Vice President and Chief Financial Officer. To date, Messrs. Kakures
and Sauer are the only persons who have received Stock Bonus Agreements. Each
Agreement provided for a stock bonus to the officer dependent upon the return on
equity realized for the Company's shareholders over a three-year period, and
starting with Agreements entered into in 1998, also dependent upon the growth in
the Company's net income over that three-year period before taking into account
any income derived from or expenses attributable to interest, income taxes,
depreciation and/or amortization ("EBITDA"). The Agreements also provide that
the right to receive any stock bonus earned is subject to vesting over a
four-year period contingent upon the officer remaining in the employ of the
Company. Messrs. Kakures and Sauer were awarded stock bonuses based upon the
Company's performance over the three-year period ended December 31, 2000. The
following table sets forth certain information with respect to the stock bonuses
awarded. The "Values" in the table are calculated based on the market value of
the shares of Common Stock as of December 31, 2000.
As of 12/31/00 Will Vest at December 31,
------------------ ----------------------------------------
Earned Vested 2001 2002 2003 2004
Name ------- ------- ------- ------- ------- -------
Dennis C. Kakures Shares 2,994 599 599 599 599 598
Value $58,009 $11,606 $11,606 $11,606 $11,606 $11,586
Thomas J. Sauer Shares 1,954 391 391 391 391 390
Value $37,859 $7,576 $7,576 $7,576 $7,576 $7,556
The Company has entered into further Stock Bonus Agreements with both Mr.
Kakures and Mr. Sauer, under which a maximum aggregate of 45,459 shares in
additional stock bonuses could be awarded if the Company's performance goals
over the successive three-year periods ending December 31, 2001 and 2002 are
met. 373,879 shares remain available in the 2000 Plan for future bonus grants.
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REPORT BY THE EXECUTIVE COMPENSATION COMMITTEE
The Company has a four-member Executive Compensation Committee, consisting
of its three outside directors, William J. Dawson, Robert C. Hood 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 reflect 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 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 Bonuses - The Executive Compensation Committee has
divided the executive officers into four groups for purposes of providing cash
incentive bonuses: the Chief Executive Officer, the next two highest compensated
officers, the next two highest compensated officers thereafter, and the
remainder of the Company's executive officers.
The Executive Compensation Committee adopted a formula in early 2000
for calculating a cash incentive bonus for the Company's Chief Executive Officer
for 2000 based solely upon the Company achieving certain levels of pre-tax
profit for the year, with him being eligible to receive a bonus ranging from
zero up to a maximum of 70% of his base salary. See "Chief Executive Officer's
Compensation" below.
At the same time, the Executive Compensation Committee adopted a
formula for calculating cash incentive bonuses for the next two highest
compensated executive officers of the Company (Mr. Kakures and Mr. Sauer) 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%).
Mr. Kakures was eligible to receive a bonus ranging from zero up to a maximum of
70% of his base salary, while Mr. Sauer was eligible to receive a bonus ranging
from zero up to a maximum of 56% of his base salary. The aggregate cash
incentive bonuses earned by these two executive officers under this program for
2000 was 63% of their aggregate base salaries.
The Executive Compensation Committee had also directed the Chief
Executive Officer and the President and Chief Operating Officer of the Company
to determine jointly at the end of 2000 the amount of incentive bonuses which
should be paid for that year to the next two highest compensated executive
officers of the Company (Mr. Alexander and Mr. Sanders) based upon the extent to
which each achieved his own individual performance goals. These two officers
were eligible to receive bonuses ranging from zero to a
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maximum of 36% of their base salaries. The aggregate cash incentive bonuses
awarded to these two executive officers for 2000 was 36% of their aggregate 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 1998 Stock Option Plan.
The Executive Compensation Committee may make recommendations to the
Company's Board of Directors with respect to the granting of stock bonuses under
the Company's 2000 Long-Term Stock Bonus Plan to executive officers. The Plan
has been used to reward the achievement of pre-set, long-term financial goals;
and the bonuses of stock have been awarded for achieving pre-set goals with
respect to the return on equity realized by the Company over successive
three-year periods. See "Long-Term Stock Bonus Plans" above.
The Executive Compensation Committee may make recommendations to the
Board of Directors with respect to the granting of stock options under the 1998
Stock Option Plan to executive officers. The Board has granted stock options
from time to time to executive officers and other key personnel of the Company
under the 1998 Plan and earlier option plans 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 2000, 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 - After a review in early 2000 of Mr. McGrath's level of
responsibility, performance and contributions to the Company's success, the
Executive Compensation Committee raised Mr. McGrath's base salary to $424,000.
Annual Cash Incentive Bonus - Mr. McGrath earned a cash incentive bonus
of $295,663 for 2000 (70% 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 2000 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:
William J. Dawson Robert C. Hood
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.
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STOCK PRICE PERFORMANCE GRAPH
The following graph compares the Company's stock price since December 31,
1995 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"), and (3) the Russell 2000 Index.
[PERFORMANCE GRAPH]
MCGRATH RENTCORP S & P 500 RUSSELL 2000 INDUSTRIAL SERVICES
---------------- --------- ------------ -------------------
1995 100 100 100 100
1996 139 123 116 148
1997 269 164 142 213
1998 246 211 138 167
1999 200 254 163 246
2000 247 228 157 305
The graph assumes an investment of $100 on December 31, 1995 and monthly
reinvestment of dividends thereafter, and is based upon information provided to
the Company by Value Line, Inc.
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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, the chief
executive officer and the other four most highly compensated officers of the
Company, and all officers and directors as a group as of April 13, 2001. 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 Shares Outstanding
---- --------- -------------
Robert P. and Joan M. McGrath(1, 2 ).......... 2,293,162 18.8%
McGrath RentCorp
5700 Las Positas Road
Livermore, CA 94550
T. Rowe Price Associates, Inc.(3)............. 1,913,100 15.7%
100 E. Pratt Street
Baltimore, MD 21202
Dimensional Fund Advisors, Inc.(4)............ 735,600 6.0%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Dennis C. Kakures(2, 5)....................... 353,465 2.9%
Delight Saxton(2)............................. 340,519 2.8%
Thomas J. Sauer(2, 5)......................... 281,076 2.3%
Scott A. Alexander(2)......................... 205,869 1.7%
Thomas L. Sanders(2, 6, 7).................... 29,450 *
Ronald H. Zech(6)............................. 16,000 *
William J. Dawson(6).......................... 8,500 *
Robert C. Hood(6)............................. 2,500 *
All Executive Officers and Directors as a
group (12 persons)(1, 2, 5, 6).............. 3,565,379 29.2%
- ------------
* Denotes less than 1%.
1 Includes 399,006 shares held by two organizations controlled by Mr. and
Mrs. McGrath; however, they disclaim any beneficial interest in such
shares.
2 Includes the shares held by the McGrath RentCorp Employee Stock Ownership
Plan for benefit of the named individual. The number of shares included
is 54,744 shares for Mr. McGrath, 30,662 shares for Ms. McGrath, 47,554
shares for Mr. Kakures, 41,519 shares for Ms. Saxton, 35,613 shares for
Mr. Sauer, 39,867 shares for Mr. Alexander, 9,450 shares for Mr. Sanders,
and 266,497 shares for all executive officers 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).
3 These securities are owned by various individual and institutional
investors, including T. Rowe Price Small Cap Value Fund, Inc. that owns
1,280,000 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.
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4 Dimensional Fund Advisors Inc. ("Dimensional"), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940,
furnishes investment advice to four investment companies registered under
the Investment Company Act of 1940, and serves as investment manager to
certain other investment vehicles, including commingled group trusts.
(These investment companies and investment vehicles are the
"Portfolios.") In its role as investment advisor and investment manager,
Dimensional possessed both investment and voting power over 735,600
shares of McGrath RentCorp stock as of December 31, 2000. The Portfolios
own all securities reported in this statement, and Dimensional disclaims
beneficial ownership of such securities.
5 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
is 24,570 shares for Mr. Kakures, 15,839 shares for Mr. Sauer, and 40,409
shares for all executive officers as a group.
6 Includes 45,250 shares, which are the portions of outstanding stock
options held by two officers and three directors that will be exercisable
over the next 60 days.
7 Mr. Sanders resigned from the Company in January 2001, and he is included
in "All Executive Officers and Directors as a group."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
COMPLIANCE WITH SEC.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 sec.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 sec.16(a) reports the Company received
from such persons during or with respect to 2000, 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 2000, the Company believes
that all reporting requirements under sec.16(a) for 2000 were met in a timely
manner by its directors, executive officers and greater than 10% shareholders
except as follows: Thomas L. Sanders filed late a report regarding his exercise
of a stock option. Laura C. Cissell filed late a report required by her election
as an officer of the Company.
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 or her service to the Company.
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.
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REPORT BY THE AUDIT COMMITTEE
The Company has a three-member Audit Committee, consisting of its three
outside directors, William J. Dawson, Robert C. Hood and Ronald H. Zech.
The Company's management is responsible for the Company's internal
controls, financial reporting, compliance with laws and regulations and ethical
business standards. The Company's independent auditors, Arthur Andersen LLP, are
responsible for performing an independent audit of the Company's consolidated
financial statements in accordance with generally accepted auditing standards
and to issue reports thereon. The Audit Committee's responsibility is to monitor
and oversee these processes as well as the independence and performance of the
Company's independent auditors. (A copy of the Audit Committee Charter is
attached hereto as Appendix A.)
In this context, the Audit Committee has met and held discussions with
management and the independent auditors, and has reviewed and discussed the
audited consolidated financial statements for the year ended December 31, 2000
with management and the independent auditors. The Committee has discussed with
the independent auditors the matters required to be discussed by Statement on
Auditing Standards No. 61 (Communication with Audit Committees). The independent
auditors also provided to the Committee the written disclosures and the letter
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), and the Committee has considered the
compatibility of the non-audit services provided by the independent auditors
with maintaining auditor independence and has discussed with the independent
auditors that firm's independence.
Based upon the Audit Committee's reviews and discussions referred to above,
the Committee recommended the Board of Directors include the Company's audited
consolidated financial statements in the Company's Annual Report on Form 10-K
for the year ended December 31, 2000 filed with the Securities and Exchange
Commission.
Audit Committee:
William J. Dawson
Robert C. Hood
Ronald H. Zech
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company that are intended to be presented
at the Company's 2002 Annual Meeting must be received by the Company no later
than December 28, 2001, in order that they may be included in the proxy
statement and form of proxy relating to that meeting.
Dated: April 26, 2001 THE BOARD OF DIRECTORS
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APPENDIX A
MCGRATH RENTCORP
Audit Committee Charter
This Charter sets forth the scope of the Committee's responsibilities and how it
carries out those responsibilities, including structure, process and membership
requirements.
STRUCTURE & MEMBERSHIP
The Committee shall be comprised of three or more directors as determined by the
Board of Directors. The Committee members shall be designated by the Board of
Directors and shall serve at the discretion of the Board of Directors.
Each member of the Committee shall be an independent director, and free from any
relationship that, in the opinion of the Board of Directors, would interfere
with the exercise of his or her independent judgment as a member of the
Committee.
Each member of the Committee shall be able to read and understand fundamental
financial statements, in accordance with the NASDAQ National Market Committee
requirements. At least one member shall have past employment experience in
finance or accounting, requisite professional certification in accounting, or
other comparable experience or background which results in the individual's
financial sophistication, including a current or past position as a chief
executive or financial officer or other senior officer with financial oversight
responsibilities.
STATEMENT OF POLICY
The Committee shall provide assistance to the Board of Directors in connection
with corporate accounting and the quality and integrity of the financial reports
of the Corporation. In so doing, the Committee shall endeavor to maintain free
and open means of communication between the directors, the independent auditors,
and the financial management of the Corporation. In addition, the Committee
shall review the policies and procedures adopted by the Corporation to fulfill
its responsibilities for the fair and accurate presentation of financial
statements in accordance with generally accepted accounting principles and SEC
rules and regulations.
RESPONSIBILITIES
The Committee's policies and procedures should remain flexible, in order to best
react to changing conditions and to ensure to the directors and shareholders
that the corporate accounting and reporting practices of the Corporation are in
accordance with all requirements and are of the highest quality.
In meeting its responsibilities, the Committee is expected to:
1. Review and reassess the adequacy of this Charter annually.
2. Independent auditors:
(a) Make recommendations to the Board of Directors with respect to
the selection, evaluation, compensation and, where appropriate,
replacement of the independent auditors. The independent auditors
shall be accountable ultimately to the Board of Directors and to
the Committee.
A-1
18
(b) Review the independence of the independent auditors, including a
review of management consulting services and related fees provided
by the independent auditors. The Committee shall require the
independent auditors to provide a formal written statement
delineating all relationships between the independent auditors and
the Corporation consistent with the NASDAQ National Market
Committee requirements. The Committee shall actively engage the
auditors in a dialogue with respect to any disclosed relationships
or services that may impact the objectivity and independence of the
auditors. The Committee shall take, or recommend the full Board of
Directors take, appropriate action to oversee the independence of
the auditors.
(c) Review the rationale for employing audit firms other than the
principal independent auditors; and when an additional audit firm
has been employed, review the coordination of audit efforts to
assure completeness of coverage, reduction of redundant efforts,
and the effective use of audit resources.
3. Review and concur with management the appointment, replacement,
reassignment, or dismissal of an internal audit department and its
manager or director, as well as its scope and responsibilities.
4. Consider and review in consultation with the independent auditors,
the internal audit department, if any, and management at the
completion of the annual examinations and such other times as the
Committee may deem appropriate:
(a) Review in consultation with the independent auditors and management
the audit scope and plan for the independent auditors.
(b) The Corporation's annual financial statements and related
footnotes.
(c) The independent auditors' audit of the financial statements and
their report thereon.
(d) Any significant changes required in the independent auditors' audit
plan.
(e) Any serious difficulties or disputes with management encountered
during the course of the audit.
(f) The adequacy of the Corporation's system of internal financial
controls.
(g) Any material deficiency in or suggested improvement to the
procedures or practices employed by the Corporation as reported by
the independent auditors in their annual management letter.
(h) Other matters related to the conduct of the audit, which are to be
communicated to the Committee under generally accepted auditing
standards.
5. Discuss with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61, as modified or
supplemented.
6. Review and discuss with management, before release, the audited
financial statements and the Management's Discussion and Analysis
proposed to be included in the Corporation's annual report in Form
10-K. Make a recommendation to the Board of Directors whether or not
the audited financial statements should be included in the
Corporation's annual report on Form 10-K.
7. Review and discuss with management, before release, the unaudited
quarterly operating results in the Corporation's quarterly earnings
release.
8. Review policies and procedures with respect to officers' expense
accounts and perquisites, including their use of corporate assets,
and consider the results of any review of these areas by the
independent auditors.
A-2
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9. Consider and review with management significant findings of the
Committee during the year and management's responses thereto.
10. Report Committee action to the Board of Directors with such
recommendations as the Committee may deem appropriate.
11. Provide a report in the Corporation's proxy statement in accordance
with SEC requirements.
12. Perform such other functions as assigned by law, the Corporation's
Articles or bylaws, or the Board of Directors. Review and investigate
such other matters pertaining to the Corporation's financial
reporting and controls as the Committee may consider appropriate.
The duties and responsibilities of a member of the Committee are in addition to
those duties set out for a member of the Board of Directors.
POWERS
The Committee shall have the power to conduct or authorize investigations into
any matters within the Committee's scope of responsibilities. The Committee
shall be empowered to retain independent counsel, accountants, or others to
assist it in the conduct of any investigation.
MEETINGS
The Committee shall meet at least two times per year or more frequently as
required. The Committee may ask members of management or others to attend the
meetings and provide pertinent information as necessary.
A-3
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PROXY
MCGRATH RENTCORP
THE BOARD OF DIRECTORS SOLICITS THIS PROXY FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON WEDNESDAY, MAY 30, 2001, AT 2:00 P.M., LOCAL TIME, AT
THE MCGRATH RENTCORP CORPORATE HEADQUARTERS LOCATED AT 5700 LAS POSITAS ROAD,
LIVERMORE, CALIFORNIA 94550.
The undersigned hereby constitutes and appoints Robert P. McGrath and Randle
F. Rose, 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.
PROPOSAL NO. 1: Election of Directors
[ ] FOR the election of William J. Dawson, Robert C. Hood, 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
[ ] WITHHOLD AUTHORITY to vote for any of the nominees for
director listed above.
PROPOSAL NO. 2: Approval of the appointment of Arthur Andersen
LLP as McGrath RentCorp's independent public accountants for the
year ending December 31, 2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
21
The Board of Directors recommends a vote FOR the nominees named above and
FOR Proposal No. 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
NOMINEES AND PROPOSAL. 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 2000 Annual Report to Shareholders
furnished with this Proxy.
Dated: , 2001
---------
--------------------------
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
