SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
McGrath RentCorp
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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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 1, 1995
Notice is hereby given that the 1995 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 1, 1995, at 2:00 p.m., local time, for
the following purposes:
1. To elect five directors to serve until the next annual meeting of
shareholders and until their respective successors are duly elected;
2. To approve the action of the Board of Directors in appointing Arthur
Andersen LLP as McGrath RentCorp's independent public accountants for
the fiscal year ending December 31, 1995; 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 20, 1995 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 21, 1995 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 1995 Annual Meeting of
Shareholders to be held on Thursday, June 1, 1995, 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 24, 1995, to all
shareholders entitled to vote at the Meeting.
RECORD DATE AND OUTSTANDING SHARES
Shareholders of record at the close of business on April 20, 1995, are
entitled to notice of, and to vote at, the Meeting. At the record date,
8,146,843 shares of the Company's Common Stock were issued and outstanding.
VOTING
In order to conduct business at the Meeting, a quorum must be established.
The presence in person or by proxy of shareholders entitled to vote a
majority of the Company's outstanding Common Stock will constitute a quorum
for the transaction of business at the Meeting.
Every shareholder voting for the election of directors may cumulate such
shareholder's votes and give one candidate a number of votes equal to the
number of directors to be elected (five) multiplied by the number of shares
held, or may distribute such shareholder's votes on the same principle among
as many candidates as the shareholder may select. However, no shareholder
shall be entitled to cumulate votes for any candidate unless the candidate's
name has been placed in nomination prior to the voting and the shareholder,
or any other shareholder, has given notice at the Meeting prior to the voting
of the intention to cumulate the shareholder's votes. The proxy holders are
given discretionary authority, under the terms of the Proxy, to cumulate
votes represented by shares for which they are named in the Proxy. In
electing directors, the candidates receiving the highest number of
affirmative votes, up to the number of directors to be elected (five) shall
be elected.
Unless otherwise noted herein, each of the Company's proposals (other than
the election of directors) described in this Proxy Statement requires the
affirmative vote of the holders of a majority of the shares of the Company's
Common Stock represented and voting at the Meeting if a quorum is present.
Unless otherwise instructed, each valid returned Proxy which is not revoked
will be voted in the election of directors "FOR" the nominees of the Board
of Directors and "FOR" Proposal No. 2 described in this Proxy Statement,
and at the proxy holders' discretion, on such other matters, if any, which
may come before the Meeting (including any proposal to adjourn the Meeting).
SOLICITATION
The cost of this solicitation will be borne by the Company. In
addition, the Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in forwarding
solicitation material to such beneficial owners. Proxies may also be
solicited by certain of the Company's directors, officers and regular
employees, without additional compensation, personally or by telephone or
telegram.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the Meeting and voting in person.
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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 otherwise instructed, the proxy
holders will vote the Proxies received by them for the Company's nominees
named below, all of whom are presently directors of the Company. In the
event that any nominee is unable or declines to serve as a director at the
time of the Meeting, the Proxies will be voted for any nominee who shall be
designated by the present Board of Directors to fill the vacancy. It is not
expected that any nominee will be unable, or will decline, to serve as a
director. In the event that additional persons are nominated for election as
directors, the proxy holders intend to vote all Proxies received by them in
such a manner in accordance with cumulative voting as will assure the
election of as many of the nominees listed below as possible, and, in such
event, the specific nominees to be voted for under the Proxies will be
determined by the proxy holders.
The names of the nominees and certain information about them are set forth
below.
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- --------------- --- -------------------- ---------
Bryant J. Brooks 68 Independent Financial Consultant 1989
Joan M. McGrath 58 Businesswoman 1982
Robert P. McGrath 61 Chairman of the Board and Chief 1979
Executive Officer of the Company
Delight Saxton 49 Chief Financial Officer, Vice 1982
President of Administration and
Secretary of the Company
Ronald H. Zech 51 President and Chief Operating Officer 1989
of GATX Corporation
-2-
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 until this year and as its Chief Financial Officer until 1993. He
is a member of the Executive Compensation Committee of the Company's Board of
Directors. Mr. McGrath graduated from the University of Notre Dame in 1955
with a BS in electrical engineering.
DELIGHT SAXTON has been with the Company since its inception in 1979. She
has been a director and the Secretary of the Company since 1982, its Vice
President of Administration since 1989, and its Chief Financial Officer since
1993. Ms. Saxton also served as the Company's Treasurer from 1982 until
1989. She is responsible for administration of personnel and all corporate
compliance requirements, monitors the auditing function, and is responsible
for the Company's relationships with its bankers and auditors. Ms. Saxton is
a member of the Audit Committee of the Company's Board of Directors.
RONALD H. ZECH was elected a director of the Company in 1989, and he
serves on its Audit and Executive Compensation Committees. In 1994, Mr. Zech
was elected President and Chief Operating Officer of GATX Corporation, a New
York Stock Exchange listed company. He also serves as a director of GATX
Corporation. GATX is engaged in the business of providing transportation and
distribution equipment and related services. For the ten years prior to
1994, he had been the President and Chief Executive Officer of GATX's wholly
owned subsidiary, GATX Capital Corporation. GATX Capital provides 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 three times during the
year ended December 31, 1994; and at each meeting and on each corporate
action, all members of the Board of Directors participated, with the
exception of one director who was unable to attend one Board meeting.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a three-member Audit Committee consisting of
Directors Bryant J. Brooks, Delight Saxton and Ronald H. Zech. The Audit
Committee exercises the following powers: (1) nominates the independent
auditors of the Company to be approved by the Board of Directors; (2) meets
with the independent auditors to review the annual audit; (3) assists the
full Board in evaluating the auditors' performance; and (4) reviews internal
control procedures, related party transactions and, where appropriate,
potential conflict of interest situations. The Audit Committee met three
times during 1994.
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
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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 two meetings and took corporate action by unanimous written
consent once during 1994.
The Board has a Long-Term Stock Bonus Plan Committee. All members of the
Board of Directors, except a Director who was a participant in the Long-Term
Stock Bonus Plan at any time within the preceding twelve months, are
automatically members of this Committee. At the present time, all five
directors of the Company are members of the Long-Term Stock Bonus Plan
Committee. The Long-Term Stock Bonus Plan Committee administers the
Company's Long-Term Stock Bonus Plan. The Long-Term Stock Bonus Plan
Committee held two meetings and took corporate action by unanimous written
consent once during 1994.
COMPENSATION OF DIRECTORS
Each director who is not also an officer or employee of the Company is
compensated for his or her services as a director at the rate of $11,000 per
annum. An additional fee of $600 per meeting is paid to each outside
director for attendance at the meetings of the Board of Directors or one of
its Committees (in the event a Committee meeting is held in conjunction with
a Board meeting, only one $600 fee is paid to the Director). Pursuant to the
foregoing, Mr. Brooks and Mr. Zech, the Company's two outside directors, each
received $13,400 for his services as a director of the Company during 1994.
All directors, including those who may also be officers or employees of the
Company, are reimbursed for expenses incurred in connection with attending
Board or Committee meetings.
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| PROPOSAL NO. 2: RATIFICATION OF APPOINTMENT |
| OF INDEPENDENT PUBLIC ACCOUNTANTS |
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The Board of Directors of the Company, with the approval of its Audit
Committee, has appointed Arthur Andersen LLP to audit the books and records
of the Company for fiscal year ending December 31, 1995. A resolution will
be offered at the Meeting to approve the appointment of Arthur Andersen & Co.
as the Company's independent public accountants.
Representatives of the accounting firm are expected to be present at the
Meeting with the opportunity to make a statement if they desire to do so and
are expected to be available to respond to appropriate questions.
The Board of Directors recommends a vote "FOR" such proposal. In the
event of a negative vote on such ratification, the Board of Directors will
reconsider its selection.
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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.
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STOCK PRICE PERFORMANCE GRAPH
The following graph compares the Company's stock price since December 31,
1989 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").
[GRAPH]
The graph assumes an investment of $100 on December 31, 1989 and monthly
reinvestment of dividends thereafter, and is based upon information provided
to the Company by Value Line, Inc.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information regarding the executive
officers of the Company.
NAME AGE POSITION HELD WITH THE COMPANY
---- --- ------------------------------
Robert P. McGrath 61 Chairman of the Board and
Chief Executive Officer
Dennis C. Kakures 38 President and Chief Operating Officer
Delight Saxton 49 Chief Financial Officer, Vice
President of Administration and
Secretary
Thomas J. Sauer 38 Vice-President and Treasurer
Robert P. McGrath and Delight Saxton are also directors of the Company
and descriptions of them appear under "Proposal No. 1: Election of
Directors -- Description of Nominees for Election to the Board of Directors"
above.
DENNIS C. KAKURES joined the Company in 1982 as Sales and Operations
Manager of the Company's Northern California office. He became a Vice
President of the Company in 1987, Chief Operating Officer in 1989, Executive
Vice President in 1993, and President in 1995. He is responsible for the
sales and operations of the Company. He earned a BS in marketing at
California State University at Hayward in 1978.
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THOMAS J. SAUER joined the Company in 1983 as its Accounting Manager,
became its Controller in 1987, Treasurer in 1989, and a Vice-President in
1995. Mr. Sauer is responsible for accounting, financial reporting and
corporate taxes. Mr. Sauer is a Certified Public Accountant, and he had been
employed by Arthur Andersen LLP, the Company's auditors, from 1980 to 1983.
He earned a BS degree in business at the University of California at Berkeley
in 1978 and an MBA in accounting at Golden Gate University, San Francisco in
1980.
Each executive officer of the Company serves at the pleasure of the
Board of Directors.
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the Company's four other highest paid executive
officers for services rendered in all capacities to the Company for each of
the last three fiscal years.
ANNUAL COMPENSATION LONG-TERM COMPENSATION
NAME AND ------------------- ----------------------- ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS AWARDS(1) PAYOUT(2) COMPENSATION(3)
- ------------------- ---- ------ ----- -------- -------- --------------
Robert P. McGrath 1994 $320,000 $167,910 -- -- $11,228
CHAIRMAN AND CHIEF 1993 392,700 -- -- -- 26,222
EXECUTIVE OFFICER 1992 377,825 -- -- -- 24,449
Dennis C. Kakures 1994 160,000 100,746 $13,430 $34,921 14,395
PRESIDENT AND CHIEF 1993 160,000 40,000 -- 34,443 30,000
OPERATING OFFICER 1992 150,625 36,500 -- 34,457 30,000
Delight Saxton 1994 128,000 67,164 -- -- 14,395
CHIEF FINANCIAL OFFICER, 1993 157,300 -- -- -- 23,597
VICE PRESIDENT OF 1992 150,792 -- -- -- 22,780
ADMINISTRATION AND
SECRETARY
Thomas J. Sauer 1994 108,900 61,445 9,656 20,121 14,395
VICE-PRESIDENT AND 1993 108,900 27,225 -- 19,846 22,421
TREASURER 1992 104,775 25,500 -- 19,846 22,757
Joan M. McGrath 1994 112,775 -- -- -- 3,167
VICE PRESIDENT (RESIGNED AS 1993 143,000 -- -- -- 8,842
AN OFFICER IN 1994) 1992 137,583 -- -- -- 8,071
- ----------------
(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.
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(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 1994, and his
or her share of any re-allocations of forfeited benefits in 1994. 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. Under the
ESOP, a trust was created by the Company to hold plan assets, with The Bank
of California, N.A. acting as trustee. The Company may amend or terminate
the ESOP at any time. All assets acquired by the trust are administered by a
Plan Committee appointed by the Board of Directors composed of Edward Diaz,
Gary Gibson, Thomas Sauer, Delight Saxton and Nanci Clifton (all Company
employees) for the exclusive benefit of employees who are participants in the
ESOP and their designated beneficiaries.
Employees, who are 21 years or older, are entitled to participate in
the ESOP when they have completed one year of service to the Company by June
30 of any year. As of December 31, 1994, 143 employees of the Company were
participants in the ESOP. Allocations to each eligible participant's trust
account are made each year from Company contributions, trust income or loss
and re-allocations of forfeited ESOP benefits if the participant remains
employed throughout the year and has worked a minimum number of hours or his
employment has terminated due to death or retirement (as that term is defined
in the ESOP), during that year. Allocations are made based upon each
participant's compensation from the Company and time employed by the Company.
As provided by law, a participant's interest in the ESOP becomes 20% vested
after three years of service and will continue to vest at 20% per year
thereafter until it is fully vested after the seventh year or upon death or
total disability. The vesting schedule will be accelerated and the Company's
contributions and ESOP allocations will be modified if the ESOP becomes a
"top heavy plan" under federal tax laws.
In general, Company contributions are immediately tax deductible by the
Company, but participants do not recognize income for tax purposes until
distributions are made to them. The amount of Company contributions to the
ESOP in cash, Company stock or other property is determined by the Company's
Board of Directors each year with consideration for federal tax laws. The
Company's cash contribution to the ESOP for the 1994 plan year is $550,000,
and it had made an aggregate of $2,225,000 in cash contributions for the five
prior years. Employees may not make contributions to the ESOP.
Contributions in cash are used to purchase Company stock; however, other
investments may be made and loans may be incurred by the ESOP for the
purchase of Company stock.
The Plan Committee has determined that cash dividends paid by the
Company on shares of the Company's Common Stock held by the ESOP shall be
paid out to the participants. The Plan Committee has the right to revoke
this decision at any time.
INCENTIVE STOCK OPTION PLAN
The Company has a 1987 Incentive Stock Option Plan under which options
have been granted to key employees of the Company for the purchase of its
Common Stock. Options granted under this Plan are intended to qualify as
incentive stock options as that term is defined in Section 422A of the
Internal Revenue Code of 1986, as amended. The Plan authorizes the issuance
of an aggregate of 1,000,000 shares of the Company's Common Stock under
options. Options for an aggregate of 346,000 shares have been granted to 15
key employees at exercise prices of $6.13 or $13.88 per share. Of these
options granted, options have been exercised for the purchase of 59,149
shares, options for 5,650 shares have been terminated, and options for the
remaining 281,201 shares are still outstanding. A balance of 659,650 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 1994; and no options under the Plan were exercised by any of
the Company's executive officers during 1994. Thomas J.
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Sauer is the only executive officer of the Company who holds an option under
the Plan as of December 31, 1994. Mr. Sauer was granted an option in 1987
for the purchase of 75,000 shares at an exercise price of $6.125 per share.
As of December 31, 1994, Mr. Sauer had the right to exercise that option as
to 57,000 shares, and the remaining 18,000 shares had not yet become
exercisable. Based upon a market price of the Company's Common Stock of
$17.00 on December 31, 1994, the exercisable portion of Mr. Sauer's option
had a value of $619,875 as of that date, and the unexercised portion had a
value of $195,750.
LONG-TERM STOCK BONUS PLAN
In March 1991, the Company's Board of Directors adopted, and the
Company's shareholders subsequently approved, a Long-Term Stock Bonus Plan
under which 200,000 shares of the Company's Common Stock were reserved for
bonuses to be granted to officers and other key employees to provide
incentives for high levels of performance and unusual efforts to improve the
financial performance of the Company. The Plan was effective retroactively
to January 1, 1990, and all then-existing Long-Term Stock Bonus Plan
Agreements were amended to conform to the Plan.
Seven 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
and 1996.
The following table sets forth certain information with respect to
shares of the Company's Common Stock under the first, second and fifth
Long-Term Stock Bonus Agreements entered into by the Company with Messrs.
Kakures and Sauer. (The Company did not meet the long-term financial goals
pre-set in the third and fourth Agreements for the periods ended December 31,
1992 or December 31, 1993, thus no stock bonuses were awarded under those
Agreements; and the conclusion of the performance periods for the sixth and
seventh 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 12/31/94 WILL VEST IN
------------------ --------------------------------------
NAME EARNED VESTED 1995 1996 1997 1998
-------- ------- ------ ---- ---- ---- ----
Dennis C. Kakures SHARES 16,219 11,884 1,968 789 789 789
VALUE $241,731 $170,689 $30,803 $13,413 $13,413 $13,413
Thomas J. Sauer SHARES 9,912 6,961 1,247 568 568 568
VALUE $148,916 $100,277 $19,671 $9,656 $9,656 $9,656
REPORT BY THE EXECUTIVE COMPENSATION COMMITTEE
The Company has a three-member Executive Compensation Committee,
consisting of its two outside directors, Bryant J. Brooks and Ronald H. Zech,
as well as its Chairman of the Board and Chief Executive Officer, Robert P.
McGrath. The Committee establishes the general compensation policies of the
Company for its executive officers and sets the actual compensation plans and
specific compensation levels for the individual officers.
COMPENSATION PHILOSOPHY -- The Company's executive compensation philosophy
is to pay for performance. The Executive Compensation Committee believes that
executive compensation should be
-8-
reflective of the executive's, as well as the Company's, current and
long-term performance, and that any management compensation program should be
structured to attract, motivate and retain qualified personnel by providing
attractive compensation incentives consistent with Company performance. The
executive compensation program is intended to provide an overall level of
compensation opportunity that the Committee believes, based upon its own
judgment and experience and upon periodic studies by independent executive
compensation consultants, is competitive with other, comparable companies.
The Committee also believes that management should have significant equity
participation through the ownership of Common Stock of the Company so as to
align the interests of executives with those of the Company's other
shareholders in an effort to achieve long-term shareholder returns.
COMPONENTS OF EXECUTIVE COMPENSATION -- In addition to the return which
executives receive along with other shareholders through their individual
ownership of shares of the Company's Common Stock, there are currently three
components of executive compensation: base salary, annual cash incentive
bonus and long-term stock ownership incentives.
BASE SALARIES -- The Executive Compensation Committee establishes the
base salaries of each of the Company's executive officers after considering a
variety of factors including the executive's level of responsibility and
individual performance, the executive's contributions to the success of the
Company, internal equities among the salaries of other officers and key
personnel of the Company, the salaries of executive officers in similar
positions in comparable companies, and the Company's financial performance.
ANNUAL CASH INCENTIVE BONUS -- The Executive Compensation Committee
adopted a formula for calculating cash incentive bonuses for each executive
officer of the Company for 1994 based upon the extent to which the Company
achieved its goal for pre-tax profits during 1994. The executives were
eligible to receive bonuses ranging from zero up to, in the case of one
executive, 67% of base salary dependent upon the pre-tax profit achieved by
the Company. The aggregate of the cash incentive bonuses earned by the
Company's top four executives for 1994 were an average of 55% of their base
salaries.
For 1995, the Executive Compensation Committee again has established a
formula for the payment of incentive bonuses to the Company's executives,
this time with the maximum bonus payable being 56% of base salary. The
formula for the calculation of the 1995 incentive bonus for the Company's
Chief Executive Officer is based solely upon the Company achieving certain
levels of pre-tax profit for the year; while the bonuses for all other
executives are 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%).
LONG-TERM STOCK OWNERSHIP INCENTIVES -- The Company has two long-term
stock ownership incentive programs for its executives and other key
personnel: The Long-Term Stock Bonus Plan and the 1987 Incentive Stock
Option Plan.
By the terms of the Company's Long-Term Stock Bonus Plan, as approved by
its shareholders, the grant of stock bonuses is determined by the Company's
Long-Term Stock Bonus Plan Committee (see "Long-Term Stock Bonus Plan"
above). The Executive Compensation Committee may make recommendations to the
Long-Term Stock Bonus Plan Committee with respect to the granting of stock
bonuses under the Plan to executive officers. The Long-Term Stock Bonus Plan
has been used to reward the achievement of pre-set, long-term financial
goals; and stock bonuses have been awarded for achieving pre-set goals with
respect to the average return on equity realized by the Company over
successive three-year periods.
By the terms of the Company's 1987 Incentive Stock Option Plan, as
approved by its shareholders, the grant of incentive stock options is
determined by the Company's Board of Directors (see "Incentive Stock Option
Plan" above). The Executive Compensation Committee may make recommendations
to the Board of Directors with respect to the granting of incentive stock
options under the Plan to executive officers. The Board has granted
incentive stock options from time to time to executive officers and other key
personnel of the Company because the Board believed that such grants would be
an effective part of the particular executive officer's overall compensation
package and that an increase in his or her equity participation in the
Company would be appropriate.
-9-
CHIEF EXECUTIVE OFFICER'S COMPENSATION -- Throughout 1994, Robert P.
McGrath was the President and Chief Executive Officer of the Company, as well
as the Chairman of its Board of Directors. (Dennis C. Kakures, the Company's
Chief Operating Officer, assumed the title of President as of the beginning
of 1995.) Mr. McGrath was the founder of the Company, and he still owns a
significant percentage of its Common Stock (see "Security Ownership of
Management and Principal Shareholders" below).
BASE SALARY -- Mr. McGrath's 1994 base salary was set by the Executive
Compensation Committee at $320,000 after consultation with an independent,
professional compensation expert, after a review of the compensation paid to
chief executive officers of comparable companies, and in consideration of Mr.
McGrath's level of responsibility, performance and contributions to the
Company's success.
ANNUAL CASH INCENTIVE BONUS -- Mr. McGrath earned a cash incentive bonus
of $167,910 for 1994 (52% of his salary). This bonus was calculated as a
function of the extent to which the Company achieved its goal for pre-tax
profits in 1994, in accordance with the formula which had been established by
the Executive Compensation Committee.
LONG-TERM STOCK OWNERSHIP INCENTIVES -- Mr. McGrath has not participated
in any of the various long-term stock ownership incentive plans offered by
the Company to its officers and employees (except that, as an employee, he
has participated in the Company's Employee Stock Ownership Plan ("ESOP") on
the same basis as other employees). The Board of Directors believes that Mr.
McGrath's existing ownership of a substantial portion of the Company's Common
Stock has been sufficient to provide the incentive and alignment of interest
with the Company's other shareholders that are the goals of the Company's
long-term stock ownership incentive plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION -- 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 under "Certain Relationships and Related Transactions," he has also
participated in investor-owned relocatable modular office programs with the
Company.
Executive Compensation Committee:
BRYANT J. BROOKS
ROBERT P. McGRATH
RONALD H. ZECH
-10-
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 20,
1995. The table is presented in accordance with the rules of the Securities
and Exchange Commission and, accordingly, in several instances beneficial
ownership of the same shares is attributed to more than one person.
BENEFICIAL OWNERSHIP
----------------------------
NUMBER OF PERCENTAGE OF
NAME ADDRESS SHARES OUTSTANDING
-------- --------- ---------- --------------
Robert P. McGrath (1),(2),(3) McGrath RentCorp 1,302,795 15.92%
AND Joan M. McGrath (1),(2),(3) 2500 Grant Avenue
San Lorenzo, CA 94580
T. Rowe Price Associates, Inc.(4) 100 E. Pratt Street 796,200 9.73%
Baltimore, MD 21202
Oppenheimer Group, Inc.(5) Oppenheimer Tower 508,500 6.21%
World Financial Center
New York, NY 10281
Delight Saxton(1),(3) McGrath RentCorp 167,834 2.05%
2500 Grant Avenue
San Lorenzo, CA 94580
Dennis C. Kakures(3),(6) McGrath RentCorp 155,643 1.90%
2500 Grant Avenue
San Lorenzo, CA 94580
Thomas J. Sauer(3),(6),(7) McGrath RentCorp 120,746 1.46%
2500 Grant Avenue
San Lorenzo, CA 94580
Ronald H. Zech(1) GATX Corporation 3,500 0.04%
500 West Monroe
Chicago, IL 60661
Bryant J. Brooks(1) Sansome Street Appraisers 1,000 0.01%
114 Sansome Street
San Francisco, CA 94104
All Executive Officers and Directors 1,751,518 21.24%
as a group (7 PERSONS)(2),(3),(6),(7)
- ------------------
(1) Currently a director of the Company.
(2) Includes 199,503 shares held by two organizations controlled by Mr. and
Mrs. McGrath; however, they disclaim any beneficial interest in such shares.
(3) Includes the shares held by the McGrath RentCorp Employee Stock Ownership
Plan for benefit of the named individual. The number of shares included are
24,603 shares for Mr. McGrath, 14,964 shares for Mrs. McGrath, 17,834 shares
for Mrs. Saxton, 20,677 shares for Mr. Kakures, 14,709 shares for Mr. Sauer,
and 92,787 shares for all executive officers and directors as a group. These
shares are included because
-11-
beneficiaries under the Plan hold sole voting
power over the shares (whether or not rights to the shares have vested).
(4) These securities are owned by various individual and institutional
investors for which T. Rowe Price Associates, Inc. ("Price Associates")
serves as investment adviser with power to direct investments and/or sole
power to vote the securities. For purposes of the reporting requirements
of the Securities Exchange Act of 1934, Price Associates is deemed to be
a beneficial owner of such securities; however, Price Associates expressly
disclaims that it is, in fact, the beneficial owner of such securities.
(5) Oppenheimer Group, Inc. is a holding company which owns directly and
indirectly a variety of subsidiary companies. The 508,500 shares
referred to above are held by a combination of Oppenheimer Group, Inc.,
its affiliates and subsidiaries, and/or investment advisory clients or
discretionary accounts of one or more of such subsidiaries; and
accordingly, Oppenheimer Group, Inc. disclaims that it is, in fact, the
beneficial owner of all such securities.
(6) Includes unvested shares issued to the named individual under the McGrath
RentCorp Long-Term Stock Bonus Plan, which shares are subject to return to
the Company under certain circumstances. The number of shares included are
4,335 shares for Mr. Kakures, 2,951 shares for Mr. Sauer, and 7,286 shares
for all executive officers as a group.
(7) Includes 61,125 shares which are the portion of an outstanding stock option
held by Mr. Sauer which will be exercisable over the next 60 days.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
COMPLIANCE WITH 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 which the Company received from such persons during or with
respect to 1994, and (ii) written representations received from all such
persons that no annual Form 5 reports were required to be filed by them with
respect to 1994, the Company believes that all reporting requirements under
Section 16(a) for 1994 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
There are 86 investor-owners who have purchased relocatable modular
offices and placed them in the Company's rental fleet for management by it,
including three limited partnerships formed in 1980 and 1981 of which Robert
P. McGrath is the general partner (with an aggregate of 24 limited partners)
and three limited partnerships formed in 1984 of which the Company is the
general partner (with an aggregate of 9 limited partners). The units still
in the Company's rental fleet which are owned by the three limited
partnerships of which Mr. McGrath is the general partner had an original
aggregate purchase price of $1,420,976. Mr. McGrath has a 1% profits
interest and a 14% subordinated profits interest in the three limited
partnerships. He 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
$175,521. His share of rental revenues from these units for the year ended
December 31, 1994 was
-12-
$42,424 and his share of operating expenses, management fees and incentive
fees paid to the Company for the year was $29,587.
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. At
present, there is no pending litigation or proceeding where indemnification
would be required or permitted under these Agreements; nor is the Company
aware of any threatened litigation or proceeding which might result in such a
claim for indemnification.
CONTROL
By virtue of their positions in the Company and ownership of the
Company's Common Stock, Robert P. McGrath and Joan M. McGrath may be deemed
"control persons" of the Company as that term is defined under the Securities
Act of 1933, as amended.
FAMILY RELATIONSHIPS
There are no family relationships between any director or executive
officer of the Company except that Robert P. McGrath and Joan M. McGrath are
husband and wife.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company which are intended to be
presented at the Company's 1996 Annual Meeting must be received by the
Company no later than December 26, 1995, in order that they may be included
in the proxy statement and form of proxy relating to that meeting.
Dated: April 21, 1995 THE BOARD OF DIRECTORS
-13-
McGRATH RENTCORP
PROXY
THE BOARD OF DIRECTORS SOLICITS THIS PROXY FOR THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD ON THURSDAY, JUNE 1,
1995 AT 2:00 P.M., LOCAL TIME, AT THE McGRATH RENTCORP
CORPORATE HEADQUARTERS LOCATED AT 2500 GRANT AVENUE, SAN
LORENZO, CALIFORNIA 94580.
The undersigned hereby constitutes and appoints Robert P. McGrath and Delight
Saxton, or each of them, with full power of substitution and revocation,
attorneys and proxies of the undersigned at the Annual Meeting of
Shareholders of McGrath RentCorp or any adjournments thereof, and to vote,
including the right to cumulate votes (if cumulative voting is required), the
shares of Common Stock of McGrath RentCorp registered in the name of the
undersigned on the record date for the Meeting.
FOR the election of Bryant J. Brooks, Joan M. McGrath, Robert P. McGrath,
Delight Saxton and Ronald H. Zech as directors (TO WITHHOLD AUTHORITY TO
VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S
NAME);
OR
TO WITHHOLD AUTHORITY to vote for any of the nominees for
director listed above.
Approval of the appointment of Arthur Andersen LLP as McGrath RentCorp's
independent public accountants for the fiscal year ending December 31,
1995.
FOR AGAINST ABSTAIN
The Board of Directors recommends a vote FOR the nominees named in Proposal 1
and FOR Proposal 2. The shares represented by this Proxy will be voted as
directed on the reverse side; if no specification is made, the shares will be
voted FOR said proposals and nominees. In their discretion, the proxies are
authorized to vote upon such other business as may properly come before the
Meeting to the extent authorized by Rule 14a-4(c) promulgated by the
Securities and Exchange Commission.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders, the Proxy Statement and the 1994 Annual Report to
Shareholders furnished with this Proxy.
Dated: _______________, 1995
______________________________
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
