<PAGE>
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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Confidential, for Use of the
[_] Preliminary Proxy Statement Commission Only (as Permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
MAC-GRAY CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(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:
(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:
<PAGE>
MAC-GRAY CORPORATION
22 WATER STREET
CAMBRIDGE, MASSACHUSETTS 02141
April 15, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Mac-Gray Corporation (the "Company") to be held on Tuesday, June 2, 1998 at
9:00 a.m., local time, at the Goodwin, Procter & Hoar llp Conference Center,
Second Floor, Exchange Place, Boston, Massachusetts 02109 (the "Annual
Meeting").
The Annual Meeting has been called for the purpose of (i) electing two
Directors, each to hold office until the annual meeting of stockholders to be
held in 2001, and (ii) voting upon such other business as may properly come
before the Annual Meeting or any adjournments or postponements thereof.
After the formal portion of the Annual Meeting, there will be an informal
session for the purpose of presenting a brief report on the Company and
responding to your questions.
The Board of Directors has fixed the close of business on April 10, 1998 as
the record date for determining stockholders entitled to notice of and to vote
at the Annual Meeting and any adjournments or postponements thereof.
The Board of Directors of the Company recommends that you vote "FOR" the
election of the two nominees of the Board of Directors of the Company.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU
ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU
HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
Very truly yours,
Stewart Gray MacDonald
Chairman of the Board and
Chief Executive Officer
<PAGE>
MAC-GRAY CORPORATION
22 WATER STREET
CAMBRIDGE, MASSACHUSETTS 02141
(617) 492-4040
----------------
NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, JUNE 2, 1998
----------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Mac-Gray
Corporation (the "Company") will be held on Tuesday, June 2, 1998 at 9:00
a.m., local time, at the Goodwin, Procter & Hoar llp Conference Center, Second
Floor, Exchange Place, Boston, Massachusetts 02109 (together with adjournments
or postponements thereof, the "Annual Meeting") for the purpose of considering
and voting upon:
1. The election of two Directors, each to hold office until the annual
meeting of stockholders to be held in 2001 and until their successors
are duly elected and qualified; and
2. Such other business as may properly come before the Annual Meeting and
any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April 10, 1998 as
the record date for determination of stockholders entitled to notice of and to
vote at the Annual Meeting and any adjournments or postponements thereof. Only
holders of common stock of record at the close of business on that date will
be entitled to notice of and to vote at the Annual Meeting and any
adjournments or postponements thereof.
In the event there are not sufficient votes with respect to the foregoing
proposals at the time of the Annual Meeting, the Annual Meeting may be
adjourned in order to permit further solicitation of proxies.
By Order of the Board of Directors
Patrick A. Flanagan
Secretary
Cambridge, Massachusetts
April 15, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE>
MAC-GRAY CORPORATION
22 WATER STREET
CAMBRIDGE, MASSACHUSETTS 02141
(617) 492-4040
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, JUNE 2, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Mac-Gray Corporation, a Delaware
corporation (the "Company"), for use at the Annual Meeting of Stockholders of
the Company to be held on Tuesday, June 2, 1998 at 9:00 a.m., local time, at
the Goodwin, Procter & Hoar llp Conference Center, Second Floor, Exchange
Place, Boston, Massachusetts 02109, (together with any adjournments or
postponements thereof, the "Annual Meeting").
At the Annual Meeting, all of the stockholders of the Company will be asked
to consider and vote upon the following matters:
1. The election of two Directors, each to hold office until the annual
meeting of stockholders to be held in 2001 and until their successors are
elected and qualified; and
2. Such other business as may properly come before the Annual Meeting and
any adjournments or postponements thereof.
The Notice of the Annual Meeting, Proxy Statement and Proxy Card are first
being mailed to stockholders of the Company on or about April 15, 1998 in
connection with the solicitation of proxies for the Annual Meeting. The Board
of Directors has fixed the close of business on April 10, 1998 as the record
date for the determination of stockholders entitled to notice of and to vote
at the Annual Meeting (the "Record Date"). Only holders of Common Stock of
record at the close of business on the Record Date will be entitled to notice
of and to vote at the Annual Meeting. As of the Record Date, there were
13,174,118 shares of the Company's Common Stock outstanding and entitled to
vote at the Annual Meeting and 87 stockholders of record. Each holder of a
share of Common Stock outstanding as of the close of business on the Record
Date will be entitled to one vote for each share held of record for each
matter properly submitted at the Annual Meeting. Unless otherwise indicated,
references to the Company in this Proxy Statement include its various
subsidiaries.
The presence, in person or by proxy, of a majority of the outstanding shares
of Common Stock entitled to vote is necessary to constitute a quorum for the
transaction of business at the Annual Meeting. A quorum being present, the
affirmative vote of a plurality of the votes cast is necessary to elect a
nominee as a Director of the Company. Shares that reflect abstentions or
"broker non-votes" (i.e., shares represented at the meeting held by brokers or
nominees as to which instructions have not been received from the beneficial
owners or persons entitled to vote such shares and with respect to which the
broker or nominee does not have discretionary voting power to vote such
shares) will be counted for purposes of determining whether a quorum is
present for the transaction of business at the meeting. With respect to the
election of Directors, votes may only be cast in favor of or withheld from
each nominee; abstentions, broker non-votes or votes that are otherwise
withheld will be excluded entirely from the vote and will have no effect.
STOCKHOLDERS OF THE COMPANY ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN
THE ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE. SHARES OF COMMON STOCK
REPRESENTED BY PROPERLY EXECUTED PROXIES RECEIVED BY THE COMPANY AND NOT
REVOKED WILL BE VOTED AT THE ANNUAL MEETING IN ACCORDANCE WITH THE
INSTRUCTIONS CONTAINED THEREIN. IF INSTRUCTIONS ARE NOT GIVEN THEREIN,
PROPERLY EXECUTED PROXIES WILL BE
<PAGE>
VOTED "FOR" THE ELECTION OF THE TWO NOMINEES FOR DIRECTOR LISTED IN THIS PROXY
STATEMENT. IT IS NOT ANTICIPATED THAT ANY OTHER MATTERS WILL BE PRESENTED AT
THE ANNUAL MEETING. IF OTHER MATTERS ARE PRESENTED, PROXIES WILL BE VOTED IN
ACCORDANCE WITH THE DISCRETION OF THE PROXY HOLDERS.
Any properly completed proxy may be revoked at any time before it is voted
on any matter (without, however, affecting any vote taken prior to such
revocation) by giving written notice of such revocation to the Secretary of
the Company, or by signing and duly delivering a proxy bearing a later date,
or by attending the Annual Meeting and voting in person.
The Annual Report of the Company for the fiscal year ended December 31, 1997
(the "Annual Report") is being mailed to stockholders of the Company
concurrently with this Proxy Statement. The Annual Report, however, is not a
part of the proxy solicitation material.
PROPOSAL NUMBER 1
ELECTION OF DIRECTORS
NOMINEES
The Board of Directors of the Company consists of six members and is divided
into three classes, with two directors in Class I, two directors in Class II
and two directors in Class III. Directors serve for three-year terms with one
class of Directors being elected by the Company's stockholders at each annual
meeting.
At the Annual Meeting, two Class I Directors will be elected to serve until
the 2001 annual meeting of stockholders and until their successors are duly
elected and qualified. The Board of Directors has nominated Patrick A.
Flanagan and John P. Leydon for re-election as Class I Directors. Certain
information with respect to the persons nominated by the Board of Directors
for election as Directors is shown below under "Information Regarding
Directors." Unless otherwise specified in the proxy, it is the intention of
the persons named in the proxy to vote the shares represented by each properly
executed proxy for the election as Directors of each of the nominees. Each of
the nominees has agreed to stand for re-election and to serve if re-elected as
a Director. If any of the persons nominated by the Board of Directors fails to
stand for re-election or is unable to accept re-election, however, proxies not
marked to the contrary will be voted in favor of the election of such other
person as the Board of Directors may recommend.
VOTE REQUIRED FOR APPROVAL
A quorum being present, the affirmative vote of a plurality of the votes
cast is necessary to elect a nominee as a Director of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS VOTE "FOR" THE ELECTION OF THE TWO NOMINEES OF THE BOARD OF
DIRECTORS AS DIRECTORS OF THE COMPANY.
2
<PAGE>
INFORMATION REGARDING DIRECTORS
MEETINGS OF BOARD OF DIRECTORS AND COMMITTEES
During the fiscal year ended December 31, 1997 ("Fiscal 1997"), the Board of
Directors of the Company held seven meetings. Each Director who was a Director
during Fiscal 1997 attended at least 75% of the aggregate of the total number
of meetings of the Board of Directors and meetings held by all committees of
the Board of Directors on which such Director served, with the exception of
Eugene B. Doggett, who missed one meeting.
The Board of Directors has established an Audit Committee (the "Audit
Committee") and a Compensation Committee (the "Compensation Committee"). The
Audit Committee, which consists of John P. Leydon and Jerry A. Schiller, held
one meeting during Fiscal 1997. The Audit Committee recommends to the Board of
Directors the firm to be appointed as independent accountants to audit
financial statements and to perform services related to the audit, reviews the
scope and results of the audit with the independent accountants, reviews with
management and the independent accountants the Company's year-end operating
results, considers the adequacy of the internal accounting procedures and
considers the effect of such procedures on the accountants' independence.
The Compensation Committee, which consists of Stewart Gray MacDonald, Mr.
Leydon and Mr. Schiller, held three meetings during Fiscal 1997. The
Compensation Committee reviews and recommends to the Board of Directors the
compensation arrangements for all directors and officers other than Mr.
MacDonald, whose compensation arrangements are reviewed and recommended by
Messrs. Leydon and Schiller, approves such arrangements for other senior level
employees and administers and takes such other action as may be required in
connection with certain compensation and incentive plans of the Company. The
Compensation Committee also determines the number of options to be granted or
shares of the Company's Common Stock to be issued to eligible persons under
the Company's 1997 Stock Option and Incentive Plan (the "1997 Stock Plan") and
prescribes the terms and provisions of each grant made under the 1997 Stock
Plan other than with respect to the eligibility of Mr. MacDonald, as to whom
the full Board of Directors makes such determinations. In addition, the
Compensation Committee interprets the 1997 Stock Plan and grants thereunder,
and establishes, amends and revokes rules and regulations for administration
of the 1997 Stock Plan.
The Board of Directors does not have a nominating committee.
COMPENSATION OF DIRECTORS
Directors who are also employees of the Company do not receive compensation
for their services on the Board of Directors or any committee thereof. Each
Director who is not an employee of the Company (an "Independent Director")
receives an annual fee of $12,000 and an additional fee of $500 per meeting of
the Board of Directors. In addition, upon consummation of the Company's
initial public offering (the "IPO"), each Independent Director was granted an
option to purchase 1,000 shares of the Company's Common Stock at an exercise
price equal to the fair market value of the Company's Common Stock on the date
of the grant. Under the 1997 Stock Plan, each newly elected Independent
Director is also entitled to receive an initial grant of an option to purchase
1,000 shares of the Company's Common Stock upon his or her election to the
Board of Directors, and each Independent Director who is serving as a Director
on the fifth business day after each annual meeting of stockholders, beginning
with the Annual Meeting, will automatically be granted an option to purchase
1,000 shares of the Company's Common Stock. All options granted to Independent
Directors under the 1997 Stock Plan are exercisable upon grant at an exercise
price equal to the fair market value of the Company's Common Stock on the date
of the grant and shall terminate upon the tenth anniversary of the date of
grant.
All Directors are reimbursed for travel expenses incurred in attending
meetings of the Board of Directors and its committees.
3
<PAGE>
Set forth below is certain information regarding the Directors of the
Company, including the two Class I Directors who have been nominated for re-
election at the Annual Meeting, based on information furnished by them to the
Company.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
---- --- --------
<S> <C> <C>
CLASS I
Patrick A. Flanagan*.......................................... 45 1992
John P. Leydon*............................................... 65 1997
CLASS II
Jeffrey C. Huenink............................................ 41 1997
Jerry A. Schiller............................................. 65 1997
CLASS III
Stewart Gray MacDonald........................................ 48 1983
Eugene B. Doggett............................................. 61 1997
</TABLE>
- --------
*Nominee for election.
STEWART GRAY MACDONALD serves as Chairman of the Board and Chief Executive
Officer and has served as a Director of the Company since 1983. Mr. MacDonald
served the Company in various executive capacities from 1989 until his
election as Chairman of the Board in 1992. Mr. MacDonald, the son of the
Company's co-founder and first President, is the fourth member of the
Company's founding families to lead the organization. Mr. MacDonald, a three
time member of the U.S. Olympic Rowing Team and a former coach with the
U.S. National Rowing Team, also had an academic career for fifteen years. He
received his B.A. from the University of Wisconsin.
EUGENE B. DOGGETT has been a Director of the Company since October 1997. Mr.
Doggett is an Executive Vice President and Director of Iron Mountain
Incorporated ("Iron Mountain"), a publicly traded records management company.
From 1987 until June 1997, Mr. Doggett was also Chief Financial Officer of
Iron Mountain. Prior to joining Iron Mountain, Mr. Doggett had extensive
experience in commercial and investment banking, as well as financial and
general management experience at senior levels. He holds a B.A. from Yale
University and an M.B.A. from Harvard Business School.
PATRICK A. FLANAGAN has served as a Director of the Company since 1992 and
has served as Executive Vice President, Mergers and Acquisitions of the
Company since April 1996. From January 1993 through April 1996, Mr. Flanagan
was a partner with American Capital Strategies, an investment bank
specializing in mergers and acquisitions. From 1990 to January 1993, Mr.
Flanagan was a partner in Fidelis Group, an investment bank. From 1983 to
1990, Mr. Flanagan was an investment banker in the Corporate Finance
Department at Drexel Burnham Lambert where he was a First Vice President. Mr.
Flanagan serves as a director of Cains Foods, Inc. and National Forge
Corporation. Mr. Flanagan holds a B.S. from Purdue University and received his
M.B.A. from Harvard Business School.
JEFFREY C. HUENINK has been a Director of the Company since April 1997. Mr.
Huenink was the President and owner of Sun Services of America, Inc. from 1986
until its acquisition by the Company in April 1997. Mr. Huenink was a member
of the Florida House of Representatives from 1988 until 1992. Mr. Huenink
received his B.S. in Business Administration from the University of South
Florida.
JOHN P. LEYDON has been a Director of the Company since April 1997. Mr.
Leydon has been the Chief Financial Officer of Pacific Packaging Products,
Inc. since December 1996. From 1983 to 1996, Mr. Leydon was a partner at
Leydon & Gallagher, a certified public accounting firm. Mr. Leydon received
his B.S. in Business Administration from Boston College, his M.B.A. from
Babson College and his M.S. in Taxation from Bentley College.
4
<PAGE>
JERRY A. SCHILLER has been a Director of the Company since April 1997. Mr.
Schiller has been a private investor and consultant since 1993. In October
1993, Mr. Schiller retired after 31 years of service with The Maytag
Corporation. From 1985 until his retirement, Mr. Schiller served as the
Executive Vice President and Chief Financial Officer, as well as a Director,
of The Maytag Corporation. From 1962 until 1985, Mr. Schiller held various
executive positions with The Maytag Corporation. Mr. Schiller received his
B.S. in Business Administration and Accounting from Augustana College.
There are no family relationships among any of the Directors and executive
officers of the Company except that Eugene B. Doggett is the uncle of Cynthia
V. Doggett, Stewart Gray MacDonald's wife.
INFORMATION REGARDING EXECUTIVE OFFICERS
The names and ages of all executive officers of the Company and the
principal occupation and business experience during at least the last five
years for each are set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Stewart Gray MacDonald.... 48 Chairman and Chief Executive Officer
Executive Vice President, Sales and
Neil F. MacLellan, III.... 38 Marketing
John S. Olbrych........... 42 Chief Financial Officer and Treasurer
Patrick A. Flanagan....... 45 Executive Vice President, Mergers and
Acquisitions and Secretary
</TABLE>
The biographies of Messrs. MacDonald and Flanagan are set forth above.
NEIL F. MACLELLAN, III has been with the Company since 1985 and has served
as Executive Vice President, Sales and Marketing since December 1995. From
January 1991 through December 1995, Mr. MacLellan served as the Company's
Director of Finance and Administration and from March 1985 through January
1991, Mr. MacLellan served as Controller of the Company. Mr. MacLellan
received his B.S. in Accounting from Bentley College.
JOHN S. OLBRYCH has served as Chief Financial Officer of the Company since
April 1996 and served as a Director of the Company from November 1993 until
May 1997. From 1991 through 1996, Mr. Olbrych was an independent business
consultant. In this role he served as interim Chief Financial Officer of
AirTran Corporation, Airways Corporation, Carus Corporation, Carus Publishing
Company and Daisytek International. He remains on the board of directors of
both Carus Corporation and Carus Publishing Company. From 1986 through 1991,
Mr. Olbrych served as a Vice President of State Street Bank. Mr. Olbrych
received his B.A. from Dartmouth College and his M.B.A. from The Amos Tuck
School at Dartmouth College.
Each of the executive officers holds his respective office until the regular
annual meeting of the Board of Directors following the annual meeting of
stockholders and until his successor is duly elected and qualified or until
his earlier resignation or removal.
5
<PAGE>
EXECUTIVE COMPENSATION
The following sections of this Proxy Statement set forth and discuss the
compensation paid or awarded during the last two fiscal years to the Company's
Chief Executive Officer and the other executive officers named in tables below
(the "Named Executive Officers"). Other than the Named Executive Officers, no
other officer of the Company who held office as of December 31, 1997 met the
definition of "highly compensated" within the meaning of the Security and
Exchange Commission's executive compensation disclosure rules for this period.
Information with respect to other persons is not required to be disclosed
under the rules and regulations of the Securities and Exchange Commission.
SUMMARY COMPENSATION TABLE
The following table shows for each of the last two fiscal years compensation
paid by the Company to the Chief Executive Officer and the Named Executive
Officers.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
NAME AND PRINCIPAL -------------------------- UNDERLYING COMPENSATION
POSITION YEAR SALARY($) BONUS($)(1) OPTIONS(#) ($)(2)
------------------ ---- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Stewart Gray MacDonald.... 1997 176,596 30,000 14,870 5,349
Chairman and Chief 1996 131,976 98,380 148,700 2,245
Executive Officer
Neil F. MacLellan, III.... 1997 158,846 25,000 8,180 15,971
Executive Vice President, 1996 85,000 115,188 81,800 8,624
Sales and Marketing
John S. Olbrych(3)........ 1997 187,500 25,000 8,180 6,634
Chief Financial Officer 1996 88,411 70,000 81,800 --
and Treasurer
Patrick A. Flanagan(4).... 1997 160,144 20,000 7,435 --
Executive Vice President, 1996 97,500 89,133 74,350 --
Mergers and Acquisitions
and Secretary
</TABLE>
- --------
(1) Executive officers are eligible for annual cash bonuses. Such bonuses are
based upon achievement of individual or corporate performance objectives
determined by the Board of Directors.
(2) Includes contributions made on the executive's behalf to the Company's
profit sharing plan and, in the case of Mr. MacLellan, premiums paid by
the Company for life insurance benefitting such executive's spouse.
(3) Mr. Olbrych was appointed the Company's Chief Financial Officer in April
1996.
(4) Mr. Flanagan was appointed Executive Vice President, Mergers and
Acquisitions in April 1996.
6
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning the number and value
of unexercised options to purchase shares of the Company's Common Stock held
by the Chief Executive Officer and each of the Named Executive Officers who
held such options at December 31, 1997. None of the Chief Executive Officer or
the Named Executive Officers exercised any stock options during Fiscal 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Stewart Gray MacDonald...... 29,740 133,830 $202,975 $906,698
Neil F. MacLellan, III...... 16,360 73,620 111,657 498,776
John S. Olbrych............. 16,360 73,620 111,657 498,776
Patrick A. Flanagan......... 14,870 66,915 101,488 453,349
</TABLE>
- --------
(1) These values have been calculated based upon the closing sale price of the
Company's Common Stock, as reported by the NYSE, on December 31, 1997
($15.625) less the applicable exercise price.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the options granted in Fiscal 1997 to the
Chief Executive Officer and each of the Named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED ANNUAL
INDIVIDUAL GRANTS RATES OF SHARE
---------------------------------------------------- PRICE
NUMBER OF APPRECIATION
SHARES PERCENT OF TOTAL EXERCISE FOR OPTION
UNDERLYING OPTIONS GRANTED OR BASE TERM(3)
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION --------------
NAME GRANTED (#)(1) FISCAL YEAR ($/SH)(2) DATE 5%($) 10%($)
- ---- -------------- ---------------- --------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Stewart Gray MacDonald.. 14,870 16.6% $9.25 8/14/07 86,503 219,215
Neil F. MacLellan, III.. 8,180 9.1% $9.25 8/14/07 47,585 120,591
John S. Olbrych......... 8,180 9.1% $9.25 8/14/07 47,585 120,591
Patrick A. Flanagan..... 7,435 8.3% $9.25 8/14/07 43,251 109,608
</TABLE>
- --------
(1) Each option agreement with respect to one or more shares of the Company's
Common Stock provides that such option will vest and become exercisable
with respect to twenty percent (20%) of the shares of the Company's Common
Stock to which such option agreement relates on each of August 14, 1998,
1999, 2000, 2001 and 2002.
(2) All options were granted at fair market value as determined by the Board
of Directors on the date of grant.
(3) This column shows the hypothetical gain or option spreads of the options
granted based on assumed annual compound stock appreciation rates of 5%
and 10% over the full 10-year term of the options. The gains shown are net
of the option exercise price, but do not include deductions for taxes or
other expenses associated with the exercise. The 5% and 10% assumed rates
of appreciation are mandated by the rules of the Commission and do not
represent the Company's estimate or projection of future prices of the
Company's Common Stock. Actual gains, if any, on stock option exercises
will depend on the future performance of the Company's Common Stock, the
option holders' continued employment through the option period and the
date on which the options are exercised.
7
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Compensation Committee, which consists of Messrs. MacDonald, Leydon, and
Schiller, reviews and recommends to the Board of Directors the compensation
arrangements for all directors and officers other than Mr. MacDonald, whose
compensation arrangements are reviewed and recommended by Messrs. Leydon and
Schiller (the "CEO Subcommittee"). The Compensation Committee consults with
Mr. MacDonald regarding compensation of other executive officers, and
administers and takes such other action as may be required in connection with
certain compensation and incentive plans of the Company.
In addition, the Compensation Committee determines the number of options to
be granted or shares of the Company's Common Stock to be issued to eligible
persons under the Company's 1997 Stock Plan and prescribes the terms and
provisions of each grant made under the 1997 Stock Plan. Determinations with
respect to the eligibility of Mr. MacDonald are made by the full Board of
Directors. The Compensation Committee interprets the 1997 Stock Plan and
grants thereunder, and establishes, amends and revokes rules and regulations
for administration of the 1997 Stock Plan.
GENERAL
The compensation arrangements of the Company reflect the philosophy that the
Company and its shareholders are best served by running the business with a
long-term perspective, while striving to deliver consistently good annual
results. Compensation arrangements are therefore designed to provide
competitive financial rewards for successfully meeting the Company's larger
strategic as well as annual operating objectives. The Company rewards the
creation of sustainable long-term shareholder value. The Compensation
Committee recognizes that there are not a significant number of comparable
publicly traded companies in the Company's industry segment, and accordingly,
did not arrange for an independent analysis of the competitive compensation
structures in the industry segment.
COMPENSATION POLICIES FOR EXECUTIVE OFFICERS
The compensation of the Company's Chief Executive Officer and other
executive officers is comprised of annual salary and cash and stock incentives
based on annual and long-term performance of the Company.
Base Salary. The Compensation Committee, in its discretion, determines the
annual base salary and base salary adjustments for executive officers.
Generally, salary adjustments for executive officers are determined by
evaluating:
. competitive pay practices
. the performance of the Company
. the performance of the executive officer including any change in the
responsibilities assumed by the executive officer.
The Compensation Committee believes that the base salaries are reasonable
when compared with other companies.
Cash Bonuses. The Company's objectives in awarding cash bonuses to executive
officers are based upon individual performances and the Company's achievement
of certain internal financial objectives. The objectives may include revenue
growth objectives, pre-tax income objectives, and balance sheet strength
objectives, although the Compensation Committee did not rely upon any
particular performance measurements in 1997. By implementing a compensation
structure composed of salary and a performance-related bonus, a significant
portion of each executive officer's annual total cash compensation is placed
at risk in order to provide an incentive toward sustained high performance.
The Compensation Committee considered the compensation that the executive
officers received in the form of stock options in determining the appropriate
cash bonus for each executive officer.
8
<PAGE>
Stock Options. Stock option grants are designed to attract and retain
employees who can make significant contributions to the Company's success,
reward employees for such significant contributions, and give employees a
longer-term incentive to increase shareholder value. Because an optionee will
benefit only if Mac-Gray's stock price increases over time, options are
considered to be an effective means of linking executive pay with the creation
of shareholder wealth.
The size and frequency of stock option grants are determined by the
Compensation Committee in its discretion, taking into account the optionee's
level of responsibility, their achievement of objectives, the implementation
of key strategies, and/or the potential for positively influencing future
results. The Compensation Committee may impose specific performance measures
on stock option grants. The Compensation Committee also may grant stock
options for executive recruitment and retention purposes, in amounts that the
Compensation Committee, in its discretion, deems necessary and appropriate.
To ensure that high levels of performance occur over the long term, stock
options granted to executives typically have a life of ten years, vest over
five years, and have an exercise price equal to 100% of the fair market value
of the Company's Common Stock on the grant date. Any value received by an
executive officer from a stock option grant depends entirely on increases in
the price of the Company's Common Stock.
In addition to the executive officers, 29 other officers, managers and
employees of the Company had options as of December 31, 1997.
Since the adoption of the 1997 Stock Plan, the Company's executive officers
have all been granted options to acquire shares of the Company's Common Stock.
During Fiscal 1997, Messrs. MacDonald, MacLellan, Olbrych and Flanagan
received options to purchase 14,870, 8,180, 8,180 and 7,435 shares of Common
Stock, respectively.
Other Compensation. The Company provides executive officers and management
with health, retirement and other benefits under plans that are generally
available to the Company's employees.
Compensation of the Chief Executive Officer. Modifications to Mr.
MacDonald's compensation arrangements are determined by the CEO Subcommittee,
in its discretion, based upon an analysis of his performance during the year
and the Company's overall performance. Mr. MacDonald received an annual base
salary of $177,000 for Fiscal 1997. Mr. MacDonald currently beneficially owns
more than 16% of the Company's outstanding Common Stock. The CEO Subcommittee
recognizes that, as one of the Company's principal stockholders, Mr. MacDonald
has participated directly in the increase in value of the Company's Common
Stock since its initial public offering.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Stewart Gray MacDonald
John P. Leydon
Jerry A. Schiller
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All executive officer compensation decisions are made by the Compensation
Committee. The Compensation Committee reviews and makes recommendations
regarding the compensation for management and key employees of Mac-Gray,
including salaries and bonuses. The members of the Compensation Committee are
Messrs. MacDonald, Leydon and Schiller. Mr. MacDonald, the Chairman and Chief
Executive Officer, does not participate in the review and decisions regarding
his own compensation. Prior to May 2, 1997, and prior to the creation of the
Compensation Committee, Mr. MacDonald, Mr. Olbrych, the Chief Financial
Officer, and Mr. Flanagan, the Secretary and an Executive Vice President,
participated in deliberations of the Mac-Gray Board concerning executive
compensation.
9
<PAGE>
STOCKHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the percentage change in the
cumulative total stockholder return on the Company's Common Stock from October
17, 1997, the date on which the Company's Common Stock was first publicly
traded, through December 31, 1997, based on the market price of the Company's
Common Stock and assuming reinvestment of dividends, with the total return of
a group of peer issuers and the S&P 500 Index. The calculation of total
cumulative return assumes a $100 investment in the Company's Common Stock, a
composite of the peer issuers and the S&P 500 Index on October 17, 1997. The
comparisons in this line graph are historical and are not intended to forecast
or be indicative of possible future performance of the Common Stock of the
Company.
[PERFORMANCE GRAPH APPEARS HERE]
TABULAR REPRESENTATION OF DATA POINTS USED IN
PRINTED GRAPHIC
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
------------------------
OCTOBER 17, DECEMBER 31,
1997(1) 1997
----------- ------------
<S> <C> <C>
Mac-Gray Corporation................................ 100.00 112.61
Peer Issuer Group(2)................................ 100.00 102.66
S&P 500 Index....................................... 100.00 102.78
</TABLE>
- --------
(1) The beginning measurement point is established by the market close on
October 17, 1997, the first day on which the Company's Common Stock was
publicly traded.
(2) The Peer Issuer Group (the "Group") consists of Coinmach Laundry
Corporation, G&K Services, Inc., Unitog Company, UniFirst Corporation,
Angelica Corp., Cintas Corporation, Rollins, Inc. and Iron Mountain
Incorporated. The portion of the $100 deemed to be invested in each
component issuer of the Group is proportional to its stock market
capitalization at the beginning of the measurement period. Because
information regarding the number of outstanding common shares of the
component issuers on October 17, 1997 was not available, the number of
outstanding shares of each issuer as of the date closest to September 30,
1997 as reported in such issuer's quarterly or annual reports was
multiplied by the market close of its common stock on October 17, 1997 to
arrive at the stock market capitalization used for purposes of
apportioning the original investment of $100 among the component issuers.
10
<PAGE>
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
The Company is not a party to any employment agreements with any of its
executive officers.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In April 1997, the Company consummated the acquisition of Sun Services of
America, Inc. ("Sun Services," and such acquisition, "Sun Services
Acquisition") whereby it acquired Sun Services via mergers in which it issued
an aggregate consideration of approximately $2 million and 612,026 shares of
the Company's Common Stock to Jeffrey C. Huenink, who is currently a member of
the Board of Directors and a stockholder of the Company. In connection with
the Sun Services Acquisition, the Company entered into a non-competition
agreement (the "Huenink Non-Competition Agreement") and a Consulting Agreement
(the "Consulting Agreement") with Mr. Huenink, the former owner of Sun
Services. The Huenink Non-Competition Agreement prohibits Mr. Huenink from
conducting business in the Company's principal industry for a period of three
years from the later of the date of termination of the Consulting Agreement
and the date that Mr. Huenink ceases to be a director of the Company. Pursuant
to the terms of the Consulting Agreement, Mr. Huenink is to advise the Company
through April 16, 2002 with respect to its acquisition strategy and assist the
Company in seeking out acquisition candidates that complement this strategy.
The Company has provided Mr. Huenink with incentives to identify acquisition
candidates that may be successfully integrated into the Company including a
combined fixed rate/bonus compensation package. The fixed rate portion of the
compensation package provides Mr. Huenink with an annual consulting payment of
$50,000 during each of the first and second years of the Consulting Agreement
and $100,000 for each of the third through fifth years. In addition, the bonus
portion of the compensation package is computed based upon a percentage (1%
during the first and second years and .75% during each of the third through
fifth years) of revenues of certain acquired businesses and is guaranteed to
be at least $225,000 during each of the first and second years of the
Consulting Agreement.
In connection with the Sun Services Acquisition, the Company entered into a
Stockholders' Agreement (the "First Stockholders' Agreement") with Mr. Huenink
and certain principal stockholders of the Company pursuant to which (i) Mr.
Huenink received demand and "piggy-back" registration rights, (ii) each such
stockholder agreed to vote their respective shares in favor of Mr. Huenink's
election to the Board of Directors until the earlier to occur of (a) April 17,
1999, and (b) such time as Mr. Huenink ceases to hold five percent of the
outstanding shares of the Company's Common Stock which occurred as a result of
the acquisition of Intirion Corporation (the "Intirion Acquisition"), (iii)
the Company became obligated to repurchase up to 612,026 shares of its Common
Stock issued in connection with the Sun Services Acquisition at a purchase
price of $12.74 per share in the event the holder or holders of such shares
elect to require the Company to repurchase such shares (the "Put Right") and
(iv) the Company received the right to repurchase such shares of its Common
Stock (the "Call Right"). The Call Right terminated upon the consummation of
the IPO. The Put Right expires on October 22, 2000.
In connection with the reorganization (the "Mac-Gray Combination") of Mac-
Gray Services, Inc., a Delaware corporation that was formerly known as Mac-
Gray Co., Inc. ("Mac-Gray Co."), and Mac-Gray, L.P., a Delaware limited
partnership (the "Limited Partnership"), the Company (i) acquired all of the
shares of common stock, par value $.01 per share, of Mac-Gray Co. from each of
Mr. Stewart Gray MacDonald ("Mr. S. MacDonald"), Ms. Sandra E. MacDonald ("Ms.
S. MacDonald"), Mr. Daniel W. MacDonald ("Mr. D. MacDonald," and collectively,
the "MacDonalds") and certain trusts under which such individuals are
beneficiaries in exchange for an aggregate of 5,000,000 shares of the
Company's Common Stock and (ii) acquired all of the limited partner interests
in the Limited Partnership from each of the MacDonalds in exchange for an
aggregate of 1,367,800 shares of The Company's Common Stock. Immediately after
the Mac-Gray Combination, the Company effected the merger of the Limited
Partnership with and into Mac-Gray Co., the Limited Partnership's sole general
partner. The Company and Mac-Gray Co. have assumed the existing liabilities
and indebtedness of the Limited Partnership. Mr. S. MacDonald is Chief
Executive Officer and Chairman of the Board of Directors, and each of Mr. S.
MacDonald, Ms. S. MacDonald and Mr. D. MacDonald own of record and
beneficially greater than five percent of the outstanding shares of the
Company's Common Stock.
11
<PAGE>
Pursuant to a Stockholders' Agreement by and among the Company and certain
of its stockholders (the "Second Stockholders' Agreement," and together with
the First Stockholders' Agreement, the "Stockholders' Agreements"), (i) each
of Mr. S. MacDonald, Ms. S. MacDonald and Mr. D. MacDonald (and any assignees
or trusts created by them or under which they are beneficiaries) received
"piggy-back" and demand registration rights, (ii) each of the MacDonalds
granted to and received rights of first offer to purchase shares of the
Company's Common Stock offered for sale by another stockholder who is a party
thereto and (iii) the MacDonalds granted to the Company rights of second offer
to purchase such shares.
In 1977, Mac-Gray Co. entered into an arrangement with the Company's co-
founder and then Chief Executive Officer that provided his wife, Ms. Evelyn C.
MacDonald ("Ms. E. MacDonald"), with an annual payment following his death.
The Company, through its subsidiary, Mac-Gray Services, pays Ms. E. MacDonald,
the mother of Mr. S. MacDonald, the Company's Chairman and Chief Executive
Officer, a fixed amount of $104,000 per year pursuant to this arrangement,
which is not evidenced by a comprehensive written agreement, and will continue
to make such payments for the remainder of Ms. E. MacDonald's life.
Immediately following the consummation of the IPO, the Company distributed
approximately $9.0 million of the proceeds thereof to its stockholders of
record as of a date immediately prior to the consummation of the IPO. This
distribution represented a significant portion of the Company's and certain of
its predecessor's historical, undistributed earnings through June 30, 1997,
which were previously taxed for federal and state income tax purposes directly
to the stockholders of the Company.
12
<PAGE>
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of April 10, 1998 by (i)
each person known by the Company to own beneficially five percent or more of
the outstanding shares of the Company's Common Stock, (ii) each director of
the Company, the Chief Executive Officer and each of the executive officers,
and (iii) all director and executive officers of the Company as a group.
Except as otherwise indicated, the Company believes that the beneficial owners
of the Company's Common Stock listed below, based on information furnished by
such owners, have sole investment and voting power with respect to such
shares, subject to community property laws where applicable.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENTAGE OF SHARES
NAME OF BENEFICIAL OWNER(1) OWNED(2)(3) BENEFICIALLY OWNED
--------------------------- ------------ --------------------
<S> <C> <C>
Evelyn C. MacDonald(3)(4)................. 1,700,000 12.9%
Stewart Gray MacDonald(3)(4)(5)........... 1,944,340 14.7%
Sandra E. MacDonald(3)(4)(6).............. 3,209,250 24.4%
Daniel W. MacDonald(3)(4)(7).............. 2,122,600 16.1%
Patrick A. Flanagan(3)(4)(8).............. 1,716,370 13.0%
Peter C. Bennett(3)(4)(9)................. 1,700,000 12.9%
R. Robert Woodburn, Jr.(3)(4)(10)......... 1,700,000 12.9%
Cynthia V. Doggett(3)(11)................. 1,435,100 10.9%
Richard G. MacDonald(3)(12)............... 459,750 3.5%
Gilbert M. Roddy, Jr.(3)(13).............. 580,000 4.4%
Jeffrey C. Huenink(14).................... 613,026 4.7%
Jerry A. Schiller(14)..................... 1,000 *
John P. Leydon(14)........................ 2,000 *
Eugene B. Doggett(14)..................... 3,000 *
Neil F. MacLellan, III(15)................ 18,860 *
John S. Olbrych(15)....................... 16,360 *
All executive officers and directors as a
group (8 persons)........................ 3,748,289 28.3%
</TABLE>
- --------
* less than 1%
(1) Unless otherwise indicated, the mailing address for each stockholder and
director is c/o Mac-Gray Corporation, 22 Water Street, Cambridge, MA
02141.
(2) Beneficial ownership is determined in accordance with the rules of the
Commission. In computing the number of shares of the Company's Common
Stock beneficially owned by a person, shares of the Company's Common
Stock subject to options and warrants held by that person that are
currently exercisable or exercisable within 60 days of this Proxy
Statement are deemed outstanding. As of April 10, 1998, a total of
13,174,118 shares of the Company's Common Stock were issued and
outstanding.
(3) The Company and certain stockholders of the Company, including The Evelyn
C. MacDonald Family Trust for the benefit of Stewart G. MacDonald, The
Evelyn C. MacDonald Family Trust for the benefit of Sandra E. MacDonald,
The Evelyn C. MacDonald Family Trust for the benefit of Daniel W.
MacDonald (each of these sub-trusts under The Evelyn C. MacDonald Family
Trusts is referred to herein as a "Sub-Trust" and collectively as "Sub-
Trusts"), Mr. S. MacDonald, Ms. S. MacDonald, Mr. D. MacDonald, The
Stewart G. MacDonald 1984 Trust (the "SGM Trust"), The Daniel W.
MacDonald Trust 1988 (the "DWM Trust"), the New Century Trust, The
Whitney E. MacDonald GST Trust-1997, The Jonathan S. MacDonald GST Trust-
1997, The Robert C. MacDonald GST Trust-1997, The Whitney E. MacDonald
Gift Trust, The Jonathan S. MacDonald Gift Trust, The Robert C. MacDonald
Gift Trust and Jeffrey C. Huenink are parties to the First Stockholders'
Agreement. The First Stockholders' Agreement provides, among other
things, that the parties thereto must vote their respective shares,
subject to certain conditions contained therein, in favor of Mr.
Huenink's election as a director of the Company. In addition, the First
Stockholders' Agreement provides Mr. Huenink with certain rights to put
his shares of the Company's
13
<PAGE>
Common Stock to the Company. As a result of the First Stockholders'
Agreement, each stockholder may be deemed to beneficially own all of the
issued and outstanding shares of the Company's Common Stock owned by the
other parties thereto, although such beneficial ownership is not reflected
in the table of shares beneficially owned. The Company and each of the Sub
Trusts, Mr. S. MacDonald, Ms. S. MacDonald, Mr. D. MacDonald, the SGM
Trust, the DWM Trust, the New Century Trust, The Whitney E. MacDonald GST
Trust-1997, The Jonathan S. MacDonald GST Trust-1997, The Robert C.
MacDonald GST Trust-1997, The Whitney E. MacDonald Gift Trust, The
Jonathan S. MacDonald Gift Trust, The Robert C. MacDonald Gift Trust, and
Cynthia V. Doggett are parties to the Second Stockholders' Agreement. The
Second Stockholders' Agreement gives the parties thereto rights of first
offer to purchase shares offered for sale by another stockholder who is a
party thereto, as well as providing the Company with rights of second
offer to purchase such shares. As a result of the Second Stockholders'
Agreement, each of the parties thereto may be deemed to beneficially own
all of the issued and outstanding shares of the Company's Common Stock
owned by the other parties thereto, although such beneficial ownership is
not reflected in the table of shares beneficially owned.
(4) Includes 1,700,000 shares of the Company's Common Stock held in trust
pursuant to The Evelyn C. MacDonald Family Trusts (the "ECM Trust"), the
grantor of which is Ms. E. MacDonald. The independent trustees (the
"Independent Trustees") of the ECM Trust are Peter C. Bennett
("Mr. Bennett"), R. Robert Woodburn, Jr. ("Mr. Woodburn") and Patrick A.
Flanagan ("Mr. Flanagan"). In addition, each of Mr. S. MacDonald, Ms. S.
MacDonald and Mr. D. MacDonald are trustees of the individual Sub-Trust
under the ECM Trust of which such individual is a beneficiary. 566,667
shares of the Company's Common Stock held by the ECM Trust are held in a
Sub-Trust for the benefit of Mr. S. MacDonald, 566,667 shares of the
Company's Common Stock held by the ECM Trust are held in a Sub-Trust for
the benefit of Ms. S. MacDonald, and 566,667 shares of the Company's
Common Stock held by the ECM Trust are held in a Sub-Trust for the
benefit of Mr. D. MacDonald. The Independent Trustees have voting power
over the shares held by the ECM Trust and the Sub-Trusts, and may be
deemed to have beneficial ownership of such shares of the Company's
Common Stock. Under the ECM Trust, Ms. E. MacDonald has the right to
replace the property held by the ECM Trust, including the shares of the
Company's Common Stock, at any time by contributing property of
equivalent value to the ECM Trust. As a result, Ms. E. MacDonald may be
deemed to have beneficial ownership of the shares of Mac- Gray Common
Stock held by the ECM Trust. The four trustees of each Sub-Trust
(including each of Mr. S. MacDonald, Ms. S. MacDonald and Mr. D.
MacDonald as to their own respective Sub-Trust) generally have the shared
power to dispose of the shares of the Company's Common Stock attributed
to such Sub-Trust and, therefore, may be deemed to have beneficial
ownership of the shares of the Company's Common Stock held by such Sub-
Trust.
(5) Includes (i) 655,000 shares of the Company's Common Stock held by the SGM
Trust, of which Mr. S. MacDonald serves as co-trustee and is sole
beneficiary, (ii) 580,000 shares of the Company's Common Stock held by
the New Century Trust, of which Mr. S. MacDonald is the grantor, and
(iii) 566,667 shares of the Company's Common Stock held by the ECM Trust
for the benefit of Mr. S. MacDonald, of which Mr. S. MacDonald serves as
co-trustee and is the beneficiary. Mr. S. MacDonald, may replace the
shares of the Company's Common Stock held by the New Century Trust at any
time with property of equivalent value and therefore may be deemed to
beneficially own all such shares of the Company's Common Stock. Mr. S.
MacDonald disclaims beneficial ownership of such shares of the Company's
Common Stock. Mr. S. MacDonald holds options to purchase up to 163,570
shares of the Company's Common Stock, 29,740 of which are exercisable and
included in shares beneficially owned.
(6) Includes (i) 148,800 shares of the Company's Common Stock held by The
Whitney E. MacDonald GST Trust-1997, (ii) 148,800 shares of the Company's
Common Stock held by The Jonathan S. MacDonald GST Trust-1997, (iii)
148,800 shares of the Company's Common Stock held by The Robert C.
MacDonald GST Trust-1997, (iv) 566,667 shares held by the ECM Trust for
the benefit of Ms. S. MacDonald, of which Ms. S. MacDonald serves as co-
trustee and is the beneficiary, and (v) 1,100,000 shares of the Company's
Common Stock held by the DWM Trust, of which Ms. S. MacDonald serves as
co-trustee. Richard G.
14
<PAGE>
MacDonald ("Mr. R. MacDonald") is the sole trustee of each of the
aforementioned trusts (other than the ECM Trust and DWM Trust) and may be
deemed to beneficially own all of such shares of the Company's Common
Stock. The shares held by each of The Whitney E. MacDonald GST Trust-1997,
The Jonathan S. MacDonald GST Trust-1997 and The Robert C. MacDonald GST
Trust-1997 (collectively, the "GST Trusts") may be replaced at any time by
Ms. S. MacDonald, the grantor of such trusts, with property of equivalent
value and, therefore, Ms. S. MacDonald may be deemed to beneficially own
all such shares of the Company's Common Stock. Ms. S. MacDonald disclaims
beneficial ownership of the shares of the Company's Common Stock held by
the GST Trusts and the 1,100,000 shares of the Company's Common Stock held
by the DWM Trust.
(7) Includes (i) 1,100,000 shares of the Company's Common Stock held by the
DWM Trust, of which Mr. D. MacDonald is co-trustee and sole beneficiary,
and (ii) 566,667 shares of the Company's Common Stock held by the ECM
Trust for the benefit of Daniel W. MacDonald, of which Mr. D. MacDonald
serves as co-trustee and is the beneficiary.
(8) Includes 1,700,000 shares of the Company's Common Stock in the aggregate
held by the ECM Trust for which Mr. Flanagan serves as co-trustee and
shares voting and dispositive power over the shares of the Company's
Common Stock. Mr. Flanagan disclaims beneficial ownership of the shares of
the Company's Common Stock held by the ECM Trust. Mr. Flanagan holds
options to purchase up to 81,785 shares of the Company's Common Stock,
14,870 of which are exercisable and included in shares of the Company's
Common Stock beneficially owned.
(9) Includes 1,700,000 shares of the Company's Common Stock held by the ECM
Trust for which Mr. Bennett serves as co-trustee and shares voting and
dispositive power over the shares of the Company's Common Stock. Mr.
Bennett disclaims beneficial ownership of the shares of the Company's
Common Stock held by the ECM Trust. Mr. Bennett's mailing address is c/o
State Street Research & Management Company, One Financial Center, 31st
Floor, Boston, MA 02110.
(10) Includes 1,700,000 shares of the Company's Common Stock held by the ECM
Trust for which Mr. Woodburn serves as co-trustee and shares voting and
dispositive power over the shares of the Company's Common Stock. Mr.
Woodburn disclaims beneficial ownership of the shares of the Company's
Common Stock held by the ECM Trust. Mr. Woodburn's mailing address is c/o
Palmer & Dodge, One Beacon Street, Boston, Massachusetts 02108.
(11) Includes (i) 655,000 shares of the Company's Common Stock held by the SGM
Trust, of which Ms. Doggett serves as co-trustee, and (ii) 580,000 shares
of the Company's Common Stock held by the New Century Trust, of which Ms.
Doggett serves as co-trustee. The shares of the Company's Common Stock
held in the New Century Trust may be replaced at any time by the grantor,
Mr. S. MacDonald, with property of equivalent value. The SGM Trust is
revocable by the grantor, Mr. S. MacDonald Ms. Doggett disclaims
beneficial ownership of all of shares of the Company's Common Stock held
by such trusts.
(12) Includes (i) 148,800 shares of the Company's Common Stock held by The
Whitney E. MacDonald GST Trust-1997, (ii) 148,800 shares of the Company's
Common Stock held by The Jonathan S. MacDonald GST Trust-1997, (iii)
148,800 of the Company's Common Stock shares held by The Robert C.
MacDonald GST Trust-1997, (iv) 4,450 shares of the Company's Common Stock
held by The Whitney E. MacDonald Gift Trust, (v) 4,450 shares of the
Company's Common Stock held by The Jonathan S. MacDonald Gift Trust, and
(vi) 4,450 shares of the Company's Common Stock held by The Robert C.
MacDonald Gift Trust (together with The Whitney E. MacDonald Gift Trust
and The Jonathan S. MacDonald Gift Trust, collectively, the "Gift
Trusts"). Mr. R. MacDonald is the sole trustee of each of the
aforementioned trusts and may be deemed to beneficially own all such
shares of the Company's Common Stock. The 459,750 shares of the Company's
Common Stock held by the GST Trusts and the Gift Trusts may be replaced at
any time by Ms. S. MacDonald, the grantor, with property of equivalent
value, all 459,750 shares of the Company's Common Stock of which Mr. R.
MacDonald disclaims beneficial ownership.
(13) Includes 580,000 shares of the Company's Common Stock held by the New
Century Trust, of which Mr. Roddy serves as co-trustee. The shares of the
Company's Common Stock held by the New Century Trust may be replaced at
any time by Mr. S. MacDonald, the grantor, with property of equivalent
value, of
15
<PAGE>
which all 580,000 shares of the Company's Common Stock Mr. Roddy disclaims
beneficial ownership. Mr. Roddy's mailing address is c/o Loring, Wolcott &
Coolidge, 230 Congress Street, Boston, Massachusetts 02110.
(14) Each of Messrs. Doggett, Huenink and Leydon holds options to purchase up
to 1,000 shares of the Company's Common Stock, all of which are
exercisable and included in shares of the Company's Common Stock
beneficially owned. Mr. Schiller exercised an option to purchase 1,000
shares of the Company's Common Stock in January 1998.
(15) Each of Messrs. MacLellan and Olbrych holds options to purchase up to
89,980 shares of the Company's Common Stock, 16,360 of which are
exercisable and included in shares of the Company's Common Stock
beneficially owned.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The Company's executive officers and directors and beneficial owners of more
than 10% of its Common Stock are required under Section 16(a) of the Exchange
Act to file reports of ownership and changes in ownership with the SEC. Copies
of those reports must also be furnished to the Company. Based solely on a
review of the copies of reports furnished to the Company, and written
representations that no other reports were required, the Company believes that
during Fiscal 1997 no person who was a director, officer or greater than 10%
beneficial owner of the Company's Common Stock failed to file on a timely
basis all reports required by Section 16(a).
EXPENSES OF SOLICITATION
The Company will pay the entire expense of soliciting proxies for the Annual
Meeting. In addition to solicitations by mail, certain directors, officers and
regular employees of the Company (who will receive no compensation for their
services other than their regular compensation) may solicit proxies by
telephone, telegram or personal interview. Banks, brokerage houses,
custodians, nominees and other fiduciaries have been requested to forward
proxy materials to the beneficial owners of shares held of record by them and
such custodians will be reimbursed for their expenses. All costs incurred with
respect to the Annual Meeting will be borne by the Company.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Stockholder proposals intended to be presented at the 1999 annual meeting
must be received by the Company on or before December 16, 1998 in order to be
considered for inclusion in the Company's proxy statement and form of proxy
for that meeting. Any such proposal should be mailed to: Secretary, Mac-Gray
Corporation, 22 Water Street, Cambridge, Massachusetts 02141.
INDEPENDENT ACCOUNTANTS
The firm of Price Waterhouse LLP served as the Company's independent public
accountants for Fiscal 1997 and will serve in such capacity for Fiscal 1998. A
representative of Price Waterhouse LLP will be present at the Annual Meeting
and will be given the opportunity to make a statement if he or she so desires.
The representative will be available to respond to appropriate questions.
16
<PAGE>
OTHER MATTERS
The Board of Directors does not know of any matters other than those
described in this Proxy Statement which will be presented for action at the
Annual Meeting. If other matters are duly presented, proxies will be voted in
accordance with the best judgment of the proxy holders.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
17
<PAGE>
- --------------------------------------------------------------------------------
MAC-GRAY CORPORATION
- --------------------------------------------------------------------------------
1. Election of Directors.
<TABLE>
<CAPTION>
For All With- For All
Nominees hold Except
<S> <C> <C> <C>
PATRICK A. FLANAGAN [_] [_] [_]
JOHN P. LEYDON [_] [_] [_]
</TABLE>
NOTE: IF YOU DO NOT WISH YOUR SHARES VOTED "FOR" A PARTICULAR NOMINEE, MARK THE
"FOR ALL EXCEPT" BOX AND STRIKE A LINE THROUGH THAT NOMINEE'S NAME. YOUR SHARES
SHALL BE VOTED FOR THE REMAINING NOMINEES.
2. In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting or at any adjournment(s)
thereof.
Mark box at right if an address change or comment has been [_]
noted on the reverse side of this card.
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Please be sure to sign and date this Proxy. Date
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- ---------Stockholder sign here------------------------Co-owner sign here--------
DETACH CARD DETACH CARD
MAC-GRAY CORPORATION
Please take note of the important information pertaining to the Company and the
election of its directors enclosed with this Proxy Ballot. Please take time to
read the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders to be
held on June 2, 1998.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Mac-Gray Corporation
<PAGE>
MAC-GRAY CORPORATION
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 2, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AND MAY BE REVOKED AT ANY TIME PRIOR TO THE ANNUAL MEETING
The undersigned stockholder(s) of Mac-Gray Corporation, a Delaware corporation
(the "Company"), hereby appoint(s) Mr. Stewart G. MacDonald and Mr. John S.
Olbrych as proxies for the undersigned, with full power of substitution in each
of them, to attend the Annual Meeting of Stockholders of the Company to be held
on June 2, 1998 at 9:00 a.m. local time, at the Goodwin, Procter & Hoar LLP
Conference Center, Second Floor, Exchange Place, Boston, Massachusetts 02109 and
any postponement or adjournment thereof, to cast on behalf of the undersigned
all votes that the undersigned is entitled to cast at the meeting as a holder of
common shares of the Company, par value $.01 per share (the "Shares"), held of
record by the undersigned on April 10, 1998, and otherwise to represent the
undersigned at the meeting with all powers of the undersigned as if the
undersigned were present and voting the Shares. The Board of Directors of the
Company recommends a vote FOR the election of the two nominees for director
listed on the reverse of this proxy card. The undersigned acknowledges receipt
of the Notice of the Annual Meeting of Stockholders and the accompanying Proxy
Statement and revokes any proxy heretofore given with respect to the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
"FOR" THE ELECTION OF THE TWO NOMINEES FOR DIRECTOR LISTED ON THE REVERSE SIDE
OF THIS PROXY CARD AND IN THE DISCRETION OF THE PROXY HOLDER ON ANY OTHER MATTER
THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT
THEREOF.
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PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE.
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Please sign exactly as your name(s) appear(s) on the books of the Company. Joint
owners should each sign personally. Trustees, custodians, and other fiduciaries
should indicate the capacity in which they sign, and where more than one name
appears, a majority must sign. If the stockholder is a corporation, the
signature should be that of an authorized officer who should indicate his or her
title.
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HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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