Exhibit 10.1


 


MAC-GRAY CORPORATION


LONG TERM INCENTIVE PLAN


 


1.             Purpose.  This Plan is intended to create incentives
for certain executive officers and key employees of the Company and any
Subsidiary to allow the Company to attract and retain in its employ persons who
will contribute to the future success of the Company.  It is further the intent of the Company that
awards made under this Plan be used to achieve the twin goals of (i) aligning
executive incentive compensation with increases in stockholder value over the
long term, and (ii) using equity compensation as a tool to retain executive
officers and key employees.  In
furtherance of the goals, it is the intention of the Company that, except in
limited circumstances, fifty percent (50%) of each Award made under this Plan
will be made in the form of restricted stock and the remaining fifty percent
(50%) in the form of stock options.


 


2.             Definitions.  Capitalized terms not otherwise defined
herein shall have the meanings set forth below:


 


2.1           “Annual
Target Award” shall mean, for any Participant, a percentage of his or her base
salary at the beginning of each Fiscal Year.


 


2.2           “Committee”
shall mean those members of the Compensation Committee of the Board of
Directors of the Company who are “non-employee directors” as such term is
defined under Rule 16b-3 promulgated under the Securities Exchange Act of 1934,
as amended.


 


2.3           “Company”
shall mean Mac-Gray Corporation.


 


2.4           “Effective
Date” shall mean February 27, 2006.


 


2.5           “Fiscal
Year” shall mean the fiscal year of the Company, which is the 12-month period
ending December 31 of each year.


 


2.6           “Participant”
shall mean any executive officer or key employee recommended by the Chief
Executive Officer and approved by the Committee pursuant to Section 4 to participate
herein.


 


2.7           “Performance
Measure” shall mean, for any Fiscal Year, (a) the Company’s earnings before
interest, taxes, depreciation and amortization


 

















 


(EBITDA) for
such Fiscal Year, less (b) the Company’s interest expense and capital
expenditures for such Fiscal Year, as determined by reference to the Company’s
audited financial statements for such Fiscal Year.


 


2.8           “Plan”
shall mean the Mac-Gray Corporation Long Term Incentive Plan, as amended from
time to time.


 


2.9           “Stock”
shall mean the common stock, par value $.01 per share, of the Company.


 


2.10         “Stock
Option Plan” shall mean the Mac-Gray Corporation 2005 Stock Option and
Incentive Plan, as amended or amended and/or restated from time to time.


 


2.11         “Subsidiary”
shall mean any corporation or other entity in which the Company has a
controlling interest, either directory or indirectly.


 


3.             Administration.  The Committee shall have sole discretionary
power to determine the target amount for the Performance Measure each year, to
interpret the provisions of this Plan, to administer and make all decisions and
exercise all rights of the Company with respect to this Plan.  The Committee shall have final authority to
apply the provisions of the Plan and determine, in its sole discretion, the
amount of the Annual Target Awards for Participants hereunder and shall also
have the exclusive discretionary authority to make all other determinations
(including, without limitation, the interpretation and construction of the Plan
and the determination of relevant facts) regarding the entitlement to benefits
hereunder and the amount of benefits to be paid from the Plan.  The Committee’s exercise of this
discretionary authority shall at all times be in accordance with the terms of
the Plan and shall be entitled to deference upon review by any court, agency or
other entity empowered to review its decision, and shall be enforced provided
that it is not arbitrary, capricious or fraudulent.


 


4.             Eligibility.  For each Fiscal Year, those executive
officers and key employees recommended by the Chief Executive Officer and
approved by the Committee shall be Participants.  The selection of an individual to be a
Participant in any one Fiscal Year does not entitle the individual to be a Participant
in any other Fiscal Year.


 


5.             Annual
Target Awards.  The Committee shall
determine the Annual Target Award for each Participant.  It is expected that 50 percent of the value
of the Annual Target Award shall be awarded annually in the form of stock
options and 50 percent of the value of the Annual Target Award shall be awarded
annually in the form of restricted stock. 
Value for this purpose shall mean (a) in the case of stock options, the
Black-Scholes value of such stock options, and (b) in the case of restricted
stock, the number of shares subject to the award multiplied by the average
closing price of the Stock for the


 

















 


ten
trading days immediately preceding the award date.  Stock options shall have an exercise price
equal to the fair market value of the Stock on the date of grant and shall
become exercisable over a three-year period, at the rate of 33 1/3  percent each year,
subject to continued employment of the Participant by the Company or a
Subsidiary.  The restricted stock awards
shall become vested over a three-year period, at the rate of 33 1/3 percent
each year, subject to both (x) continued employment of the Participant by the
Company or a Subsidiary and (y) the Company meeting or exceeding the
Performance Measure annual target amount established by the Committee for the
applicable Fiscal Year.  In view of the
Chief Executive Officer’s significant ownership position in the Stock, he shall
have the right to receive a cash award in lieu of a restricted stock award,
such that 50 percent of the value of his Annual Target Award shall be awarded
in the form of stock options and up to 50 percent of the value of his Annual
Target Award shall be awarded in cash. 
The amount of the cash award shall equal the closing price of the Stock
on the trading date immediately preceding the applicable vesting date
multiplied by the number of shares of Stock that would have vested on such date
to the Chief Executive Officer if his award had been in the form of restricted
stock.  The Committee shall have full discretion
to modify the Performance Measure target amount for any Fiscal Year at any
time, including without limitation to take into account any acquisitions or
other corporate transactions occurring during such Fiscal Year.


 


6.             Forfeiture.  Unless otherwise determined by the Committee,
a Participant whose employment with the Company terminates for any reason prior
to fulfilling the vesting requirements for his or her stock options and
restricted stock award hereunder shall forfeit all rights to his or her stock
options and restricted stock that remain unvested on his or her termination
date.


 


7.             Amendment
or Termination of Plan.  The Compensation
Committee may amend or terminate this Plan at any time or from time to time;
provided, however, that no such amendment or termination shall, without the written
consent of the Participants, in any material adverse way affect the rights of a
Participant with respect to benefits earned prior to the date of amendment or
termination.


 


8.             Limitation
of Company’s Liability.  Subject to its
obligation to make payments as provided for hereunder, neither the Company nor
any person acting on behalf of the Company shall be liable for any act
performed or the failure to perform any act with respect to this Plan, except
in the event that there has been a judicial determination of willful misconduct
on the part of the Company or such person. 
The Company is under no obligation to fund any of the payments required
to be made hereunder in advance of their actual payment or to establish any
reserves with respect to this Plan.  Any
benefits which become payable hereunder shall be paid from the general assets
of the Company.  No Participant, or his
or her beneficiary or beneficiaries, shall have any right, other than the right
of an unsecured general creditor, against the Company in respect of the
benefits to be paid hereunder.


 


9.             Withholding
of Tax.  Anything to the contrary
notwithstanding, all payments required to be made by the Company hereunder
shall be subject to the withholding of


 

















 


such
amounts as the Company reasonably may determine that it is required to withhold
pursuant to applicable federal, state or local law or regulation.  Withholding can be made in the form of Stock
up to the minimum withholding amount.


 


10.           Assignability.  Except as otherwise
provided by law, no benefit hereunder shall be assignable, or subject to
alienation, garnishment, execution or levy of any kind, and any attempt to
cause any benefit to be so subject shall be void.


 


11.           No
Contract for Continuing Services.  This
Plan shall not be construed as creating any contract for continued services
between the Company and any Participant and nothing herein contained shall give
any Participant the right to be retained as an employee of the Company.


 


12.           Governing
Law.  This Plan shall be construed, administered,
and enforced in accordance with the laws of the Commonwealth of Massachusetts.


 


13.           Non-Exclusivity.  The Plan does not limit the authority of the
Company, the Committee, or any subsidiary of the Company, to grant awards or
authorize any other compensation under any other plan or authority, including,
without limitation, awards or other compensation based on the same Performance
Measure used under the Plan.  In
addition, executives not selected to participate in the Plan may participate in
other plans of the Company.