8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported)    January 9, 2009

Mac-Gray Corporation

(Exact Name of Registrant as Specified in Its Charter)

Delaware

(State or Other Jurisdiction of Incorporation)

1-13495	04-3361982
(Commission File Number)	(IRS Employer Identification No.)
404 Wyman Street, Suite 400
Waltham, Massachusetts	02451
(Address of Principal Executive Offices)	(Zip Code)

(781) 487-7600

(Registrant’s Telephone Number, Including Area Code)

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers.

(e)

Amended Long-Term Incentive Plan

On January 9, 2009, the Compensation Committee of the Board of Directors of Mac-Gray Corporation (the “Company”), consisting solely of independent directors (the “Committee”), approved the amendment and restatement of the Mac-Gray Corporation Long Term Incentive Plan (the “Amended LTIP”).  The Amended LTIP amends the Company’s Long-Term Incentive Plan previously filed as Exhibit 10.1 to the Company’s Form 8-K filed on January 24, 2008 (the “Prior LTIP”).  Pursuant to the Amended LTIP, eligible participants may receive incentive awards of restricted stock units and stock options upon the achievement of certain financial performance goals based on the Company’s earnings before interest, taxes, depreciation and amortization (EBITDA) less interest expense and capital expenditures.  The Amended LTIP amends the Prior LTIP to provide that the performance measure target will be calculated on a per share basis using the weighted average number of shares of stock outstanding for the fiscal year determined on a diluted basis using the treasury stock method.  The Amended LTIP also amends the Prior LTIP to change the vesting formula such that a minimum of 80% of the performance goal for a particular year must be met in order for any vesting of restricted stock to occur, with such portion that vests increasing as the percentage of the performance goal achieved increases.  The foregoing description is qualified in its entirety by reference to the Amended LTIP, a copy of which is attached hereto as Exhibit 10.1 and incorporated herein by reference.

On January 9, 2009, the Committee designated sixteen participants who are eligible for awards under the Amended LTIP and established a target award for each participant for the 2009 fiscal year.  The Chief Executive Officer and the four other named executive officers of the Company are eligible for awards under the Amended LTIP with a value equal to the following percentages of their base salary:

Stewart G. MacDonald, Jr., Chairman and CEO	150	%
Michael J. Shea, Executive Vice President, Chief Financial Officer and Treasurer	100	%
Neil F. MacLellan, Executive Vice President, Sales	70	%
Phillip Emma, Executive Vice President, Operations	70	%
Robert J. Tuttle, Executive Vice President, Technology and Information Systems	60	%

In addition, under the Amended LTIP, in the event that the performance goal for a particular year is achieved at 101% or above, each executive is eligible to receive an additional stock award under the LTIP.  If the performance goal is achieved at the highest level set by the Committee (110%), then each executive is eligible to receive a stock award with a value equal to the following percentages of their base salary: Mr. MacDonald – 7.5%, Mr. Shea – 5%, Mr. MacLellan – 3.5%, Mr. Emma – 3.5%, and Mr. Tuttle – 3.0%.

In connection with the Amended LTIP, the Committee approved four new forms of restricted stock unit agreements to be used for awards under the Amended LTIP, copies of which are attached hereto as Exhibits 10.2, 10.3, 10.4 and 10.5.

Senior Executive Incentive Plan

On January 14, 2009, the Committee approved the 2009 cash award targets under the Mac-Gray Corporation Senior Executive Incentive Plan (the “EIP”).  The EIP was filed as Exhibit 10.4 to the Company’s Form 8-K filed on January 24, 2008.  For 2009, the Chief Executive Officer and four other named executive officers of the Company are eligible for target cash awards under the EIP equal to the following percentages of their base salary:

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Stewart G. MacDonald, Jr., Chairman and CEO	70	%
Michael J. Shea, Executive Vice President, Chief Financial Officer and Treasurer	60	%
Neil F. MacLellan, Executive Vice President, Sales	60	%
Phillip Emma, Executive Vice President, Operations	60	%
Robert J. Tuttle, Executive Vice President, Technology and Information Systems	60	%

In addition to the target award, in the event that one or more of the performance goals under the EIP are achieved at a specified level which is more than 100%, each executive is eligible to receive an additional cash bonus.  If every performance goal is achieved at the highest level above 100% set by the Committee, then each executive is eligible to receive a cash award equal to the following percentages of their base salary: Mr. MacDonald - 35% and each of Messrs. Shea MacLellan, Emma and Tuttle — 30%.

Item 9.01 Financial Statements And Exhibits.

(d) Exhibits

10.1Mac-Gray Corporation Long Term Incentive Plan

10.2Form of Restricted Stock Unit Agreement (Cash Settled Target Award)

10.3Form of Restricted Stock Unit Agreement (Stock Settled Target Award)

10.4Form of Restricted Stock Unit Agreement (Cash Settled Excess Award)

10.5Form of Restricted Stock Unit Agreement (Stock Settled Excess Award)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	MAC-GRAY CORPORATION
Date: January 15, 2009	By:	/s/ Michael J. Shea
		Name:  Michael J. Shea
		Title:  Executive Vice President, Chief Financial Officer and Treasurer

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EXHIBIT INDEX

Exhibit Number	Description
10.1	Mac-Gray Corporation Long Term Incentive Plan, filed herewith.
10.2	Form of Restricted Stock Unit Agreement (Cash Settled Target Award), filed herewith.
10.3	Form of Restricted Stock Unit Agreement (Stock Settled Target Award), filed herewith.
10.4	Form of Restricted Stock Unit Agreement (Cash Settled Excess Award), filed herewith.
10.5	Form of Restricted Stock Unit Agreement (Stock Settled Excess Award), filed herewith.

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EX-10.1

Exhibit 10.1

MAC-GRAY CORPORATION

LONG TERM INCENTIVE PLAN

(Amended and Restated as of January 9, 2009)

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 units and the remaining fifty percent (50%) in the form of stock options.  Additional awards of restricted stock units only may be made for Annual Excess Awards.

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           “Annual Excess Award” shall mean, for any Participant, a percentage of his or her Annual Target Award.

2.3           “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.

2.4           “Company” shall mean Mac-Gray Corporation.

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

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

2.7           “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.

2.8“Performance Measure” shall mean, for any Fiscal Year, the quotient obtained by dividing (x) the difference between (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, by (y) the weighted average number of shares of Stock outstanding for such Fiscal Year determined on a diluted basis using the treasury

stock method, all as determined by reference to the Company’s audited financial statements for such Fiscal Year.

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

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

2.11“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.

2.12“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 and Excess 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 and Annual Excess Awards.  The Committee shall determine the Annual Target Award and Annual Excess 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 units.  It is expected that 100 percent of the value of the Annual Excess Award shall be awarded annually in the form of restricted stock units.  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 units, the number of units 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 331/3 percent each year, subject to continued employment of the Participant by the Company or a Subsidiary.  Up to 331/3 percent of the restricted stock units subject to an award shall become vested following each Fiscal Year on the date (the “Vesting Date”) on which the Committee makes a determination that the Company has achieved the Performance Measure for such Fiscal Year, subject to continued

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employment of the Participant by the Company or a Subsidiary.  The actual number of restricted stock units that will vest on a particular Vesting Date will depend on the percentage of the Performance Measure the Company achieved for the relevant Fiscal Year.  For restricted stock units issued in respect of Annual Target Awards, such vesting will be based on the following percentage thresholds:

If this % of the Performance Measure is achieved (without rounding):	This % of one third (1/3) of the restricted stock units will become vested on the Vesting Date:
Less than 80%	0.00%
80%	30.0%
81%	33.5%
82%	37.0%
83%	40.5%
84%	44.0%
85%	47.5%
86%	51.0%
87%	54.5%
88%	58.0%
89%	61.5%
90%	65.0%
91%	68.5%
92%	72.0%
93%	75.5%
94%	79.0%
95%	82.5%
96%	86.0%
97%	89.5%
98%	93.0%
99%	96.5%
100%	100%

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For restricted stock units issued in respect of Annual Excess Awards, such vesting will be based on the following percentage thresholds:

If this % of the Performance Measure is achieved (without rounding):	This % of one third (1/3) of the restricted stock units will become vested on the Vesting Date:
Less than 101%	0.00%
101%	10%
102%	20%
103%	30%
104%	40%
105%	50%
106%	60%
107%	70%
108%	80%
109%	90%
110%	100%

The Committee shall review the Company’s audited financial statements promptly after their preparation each year to determine the percentage of the Performance Measure that was achieved for purposes of the Plan.  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.  If on any Vesting Date all or some of the restricted stock units subject to an award do not vest because the applicable Performance Measure is not achieved at the requisite level, then such unvested restricted stock units shall be forfeited.

In view of the Chief Executive Officer’s significant ownership position in the Stock, he shall have the right, with respect to any award of restricted stock units, to elect to have such restricted stock units settled in cash rather than in Stock.  The Chief Executive Officer may make such election with respect to any award of restricted stock units at any time within fifteen (15) days following the grant date of such award.  If such election is timely made, such award will be settled in cash on each applicable Vesting Date with the payment amount equal to the aggregate number of restricted stock units that vest on such Vesting Date multiplied by the closing price of the Stock on such Vesting Date.  If no such election is timely made, such award will be settled in Stock.

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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 units hereunder shall forfeit all rights to his or her stock options and restricted stock units 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.

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EX-10.2

Exhibit 10.2

Cash-Settled

 RESTRICTED STOCK UNIT AGREEMENT

UNDER THE MAC-GRAY CORPORATION

2005 STOCK OPTION AND INCENTIVE PLAN

Name of Grantee:

No. of Restricted Stock Units Granted:

Grant Date:

Final Acceptance Date:

Pursuant to the Mac-Gray Corporation 2005 Stock Option and Incentive Plan (the “Plan”) as amended through the date hereof, Mac-Gray Corporation (the “Company”) hereby grants a deferred stock award consisting of the number of Restricted Stock Units listed above (an “Award”) to the Grantee named above.  Each Restricted Stock Unit shall relate to one share of Common Stock, par value $0.01 per share (the “Stock”) of the Company specified above, subject to the restrictions and conditions set forth herein and in the Plan.

1.Acceptance of Award.  The Grantee shall have no rights with respect to this Award unless he or she shall have accepted this Award prior to the close of business on the Final Acceptance Date specified above by signing and delivering to the Company a copy of this Award Agreement.  Any consideration due to the Company on the issuance of the Award has been deemed to be satisfied by past services rendered by the Grantee to the Company.

2.Restrictions on Transfer of Award.

(a)           The Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of by the Grantee until (i) the Restricted Stock Units have vested as provided in Section 3 of this Agreement and (ii) shares of Stock have been issued to the Grantee.

(b)           If the Grantee’s employment with the Company and its Subsidiaries is voluntarily or involuntarily terminated for any reason prior to the satisfaction of the vesting conditions set forth in Section 3 below, any Restricted Shares that have not vested as of such date shall automatically and without notice terminate, be forfeited and be and become null and void, and neither the Grantee nor any of his or her successors, heirs, assigns, or personal representatives will thereafter have any further rights or interests in such unvested Restricted Stock Units.

3.Vesting of Restricted Stock Units.  The restrictions and conditions in Section 2 of this Agreement shall lapse on up to one third (1/3) of the Restricted Stock Units following each of the Company’s three succeeding fiscal years commencing with the fiscal year in which this Award was granted (each, a “Fiscal Year”) on the date (the “Vesting Date”) on which the Committee makes a determination that the Company has achieved the Performance Measure (as defined below) target amount established by the Committee for such Fiscal Year, provided that the Grantee is an employee of the Company or a Subsidiary on such Vesting Date.  The actual number of Restricted Stock Units that will vest on a particular Vesting Date will depend on the percentage of the Performance Measure target amount the Company achieved for the previous Fiscal Year based on the following percentage thresholds:

If this % of the Performance Measure is achieved (without rounding):	This % of one third (1/3) of the restricted stock units will become vested on the Vesting Date:
Less than 80%	0.00%
80%	30.0%
81%	33.5%
82%	37.0%
83%	40.5%
84%	44.0%
85%	47.5%
86%	51.0%
87%	54.5%
88%	58.0%
89%	61.5%
90%	65.0%
91%	68.5%
92%	72.0%
93%	75.5%
94%	79.0%
95%	82.5%
96%	86.0%
97%	89.5%
98%	93.0%
99%	96.5%
100%	100%

For purposes of this Section 3, the “Performance Measure” shall mean, for any Fiscal Year, the quotient obtained by dividing (x) the difference between (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, by (y) the weighted average number of shares of Stock outstanding for such Fiscal Year determined on a diluted basis using the treasury stock method, all as determined by reference to the Company’s audited financial statements for such Fiscal Year.  The Committee shall review the Company’s audited financial statements promptly after their preparation each year to determine the percentage of the Performance Measure target amount that was achieved for purposes of this Section 3.

If on any Vesting Date all or some of the Restricted Stock Units do not vest because the conditions of this Section 3 are not fully satisfied, then such unvested Restricted Stock Units shall automatically and without notice terminate, be forfeited and become null and void, and neither the Grantee nor any of his or her successors, heirs, assigns, or personal representatives will thereafter have any further rights or interests in such forfeited Restricted Stock Units.

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4.Dividend Equivalents.

(a)           If on any date the Company shall pay any dividend on shares of Stock of the Company, the number of Restricted Stock Units credited to the Grantee shall, as of such date, be increased by an amount determined by the following formula:

W = (X multiplied by Y) divided by Z, where:

W = the number of additional Restricted Stock Units to be credited to the Grantee on such dividend payment date;

X = the aggregate number of Restricted Stock Units (whether vested or unvested) credited to the Grantee as of the record date of the dividend;

Y = the cash dividend per share amount; and

Z = the Fair Market Value per share of Stock (as determined under the Plan) on the dividend payment date.

(b)           In the case of a dividend paid on Stock in the form of Stock, including without limitation a distribution of Stock by reason of a stock dividend, stock split or otherwise, the number of Restricted Stock Units credited to the Grantee shall be increased by a number equal to the product of (i) the aggregate number of Restricted Stock Units that have been awarded to the Grantee through the related dividend record date, and (ii) the number of shares of Stock (including any fraction thereof) payable as dividend on one share of Stock.  Any additional Restricted Stock Units shall be subject to the vesting and restrictions of this Agreement in the same manner and for so long as the Restricted Stock Units granted pursuant to this Agreement to which they relate remain subject to such vesting and restrictions, and shall be promptly forfeited to the Company if and when such Restricted Stock Units are so forfeited.

5.Settlement of Restricted Stock Units.

(a)           As soon as practicable following each vesting date, the Company shall make a cash payment to the Grantee in an amount equal to the value of  the aggregate number of Restricted Stock Units  credited to the Grantee that have vested pursuant to Section 3 of this Agreement on such date, based on the closing price of a share of Stock on such date.

(b)           Upon a Sale Event, the Company shall make a cash payment  to the Grantee in an amount equal in value to  the aggregate number of Restricted Stock Units credited to the Grantee on the date of the Sale Event  based on the amount payable to the shareholders for a share of Stock upon the Sale Event.

6.Incorporation of Plan.  Notwithstanding anything herein to the contrary, this Agreement shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan.  Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.

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7.             Tax Withholding.  The Grantee shall, not later than the date as of which the receipt of this Award becomes a taxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to be withheld on account of such taxable event.

8.             No Obligation to Continue Employment.  Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue the Grantee in employment and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate the employment of the Grantee at any time.

9.             Notices.  Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Grantee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.

MAC-GRAY CORPORATION
By:
	Name:                             Title:

The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned.

Dated:
	Grantee’s Signature
	Grantee’s name and address:

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EX-10.3

Exhibit 10.3

RESTRICTED STOCK UNIT AGREEMENT

UNDER THE MAC-GRAY CORPORATION
2005 STOCK OPTION AND INCENTIVE PLAN

Name of Grantee:

No. of Restricted Stock Units Granted:

Grant Date:

Final Acceptance Date:

Pursuant to the Mac-Gray Corporation 2005 Stock Option and Incentive Plan (the “Plan”) as amended through the date hereof, Mac-Gray Corporation (the “Company”) hereby grants a deferred stock award consisting of the number of Restricted Stock Units listed above (an “Award”) to the Grantee named above.  Each Restricted Stock Unit shall relate to one share of Common Stock, par value $0.01 per share (the “Stock”) of the Company specified above, subject to the restrictions and conditions set forth herein and in the Plan.

1.Acceptance of Award.  The Grantee shall have no rights with respect to this Award unless he or she shall have accepted this Award prior to the close of business on the Final Acceptance Date specified above by signing and delivering to the Company a copy of this Award Agreement.  Any consideration due to the Company on the issuance of the Award has been deemed to be satisfied by past services rendered by the Grantee to the Company.

2.Restrictions on Transfer of Award.

(a)The Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of by the Grantee until (i) the Restricted Stock Units have vested as provided in Section 3 of this Agreement and (ii) shares of Stock have been issued to the Grantee.

(b)If the Grantee’s employment with the Company and its Subsidiaries is voluntarily or involuntarily terminated for any reason prior to the satisfaction of the vesting conditions set forth in Section 3 below, any Restricted Shares that have not vested as of such date shall automatically and without notice terminate, be forfeited and be and become null and void, and neither the Grantee nor any of his or her successors, heirs, assigns, or personal representatives will thereafter have any further rights or interests in such unvested Restricted Stock Units.

3.Vesting of Restricted Stock Units.  The restrictions and conditions in Section 2 of this Agreement shall lapse on up to one third (1/3) of the Restricted Stock Units following each of the Company’s three succeeding fiscal years commencing with the fiscal year in which this Award was granted (each, a “Fiscal Year”) on the date (the “Vesting Date”) on which the Committee makes a determination that the Company has achieved the Performance Measure (as defined below) target amount established by the Committee for such Fiscal Year, provided that the Grantee is an employee of the Company or a Subsidiary on such Vesting Date.  The actual number of Restricted Stock Units that will vest on a particular Vesting Date will depend on the percentage of the Performance Measure target amount the Company achieved for the previous Fiscal Year based on the following percentage thresholds:

If this % of the Performance Measure is achieved (without rounding):	This % of one third (1/3) of the restricted stock units will become vested on the Vesting Date:
Less than 80%	0.00%
80%	30.0%
81%	33.5%
82%	37.0%
83%	40.5%
84%	44.0%
85%	47.5%
86%	51.0%
87%	54.5%
88%	58.0%
89%	61.5%
90%	65.0%
91%	68.5%
92%	72.0%
93%	75.5%
94%	79.0%
95%	82.5%
96%	86.0%
97%	89.5%
98%	93.0%
99%	96.5%
100%	100%

For purposes of this Section 3, the “Performance Measure” shall mean, for any Fiscal Year, the quotient obtained by dividing (x) the difference between (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, by (y) the weighted average number of shares of Stock outstanding for such Fiscal Year determined on a diluted basis using the treasury stock method, all as determined by reference to the Company’s audited financial statements for such Fiscal Year.  The Committee shall review the Company’s audited financial statements promptly after their preparation each year to determine the percentage of the Performance Measure target amount that was achieved for purposes of this Section 3.

If on any Vesting Date all or some of the Restricted Stock Units do not vest because the conditions of this Section 3 are not fully satisfied, then such unvested Restricted Stock Units shall automatically and without notice terminate, be forfeited and become null and void, and neither the Grantee nor any of his or her successors, heirs, assigns, or personal representatives will thereafter have any further rights or interests in such forfeited Restricted Stock Units.

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4.Dividend Equivalents.

(a)If on any date the Company shall pay any dividend on shares of Stock of the Company, the number of Restricted Stock Units credited to the Grantee shall, as of such date, be increased by an amount determined by the following formula:

W = (X multiplied by Y) divided by Z, where:

W = the number of additional Restricted Stock Units to be credited to the Grantee on such dividend payment date;

X = the aggregate number of Restricted Stock Units (whether vested or unvested) credited to the Grantee as of the record date of the dividend;

Y = the cash dividend per share amount; and

Z = the Fair Market Value per share of Stock (as determined under the Plan) on the dividend payment date.

(b)In the case of a dividend paid on Stock in the form of Stock, including without limitation a distribution of Stock by reason of a stock dividend, stock split or otherwise, the number of Restricted Stock Units credited to the Grantee shall be increased by a number equal to the product of (i) the aggregate number of Restricted Stock Units that have been awarded to the Grantee through the related dividend record date, and (ii) the number of shares of Stock (including any fraction thereof) payable as dividend on one share of Stock.  Any additional Restricted Stock Units shall be subject to the vesting and restrictions of this Agreement in the same manner and for so long as the Restricted Stock Units granted pursuant to this Agreement to which they relate remain subject to such vesting and restrictions, and shall be promptly forfeited to the Company if and when such Restricted Stock Units are so forfeited.

5.Receipt of Shares of Stock.

(a)As soon as practicable following each vesting date, the Company shall issue to the Grantee a certificate representing the number of shares of Stock equal to the aggregate number of Restricted Stock Units credited to the Grantee that have vested pursuant to Section 3 of this Agreement on such date and the Grantee shall thereafter have all the rights of a stockholder of the Company with respect to such shares, including voting and dividend rights, and such shares of Stock shall not be restricted by the provisions hereof.

(b)Upon a Sale Event, the Company shall issue to the Grantee the number of shares of Stock equal to the aggregate number of Restricted Stock Units credited to the Grantee on such date in full satisfaction of such Restricted Stock Units; provided, however, that in the event the Company is involved in a transaction in which shares of Stock will be exchanged for cash or other consideration, the Grantee shall receive cash or other consideration equal in value to the aggregate number of Restricted Stock Units credited to the Grantee on the date of the Sale Event.

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6.Incorporation of Plan.  Notwithstanding anything herein to the contrary, this Agreement shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan.  Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.

7.Tax Withholding.  The Grantee shall, not later than the date as of which the receipt of this Award becomes a taxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to be withheld on account of such taxable event.  The Grantee may elect to have such minimum tax withholding obligation satisfied, in whole or in part, by (i) authorizing the Company to withhold from shares of Stock to be issued, or (ii) transferring to the Company, a number of shares of Stock with an aggregate Fair Market Value that would satisfy the withholding amount due.

8.No Obligation to Continue Employment.  Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue the Grantee in employment and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate the employment of the Grantee at any time.

9.Notices.  Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Grantee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.

MAC-GRAY CORPORATION
By:
	Name; Stewart G. MacDonald
	Title: Chief Executive Officer

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The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned.

Dated:
	Grantee’s Signature
	Grantee’s name and address:

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EX-10.4

Exhibit 10.4

Cash-Settled

 RESTRICTED STOCK UNIT AGREEMENT

UNDER THE MAC-GRAY CORPORATION
2005 STOCK OPTION AND INCENTIVE PLAN

Name of Grantee:

No. of Restricted Stock Units Granted:

Grant Date:

Final Acceptance Date:

Pursuant to the Mac-Gray Corporation 2005 Stock Option and Incentive Plan (the “Plan”) as amended through the date hereof, Mac-Gray Corporation (the “Company”) hereby grants a deferred stock award consisting of the number of Restricted Stock Units listed above (an “Award”) to the Grantee named above.  Each Restricted Stock Unit shall relate to one share of Common Stock, par value $0.01 per share (the “Stock”) of the Company specified above, subject to the restrictions and conditions set forth herein and in the Plan.

1.             Acceptance of Award.  The Grantee shall have no rights with respect to this Award unless he or she shall have accepted this Award prior to the close of business on the Final Acceptance Date specified above by signing and delivering to the Company a copy of this Award Agreement.  Any consideration due to the Company on the issuance of the Award has been deemed to be satisfied by past services rendered by the Grantee to the Company.

2.             Restrictions on Transfer of Award.

(a)           The Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of by the Grantee until (i) the Restricted Stock Units have vested as provided in Section 3 of this Agreement and (ii) shares of Stock have been issued to the Grantee.

(b)           If the Grantee’s employment with the Company and its Subsidiaries is voluntarily or involuntarily terminated for any reason prior to the satisfaction of the vesting conditions set forth in Section 3 below, any Restricted Shares that have not vested as of such date shall automatically and without notice terminate, be forfeited and be and become null and void, and neither the Grantee nor any of his or her successors, heirs, assigns, or personal representatives will thereafter have any further rights or interests in such unvested Restricted Stock Units.

3.             Vesting of Restricted Stock Units.  The restrictions and conditions in Section 2 of this Agreement shall lapse on up to one third (1/3) of the Restricted Stock Units following each of the Company’s three succeeding fiscal years commencing with the fiscal year in which this Award was granted (each, a “Fiscal Year”) on the date (the “Vesting Date”) on which the Committee makes a determination that the Company has achieved the Performance Measure (as defined below) target amount established by the Committee for such Fiscal Year, provided that the Grantee is an employee of the Company or a Subsidiary on such Vesting Date.  The actual number of Restricted Stock Units that will vest on a particular Vesting Date will depend on the percentage of the Performance Measure target amount the Company achieved for the previous Fiscal Year based on the following percentage thresholds:

If this % of the Performance Measure is achieved (without rounding):	This % of one third (1/3) of the restricted stock units will become vested on the Vesting Date:
Less than 101%	0.00%
101%	10%
102%	20%
103%	30%
104%	40%
105%	50%
106%	60%
107%	70%
108%	80%
109%	90%
110%	100%

For purposes of this Section 3, the “Performance Measure” shall mean, for any Fiscal Year, the quotient obtained by dividing (x) the difference between (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, by (y) the weighted average number of shares of Stock outstanding for such Fiscal Year determined on a diluted basis using the treasury stock method, all as determined by reference to the Company’s audited financial statements for such Fiscal Year.  The Committee shall review the Company’s audited financial statements promptly after their preparation each year to determine the percentage of the Performance Measure target amount that was achieved for purposes of this Section 3.

If on any Vesting Date all or some of the Restricted Stock Units do not vest because the conditions of this Section 3 are not fully satisfied, then such unvested Restricted Stock Units shall automatically and without notice terminate, be forfeited and become null and void, and neither the Grantee nor any of his or her successors, heirs, assigns, or personal representatives will thereafter have any further rights or interests in such forfeited Restricted Stock Units.

4.             Dividend Equivalents.

(a)           If on any date the Company shall pay any dividend on shares of Stock of the Company, the number of Restricted Stock Units credited to the Grantee shall, as of such date, be increased by an amount determined by the following formula:

W = (X multiplied by Y) divided by Z, where:

W = the number of additional Restricted Stock Units to be credited to the Grantee on such dividend payment date;

X = the aggregate number of Restricted Stock Units (whether vested or unvested) credited to the Grantee as of the record date of the dividend;

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Y = the cash dividend per share amount; and

Z = the Fair Market Value per share of Stock (as determined under the Plan) on the dividend payment date.

(b)           In the case of a dividend paid on Stock in the form of Stock, including without limitation a distribution of Stock by reason of a stock dividend, stock split or otherwise, the number of Restricted Stock Units credited to the Grantee shall be increased by a number equal to the product of (i) the aggregate number of Restricted Stock Units that have been awarded to the Grantee through the related dividend record date, and (ii) the number of shares of Stock (including any fraction thereof) payable as dividend on one share of Stock.  Any additional Restricted Stock Units shall be subject to the vesting and restrictions of this Agreement in the same manner and for so long as the Restricted Stock Units granted pursuant to this Agreement to which they relate remain subject to such vesting and restrictions, and shall be promptly forfeited to the Company if and when such Restricted Stock Units are so forfeited.

5.             Settlement of Restricted Stock Units.

(a)           As soon as practicable following each vesting date, the Company shall make a cash payment to the Grantee in an amount equal to the value of  the aggregate number of Restricted Stock Units  credited to the Grantee that have vested pursuant to Section 3 of this Agreement on such date, based on the closing price of a share of Stock on such date.

(b)           Upon a Sale Event, the Company shall make a cash payment  to the Grantee in an amount equal in value to  the aggregate number of Restricted Stock Units credited to the Grantee on the date of the Sale Event  based on the amount payable to the shareholders for a share of Stock upon the Sale Event.

6.             Incorporation of Plan.  Notwithstanding anything herein to the contrary, this Agreement shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan.  Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.

7.             Tax Withholding.  The Grantee shall, not later than the date as of which the receipt of this Award becomes a taxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to be withheld on account of such taxable event.

8.             No Obligation to Continue Employment.  Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue the Grantee in employment and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate the employment of the Grantee at any time.

9.             Notices.  Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Grantee at the address on file

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with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.

MAC-GRAY CORPORATION
By:
	Name:

The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned.

Dated:
	Grantee’s Signature
	Grantee’s name and address:

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EX-10.5

Exhibit 10.5

RESTRICTED STOCK UNIT AGREEMENT

UNDER THE MAC-GRAY CORPORATION
2005 STOCK OPTION AND INCENTIVE PLAN

Name of Grantee:

No. of Restricted Stock Units Granted:

Grant Date:

Final Acceptance Date:

Pursuant to the Mac-Gray Corporation 2005 Stock Option and Incentive Plan (the “Plan”) as amended through the date hereof, Mac-Gray Corporation (the “Company”) hereby grants a deferred stock award consisting of the number of Restricted Stock Units listed above (an “Award”) to the Grantee named above.  Each Restricted Stock Unit shall relate to one share of Common Stock, par value $0.01 per share (the “Stock”) of the Company specified above, subject to the restrictions and conditions set forth herein and in the Plan.

1.             Acceptance of Award.  The Grantee shall have no rights with respect to this Award unless he or she shall have accepted this Award prior to the close of business on the Final Acceptance Date specified above by signing and delivering to the Company a copy of this Award Agreement.  Any consideration due to the Company on the issuance of the Award has been deemed to be satisfied by past services rendered by the Grantee to the Company.

2.             Restrictions on Transfer of Award.

(a)           The Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of by the Grantee until (i) the Restricted Stock Units have vested as provided in Section 3 of this Agreement and (ii) shares of Stock have been issued to the Grantee.

(b)           If the Grantee’s employment with the Company and its Subsidiaries is voluntarily or involuntarily terminated for any reason prior to the satisfaction of the vesting conditions set forth in Section 3 below, any Restricted Shares that have not vested as of such date shall automatically and without notice terminate, be forfeited and be and become null and void, and neither the Grantee nor any of his or her successors, heirs, assigns, or personal representatives will thereafter have any further rights or interests in such unvested Restricted Stock Units.

3.             Vesting of Restricted Stock Units.  The restrictions and conditions in Section 2 of this Agreement shall lapse on up to one third (1/3) of the Restricted Stock Units following each of the Company’s three succeeding fiscal years commencing with the fiscal year in which this Award was granted (each, a “Fiscal Year”) on the date (the “Vesting Date”) on which the Committee makes a determination that the Company has achieved the Performance Measure (as defined below) target amount established by the Committee for such Fiscal Year, provided that the Grantee is an employee of the Company or a Subsidiary on such Vesting Date.  The actual number of Restricted Stock Units that will vest on a particular Vesting Date will depend on the percentage of the Performance Measure target amount the Company achieved for the previous Fiscal Year based on the following percentage thresholds:

If this % of the Performance Measure is achieved (without rounding):	This % of one third (1/3) of the restricted stock units will become vested on the Vesting Date:
Less than 101%	0.00%
101%	10%
102%	20%
103%	30%
104%	40%
105%	50%
106%	60%
107%	70%
108%	80%
109%	90%
110%	100%

For purposes of this Section 3, the “Performance Measure” shall mean, for any Fiscal Year, the quotient obtained by dividing (x) the difference between (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, by (y) the weighted average number of shares of Stock outstanding for such Fiscal Year determined on a diluted basis using the treasury stock method, all as determined by reference to the Company’s audited financial statements for such Fiscal Year.  The Committee shall review the Company’s audited financial statements promptly after their preparation each year to determine the percentage of the Performance Measure target amount that was achieved for purposes of this Section 3.

If on any Vesting Date all or some of the Restricted Stock Units do not vest because the conditions of this Section 3 are not fully satisfied, then such unvested Restricted Stock Units shall automatically and without notice terminate, be forfeited and become null and void, and neither the Grantee nor any of his or her successors, heirs, assigns, or personal representatives will thereafter have any further rights or interests in such forfeited Restricted Stock Units.

4.             Dividend Equivalents.

(a)           If on any date the Company shall pay any dividend on shares of Stock of the Company, the number of Restricted Stock Units credited to the Grantee shall, as of such date, be increased by an amount determined by the following formula:

W = (X multiplied by Y) divided by Z, where:

W = the number of additional Restricted Stock Units to be credited to the Grantee on such dividend payment date;

X = the aggregate number of Restricted Stock Units (whether vested or unvested) credited to the Grantee as of the record date of the dividend;

2

Y = the cash dividend per share amount; and

Z = the Fair Market Value per share of Stock (as determined under the Plan) on the dividend payment date.

(b)           In the case of a dividend paid on Stock in the form of Stock, including without limitation a distribution of Stock by reason of a stock dividend, stock split or otherwise, the number of Restricted Stock Units credited to the Grantee shall be increased by a number equal to the product of (i) the aggregate number of Restricted Stock Units that have been awarded to the Grantee through the related dividend record date, and (ii) the number of shares of Stock (including any fraction thereof) payable as dividend on one share of Stock.  Any additional Restricted Stock Units shall be subject to the vesting and restrictions of this Agreement in the same manner and for so long as the Restricted Stock Units granted pursuant to this Agreement to which they relate remain subject to such vesting and restrictions, and shall be promptly forfeited to the Company if and when such Restricted Stock Units are so forfeited.

5.             Receipt of Shares of Stock.

(a)           As soon as practicable following each vesting date, the Company shall issue to the Grantee a certificate representing the number of shares of Stock equal to the aggregate number of Restricted Stock Units credited to the Grantee that have vested pursuant to Section 3 of this Agreement on such date and the Grantee shall thereafter have all the rights of a stockholder of the Company with respect to such shares, including voting and dividend rights, and such shares of Stock shall not be restricted by the provisions hereof.

(b)           Upon a Sale Event, the Company shall issue to the Grantee the number of shares of Stock equal to the aggregate number of Restricted Stock Units credited to the Grantee on such date in full satisfaction of such Restricted Stock Units; provided, however, that in the event the Company is involved in a transaction in which shares of Stock will be exchanged for cash or other consideration, the Grantee shall receive cash or other consideration equal in value to the aggregate number of Restricted Stock Units credited to the Grantee on the date of the Sale Event.

6.             Incorporation of Plan.  Notwithstanding anything herein to the contrary, this Agreement shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan.  Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.

7.             Tax Withholding.  The Grantee shall, not later than the date as of which the receipt of this Award becomes a taxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to be withheld on account of such taxable event.  The Grantee may elect to have such minimum tax withholding obligation satisfied, in whole or in part, by (i) authorizing the Company to withhold from shares of Stock to be issued, or (ii) 

3

transferring to the Company, a number of shares of Stock with an aggregate Fair Market Value that would satisfy the withholding amount due.

8.             No Obligation to Continue Employment.  Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue the Grantee in employment and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate the employment of the Grantee at any time.

9.             Notices.  Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Grantee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.

MAC-GRAY CORPORATION
By:
	Name; Stewart G. MacDonald
	Title: Chief Executive Officer

The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned.

Dated:
	Grantee’s Signature
	Grantee’s name and address:

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