<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
ELECTRO RENT 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
ELECTRO RENT CORPORATION
6060 SEPULVEDA BOULEVARD
VAN NUYS, CALIFORNIA 91411-2512
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of ELECTRO RENT CORPORATION, a
California corporation, will be held on Thursday, October 9, 1997, at 10:00
o'clock A.M., local time, at the principal office of the corporation, 6060
Sepulveda Boulevard, Van Nuys, California 91411-2512. At this meeting or any
adjournment or adjournments thereof, the Shareholders will:
1. Elect a Board of eight directors. The names of nominees intended to
be presented by management for election are set forth in the Proxy
Statement.
2. Vote to approve the Amendment to the Articles of Incorporation to
increase the authorized number of common shares from 20,000,000 to
40,000,000.
3. Vote to approve the selection of Arthur Andersen LLP as the
Company's independent public accountants.
4. Act upon such other business as may lawfully come before said
meeting.
The Board of Directors has fixed August 11, 1997 as the record date for the
determination of shareholders entitled to notice of and to vote at said Annual
Meeting, or any adjournment or adjournments thereof. All shareholders are urged
to attend the meeting. In order to assure the presence of a quorum, whether you
expect to be present personally or not, please sign and mail immediately the
enclosed proxy. You have full power to revoke it at any time before it is
exercised by giving written notice to the Company.
Steven Markheim, Secretary
DATED: August 22, 1997
IMPORTANT
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING REGARDLESS OF
THE NUMBER OF SHARES THAT YOU HOLD. IN ORDER TO AVOID THE ADDITIONAL EXPENSE TO
THE COMPANY OF FURTHER SOLICITATION, PLEASE COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY CARD IMMEDIATELY, WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE
MEETING. IF YOU ARE PRESENT AND VOTE AT THE MEETING YOUR SHARES WILL NOT BE
VOTED BY THE PROXY.
<PAGE> 3
ELECTRO RENT CORPORATION
6060 SEPULVEDA BOULEVARD
VAN NUYS, CALIFORNIA 91411-2512
PROXY STATEMENT
SOLICITATION AND REVOCATION OF PROXY
The enclosed proxy IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
ELECTRO RENT CORPORATION (the "Company") in connection with the Annual Meeting
of Shareholders to be held on Thursday, October 9, 1997 as stated in the
foregoing notice. The cost of solicitation of proxies will be borne by the
Company. Proxies will be solicited by mail. The person giving the proxy has the
power to revoke it before it is exercised by giving written notice of revocation
to the Company.
VOTING SECURITIES
The Board of Directors of the Company (the "Board") has fixed August 11,
1997 as the Record Date for the determination of shareholders entitled to vote
at the Annual Meeting or any adjournment or adjournments thereof. The Company
has issued and outstanding on the Record Date, 12,050,571 shares of Common Stock
without par value. Holders of Common Stock have full voting rights, one vote for
each share held of record. In the election of directors, shareholders are
entitled to cumulate their votes provided the name of the candidate or
candidates for whom such votes would be cast has been placed in nomination prior
to the voting and any shareholder has given notice at the meeting prior to the
voting of such shareholder's intention to cumulate his votes.
If voting for directors is conducted by cumulative voting, the proxy
holders will have discretionary authority to cumulate votes among the nominees
with respect to whom authority was not withheld or if the proxy was not marked
or was marked for all nominees. In any event, the proxies may be voted for less
than the entire number of nominees if, in the opinion of the proxy holders, such
action is necessary or desirable.
The candidates receiving the highest number of votes of shares entitled to
be voted for them, up to the number of directors to be elected, shall be
elected.
<PAGE> 4
PRINCIPAL SHAREHOLDERS
The following table sets forth as of the Record Date the holdings of each
person who was known to the Company to own of record and beneficially 5% or more
of the Company's outstanding Common Stock and by all directors and officers as a
group:
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY PERCENT OF
NAME AND ADDRESS(1) OWNED CLASS(3)
- --------------------------------------------------------------------- ------------ ----------
<S> <C> <C>
Daniel Greenberg..................................................... 1,617,939(2) 13.68%
Private Capital Management........................................... 1,546,200 12.76%
3003 Tamiami Trail North
Naples, Florida 33940
T. Rowe Price Associates, Inc........................................ 1,329,500 10.97%
100 East Pratt Street
Baltimore, Maryland 21202
Phillip Greenberg.................................................... 1,173,335 9.68%
Daniel Greenberg and Harold Easton,.................................. 692,815 5.72%
Trustees Under the Will of Mayer Greenberg, Deceased
Officers and Directors as a Group (14 Persons)....................... 1,807,734(4) 17.78%
</TABLE>
- ---------------
(1) The address of each shareholder is 6060 Sepulveda Boulevard, Van Nuys,
California 91411-2512, unless otherwise set forth.
(2) The 1,617,939 shares do not include (a) 692,815 shares in the Mayer
Greenberg Trust which Daniel Greenberg has the right to vote as co-trustee
of the Trust; (b) 45,894 shares underlying options currently exercisable by
Mr. Greenberg; (c) 102,089 shares held by the Electro Rent Corporation
Employee Stock Ownership Plan (ESOP); and (d) 55,748 shares held by The
Mayer Greenberg Foundation which Daniel Greenberg has the right to vote.
(3) Any shares which are available under options which are currently exercisable
or which will become exercisable by October 9, 1997 have been deemed to be
outstanding for the purpose of computing the percentage of outstanding
shares owned by such person, but are not deemed outstanding for the purpose
of computing the percentage of shares owned by any other person.
(4) Does not include 421,248 shares underlying currently exercisable options
held by officers and directors or 208,278 shares held by the ESOP for such
officers and directors. Excludes 440,025 shares held by the Trusts under the
Will of Louis W. Corwin of which Mr. Weitzman is a trustee, 12,542 shares
held by Mr. Weitzman as trustee for two of his adult children, and 6,273
shares held by one of his adult children as custodian for one of his minor
children.
ELECTION OF DIRECTORS
The Board has nominated for election as directors the following eight
persons to serve until the next annual meeting of shareholders and until their
respective successors are elected and qualify. The proxies will be voted in
favor of these nominees unless the contrary is indicated on the proxy. Each of
the nominees is now a director of the Company. None of the nominees is related
by blood, marriage or adoption to any other nominee or any executive officer of
the Company.
Each of the incumbent directors except S. Lee Kling was elected by the
shareholders at the annual meeting of shareholders held on October 3, 1996.
2
<PAGE> 5
The schedule below sets forth with respect to each nominee for election as
a director his or her age, the date when he or she first became a director, the
number of shares of Common Stock of the Company he or she owned beneficially as
of the Record Date, his or her principal occupation and his or her business
experience during the past five years.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL DIRECTOR COMMON SHARES
OCCUPATION AGE SINCE OWNED
------------------------------------------------------ --- -------- -------------
<S> <C> <C> <C>
GERALD D. BARRONE(1).................................. 66 1987 1,500
Director of Coast Federal Bank
NANCY Y. BEKAVAC(2)................................... 49 1992 200
President, Scripps College
DANIEL GREENBERG...................................... 56 1976 1,617,939(3)
Chief Executive Officer and Chairman of the Board of
Directors of the Company for more than five years
JOSEPH J. KEARNS...................................... 55 1988 883
Vice President and Chief Financial Officer of the J.
Paul Getty Trust for more than five years
S. LEE KLING.......................................... 68 1996 4,000
Chairman of the Board of Directors of Kling Rechter
& Co. for more than five years(4)
MICHAEL R. PEEVEY(5).................................. 59 1995 -0-
President, New Energy Ventures, Inc.
WILL RICHESON, JR.(6)................................. 73 1989 400
Consultant
WILLIAM WEITZMAN...................................... 58 1974 159,869(7)
President and Chief Operating Officer of the Company
for more than five years
</TABLE>
- ---------------
(1) From March 1987 to December 1991 Mr. Barrone was president, chief operating
officer and a director of Coast Federal Bank. Prior to January 1987, he was
president, chief executive officer and a director of Fidelity Federal
Savings and Loan Association and Citadel Holding Corporation.
(2) Ms. Bekavac has been president of Scripps College since 1990. From 1988 to
1990 she was counselor to the president of Dartmouth College.
(3) See "Principal Shareholders."
(4) Mr. Kling is a director of Bernard Chaus, Inc., Falcon Products, Inc.,
Hanover Direct, Inc., Lewis Galoob Toys, Inc., Magna Group, Inc., National
Beverage Corp. and Top Air Manufacturing Co., Inc.
(5) From 1986 to 1990 Mr. Peevey was executive vice president, Southern
California Edison Company. From 1990 to 1993 he was president and a
director, Edison International and Southern California Edison Company. From
1993 to 1995 he was a consultant with Winner/Wagner & Associates, and a
consultant for Southern California Edison Company. He is a director of Dames
and Moore, Amerigon, Inc. and Ocal, Inc.
(6) From 1985 to 1988 Mr. Richeson was a partner of Riordan, Freeman & Spogli,
an investment banking firm. From 1977 to 1985 he was chairman, president and
chief executive officer of the corporate finance subsidiary of Security
Pacific Corporation.
(7) These shares are held in a revocable family trust.
3
<PAGE> 6
EXECUTIVE OFFICERS
The schedule below sets forth the name, age and office or offices of each
executive officer of the Company. In each instance the officer holds office at
the will of the Board. No executive officer is related by blood, marriage or
adoption to any other executive officer, director or nominee for director. Each
executive officer has been employed by the Company for more than five years.
<TABLE>
<CAPTION>
HELD OFFICE OR
NAME AGE OFFICE OR OFFICES OFFICES SINCE
- ------------------------ ---- --------------------------------------------------- --------------
<S> <C> <C> <C>
Daniel Greenberg........ 56 Chairman of the Board of Directors and Chief 1979
Executive Officer
William Weitzman........ 58 President and Chief Operating Officer 1982
Gary B. Phillips........ 45 Senior Vice President 1983
Steven Markheim......... 44 Vice President, Administration and Secretary 1987
Craig R. Jones.......... 51 Vice President and Chief Financial Officer 1990
Richard E. Bernosky..... 41 Vice President, Product Management 1993
Dennis M. Clark......... 43 Vice President, Sales -- Western Region 1994
Thomas A. Curtin........ 44 Vice President, Sales -- Eastern Region 1994
</TABLE>
BOARD OF DIRECTORS AND COMMITTEES
The Board meets quarterly and also takes action as required by unanimous
written consent.
The Board has three standing committees: Audit Committee, Compensation
Committee and Stock Option Committee. The members of the three committees are
all non-employee directors. The Company does not have a nominating committee.
Audit Committee. The Audit Committee is responsible for recommending to the
Board the engagement of independent public accountants for the Company and
reviewing with the independent public accountants the plan and results of the
auditing engagement. The Committee also reviews with management and with the
Board the scope of the internal audit and any action taken in response to the
recommendations of the independent public accountants. The members of the Audit
Committee were: Joseph J. Kearns, Chairman, Gerald D. Barrone, Nancy Y. Bekavac,
Michael R. Peevey and Will Richeson, Jr. The Audit Committee met two times
during the past fiscal year.
Compensation Committee. The Compensation Committee reviews the compensation
of officers and key employees and recommends to the Board amounts of or changes
in compensation including bonuses, stock options and other management
incentives. All recommendations of the Compensation Committee are subject to
approval and action by the Board. The members of the Compensation Committee
were: Will Richeson, Jr., Chairman, Gerald D. Barrone, Nancy Y. Bekavac, Joseph
J. Kearns and Michael R. Peevey. The Compensation Committee met twice during the
past fiscal year.
Stock Option Committee. The Stock Option Committee currently grants options
under the Company's 1996 Stock Option Plan. It formerly granted options under
the Company's 1990 and 1980 Stock Option Plans. The members of the Stock Option
Committee were: Gerald D. Barrone, Chairman, Nancy Y. Bekavac and Joseph J.
Kearns. The Stock Option Committee met twice during the past fiscal year.
COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934.
The Company reports that based solely upon a review of prescribed forms
furnished to it, no director, officer or 10 percent shareholder of the Company
has failed to file on a timely basis the filings called for by Section 16(a) of
the Securities Exchange Act of 1934, except that Steven Markheim was late in
filing one report covering the sale of 1,000 shares of Company stock.
4
<PAGE> 7
TRANSACTIONS WITH MANAGEMENT
Daniel Greenberg, chairman of the board and chief executive officer of the
Company, individually and through a corporation which he controls, rents
approximately 3,750 square feet of space in the Company's building at rates
comparable to those paid by other third party tenants.
As an inducement to the Company to enter into an equipment lease with
Advanced Media Systems, LLC, Mr. Greenberg personally guaranteed the lease
obligations. He has a membership interest in the limited liability company. The
lease was terminated and Mr. Greenberg fulfilled his obligations under the
guarantee.
EXECUTIVE COMPENSATION AND RELATED MATTERS
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning annual and long-term
compensation paid by the Company to its chief executive officer and to each of
the other four most highly compensated executive officers (the Named Executive
Officers) for their services to the Company and its subsidiaries in all
capacities for the fiscal years ended May 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------
ANNUAL COMPENSATION AWARDS
------------------------------------------ ------------------------ PAYOUTS
NAME AND OTHER RESTRICTED ---------- ALL OTHER
PRINCIPAL ANNUAL COMPENSATION STOCK LTIP COMPENSATION
POSITION YEAR SALARY($) BONUS($) ($)(1) AWARD(S)($) OPTIONS(#) PAYOUTS($) ($)(2)
- ----------------------- ---- --------- -------- ------------------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Daniel Greenberg 1997 $ 340,000 $300,000 0 0 0 0 $ 22,961
Chairman of 1996 330,000 300,000 0 0 0 0 22,499
the Board and 1995 320,000 205,000 0 0 0 0 17,119
Chief Executive
Officer
William Weitzman 1997 $ 290,000 $275,000 0 0 0 0 $ 22,430
President and 1996 280,000 275,000 0 0 0 0 20,664
Chief Operating 1995 270,000 185,000 0 0 0 0 16,493
Officer
Gary B. Phillips 1997 $ 185,000 $150,000 0 0 0 0 $ 16,098
Senior Vice 1996 173,500 150,000 0 0 0 0 10,319
President 1995 165,000 100,000 0 0 0 0 9,238
Steven Markheim 1997 $ 160,000 $100,000 0 0 0 0 $ 13,856
Vice President 1996 145,000 90,000 0 0 0 0 9,107
and Secretary 1995 135,000 55,000 0 0 0 0 7,922
Craig R. Jones 1997 $ 130,000 $ 35,000 0 0 0 0 $ 10,478
Vice President 1996 125,000 35,000 0 0 0 0 9,042
and Chief Financial 1995 120,000 25,000 0 0 0 0 6,697
Officer
</TABLE>
- ---------------
(1) The value of perquisites and other personal benefits has not been included
for fiscal years 1997, 1996 and 1995, since the value of such benefits did
not exceed the lesser of either $50,000 or 10% of the total annual salary
and bonus reported for any individual named.
(2) All Other Compensation for fiscal year 1997 includes the following for
Messrs. Greenberg, Weitzman, Phillips, Markheim and Jones, (i) Company
matching contributions to the 401(k) Savings Plan of $8,083; $8,083; $7,590;
$6,453 and $8,083 for each Named Executive Officer, respectively, (ii)
Company contributions to the Supplemental Executive Retirement Plan of
$11,608; $9,899; $7,936; $6,848 and $1,322 on behalf of each of the Named
Executive Officers, respectively, to match a portion of 1997 pretax elective
deferral contributions (included under salary) made by each person to such
plans, and (iii) Company payments of term life insurance premiums of $3,270;
$4,448; $572; $555 and $1,073 on behalf of each of the Named Executive
Officers, respectively.
OPTION GRANTS IN LAST FISCAL YEAR.
No stock options were granted to the Named Executive Officers during the
fiscal year ended May 31, 1997.
5
<PAGE> 8
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES.
The following table summarizes for each of the Named Executive Officers the
number of stock options exercised during the fiscal year ended May 31, 1997, and
the aggregate dollar value realized upon exercise, the total number of
unexercised options held at May 31, 1997, and the aggregate dollar value of
in-the-money, unexercised options held at May 31, 1997. Value realized upon
exercise is the difference between the fair market value of the underlying stock
on the exercise date and the exercise or base price of the option. Value of
unexercised, in-the-money options at fiscal year-end is the difference between
its exercise or base price and the fair market value of the underlying stock on
May 31, 1997, which was $23.00 per share. These values, unlike the amounts set
forth in the column headed "Value Realized," have not been, and may never be,
realized. The underlying options have not been, and may not be, exercised;
actual gains, if any, on exercise will depend on the value of the Company's
stock on the date of exercise. There can be no assurance that these values will
be realized.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(1)
ACQUIRED VALUE ------------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Daniel Greenberg....... 15,717 $ 262,067 126,519 0 $ 2,267,027 $ 0
William Weitzman....... 59,800 $ 1,163,069 153,700 0 $ 2,667,550 $ 0
Gary B. Phillips....... 8,900 $ 161,213 66,475 22,500 $ 1,044,702 $ 132,188
Steven Markheim........ 0 $ 0 56,250 15,000 $ 907,732 $ 88,125
Craig R. Jones......... 2,000 $ 37,907 26,125 0 $ 448,030 $ 0
</TABLE>
- ---------------
(1) In-the-Money Options are those where the fair market value of the underlying
securities exceeds the exercise or base price of the option.
6
<PAGE> 9
FIVE YEAR STOCK PERFORMANCE GRAPH.
The graph below reflects a comparison of the cumulative total shareholder
return on the Company's common stock with the NASDAQ(US) and the S & P
Technology Sector indices, respectively, for the five year period commencing May
31, 1992 through May 31, 1997. The graph assumes that the value of the
investment in the Company's common stock and in each index was $100 at May 31,
1992 and all dividends were reinvested. The comparisons in this table are
required by the SEC and, therefore, are not intended to forecast or be
necessarily indicative of actual future returns on the Company's common stock.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
VALUE OF $100 INVESTED ON MAY 31, 1992
FISCAL YEARS ENDED MAY 31
<TABLE>
<CAPTION>
MEASUREMENT PERIOD ELECTRO RENT S & P TECHNOLOGY NASDAQ STOCK
(FISCAL YEAR COVERED) CORPORATION SECTOR MARKET - US
<S> <C> <C> <C>
1992 100 100 100
1993 86 115 120
1994 120 129 127
1995 190 186 151
1996 321 246 219
1997 298 358 246
</TABLE>
CEO COMPENSATION.
Daniel Greenberg, CEO of the Company, is employed pursuant to an Executive
Employment Agreement with the Company originally entered into in 1986, amended
in 1988 and further amended and restated in July 1992. In its present form the
Agreement provides for a rolling three year term at a base salary of not less
than $300,000 subject to being adjusted annually based upon the consumer price
index and may be increased at any time by the Board or its Compensation
Committee. It provides that the CEO shall be entitled to receive bonuses and
incentive compensation each year in addition to his base salary. In determining
the amount of the bonus and incentive compensation the Agreement provides that
the Board shall consider all pertinent factors including those specifically
enumerated in the Agreement. The Agreement provides that the CEO shall receive
employee benefits comparable to those provided to the Company's senior
executives, and to certain payments and benefits in the event of the CEO's
involuntary termination including such termination following a change of
control.
For the fiscal year ended May 31, 1997 the CEO was paid base salary of
$340,000 plus a bonus of $300,000. He received fringe benefits comparable to
those received by salaried employees generally, and perquisites which in the
aggregate did not exceed 10% of his base compensation and bonus.
7
<PAGE> 10
On September 19, 1996 the CEO exercised 15,717 stock options previously
granted to him under the Company's 1990 Stock Option Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
The following members of the Board served as members of the Compensation
Committee during the last completed fiscal year: Will Richeson, Jr., Chairman,
Gerald D. Barrone, Nancy Y. Bekavac, Joseph J. Kearns and Michael R. Peevey.
No member of the Compensation Committee is or was an officer or employee of
the Company or any of its subsidiaries or divisions.
No member of the Compensation Committee is related to any other member of
the Committee, of any member of the Board, or any executive officer of the
Company by blood, marriage or adoption.
COMPENSATION OF DIRECTORS.
Each non-employee director of the Company is compensated for his or her
services as a director at the rate of $14,000 per year plus $800 for each board
meeting which he or she attends and for each meeting of the Compensation and
Audit Committee which he or she attends as a member of either or both of said
committees.
Directors who are employees receive no additional compensation for their
services as directors.
REPORT OF THE COMPENSATION COMMITTEE
AND THE STOCK OPTION COMMITTEE
The Compensation Committee makes recommendations to the Board respecting
compensation for the Company's executives including the Chief Executive Officer
and the President. It also makes recommendations to the Stock Option Committee
respecting the grant of stock options to the executives.
COMPENSATION PHILOSOPHY.
In designing its compensation programs, the Company follows its belief that
compensation should reflect the value created for shareholders while supporting
the Company's strategic goals. In doing so, the compensation programs reflect
the following principles:
- Compensation should be meaningfully related to the value created for
shareholders.
- Compensation programs should support the short- and long-term strategic
goals and objectives of the Company.
- Compensation programs should reflect and promote the Company's values,
and reward individuals for outstanding contributions to the Company's
success.
- Short- and long-term compensation play a critical role in attracting and
retaining well-qualified executives.
Executive compensation has consisted of three parts: base compensation,
bonuses and stock options.
In recommending base compensation the Compensation Committee has
periodically called upon compensation consultants to submit compensation data
from comparable companies. The Committee has recommended bonus awards on an
annual basis taking into consideration all relevant factors including the
performance of the particular executive and the success of management generally
in carrying out the objectives of the Company. For example, during the past
fiscal year the Company increased net income by 11% and achieved a 19% return on
equity. The Committee regarded this as a creditable performance on the part of
management justifying appropriate bonuses.
8
<PAGE> 11
COMPENSATION PROCEDURE.
In the first quarter of each fiscal year the Compensation Committee meets
to review executive compensation and to make recommendations for executive
bonuses for the fiscal year ended the preceding May 31st and base compensation
for the then current fiscal year.
The Chief Executive Officer and the President give the Compensation
Committee a report and recommendation respecting each of the executives other
than themselves. They also supply the Compensation Committee with whatever
information the Compensation Committee requests concerning their own performance
and any other aspects of the Company's operations which might be relevant in
fixing or recommending compensation for the Chief Executive Officer and the
President. Those two officers absent themselves from the meeting in which their
compensation is being fixed or recommended by the Compensation Committee.
The Compensation Committee makes its recommendations to the Board. The
Board fixes the compensation by appropriate resolutions. In most instances the
Board follows the recommendations of the Compensation Committee. The Chief
Executive Officer and the President, both of whom are members of the Board, do
not participate in the Board's consideration of their compensation and absent
themselves when their compensation is being considered and voted upon.
THE CHIEF EXECUTIVE OFFICER AND THE PRESIDENT.
In 1986 the Company entered into written Executive Employment Agreements
with Daniel Greenberg, the Chief Executive Officer, and with William Weitzman,
the President. The Agreements were amended in November 1988 and were further
amended and restated in July 1992.
In their present form the Agreements provide for a three year rolling term
at a base salary of not less than $300,000 for the Chief Executive Officer and
not less than $250,000 for the President. Base salary is adjusted annually based
upon the consumer price index and may be increased at any time by the Board or
its Compensation Committee.
The Agreements provide that the Executive shall be entitled to receive
bonuses and incentive compensation each year in addition to his base salary. In
determining the amount of such bonus and incentive compensation, consideration
is to be given to all pertinent factors including, but not limited to, the
following:
". . . historic policies and practices, business revenues, business
profits, the quality of the Executive's performance and the value of his
contributions to the Company, the prevailing compensation levels for
comparable executive officers in businesses of size, complexity and/or
character similar to those of the Company."
The Executives are also entitled to receive employee benefits comparable to
those provided to its senior executives; and to certain payments and benefits in
case of the Executive's involuntary termination including such termination
following a change of control.
No other executive officer of the Company is employed pursuant to a formal
written employment agreement.
STOCK OPTION PLANS.
The Company's current stock option plan is the 1996 Stock Option Plan.
Options under the 1990 Stock Option Plan are all granted, and options under the
1980 Plan can no longer be granted since the ten year life of the Plan expired.
However, options granted under the 1980 and 1990 Plans which have not expired or
been forfeited, are valid and exercisable according to the terms of the
respective option grants.
The 1996 Plan provides for Incentive Stock Options which may only be
granted to employees, and for Nonstatutory Stock Options which may be granted to
non-employee directors and consultants.
The Stock Option Committee grants Incentive Stock Options to key employees
of the Company, including Company Executives, to encourage proprietary interest
in the Company, to encourage such key
9
<PAGE> 12
employees to remain in the employ of the Company and to attract new employees
with outstanding qualifications.
In granting stock options, the Stock Option Committee confers with senior
management and with the Compensation Committee.
During the fiscal year ended May 31, 1997, no stock options were granted to
the Chief Executive Officer or to any of the five highest paid executives.
Directors are granted Nonstatutory Stock Options based upon an amendment to
the 1996 Plan adopted November 1, 1996 setting forth a formula pursuant to Rule
16b-3 of the General Rules and Regulations under the Securities Exchange Act of
1934 whereby each non-employee director receives 3,000 options the first year of
service and 2,000 options the second year of service.
The members of the Compensation Committee and the Stock Option Committee
are not and have not been employees of the Company and are not related to each
other or to any executive officer of the Company by blood, marriage or adoption.
<TABLE>
<S> <C>
Compensation Committee Stock Option Committee
Will Richeson, Jr., Chairman Gerald D. Barrone, Chairman
Gerald D. Barrone Nancy Y. Bekavac
Nancy Y. Bekavac Joseph J. Kearns
Joseph J. Kearns
Michael R. Peevey
</TABLE>
Under the 1996 Director Option Plan non-employee directors may elect to
defer all or a portion of their annual retainer fee (currently $14,000) and
receive nonqualified options at 75% of fair market value of the shares at time
of grant. Upon exercise of the Options the director pays 25% of the fair market
value per share on the date of grant.
APPROVAL OF THE AMENDMENT
OF THE ARTICLES OF INCORPORATION
On July 10, 1997 the Board adopted a resolution amending paragraph (a) of
ARTICLE III of the Company's Restated Articles of Incorporation to increase the
number of shares of Common Stock of the Company authorized to be issued from
20,000,000 to 40,000,000.
The Board ordered that this amendment to the Restated Articles of
Incorporation of the Company be submitted to the vote of the shareholders at the
next annual meeting with a recommendation by the Board that the shareholders
vote to approve the amendment.
The Company currently has in excess of 12,000,000 common shares
outstanding. It is prudent for the Company to have a sufficient quantity of
authorized but unissued shares to give it flexibility to declare stock
dividends, stock splits, issue shares upon exercise of options and make
acquisitions.
The authorization to issue additional shares has no effect on shares
currently issued and outstanding.
The affirmative vote of the holders of a majority of the outstanding common
shares of the Company is required to approve the amendment. Proxies solicited by
the Board will be voted in favor of approving the amendment unless a different
vote is specified.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT AND
YOUR PROXY WILL BE SO VOTED UNLESS OTHERWISE SPECIFIED.
10
<PAGE> 13
INDEPENDENT PUBLIC ACCOUNTANTS
The Board on the recommendation of the Audit Committee has appointed Arthur
Andersen LLP to audit the books and records of the Company for the fiscal year
beginning June 1, 1997.
Representatives of the firm are expected to be at the meeting to respond to
appropriate questions and to make a statement if they wish.
Notwithstanding the ratification by the shareholders of the appointment of
Arthur Andersen LLP, the Board or the Audit Committee may, if the circumstances
warrant, appoint other independent public accountants.
A resolution will be offered at the annual meeting to approve the
appointment of Arthur Andersen LLP as the independent public accountants of the
Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR SUCH PROPOSAL AND YOUR PROXY
WILL BE SO VOTED UNLESS OTHERWISE SPECIFIED.
DATE FOR RECEIPT OF SHAREHOLDER
PROPOSALS FOR PRESENTATION AT
1998 ANNUAL MEETING
Any proposal which a shareholder wishes to have presented for consideration
at the 1998 annual meeting must be received at the Company's principal office,
attention: Steven Markheim, Secretary, no later than May 31, 1998.
OTHER MATTERS
As of the date of this proxy statement the Board does not intend to
present, and has not been informed that any other person intends to present, any
other matter for action at this meeting. If any other matter properly comes
before the meeting, the holders of the proxies will act in each instance in
accordance with their best judgment.
In addition to the solicitation of proxies by mail, certain employees of
the Company, without extra remuneration, may solicit proxies. The Company also
will request brokerage houses, nominees, custodians and fiduciaries to forward
soliciting material to the beneficial owners of stock held of record and will
reimburse such persons for the cost of forwarding the material. The cost of
solicitation will be borne by the Company.
Copies of the 1997 annual report of the Company are being mailed to
shareholders. Additional copies and additional information, including the annual
report (Form 10-K) filed with the Securities and Exchange Commission may be
obtained by any shareholder without charge. Requests should be addressed to the
Company's principal office, attention: Steven Markheim, Secretary.
By order of the Board of Directors
Steven Markheim
Secretary
Van Nuys, California
August 22, 1997
11
<PAGE> 14
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS.
The undersigned hereby appoints Daniel
Greenberg, William Weitzman and Joseph J.
PROXY Kearns as Proxies, each with the power to
appoint his substitute, and hereby authorizes
them to represent and to vote, as designated
below, all the shares of common stock of Electro
Rent Corporation held of record by the
undersigned on August 11, 1997 at the annual
meeting of shareholders to be held on October 9,
1997, or any adjournment thereof.
ELECTRO
RENT
CORPORATION
6060 SEPULVEDA BOULEVARD
VAN NUYS, CALIFORNIA 91411-2512
- --------------------------------------------
I,2
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the (to vote for all nominees listed
contrary below) [ ] below) [ ]
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee strike a
line through the nominee's name on the list below.)
G. D. Barrone, N. Y. Bekavac, D. Greenberg,
J. J. Kearns, S. L. Kling, M. R. Peevey,
W. Richeson, Jr., W. Weitzman
2. PROPOSAL TO APPROVE THE AMENDMENT OF THE ARTICLES OF INCORPORATION OF ELECTRO
RENT CORPORATION.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO APPROVE THE APPOINTMENT OF ARTHUR ANDERSEN LLP as the independent
public accountants of the corporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE> 15
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy will
be voted for the eight nominees for directors and for proposals 2 and 3.
PLEASE SIGN EXACTLY AS NAME APPEARS OF RECORD ON YOUR STOCK CERTIFICATES.
WHEN SHARES ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN.
DATED:............, 1997
------------------------
Signature
------------------------
Signature, if held
jointly
When signing as
attorney, as executor,
administrator, trustee,
or guardian, please give
full title as such. If a
corporation, please sign
in full corporate name,
by President or other
authorized officer. If a
partnership, please sign
in partnership name by
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
