<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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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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<PAGE> 2
ELECTRO RENT CORPORATION
6060 SEPULVEDA BOULEVARD
VAN NUYS, CALIFORNIA 91411-2512
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 12, 2000
DEAR SHAREHOLDERS:
You are cordially invited to attend the 2000 Annual Meeting of Shareholders
of ELECTRO RENT CORPORATION (the "Company") to be held on Thursday, October 12,
2000, at 10:00 o'clock A.M., at the office of the corporation, 6060 Sepulveda
Boulevard, Van Nuys, California 91411-2512. At the meeting we will:
1. Elect eight directors for the next year.
2. Vote to approve the selection of Arthur Andersen LLP as the
Company's independent public accountants.
3. Consider and act upon such other business as may properly come
before said meeting.
Shareholders of record at the close of business on August 14, 2000 are
entitled to vote at the Annual Meeting. We urge you to vote your shares promptly
by signing, dating and marking the enclosed proxy. You have the right to revoke
your proxy before it is exercised by giving written notice to the Company.
Steven Markheim,
Secretary
DATED: August 21, 2000
<PAGE> 3
ELECTRO RENT CORPORATION
6060 SEPULVEDA BOULEVARD
VAN NUYS, CALIFORNIA 91411-2512
------------------------
PROXY STATEMENT
------------------------
VOTING SHARES AND PROCEDURES
The Board of Directors (the "Board") requests your proxy for the annual
meeting of shareholders on October 12, 2000. If you sign and return the proxy
you authorize the persons named in the proxy to represent you and vote your
shares for the purposes mentioned in the notice of annual meeting.
If you come to the meeting you can vote in person if you wish. You can
revoke your proxy any time before it is voted by giving written notice to the
Company.
As of August 14, 2000, the record date, there were 24,341,611 shares of
common stock issued and outstanding. Each share is entitled to one vote.
If you sign and return your proxy but do not give voting instructions, your
shares will be voted as recommended by the Board.
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 5% or more of the Company's 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>
Private Capital Management.................................. 5,224,565 21.47%
3003 Tamiami Trail North
Naples, Florida 33940
Daniel Greenberg............................................ 3,865,047(2) 16.06%
T. Rowe Price Associates, Inc............................... 3,351,200 13.77%
100 East Pratt Street
Baltimore, Maryland 21202
Phillip Greenberg........................................... 2,733,273 11.23%
Officers and Directors as a Group (18 Persons).............. 4,014,154(4) 16.49%
</TABLE>
---------------
(1) The address of each shareholder is 6060 Sepulveda Boulevard, Van Nuys,
California 91411-2512, unless otherwise set forth.
(2) The 3,865,047 shares do not include (a) 204,463 shares held by the Electro
Rent Corporation Employee Stock Ownership Plan (ESOP); and (b) 121,496
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 12, 2000 have been considered to
be outstanding for the purpose of computing the percentage of outstanding
shares owned by such person, but are not considered outstanding for the
purpose of computing the percentage of shares owned by any other person.
(4) Does not include 756,244 shares underlying currently exercisable options
held by officers and directors or 417,503 shares held by the ESOP for such
officers and directors.
<PAGE> 4
ELECTION OF DIRECTORS
The Board has nominated the following eight persons as directors to serve
until the next annual meeting and until their successors are elected and
qualify. 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.
The schedule below sets forth with respect to each nominee for election as
a director the following:
- His or her age.
- When he or she first became a director.
- The number of shares of the Company he or she owned on the record date.
- His or her occupation and 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)........................................ 69 1987 3,000
Retired
Nancy Y. Bekavac(2)......................................... 53 1992 3,400
President, Scripps College
Daniel Greenberg............................................ 59 1976 3,865,047(3)
Chief Executive Officer and Chairman of the Board of
Directors of the Company.
Joseph J. Kearns(4)......................................... 58 1988 1,766
President, Kearns Associates,
an investment consulting firm
S. Lee Kling(5)............................................. 71 1996 10,000
Chairman of the Board of Directors of Kling Rechter & Co.
Michael R. Peevey(6)........................................ 62 1995 2,000
Chairman of the Board of Directors and Chief Executive
Officer, TruePricing Inc.
Will Richeson, Jr.(7)....................................... 76 1989 800
Consultant
William Weitzman............................................ 61 1974 91,930(8)
President and Chief Operating Officer of the Company.
</TABLE>
---------------
(1) From 1991 until 1998 Mr. Barrone was a director of Coast Federal Bank.
(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) From 1982 to 1998 Mr. Kearns was Vice President and Chief Financial Officer
of the J. Paul Getty Trust. He is a trustee of MAS Funds and Southern
California Edison Nuclear Decommissioning Trust.
(5) Mr. Kling is a director of Bernard Chaus, Inc., Falcon Products, Inc.,
National Beverage Corp., Union Planters Corp., and Top Air Manufacturing
Co., Inc.
(6) From 1993 to 1995 Mr. Peevey was an independent energy consultant. From 1995
to 2000 he was President of New Energy Ventures, LLC, a national energy
services company.
(7) For more than five years Mr. Richeson has been a financial consultant.
(8) These shares are held in a revocable family trust.
2
<PAGE> 5
EXECUTIVE OFFICERS
The schedule below sets forth the name, age and office or offices of each
executive officer of the Company. 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..... 59 Chairman of the Board of Directors and Chief 1979
Executive Officer
William Weitzman..... 61 President and Chief Operating Officer 1982
Gary B. Phillips..... 48 Senior Vice President 1983
Steven Markheim...... 47 Vice President, Administration and Secretary 1987
Craig R. Jones....... 54 Vice President and Chief Financial Officer 1990
Richard E. 44 Vice President, Product Management 1993
Bernosky...........
Dennis M. Clark...... 46 Vice President, Sales -- Western Region 1994
Thomas A. Curtin..... 47 Vice President, Sales -- Eastern Region 1994
Ronald J. Deming..... 51 Vice President, Distribution and Technical 1998
Services
Craig R. Burgi....... 47 Vice President, Sales -- Northwest Region 1998
John Hart............ 51 Vice President, Sales -- Southwest Region 1998
Peter M. Shapiro..... 56 Vice President, Human Resources 1998
</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 described below.
Overall attendance at board and committee meetings exceeded 95%.
Audit Committee. The Audit Committee is generally responsible for:
- Making recommendations to the Board regarding the engagement of
independent public accountants for the Company.
- Approving:
- The Company's annual report to shareholders (except for portions not
required by Securities and Exchange Commission or NASDAQ rules).
- Certain non-audit services of the independent public accountants.
- Reviewing:
- The Company's quarterly report to the SEC.
- Proposed changes in major accounting policies.
- Scope of the annual audit.
- Reports of compliance of management and operating personnel with the
Company's code of ethics.
- Adequacy of the Company's system of internal accounting controls.
- Other factors affecting the integrity of published financial reports.
- Members: All of the Board members except Messrs. Greenberg and Weitzman
serve as members of the Audit Committee.
- Meetings: The Audit Committee met twice during the past fiscal year.
3
<PAGE> 6
- Audit Committee Charter and Audit Committee Disclosures:
- On February 16, 2000 the Board adopted the Electro Rent Corporation
Audit Committee Charter, being the written charter for the audit
committee. A copy of the Audit Committee Charter is appended to this
proxy statement.
- The members of the audit committee are independent as independence is
defined in Rule 4200(a)(15) of the National Association of Security
Dealers ("NASD") listing standards.
- The audit committee has reviewed and discussed the audited financial
statements with management.
- The audit committee has discussed with the independent auditors the
matters required to be discussed by Statement of Auditing Standards 61.
- The audit committee has received the written disclosures and the letter
from the independent accountants required by Independence Standards
Board Standard No. 1, and has discussed with the independent accountant
the independent accountant's independence.
- Based upon the foregoing, the audit committee recommended to the Board
that the audited financial statements be included in the Company's
annual report on Form 10-K (as incorporated by reference from the annual
report to shareholders).
Compensation Committee. The Compensation Committee is generally responsible
for:
- Reviewing the compensation of officers and key employees.
- Making recommendations to the Board regarding amounts of or changes in
compensation including:
- Bonuses.
- Stock Options.
- Other management incentives.
- Members: All of the Board members except Messrs. Greenberg and Weitzman
serve as members of the Compensation Committee.
- Meetings: The Compensation Committee met twice during the past fiscal
year.
1996 Stock Option Committee. The Stock Option Committee grants options
under the Company's 1996 stock option plan.
- Members: The members of the Stock Option Committee are Messrs. Barrone,
Kearns and Kling, and Ms. Bekavac.
- Meetings: The 1996 Stock Option Committee met once during the past fiscal
year.
- Options under the 1996 Director Option Plan are granted to outside
directors by a Committee composed of Messrs. Greenberg and Weitzman who
are ineligible to receive options under the 1996 Director Option Plan.
Director Compensation. Directors who are not employees are paid each year:
- A cash retainer of $20,000.
- $1,000 for each board meeting which he or she attends.
- $1,000 for each meeting of the Compensation and Audit Committees which he
or she attends.
Directors who are employees receive no additional compensation for their
services as directors.
Under the 1996 Director Option Plan non-employee directors may elect to
defer all or a portion of their annual retainer and receive nonqualified options
equivalent to the amount of the deferred director's fees divided by 75% of the
fair market value per share on the date of grant. Upon exercise of the options,
the director pays 25% of the fair market value per share on the date of grant.
4
<PAGE> 7
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 Michael R. Peevey was late in
filing one report covering the purchase of 2,000 shares of the Company's stock.
TRANSACTIONS WITH MANAGEMENT
Mr. Greenberg, individually, rents approximately 600 square feet of space
in the Company's building at rates comparable to those paid by other third party
tenants.
5
<PAGE> 8
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, 2000, 1999 and 1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------- ------------------------ ----------
OTHER RESTRICTED ALL OTHER
NAME AND PRINCIPAL ANNUAL COMPEN- STOCK LTIP COMPEN-
POSITION YEAR SALARY($) BONUS($) SATION($)(1) AWARD(S)($) OPTIONS(#) PAYOUTS($) SATION($)(2)
------------------ ---- --------- -------- -------------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Daniel Greenberg...... 2000 $385,000 $375,000 0 0 0 0 $25,231
Chairman of 1999 385,000 290,000 0 0 0 0 27,174
the Board and 1998 355,000 375,000 0 0 70,000 0 24,593
Chief Executive
Officer
William Weitzman...... 2000 $335,000 $350,000 0 0 0 0 $10,844
President and 1999 335,000 265,000 0 0 0 0 12,584
Chief Operating 1998 305,000 350,000 0 0 70,000 0 18,733
Officer
Gary B. Phillips...... 2000 $210,000 $190,000 0 0 0 0 $11,292
Senior Vice
President 1999 210,000 150,000 0 0 0 0 15,413
1998 192,500 190,000 0 0 40,000 0 14,073
Steven Markheim....... 2000 $185,000 $150,000 0 0 0 0 $10,453
Vice President 1999 185,000 110,000 0 0 0 0 12,735
and Secretary 1998 170,000 135,000 0 0 40,000 0 11,084
Craig R. Jones........ 2000 $145,000 $ 50,000 0 0 0 0 $ 7,103
Vice President 1999 145,000 40,000 0 0 0 0 10,053
and Chief Financial 1998 135,000 48,000 0 0 15,000 0 9,512
Officer
</TABLE>
---------------
(1) The value of perquisites and other personal benefits has not been included
for fiscal years 2000, 1999 and 1998 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 2000 includes the following for
Messrs. Greenberg, Weitzman, Phillips, Markheim and Jones, (i) Company
matching contributions to the 401(k) Savings Plan of $6,504; $6,504; $6,504;
$6,119 and $6,330 for each Named Executive Officer, respectively, (ii)
Company contributions to the Supplemental Executive Retirement Plan of
$11,875; $-0-; $4,240; $3,803 and $-0-on behalf of each of the Named
Executive Officers, respectively, to match a portion of 2000 pretax elective
deferral contributions (included under salary) made by each person to such
plans, and (iii) Company payments of term life insurance premiums of $6,852;
$4,340; $548; $531 and $773 on behalf of each of the Named Executive
Officers, respectively.
OPTION GRANTS IN LAST FISCAL YEAR.
No options were granted to any of the Named Executive Officers under the
Company's 1996 Stock Option Plan during the fiscal year ended May 31, 2000.
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, 2000, the
aggregate dollar value realized upon exercise, the total number of unexercised
options held at May 31, 2000, and the aggregate dollar value of in-the-money,
unexercised options held at May 31, 2000. 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
6
<PAGE> 9
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, 2000, which was $10.81 per share. These values, unlike the amounts set
forth in the column headed "Value Realized," have not been, and may never be,
realized. The underlying options have not been, and may not be, exercised;
actual gains, if any, on exercise will depend on the value of Electro Rent
Common Stock on the date of exercise. There can be no assurance that these
values will be realized.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(1)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Daniel Greenberg.............. 0 $ 0 35,000 35,000 $ 0 $0
William Weitzman.............. 86,900 $423,113 180,350 35,000 $1,079,743 $0
Gary B. Phillips.............. 47,500 $409,674 103,050 20,000 $ 308,336 $0
Steven Markheim............... 8,000 $ 71,606 92,000 20,000 $ 330,640 $0
Craig R. Jones................ 0 $ 0 46,750 7,500 $ 305,880 $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.
7
<PAGE> 10
COMPARISON OF TOTAL SHAREHOLDER RETURN.
This graph compares the Company's total shareholder return with (1) the
NASDAQ(US) Index, (2) the Russell 2000 Index, and (3) the composite prices of
the companies listed by Value Line, Inc. in its Industrial Services Group ("Peer
Group"). The Company is listed in both the Russell 2000 Index and the Industrial
Services Group. The comparison is over a five year period, beginning May 31,
1995 and ending May 31, 2000. The total shareholder return assumes $100 invested
at the beginning of the period in the Company's common stock and in each index.
It also assumes reinvestment of all dividends.
CUMULATIVE FIVE YEAR TOTAL RETURN
VALUE OF $100 INVESTED ON MAY 31, 1995
FISCAL YEARS ENDED MAY 31
[GRAPH]
<TABLE>
<CAPTION>
ELECTRO RENT NASDAQ STOCK VALUE LINE INDUSTRIAL
CORPORATION MARKET - US RUSSELL 2000 SERVICES
------------ ------------ ------------ ---------------------
<S> <C> <C> <C> <C>
1995 100 100 100 100
1996 169 145 129 175
1997 157 164 156 222
1998 325 208 197 305
1999 170 293 178 233
2000 147 405 178 428
</TABLE>
CEO Compensation
CEO Daniel Greenberg is employed pursuant to a written contract which
provides for the following:
- A rolling three year term.
- Base salary of not less than $300,000.
- Annual adjustments based on the consumer price index.
- Increases, bonuses and incentive compensation authorized by the Board.
- Employee benefits comparable to those given by the Company to its other
senior executives.
- Certain payments and benefits in the event of involuntary termination
including such termination following a change of control.
8
<PAGE> 11
For the fiscal year ended May 31, 2000 the CEO was paid:
- Base salary of $385,000.
- Bonus of $375,000.
- Fringe benefits comparable to those received by salaried employees
generally (not exceeding in the aggregate 10% of his base salary).
During the May 31, 2000 fiscal year the CEO exercised no stock options.
Compensation Committee Interlocks and Insider Participation.
No member of the Compensation Committee or the Stock Option Committee is or
was an officer or employee of the Company, or 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.
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 (a) the Company's personnel worked diligently and extensively in
improving operating efficiencies, resulting in substantial reductions of
accounts receivable, rental and lease equipment and bank borrowings; and (b) the
Company achieved increased net income and net income margin in spite of
continuing adverse market conditions. The Committee regarded these efforts as
creditable performances on the part of management justifying appropriate
bonuses.
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.
9
<PAGE> 12
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.
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. However, options
granted under the prior 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 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, 2000, no stock options were granted to
the Chief Executive Officer or any of the other four of the five highest paid
executives.
10
<PAGE> 13
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 6,000 options the first year of
service and 4,000 options the second year of service.
<TABLE>
<CAPTION>
COMPENSATION COMMITTEE STOCK OPTION COMMITTEE
---------------------- ----------------------
<S> <C>
Will Richeson, Jr., Chairman Gerald D. Barrone, Chairman
Gerald D. Barrone Nancy Y. Bekavac
Nancy Y. Bekavac Joseph J. Kearns
Joseph J. Kearns S. Lee Kling
S. Lee Kling
Michael R. Peevey
</TABLE>
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, 2000.
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 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 2001 ANNUAL
MEETING
Any proposal which a shareholder wishes to have presented for consideration
at the 2001 annual meeting must be received at the Company's principal office,
attention: Steven Markheim, Secretary, no later than May 31, 2001.
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.
11
<PAGE> 14
Copies of the 2000 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 21, 2000
12
<PAGE> 15
ELECTRO RENT CORPORATION
AUDIT COMMITTEE CHARTER
The purpose of the Audit Committee (the "Committee") of the Board of
Directors (the "Board") of Electro Rent Corporation (the "Company") is to
provide assistance to the Board in overseeing the financial organization,
accounting and reporting practices, and the quality and integrity of the
financial reports of the Company. The Committee, the CEO, and the CFO share
responsibility to maintain free and open lines of communication between the
directors, the independent auditors and financial management of the Company.
MEMBERSHIP AND REVIEW OF CHARTER
1. The Committee shall consist of not fewer than three outside Directors,
including a Chairman. Each Director on the Committee must be independent of the
management of the Company.
2. The Committee shall review and reassess the adequacy of this charter on
an annual basis.
CONTINUOUS ACTIVITIES -- GENERAL
1. Provide an open avenue of communication between the independent auditor,
CFO, and the Board.
2. Meet two times per year or more frequently as circumstances require. The
Committee may ask members of management or others to attend meetings and provide
pertinent information as necessary. There will be an executive session with the
independent auditor after each meeting. Minutes of the general meeting will be
prepared by the CFO, approved by the Committee Chairman and submitted to the
Board.
3. Confirm and assure the independence of the independent auditor and the
objectivity of the CFO.
4. Review with the independent auditor and the CFO the coordination of
audit efforts to assure completeness of coverage, reduction of redundant
efforts, and the effective use of audit resources.
5. Inquire of management, the independent auditor, and the CFO about
significant risks or exposures and assess the steps management has taken to
minimize such risk to the Company.
6. Consider and review with the independent auditor and the CFO:
(a) The adequacy of the Company's internal controls including
computerized information system controls and security.
(b) Related findings and recommendations of the independent auditor
together with management's responses.
7. Consider and review with management, the CFO and the independent
auditor:
(a) Significant findings during the year, including the Status of
Previous Audit Recommendations.
(b) Any difficulties encountered in the course of audit work including
any restrictions on the scope of activities or access to required
information.
(c) Any changes required in the planned scope of the Audit Plan.
8. Meet periodically with the independent auditor, the CFO and management
in separate executive sessions to discuss any matters that the Committee or
these groups believe should be discussed privately with the Committee.
9. Report periodically to the Board on significant results of the foregoing
activities.
10. Ensure that the independent auditor's ultimate accountability is to the
Board and the Committee, as the shareholders' representatives.
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CONTINUOUS ACTIVITIES -- RE: REPORTING SPECIFIC POLICIES
1. Advise the CFO and the independent auditor they are expected to provide
a timely analysis of significant current financial reporting issues and
practices.
2. Provide that the CFO and the independent auditor discuss with the
Committee their qualitative judgments about the appropriateness, not just the
acceptability, of accounting principles and financial disclosure practices used
or proposed to be adopted by the Committee and, particularly, about the degree
of aggressiveness or conservatism of its accounting principles and underlying
estimates.
3. Inquire as to the auditor's independent qualitative judgments about the
appropriateness, not just the acceptability, of the accounting principles and
the clarity of the financial disclosure practices used or proposed to be adopted
by the Company.
4. Inquire as to the independent auditor's views about whether management's
choices of accounting principles are conservative, moderate, or aggressive from
the perspective of income, asset, and liability recognition, and whether those
principles are common practices or are minority practices.
5. Determine, as regards to new transactions or events, the independent
auditor's reasoning for the appropriateness of the accounting principles and
disclosure practices adopted by management.
6. Ascertain the auditor's reasoning in determining the appropriateness of
changes in accounting principles and disclosure practices adopted by management.
7. Inquire as to the auditor's views about how the Company's choices of
accounting principles and disclosure practices may affect public views and
attitudes about the Company.
SCHEDULED ACTIVITIES
1. Recommend the selection of the independent auditor for approval by the
Board and ratification by the shareholders, approve the compensation of the
independent auditor, and review and approve the discharge of the independent
auditor.
2. Consider, in consultation with the independent auditor and the CFO, the
audit scope and plan of the independent auditor.
3. Review with management and the independent auditor the results of annual
audits and related comments including:
(a) The independent auditor's audit of the Company's annual financial
statements, accompanying footnotes and its report thereon.
(b) Any significant changes required in the independent auditor's
audit plans.
(c) Any difficulties or disputes with management encountered during
the course of the audit.
(d) Other matters related to the conduct of the audit which are to be
communicated to the Committee under Generally Accepted Auditing Standards.
4. Arrange for the independent auditor to be available to the full Board at
least annually to help provide a basis for the Board to recommend to
shareholders the appointment of the independent auditor.
5. Determine the independent auditor's reasoning in accepting or
questioning significant estimates by management.
"WHEN NECESSARY" ACTIVITIES
1. Review and concur in the appointment, replacement, reassignment, or
dismissal of the CFO.
2. Review and approve requests for any significant management consulting
engagement to be performed by the Company's independent auditor and be advised
of any other study undertaken at the request of management that is beyond the
scope of the audit engagement letter.
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3. Review periodically with general counsel legal and regulatory matters
that may have a material impact on the Company's financial statements,
compliance policies and programs.
4. Conduct or authorize investigations into any matters within the
Committee's scope of responsibilities. The Committee shall be empowered to
retain independent counsel and other professionals to assist in the conduct of
any investigation.
Adopted: February 16, 2000
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ELECTRO
RENT
CORPORATION
6060 SEPULVEDA BOULEVARD
VAN NUYS, CALIFORNIA 91411-2512
--------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS.
The undersigned hereby appoints Daniel Greenberg, William Weitzman and Joseph J.
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 14, 2000 at the annual
meeting of shareholders to be held on October
12, 2000, or any adjournment thereof.
<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 APPOINTMENT OF ARTHUR ANDERSEN LLP as the independent
public accountants of the corporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROXY
<PAGE> 19
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:............, 2000
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Signature
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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.
