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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] 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 Section 240.14a-11(c) or Section 240.14a-12
ELECTRO RENT CORPORATION
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(Name of Registrant as Specified In Its Charter)
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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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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ELECTRO RENT CORPORATION
6060 Sepulveda Boulevard
Van Nuys, California 91411-2512
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
October 11, 2001
DEAR SHAREHOLDERS:
You are cordially invited to attend the 2001 Annual Meeting of
Shareholders of ELECTRO RENT CORPORATION to be held on Thursday, October 11,
2001, at 10:00 o'clock A.M., at our offices, located at 6060 Sepulveda
Boulevard, Van Nuys, California 91411-2512. At the meeting we will:
1. Elect eight directors to serve as a members of our Board of
Directors until the next Annual Meeting or until their
successors are elected.
2. Vote to approve an amendment to Electro Rent's 1996 Director
Option Plan increasing the number of shares of Common Stock
available for grant under the 1996 Director Option Plan from
50,000 to 100,000.
3. Vote to approve the selection of Arthur Andersen LLP as our
independent public accountants.
4. Transact and act upon such other business as may properly come
before the meeting or any adjournments or postponements thereof.
Shareholders of record at the close of business on August 23, 2001 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 us written notice any time before
the Annual Meeting.
All shareholders are cordially invited to attend the meeting in person.
In any event, please mark, date, sign and return the enclosed proxy.
By Order of the Board of Directors
Steven Markheim, Secretary
DATED: August 23, 2001
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YOUR VOTE IS IMPORTANT, WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING
OF SHAREHOLDERS, PLEASE MARK, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY
IN THE STAMPED RETURN ENVELOPE PROVIDED. YOUR PROMPT RETURN OF THE PROXY WILL
HELP AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION TO ASSURE A QUORUM AT
THE MEETING.
THE ANNUAL MEETING IS ON OCTOBER 11, 2001. PLEASE RETURN YOUR PROXY IN TIME.
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ELECTRO RENT CORPORATION
6060 SEPULVEDA BOULEVARD
VAN NUYS, CALIFORNIA 91411-2512
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PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON THURSDAY, OCTOBER 11, 2001
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GENERAL INFORMATION CONCERNING SOLICITATION AND VOTING
Unless otherwise noted (1) the terms "Electro Rent," "we," "us," and "our,"
refer to Electro Rent Corporation and its subsidiaries, Genstar Rental
Electronics, Inc., and Electro Rent de Mexico S. A. de C.V. , (2) the terms
"Common Stock" and "shareholder(s)" refer to Electro Rent's common stock and the
holders of that stock, respectively, and (3) the term "Board" shall refer to our
Board of Directors.
We are furnishing this Proxy Statement to you in connection with our
solicitation of proxies at our Annual Meeting of shareholders on October 11,
2001, and any adjournments or postponements thereof. Enclosed with this Proxy
Statement is a copy of our Annual Report on Form 10-K (without exhibits) for the
fiscal year ended May 31, 2001. However, the Annual Report is not intended to be
a part of this Proxy Statement or a solicitation of proxies. We are first
mailing this Proxy Statement and the accompanying form of proxy on or about
August 23, 2001.
TIME, PLACE AND PURPOSES
We will hold our Annual Meeting at our offices, located at 6060
Sepulveda Boulevard, Van Nuys, California 91411-2512 on Thursday, October 11,
2001 at 10:00 A.M., local time. At the Annual Meeting, we will ask you:
- To elect eight directors to serve as a members of our Board
until the next Annual Meeting or until their successors are
elected.
- To approve an amendment to Electro Rent's 1996 Director Option
Plan increasing the number of shares of Common Stock available
for grant under the 1996 Director Option Plan from 50,000 to
100,000.
- To approve the selection of Arthur Andersen LLP as our
independent public accountants.
Although we are not aware of any other matters to be submitted to our
shareholders at the Annual Meeting, any other business which properly comes
before the meeting may be transacted at the meeting. If other matters do
properly come before the meeting, the persons named in the enclosed proxy may
vote on such matters in accordance with their best judgment.
RECORD DATE; VOTING RIGHTS; VOTES REQUIRED FOR APPROVAL
Our Board has fixed the close of business on August 23, 2001 as the
record date for determining the shareholders entitled to receive notice of and
to vote at the Annual Meeting. Only shareholders of record as of the close of
business on the record date will be entitled to vote at the Annual Meeting.
As of August 23, 2001, the record date, there were 24,526,164 shares of
Common Stock issued and outstanding. Each share is entitled to one vote.
Holders of a majority of the issued and outstanding shares of Common
Stock, present in person or by proxy, will constitute a quorum for the
transaction of business at the Annual Meeting. The eight nominees for the Board
receiving the greatest numbers of votes at the meeting will be elected to the
eight director positions. The amendment to the 1996 Director Option Plan and the
selection of Arthur Andersen LLP as our independent accountants must both be
approved by the shareholders holding (i) a majority of shares present,
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or represented, and voting at the Annual Meeting, and (ii) a majority of the
required quorum. For this purpose, abstentions and broker non-votes will have no
effect on the outcome of the vote unless such shares are necessary to satisfy
the quorum requirement, in which case abstentions and broker non-votes will have
the effect of a vote against the proposal.
VOTING AND REVOCATION OF PROXIES
All shares represented by valid proxies that we receive before the
Annual Meeting will be voted at the Annual Meeting as specified in the proxy,
unless the proxy has been previously revoked. If no specification is made on a
proxy with respect to a proposal, the related shares will be voted "FOR" that
proposal. Unless you indicate otherwise, your proxy card also will confer
discretionary authority on the board-appointed proxies to vote the shares
represented by the proxy on any matter that is properly presented for action at
the Annual Meeting.
You have the right to revoke your proxy at any time before it is voted
by giving written notice of revocation to our Secretary by mail or by facsimile,
by submitting a subsequent later-dated proxy or by voting in person at the
Annual Meeting.
COSTS OF SOLICITATION
We will pay the expenses of printing, assembling and mailing this Proxy
Statement. In addition to the use of the mails, our directors, officers or
regular employees may solicit proxies without additional compensation, except
for reimbursement of actual expenses. They may do so using the mails, in person,
by telephone, by facsimile transmission or by other means of electronic
communication. We may also make arrangements with brokerage firms and
custodians, nominees and fiduciaries to forward proxy solicitation materials to
beneficial owners of Common Stock held of record by such persons as of the
record date. We will reimburse brokers, fiduciaries, custodians and other
nominees for out-of-pocket expenses incurred in sending these proxy materials
to, and obtaining instructions from, beneficial owners.
RECOMMENDATION OF OUR BOARD
Our Board unanimously recommends that you vote "FOR" the nominees to be
elected to the Board, "FOR" the amendment to the 1996 Director Option Plan
increasing the number of shares of Common Stock available for grant under the
1996 Director Option Plan from 50,000 to 100,000, and "FOR" the selection of
Arthur Andersen LLP as our independent public accountants.
If you sign and return your proxy but do not give voting instructions,
your shares will be voted as recommended by the Board.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of the record date the holdings (i) by
each person who we know owns 5% or more of our Common Stock, (ii) each of our
directors, (iii) each person named in the summary compensation table, and (iv)
by all directors and officers as a group. Except as otherwise noted, the persons
or entities named have sole voting and investment power with respect to all
shares shown as beneficially owned by them.
COMMON STOCK
---------------------------------
NUMBER OF PERCENT OF
NAME AND ADDRESS OF OWNER(1) SHARES(2) CLASS (2)
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Private Capital Management(3) .................................... 5,630,514 22.96%
3003 Tamiami Trail North
Naples, Florida 33940
Daniel Greenberg(2)(4) ........................................... 4,225,906 17.18%
T. Rowe Price Associates, Inc.(5) ................................ 3,208,400 13.08%
100 East Pratt Street
Baltimore, Maryland 21202
Phillip Greenberg(6) ............................................. 2,654,773 10.82%
William Weitzman(2)(7) ........................................... 456,359 1.85%
Gerald D. Barrone ................................................ 44,741 *
Nancy Y. Bekavac ................................................. 35,477 *
Dennis M. Clark(2) ............................................... 39,750 *
Joseph J. Kearns ................................................. 26,991 *
S. Lee King ...................................................... 26,991 *
Steven Markheim(2) ............................................... 108,135 *
Michael R. Peevey ................................................ 45,281 *
Gary B. Phillips(2) .............................................. 148,876 *
Will Richeson, Jr ................................................ 800 *
Executive Officers and Directors as a Group (18 Persons) ......... 5,319,362(8) 18.88%
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* Less than 1%.
(1) The address of each shareholder is 6060 Sepulveda Boulevard, Van Nuys,
California 91411-2512, unless otherwise set forth.
(2) Any shares which are available under options which are currently
exercisable or which will become exercisable within 60 days after the
date as of which information in this table is provided are 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. The number of shares in this table includes
shares issuable upon exercise of options currently exercisable or
exercisable within 60 days after the date as of which information in
this table is provided as follows: Mr. Greenberg, 70,000 shares; Mr.
Weitzman, 164,225 shares; Mr. Phillips, 115,800 shares; Mr. Markheim,
95,750 shares, and Mr. Clark, 39,750 shares.
(3) Based upon information disclosed in the Form 13F filed by Private
Capital Management, it beneficially owns 5,630,514 shares. Based upon
information contained in the Schedule 13G filed by Private Capital
Management, it has sole voting and disposition power with respect to
25,000 shares and has shared voting and disposition power with respect
to 5,228,014 shares. Bruce S. Sherman has sole voting and disposition
power with respect to 86,600 shares and has shared voting and
disposition power with respect to 5,639,514 shares. Gregg J. Powers
has sole voting and disposition power with respect to 34,000 shares
and has shared voting and disposition power with respect to 5,630,514
shares. SPS Partners, L.P. has shared voting and disposition power
with respect to 402,500 shares.
(4) Based upon information contained in the Schedule 13G filed by Daniel
Greenberg, Mr. Greenberg has sole voting and disposition power with
respect to 3,829,947 shares. The 4,225,906 shares reflected in the
table include (a) 204,463 shares held by the Electro Rent Corporation
Employee Stock Ownership Plan, referred to as the ESOP, for the
benefit of Mr. Greenberg, but to which he disclaims
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beneficial ownership; (b) 121,496 shares held by The Mayer Greenberg
Foundation, which Daniel Greenberg has the right to vote, but as to
which he disclaims beneficial ownership, and (c) 70,000 shares
issuable upon options currently exercisable or exercisable within 60
days after the date as of which information in this table is provided.
(5) Based upon information contained in the Schedule 13G filed by T. Rowe
Price Associates, Inc., it has sole voting power with respect to
435,300 shares and sole dispositive power with respect to 3,208,400
shares. T. Rowe Price Small-Cap Value Fund, Inc. has sole voting power
with respect to 2,000,000 shares, but does not have sole or shared
dispositive power to any shares.
(6) Based upon information contained in the Schedule 13G filed by Phillip
Greenberg, Mr. Greenberg has sole voting and disposition power with
respect to 2,654,773 shares.
(7) 98,200 of these shares are held in a revocable family trust.
(8) Based on publicly available share ownership information and includes
(a) 788,969 shares underlying options held by executive officers and
directors that are currently exercisable or exercisable within 60 days
after the date as of which information in this table is provided, (b)
417,503 shares held by the ESOP for the benefit of such executive
officers and directors, and (c) 121,498 shares held by The Mayer
Greenberg Foundation, which Daniel Greenberg has the right to vote but
as to which he disclaims beneficial ownership.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board has nominated the following eight persons as directors to
serve until the next Annual Meeting, or until their successors have been duly
elected and qualified. Each of the nominees is now a director of Electro Rent.
None of the nominees is related by blood, marriage or adoption to any other
nominee or any executive officer of Electro Rent. The eight nominees receiving
the greatest numbers of votes at the meeting will be elected to the eight
director positions. Our Board recommends that you vote FOR each of the nominees
listed below. Unless otherwise instructed, the proxy holders will vote the
proxies received by them for the Board's eight nominees named below. If any
nominee is unable or declines to serve as director at the time of the Annual
Meeting, the proxies will be voted for any nominee who is designated by our
present Board to fill the vacancy. 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.
- His or her occupation and business experience during the past
five years.
NAME AND PRINCIPAL OCCUPATION AGE DIRECTOR SINCE
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Gerald D. Barrone(1) ................................................................ 70 1987
Retired
Nancy Y. Bekavac(2) ................................................................. 54 1992
President, Scripps College
Daniel Greenberg .................................................................... 60 1976
Chief Executive Officer and Chairman of the
Board of Electro Rent
Joseph J. Kearns(4) ................................................................. 59 1988
President, Kearns Associates, an investment consulting firm
S. Lee Kling(5) ..................................................................... 72 1996
Chairman of the Board of Kling Rechter & Co., a merchant banking corporation
Michael R. Peevey(6) ................................................................ 63 1995
Chairman of the Board and Chief Executive
Officer, TruePricing Inc., an energy technology company
Will Richeson, Jr.(7) ............................................................... 77 1989
Consultant
William Weitzman .................................................................... 62 1974
President and Chief Operating Officer of Electro Rent
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(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.
(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., Engineered Support
Systems, Inc., Falcon Products, Inc., Kupper Parker Communications,
Inc., Learn2.com, and National Beverage Corp.
(6) From 1995 to 2000 Mr. Peevey was President of New Energy Ventures, LLC,
a national energy services company.
(7) Mr. Richeson has been an independent financial consultant for more than
five years.
EXECUTIVE OFFICERS
The schedule below sets forth the name, age and office or offices of
each of our executive officers. 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 Electro Rent for more than
five years.
HELD OFFICE OR
NAME AGE OFFICE OR OFFICES OFFICES SINCE
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Daniel Greenberg ........ 60 Chairman of the Board and Chief Executive Officer 1979
William Weitzman ........ 62 President and Chief Operating Officer 1982
Gary B. Phillips ........ 49 Senior Vice President 1983
Steven Markheim ......... 48 Vice President, Administration and Secretary 1987
Craig R. Jones .......... 55 Vice President and Chief Financial Officer 1990
Richard E. Bernosky ..... 45 Vice President, Product Management 1993
Dennis M. Clark ......... 47 Vice President and General Manager - Computer Products and Services Group 1994
Thomas A. Curtin ........ 48 Vice President, Sales - Eastern Region and Canada 1994
Ronald J. Deming ........ 52 Vice President, Distribution and Technical Services 1998
Craig R. Burgi .......... 48 Vice President, Sales - Computer Products 1998
John Hart ............... 52 Vice President, Sales - Western Region 1998
Peter M. Shapiro ........ 57 Vice President, Human Resources 1998
BOARD 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%, and no director
has attended less than 75% of the meetings in the prior year.
DIRECTOR COMPENSATION. Directors who are employees receive no additional
compensation for their services as directors. Directors who are not employees
are paid:
- An annual 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.
AUDIT COMMITTEE. The Audit Committee is generally responsible for:
- Making recommendations to the Board regarding the engagement of
independent public accountants for Electro Rent.
- Approving:
- Our annual report to shareholders (except for portions not
required by SEC or NASDAQ rules).
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- Certain non-audit services of the independent public
accountants.
- Reviewing:
- Our quarterly reports to the SEC.
- Proposed changes in major accounting policies.
- The scope of our annual audit.
- Reports of compliance of management and operating personnel
with our code of ethics.
- The adequacy of our system of internal accounting controls.
- Other factors affecting the integrity of published
financial reports.
Audit Committee Members. All of the Board members except Messrs.
Greenberg and Weitzman serve as members of the Audit Committee.
Audit Committee Meetings. The Audit Committee met twice during the
past fiscal year.
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
was filed as an appendix to our proxy statement filed in 2000
for our 2000 Annual Meeting of Shareholders.
- The members of the Audit Committee are "independent" as 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 our
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.
Compensation Committee Members. All of the Board members except
Messrs. Greenberg and Weitzman serve as members of the Compensation
Committee.
Compensation Committee Meetings. The Compensation Committee met twice
during the past fiscal year.
1996 STOCK OPTION PLAN COMMITTEE. The 1996 Stock Option Plan Committee
grants options under our 1996 Stock Option Plan, as amended, referred to
as the "1996 Option Plan." We may grant incentive stock options and
nonstatutory stock options under the 1996 Option Plan.
1996 Option Plan Committee Members. The members of the 1996 Option
Committee are Messrs. Barrone, Kearns and Kling, and Ms. Bekavac.
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1996 Option Plan Committee Meetings. The 1996 Option Plan Committee
met once during the past fiscal year.
Options Granted under 1996 Option Plan. Options to purchase 163,800
shares of Common Stock were granted under the 1996 Option Plan in our
fiscal year ended May 31, 2001.
1996 DIRECTOR OPTION PLAN COMMITTEE. The 1996 Director Option Plan
Committee grants options under our 1996 Director Option Plan, referred
to as the "1996 Director Option Plan." We may grant nonstatutory stock
options under the 1996 Director Option Plan to our directors who are not
employed by Electro Rent or any of its subsidiaries.
1996 Director Option Plan Committee Members. The members of the 1996
Stock Option Committee are Messrs. Greenberg and Weitzman, both of
whom are ineligible to receive options under the 1996 Director Option
Plan.
1996 Director Option Plan Committee Meetings. The 1996 Option Plan
Committee met once during the past fiscal year.
Options Granted under 1996 Director Option Plan. Options to purchase
8,840 shares of Common Stock were granted under the 1996 Director
Option Plan in our fiscal year ended May 31, 2001.
Proposed Amendment to 1996 Director Option Plan. We propose to adopt
an amendment to our 1996 Director Option Plan, which would increase
the number of shares of Common Stock available for grant under the
1996 Director Option Plan from 50,000 to 100,000. See "Proposal 2:
Approval of the Amendment to the 1996 Director Option Plan."
COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934.
We report that, based solely upon a review of prescribed forms furnished
to it, no director, officer or 10 percent shareholder of Electro Rent has failed
to file on a timely basis the filings called for by Section 16(a) of the
Securities Exchange Act of 1934.
TRANSACTIONS WITH MANAGEMENT
Mr. Greenberg personally rents approximately 600 square feet of space in
our building located at 6060 Sepulveda Boulevard, Van Nuys, California
91411-2512, at rates comparable to those paid by other third party tenants.
EXECUTIVE COMPENSATION
The summary compensation table set forth on the opposite page reflects
information concerning annual and long-term compensation we paid to our chief
executive officer and to each of the other four most highly compensated
executive officers (the "Named Executive Officers") for their services to
Electro Rent and its subsidiaries in all capacities for the fiscal years ended
May 31, 2001, 2000 and 1999.
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Long-Term Compensation
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Annual Compensation Awards Payouts
--------------------------------------------- ----------------------- -----------
Other Restricted All Other
Annual Comp- Stock LTIP Compen-
Name and Principal Position Year Salary($) Bonus($) ensation($)(1) Award(s)($) Options(#) Payouts ($) sation($)(2)
- --------------------------- ---- --------- -------- -------------- ----------- ---------- ----------- -------------
Daniel Greenberg 2001 $385,000 $375,000 0 0 0 0 $ 25,592
Chairman of the Board and 2000 385,000 375,000 0 0 0 0 25,231
Chief Executive Officer 1999 385,000 290,000 0 0 0 0 27,174
William Weitzman 2001 $335,000 $350,000 0 0 19,500 0 $ 24,658
President and 2000 335,000 350,000 0 0 0 0 10,844
Chief Operating Officer 1999 335,000 265,000 0 0 0 0 12,584
Gary B. Phillips 2001 $210,000 $190,000 0 0 11,000 0 $ 12,425
Senior Vice President 2000 210,000 190,000 0 0 0 0 11,292
1999 210,000 150,000 0 0 0 0 15,413
Steven Markheim 2001 $195,000 $150,000 0 0 11,000 0 $ 12,406
Vice President and 2000 190,000 150,000 0 0 0 0 10,453
Secretary 1999 185,000 110,000 0 0 0 0 12,735
Dennis M. Clark 2001 $135,000 $ 80,000 0 0 6,000 0 $ 9,604
Vice President 2000 125,000 80,000 0 0 0 0 7,468
1999 115,000 60,000 0 0 0 0 7,287
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(1) The value of perquisites and other personal benefits has not been included
for fiscal years 2001, 2000 and 1999, because the value of such benefits did not
exceed the lesser of $50,000 or 10% of the total annual salary and bonus
reported for any individual named.
(2) All Other Compensation for fiscal year 2001 includes the following for
Messrs. Greenberg, Weitzman, Phillips, Markheim and Clark: (i) Electro Rent
matching contributions to the 401(k) Savings Plan of $7,127; $7,127; $7,127;
$7,127 and $7,453 for each Named Executive Officer, respectively, (ii) Electro
Rent contributions to the Supplemental Executive Retirement Plan of $15,038;
$13,191; $4,750, $4,748 and $1,687 on behalf of the Named Executive Officers,
respectively, to match a portion of 2001 pretax elective deferred contributions
(included under salary) made by each person to such plans, and (iii) Electro
Rent payments of term life insurance premiums of $3,426; $4,340; $548; $531 and
$464 on behalf of the Named Executive Officers, respectively.
STOCK OPTION PLANS
1996 Option Plan. The 1996 Option Plan permits the grant of options to
officers, employees, directors and consultants of the Company. At May 31, 2001,
the 1996 Option Plan had 13,165 shares of Common Stock remaining for future
grants.
The 1996 Option Plan is administered by a committee of the Board
composed of Messrs. Barrone, Kearns and Kling, and Ms. Bekavac, who are not
eligible to participate in the Plan. Each option is evidenced by written
agreement in a form approved by the options committee. No options granted under
the 1996 Option Plan are transferable by the optionee other than by will or by
the laws of descent and distribution, and each option is exercisable, during the
lifetime of the optionee, only by the optionee.
Under the 1996 Option Plan, the exercise price of an incentive stock
option must be at least equal to 100% of the fair market value of the Common
Stock on the date of grant (110% of the fair market value in the case of options
granted to employees who hold more than ten percent of the voting power of
Electro Rent's capital stock on the date of grant). The exercise price of a
non-qualified stock option must be not less than 75% of the fair market value of
the Common Stock on the date of grant. The term of an incentive or non-qualified
stock option is not to exceed ten years (five years in the case of an incentive
stock option granted to a ten percent holder). The options committee has the
discretion to determine the vesting schedule and the period required for full
exercisability of stock options. Upon exercise of any option granted under the
1996 Option Plan, the exercise price may be paid in cash, and/or such other form
of payment as may be permitted under the applicable option agreement, including,
without limitation, previously owned shares of Common Stock.
1996 Director Option Plan. The 1996 Director Option Plan permits the
grant of nonstatutory stock options to our directors who are not employed by
Electro Rent or any of its subsidiaries. At May 31, 2001, the 1996 Director
Option Plan had 9,523 shares of Common Stock remaining for future grants.
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The 1996 Director Option Plan is administered by Messrs. Greenberg and
Weitzman, both of whom are ineligible to receive options under the plan. Each
option is evidenced by written agreement in a form approved by the options
committee. No options granted under the 1996 Director Option Plan are
transferable by the optionee other than by will or by the laws of descent and
distribution, and each option is exercisable, during the lifetime of the
optionee, only by the optionee.
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.
The term of an option granted under this plan is five years. The options
committee has the discretion to determine the vesting schedule and the period
required for full exercisability of stock options; however, in no event can an
option be exercised before the first anniversary of the date of grant. Upon
exercise of any option granted under the 1996 Director Option Plan, the exercise
price must be paid in cash.
We propose to adopt an amendment to our 1996 Director Option Plan, which
would increase the number of shares of Common Stock available for grant under
the plan from 50,000 to 100,000. See "Proposal 2: Approval of the Amendment to
the 1996 Director Option Plan."
OPTION GRANTS IN LAST FISCAL YEAR
The table below shows information regarding grants of stock options made
to the Named Executive Officers under our 1996 Option Plan during the fiscal
year ended May 31, 2001. The amounts shown for each of the Named Executive
Officers as potential realizable values are based on arbitrarily assumed
annualized rates of stock price appreciation of 5% and 10% over the full five or
ten year term of the options. The amounts of potential realizable values for all
shareholders for the corresponding increases in the market value of 24,526,164
outstanding shares of our stock held by all shareholders as of August 23, 2001,
at the 5% and 10% assumed annualized rates over a term of 10 years would total
approximately $179.3 million and $454.4 million, respectively. No gain for
optionees is possible without an increase in stock price which will benefit all
shareholders proportionately. These potential realizable values are based solely
on arbitrarily assumed rates of appreciation required by applicable SEC
regulations. Actual gains, if any, on option exercises and Electro Rent
shareholdings are dependent on the future performance of our stock and overall
stock market conditions. We can make no assurance that the potential realizable
values shown in this table will be achieved.
Potential Realizable Value at
Assumed Annual Rates of Stock
Appreciation for
Individual Grants (1) Option Term(1)
----------------------------------------------------------- ----------------------------
Percent of Total
Options
Granted to Exercise
Options Employees in or Base Expiration
Name Granted (#) Fiscal Year Price ($/Sh) Date 5%($) 10%($)
- ---- ----------- -------------- ------------ ---------- -------- --------
Daniel Greenberg 0 0.00% -- -- $ 0 $ 0
William Weitzman 19,500 11.90% $ 11.625 7/13/10 $142,563 $361,281
Gary B. Phillips 11,000 6.72% $ 11.625 7/13/10 $ 80,420 $203,800
Steven Markheim 11,000 6.72% $ 11.625 7/13/10 $ 80,420 $203,800
Dennis M. Clark 6,000 3.66% $ 11.625 7/13/10 $ 43,865 $111,164
- ----------
(1) Except for Mr. Greenberg, all stock options are awarded at the fair market
value of shares of our stock at the date of award, have a term of ten years, and
become exercisable as follows: 25% after one year, 50% after two years, 75%
after three years, and 100% after four years. Because Mr. Greenberg is the
beneficial owner of more than 10% shareholder of Electro Rent, his options are
required to be granted at 110% of the fair market value, and the options granted
to him may not be exercisable after five years from the date of grant. Mr.
Greenberg was not awarded options in fiscal 2001.
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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, 2001,
the aggregate dollar value realized upon exercise, the total number of
unexercised options held at May 31, 2001, and the aggregate dollar value of
in-the-money, unexercised options held at May 31, 2001. 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, 2001, which was $16.00 per share. These values, unlike the amounts set
forth in the column headed "Value Realized," have not been, and may never be,
realized. The underlying options have not been, and may not be, exercised;
actual gains, if any, on exercise will depend on the value of our Common Stock
on the date of exercise. There can be no assurance that these values will be
realized.
Value of Unexercised
Number of Unexercised In-the Money Options
Shares Options at Fiscal Year-End(#) at Fiscal Year-End ($)(1)
Acquired Value ------------------------------ ------------------------------
Name on Exercise (#) Realized Exercisable Unexercisable Exercisable Unexercisable
- ---------------- --------------- ---------- ----------- ------------- ----------- -------------
Daniel Greenberg 0 $ 0 52,500 17,500 $ 38,719 $ 12,906
William Weitzman 66,000 $ 592,400 151,850 37,000 $1,400,551 $ 122,500
Gary B. Phillips 10,000 $ 123,013 103,050 18,250 $ 675,844 $ 69,375
Steven Markheim 19,000 $ 245,843 83,000 21,000 $ 526,458 $ 69,375
Dennis M. Clark 0 $ 0 35,250 9,000 $ 273,656 $ 32,625
- ----------
(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.
OTHER EMPLOYEE BENEFIT PLANS
We maintain a Savings Plan (the "401(k) Plan"), which is intended to
qualify under Section 401(k) of the Internal Revenue Code of 1986, as amended
(the "Code"), and a frozen Employee Stock Ownership Plan. Under Section 401(k)
of the Code, contributions by employees or by us to the 401(k) Plan, and income
earned on plan contributions, are not taxable to employees until withdrawn from
the 401(k) Plan, and our contributions will be deductible by us when made.
All of our employees who have attained 18 years of age become eligible
to participate in the 401(k) Plan after one year of employment. We have the
option to match contributions of participants at a rate determined by our
management each year. For participants with three or more years of service, we
also may elect to make additional discretionary matching contributions in excess
of the rate elected for participants with less than three years of service.
Our Board determines the amount to be contributed annually to the 401(k)
in cash, provided that such contributions shall not exceed the amount deductible
for federal income tax purposes. Cash contributions to our 401(k) Plan of
$670,000, $756,000 and $899,000 were made for 2001, 2000 and 1999, respectively.
EMPLOYMENT AGREEMENTS
Our CEO, Daniel Greenberg, and our President, William Weitzman, are
employed pursuant to written employment contracts containing a rolling three
year term. We entered into these employment agreements in 1986 and amended these
agreements in November 1988. The agreements and were further amended and
restated in July 1992. None of our other executive officers are employed
pursuant to a formal written employment agreement. The terms of the employment
agreements of Messrs. Greenberg and Weitzman are described in the report of our
Compensation Committee.
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CEO Compensation. For the fiscal year ended May 31, 2001 Mr. Greenberg
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, 2001 fiscal year the Mr. Greenberg exercised no stock
options.
President Compensation. For the fiscal year ended May 31, 2001 Mr.
Weitzman was paid:
- Base salary of $335,000.
- Bonus of $350,000.
- Fringe benefits comparable to those received by salaried
employees generally (not exceeding in the aggregate 10% of his
base salary).
- Options to purchase 19,500 shares of our Common Stock with an
exercise price of $11.625.
During the May 31, 2001 fiscal year the Mr. Weitzman exercised 66,000
stock options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee or the Stock Option Committee is
or was an Electro Rent officer or employee, or is related to any other member of
the Committee, or any member of the Board, or any Electro Rent executive officer
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. In this report, the
term "the Company" refers to Electro Rent Corporation and its subsidiaries.
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
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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.
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; family health care benefits upon
retirement; and to certain other payments and benefits in case of the
Executive's involuntary termination including such termination following a
change of control. A "change of control" is defined to include a transaction in
which any person or entity becomes the beneficial owner, directly or indirectly,
of 20% or more of the Company's Common Stock. According to an amendment filed to
a Schedule 13G in February 14, 2001, Private Capital Management, a passive
investor in the Company, beneficially owns Common Stock aggregating more than
20% of the total outstanding Common Stock.
No other executive officer of the Company is employed pursuant to a
formal written employment agreement.
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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 Stock Option 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 1996 Stock Option Plan 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 1996 Stock Option Plan Committee
confers with senior management and with the Compensation Committee.
During the fiscal year ended May 31, 2001, no stock options were granted
to the Chief Executive Officer. Stock options with an exercise price of $11.625
were granted to four of the five highest paid executives as follows: William
Weitzman, 19,500 options; Gary B. Phillips, 11,000 options; Steven Markheim,
11,000 options; and Dennis M. Clark, 6,000 options.
Directors are granted Nonstatutory Stock Options under our 1996 Stock
Option Plan based upon an amendment to that plan, adopted November 1, 1996. This
amendment sets 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. Directors are entitled to receive additional stock
options under our 1996 Director Option Plan, which is described above in the
Section entitled "Stock Option Plans--1996 Director Option Plan."
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 S. Lee Kling
S. Lee Kling
Michael R. Peevey
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COMPARISON OF TOTAL SHAREHOLDER RETURN
This graph compares our 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"). Our Common Stock is listed in both the Russell 2000 Index and the
Industrial Services Group. The comparison is over a five year period, beginning
May 31, 1996 and ending May 31, 2001. The total shareholder return assumes $100
invested at the beginning of the period in our 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, 1996
FISCAL YEARS ENDED MAY 31
1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
Electro Rent Corporation 100 93 193 101 87 129
NASDAQ Stock Market - US 100 113 143 202 276 172
Russell 2000 100 107 130 126 139 147
Value Line Industrial Services 100 127 175 133 245 309
PROPOSAL 2
AMENDMENT TO 1996 DIRECTOR OPTION PLAN
INCREASING NUMBER OF SHARES OF COMMON STOCK ISSUABLE UNDER PLAN
We believe that our outside directors whose continued services are
considered essential to our continuing progress should have a stake in our stock
price performance under programs that link compensation to shareholder return.
As a result, stock option grants to our outside directors are an integral part
of our compensation program for outside directors. We currently rely on a single
plan, the 1996 Director Option Plan, for these grants. We currently have
approximately 9,523 shares of Common Stock remaining under this plan for future
grants. Rather than adopting a new stock option plan at the present time, we
propose to increase the number of shares of Common Stock available for grants
under the 1996 Director Option Plan from 50,000 to 100,000 shares, an increase
of 50,000 shares of Common Stock. The Board has adopted such an amendment to the
1996 Director Option Plan subject to shareholder approval. The following is a
summary of the material features of the plan, as amended. The summary is
qualified in it entirety by reference to the full text of the 1996 Director
Option Plan and the amendment to that plan, which are attached as Annex A and B,
respectively.
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SUMMARY DESCRIPTION OF THE 1996 DIRECTOR OPTION PLAN
Proposed Amendment. The proposed amendment to the 1996 Director Option
Plan would increase the number of shares of Common Stock available for grant
under the plan from 50,000 to 100,000.
Type of Awards. We may award nonstatutory, or non-qualified, stock
options which are not intended to qualify for any special treatment under the
Internal Revenue Code to our directors who are not also employees of Electro
Rent or any subsidiary of Electro Rent. The plan does not permit the award of
"phantom stock," "stock appreciation rights" or other similar awards.
Administration. The plan is administered by committee of the Board
comprised of our directors who are not eligible to receive options under the
plan. Each option is evidenced by written agreement in a form approved by the
committee. No options granted under the plan are transferable by the optionee
other than by will or by the laws of descent and distribution, and each option
is exercisable, during the lifetime of the optionee, only by the optionee. No
option or interest therein may be transferred, assigned, pledged or hypothecated
by the optionee during his or her lifetime, whether by operation of law or
otherwise, or be made subject to execution, attachment or similar process.
Grant of Options. On or before the first business day following June 1,
each director eligible to receive stock option grants under the plan must notify
the Secretary of Electro Rent in writing that he or she has elected irrevocably
to defer the payment of one-third, two-thirds, or all of the amount to which the
director is entitled to receive for serving as a director on the Board in the
relevant fiscal year, not including fees for attending meetings of the Board or
any committee of the Board. If no such notice is given and received, the
director shall be deemed to have waived the right to defer any part of the
amount to which he or she is entitled to receive. Each director who elects to
receive options to purchase Common Stock under the plan in lieu of cash
automatically receives nonstatutory options as of the first business day
following June 1 for a number of shares of Common Stock equal to the amount of
the deferred director's fees divided by 75% of the fair market value per share
on the date of grant.
Exercise Price and Duration of Options. Upon exercise of the options,
the director pays 25% of the fair market value per share on the date of grant.
The exercise price is payable in cash. No option may be exercised before the
first anniversary of the date upon which it was granted or after the expiration
of five years from the date upon which it was granted. Options shall become
exercisable upon retirement of the optionee because of age or total and
permanent disability, or upon his or her death.
Duration and Amendment of 1996 Director Option Plan. The 1996 Director
Option Plan became effective upon its adoption by the Board on July 11, 1996,
and will continue in effect for 10 years unless terminated earlier in accordance
with the terms of the Plan. The amendment to the plan became effective upon its
adoption by the Board on April 12, 2001 and, assuming shareholder approval at
the Annual Meeting, the amended plan will continue in effect until the
termination of the 1996 Director Option Plan.
Federal Income Tax Consequences.
Nonqualified Stock Options. Under current Federal income tax law, the
grant of a nonqualified stock option has no tax effect on Electro Rent or the
option holder. If the shares received on exercise of an option are not subject
to restrictions on transfer or risk of forfeiture imposed by the options
committee, the exercise of a nonqualified stock option will result in ordinary
income to the option holder equal to the excess of the fair market value of the
shares at the time of exercise over the option price. The amount taxed to the
option holder as ordinary income is treated as earned income. The option
holder's tax basis in the shares will be equal to the aggregate exercise price
paid by the option holder plus the amount of taxable income recognized upon the
exercise of the option. Upon any subsequent disposition of the shares, any
further gain or loss recognized by the option holder will be treated as capital
gain or loss. Any capital gain will be long-term capital gain if the shares are
held for more than eighteen months after exercise, mid-term capital gain if the
shares are held for more than one year but up to eighteen months after exercise
and short-term capital gain if the shares are held for one year or less after
exercise. Capital losses will be long-term if the holding period is more than
one year and short-term otherwise. We will normally be allowed, at the time of
recognition of
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ordinary income by the option holder upon exercise, to take a deduction for
Federal income tax purposes in an amount equal to such recognized income.
VOTE REQUIRED
Under applicable law and our Bylaws, the amendment to the 1996 Director
Option Plan must be approved by the shareholders holding (i) a majority of
shares present, or represented, and voting at the Annual Meeting, and (ii) a
majority of the required quorum. For this purpose, abstentions and broker
non-votes will have no effect on the outcome of the vote unless such shares are
necessary to satisfy the quorum requirement, in which case abstentions and
broker non-votes will have the effect of a vote against the proposal. We believe
that shareholder approval in accordance with our Bylaws will also satisfy the
shareholder approval requirement of the Section 162(m) Regulations.
THE BOARD RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE AMENDMENT
TO THE 1996 DIRECTOR OPTION PLAN.
PROPOSAL 3
APPROVAL OF SELECTION OF INDEPENDENT AUDITORS
Our Board, upon a recommendation of its Audit Committee, has selected
the accounting firm of Arthur Andersen LLP as Electro Rent's independent
auditors for the fiscal year ended May 31, 2002, subject to approval by the
shareholders at the Annual Meeting. Arthur Andersen LLP has no financial
interest of any kind in Electro Rent except the professional relationship
between auditor and client.
Audit Fees. We entered into an agreement with Arthur Andersen LLP on May
3, 2001 fixing our aggregate fees at $110,000 for professional services rendered
by Arthur Andersen LLP for the audit of our annual financial statements for the
fiscal year ended May 31, 2001, and for the review of the financial statements
included in our Quarterly Reports on Form 10-Q for that fiscal year. As of
August 15, 2001, all but $4,000 of these fees had been billed.
All Other Fees. We estimate that the aggregate fees billed by Arthur
Andersen LLP for services rendered to Electro Rent, other than the services
described above under "Audit Fees," during the fiscal year ended May 31, 2001,
will be approximately $18,500. These fees primarily relate to income tax
compliance services and are not billed until after our tax return filing date of
February 15, 2002.
Attendance of Annual Meeting. A representative of Arthur Andersen LLP
will be available at the Annual Meeting to respond to appropriate questions or
make any other statements such representative deems appropriate.
VOTE REQUIRED; RECOMMENDATION OF THE BOARD
Proposal 3 must be approved by the shareholders holding (i) a majority
of shares present, or represented, and voting at the Annual Meeting, and (ii) a
majority of the required quorum. For this purpose, abstentions and broker
non-votes will have no effect on the outcome of the vote unless such shares are
necessary to satisfy the quorum requirement, in which case abstentions and
broker non-votes will have the effect of a vote against the proposal.
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.
THE BOARD RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE SELECTION
OF ARTHUR ANDERSEN LLP AS OUR INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDED MAY
31, 2002.
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DATE FOR RECEIPT OF SHAREHOLDER PROPOSALS
FOR PRESENTATION AT 2002 ANNUAL MEETING
Any proposal which a shareholder wishes to have presented for
consideration at the 2002 Annual Meeting must be received at our principal
office, attention: Steven Markheim, Secretary, no later than May 31, 2002.
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 of our
employees, without extra remuneration, may solicit proxies. We 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. We will bear the cost of
solicitation.
Copies of our 2001 Annual Report are being mailed to shareholders.
Additional copies and additional information, including our Annual Report on
Form 10-K, filed with the Securities and Exchange Commission may be obtained by
any shareholder without charge. Requests should be addressed to our principal
office, attention: Steven Markheim, Secretary.
By order of the Board
Steven Markheim
Secretary
Van Nuys, California
August 23, 2001
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ANNEX A
ELECTRO RENT CORPORATION
1996 DIRECTOR OPTION PLAN
1. PURPOSE.
The purpose of this 1996 Director Option Plan (the "Plan") of the
Corporation is to encourage ownership in the Corporation by outside directors
whose continued services are considered essential to the Corporation's
continuing progress, and thus to provide the directors with a further incentive
to continue as directors of the Corporation.
2. DEFINITIONS.
(a) Annual Retainer" shall mean the amount to which the Eligible
Director will be entitled to receive for serving as a director of the
Corporation in the relevant Plan Year; but shall not include fees for attending
meetings of the Board or of any committee of the Board.
(b) "Board" shall mean the Board of the Corporation.
(c) "Change of Control" shall mean and shall be deemed to have
occurred if (a) any person or entity (other than the current chief executive
officer of the Corporation), including a "group" (as defined in Section 13(d)(3)
of the Securities Exchange Act of 1934), is or becomes the beneficial owner,
directly or indirectly, of Shares having 20% or more of the total number of
votes that may be cast for the election of members of the Board; or (b) as a
result of or in connection with, any cash tender or exchange offer, merger or
other business combination, sale of assets or contested election, or any
combination of the foregoing transactions (a "Transaction"), the persons who
were members of the Board immediately prior to the Transaction cease to
constitute a majority of the members of the Board or of the Board of any
successor to the Corporation.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended
to date and as may be amended hereafter from time to time.
(e) "Committee" shall mean the committee of the Board provided for in
Section 4 of the Plan.
(f) "Common Stock" shall mean the Common Stock of the Corporation
without par value.
(g) "Corporation" shall mean Electro Rent Corporation, a California
corporation.
(h) "Disability" shall mean the condition of an Eligible Director who
is unable to perform his duties by reason of any medically determinable physical
or mental impairment which can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not less than
twelve months. The determination of Disability shall be by a doctor or doctors
acceptable to the Corporation.
(i) "Eligible Director" shall mean a director of the Corporation who
is not an employee of the Corporation or any subsidiary of the Corporation.
(j) "Exercise Price" shall mean the price per Share of Common Stock
at which an Option may be exercised.
(k) "Fair Market Value" shall mean the value of one Share of Common
Stock, determined as follows:
(1) If the Shares are traded on an exchange, the price at which
Shares traded at the
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close of business on the date of valuation;
(2) If the Shares are traded over-the-counter on the NASDAQ
System, the mean between the bid and asked prices on said System at the close of
business on the date of valuation; and
(3) If neither (1) nor (2) applies, the fair market value as
determined by the Committee in good faith. Such determination shall be
conclusive and binding on all persons.
(l) "Nonstatutory Stock Option" shall mean an option not described in
Section 422 of the Code.
(m) "Option" shall mean any Nonstatutory Stock Option granted
pursuant to the Plan.
(n) "Plan" shall mean this Electro Rent Corporation 1996 Director
Stock Option Plan, as it may be amended from time to time.
(o) "Plan Year" shall mean the period from June 1 of each calendar
year to and including May 31 of the ensuing calendar year, commencing with June
1, 1996.
(p) "Purchase Price" shall mean the Exercise Price times the number
of Shares with respect to which an Option is exercised.
(q) "Share" shall mean one share of Common Stock, adjusted in
accordance with Section 8 of the Plan, as applicable.
(r) "Subsidiary" shall mean any corporation at least fifty percent
(50%) of the total combined voting power of which is owned by the Corporation or
by another Subsidiary.
3. EFFECTIVE DATE AND EXPIRATION.
The Plan was adopted by the Board effective June 1, 1996, subject to
the approval of the Corporation's shareholders pursuant to Section 12 of the
Plan. Options may be granted pursuant to the Plan until the expiration of the
Plan, to wit: ten years from the date of its actual adoption by the Board.
4. ADMINISTRATION.
The Plan shall be administered by the Committee. The Committee shall
consist of the directors of the Corporation who are not Eligible Directors. The
Board shall appoint one of the members of the Committee as Chairman. The
Committee shall hold meetings at such times and places as it may determine. Acts
of a majority of the Committee at which a quorum is present, or acts reduced to
or approved in writing by a majority of the members of the Committee, shall be
the valid acts of the Committee. The interpretation and construction by the
Committee of any provisions of the Plan or of any Option granted thereunder
shall be final. No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Option granted
thereunder.
5. ELIGIBILITY AND PARTICIPATION.
The only persons eligible to participate in the Plan are Eligible
Directors.
6. STOCK SUBJECT TO THE PLAN.
The Stock subject to the Options granted under the Plan shall be
Shares of the Corporation's authorized but unissued or reacquired Common Stock.
The aggregate number of Shares which may be issued upon exercise of Options
under the Plan shall not exceed Twenty-five Thousand (25,000). The number of
Shares subject to Options outstanding at any time shall not exceed the number of
Shares remaining available for issuance under the Plan. In the event that any
outstanding Option for any reason
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expires or is terminated, the Shares allocable to the unexercised portion of
such Option may again be made subject to an Option. The limitations established
by this Section 6 shall be subject to adjustment in the manner provided in
Section 8 hereof upon the occurrence of an event specified therein.
7. PROCEDURES AND TERMS OF OPTIONS.
(a) Election to Defer Annual Retainer.
On or before the first business day of each Plan Year, each
Eligible Director shall notify the Secretary of the Corporation in writing that
he or she has elected irrevocably to defer the payment of one-third, two-thirds,
or all of his or her Annual Retainer for the Plan Year. If no such notice is
given and received, the Eligible Director shall be deemed to have waived the
right to defer any part of his or her Annual Retainer for the Plan Year.
(b) Grant of Options.
Each Eligible Director who has elected to defer all or part of
his or her Annual Retainer shall automatically receive Nonstatutory Options as
of the first business day of the Plan Year equal to the nearest number of whole
shares determined in accordance with the following formula:
Dollar Amount of Annual Retainer Deferred
----------------------------------------- = Number of Shares
75% of Fair Market Value on Date of Grant
(c) Options Non-Transferable.
Options granted under the Plan are not transferable by the
Optionee otherwise than by will or by the laws of descent and distribution.
During the lifetime of the Optionee they may be exercised only by the Optionee.
No Option or interest therein may be transferred, assigned, pledged or
hypothecated by the Optionee during his or her lifetime, whether by operation of
law or otherwise, or be made subject to execution, attachment or similar
process.
(d) Period of Option.
No Option may be exercised before the first anniversary of the
date upon which it was granted; provided, however, that any Option shall become
exercisable upon retirement of the Optionee because of age or total and
permanent disability, or upon his or her death. No Option shall be exercisable
after the expiration of five years from the date upon which it was granted.
(e) Exercise of Options.
Options may be exercised only by written notice to the
Corporation at its head office accompanied by payment in cash of the full
consideration for the Shares as to which they are exercised.
(f) Exercise Price.
The Option price per Share of each Option being exercised is
twenty-five percent (25%) of the Fair Market Value per Share on the date the
Option was granted.
(g) Exercise by Representative Following Death of Director.
If an Optionee dies when he or she could have exercised Options
and has not fully exercised the Options, then the Options may be exercised in
full at any time within 12 months after the Optionee's death by the executors or
administrators of his or her estate or by any person or persons who have
acquired the Option directly from the Optionee by bequest or inheritance, but
only to the extent that, at the
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date of death, the Optionee's right to exercise such Option had accrued and had
not been forfeited pursuant to the terms of the applicable Option Agreement and
had not previously been exercised.
(h) Disability of Optionee.
If an Optionee ceases to be an Eligible Director by reason of
Disability, such Optionee shall have the right to exercise the Options at any
time within 12 months after ceasing to be an Eligible Director, but only to the
extent that, at the date of termination, the Optionee's right to exercise such
Options had accrued pursuant to the terms of the applicable Option Agreement and
had not previously been exercised.
(i) Retirement or Termination of Optionee or Change of Control.
If an Optionee ceases to be an Eligible Director by reason of
retirement or termination for any reason other than death or Disability, or in
the event of a Change of Control, the Optionee shall have the right to exercise
the Options at any time within three months after termination or after the
Change of Control, but only to the extent that, at the date of termination or
after the Change of Control, the Optionee's right to exercise such Options had
accrued pursuant to the terms of the applicable Option Agreement and had not
previously been exercised.
(j) When Right Accrues.
For the purpose of Subsections (g), (h) and (i) of this Section
7, the right to exercise Options granted as of the first day of the particular
Plan Year shall be deemed to accrue quarterly in advance on the first days of
June, September, December and March during that Plan Year.
(k) Rights as a Shareholder.
An Optionee, or a transferee of an Optionee, shall have no rights
as a shareholder with respect to any Shares covered by his or her Option until
the date of the issuance of a stock certificate for such Shares. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property), distributions or other rights for which the
record date is prior to the date such stock certificate is issued, except as
provided in Section 8 hereof.
(l) Modification, Extension and Renewal of Options.
Within the limitations of the Plan, the Committee may modify,
extend or renew outstanding Options or accept the cancellation of outstanding
Options (to the extent not previously exercised) for the granting of new Options
in substitution therefor. The foregoing notwithstanding, no modification of an
Option shall, without the consent of the Optionee, alter or impair any rights or
obligations under any Option previously granted.
(m) Sequential Exercise.
Unless required by law or by the particular Option Agreement,
Options may be exercisable with respect to all or any part of the Shares subject
thereto without regard to the sequence in which Options were granted to the
Optionee (under this Plan or otherwise) to purchase any stock in the
Corporation, in a parent or subsidiary of the Corporation, or in any predecessor
corporation.
(n) Stock Option Agreements.
Options granted under this Plan shall be evidenced by written
Option Agreements consistent with and subject to the terms and conditions in
this Plan, and in such form as the Committee shall from time to time determine.
The Option Agreements may contain such other provisions not inconsistent with
the terms of the Plan as the Committee shall deem advisable.
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8. RECAPITALIZATIONS.
Subject to any required action by shareholders, the number of Shares
covered by the Plan as provided in Section 6 hereof, the number of Shares
covered by each outstanding Option and the Exercise Price thereof shall be
proportionately adjusted for any increase or decrease in the number of issued
Shares resulting from a subdivision or consolidation of Shares or the payment of
a stock dividend (but only of Common Stock) or any other increase or decrease in
the number of issued Shares effected without receipt of consideration by the
Corporation.
Subject to any required action by shareholders, if the Corporation is
the surviving corporation in any merger or consolidation, each outstanding
Option shall pertain and apply to the securities to which a holder of the number
of Shares subject to the Option would have been entitled. A dissolution or
liquidation of the Corporation or a merger or consolidation in which the
Corporation is not the surviving corporation shall cause each outstanding Option
to terminate, unless the agreement of merger or consolidation otherwise
provides.
To the extent that the foregoing adjustments relate to securities of
the Corporation, such adjustments shall be made by the Committee, whose
determination shall be conclusive and binding on all persons.
Except as expressly provided in this Section 8, the Optionee shall
have no rights by reason of any subdivision or consolidation of shares of stock
of any class, the payment of any stock dividend or any other increase or
decrease in the number of shares of stock of any class or by reason of any
dissolution, liquidation, merger or consolidation or spin-off of assets or stock
of another corporation, and any issue by the Corporation of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
not affect, and no adjustment by reason thereof shall be made with respect to,
the number or Exercise Price of Shares subject to an Option.
The grant of an Option pursuant to the Plan shall not affect in any
way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure, to merge or consolidate or to dissolve, liquidate, sell or transfer
all or any part of its business or assets.
9. SECURITIES LAW REQUIREMENTS.
(a) Legality of Issuance.
No Shares shall be issued upon the exercise of any Option unless
and until the Corporation has determined that:
(i) it and the Optionee have taken all actions required to
register the Shares under the Securities Act of 1933, as amended (the "Act"), or
to perfect an exemption from the registration requirements thereof;
(ii) any applicable listing requirement of any stock exchange on
which the Common Stock is listed has been satisfied; and
(iii) any other applicable provision of state or Federal law has
been satisfied.
Regardless of whether the offering and sale of Shares under the Plan
has been registered under the Act or has been registered or qualified under the
securities laws of any state, the Corporation may impose restrictions upon the
sale, pledge or other transfer of such Shares (including the placement of
appropriate legends on stock certificates) if, in the judgment of the
Corporation and its counsel, such restrictions are necessary or desirable in
order to achieve compliance with the provisions of the Act, the securities laws
of any state or any other law. In the event that the sale of Shares under the
Plan is not registered under the Act but an exemption is available which
requires an investment representation or other
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representation, each Optionee shall be required to represent that such Shares
are being acquired for investment, and not with a view to the sale or
distribution thereof, and to make such other representations as are deemed
necessary or appropriate by the Corporation and its counsel. Stock certificates
evidencing Shares acquired under the Plan pursuant to an unregistered
transaction shall bear the following restrictive legend and such other
restrictive legends as are required or deemed advisable under the provisions of
any applicable law:
"THE SALE OF THE SECURITIES REPRESENTED HEREBY HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 ('ACT'). ANY TRANSFER OF
SUCH SECURITIES WILL BE INVALID UNLESS A REGISTRATION STATEMENT UNDER
THE ACT IS IN EFFECT AS TO SUCH TRANSFER OR IN THE OPINION OF COUNSEL
FOR THE ISSUER SUCH REGISTRATION IS UNNECESSARY IN ORDER FOR SUCH
TRANSFER TO COMPLY WITH THE ACT."
Any determination by the Corporation and its counsel in connection
with any of the matters set forth in this Section 9 shall be conclusive and
binding on all persons.
(b) Registration or Qualification of Securities.
The Corporation may, but shall not be obligated to, register or
qualify the sale of Shares under the Act or any other applicable law. The
Corporation shall not be obligated to take any affirmative action in order to
cause the sale of Shares under the Plan to comply with any law.
(c) Exchange of Certificates.
If, in the opinion of the Corporation and its counsel, any legend
placed on a stock certificate representing shares sold under the Plan is no
longer required, the holder of such certificate shall be entitled to exchange
such certificate for a certificate representing the same number of Shares but
lacking such legend.
10. AMENDMENT OF THE PLAN.
The Board may from time to time, with respect to any Shares at the
time not subject to Options, suspend or discontinue the Plan or revise or amend
it in any respect whatsoever except that, without the approval of the
Corporation's shareholders, no such revision or amendment shall:
(a) Increase the number of Shares subject to the Plan;
(b) Change the designation in Section 5 hereof with respect to the
persons eligible to receive Options; or
(c) Amend this Section 10 to defeat its purpose.
11. APPLICATION OF FUNDS.
The proceeds received by the Corporation from the sale of Common
Stock pursuant to the exercise of an Option will be used for general corporate
purposes.
12. APPROVAL OF SHAREHOLDERS.
The Plan shall be subject to approval by the affirmative vote of the
holders of a majority of the outstanding Shares present and entitled to vote at
the first annual meeting of shareholders of the Corporation following the
adoption of the Plan, and in no event later than December 31, 1996. Prior to
such approval, Options may be granted but shall not be exercisable. Any
amendment described in Section 10 shall also be subject to approval by the
Corporation's shareholders.
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13. EXECUTION.
To record the adoption of the Plan by the Board on July 11, 1996,
the Corporation has caused its authorized officers to affix the corporate name
and seal hereto.
ELECTRO RENT CORPORATION
By
-------------------------------------
President
By
-------------------------------------
Secretary
[Seal]
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ELECTRO RENT CORPORATION
STOCK OPTION AGREEMENT
(NONSTATUTORY OPTION)
(1996 DIRECTOR OPTION PLAN)
THIS AGREEMENT, entered into this ______ day of ______________, 199__,
between ELECTRO RENT CORPORATION, a California corporation (the "Company"), and
_________________________________________ (the "Optionee").
R E C I T A L S
A. The Board of the Company (the "Board") has established the Electro
Rent Corporation 1996 Director Option Plan (the "Plan") in order to provide
outside directors of the Company with a favorable opportunity to acquire shares
of the Company's common stock ("Stock").
B. The Board has determined that it would be in the best interests of
the Company and its shareholders to grant the Option described in this Agreement
to the Optionee as an inducement to remain as a director of the Company, and as
an incentive for increasing efforts during such service.
NOW, THEREFORE, it is agreed as follows:
1. Definitions and Incorporation. The terms used in this Agreement shall
have the meanings given to such terms in the Plan. The Plan is hereby
incorporated in and made a part of this Agreement as if fully set forth herein.
The Optionee hereby acknowledges that he or she has received a copy of the Plan.
2. Grant of Option. Pursuant to the Plan, the Company hereby grants to
the Optionee as of the date thereof the option to purchase all or any part of an
aggregate of __________ shares of Stock (the "Option"), subject to adjustment in
accordance with Section 8 of the Plan. The Option is not intended to qualify as
an incentive stock option under Section 422 of the Internal Revenue Code of
1986, as amended.
3. Option Price. The price to be paid for Stock upon exercise of the
Option or any part thereof shall be $__________ per share.
4. Right to Exercise. Subject to the conditions set forth in this
Agreement, the right to exercise the Option shall accrue quarterly from date of
grant and shall be exercisable one year from the date of this grant except as
otherwise herein provided. No Option shall be exercisable after the expiration
of five years from the date upon which it was granted.
5. Securities Law Requirements. No part of the Option shall be exercised
if counsel to the Company determines that any applicable registration
requirement under the Securities Act of 1933 or any other applicable requirement
of Federal or state law has not been met.
6. Exercise by Representative Following Death of Director. If an
Optionee dies when he or she could have exercised Options and has not fully
exercised the Options, then the Options may be exercised in full at any time
within 12 months after the Optionee's death by the executors or administrators
of his or her estate or by any person or persons who have acquired the Option
directly from the Optionee by bequest or inheritance, but only to the extent
that, at the date of death, the Optionee's right to exercise such Option had
accrued and had not been forfeited pursuant to the terms of this Option
Agreement and had not previously been exercised.
7. Disability of Optionee. If an Optionee ceases to be an Eligible
Director by reason of Disability, such Optionee shall have the right to exercise
the Options at any time within 12 months after ceasing to be an Eligible
Director, but only to the extent that, at the date of termination, the
Optionee's right to exercise such Options had accrued pursuant to the terms of
this Option Agreement and had not previously been exercised.
8. Retirement or Termination of Optionee or Change of Control. If an
Optionee ceases to be an
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Eligible Director by reason of retirement or termination for any reason other
than death or Disability, or in the event of a Change of Control, the Optionee
shall have the right to exercise the Options at any time within three months
after termination or after the Change of Control, but only to the extent that,
at the date of termination or after the Change of Control, the Optionee's right
to exercise such Options had accrued pursuant to the terms of this Option
Agreement and had not previously been exercised.
9. Nontransferability. The Option shall be exercisable during the
Optionee's lifetime only by the Optionee and shall be nontransferable, except
that the Optionee may transfer all or any part of the Option by will or by the
laws of descent and distribution. Except as otherwise provided herein, any
attempted alienation, assignment, pledge, hypothecation, attachment, execution
or similar process, whether voluntary or involuntary, with respect to all or any
part of the Option or any right thereunder, shall be null and void and, at the
Company's option, shall cause all of the Optionee's rights under this Agreement
to terminate.
10. Effect of Exercise. Upon exercise of all or any part of the Option,
the number of shares of Stock subject to option under this Agreement shall be
reduced by the number of shares with respect to which such exercise is made.
11. Exercise of Option. The Option may be exercised by delivering to the
Company (a) a written notice of exercise in substantially the form prescribed
from time to time by the Committee and (b) full payment of the option price for
each share of Stock purchased under the Option. Such notice shall specify the
number of shares of Stock with respect to which the Option is exercised and
shall be signed by the person exercising the Option. If the Option is exercised
by a person other than the Optionee, such notice shall be accompanied by proof,
satisfactory to the Company, of such person's right to exercise the Option. The
Option Price shall be payable in full in United States Dollars upon the exercise
of the Option.
12. Issuance of Shares. Subject to the foregoing conditions, the
Company, as soon as reasonably practicable after receipt of a proper notice of
exercise and without transfer or issue tax or other incidental expense to the
person exercising the Option, shall deliver to such person at the principal
office of the Company, or such other location as may be acceptable to the
Company and such person, one or more certificates for the shares of Stock with
respect to which the Option is exercised. Such shares shall be fully paid and
nonassessable and shall be issued in the name of such person.
13. Rights as a Shareholder. Neither the Optionee nor any other person
entitled to exercise the Option shall have any rights as a shareholder of the
Company with respect to the shares subject to the Option until a certificate for
such shares has been issued to him or her upon exercise of the Option.
14. Notices. Any notice to the Company contemplated by this Agreement
shall be addressed to it in care of its President; and any notice to the
Optionee shall be addressed to him or her at the address on file with the
Company on the date hereof or at such other address as he or she may hereafter
designate in writing.
15. Interpretation. The interpretation, construction, performance and
enforcement of this Agreement and of the Plan shall lie within the sole
discretion of the Committee, and the Committee's determinations shall be
conclusive and binding on all interested persons.
16. Choice of Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, in the case of the Company by its duly authorized officer, as of the
day and year first above written.
ELECTRO RENT CORPORATION
By
- ------------------------------- ------------------------------
Optionee
- -------------------------------
(Please print Optionee's name)
- -------------------------------
Optionee's Spouse*
- -------------------------------
(Please print spouse's name)
- -------------------------------
*Include Signature and name of Optionee's spouse, if Optionee is
married.
SCHEDULE 1
RIGHT TO EXERCISE
Subject to the conditions set forth in this Agreement, the right to
exercise the Option shall accrue as follows:
(a) Commencing one year after the date of this Agreement, the
Option may be exercised to the extent of one-fourth of the shares
subject to the Option.
(b) Commencing two years after the date of this Agreement, the
Option may be exercised to the extent of one-fourth of the shares
subject to the Option, plus any shares with respect to which the Option
has previously become exercisable but has not been exercised.
(c) Commencing three years after the date of this Agreement, the
Option may be exercised to the extent of one-fourth of the shares
subject to the Option, plus any shares with respect to which the Option
has previously become exercisable but has not been exercised.
(d) Commencing four years after the date of this Agreement, the
entire Option may be exercised to the extent it has not previously been
exercised.
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ANNEX B
ELECTRO RENT CORPORATION
1996 DIRECTOR OPTION PLAN
AMENDMENT NO. ONE
This is Amendment No. One (this "AMENDMENT") to the Electro Rent
Corporation 1996 Director Option Plan (the "PLAN").
RECITATIONS
1. Words, phrases and names capitalized in this Amendment and in the
Plan shall have the meanings ascribed to them in the Plan.
2. The Plan was adopted by the Board of the Corporation on July 11,
1996, and was ratified and approved by the Shareholders of the Corporation at
the annual meeting of Shareholders held on October 3, 1996.
3. On April 9, 1998 the Board adopted a resolution providing for a
two-for-one split of the Corporation's Stock (the "Stock Split") in the form of
a one hundred percent (100%) stock dividend, effective May 12, 1998.
4. As a result of the Stock Split and the anti-dilution provisions of
Section 8 of the Plan, the number of Shares for which Options may be granted was
increased from 25,000 Shares to 50,000 Shares.
5. As of the date of this Amendment Options for 40,477 Shares have been
granted, and Options for 9,523 Shares remain ungranted.
6. In order for the Plan to continue to carry out its purpose, it is
necessary and appropriate to increase the number of Shares for which Options may
be granted.
AGREEMENT
7. Section 6 of the Plan is hereby amended to read as follows:
"6. STOCK SUBJECT TO THE PLAN.
"The Stock subject to the Options granted under the Plan shall be
Shares of the Corporation's authorized but unissued or reacquired
Common Stock. The aggregate number of Shares which may be issued upon
exercise of Options under the Plan shall not exceed One Hundred
Thousand (100,000). The number of Shares subject to Options
outstanding at any time shall not exceed the number of Shares
remaining available for issuance under the Plan. In the event that
any outstanding Option for any reason expires or is terminated, the
Shares allocable to the unexercised portion of such Option may again
be made subject to an Option. The limitations established by this
Section 6 shall be subject to adjustment in the manner provided in
Section 8 hereof upon the occurrence of an event specified therein."
8. This Amendment shall be subject to approval by the affirmative vote
of the holders of a majority of the outstanding Shares present and entitled to
vote at the first annual meeting of Share- holders of the Corporation following
the adoption of this Amendment, and in no event later than December 31, 2001.
Prior to such approval, Options may be granted pursuant to this Amendment but
shall not be exercisable.
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9. To record the adoption of this Amendment by the Board on April 12,
2001, the Corporation has caused its authorized officers to affix the corporate
name and seal hereto.
ELECTRO RENT CORPORATION
By
---------------------------------
President
By
---------------------------------
Secretary
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ELECTRO
RENT
CORPORATION PROXY
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 23, 2001 at the
annual meeting of shareholders to be held on
October 11, 2001, or any adjournment thereof.
<Table>
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 TO THE 1996 DIRECTOR OPTION PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO APPROVE THE SELECTION 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
33
This proxy, when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made,
this proxy will be voted for the eight nominees for directors and for proposals
2, 3 and 4.
PLEASE SIGN EXACTLY AS NAME APPEARS OF RECORD ON YOUR STOCK CERTIFICATES.
WHEN SHARES ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN.
DATED:............, 2001
------------------------
Signature
------------------------
Title
------------------------
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.