<PAGE>
<PAGE> 1
ERLY INDUSTRIES INC.
10990 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
PROXY STATEMENT
_________________
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
SEPTEMBER 16, 1994
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of ERLY Industries Inc.
("ERLY" or the "Company") for use at the Company's Annual Meeting of
Shareholders to be held on September 16, 1994, and at any adjournment
thereof, for the purposes set forth herein and in the accompanying Notice
of Annual Meeting. It is anticipated that this Proxy Statement will be
mailed to shareholders on or about August 15, 1994. All expenses incident
to the preparation and mailing of, or otherwise making available to all
Shareholders, the Notice, Proxy Statement and Form of Proxy, are to be
paid by the Company. In addition to the use of the mails, proxies may be
solicited personally, or by telephone or telegraph, by employees of the
Company.
Shares represented by proxies in the accompanying form which are
returned properly executed will be voted in accordance with the proxy,
unless previously revoked. A proxy given pursuant to the solicitation may
be revoked at the option of the person executing it at any time prior to
the exercise of the powers conferred, by the filing with the Secretary of
the Company of an instrument revoking such proxy or of a duly executed
proxy bearing a later date, or by attending the Annual Meeting and voting
in person.
<PAGE>
<PAGE> 2
VOTING SECURITIES
Only Shareholders of record of the Company's Common Stock at the
close of business on August 5, 1994, will be entitled to vote at the
Meeting, or at any adjournment thereof. On that date, the Company had
outstanding 3,674,865 shares of Common Stock. Each share is entitled to
one vote, subject, however, to the right of each Shareholder to cumulate
his votes in the election of directors. (For an explanation of cumulative
voting, see "Election of Directors" herein).
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information regarding the ownership
of the Company's Common Stock as of May 31, 1994 of (i) each person known
to the Company to be the beneficial owner of more than five percent of the
outstanding shares of Common Stock; (ii) each director and nominee for
director of the Company; (iii) each executive officer named in the
Compensation Table; and (iv) all directors and executive officers of the
Company and its subsidiaries as a group. Except as indicated, each of the
stockholders has sole voting and investment power with respect to the
shares beneficially owned by each stockholder.
<TABLE>
<CAPTION>
Name and address of Amount and nature of Percent of
beneficial owner beneficial ownership class *
---------------------- -------------------- ----------
<S> <C> <C>
Gerald D. Murphy, Chairman 1,566,781 shares 39.1%
ERLY Industries Inc. Direct (1) and
10990 Wilshire Blvd. Indirect (2)
Los Angeles, CA 90024
Douglas A. Murphy, President 506,130 shares 12.6%
and Director Direct (3)
ERLY Industries Inc.
10990 Wilshire Blvd.
Los Angeles, CA 90024
State Treasurer of the 362,368 shares 9.9%
State of Michigan Direct
301 W. Allegan Street
Lansing, MI 48922
William H. Burgess, Director 310,686 shares 8.5%
550 Palisades Drive Direct
Palm Springs, CA 92262
</TABLE>
<PAGE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
Gentleness 220,000 shares 6.0%
P.O. Box N7776 Direct (4)
Lyford Cay
Nassau, Bahamas
Bill J. McFarland, Director 41,647 shares 1.1%
ERLY Industries Inc. Direct
10990 Wilshire Blvd.
Los Angeles, CA 90024
Richard N. McCombs 36,922 shares 1.0%
ERLY Industries Inc. Direct
10990 Wilshire Blvd.
Los Angeles, CA 90024
Frank M. Feffer 12,546 shares .3%
ERLY Industries Inc. Direct
10990 Wilshire Blvd.
Los Angeles, CA 90024
All directors and executive 2,033,013 shares (5) 50.0%
officers as a group
(10 persons)
</TABLE>
- - ----------------------------
* The percentages of shares held assume that options or
convertible notes held by the particular individual, if any,
have been exercised or converted, and no others.
(1) Mr. Gerald D. Murphy, Chairman of the Board of the Company, is
the record holder of 1,056,658 shares.
(2) Mr. Gerald D. Murphy's indirect beneficial ownership
represents 510,123 shares owned (1) directly by his son
Douglas A. Murphy, President of the Company, and (2) held in
trust for his grandson. Of this total, Gerald D. Murphy has
voting control of the 3,993 shares held in trust for his
grandson, however, he denies holding voting or investment
control of the balance of the 506,130 shares owned directly by
his son, Douglas A. Murphy.
(3) Mr. Douglas A. Murphy, President of the Company, is the record
holder of 172,984 shares and has the right to acquire an
additional 66,550 shares pursuant to options granted under the
1982 Incentive Stock Option Plan described under "Executive
Compensation." In addition, Mr. D.A. Murphy has the right to
acquire an additional 266,596 shares pursuant to the
conversion features of a $1,000,000 note receivable from the
Company described under "Transactions With Management" in this
Proxy Statement.
<PAGE>
<PAGE> 4
(4) Based upon Schedule 13D filed as of October 30, 1992 with the
Securities and Exchange Commission. Gentleness is an Isle of
Man Corporation indirectly controlled by John M. Templeton.
Mr. Templeton may be deemed to be the beneficial owner of the
shares of ERLY owned by Gentleness by virtue of his ability to
direct the voting or disposition of such shares.
(5) The number of shares shown as beneficially owned by all
directors and officers as a group includes stock options held
by officers to purchase 123,184 shares under the Company's
Incentive Stock Option Plan and 266,596 shares issuable
pursuant to a note payable by the Company described under
"Transactions With Management."
Mr. Gerald D. Murphy has pledged 451,805 shares of his ERLY
Industries stock as collateral for personal loans totalling $647,500 from
three financial institutions.
Mr. Douglas A. Murphy has pledged 150,175 shares of ERLY Industries
stock as collateral for a personal loan totalling $360,000 from a
financial institution.
In conjunction with a transaction completed in May 1993, ERLY
combined its investment in its wholly owned subsidiary, Comet Rice, Inc.
into American Rice, Inc. ("ARI"). As a result of the transaction, ERLY
increased its ownership in the combined voting rights of ARI stock
outstanding from 48% to 81%. ERLY's ownership in ARI consists of
3,888,889 shares of the ARI Common Stock, 3,888,889 shares of Series A
Preferred Stock (each share of which is convertible into one share of ARI
Common Stock), and 14,000,000 shares of Series B Preferred Stock (each
share of which is convertible into two shares of ARI Common Stock).
If ERLY were to convert all of the shares of Series A Preferred
Stock and Series B Preferred Stock owned by it, ERLY would hold 35,777,778
shares, or approximately 81% of the outstanding shares, of ARI common
stock.
Because of their positions as directors and significant shareholders
of ERLY Industries, Messrs. G.D. Murphy, D.A. Murphy, and W.H. Burgess
could be deemed to be the beneficial owners of the ARI stock owned by ERLY
Industries.
ELECTION OF DIRECTORS
Four directors shall be elected at the meeting to serve until the
next annual meeting and until their successors shall be elected and
qualified. In voting for directors, each shareholder has the right, as
provided by the Bylaws and by California law, to cumulate his votes and
give one candidate a number of votes equal to the number of directors to
be elected multiplied by the number of votes to which his shares are
entitled, or to distribute that total number of votes among as many
candidates as he desires. The four candidates receiving the highest
number of votes will be elected.
<PAGE>
<PAGE> 5
In the election of directors, the votes represented by proxies
received pursuant to this solicitation will be distributed among the four
nominees listed below to the end that, within the limitations of
cumulative voting, the maximum number of said nominees will be elected.
Should any of the said nominees become unavailable, discretionary
authority is reserved to vote or refrain from voting for other nominees or
to distribute the votes among all remaining nominees.
<PAGE>
<PAGE> 6
NOMINEES FOR BOARD OF DIRECTORS
The names of the nominees and certain information about each of them
as of the Record Date are set forth below:
NOMINEES
<TABLE>
<CAPTION>
Date elected Number of shares Percent
as director of common stock of
Name of nominee Age of company beneficially owned class
- - --------------- --- ----------- ------------------ --------
<S> <C> <C> <C> <C>
Gerald D. Murphy 66 April 1964 1,566,781 39.1%
</TABLE>
Mr. Murphy is Chairman of the Board and Chief Executive Officer of ERLY
Industries Inc. since formation of the Company in 1964 and is Chairman of
the Board of American Rice, Inc. (voting rights of which are 81% owned by
ERLY effective May 1993). He also serves as a Director of Pinkerton's,
Inc., a security and investigation services firm, and High Resolution
Sciences, Inc., a technological corporation.
<TABLE>
<S> <C> <C> <C> <C>
Douglas A. Murphy 38 January 1988 506,130 12.6%
</TABLE>
Mr. Murphy is President (since 1990) and Chief Operating Officer (since
1992) of ERLY Industries Inc., President and Chief Executive Officer
(since 1993) and Director (since 1990) of American Rice, Inc. and
President of ERLY Juice Inc. (since 1988), a subsidiary of the Company.
He was President of Comet American Marketing, a division of American Rice,
Inc. from 1986 to 1990. He is also a Director of Compass Bank Houston.
<TABLE>
<S> <C> <C> <C> <C>
William H. Burgess 77 September 1975 310,686 8.5%
</TABLE>
Mr. Burgess is a private business consultant, Chairman of CMS Digital,
Inc., a privately held company, and a Director of American Rice, Inc.
From 1978 to 1986 Mr. Burgess was Chairman of International Controls
Corp., an internationally diversified manufacturing company listed on the
New York Stock Exchange.
<TABLE>
<S> <C> <C> <C> <C>
Bill J. McFarland 57 August 1986 41,647 1.1%
</TABLE>
Mr. McFarland is Vice President of the Company (since 1975), President of
Comet American Marketing (since 1993), Senior Vice President of American
Rice, Inc. (since 1993) and President of ERLY Food Group (since 1990). He
was formerly President of The Beverage Source (from 1979 to 1990) and
President of Early California Foods from 1975 until its sale in 1985 (both
subsidiaries of the Company).
<PAGE>
<PAGE> 7
Mr. Douglas A. Murphy is the son of Gerald D. Murphy, Chairman of
the Board of the Company. There are no other family relationships among
the directors of the Company.
Each of the nominees has sole voting and investment power with
respect to shares owned directly by them. Included in common stock
beneficially owned by Mr. Douglas A. Murphy and Mr. Bill J. McFarland are
options to purchase 66,550 shares and 34,673 shares, respectively, at
$3.73 to $4.51 per share under the Company's Incentive Stock Option Plan.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has four committees with specific
responsibilities to support the operations of the full Board. These are
the Executive Committee, the Audit Committee, the Compensation and Stock
Option Plan Committee and the Profit Sharing Plan Committee. The Board of
Directors does not have a Nominating Committee, as the entire Board acts
in this capacity.
The Board of Directors has delegated to the Executive Committee the
powers and authority of the Board in the management of the business,
except that the Executive Committee is not to: take any actions which
could await actions by the Board; approve capital expenditures exceeding
$100,000; or, authorize transactions which would be both material and
outside the ordinary and normal course of the business of the corporation.
Mr. Gerald D. Murphy serves as Chairman of this Committee, and Messrs.
Douglas A. Murphy and Burgess are Committee members.
The Audit Committee meets with the Company's independent certified
public accountants and reviews the scope and results of the annual audit.
Mr. Burgess is Chairman and Mr. McFarland is a member of the Audit
Committee.
The Compensation and Stock Option Plan Committee recommends to the
Board of Directors proposed compensation programs for all principal
officers of the corporation. Mr. Burgess is Chairman and Mr. Gerald D.
Murphy is a committee member.
The Profit Sharing Plan Committee recommends to the Board of
Directors proposed contributions by the Company to the ERLY Industries
Inc. Employees Profit Sharing Retirement Plan. Mr. Douglas A. Murphy is
Chairman and Mr. McFarland is a Committee member.
During the fiscal year ended March 31, 1994, the full Board held
seven meetings; the Executive Committee acted by unanimous written consent
two times; the Audit Committee met two times; the Compensation and Stock
Option Plan Committee met two times; and, the Profit Sharing Plan
Committee met four times. Each director was in attendance at 75% or more
of all of the meetings of the full Board of Directors and all committees
on which each director served.
<PAGE>
<PAGE> 8
Members of the Board of Directors who are not officers of the
Company are compensated on the basis of $1,500 per quarter plus a fee of
$1,100 for each meeting attended in person or by telephone. In addition,
in fiscal 1994, Mr. Burgess received fees of $18,000 for public relations
services provided to the Company.
EXECUTIVE COMPENSATION
The following table sets forth information for each of the three
fiscal years ended March 31, 1994 for the Chief Executive Officer of the
Company and the four other most highly compensated executive officers of
the Company and its subsidiaries:
COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-term Compensation
---------------------------- ------------------------------
Awards Payouts
--------------------- -------
Fiscal Other Securities
Year Annual Restricted Underlying All Other
Name and ended Compen- Stock Options/ LTIP Compen-
Principal Position March 31 Salary Bonus($) sation($) Awards($) SARs(#) Payouts sation($)
- - ------------------ -------- -------- -------- --------- ---------- --------- ------- ---------
(1) (2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gerald D. Murphy 1994 $290,000 $50,000 $ 588 $75,000 - - $293,507(4)
Chairman of the 1993 280,000 - 3,284 - - - 6,650(3)
Board and Chief 1992 290,000 - (6) - - - (6)
Executive Officer
of ERLY Industries
Inc.
Chairman of the
Board of American
Rice, Inc.
Douglas A. Murphy 1994 210,000 50,000 4,975 75,000 - - 112,720(5)
President and 1993 195,000 - 6,695 - - - 5,143(3)
Chief Operating 1992 200,000 - (6) - - - (6)
Officer of ERLY
Industries Inc.
President and
Chief Executive
Officer of
American Rice,
Inc.
Bill J. McFarland 1994 190,000 5,000 1,815 5,000 - - 10,303(3)
Vice President of 1993 185,000 - 2,670 - - - 3,700(3)
ERLY Industries 1992 190,000 - (6) - - - (6)
Inc.
Senior Vice President
of American Rice,
Inc.
Frank M. Feffer 1994 154,500 62,064 3,800 41,373 - - -
President of 1993 150,000 - 6,272 - - - -
Chemonics 1992 150,000 28,500 (6) 19,000 - - (6)
Industries, Inc.
Richard N. McCombs 1994 155,000 74,000 1,954 88,250 - - 11,135(3)
Vice President and 1993 140,000 10,000 1,933 - - - 4,399(3)
Chief Financial 1992 140,000 - (6) - - - (6)
Officer of ERLY
Industries Inc.
Executive Vice
President of
Finance and
Administration of
American Rice, Inc.
</TABLE>
<PAGE>
<PAGE> 9
(1) Amounts included in this column reflect: (i) the cost of Company
provided automobiles relating to personal use, and (ii)
reimbursements under the Company's Executive Medical Plan. Under
the Plan, key executive officers of the Company are entitled to be
reimbursed for expenses incurred for medical and dental care
provided to the key executive officer and his dependents which are
not otherwise covered by other sources.
(2) The number of shares of restricted stock and the market value
thereof held by the executive officers listed in the table at March
31, 1994, was as follows: G.D. Murphy, 17,123 shares ($75,000);
D.A. Murphy, 17,123 shares ($75,000); B.J. McFarland, 1,142 shares
($5,000); F.M. Feffer, 9,446 shares ($41,373); and, R.N. McCombs,
23,416 shares ($102,445). Such shares are restricted for a two-year
period from the date of issuance. Although no cash dividends have
ever been paid on ERLY common stock, dividends, if any, would be
paid on restricted stock at the times and in the same amounts as
dividends paid to all shareholders.
(3) Amounts represent Company contributions to the ERLY Industries Inc.
Employees Profit Sharing Retirement Plan.
(4) Amount includes: (1) Company contribution to the ERLY Industries
Inc. Employees Profit Sharing Retirement Plan ($13,507); (2) a
$180,000 fee for a personal guaranty by G.D. Murphy of an $8 million
bank line of credit advance to Comet Rice; and (3) a $100,000 fee
($35,000 cash plus $65,000 of ERLY stock) for a personal guaranty by
G.D. Murphy of up to $5 million of bank debt under a letter
agreement between ING Bank, ERLY Industries Inc. and ERLY Juice Inc.
(5) Amount includes: (1) Company contribution to the ERLY Industries
Inc. Employees Profit Sharing Plan ($12,720); and (2) a $100,000 fee
($35,000 cash plus $65,000 ERLY stock) for a personal guaranty by
D.A. Murphy of up to $5 million of bank debt under a letter
agreement between ING Bank, ERLY Industries Inc. and ERLY Juice Inc.
(6) Disclosure not required by applicable transition rules of the
Securities and Exchange Commission.
In 1982, the Board of Directors adopted an Incentive Stock Option
Plan, which was subsequently approved by the shareholders. On June 18,
1982, the Board granted options to key management employees for 80,525
shares (as adjusted for stock dividends), including 20,131 shares each to
Messrs. Gerald D. Murphy and McFarland. The option price for Mr.
McFarland was $4.35 per share, being equal to the market value as of date
of grant (as adjusted for subsequent stock dividends). Mr. Gerald D.
Murphy's option price was $5.26 per share or 110% of the market value at
date of grant, since Mr. Gerald D. Murphy held more than 10% of the
outstanding stock of the Company. Mr. Murphy exercised all of his options
in 1988.
On March 31, 1983, the Board granted options for 67,639 shares (as
adjusted for stock dividends) to key management employees. The option
price was $4.78 per share, being equal to the market value at date of
grant.
<PAGE>
<PAGE> 10
On March 31, 1985, the Board granted options for 16,105 shares (as
adjusted for stock dividends), including 8,053 shares to Mr. McFarland, at
an option price of $3.73 per share, the market price at date of grant.
On March 22, 1988, the Board granted options for 124,448 shares (as
adjusted for stock dividends), including 26,620 shares to Mr. McFarland
and 66,550 shares to Mr. Douglas A. Murphy at an option price of $4.51 per
share, the market price at date of grant.
Options may be exercised over a maximum period of ten years, except
that Mr. Gerald D. Murphy was required to exercise his option within a
five year period, with exercise rights accruing at the rate of 25% of the
total grant per year beginning one year from date of grant. An employee
pays no federal income tax when an option is granted or when shares are
purchased under the option, nor does the Company obtain the benefit of a
tax deduction at such times. Applicable federal income taxes, if any,
payable by the employee are deferred until the shares are sold.
As of this date, options for 123,184 shares remain outstanding. The
market value of the Company's common stock at May 31, 1994 was $5.38 per
share, compared to the per share option prices (as adjusted for stock
dividends) of $3.73 to $4.51.
The following table presents information on stock options held by
the executive officers named in the Compensation Table at the end of
fiscal 1994. None of such officers exercised any stock options during the
year.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1994
AND MARCH 31, 1994 OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Shares March 31, 1994 (#) March 31, 1994 ($)(1)
Acquired on Value ----------------------------- --------------------------
Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerald D. Murphy - - - - - -
Douglas A. Murphy - - 66,550 - - -
Bill J. McFarland - - 34,673 - - -
Frank M. Feffer - - - - - -
Richard N. McCombs - - - - - -
</TABLE>
(1) Market value of underlying securities at March 31, 1994 ($4.38 per
share), less the exercise price.
<PAGE>
<PAGE> 11
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Decisions on the compensation of the Company's executive officers
are made by the Compensation Committee of the Board of Directors which
consisted of Mr. William H. Burgess, Chairman, and Mr. Gerald D. Murphy.
Mr. Burgess is a private business consultant, Chairman of CMS Digital,
Inc. and a Director of American Rice, Inc. He is the beneficial owner of
8.5% of the Company's common stock. Mr. Murphy is Chairman and Chief
Executive Officer of the Company and is the beneficial owner of 39.1% of
the Company's common stock.
All decisions by the Compensation Committee were reviewed and
approved without change, by the full Board of Directors of the Company.
Mr. Murphy did not participate in any Compensation Committee or Board of
Directors discussions or decisions concerning his own compensation.
Except for Mr. Murphy, who is the Chief Executive Officer of the Company,
no other member of the Compensation Committee is now or ever has been an
officer or employee of the Company or its subsidiaries.
Mr. Burgess and Mr. Murphy are also Directors of American Rice,
Inc. Both serve on ARI's Compensation Committee of the Board of Directors,
with Mr. Murphy as Chairman of the Committee.
Messrs. G.D. Murphy, D.A. Murphy and W.H. Burgess also serve as
Directors of American Rice, Inc. Mr. B.J. McFarland, a Director and Vice
President of ERLY, is a Senior Vice President of American Rice, Inc. In
addition, Mr. R.N. McCombs, Vice President and Chief Financial Officer of
ERLY Industries, is a Director and Executive Vice President of American
Rice.
In March 1987, Mr. Gerald D. Murphy, Chairman of the Board of
ERLY Industries Inc., loaned the Company $1.2 million (the "Murphy Note")
to help finance a loan by ERLY Industries to Hansen Foods, Inc. The Murphy
Note provided for interest at the prime rate plus 4.5%.
On January 1, 1990, the Murphy Note (with a balance of $1,296,000,
including accrued interest) was canceled in exchange for two convertible
promissory notes with face amounts of $1,000,000 and $296,000. These
notes bore interest at the prime rate plus 2% and were due in full on
January 1, 1993. These notes were convertible at any time into ERLY
Industries common shares at a conversion price of $5.57 per share, the
market price on January 1, 1990 (as adjusted for a 10% stock dividend in
September 1990).
In April 1992, Mr. Gerald D. Murphy sold the $1.0 million note
to his son, Douglas A. Murphy, President of the Company. The $296,000 note
retained by Mr. G.D. Murphy was repaid through principal payments of
$1,000 (1994), $215,000 (1993), $30,000 (1992) and $50,000 (1991). Mr.
Douglas Murphy renewed the $1.0 million note on April 1, 1994. The new
note bears interest at the prime rate plus 2%, is due in full on April 1,
1995, and may be converted at any time into ERLY Industries common shares
at a conversion price of $3.75 per share, the average market price of ERLY
stock for the seven trading days immediately prior to the April 1, 1993
renewal of the note.
<PAGE>
<PAGE> 12
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee reviews and sets the compensation levels
of members of management. It is responsible for the administration of the
Company's various compensation plans including annual salaries and
bonuses, the stock option plan, the ERLY Industries Inc. Employees Profit
Sharing and Retirement Plan and other benefits provided to executives.
Historically, the compensation of the Chief Executive Officer and
other executive officers has not been formally set by the Committee using
specific performance goals or empirical criteria. Rather, base salary
levels for the executives of the Company and its subsidiaries are set
annually based on a variety of subjective factors such as personal
performance, current responsibilities and the performance of the Company
and the subsidiary or operating unit to which the executive is assigned.
Salaries for ERLY's executive officers increased by 5.9% from fiscal year
1993 to 1994. Under the Company's executive compensation program, bonuses
of stock and/or cash may be awarded to executive officers in recognition
of achievement during a year. Individual performance is assessed
considering both qualitative and quantitative performance; however, the
individual performance reviews relating to bonuses have been conducted on
a subjective, non-formula basis. Cash and stock bonuses were awarded to
the executive officers in 1994 to acknowledge various contributions in
fiscal 1994, including: (1) the improvement in ERLY's financial results,
(2) the completion of the transaction with American Rice in May 1993, (3)
the refinancing of the debt of American Rice and Comet Rice, and (4) the
disposition of the Company's juice business in fiscal 1994.
In considering the amount of compensation for fiscal year 1994 for
Mr. Gerald D. Murphy, Chief Executive Officer, the Committee (excluding Mr.
G.D. Murphy) and the Board considered the improved financial results reported by
the Company in 1994, and contributions of a strategic nature made by Mr. Murphy
to enhance the long-term growth of the Company. Mr. Murphy's base salary
increased from $280,000 in 1993 to $290,000 in 1994, a 3.6% increase. Mr.
Murphy also received a bonus of $125,000 in 1994. Specifically, Mr. G.D. Murphy
made a substantial contribution in completing the combination of American Rice,
Inc. and the Company's wholly owned subsidiary, Comet Rice, Inc., in May
1993; the disposition of the Company's juice business in fiscal 1994; the
significant export sales of rice to the Far East; and, the establishment
of a joint venture in Vietnam.
In fiscal 1994, Mr. G.D. Murphy also received a fee of $180,000
for his personal guaranty of an $8 million bank line of credit to the
Company's subsidiary, Comet Rice, and a fee of $100,000 ($35,000 cash plus
$65,000 of ERLY stock) for his personal guaranty of up to $5 million of bank
debt pursuant to an agreement with ING Bank, ERLY Industries Inc. and ERLY
Juice Inc. The amounts paid to Mr. G.D. Murphy were based upon the
Board's estimation of the value of such guarantees plus recommendations
from the Company's independent accountants.
The Company also has an Incentive Stock Option Plan, as described
under "Executive Compensation" which authorizes the issuance of stock
options. No options have been granted under the Plan in the last three
fiscal years. The Company provides insured medical benefits to executive
<PAGE>
<PAGE> 13
officers that are generally available to all full-time employees of the
Company. Executive officers also are eligible to participate in the ERLY
Industries Inc. Employees Profit Sharing and Retirement Plan on the same
basis as all other eligible employees of the Company. The Company
provides additional benefits to executive officers through executive
medical coverage and company provided automobiles.
Amounts paid in fiscal 1994 under the above described plans and
programs for the Chief Executive Officer and the four most highly
compensated executive officers of the Company and its subsidiaries are
included in the compensation table and related footnotes presented in the
"Executive Compensation" section.
In 1993, the U.S. Treasury Department issued regulations (Section
162(m) to the Internal Revenue Code) that prevent publicly traded
companies from receiving tax deductions on compensation paid to its
executive officers in excess of $1 million. The Company has not paid, and
does not currently anticipate paying compensation at these levels, and
therefore, does not believe that these provisions will be relevant to the
Company's executive compensation levels for the foreseeable future.
COMPENSATION COMMITTEE
ERLY INDUSTRIES INC.
William H. Burgess, Chairman
Gerald D. Murphy
<PAGE>
<PAGE> 14
STOCK PRICE PERFORMANCE
The graph below compares the cumulative total return on the
Company's Common Stock with the cumulative total return of (i) the Total
Return Index for the Nasdaq Stock Market (U.S. Companies) Index, and (ii)
the Total Return Index for Standard and Poor's Food Products Companies
Index. The comparison covers the five-year period from April 1, 1989 to
March 31, 1994, the end of ERLY's 1994 fiscal year and assumes that $100
was invested at the beginning of the period in ERLY Common Stock and in
each index.
The stock price performance shown on the graph is not necessarily
indicative of future price performance.
<TABLE>
<CAPTION>
Total Return S & P
for the Food
ERLY NASDAQ Stock Products
Industries Market - Companies
Measurement Period Inc. U.S. Companies Index
- - ------------------ ---------- -------------- ---------
<S> <C> <C> <C>
At April 1, 1989 $100 $100 $100
FYE March 31, 1990 138 109 120
FYE March 31, 1991 135 124 164
FYE March 31, 1992 63 159 179
FYE March 31, 1993 59 182 196
FYE March 31, 1994 81 196 181
</TABLE>
<PAGE>
<PAGE> 15
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Officers and directors of the Company are required to file
initial reports of ownership and reports of changes in ownership
with the Securities and Exchange Commission pursuant to Section
16(a) of the Securities Exchange Act of 1934, as amended. The
Company has reviewed such reports received by it and believes that
during the fiscal year ended March 31, 1994 its officers and
directors complied with all applicable Section 16(a) filing
requirements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT
In March 1987, Mr. Gerald D. Murphy, Chairman of the Board of
ERLY Industries Inc., loaned the Company $1.2 million (the "Murphy
Note") to help finance a loan by ERLY Industries to Hansen Foods,
Inc. The Murphy Note provided for interest at the prime rate plus
4.5%.
On January 1, 1990, the Murphy Note (with a balance of
$1,296,000, including accrued interest) was canceled in exchange for
two convertible promissory notes with face amounts of $1,000,000 and
$296,000. These notes bore interest at the prime rate plus 2% and
were due in full on January 1, 1993. These notes were convertible
at any time into ERLY Industries common shares at a conversion price
of $5.57 per share, the market price on January 1, 1990 (as adjusted
for a 10% stock dividend in September 1990).
In April 1992, Mr. Gerald D. Murphy sold the $1.0 million note
to his son, Douglas A. Murphy, President of the Company. The
$296,000 note retained by Mr. G.D. Murphy was repaid through
principal payments of $1,000 (1994), $215,000 (1993), $30,000 (1992)
and $50,000 (1991). Mr. Douglas Murphy renewed the $1.0 million
note on April 1, 1994. The new note bears interest at the prime
rate plus 2%, is due in full on April 1, 1995, and may be converted
at any time into ERLY Industries common shares at a conversion price
of $3.75 per share, the average market price of ERLY stock for the
seven trading days immediately prior to the April 1, 1993 renewal of
the note.
CERTAIN BUSINESS RELATIONSHIPS
In conjunction with a transaction completed in May 1993, ERLY
combined its investment in its wholly owned subsidiary, Comet Rice,
Inc. into American Rice, Inc. As a result of the transaction, ERLY
increased its ownership in the combined voting rights of ARI stock
outstanding from 48% to 81%. ERLY's ownership in ARI consists of
3,888,889 shares of the ARI Common Stock, 3,888,889 shares of Series
A Preferred Stock (each share of which is convertible into one share
of ARI Common Stock), and 14,000,000 shares of Series B Preferred
<PAGE>
<PAGE> 16
Stock (each share of which is convertible into two shares of ARI
Common Stock). Because of their positions as directors and
significant shareholders of ERLY Industries, Messrs. Gerald Murphy,
Douglas Murphy, and W.H. Burgess could be deemed to be the
beneficial owners of the ARI stock owned by ERLY Industries.
Messrs. G.D. Murphy, D.A. Murphy and W.H. Burgess also serve as
Directors of American Rice, Inc. Mr. B.J. McFarland, a Director and
Vice President of ERLY, is a Senior Vice President of American Rice,
Inc. In addition, R.N. McCombs, Vice President and Chief Financial
Officer of ERLY Industries, is a Director and Executive Vice
President of American Rice.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Deloitte & Touche has been the Company's independent certified
public accountants since the inception of the Company in 1964 and
will continue to perform in this capacity for the coming year.
Representatives of Deloitte & Touche are expected to be present at
the Annual Meeting of Shareholders. They will have the opportunity
to make a statement if they desire to do so and will be available to
respond to appropriate questions.
OTHER MATTERS
The Board of Directors knows of no business which will be
presented for consideration at the Annual Meeting other than that
stated in the Notice of Meeting. However, if any other business
shall properly come before the Meeting, votes may be cast pursuant
to the proxies solicited hereby in respect to such other business in
accordance with the best judgment of the person or persons acting
under the proxies.
1995 SHAREHOLDER PROPOSALS
Any proposal a shareholder of the Company wishes to have
presented at the 1995 Annual Meeting of Shareholders must be
received by the Company on or before May 31, 1995.
By Order of the Board of Directors
/s/ R.N. McCOMBS
--------------------------------------
Richard N. McCombs
Vice President, Chief Financial Officer
and Secretary
Los Angeles, California
July 8, 1994
