<PAGE>
<PAGE> 1
ERLY INDUSTRIES INC.
10990 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held September 17, 1996
TO THE SHAREHOLDERS OF ERLY INDUSTRIES INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders
of ERLY Industries Inc. (the "Company"), a California corporation,
will be held on Tuesday, September 17, 1996 at 10:00 a.m., at the
Westwood Marquis Hotel, 930 Hilgard Avenue, Los Angeles, California,
for the following purposes as more fully described in the accompanying
proxy statement:
1. To elect five directors to serve until the next
Annual Meeting of Shareholders;
2. To transact such other business as may properly come
before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on
Friday, July 26, 1996 as the record date for the determination of
shareholders entitled to receive notice of, and to vote at, the
annual meeting or any adjournment thereof.
WHETHER YOU PLAN TO ATTEND THE MEETING OR NOT, MANAGEMENT
URGES YOU TO COMPLETE, SIGN AND RETURN YOUR PROXY AS SOON AS
POSSIBLE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO ITS USE.
A SELF-ADDRESSED POSTAGE PREPAID ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE IN RETURNING THE SIGNED PROXY.
By Order of the Board of Directors,
/s/ Thomas A. Whitlock
--------------------------
Thomas A. Whitlock
Vice President and
Assistant Secretary
Los Angeles, California
August 16, 1996
IMPORTANT
BY SIGNING AND RETURNING THE ENCLOSED PROXY PROMPTLY, YOU WILL SAVE
YOUR COMPANY FOLLOW-UP EXPENSE IN CONNECTION WITH THIS PROXY SOLICITATION.
<PAGE>
<PAGE> 2
ERLY INDUSTRIES INC.
10990 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
PROXY STATEMENT
_________________
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
September 17, 1996
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 17, 1996,
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 16, 1996. 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 or Assistant 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> 3
VOTING SECURITIES
Only Shareholders of record of the Company's Common Stock
at the close of business on July 26, 1996 will be entitled to vote
at the Meeting, or at any adjournment thereof. On that date, the
Company had outstanding 4,307,616 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 July 26, 1996 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.
<PAGE>
<PAGE> 4
<TABLE>
<CAPTION>
Name and address of Amount and nature of Percent of
beneficial owner beneficial ownership class *
-------------------- -------------------- ----------
<S> <C> <C>
Gerald D. Murphy, Chairman 1,714,253 shares 36.5%
ERLY Industries Inc. Direct (1) and
10990 Wilshire Blvd. Indirect (2)(7)
Los Angeles, CA 90024
Douglas A. Murphy, President 551,567 shares 11.8%
and Director Direct (3)
ERLY Industries Inc.
10990 Wilshire Blvd.
Los Angeles, CA 90024
Internationale Nederlanden 525,166 shares 10.0%
(U.S.) Capital Corporation Direct (4)
135 E. 57th Street
New York, NY 10222-2101
Kennedy Capital Management, Inc. 437,429 shares 10.2%
425 N. New Ballas Road, #181 Direct (5)
St. Louis, MO 63141
William H. Burgess, Director 263,450 shares 6.1%
550 Palisades Drive Direct
Palm Springs, CA 92262
Gentleness Limited 205,850 shares 4.8%
P.O. Box N-7776 Direct (6)
Lyford Cay
Nassau, Bahamas
Richard N. McCombs 124,964 shares 2.8%
Vice President and Direct
Chief Financial Officer
ERLY Industries Inc.
10990 Wilshire Blvd.
Los Angeles, CA 90024
Bill J. McFarland, Director 41,322 shares 1.0%
ERLY Industries Inc. Direct
10990 Wilshire Blvd.
Los Angeles, CA 90024
Alan M. Wiener, Director -- --
ERLY Industries Inc.
10990 Wilshire Blvd.
Los Angeles, CA 90024
Thurston F. Teele, President -- --
Chemonics International, Inc.
1133 20th Street, N.W.
Wasington, D.C. 20036
All directors and executive officers
as a group (11 persons) 2,172,679 shares (8) 45.2%
</TABLE>
<PAGE>
<PAGE> 5
* 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 1,158,095 shares.
(2) Mr. Gerald D. Murphy's indirect beneficial ownership
represents 556,158 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 4,591
shares held in trust for his grandson, however, he
denies holding voting or investment control of the
balance of the 551,567 shares owned directly by his
son, Douglas A. Murphy.
(3) Mr. Douglas A. Murphy, President of the Company, is
the record holder of 168,449 shares and has the right
to acquire an additional 76,533 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 306,585 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.
(4) International Nederlanden (U.S.) Capital Corporation
("ING Capital") filed a Schedule 13D in March 1995
concerning possible beneficial ownership of 525,166
shares, as adjusted for a 15% stock dividend (on a
fully diluted basis), of ERLY Industries Inc. common
stock. The potential ownership consists of stock
that may be purchased pursuant to two warrant issues:
(i) An "A" Warrant, exercisable into 262,583 shares
at $.01 per share any time after April 1, 1996, and
(ii) a "B" Warrant, exercisable into 262,583 shares
at $.01 per share after April 1, 1995. These
warrants were issued as an inducement and condition
to certain loans and financial accommodations made by
ING Capital for the benefit of ERLY as well as for
general investment purposes. The warrants may be
redeemed by the Company prior to September 30, 1996
upon receipt of certain payments by ING Capital as
described below.
In February 1995, the "A" and "B" warrants previously
issued were amended to include a call feature, under
which the Company could repurchase the warrants at a
price of $7.61 per share (as adjusted for a 15% stock
dividend). The call feature also eliminates the
redemption provision, until the call period expires.
<PAGE>
<PAGE> 6
In June 1995, the February extension was amended to
reduce the $7.61 call price per share to $4.78 per
share (as adjusted) and extended through September
30, 1996. If the call option is not exercised, the
Company would have outstanding warrants to purchase
approximately 525,166 shares of common stock at $.01
per share, all of which would be subject to
redemption at the current market price of ERLY's
stock.
(5) Based on Schedule 13G filed February 8, 1996 with the
Securities and Exchange Commission. The filer is an
investment advisor with discretionary accounts for
investment purposes.
(6) Based upon Schedule 13D filed as of September 14,
1995 with the Securities and Exchange Commission.
Gentleness Limited 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.
(7) Kingwood Lakes South, L.P. (Kingwood), a partnership
created to build a residential development near
Houston, Texas filed a Schedule 13D on April 7, 1995
(subsequently amended by 13D filings on April 1, 1996
and May 30, 1996) concerning possible beneficial
ownership of 383,333 shares of ERLY Industries Inc.
common stock. The partnership holds the stock as a
security interest against a promissory note in the
principal amount of $1,500,000 issued by Mr. Gerald D.
Murphy as a capital contribution to the partnership.
The Company and ARI have been named as codefendants
in a lawsuit filed in the district court of Harris
County, Texas. This is a dispute between the general
partner Kingwook and G.D. Murphy and D.A. Murphy,
Chairman and President, respectively, of the Company
and ARI. Damages sought are in the range of $10
million, plus attorneys' fees and punitive damages.
The Company and ARI were named as defendants in the
lawsuit because of their actions to obtain restraining
orders to prevent threatened foreclosures on the ERLY
common stock pledged as collateral by G.D. Murphy and
to stop interference by the plaintiff in the lawsuit,
with ARI's mortgage note financing, as well as certain
other alleged activities. The Company and ARI believe
they have valid defenses in this case and that damages,
if any, will not have a material effect on the Company's
financial condition; however, as with any litigation,
the ultimate outcome is unknown.
<PAGE>
<PAGE> 7
(8) The number of shares shown as beneficially owned by
all directors and officers as a group includes stock
options held by officers to purchase 203,601 shares
of the Company's stock and 306,585 shares issuable
pursuant to a note payable by the Company described
under "Transactions With Management."
Mr. Gerald D. Murphy has pledged 701,803 shares of his ERLY
Industries stock as collateral for personal loans totaling
$2,137,500 from three financial institutions and a partnership.
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 777,777 shares of ARI Common Stock, 777,777
shares of Series A Preferred Stock (each share of which is
convertible into one share of ARI Common Stock), and 2,800,000
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 7,155,554 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.
<PAGE>
<PAGE> 8
PROPOSAL 1 - ELECTION OF DIRECTORS
Five 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 By-laws 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 five candidates receiving the highest number of votes will be
elected.
In the election of directors, the votes represented by
proxies received pursuant to this solicitation will be distributed
among the five 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> 9
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:
Date elected Number of shares Percent
as director of common stock of
Name of nominee Age of company beneficially owned class
- ----------------- --- ------------ ------------------ -------
Gerald D. Murphy 68 April 1964 1,714,253 36.5%
Mr. Murphy has served as Chairman of the Board and Chief Executive
Officer of ERLY Industries Inc. since formation of the Company in
1964. He has served as Chairman of the Board of American Rice,
Inc. (which is 81% owned by ERLY) since 1993 and as a Director of
ARI since 1988. He also serves as a Director of Pinkerton's,
Inc., a security and investigation services firm, and High
Resolution Sciences, Inc., a technological corporation.
Douglas A. Murphy 40 January 1988 551,567 11.8%
Mr. Murphy has served as President of the Company since 1990 and
as Chief Operating Officer since 1992. He has also served as
President and Chief Executive Officer of American Rice, Inc. since
1993 and as a Director of ARI since 1990. He has served as
President of ERLY Juice Inc. since 1988, a subsidiary of the
Company, and was President of Comet American Marketing, a division
of American Rice, Inc., from 1986 to 1990. He is also a director
advisor of Compass Bank Houston.
William H. Burgess 79 September 1975 263,450 6.1%
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.
Bill J. McFarland 59 August 1986 41,322 1.0%
Mr. McFarland has served as Vice President of the Company since
1975 and as Director since 1986. He has served as President of
Comet American Marketing and Senior Vice President of American
Rice, Inc. since 1993. He was President of ERLY Food Group from
1990 to 1993, President of The Beverage Source from 1979 to 1990
and President of Early California Foods from 1975 until its sale
in 1985 (all subsidiaries of the Company).
Alan M. Wiener 58 March 1995 -- --%
Mr. Wiener has served as a Director of the Company since 1995.
He was President of Impulse Designs, Inc. from 1974 to 1995 and
is presently serving as chairman of the board. He is also a
director of FloTool International, Inc. He previously served as
a director of Cal Fame Citrus Products, Inc. and Leisure
Technology, Inc.
<PAGE>
<PAGE> 10
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 issued in 1988 to purchase 76,533 shares and
30,613 shares, respectively, at $3.92 per share under the
Company's Incentive Stock Option Plan. These options expire in
1998.
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 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. Wiener is Chairman and Mr. Burgess and Mr.
McFarland are members of the Audit Committee.
<PAGE>
<PAGE> 11
The Compensation Committee recommends to the Board of
Directors proposed compensation programs for all principal
officers of the corporation. Mr. Burgess is Chairman and Mr. G.D.
Murphy and Mr. Wiener are committee members.
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, 1996, the full Board
held three meetings; the Executive Committee took three actions;
the Audit Committee met twice; the Compensation Committee met one
time. 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.
COMPENSATION OF DIRECTORS
Members of the Board of Directors who are not officers of
the Company receive compensation of $2,000 per quarter plus a fee
of $1,500 for each meeting attended in person or by telephone.
In addition, in fiscal 1996, Mr. Burgess received fees of $31,500
for public relations services provided to the Company. Effective
April 1, 1996, the Company will pay for outside Board members to
participate in the Company's group insurance plan for medical
benefits.
<PAGE>
<PAGE> 12
EXECUTIVE COMPENSATION
The following table sets forth information for each of the three fiscal
years ended March 31, 1996 for the Chief Executive Officer of the Company
and the four other most highly compensated executive officers of the Company
and its subsidiaries:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
Annual Compensation Long-term Compensation
---------------------------------- -------------------------------------
Awards Payouts
----------------------- ----------
Fiscal Other Securities
Year Annual Restricted Underlying All Other
Name and ended Compen- Stock Options/ LTIP Compen-
Principal Position March 31 Salary Bonus($) sation($) Awards($) SARs(#) Payouts($) sation($)
- ------------------ -------- -------- --------- --------- ---------- ----------- ---------- ----------
(1) (2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gerald D. Murphy 1996 $325,000 $100,000 $ 6,630 $ - - - $ 5,609(3)
Chairman of the Board and 1995 310,000 120,160 7,233 43,774 - - 9,060(3)
Chief Executive Officer of 1994 290,000 50,000 588 75,000 - - 293,507(4)
ERLY Industries Inc.
Chairman of the Board of
American Rice, Inc.
Douglas A. Murphy 1996 250,000 100,000 5,000 - - - 5,319(3)
President and Chief 1995 230,000 93,280 5,791 36,858 - - 8,914(3)
Operating Officer of 1994 210,000 50,000 4,975 75,000 - - 112,720(5)
ERLY Industries Inc.
President and Chief
Executive Officer of
American Rice, Inc.
Bill J. McFarland 1996 204,000 - 5,555 - - - 4,002(3)
Vice President of ERLY 1995 198,000 55,400 4,075 14,263 - - 7,500(3)
Industries Inc. 1994 190,000 5,000 1,815 5,000 - - 10,303(3)
Senior Vice President of
American Rice, Inc.
Thurston F. Teele 1996 200,000 253,000 5,058 - - - 7,500(3)
President of Chemonics 1995 183,600 364,000 1,640 - - - 7,500(3)
International, Inc. 1994 180,000 67,900 1,940 - - - 7,340(3)
Richard N. McCombs 1996 175,000 15,000 435 - 80,500 - 3,392(3)
Vice President and Chief 1995 170,000 28,560 2,418 7,347 - - 8,106(3)
Financial Officer of 1994 155,000 74,000 1,954 88,250 - - 11,135(3)
ERLY Industries Inc.
Executive Vice President
of Finance and
Administration of
American Rice, Inc.
</TABLE>
<PAGE>
<PAGE> 13
(1) Amounts included in this column reflect: (i) the cost of Company provided
automobiles relating to personal use, (ii) the taxable value of life
insurance provided by the Company, and (iii) reimbursements under the
Company's Executive Medical Plan (the "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, 1996, was as
follows: G.D. Murphy, 3,867 shares ($33,952); D.A. Murphy, 3,256 shares
($28,588); B.J. McFarland, 1,260 shares ($11,063); Thurston F. Teele,
none; and, R.N. McCombs, 649 shares ($5,698). 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.
In 1982, the Board of Directors adopted an Incentive Stock Option Plan (the
"Plan"), which was subsequently approved by the shareholders. Under the Plan,
250,000 shares of ERLY common stock were reserved for the granting of options
to key employees. The Plan had a term of 10 years and expired in 1992. The
expiration of the Plan has no effect on outstanding options. The purchase
price for shares could not be less than the market value of the shares at the
date of grant. The options were exercisable 25% a year over a four-year period
beginning one year after the date of issuance. Options generally expire ten
years from the date of grant.
In fiscal 1996, the Company granted stock options to a key employee for
80,500 shares at a price of $5.00 per share (as adjusted for a 15% stock
dividend in September 1995). Options for 40,250 shares became exercisable in
fiscal year 1996 and options for the remaining 40,250 shares become exercisable
in fiscal year 1997.
<PAGE>
<PAGE> 14
As of July 26, 1996, options for 193,769 shares remain outstanding, of
which 153,519 options were exercisable. The balance of the options for 40,250
shares become exercisable in fiscal year 1997. The market value of the
Company's common stock at March 31, 1996 was $8.78 per share, compared to the
option price (as adjusted for stock dividends) of $3.92 per share for 113,269
options and $5.00 per share for 80,500 options.
The following table presents information on stock options held by the
executive officers named in the Compensation Table at the end of fiscal 1996.
During fiscal 1995, Mr. McFarland exercised options granted in 1985 for the
purchase of 8,053 shares of ERLY common stock at a price of $3.73 per share.
In fiscal 1996, Mr. McCombs was granted options to acquire 80,500 shares (as
adjusted for a 15% stock dividend) at a price of $5.00 per share.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1996
AND MARCH 31, 1996 OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Shares March 31, 1996 (#) March 31, 1996 ($)(2)
Acquired on Value -------------------------- --------------------------
Name Exercise (#) Realized ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ------------ ------------ --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerald D. Murphy - - - - - -
Douglas A. Murphy - - 76,533 - $371,950 -
Bill J. McFarland - - 30,613 - $148,779 -
Thurston F. Teele - - - - - -
Richard N. McCombs - - 40,250 40,250 $152,145 $152,145
</TABLE>
(1) Market value of underlying securities at March 31, 1996 ($8.78 per share),
less the exercise price. The values in the last two columns have not been,
and may never be, realized by the officers. Actual gains, if any, on option
exercises will depend on the value of the Company's common stock on the date
of exercise.
<PAGE>
<PAGE> 15
Incentive Compensation Plan - American Rice, Inc.
The Company owns 81% of the outstanding voting capital stock of American Rice,
Inc. In fiscal 1995, ARI's shareholders and Board of Directors adopted an
Incentive Compensation Plan (the "Incentive Plan"), pursuant to which certain
key officers of ARI are entitled to receive bonuses, in addition to other
compensation they may receive from ARI, of 80% cash and 20% ERLY or ARI common
stock if the minimum Return on Equity (as defined in the Incentive Plan) of ARI
is achieved. Bonuses under the Incentive Plan are 70% earned in the year the
Return on Equity is 15% or greater and the remaining 30% will be earned in the
following year if ARI achieves a Return on Equity of 15% or greater in such
subsequent fiscal year. Unvested bonuses awarded that would otherwise be
available under the Incentive Plan in the subsequent fiscal year will be
forfeited upon a participant's voluntary termination of employment.
Furthermore, no shares of stock issued under the Incentive Plan can be
transferred for two years following issuance. The Incentive Plan is not
subject to any provisions of ERISA. ERLY's shareholders and Board of Directors
also approved the Incentive Plan and reserved 250,000 shares of ERLY's $.01
par value common stock for issuance pursuant to the terms of the Incentive
Plan.
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 consists of Mr.
William H. Burgess, Chairman, Mr. Gerald D. Murphy and Mr. Alan M. Wiener. 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 6.1% of the
Company's common stock. Mr. Murphy is Chairman and Chief Executive Officer of
the Company and is the beneficial owner of 36.7% of the Company's common stock.
He is also Chairman of the Board of American Rice, Inc.
All decisions by the Compensation Committee were reviewed and approved
without change, by the full Board of Directors of the Company. Mr. Burgess was
responsible for the determination of Mr. G.D. Murphy's compensation as Chief
Executive Officer and 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.
<PAGE>
<PAGE> 16
The Company has a $1.0 million convertible promissory note payable to
Douglas A. Murphy, President of the Company, which arose in April 1992. The
note has been renewed on an annual basis each year and on April 1, 1996 Mr.
Murphy again renewed the note. The new note bears interest at the prime rate
plus 2%, is due in full on April 1, 1997, and may be converted at any time into
ERLY Industries common shares at a conversion price of $3.26 per share (as
adjusted for a 15% stock dividend in September 1995), the average market price
of ERLY stock for the seven trading days immediately prior to the April 1,
1993 renewal of the note.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee's objectives are to establish compensation
programs designed to attract and retain executives who are responsible for
achieving the business goals of the Company. The Committee reviews and sets
the compensation levels of members of management. It is also responsible for
the administration of the Company's various compensation plans including
annual salaries and bonuses, stock options, the ERLY Industries Inc. Employees
Profit Sharing and Retirement Plan and other benefits provided to executives.
Base Salary Levels
Base salary levels for ERLY's executive officers increased by approximately
5.2% from fiscal year 1995 to 1996. Historically, the compensation of the
executive officers of the Company, including the Chief Executive Officer, has
not been formally set by the Committee using specific performance goals or
formulas tied to financial benchmarks. 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, specific accomplishments or events, increase in the consumer
price index, future potential contributions to the Company, informal surveys
of compensation paid to executive officers holding similar positions in other
publicly traded companies of comparable size, and the fiscal year 1995
performance of the Company and the subsidiary or division to which the
executive is assigned. When considering executive compensation for fiscal
1996, the Committee considered various contributions in fiscal 1995,
including: (1) the continued improvement in ERLY's financial results (net
income in 1995 was $9.3 million; stockholders' equity increased by $8.4 million
to $16.8 million at March 31, 1995; working capital was $15.9 million at
March 31, 1995 compared to $2.9 million at March 31, 1994), (2) sales increased
37% from $335 million in 1994 to $460 million in 1995 with each operating
subsidiary reporting record sales, (3) a new $11 million line of credit was
obtained for Chemonics International, Inc., and (4) the start-up of the
ARI-Vinafoods joint venture in Vietnam.
All of the subjective factors were considered by the Committee, and it is
not reasonably possible to assign relative significance to these factors on an
individual basis.
<PAGE>
<PAGE> 17
Bonuses
In fiscal 1995, ARI's shareholders and Board of Directors adopted an
Incentive Compensation Plan (the "Incentive Plan"), pursuant to which certain
key officers of ARI are entitled to receive bonuses that are payable 80% in
cash and 20% in common stock if certain specified Returns on Equity (as
defined therein) of ARI are achieved. Bonuses under the Incentive Plan are
70% earned in the year the Return on Equity is 15% or greater and the remaining
30% is earned in the following fiscal year if ARI achieves a Return on Equity
of 15% or greater in such subsequent fiscal year. Any portion of the bonus
that would otherwise be available under the Incentive Plan in the subsequent
fiscal year will be forfeited upon a participant's voluntary termination of
employment. Furthermore, no shares of stock issued under the Incentive Plan
can be transferred for two years following issuance. The Incentive Plan is
not subject to any provisions of ERISA. No bonuses were awarded under the
terms of the Incentive Plan for fiscal year 1996. Certain individuals were
given individual incentive bonuses for merit and recognition of performance
for the successful completion of the $100 million public bond offering by
American Rice in August 1995.
The Company's subsidiary, Chemonics International, Inc., has a bonus plan
covering certain executives, including the President of the subsidiary, T.F.
Teele, who is listed in the Summary Compensation Table under "Executive
Compensation." Bonuses are paid according to computations which consider: (a)
Results for the year based on a minimum return on equity (15%), and (b) results
for the year in excess of budgeted targets.
Under ERLY's executive compensation program covering corporate and
divisional executives other than ARI personnel and Chemonics International
personnel (who are covered by bonus plans described above), bonuses of stock
and/or cash may be awarded 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
bonuses were awarded to executive officers in 1996 to acknowledge various
contributions in fiscal 1996, including: (1) the improvement in ERLY's
operating results (excluding a non-recurring $7.2 million provision for loss on
disposal of a property held for sale by ARI); stockholders' equity increased by
$735,000 for the year to $17.5 million at March 31, 1996; working capital
increased to $56.5 million at March 31, 1996 compared to $15.9 million last
year; and, sales increased 6% from $460 million in 1995 to $487 million in
1996, and (2) the successful completion of a $100 million public bond offering
by American Rice in August 1995.
<PAGE>
<PAGE> 18
Other
The Company provides insured medical benefits to executive 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 1996 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 Summary
Compensation Table and related footnotes presented in the "Executive
Compensation" section.
Compensation of Chief Executive Officer in 1996
In considering the amount of compensation for fiscal year 1996 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 1996 as described above, and contributions made by Mr. Murphy to
enhance the long-term growth of the Company which included: the significant
export sales of rice to the Far East in 1994 and 1995; the establishment of a
joint venture for rice operations in Vietnam; and, the coordination of other
potential export opportunities.
As with the Company's other executives, Mr. G.D. Murphy's 1996 salary was
based on the various subjective factors detailed under the caption "Base Salary
Levels" above. Mr. Murphy's base salary increased from $310,000 in 1995 to
$325,000 in 1996, a 4.8% increase. Mr. Murphy also received a cash bonus of
$100,000 for 1996. This was paid in recognition of: The successful completion
of a $100 million public bond offering by American Rice, the favorable
financial results recorded by the Company's other operating entities, Chemonics
International and Fire-Trol, in fiscal year 1996, and the start-up of the
ARI-Vinafoods joint venture in Vietnam.
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
Alan M. Wiener
<PAGE>
<PAGE> 19
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) and (ii) the Total Return Index for
Standard and Poor's Food Products Companies. The comparison covers the
five-year period from April 1, 1991 to March 31, 1996, the end of ERLY's 1996
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, 1991 $100 $100 $100
FYE March 31, 1992 54 127 109
FYE March 31, 1993 51 147 119
FYE March 31, 1994 69 158 110
FYE March 31, 1995 178 176 131
FYE March 31, 1996 139 239 164
</TABLE>
<PAGE>
<PAGE> 20
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Executive 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. The Company has reviewed such reports received by it and
believes that, except as specified below, all of its executive officers and
directors complied with all applicable Section 16(a) filing requirements during
the fiscal year ended March 31, 1996.
Annual Report Form 5 for the fiscal year ended March 31, 1996 was not
timely filed for R.N. McCombs. Form 4's to report fiscal year 1996 sales of
ERLY common stock in the Company's Profit Sharing Plan (401k) were not timely
filed by L.M. Pullen, D.A. Murphy and G.D. Murphy. A Form 4 to report sales
of stock in December 1995 and January 1996 was not timely filed by J.S. Poole.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT
The Company has a $1.0 million convertible promissory note payable to
Douglas A. Murphy, President of the Company, which arose in April 1992. The
note has been renewed on an annual basis each year and on April 1, 1996 Mr.
Murphy again renewed the note. The new note bears interest at the prime rate
plus 2%, is due in full on April 1, 1997, and may be converted at any time
into ERLY Industries common shares at a conversion price of $3.26 per share
(as adjusted for a 15% stock dividend in September 1995), 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 777,777 shares of ARI Common Stock (each share of
which is entitled to one vote), 777,777 shares of Series A Preferred Stock
(each share of which is entitled to one vote and is convertible into one share
of ARI Common Stock), and 2,800,000 shares of Series B Preferred Stock (each
share of which is entitled to two votes and is convertible into two 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.
<PAGE>
<PAGE> 21
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 LLP 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 LLP 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
Annual 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.
1997 SHAREHOLDER PROPOSALS
Any proposal a shareholder of the Company wishes to have presented at the
1997 Annual Meeting of Shareholders must be received by the Company on or
before May 31, 1997.
By Order of the Board of Directors
/s/ Thomas A. Whitlock
------------------------
Thomas A. Whitlock
Vice President and
Assistant Secretary
Los Angeles, California
August 16, 1996
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED, SELF-ADDRESSED POSTAGE PREPAID ENVELOPE.
<PAGE>
<PAGE> 22
ERLY INDUSTRIES INC.
SHAREHOLDERS' PROXY
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints GERALD D. MURPHY and DOUGLAS A. MURPHY as
Proxies, each of them with the power to appoint his substitute, and hereby
authorizes them to represent and to vote as designated below, all of the shares
of common stock of ERLY Industries Inc. held on record by the undersigned on
July 26, 1996, at the Annual Meeting of Shareholders to be held on
September 17, 1996, or any adjournment thereof.
1. ELECTION OF DIRECTORS __ FOR all nominees listed below (except as marked
to the contrary below)
__ WITHHOLD AUTHORITY (to vote for all nominees
listed below)
G.D. Murphy, D.A. Murphy, W.H. Burgess, B.J. McFarland and A.M. Wiener.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below):
______________________________________________________________________________
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
<PAGE>
<PAGE> 23
ERLY INDUSTRIES INC.
SHAREHOLDERS' PROXY
Proxy Number Shares of common stock
This Proxy when properly executed and returned, will be voted in the manner
directed herein by the undersigned stockholder. If no direction is made, this
Proxy will be voted for Proposal 1.
Dated..............................., 1996
_________________________________________
Signature
_________________________________________
Signature, if held jointly
IMPORTANT: Please sign exactly as name appears herein. When shares are
held by joint tenants, both should sign. When signing as attorney, 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 THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
