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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
ERLY Industries Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[X] No fee required.
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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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
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LOGO
October 1, 1997
WE URGE YOU TO DISREGARD THE BLUE PROXY CARD
Dear Fellow Shareholder:
We, the members of your Board of Directors, are very grateful for the
support and encouragement we are receiving from our shareholders in the proxy
contest with the Powell Group. From responses we have received so far, WE
BELIEVE THAT MOST SHAREHOLDERS AGREE WITH US THAT NANETTE KELLEY IS NOT
QUALIFIED TO RUN YOUR COMPANY.
Although some of you have understandably questioned the proposal for
elimination of cumulative voting, we hope that you will understand the need for
it -- to prevent Ms. Kelley from electing herself to the Board with proxies on a
small minority of shares and disrupting the Company's business.
PLEASE DATE, SIGN, AND RETURN THE ENCLOSED WHITE PROXY CARD EVEN IF YOU
HAVE PREVIOUSLY SIGNED A BLUE PROXY CARD OR A WHITE PROXY CARD. ONLY YOUR LATEST
DATED PROXY CARD WILL COUNT.
WHY ELIMINATION OF CUMULATIVE VOTING IS NECESSARY
Elimination of cumulative voting is necessary to keep Nanette Kelley from
becoming a member of your Board. With cumulative voting, she can elect herself
to the Board with proxies on a small percentage of the outstanding shares. She
is so hostile to your Board and your Management and has been so negative toward
your Company in her quest to gain control that we fear she will do irreparable
damage to the Company if she becomes a Director. Here are just a few examples of
conduct which demonstrates why we think she should not be a Director of ERLY:
- Ms. Kelley has admitted that she had not even heard of ERLY until a
stockbroker touted it to her last February. NOW, SHE ACTUALLY WANTS TO
TAKE CONTROL OF YOUR COMPANY AFTER BEING AWARE OF ITS EXISTENCE FOR LESS
THAN NINE MONTHS.
- When her demand for control of the Board -- based on her untrue claim
that she controlled the vote of 51% of the outstanding shares of the
Company -- was refused, she angrily said to the Company's chief executive
officer:
"YOU HAVE ONLY KNOWN ME FOR AN HOUR AND A HALF. I DON'T DO ANYTHING
HALF-ASSED. I AM GOING TO GET YOU AND I AM GOING TO GET YOUR COMPANY."
- She sued all of the Directors of ERLY while claiming through her lawyer
that she knows nothing about the facts she has alleged in the lawsuit and
stating in her deposition that she relied on an "investigation" by Noble
Trenham and the lawyers who are helping her in her attempt to gain
control of ERLY.
- We believe that she has maligned the Board and Management in
communications with employees, suppliers, customers and shareholders,
with reckless disregard for the immediate and long-term damage that she
is doing to the Company. WE FURTHER BELIEVE THAT SUCH IRRESPONSIBLE
ACTIONS UNDERSCORE HER ATTEMPT TO BENEFIT HERSELF AT THE EXPENSE OF OTHER
SHAREHOLDERS.
- Mr. Spain, the former Baton Rouge television station manager Ms. Kelley
intends to put in charge of ERLY's worldwide operations, ADMITS THAT HE
AND MS. KELLEY LACK EXPERIENCE IN THE INTERNATIONAL RICE
BUSINESS -- WHICH IS A MAJOR PART OF ERLY'S BUSINESS.
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THE TRUTH ABOUT CUMULATIVE VOTING
Here are some very important facts about cumulative voting which you should
know:
- Contrary to what Ms. Kelley has told you, cumulative voting is the
exception and not the rule. Relatively few publicly-held companies have
cumulative voting. There's a good reason for that -- to keep a hostile
person like Ms. Kelley from getting on the board and disrupting business
and management.
- WITH CUMULATIVE VOTING, MS. KELLEY MAY BE ABLE TO ELECT HERSELF TO YOUR
BOARD WITH PROXIES ON AS LITTLE AS 12% TO 15% OF THE SHARES REPRESENTED
AT THE ANNUAL MEETING OF SHAREHOLDERS ON OCTOBER 17, 1997.
- You should vote FOR elimination of cumulative voting if you want to keep
Ms. Kelley off your Board.
- You should vote FOR elimination of cumulative voting if you don't want a
hostile Director on your Board.
WE BELIEVE THAT ONLY A BOARD CONSISTING OF DIRECTORS WITH COMMON OBJECTIVES
CAN SUCCESSFULLY LEAD ERLY INTO THE FUTURE.
DISTURBING FACTS ABOUT THE POWELL GROUP
MS. KELLEY HAS A MUCH SMALLER STAKE AND LESS TO LOSE THAN MANAGEMENT
Your Board and Management own 37% of the outstanding shares. Gerald and
Douglas Murphy's shareholdings represent the bulk of their personal assets. By
comparison, Nanette Kelley owns less than 4% of the outstanding shares, which
represents only a small fraction of her total wealth.
CLEARLY, MANAGEMENT HAS MUCH MORE AT STAKE IN THE SUCCESS OF ERLY THAN MS.
KELLEY HAS. AND SHE HAS MUCH LESS TO LOSE IF ERLY IS IRREPARABLY HARMED BY HER
CONDUCT.
MS. KELLEY DOESN'T KNOW ERLY'S BUSINESS
This all started with Noble Trenham. He is a stockbroker in Pasadena,
California. He owns only twelve shares of ERLY stock. Last February, he sent an
unsolicited letter to Ms. Kelley's company in Baton Rouge, Louisiana, bringing
ERLY to her attention.
MS. KELLEY AND MR. SPAIN HAD NEVER EVEN HEARD OF ERLY -- ONE OF THE LEADING
COMPANIES IN THE WORLDWIDE RICE BUSINESS. THAT SHOULD TELL YOU SOMETHING ABOUT
THEIR LACK OF KNOWLEDGE OF THE U.S. AND WORLDWIDE BRANDED RICE BUSINESS AND
THEIR LACK OF EXPERIENCE IN MANAGING A COMPANY LIKE ERLY. As small as Ms.
Kelley's Louisiana rice milling business is, our Management was aware of its
operations. That's because we're in the rice business and we know our business.
We know who grows rice, who processes rice, who sells rice, and who buys rice.
NOBLE TRENHAM IS IN IT FOR THE MONEY
A few weeks after learning of ERLY from Mr. Trenham, Ms. Kelley and her
company bought 188,333 shares of ERLY stock at a price of $6.10 per share in a
private transaction arranged by Mr. Trenham. Ms. Kelley's company also hired Mr.
Trenham's firm to help her solicit proxies from ERLY shareholders for a
contingent fee of $505,000 if she wins control. If she succeeds in gaining
control of ERLY, she will force ERLY to reimburse her company for all of her
expenses, which we expect to exceed $750,000, including Mr. Trenham's fee.
IF MS. KELLEY WINS CONTROL OF ERLY, MR. TRENHAM WILL RECEIVE A HUGE FEE AND
IT WILL COST MS. KELLEY NOTHING. IT WILL, INSTEAD, COST YOU, THE SHAREHOLDERS OF
ERLY. PLEASE DON'T GIVE HER YOUR PROXY AND AVOID THAT RISK. YOUR COMPANY CANNOT
AFFORD THAT CASH DRAIN.
Mr. Trenham tells shareholders that he is a good friend of Bill Burgess,
one of the directors of ERLY, but the things he has done to pressure Mr. Burgess
into joining the Powell Group are not friendly acts.
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MR. TRENHAM ACTUALLY ENCOURAGED MS. KELLEY TO SUE MR. BURGESS WHEN HE REFUSED TO
SUPPORT MS. KELLEY'S TAKEOVER BID.
We believe that Mr. Trenham is, quite clearly, in it for the money and is
willing to pressure his friends, attack our character, and distort the truth to
collect an enormous fee if the Powell Group gains control of ERLY. WE URGE YOU
TO QUESTION HIS MOTIVES.
We also urge you to question Mr. Trenham's judgment on who should be on the
Board of ERLY. Several years ago, he recommended as a Director of ERLY, a man
who was subsequently indicted and pleaded guilty to felony charges in connection
with the collapse of a large financial institution. He also recommended another
man who actually did become a Director and then resigned because of a conflict
of interest.
Mr. Trenham has also made a lot of accusations about litigation in which
ERLY has been involved despite the fact that he has been sued numerous times
himself. He was even sued by the SEC and permanently enjoined by a federal court
for violating federal securities laws. PLEASE REMEMBER THAT WHEN MR. TRENHAM
TRIES TO IMPUGN THE INTEGRITY OF YOUR BOARD AND YOUR MANAGEMENT.
NANETTE KELLEY HAS AN INHERENT CONFLICT OF INTEREST
Ms. Kelley claims that her company and ERLY are in the same business -- if
she is trying to convince you that she knows the international branded rice
products business. At other times she denies that ERLY and her company are
competitors -- when she is trying to convince you that there would not be any
conflict of interest in her taking control of ERLY. THE TRUTH IS WE ARE
COMPETITORS IN THE PURCHASE OF RICE FROM FARMERS AND THERE WOULD BE CONFLICTS OF
INTEREST. DESPITE THAT, WE DON'T THINK THAT HER EXPERIENCE IN THE REGIONAL RICE
MILLING BUSINESS EVEN COMES CLOSE TO PREPARING HER TO RUN ERLY'S INTERNATIONAL
BRANDED RICE PRODUCTS BUSINESS.
MS. KELLEY DEMANDED CONTROL AND THEN SUED THE DIRECTORS
On July 17, 1997, Ms. Kelley, Mr. Spain, and Mr. Trenham went to the
offices of ERLY and met with members of Management. At that meeting, Ms. Kelley
said she controlled the vote of 51% of the outstanding shares of ERLY and
demanded that control of the Board be surrendered to her. That was not true and
not even plausible since she had not yet begun to solicit proxies and
solicitation of proxies prior to her filing of proxy material with the SEC would
have violated federal securities laws. In truth, she and her affiliates
controlled only a small minority of outstanding shares AND SHE WAS BLUFFING. WE
SUGGEST YOU BEAR THAT IN MIND IF SHE TELLS YOU SHE EXPECTS TO WIN THE PROXY
CONTEST.
Ms. Kelley offered a deal in return for control. She said Gerald Murphy,
Doug Murphy and Bill Burgess could remain on the Board, she would help the
Murphys sell their ERLY stock, and the Murphys could have two-year employment
contracts IF Mr. Murphy agreed to hand over control of the Board to her. Mr.
Murphy told her if she wanted control of the Company, she should make a cash
offer to all of the shareholders. He told her that the Board would have to give
very serious consideration to a premium offer by her or anyone else for all
shares of ERLY -- and not just the Murphys' shares alone. MS. KELLEY MADE IT
CLEAR THAT SHE IS NOT INTERESTED IN BUYING ERLY. SHE WANTS TO GAIN CONTROL OF IT
FOR FREE, AT YOUR EXPENSE.
Ms. Kelley also offered to include Mr. Burgess in her proposed slate of
director-nominees if he would agree to vote his shares with the Powell Group.
She apparently thought enough of Mr. Burgess to keep him on the Board -- if he
would help her take control of your Company for free. When he refused, she sued
him -- with the encouragement of Mr. Burgess's "old friend" Noble Trenham.
When Gerald Murphy refused Ms. Kelley's demand for control of the Board,
she filed a shareholders derivative suit against him and Doug Murphy. Her lawyer
said that she didn't know anything about the claims she has made in arguing why
her deposition shouldn't be taken in that suit. And then, when her deposition
was taken anyway, Ms. Kelley said that she relied on an "investigation" by Mr.
Trenham and the same lawyers who are helping her with the proxy contest.
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When Mr. Burgess continued to refuse to support the Powell Group, Ms.
Kelley amended the suit to include him and the other Directors of ERLY as
defendants. She also named all of the Directors of American Rice, Inc., ERLY's
principal subsidiary. IT IS OBVIOUS THAT SHE IS TRYING TO INTIMIDATE THE
DIRECTORS INTO DOING HER BIDDING. WE CAN ONLY ASSUME THAT SHE WILL CONTINUE
THOSE BULLYING TACTICS AND MAKE IT VERY DIFFICULT TO CONDUCT THE BOARD'S
IMPORTANT BUSINESS IF SHE BECOMES A DIRECTOR.
YOUR VOTE IS IMPORTANT -- PLEASE GIVE US YOUR SUPPORT
Regardless of the number of shares you own, your vote is important on these
critical issues. We hope you will continue to give us your ongoing support by
signing, dating, and returning the enclosed WHITE proxy card FOR each of our
proposals in the enclosed return envelope. Remember, only your latest dated
proxy card counts, so we would like you to return the enclosed proxy card even
if you have previously signed a WHITE or a BLUE proxy card. Act promptly so that
your vote will be properly counted at the meeting.
We sincerely appreciate and need your help. If you have any questions or
comments, please feel free to call MacKenzie Partners, Inc., which is assisting
us with our solicitation, at (800) 322-2885.
Sincerely,
<TABLE>
<S> <C> <C> <C> <C>
/s/ Gerald Murphy /s/ William Burgess /s/ Douglas Murphy /s/ Alan Wiener /s/ Bill McFarland
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Gerald Murphy William Burgess Douglas Murphy Alan Wiener Bill McFarland
</TABLE>
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