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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )*
ERLY Industries Inc.
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(Name of Issuer)
Common Stock
---------------------------------------------------
(Title of Class of Securities)
26883910
-----------------------------------------
(CUSIP Number)
Nanette N. Kelley, The Powell Group, P.O. Box 788, Baton Rouge, Louisiana 70821
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
July 17, 1997
-----------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [_]
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
(Continued on following pages)
(Page 1 of 21 Pages)
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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CUSIP NO. 26883910 13D PAGE 2 OF 21 PAGES
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
The Powell Group
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [X]
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SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
N/A
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Louisiana
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SOLE VOTING POWER
7
NUMBER OF 0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
171,933
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 0
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
171,933
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
171,933
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 [_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
3.6%
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TYPE OF REPORTING PERSON*
14
CO,HC
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*SEE INSTRUCTION BEFORE FILLING OUT!
<PAGE>
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CUSIP NO. 26883910 13D PAGE 3 OF 21 PAGES
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Farmers Rice Milling Company, Inc.
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [X]
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SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
WC
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Louisiana
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 171,933
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
171,933
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 171,933
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
171,933
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
171,933
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 [_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
3.6%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
CO
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*SEE INSTRUCTION BEFORE FILLING OUT!
<PAGE>
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CUSIP NO. 26883910 13D PAGE 4 OF 21 PAGES
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Nanette N. Kelley
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [X]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
PF
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 16,400
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
188,333
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 16,400
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
188,333
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
188,333
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 [_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
3.9%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
IN
- ------------------------------------------------------------------------------
*SEE INSTRUCTION BEFORE FILLING OUT!
<PAGE>
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CUSIP NO. 26883910 13D PAGE 5 OF 21 PAGES
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
First Global Securities, Inc.
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [X]
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SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
WC
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
California
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SOLE VOTING POWER
7
NUMBER OF 5
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
5
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 5
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
5
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
5
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 [_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
Less than 1%
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TYPE OF REPORTING PERSON*
14
BD/IV
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*SEE INSTRUCTION BEFORE FILLING OUT!
<PAGE>
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CUSIP NO. 26883910 13D PAGE 6 OF 21 PAGES
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Noble B. Trenham
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [X]
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SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
PF
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 2
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
7
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 2
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
7
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
7
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 [_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
Less than 1%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
IN
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*SEE INSTRUCTION BEFORE FILLING OUT!
<PAGE>
ITEM 1 SECURITY AND ISSUER
This Schedule 13D relates to the common stock, $.01 par value per
share (the "Common Stock"), of ERLY Industries Inc., a California
corporation (the "Company"), which has its principal executive offices at
10990 Wilshire Boulevard, Suite 1800, Los Angeles, California 90024.
ITEM 2 IDENTITY AND BACKGROUND
This Schedule 13D is being filed on behalf of The Powell Group
("TPG"), a Louisiana corporation, and TPG's wholly-owned subsidiary Farmers
Rice Milling Company, Inc. ("FRM"), a Louisiana corporation, Nanette N.
Kelley, Noble B. Trenham and First Global Securities, Inc., a California
corporation ("First Global"). TPG and FRM are collectively referred to
herein as "Powell" and Powell, Ms. Kelley, Mr. Trenham and First Global are
collectively referred to herein as the "Filing Persons."
The filing of this Schedule 13D is not required by Rule 13d-1 under
the Securities Exchange Act of 1934. None of the Filing Persons is the
owner of more than five percent of the number of shares of Common Stock
outstanding (the "Outstanding Common Stock"). Furthermore, if each of the
Filing Persons is deemed to have acquired beneficial ownership of the
Common Stock owned by each of the other Filing Persons, collectively the
Filing Persons would not own more than five percent of the Outstanding
Common Stock. However, as more fully described below, this Schedule 13D is
being filed on behalf of the Filing Persons in anticipation of allegations
by the Company that the recent actions the Filing Persons have taken with
respect to the Common Stock require such filing.
A. THE POWELL GROUP
TPG's principal business address is P.O. Box 788, Baton Rouge,
Louisiana 70821. Powell is a holding company which owns and operates
subsidiaries (including without limitation FRM) engaged in the rice
milling, rice farming, rice hull-fired power generation, radio
broadcasting, travel management, commercial real estate development and
holdings, timber holdings and residential construction businesses. During
the last five years, TPG has not been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) and has not been a
party to a civil proceeding of a judicial administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities
laws or finding any violation with respect to such laws.
TPG is a successor to Powell Lumber Company, organized in 1896. Since
1917, FRM, formerly a company with common stockholders with TPG and
subsequent to 1992 a subsidiary of TPG, has been in the rice milling
business. Mr. Willis Page Weber, Ms. Kelley's great-grandfather, was the
President of Powell Lumber until his retirement in 1951. Ms. Kelley was
elected as a director and subsequently President and Chief Executive
Officer in 1991 to succeed her father, A.W. Noland, who resigned. As
President and Chief Executive Officer, Ms. Kelley led a restructuring of
TPG's business
7 of 21
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which occurred over the course of three years. After the restructuring was
completed, Ms. Kelley implemented a strategic plan which included selling
unprofitable assets, integrating TPG's rice business and real estate
business and acquiring positions in the radio broadcast industry. As noted
above, TPG's subsidiaries operate presently in the rice milling, rice
farming, rice hull-fired power generation, radio broadcasting, travel
management and real estate development and holdings, timber holdings and
residential construction businesses.
Nanette N. Kelley is TPG's President and Chief Executive Officer, John
M. Spain is TPG's Managing Director and Mary E. Stampley is Powell's
secretary. Ms. Kelley, Mr. Spain and David Pitts are the directors of TPG.
The following information is supplied with respect to Ms. Kelley, Mr.
Spain, Ms. Stampley and Mr. Pitts.
I. (a) Nanette N. Kelley
(b) Ms. Kelley's business address is P.O. Box 788, Baton Rouge,
Louisiana 70821.
(c) Ms. Kelley's principal occupation or employment is serving as
TPG's President and Chief Executive Officer. Ms. Kelley is also the
President and Chief Executive Officer of FRM.
(d)-(e) During the last five years, Ms. Kelley has not been convicted
in a criminal proceeding (excluding traffic violations or similar
misdemeanors) and has not been a party to a civil proceeding of a
judicial administrative body of competent jurisdiction and as a result
of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
(f) Ms. Kelley is a citizen of the United States.
II. (a) John M. Spain
(b) Mr. Spain's business address is P.O. Box 788, Baton Rouge,
Louisiana 70821.
(c) Mr. Spain's principal occupation or employment is serving as TPG's
Managing Director. Mr. Spain is also the Managing Director of FRM.
(d)-(e) During the last five years, Mr. Spain has not been convicted
in a criminal proceeding (excluding traffic violations or similar
misdemeanors) and has not been a party to a civil proceeding of a
judicial administrative body of competent jurisdiction and as a result
of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
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(f) Mr. Spain is a citizen of the United States.
III. (a) Mary E. Stampley
(b) Ms. Stampley's business address is P.O. Box 788, Baton Rouge,
Louisiana 70821.
(c) Ms. Stampley's principal occupation or employment is serving as
TPG's Secretary. Ms. Stampley is also the Secretary of FRM.
(d)-(e) During the last five years, Ms. Stampley has not been
convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) and has not been a party to a civil proceeding
of a judicial administrative body of competent jurisdiction and as a
result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or
finding any violation with respect to such laws.
(f) Ms. Stampley is a citizen of the United States.
IV. (a) David Pitts
(b) Mr. Pitts' business address is P.O. Box 788, Baton Rouge,
Louisiana 70821.
(c) Mr. Pitts' principal occupation or employment is serving as
President of Pitts Management Associates, a consulting firm.
(d)-(e) During the last five years, Mr. Pitts has not been convicted
in a criminal proceeding (excluding traffic violations or similar
misdemeanors) and has not been a party to a civil proceeding of a
judicial administrative body of competent jurisdiction and as a result
of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
(f) Mr. Pitts is a citizen of the United States.
B. FARMERS RICE MILLING COMPANY, INC.
FRM's principal business address is P.O. Box 788, Baton Rouge,
Louisiana 70821. FRM's principal business is the purchase of rough rice and
the milling and sale of rice and rice by-products. During the last five
years, FRM has not been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) and has not been a party to a
civil proceeding of a judicial administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities
laws or finding any violation with respect to such laws.
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Ms. Kelley is FRM's President and Chief Executive Officer, Mr. Spain
is FRM's Managing Director and Ms. Stampley is FRM's Secretary. Ms.
Kelley, Mr. Spain and Mr. Pitts are the directors of FRM. Information
required to be disclosed in this Schedule 13D about Ms. Kelley, Mr. Spain,
Ms. Stampley and Mr. Pitts is contained in A.I. through A.IV. above.
C. FIRST GLOBAL SECURITIES, INC./NOBLE B. TRENHAM
First Global's principal business address is 790 East Colorado
Boulevard, Suite 500, Pasadena, California 91101. First Global is a broker
dealer. During the past five years, First Global has not been convicted in
a criminal proceeding (excluding traffic violations or similar
misdemeanors) and has not been a party to a civil proceeding of a judicial
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect to
such laws.
Noble B. Trenham is First Global's Co-Chairman and Chief Investment
Officer. Susan W. Trenham is First Global's Chief Executive Officer and
Co-Chairman. The following information is supplied with respect to Mr.
Trenham and Ms. Trenham.
I. (a) Noble B. Trenham
(b) Mr. Trenham's business address is 790 East Colorado Boulevard,
Suite 500, Pasadena, California 91101.
(c) Mr. Trenham's principal occupation of employment is Co-Chairman
and Chief Investment Officer of First Global.
(d)-(e) During the last five years, Mr. Trenham has not been convicted
in a criminal proceeding (excluding traffic violations or similar
misdemeanors) and has not been a party to a civil proceeding of a
judicial administrative body of competent jurisdiction and as a result
of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
On July 23, 1987, the Securities and Exchange Commission filed a civil
injunctive action against Mr. Trenham, First Wilshire Securities
Management Inc. ("First Wilshire") and Frederick Astman, alleging
violations of (i) Section 13(d) of the Securities Exchange Act of 1934
and Rules 13d-1 and 13d-2 promulgated thereunder as a result of First
Wilshire's failure to properly and timely disclose its purpose or
effect of changing or influencing the control of at least eight public
companies while it beneficially owned at least five percent of the
outstanding shares of such companies, (ii) Section 206(2) of the
Investment Advisers Act of 1940 (the "Advisers Act") regarding (A) the
aggregate concentrations of shares accumulated by the defendants in
their clients' accounts and failing to disclose to their clients the
adverse consequences of such concentrations and (B) the
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defendants' failure to disclose multiple instances of conflicts and
potential conflicts of interest between First Wilshire and its clients
as a result of seeking and, in certain instances, receiving fees from
various issuers and entities in which the defendants had invested
client funds and (iii) Section 206(3) of the Advisers Act by effecting
transactions between a charitable foundation and the foundation's
president, both of whom were clients, without statutorily required
disclosure or permission. Without admitting or denying the allegations
of the complaint, Mr. Trenham, First Wilshire and Mr. Astman each
submitted consents to the entry of final judgments permanently
enjoining and restraining them from further violations of those
provisions of the federal securities laws which they were alleged to
have violated.
(f) Mr. Trenham is a citizen of the United States.
II. (a) Susan W. Trenham
(b) Ms. Trenham's business address is 790 East Colorado Boulevard,
Suite 500, Pasadena, California 91101.
(c) Ms. Trenham's principal occupation of employment is Chief
Executive Officer and Co-Chairman of First Global.
(d)-(e) During the last five years, Ms. Trenham has not been convicted
in a criminal proceeding (excluding traffic violations or similar
misdemeanors) and has not been a party to a civil proceeding of a
judicial administrative body of competent jurisdiction and as a result
of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
(f) Ms. Trenham is a citizen of the United States.
ITEM 3 SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
FRM. FRM used working capital to purchase the shares of Common Stock
---
of the Company.
KELLEY. Ms. Kelley used personal funds to purchase the shares of
------
Common Stock of the Company.
FIRST GLOBAL. First Global used working capital to purchase the
------------
shares of Common Stock.
TRENHAM. Mr. Trenham used personal funds to purchase the shares of
-------
Common Stock.
11 of 21
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ITEM 4 PURPOSE OF TRANSACTION
On February 12, 1997, Mr. Trenham contacted Ms. Kelley at FRM, as a
producer in the rice milling industry, to explore whether Ms. Kelley or FRM
would be interested in making an investment in the Company through a private
purchase of shares of Common Stock of the Company which Mr. Trenham understood
would become available in the near future. Mr. Trenham and his investment
advisory firm, First Global, have followed the Company for an extended period of
time and Mr. Trenham had recommended that a number of his clients invest in the
Company.
Ms. Kelley ultimately decided to proceed with the purchase and on March 10,
1997 FRM purchased 171,933 shares and Ms. Kelley purchased 16,400 shares. None
of TPG, FRM or Ms. Kelley owned shares of Common Stock prior to March 10, 1997.
Mr. Trenham and Ms. Kelley also discussed the long term performance of the
Company, the possibility of enhancing shareholder value under new management and
the extent of shareholder dissatisfaction with current management and its
performance. In March 1997, Powell engaged the services of First Global to
provide investment banking and financial services in connection with Powell's
consideration of a possible consent and/or proxy solicitation with respect to
the Common Stock (as described below).
During the period from June 9, 1997 through June 16, 1997, Powell and Mr.
Trenham met with certain shareholders of the Company to discuss the Company's
performance and to ascertain the level of support for a consent/proxy
solicitation to replace the board of directors of the Company, if Powell decided
to undertake one. Although certain of those shareholders indicated they were
inclined to support Powell if it undertook a consent/proxy solicitation, no
agreement, arrangement or understanding was reached between Powell and any such
shareholders with respect to such support or with respect to any other matters
pertaining to the Company or the Common Stock. Each of the Filing Persons
expressly disclaims beneficial ownership of any shares of Common Stock other
than its, his or her own. A list of names of such shareholders is attached to
this Schedule 13D as Annex A.
On July 17, 1997 and July 18, 1997, Powell and Mr. Trenham met with or
contacted certain shareholders of the Company solely for the purpose of asking
them to join Ms. Kelley and FRM in a request to the Company for a list of
shareholders and for a special meeting of shareholders to be held on September
9, 1997. Although certain of those shareholders elected to submit requests to
the Company for the list of shareholders and/or for the calling of a special
meeting, no agreement, arrangement or understanding was reached between Powell
and any such shareholders with respect to acquiring, holding, voting or
disposing of Common Stock or any other matters pertaining to the Company or the
Common Stock. Certain of the shareholders described in this paragraph are
clients of First Global, and therefore, from time to time, call upon Mr. Trenham
for advice with respect to matters relating to their shares of Common Stock.
Neither Mr. Trenham nor First Global has any discretionary accounts. First
Global and Mr. Trenham expressly disclaim beneficial ownership of any Common
Stock other than the shares owned by First Global and Mr. Trenham.
On July 17, 1997, Powell and Mr. Trenham met with Mr. Gerald D. Murphy, the
chief executive officer of the Company, to discuss Powell's desire to enhance
shareholder value for the
12 of 21
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benefit of all shareholders of the Company, the actions taken by Powell, as
described above, and Powell's interest in engaging in a consent/proxy
solicitation to remove the existing directors and to replace them with Powell's
nominees. Mr. William H. Burgess, a director of the Company and the owner of
208,735 shares of Common Stock, was also present at the meeting. Mr. Trenham and
Powell had previously met with Mr. Burgess on several occasions regarding the
possibility of his supporting Powell's efforts to enhance shareholder value and
replace management either by acquiring his shares or by his joining with the
Filing Persons in their efforts to achieve these purposes. Mr. Burgess expressed
unwillingness to sell his shares or to join with the Filing Persons until a
meeting could be held with Mr. Murphy. At the meeting with Mr. Murphy, Ms.
Kelley expressed the willingness of Powell to facilitate a sale of the Common
Stock owned by Mr. Murphy and his son, Douglas A. Murphy, the President and
Chief Operating Officer of the Company. Ms. Kelley also outlined various other
terms and conditions including Powell's willingness to allow the Murphys to
remain in a consulting capacity for a period of time in order to effect an
orderly transition of the Board in the event that the Board and management
decided not to resist the proposed consent/proxy solicitation. Mr. Murphy asked
for a three week period to consider the proposals and to talk to shareholders.
Ms. Kelley indicated that they were prepared to move forward promptly and
requested another meeting on July 18, 1997 at 9:00 a.m. At the meeting, Powell
also delivered written demands, executed by FRM, Ms. Kelly and certain other
shareholders for a list of the Company's shareholders to permit Powell to
communicate with other shareholders of the Company and a written consent, with
respect to the matters described below, from FRM with respect to 171,933 shares
of Common Stock, or 3.6% of the shares outstanding at June 15, 1997, thereby
establishing July 17, 1997 as the record date for the consent solicitation
described below under applicable California law.
On July 18, 1997, Powell and Mr. Trenham met again briefly with Mr. Murphy,
who was also accompanied by his lawyer, Mr. Robert H. Goon of Jeffer, Mangels,
Butler & Marmaro LLP, and delivered a request to the Company, on behalf of FRM,
Ms. Kelley and other shareholders of the Company who in the aggregate own at
least ten percent of the outstanding Common Stock, to hold a special meeting of
shareholders on September 9, 1997. Mr. Goon, on behalf of Mr. Murphy, stated Mr.
Murphy's rejection of Powell's proposals to nominate and/or elect Powell's
nominees as directors of the Company and any desire to sell his shares of Common
Stock. Mr. Goon, on behalf of the Company, also rejected the form in which the
request for the list of shareholders and request for a special meeting were
submitted on the basis that the persons executing the requests, while perhaps
beneficial holders, were not the record holders of the shares. Mr. Goon also
expressed his view that it appeared that the Filing Persons had violated the
federal securities laws.
After the meetings on July 17 and 18, through intermediaries, Mr. Murphy
indicated a possible willingness to sell his shares in the Company at a price
of $25.00 per share, more than twice the stock's trading price. Powell
disregarded Mr. Murphy's offer in the belief that it represented neither a
realistic proposal (in light of the then current trading price for the stock)
nor a good faith offer to sell his shares. As a result of Mr. Murphy's rejection
of Powell's proposals, Powell determined to proceed with the consent and proxy
solicitation described below.
Powell intends to solicit consents from the Company's shareholders in order
to remove all members of the present board of directors, amend the Company's
bylaws to require the Company to call a special meeting of shareholders to elect
directors and make other changes to the bylaws in furtherance of the foregoing.
13 of 21
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On July 25, 1997, TPG, FRM and Ms. Kelley filed with the Securities and
Exchange Commission (the "Commission") a preliminary consent statement on
Schedule 14A (the "Consent Statement"), which consent statement solicits consent
to action by shareholders of the Company in lieu of a meeting which would:
(1) remove all current members of the board of directors of the
Company;
(2) amend the bylaws of the Company to require the Company to call a
special meeting of shareholders to be held forty-five (45) days after the
date the bylaw amendment is adopted (the "Special Meeting") for the purpose
of electing directors and to prohibit the use of corporate funds in
connection with the Special Meeting except as necessary for the conduct of
the Special Meeting;
(3) amend the bylaws of the Company to set the authorized number of
directors at seven; and
(4) amend the bylaws of the Company to limit the power of the officers
of the Company to take certain actions during the pendency of the Special
Meeting.
A copy of the Consent Statement is attached to this Schedule 13D as Exhibit
1 and is incorporated herein by reference.
Powell, while disagreeing with the Company's position regarding the request
for a special meeting of shareholders to be held on September 9, 1997, intends
to correct any technical deficiencies in the requests for the special meeting
and to resubmit the requests in due course. Powell intends to file with the
Commission a preliminary proxy statement on Schedule 14A (the "Proxy
Statement"), pursuant to which Powell intends to solicit proxies from the
Company's shareholders, in connection with such special meeting or the special
meeting of shareholders to be called by the Company pursuant to the Consent
Statement, (i) to remove all of the current members of the board of directors of
the Company, (ii) to amend the bylaws of the Company to set the number of
directors of the Company at seven and (iii) to fill vacancies on the board
created by such removal. In the event that the consent solicitation is not
successful and the special meeting of shareholders on September 9, 1997 is not
held, Powell may solicit proxies with respect to the foregoing matters in
connection with the Company's Annual Meeting of Shareholders, which the Company
has indicated would be held on or about September 22, 1997. Powell believes that
under cumulative voting which will be applicable to the election of the
Company's directors at such special meeting of shareholders, Messrs. Gerald and
Douglas Murphy will own or control sufficient shares of Common Stock to insure
their election to the Board of Directors if they so desire, as Powell expects
they will.
William D. Blake, Robert Arthur Seale, Ms. Kelley, Eugene A. Cafiero and
Mr. Spain are Powell's nominees (the "Nominees") to fill the five vacancies that
would be created by the removal of the Company's current directors. Certain
information about each of the Nominees (except for Ms. Kelley and Mr. Spain
about whom information is provided as required in Item 2 of this Schedule 13D)
is attached to this Schedule 13D as Annex B.
On July 24, 1997, FRM filed a derivative complaint on behalf of the Company
and ARI against Gerald D. Murphy, Douglas A. Murphy, the Company and ARI in the
United States District Court, Central District of California. In the complaint,
FRM alleges (1) breach of
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<PAGE>
fiduciary duty, (2) waste of corporate assets and (3) illegal corporate loan.
The derivative complaint further requests injunctive relief prohibiting the
Company and ARI from making on-going payments on behalf of the Murphys and
requiring on-going indemnification by the Murphys to the Company and ARI. A copy
of the complaint is attached to this Schedule 13D as Exhibit 2.
In the event the consent and proxy solicitations are successful, the new
board of directors of the Company intends to restructure the Company's
management. The new board intends to elect Ms. Kelley as President and Chief
Executive Officer of the Company and John M. Spain as Managing Director of the
Company. Powell generally intends to reorganize the Company and ARI to reduce
their combined annual operating costs, expand their global sales, stabilize
relations with major customers and enter into new markets. Powell believes that
under new management it will be possible to refinance ARI's $100 million
principal amount of 13% Mortgage Notes at more favorable interest rates thereby
further reducing the Company's combined expenses. Powell expects to consider
elimination of the Company's non-core business operations through the possible
sale of such operations, although Powell at present has not identified any
specific assets or operations for elimination. Powell further expects to
consider combining the Company's operations with that of Powell, with FRM as a
wholly-owned subsidiary, but has no present plans to do so. In the event that
any such plan were proposed in the future, the combination of Powell, with FRM
as a wholly-owned subsidiary, with ARI would be subject to approval of
disinterested ERLY shareholders, if required, or, if required, approval of
Company directors not financially interested in any such plan. Except for the
election of officers described above, Powell does not currently have any
specific plans to implement its objectives and will require additional
information and time to analyze and understand fully the existing operations of
the Company before proposing any specific plans.
Upon a change in control of the Company which also results in a change in
control of ARI or in the event of certain changes in the composition of the
board of directors of ARI, the holders of ARI's 13% Mortgage Notes due 2002
shall have the right to require ARI to repurchase the Notes at a purchase price
of 101% of the accreted value of the notes as defined. In such event, Powell
may seek a waiver from lenders not to exercise such rights. Powell may also
seek, to the extent possible, to refinance such debt; however, the notes by
their terms are not redeemable prior to July 31, 1999 and then only at a
redemption price of 107% of par declining to 100% of par on July 31, 2001 and
thereafter.
Except as described above, the Filing Persons do not presently have any
other proposals or plans which would result in any event listed in items (a)
through (j) of Item 4 of Schedule 13D, although the Filing Persons reserve the
right to develop such plans or proposals.
ITEM 5 INTEREST IN SECURITIES OF THE ISSUER
(a)-(b) The following table sets forth information with respect to the
shares of Common Stock beneficially owned by each person or entity named in
Item 2 hereof.
Name Number of Shares % of Shares(1)
---- ---------------- -------------
Farmers Rice Milling Company, Inc. 171,933 3.6%
The Powell Group 171,933(2) 3.6%
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Nanette N. Kelley 188,333(3) 3.9%
John M. Spain 171,933(2) 3.6%
Mary Stampley 171,933(2) 3.6%
David Pitts 171,933(2) 3.6%
First Global Securities, Inc. 5 *
Noble B. Trenham 7(4) *
Susan W. Trenham 7(5) *
- ------------------------
*Less than 1%.
(1) Computed on the basis of 4,764,415 shares outstanding as of June 15, 1997 as
reported in the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1997.
(2) Includes 171,933 shares held by Farmers Rice Milling Company, Inc.
(3) Includes 171,933 shares held by Farmers Rice Milling Company, Inc. and
16,400 shares held of record by Ms. Kelley.
(4) Includes 5 shares held by First Global Securities, Inc. and 2 shares held of
record by Mr. Trenham.
(5) Includes 5 shares held of record by First Global Securities, Inc. and 2
shares held of record by Noble B. Trenham, Ms. Trenham's husband.
(c) None of the persons or entities named in paragraph (a) above have
purchased or sold any shares of Common Stock during the past 60 days.
(d) No persons other than FRM (and TPG as the parent of FRM), Ms. Kelley,
First Global and Mr. Trenham have the right to receive or power to
direct the receipt of dividends from, or the proceeds from the sale of,
their respective shares of Common Stock.
(e) Not applicable.
ITEM 6 CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
Except as described above, there are no contracts, arrangements,
understandings or relationship (legal or otherwise) among the persons named
in Item 2 and between such persons and any person with respect to any
securities of the Company, including but not limited to transfer or voting
of any of the securities, finder's fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of profits, division of profit or
loss, or the giving or withholding of proxies.
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<PAGE>
ITEM 7 MATERIAL TO BE FILED AS EXHIBITS.
1. Preliminary Consent Statement on Schedule 14A of The Powell Group,
Farmers Rice Milling Company, Inc. and Nanette N. Kelley, as filed
with the Securities and Exchange Commission on July 25, 1997.
2. Complaint filed by Farmers Rice Milling Company, Inc. against Gerald
D. Murphy, Douglas A. Murphy, ERLY Industries Inc. and American Rice,
Inc. on July 24, 1997 in the United States District Court, Central
District of California.
3. Joint Filing Agreement, dated July 24, 1997, pursuant to Rule 13d-
1(f)(1) among Farmers Rice Milling Company, Inc., The Powell Group,
Nanette N. Kelley, First Global Securities, Inc. and Noble B. Trenham.
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<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: July 24, 1997 The Powell Group
By: /s/ Nanette N. Kelley
----------------------------
Name: Nanette N. Kelley
Title: President and Chief Executive Officer
Date: July 24, 1997 Farmers Rice Milling Company, Inc.
By: /s/ Nanette N. Kelley
----------------------------
Name: Nanette N. Kelley
Title: President and Chief Executive Officer
Date: July 24, 1997 /s/ Nanette N. Kelley
-------------------------------
Nanette N. Kelley
Date: July 24, 1997 First Global Securities, Inc.
By: /s/ Noble B. Trenham
-----------------------------
Name: Noble B. Trenham
Title: Co-Chairman
Date: July 24, 1997 /s/ Noble B. Trenham
--------------------------------
Noble B. Trenham
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<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
1. Preliminary Consent Statement on Schedule 14A of The Powell
Group, Farmers Rice Milling Company, Inc. and Nanette N.
Kelley, as filed with the Securities and Exchange Commission on
July 25, 1997.
2. Complaint filed by Farmers Rice Milling Company,
Inc. against Gerald D. Murphy, Douglas A.
Murphy, ERLY Industries Inc. and American Rice,
Inc. on July 24, 1997 in the United States
District Court, Central District of California.
3. Joint Filing Agreement, dated July 24, 1997,
pursuant to Rule 13d-1(f)(1) among Farmers Rice
Milling Company, Inc., The Powell Group, Nanette
N. Kelley, First Global Securities, Inc. and
Noble B. Trenham.
</TABLE>
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<PAGE>
ANNEX A
-------
LIST OF CERTAIN SHAREHOLDERS OF ERLY INDUSTRIES, INC.
Mr. David Yocum IV Mr. Leonard Hobbs
Alice Sidney Oil Co. 12218 Tweed Lane
106 Main Street #310 Los Angeles, California 90049
El Dorado, Arkansas 71730
Jeff Dwight
Mallard Investments
106 Main Street, Suite 310
El Dorado, Arkansas 71730
Kennedy Capital Management, Inc.
10829 Olive Boulevard
St. Louis, Missouri 63141
Gruntal and Co.
2135 Center Avenue
Fort Lee, New Jersey 07024-5893
Westrock Advisors, Inc.
230 Park Avenue
New York, New York 10169
Michael E. Portnoy
Trust Advisors LLC
One Morningside Drive North
Westport, Connecticut 06880
Gary H. Driggs
3007 North 67th Place
Scottsdale, Arizona 85251
William H. Burgess
550 Palisades Drive
Palm Springs, California 92262
The Seidler Cos.
515 South Figueroa Street
Los Angeles, California 90071
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<PAGE>
ANNEX B
-------
CERTAIN INFORMATION ABOUT THE POWELL NOMINEES
(other than Ms. Kelley and Mr. Spain whose information is
provided elsewhere in this Schedule 13D)
1. WILLIAM D. BLAKE. Mr. Blake's business address is P. O. Box 1447,
----------------
Lake Charles, Louisiana 70602. Mr. Blake's principal occupation or employment is
serving as the General Manager of Quatre Parish Company and John A. Bel Estate,
and President of The Lacassne Company, companies primarily focused in the
agricultural/land holdings business. During the last five years, Mr. Blake has
not been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) and has not been a party to a civil proceeding of a
judicial administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws. Mr.
Blake is a citizen of the United States. Mr. Blake beneficially owns 14,130
shares of Common Stock of ERLY Industries, Inc. On June 24, 1997, Mr. Blake
purchased 1,600 shares of Common Stock on the open market for a price of $10.25
per share. On July 7, 1997, Mr. Blake purchased 2,000 shares of Common Stock on
the open market for a price of $11.00 per share. On July 21, 1997, Mr. Blake
purchased 1,000 shares of Common Stock on the open market for a price of $10.625
per share.
2. ROBERT ARTHUR SEALE. Mr. Seale's business address is 1331 Lamar
-------------------
Street, Suite 1700, Houston, Texas 77010. Mr. Seale is retired. His principal
occupation or employment before his retirement was a senior partner and
administrative head of the Personal Tax & Estates Group of the law firm Vinson &
Elkins in Houston, Texas. During the last five years, Mr. Seale has not been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) and has not been a party to a civil proceeding of a judicial
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws. Mr.
Seale is a citizen of the United States.
3. EUGENE A. CAFIERO. Mr. Cafiero's business address is 400 Captain
-----------------
Neville Drive, Waterbury, Connecticut 06705. Mr. Cafiero's principal occupation
or employment is serving as the Chairman of Voltarc Technologies, Inc., a major
manufacturer of specialty lamps and wiring devices for germicidal, aerospace,
reprographic, illuminated sign and other applications. During the last five
years, Mr. Cafiero has not been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) and has not been a party to a civil
proceeding of a judicial administrative body of competent jurisdiction and as a
result of such proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws. Mr. Cafiero is a citizen of the United States.
Neither Mr. Seale nor Mr. Cafiero beneficially owns any shares of Common
Stock of ERLY Industries, Inc.
21 of 21
<PAGE>
PRELIMINARY CONSENT STATEMENT
--SUBJECT TO COMPLETION--
PRELIMINARY COPY
IMPORTANT MATERIALS FOR SHAREHOLDERS OF ERLY INDUSTRIES INC.
CONSENT STATEMENT OF
THE POWELL GROUP
FARMERS RICE MILLING COMPANY, INC.
NANETTE N. KELLEY
Definitive copies of this solicitation statement, the accompanying letter
and the enclosed form of written consent are expected to be furnished by and
on behalf of The Powell Group, Farmers Rice Milling Company, Inc. and Nanette
N. Kelley (collectively, "The Powell Group") on or about August 22, 1997, in
connection with the solicitation by The Powell Group from the holders of
shares of common stock, par value $.01 per share (the "Common Stock"), of ERLY
Industries Inc., a California corporation ("ERLY" or the "Company"), of
written consents to take the following actions without a shareholders'
meeting, as permitted by California law:
(1) remove all current members of the Board of Directors, such members
being at the present time, Gerald D. Murphy, Douglas A. Murphy, William
H. Burgess, Bill J. McFarland and Alan M. Wiener, and any other person
or persons elected or appointed to the Board of Directors of the
Company prior to the effective date of the shareholder action in
addition to or in lieu of any of such individuals to fill any newly-
created directorship or vacancy on the Board of Directors of the
Company, or otherwise;
(2) amend the Bylaws of the Company to require the Company to call a
special meeting of shareholders to be held 45 days after the date the
bylaw amendment is adopted (the "Special Meeting") for the purpose of
electing directors and to prohibit the use of corporate funds in
connection with the Special Meeting except as necessary for the conduct
of the Special Meeting;
(3) amend the bylaws of the Company to set the authorized number of
directors at seven; and
(4) amend the Bylaws of the Company to limit the power of the officers of
the Company to take certain actions during the pendency of the special
meeting to be called described in (2) above (together with (1), (2) and
(3), the "Proposals").
Shareholders of ERLY are being asked to express their consent to the
Proposals by MARKING, SIGNING and DATING the enclosed BLUE consent card and
mailing it in the enclosed postage paid envelope provided.
The Powell Group believes that as of July 17, 1997 (the "Record Date"),
there were 4,764,415 shares of Common Stock issued and outstanding. As of such
date, The Powell Group was the beneficial owner of 171,933 shares of Common
Stock. In addition Nanette N. Kelley, the Chief Executive Officer and
principal shareholder of The Powell Group, was the record and beneficial owner
of an additional 16,400 shares of Common Stock. Taken together, such shares
represent approximately 3.9% of the number of shares of Common Stock reported
by the Company to be outstanding. See "Proposals--Consents Required."
The principal executive offices of the Company are located at 10990 Wilshire
Boulevard, Suite 1800, Los Angeles, California 90024, and its phone number is
(213) 879-1480.
1
<PAGE>
THE POWELL GROUP RECOMMENDS THAT
YOU CONSENT TO THE PROPOSALS
REASONS FOR THE CONSENT SOLICITATION
The Powell Group believes that shareholders should adopt the Proposals as
promptly as practicable so that the Board of Directors may be replaced with a
slate of nominees, each of whom is committed to enhancing value for all
shareholders by turning the Company around and making it profitable on a
consistent basis. The Powell Group believes that the current management of
ERLY is entrenched and ineffective, has not operated the Company so as to
enhance shareholder value and lacks the capacity to manage the Company for the
benefit of its shareholders over the long term. The Powell Group believes that
management, particularly Gerald D. Murphy and his son Douglas A. Murphy, is
interested in running the Company for its own benefit, even when its actions
may be to the detriment of shareholders. In general, The Powell Group believes
that current management is so entrenched and focused on sustaining and
enriching itself that the only viable option for ERLY's shareholders is to
begin the process of replacing management entirely.
Since 1987, the management of ERLY has done virtually nothing to enhance the
value of the Company's Common Stock. During this period, the Company has
suffered through several failed diversification attempts, a liquidity crisis
which brought the Company close to bankruptcy, an inability to repay its
public debt at maturity in 1993, delisting of its Common Stock from NASDAQ for
nearly a year, over leverage with very expensive mortgage notes and a dismal
return to shareholders. The Company's Common Stock has woefully under-
performed the stock market since 1987. In 1987, ERLY stock traded at $10.125
per share (as adjusted for stock dividends in the interim years); as of July
22, 1997, it traded at $11.00 per share. During the same time period, the Dow
Jones Industrial Average has increased approximately 245% while ERLY's stock
price has increased at a rate of less than 1% per year.
On July 17, 1997, The Powell Group met with Mr. Gerald D. Murphy, the Chief
Executive Officer of the Company, to discuss The Powell Group's desire to
enhance shareholder value for the benefit of all shareholders of the Company.
The Powell Group also explained that in order to achieve its goals of
enhancing shareholder value that it was willing to engage in a consent/proxy
solicitation to remove the existing directors and to replace them with The
Powell Group's qualified and experienced nominees. At the meeting, Ms. Nanette
N. Kelley, the President and Chief Executive Officer of The Powell Group,
expressed The Powell Group's willingness to facilitate a sale of the Common
Stock owned by Mr. Gerald Murphy and Mr. Douglas Murphy, the President and
Chief Operating Officer of the Company, at or near fair market value. Ms.
Kelley also outlined various other terms and conditions including The Powell
Group's willingness to allow the Murphys to remain in a consulting capacity in
order to effect an orderly transition of the Board in the event that the Board
and management decided not to resist the proposed consent/proxy solicitation.
Mr. Murphy asked for a three-week period to consider the proposals and to talk
to shareholders. During the meeting, it became apparent that Mr. Murphy had
never talked to certain significant shareholders of the Company, including
Kennedy Capital Management, Inc., which beneficially owns 585,515 shares of
Common Stock, approximately 12.35% of the shares outstanding. Ms. Kelley
indicated that The Powell Group was prepared to move forward promptly and
requested another meeting on July 18, 1997 at 9:00 a.m. On July 18, 1997, The
Powell Group met again briefly with Mr. Murphy, whose counsel stated Mr.
Murphy's rejection of The Powell Group's proposals to nominate and/or elect
The Powell Group's nominees as directors of the Company and indicated that Mr.
Murphy did not wish to sell his shares of Common Stock.
After the meetings on July 17 and 18, through intermediaries, Mr. Murphy
indicated a possible willingness to sell his shares in the Company at a price
of $25.00 per share, more than twice the stock's trading price. The Powell
Group disregarded Mr. Murphy's offer in the belief that it represented neither
a realistic proposal (in light of the then current trading price for the
stock) nor a good faith offer to sell his shares. As a result of Mr. Murphy's
rejection of The Powell Group's proposals, The Powell Group has determined to
proceed with the consent and proxy solicitation.
In the event Powell's consent solicitation and proxy solicitation are
successful, the new board of directors (the "Powell Board") intends to
restructure the Company's management and to elect Ms. Kelley as the President
and Chief Executive Officer and Mr. Spain as the Managing Director of the
Company.
2
<PAGE>
SUMMARY OF CONSENT PROCEDURE
The Powell Group believes that the Proposals will become effective on the
date when the written consent of holders of a majority of the shares of the
Company's Common Stock outstanding on the Record Date is delivered to ERLY. In
order to facilitate prompt adoption of the Proposals, The Powell Group
requests that you give your consent immediately, but not later than ,
1997.
A consent executed by a shareholder may be revoked in writing at any time
prior to the time that written consents of the number of shares required to
authorize the proposed action have been filed with the secretary of the
Company. The Powell Group intends to deliver executed consents to the Company
once The Powell Group has obtained valid and unrevoked consents representing a
majority of the issued and outstanding shares of Common Stock of the Company
as of the record date. Since The Powell Group cannot predict the date on which
it will receive a majority of the consents, the period within which a consent
may be revoked is uncertain.
YOUR CONSENT IS IMPORTANT
THE POWELL GROUP RECOMMENDS THAT YOU CONSENT TO THE PROPOSALS. PLEASE MARK,
SIGN AND DATE THE ENCLOSED BLUE CONSENT CARD AND MAIL IT IN THE ENCLOSED
POSTAGE PAID ENVELOPE PROMPTLY. REMEMBER, FAILURE TO RETURN YOUR CONSENT WILL
HAVE THE SAME EFFECT AS VOTING AGAINST THE PROPOSALS.
The Powell Group has retained D.F. King & Co., Inc. ("D.F. King") to assist
in the solicitation. If your shares are held in your name, please mark, sign,
date and mail the enclosed BLUE consent card to D.F. King in the postage-paid
envelope provided. If your shares are held in the name of a brokerage firm,
bank nominee or other institution, you should receive a voting instruction
form and envelope from such institution which should be used to give your
instructions to the person responsible for your account. Only that institution
can vote your shares and only upon receipt of specific instructions from you.
Remember, no matter how many shares you own, your consent is important. Please
act promptly in executing and mailing your BLUE consent.
If you have any questions about executing your consent or require
assistance, please contact:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
( ) - (call collect) or
CALL TOLL FREE: (800) -
3
<PAGE>
THE POWELL GROUP
The Powell Group is a diversified holding company based in Baton Rouge,
Louisiana owning and operating subsidiaries in the business of rice milling,
rice farming and rice hull-fired power generation. It also has interests in
radio broadcasting, travel management, land development, commercial real
estate development and holdings, timber holdings and residential construction.
The Powell Group is one of the largest privately-owned companies in the
southern United States. As of the date hereof, The Powell Group's wholly-owned
subsidiary, Farmers Rice Milling Company, Inc., a Louisiana corporation
("Farmers Rice"), owns an aggregate of 171,933 shares of the Company's common
stock and Nanette N. Kelley, President and Chief Executive Officer of each of
The Powell Group and Farmers Rice, owns an aggregate of 16,400 shares of the
Company's common stock, together, representing in the aggregate approximately
3.9% of the Common Stock currently outstanding. Accordingly, The Powell Group
believes that its interests are aligned with the interests of all ERLY
shareholders. All references to The Powell Group herein shall include Farmers
Rice. See "Proposals."
In the event this Consent Solicitation (and The Powell Group's related proxy
solicitation described below) is successful, the new board of directors of the
Company intends to restructure the Company's management as the first step in
its efforts to enhance shareholder value. The new board intends to elect
Nanette N. Kelley, The Powell Group's President and Chief Executive Officer,
as President and Chief Executive Officer of the Company, and John M. Spain,
The Powell Group's Managing Director, as Managing Director of the Company. The
Powell Group generally intends to reorganize the Company and its 81% owned
subsidiary, American Rice, Inc. ("ARI"), to reduce their combined annual
operating costs, expand their global sales, stabilize relations with major
customers and enter into new markets. The Powell Group believes that under new
management it will be possible to refinance ARI's $100 million principal
amount of 13% Mortgage Notes at more favorable interest rates thereby further
reducing the Company's combined expenses. The Powell Group expects to consider
elimination of the Company's non-core business operations through the possible
sale of such operations, although The Powell Group at present has not
identified any specific assets or operations for elimination. The Powell Group
further expects to consider combining the Company's operations with that of
The Powell Group, with Farmers Rice as a wholly-owned subsidiary, but has no
present plans to do so. In the event that any such plan were proposed in the
future, the combination of The Powell Group, with Farmers Rice as a wholly-
owned subsidiary, with ARI would be subject to approval of disinterested ERLY
shareholders, if required, or, if required, approval of Company directors not
financially interested in any such plan. Except for the election of officers
described above, The Powell Group does not currently have any specific plans
to implement its objectives and will require additional information and time
to analyze and understand fully the existing operations of ERLY before
proposing any specific plans. Any actions undertaken, however, will be with a
view towards enhancing value for all ERLY shareholders.
4
<PAGE>
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
AND RELATED ADDITIONAL INFORMATION
Except as described herein and in the Annexes hereto, neither The Powell
Group, the other participants in this Consent Solicitation nor any of their
respective associates, (i) has engaged in or has a direct or indirect interest
in any transaction or series of transactions since the beginning of the
Company's last fiscal year or in any currently proposed transaction, to which
the Company or any of its subsidiaries is a party where the amount involved
was in excess of $60,000, (ii) is the beneficial or record owner of any
securities of the Company or any parent or subsidiary thereof, (iii) is the
record owner of any securities of the Company of which it may not be deemed to
be the beneficial owner, (iv) has been within the past year, a party to any
contract, arrangement or understanding with any person with respect to any
securities of the Company, or (v) has any agreement or understanding with
respect to future employment by the Company or any arrangement or
understanding with respect to any future transactions to which the Company
will or may be a party.
Additional information about The Powell Group and certain other persons is
set forth in Annex A.
See Annex B for information regarding persons who beneficially own more than
5% of the Common Stock and the ownership of the Common Stock by the management
of the Company.
REMOVAL OF DIRECTORS
Section 303 of the California Corporations Code states that any or all
directors may be removed without cause if the removal is approved by the
affirmative vote of a majority of the outstanding shares entitled to vote.
Directors of the Company, however, may not be elected by written consent of
the shareholders except by unanimous written consent of all shares entitled to
vote for the election of directors. Therefore, in addition to soliciting the
written consent of shareholders to remove the present Directors, The Powell
Group is soliciting the written consent of shareholders to Proposal 2, a
proposal to amend the Bylaws of the Company to require the Company to hold a
special meeting of shareholders for the purpose of electing directors to fill
the vacancies created by their removal. Farmers Rice, Ms. Kelley and certain
other shareholders of the Company, who together own in excess of 10% of the
issued and outstanding Common Stock have also requested, pursuant to the
Company's Bylaws and applicable California law, that the Company call a
special meeting of shareholders to be held September 9, 1997 for the purpose
of removing the directors (if the consent solicitation is not successful by
that date) and electing directors to fill the vacancies created by their
removal. The Company has rejected the form of in which the request for a
special meeting was submitted on the basis that the persons executing the
request, while perhaps beneficial holders, were not the record holders of the
shares. The Powell Group, while disagreeing with the Company's position,
intends to correct any technical deficiencies in the requests for the special
meeting and to resubmit the requests in due course.
The Powell Group intends to solicit proxies from shareholders for the
election of The Powell Group's slate of qualified and experienced nominees to
the Company's board of directors. The slate consists of the following
nominees:
WILLIAM D. BLAKE (64) has served since 1961 General Manager of Quatre Parish
Company and John A. Bel Estate and since 1988 as President of The Lacassane
Company, companies primarily focused in the agriculture/land holdings
business. Mr. Blake's experience extends particularly to the rice, timber, oil
and gas and real estate industries. Mr. Blake also manages a substantial block
of real estate in Louisiana. Mr. Blake has served on the Board of Directors of
the Arts and Humanities Council, the Chamber of Commerce, the Coordinating
Council on Drug Abuse, Kiwanis Club and Community Development Foundation. He
has also served on the Committee of 100 for Economic Development (Louisiana),
the Louisiana Association for Business and Industry and the Louisiana Council
for Fiscal Reform. Mr. Blake graduated from Louisiana State University in
1955.
5
<PAGE>
ROBERT ARTHUR SEALE (55) was a senior partner and administrative head of the
Personal Tax & Estates Group of the law firm Vinson & Elkins in Houston, Texas
until his retirement in March 1997. Mr. Seale had practiced law with Vinson &
Elkins since 1969. His practice focused on tax and financial structuring of
businesses involved in mining, aircraft manufacturing, thoroughbred racing and
breeding, banking and real estate development. During the last five years Mr.
Seale has been involved in the tax-free reorganizations of closely held
businesses and "split-offs" of corporations for business purposes. Mr. Seale
currently serves as the Chair of the University of Texas Health Science Center
Planned Giving Committee, President of The Vivian L. Smith Foundation for
Neurologic Research, President of The Lyons Foundation, Director of The
Margaret and J.A. Elkins, Jr. Foundation, Chairman of Child Advocates, Inc.
Endowment and a Director of Child Advocates, Inc. Mr. Seale is a Fellow of the
Texas Bar Association and a Fellow of the Houston Bar Association. He earned
both his undergraduate and Juris Doctor degrees from Louisiana State University
in 1964 and 1967, respectively.
NANETTE NOLAND KELLEY (38) has been the President and Chief Executive Officer
of The Powell Group since 1991. Ms. Kelley has served on the Board of Directors
of the Baton Rouge Symphony, the Council for a Better Louisiana, the Chamber of
Commerce, the Pennington Biomedical Research Foundation and the Louisiana State
University College of Business Administration Partnership for Excellence. Ms.
Kelley is the past Chairman of St. James Place, a continuing care retirement
center, the past Vice Chairman of the Academic Distinction Fund and is
currently the Vice Chairman of General Health Systems, an integrated health
care delivery system. Ms. Kelley also teaches at Louisiana State University,
both in the undergraduate and MBA programs.
EUGENE A. CAFIERO (71) has been Chairman of Voltarc Technologies, Inc., a
major manufacturer of specialty lamps and wiring devices for germicidal,
aerospace, reprographic, illuminated sign and other applications, since 1993.
From 1986 to 1993, Mr. Cafiero served as Chairman and Chief Executive Officer
of KD Holdings, Inc. and KDI Corporation, a diversified manufacturing company.
Mr. Cafiero also served as Chief Executive Officer of Ariadne Australia, Ltd.
and President and Chief Executive Officer of Mid-American Communications. Mr.
Cafiero is the past president and director of Keene Corporation, a manufacturer
of bearings, lighting fixtures, electronics and laminated products for printed
circuit boards and other applications; past president and chief operating
officer and vice chairman of Chrysler Corporation; principle founder of
Computerized Security Systems, maker of electronic locks for the lodging
industry. Mr. Cafiero is a graduate of Dartmouth College and holds a Master of
Science in Industrial Management from the Massachusetts Institute of Technology
and an Honorary Doctorate of Science from Wittenburg University. He has served
as an overseer at the Tuck School of Business and on the Visiting Committee of
the MIT Sloan School of Business Management.
JOHN M. SPAIN (48) has been the Managing Director of The Powell Group since
1995 responsible for subsidiary operations. From 1989 to 1995, Mr. Spain served
as the Station Manager and Director of New Operations for Baton Rouge
television station WBRZ-TV. Prior to that time, Mr. Spain was WBRZ-TV's News
Director. Mr. Spain is the current Chairman of the Baton Rouge Visitors and
Convention Committee and President of the Executive Committee for Louisiana
Arts and Science Center. He is the Past President of the Radio Television News
Director's Association and Past Chairman of the ABC Television Network's News
Advisory Board and has served on the National Accrediting Council for
Journalism and Mass Communication (AEJMC) and the National Board of Directors
of the American Heart Association.
THE PROXY SOLICITATION FOR THE ELECTION OF DIRECTORS IS SEPARATE FROM THIS
CONSENT SOLICITATION AND WILL COMMENCE AFTER THE SPECIAL MEETING OF
SHAREHOLDERS HAS BEEN CALLED AND A RECORD DATE FOR THAT MEETING HAS BEEN
ESTABLISHED. AT THE APPROPRIATE TIME, ALL SHAREHOLDERS WILL BE SENT PROXY
MATERIALS.
6
<PAGE>
PROPOSALS
Definitive copies of this Consent Statement and the accompanying form of
Consent Card are expected to be furnished by The Powell Group on or about
August 22, 1997, in connection with the solicitation by The Powell Group from
the holders of shares of Common Stock of written consents to take the
following actions without a shareholders' meeting, as permitted by California
law:
PROPOSAL (1) Remove the existing directors of the Board of Directors:
"RESOLVED, that each member of the Board of Directors of the Company, such
members consisting of Gerald D. Murphy, Douglas A. Murphy, William H.
Burgess, Bill J. McFarland and Alan M. Wiener, and any other person or
persons elected or appointed to the Board of Directors of the Company prior
to the effective date of this resolution in addition to or in lieu of any
of the aforenamed individuals to fill any newly created directorship or
vacancy on the Board of Directors of the Company, or otherwise, is hereby
removed and the office of each member of the Board of Directors is hereby
declared vacant."
PROPOSAL (2) Amend Article II, Section 3 of the Bylaws of the Company as
follows:
"RESOLVED, that Article II, Section 3 of the Bylaws be amended by adding
the following paragraph:
The President shall call a special meeting of the shareholders to be held
forty-five (45) days after the date this bylaw amendment is adopted, for
the purpose of electing directors to the Board of Directors. No corporate
funds shall be expended in connection with such special meeting, except as
such expenditures may be necessary for the ordinary conduct of the special
meeting."
The purpose of Proposal 2 is to (i) require the President of the Company to
call a special meeting for the purpose of electing directors and filling the
vacancies on the Board resulting from the directors' removal pursuant to
Proposal 1 of this Consent Solicitation and (ii) prohibit the officers of the
Company from spending corporate funds in connection with the special meeting
except as may be necessary for the ordinary conduct of the meeting. The effect
of Proposal 2 is to prohibit the corporate officers from using corporate funds
for extraordinary purposes in connection with the special meeting, for
example, commencing litigation against The Powell Group, while permitting
necessary expenditures such as renting a room where the meeting will be held.
PROPOSAL (3) Amend Article III, Section 2 of the Bylaws as follows:
"RESOLVED, that Article III, Section 2 of the Bylaws of the Company be
amended as follows:
Section 2. Number of Directors. The authorized number of directors of the
corporation shall be seven, until changed in accordance with applicable
law."
The Bylaws of the Company presently provide that the number of directors of
the Company shall be not less than five nor more than seven, and the exact
number is determined by resolution of the board. The Powell Group believes
that the Company's board of directors has set the exact number of directors at
five. The purpose of Proposal 3 is to set the number of directors of the
Company at seven. In the event this Consent Solicitation is successful, The
Powell Group intends to solicit proxies from the Company's shareholders for
the election of The Powell Group's slate of five director nominees. The Powell
Group believes that under cumulative voting which will be applicable to the
election of the Company's directors at the subsequent special meeting of
shareholders, Messrs. Gerald and Douglas Murphy will own or control sufficient
shares of Common Stock to insure their election to the Board of Directors if
they so desire as The Powell Group expects they will.
7
<PAGE>
PROPOSAL (4) Amend Article IV of the Bylaws of the Company as follows:
"RESOLVED, that Article IV of the Bylaws of the Company be amended by
adding the following Section:
Section 11. Limitations on the Powers of Officers. The officers of the
corporation shall not take any of the following actions during the pendency
of the special meeting to be called by the President pursuant to Article
II, Section 3 of these Bylaws:
1. Authorize or effect the issuance, or any agreement (including without
limitation any option or any securities having conversion rights) for
the issuance of shares of common or preferred stock which (a) taken in
the aggregate with all other shares so authorized, issued or subject to
agreements (including without limitation options and convertible
securities) authorized within the preceding 12 months, carry voting
rights amounting to 10% or more of the total voting rights of all shares
entitled to vote on any matter (other than voting rights required by law
or the listing requirements of the NASDAQ National Market), (b) are
entitled to vote separately as a class on any merger, consolidation or
sale of all or substantially all assets of the corporation (other than
voting rights required by law or the listing requirements of the NASDAQ
National Market) or (c) are entitled to redemption at the option of the
holder;
2. Authorize any agreement (including without limitation any option
agreement) providing for the sale by the corporation, otherwise than in
the ordinary course of business, of any assets having a book value taken
in the aggregate with the assets subject to all such agreements
authorized during the preceding 12 months, equal to or greater than 10%
of the total book value of all tangible assets of the corporation;
3. Purchase or acquire for or on behalf of the corporation shares of its
outstanding common stock amounting, when aggregated with all such
purchases or acquisitions during the preceding 12 months, to 10% or more
of the total number of shares outstanding at the end of the preceding
year;
4. Pay any dividend in the form of securities of the corporation other than
in the form of common stock;
5. Authorize or effect the issuance of any class or series of preferred
stock or debt security containing terms or provisions other than those
which are customary in preferred stock or debt security sold through
underwritten public offerings or through private placements of publicly
held corporations.
If any of the limitations enumerated above is held by a court of competent
jurisdiction to be unenforceable, the remaining limitations shall remain in
full force and effect in accordance with their terms."
The purpose of Proposal 4 is to limit the power of the officers of the
Company to take certain actions only during the pendency of the special
meeting to be called and held pursuant to Proposal 2. The Powell Group
believes these limitations will prevent actions which could be utilized to
make it more difficult for The Powell Group to effect the election of The
Powell Group nominees and generally conduct the consent and proxy
solicitations in a fair and open manner.
The accompanying BLUE consent card will be voted in accordance with the
shareholder's instruction on such BLUE consent card. As to the Proposals set
forth herein, shareholders may consent to the Proposals, withhold their
consent or abstain by marking the proper box in the BLUE consent card. If the
enclosed BLUE consent card is signed and returned and no direction is given,
it will be deemed to constitute consent to the Proposals.
The Powell Group seeks the consent of an absolute majority of the Company's
issued and outstanding stock in order to act on the Proposals set forth in
this consent statement.
BROKER NON-VOTES, ABSTENTIONS AND THE FAILURE TO RETURN A SIGNED CONSENT
WILL HAVE THE SAME EFFECT AS WITHHOLDING CONSENT TO THE PROPOSALS.
8
<PAGE>
CONSENTS REQUIRED
The written consent of an absolute majority of the outstanding Common Stock
is required to adopt and approve the Proposals. On July 17, 1997, Farmers Rice
delivered to the Company its written consent to the Proposals with respect to
an aggregate of 171,933 shares of Common Stock, or 3.6% of the outstanding
Common Stock on such date, establishing July 17 as the Record Date for this
solicitation pursuant to Section 701(b) of the California Corporations Code.
According to the Company's filings with the Securities and Exchange
Commission, as of June 15, 1997, there were 4,764,415 shares of Common Stock
issued and outstanding. The Powell Group believes that between June 15, 1997
and the Record Date, no significant issuances of Common Stock occurred.
Therefore, The Powell Group believes that as of the Record Date there were
4,764,415 shares of Common Stock issued and outstanding.
Each share of Common Stock entitles the Record Date holder to one vote on
each of the Proposals. Accordingly, based on the information known to The
Powell Group, written consents by holders representing 2,386,972 shares of
Common Stock will be required to adopt and approve the Proposals. Accordingly,
each abstention and broker non-vote with respect to the Proposals will have
the same effect as withholding consent to the adoption of the Proposals.
SPECIAL INSTRUCTIONS
If you were a record holder as of the close of business on the Record Date,
you may elect to consent to, withhold consent or abstain with respect to each
Proposal by marking the "CONSENT", "CONSENT WITHHELD" OR "ABSTAIN" box, as
applicable, underneath each such Proposal on the accompanying BLUE consent
card and signing, dating and mailing it promptly in the enclosed postage-paid
envelope.
IF THE SHAREHOLDER WHO HAS EXECUTED AND RETURNED THE CONSENT CARD HAS FAILED
TO CHECK A BOX MARKED "CONSENT", "CONSENT WITHHELD" OR "ABSTAIN" FOR ANY OF
THE PROPOSALS, SUCH SHAREHOLDER WILL BE DEEMED TO HAVE CONSENTED TO ANY SUCH
PROPOSAL.
YOUR CONSENT IS IMPORTANT
THE POWELL GROUP RECOMMENDS THAT YOU CONSENT TO THE PROPOSALS. PLEASE MARK,
SIGN AND DATE THE ENCLOSED BLUE CONSENT CARD AND MAIL IT IN THE ENCLOSED
POSTAGE-PAID ENVELOPE PROMPTLY. REMEMBER, FAILURE TO RETURN YOUR CONSENT WILL
HAVE THE SAME EFFECT AS WITHHOLDING CONSENT TO THE PROPOSALS.
If your shares are held in the name of a brokerage firm, bank nominee or
other institution, you should contact the person responsible for your account
and give instructions for your shares to consent. Only that institution can
execute a BLUE consent card with respect to your shares and only upon receipt
of specific instructions from you.
9
<PAGE>
THE CONSENT PROCEDURE
Section 603 of the California Corporations Code states that, unless
otherwise provided in the articles of incorporation, any action which may be
taken at any annual or special meeting of shareholders may be taken without a
meeting, without prior notice, if consents in writing, setting forth the
action so taken, shall be signed by the holders of outstanding shares having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. The Powell Group, as holder of approximately 3.9% of
the outstanding shares of Common Stock, has executed a consent form which
CONSENTS to the Proposals. In order to facilitate prompt adoption of the
Proposals, The Powell Group requests that you give your consent by , 1997.
IT IS CURRENTLY THE INTENTION OF THE POWELL GROUP TO DELIVER CONSENTS TO THE
COMPANY FOR FILING WITH THE SECRETARY OF THE COMPANY ONCE THE POWELL GROUP HAS
DETERMINED THAT VALID AND UNREVOKED CONSENTS REPRESENTING A MAJORITY OF THE
ISSUED AND OUTSTANDING SHARES OF COMMON STOCK AS OF THE RECORD DATE HAVE BEEN
OBTAINED. WHEN CONSENTS FOR A MAJORITY OF THE COMPANY'S COMMON STOCK HAVE BEEN
OBTAINED AND DELIVERED TO THE COMPANY, A SHAREHOLDER WILL BE UNABLE TO REVOKE
HIS OR HER CONSENT.
Since The Powell Group must receive consents from a majority of the
Company's outstanding shares in order for the Proposals to be adopted, a
broker non-vote or direction to withhold authority to vote on the blue card
will have the same effect as a "no" vote with respect to The Powell Group's
solicitation.
BROKER NON-VOTES, ABSTAINING OR NOT RETURNING A SIGNED CONSENT WILL HAVE THE
SAME EFFECT AS WITHHOLDING CONSENT TO THE PROPOSED ACTIONS. THE POWELL GROUP
URGES EACH SHAREHOLDER TO ENSURE THAT THE RECORD HOLDER OF HIS OR HER SHARES
MARKS, SIGNS, DATES AND MAILS THE ENCLOSED CONSENT AS SOON AS POSSIBLE.
VOTING; COSTS OF CONSENT SOLICITATION
Consents will be solicited by mail, telephone, facsimile and other
electronic means, telegram and/or personal solicitation, by officers,
employees and agents of The Powell Group, including its financial advisor,
First Global Securities and its employees. The Powell Board may also solicit
consents. No such persons shall receive additional compensation for such
solicitation. In addition, The Powell Group has retained D.F. King to act as
an advisor in connection with this consent solicitation. The Powell Group has
agreed to pay D.F. King a fee estimated not to exceed $ plus
reasonable out-of-pocket expenses for services in connection with this consent
solicitation. Approximately 50 persons will be used by D.F. King in its
solicitation efforts.
If your shares are registered in your own name, you may mail your consent to
The Powell Group in the postage paid envelope provided.
If your shares are held in "street name"--held by your brokerage firm or
bank--immediately instruct your broker or bank representative to execute The
Powell Group's BLUE consent card on your behalf. You should also mark, sign,
date and return your BLUE consent card (or voting instruction form) to your
broker or banker when you receive it in the mail. If you have additional
questions, please call:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
CALL: ( ) -
FAX: ( ) -
10
<PAGE>
The Powell Group anticipates that a total of approximately $750,000 will be
spent in connection with the consent solicitation and the related proxy
solicitation. Actual expenditures may vary materially from the estimate,
however, as many of the expenditures cannot be readily predicted. To date,
expenses of approximately $150,000 have been incurred in connection with the
solicitations. The entire expense of preparing, assembling, printing and
mailing this Consent Statement and any other consent soliciting materials and
the related proxy solicitation materials and the cost of soliciting consents
and proxies will initially be borne by The Powell Group. The Powell Group
believes that the actions it is taking are in the best interest of all the
Company's shareholders. Accordingly, if the members of the Board of the
Company are removed and the Bylaws of the Company are amended pursuant to this
consent solicitation and The Powell Board is elected pursuant to the related
proxy solicitation, The Powell Group intends to request reimbursement from the
Company for these expenses. This request will not be submitted to a vote of
the Company's shareholders. Banks, brokerage houses and other custodians,
nominees and fiduciaries may be requested to forward The Powell Group's
solicitation material to the beneficial owners of the shares they hold of
record, and The Powell Group will reimburse them for their reasonable out-of-
pocket expenses.
A consent executed by a shareholder may be revoked at any time before its
exercise by submitting a written, dated revocation of such consent covering
the same shares. A revocation may be in any written form validly signed by the
record holder as long as it clearly states that the consent previously given
is no longer effective and must be executed and delivered prior to the time
that the action authorized by the executed consent is taken. The revocation
may be delivered to The Powell Group, c/o ,
, Attn: . Although a revocation
delivered only to the Company will be effective to revoke a previously
executed consent, The Powell Group requests that if a revocation is delivered
to the Company, a photocopy of the revocation also be delivered to The Powell
Group, at the address set forth above, so that The Powell Group will be aware
of such revocation. The principal executive offices of the Company are located
at 10990 Wilshire Boulevard, Suite 1800, Los Angeles, California 90024, and
its phone number is (213) 879-1480.
YOUR CONSENT IS IMPORTANT. NO MATTER HOW MANY OR HOW FEW SHARES YOU OWN,
PLEASE CONSENT TO THE REMOVAL OF THE DIRECTORS AND THE OTHER PROPOSALS BY
MARKING, SIGNING, DATING AND MAILING THE ENCLOSED BLUE CONSENT PROMPTLY. ONLY
YOUR LATEST DATED CONSENT COUNTS. PLEASE ACT TODAY.
FAILURE TO RETURN YOUR CONSENT HAS THE SAME EFFECT AS A VOTE TO RETAIN THE
CURRENT DIRECTORS--DIRECTORS WHO SHOULD BE HELD RESPONSIBLE FOR THE WOEFUL
PERFORMANCE OF YOUR STOCK.
11
<PAGE>
ANNEX A
The names, business addresses, principal business occupations (unless
disclosed elsewhere in this Consent Solicitation) and number of shares of
Common Stock beneficially owned as of the date hereof, unless otherwise noted,
by The Powell Group and other participants in this solicitation are set forth
below. The number of shares of Common Stock beneficially owned includes shares
in which the persons set forth in the table have either investment or voting
power. Unless otherwise indicated, all of such interests are owned directly,
and the indicated person or entity has sole voting and investment power.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------- -------------------- ----------------
<S> <C> <C>
The Powell Group(1)....................... 171,933(2) 3.6%
Farmers Rice Milling Company, Inc.(1)..... 171,933 3.6%
Nanette N. Kelley(1)(3)................... 188,333(4) 3.9%
First Global Securities, Inc.(5).......... 5 *
Noble B. Trenham(6)....................... 7(7) *
William D. Blake(8)....................... 14,130 *
John M. Spain(1).......................... 171,933(2) 3.6%
Eugene A. Cafiero(9)...................... 0
Robert Arthur Seale(10)................... 0
</TABLE>
- --------
* Less than 1%.
(1) The business address of such person is P.O. Box 788, Baton Rouge,
Louisiana 70821.
(2) Includes 171,933 shares held by Farmers Rice Milling Company, Inc.
(3) Ms. Kelley's husband is Timothy Kelley. Mr. Kelley may be deemed to share
beneficial ownership with respect to some or all of the shares owned by
Ms. Kelley. Mr. Kelley disclaims beneficial ownership of such shares.
(4) Includes 171,933 shares held by Farmers Rice Milling Company, Inc. and
16,400 shares held of record by Ms. Kelley.
(5) First Global Securities, Inc. is a broker dealer. The business address of
First Global Securities, Inc. is 790 East Colorado Boulevard, Suite 500,
Pasadena, California 91101.
(6) Mr. Trenham's principal business occupation is serving as Co-Chairman and
Chief Investment Officer of First Global Securities, Inc. The business
address of Mr. Trenham is 790 East Colorado Boulevard, Suite 500,
Pasadena, California 91101. Mr. Trenham's wife is Susan W. Trenham whose
principal business occupation is Chief Executive Officer and Co-Chairman
of First Global Securities, Inc. Ms. Trenham may be deemed to share
beneficial ownership with respect to the shares owned by First Global
Securities, Inc. and Mr. Trenham.
(7) Includes 5 shares held by First Global, Securities, Inc. and 2 shares held
of record by Mr. Trenham.
(8) The business address of such person is P.O. Box 1447, Lake Charles,
Louisiana 70602. Mr. Blake's wife is Kay Blake. Ms. Blake may be deemed
to share beneficial ownership with respect to some or all of the shares
owned by Mr. Blake. Ms. Blake disclaims beneficial ownership of such
shares.
(9) The business address of such person is 400 Captain Neville Drive,
Waterbury, Connecticut 06705.
(10) The business address of such person is 1331 Lamar Street, Suite 1170,
Houston, Texas 77010.
A-1
<PAGE>
PURCHASES AND SALES BY FARMERS RICE MILLING COMPANY, INC. WITHIN THE LAST TWO
YEARS:
<TABLE>
<CAPTION>
DATE NUMBER OF SHARES
---- ------------------
<S> <C>
3/10/97................................................... 171,933 (purchase)
PURCHASES AND SALES BY NANETTE N. KELLEY WITHIN THE LAST TWO YEARS:
<CAPTION>
DATE NUMBER OF SHARES
---- ------------------
<S> <C>
3/10/97................................................... 16,400 (purchase)
PURCHASES AND SALES BY WILLIAM D. BLAKE WITHIN THE LAST TWO YEARS:
<CAPTION>
DATES NUMBER OF SHARES
----- ------------------
<S> <C>
9/23/96................................................... 1,000 (purchase)
2/24/97................................................... 1,000 (purchase)
4/1/97.................................................... 2,000 (purchase)
4/16/97................................................... 1,000 (purchase)
4/17/97................................................... 1,000 (purchase)
6/24/97................................................... 1,600 (purchase)
7/7/97.................................................... 2,000 (purchase)
7/21/97................................................... 1,000 (purchase)
</TABLE>
A-2
<PAGE>
ANNEX B
Security Ownership of Certain Beneficial Owners
The following table sets forth as of the Record Date (unless otherwise
indicated), to the knowledge of The Powell Group and based on a review of
publicly available information, each person reported to own beneficially more
than 5% of the Company's outstanding Common Stock and each of the directors
and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS(1)
- ------------------- -------------------- -------------------
<S> <C> <C>
Gerald D. Murphy(2)(3)................. 1,565,634 30.2%
Douglas A. Murphy(2)(4)................ 609,069 11.8%
William H. Burgess(5).................. 208,735 4.4%
Richard N. McCombs(2)(6)............... 124,964 2.6%
Bill J. McFarland(2)(7)................ 11,779 *
Alan M. Wiener(2)(6)................... 0 --
Thurston F. Teele(6)(8)................ 0 --
Kennedy Capital Management, Inc.(9).... 585,518 12.35%
</TABLE>
- --------
* Less than 1%.
(1) Computed on the basis of 4,764,415 shares outstanding as of June 15, 1997
as reported in the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1997. The percentage of shares held assumes that
options or convertible notes held by the particular individual, if any,
have been exercised or converted, and no others.
(2) The address of such beneficial owner is 10990 Wilshire Boulevard, Suite
1800, Los Angeles, California 90024.
(3) Such information, unless otherwise indicated, is derived from a Form 4
dated July 7, 1997 filed by Mr. Gerald Murphy with the Securities and
Exchange Commission. Includes 195,293 shares owned directly by Mr. Gerald
Murphy's son, Douglas A. Murphy, and 5,050 shares held in trust for Mr.
Gerald Murphy's grandson. Also includes 76,533 shares which Douglas A.
Murphy has the right to acquire pursuant to outstanding stock options,
which information is derived from the Company's proxy statement relating
to the Company's 1996 Annual Meeting of Shareholders. Also includes
337,243 shares which Douglas A. Murphy has the right to acquire pursuant
to a convertible promissory note from the Company.
(4) Such information, unless otherwise indicated, is derived from a Form 4
dated July 7, 1997 filed by Mr. Douglas Murphy with the Securities and
Exchange Commission. Includes 76,533 shares which Mr. Douglas Murphy has
the right to acquire pursuant to outstanding stock options, which
information is derived from the Company's proxy statement relating to the
Company's 1996 Annual Meeting of Shareholders. Also includes 337,243
shares which Mr. Douglas Murphy has the right to acquire pursuant to a
convertible promissory note from the Company.
(5) Mr. Burgess' address is 550 Palisades Drive, Palm Springs, California
92262.
(6) Such information is derived from the Company's proxy statement relating to
the 1996 Annual Meeting of Shareholders.
(7) Such information is derived from a Form 5 dated May 12, 1997 filed by Mr.
McFarland with the Securities and Exchange Commission.
(8) Mr. Teele is the President of Chemtronics International, Inc., a
subsidiary of the Company. His address is 1133 20th Street, N.W.,
Washington, D.C. 20036.
(9) Such information is derived from a Schedule 13G dated February 7, 1997
filed by Kennedy Capital Management, Inc. with the Securities and Exchange
Commission. Kennedy Capital Management, Inc. is an investment advisor. The
address of Kennedy Capital Management, Inc. set forth in its Schedule 13G
is 10829 Olive Boulevard, St. Louis, Missouri 63141.
B-1
<PAGE>
IMPORTANT
Your vote is important, no matter how many shares you own. To support The
Powell Group, please promptly take these few easy steps:
1. If your shares are registered in your own name(s), please mark, sign, date
and mail the enclosed BLUE Consent Card in the postage-paid envelope provided.
2. If your shares are held in the name of a brokerage firm, bank nominee or
other institution, only it can sign a BLUE Consent Card with respect to your
shares and only after receiving your specific instructions. Accordingly,
please mark, sign, date and mail the enclosed BLUE Consent Card or voting
instruction form you received from the brokerage firm, bank nominee or other
institution in whose name your shares are held in the postage-paid envelope
provided. Please do so for each account you maintain. To ensure that your
shares are voted, you should also contact the person responsible for your
account and give instructions for a BLUE Consent Card to be issued
representing your shares.
3. After signing the enclosed BLUE Consent Card or voting instruction form,
do not sign or return any card or form sent to you by ERLY, not even as a vote
of protest. Remember, only your latest dated card will count.
If you have any questions about giving your consent or require assistance,
please call:
D.F. KING & CO., INC.
77 Water Street
New York, NY 10005
(212) 269-5550 (Collect)
or
CALL TOLL-FREE
(800) -
<PAGE>
ERLY INDUSTRIES INC.
CONSENT OF SHAREHOLDERS TO ACTION WITHOUT A MEETING
THIS CONSENT IS SOLICITED BY
THE POWELL GROUP
The undersigned, a shareholder of record of ERLY INDUSTRIES INC. ("ERLY" or
the "Company"), hereby consents pursuant to Section 603 of the California
Corporations Code, with respect to all of the shares of Common Stock, par
value $.01 per share, of the Company held by the undersigned, to the following
action without a prior notice and without a vote as more fully described in
The Powell Group's consent statement ("Consent Statement") (receipt thereof is
hereby acknowledged).
THE POWELL GROUP STRONGLY RECOMMENDS THAT SHAREHOLDERS "CONSENT" TO
PROPOSALS 1, 2, 3, AND 4:
PROPOSAL 1: Remove the members of the Board of Directors of ERLY pursuant
to the resolution set forth in the Consent Statement:
For REMOVAL
-----------
Gerald D. Murphy
Douglas A. Murphy
William H. Burgess
Bill L. McFarland
Alan M. Wiener
[_] CONSENT [_] CONSENT WITHHELD [_] ABSTAIN
PROPOSAL 2: Amend Article II, Section 3 of the Bylaws of ERLY Industries
Inc. to require the President to call a special meeting for the purpose of
electing directors and to prohibit the officers from expending corporate
funds in connection with such special meeting except as may be necessary
for the ordinary conduct of the special meeting. (For complete text, see
Proposal 2 in the Consent Statement.)
[_] CONSENT [_] CONSENT WITHHELD [_] ABSTAIN
PROPOSAL 3: Amend Article III of the Bylaws of ERLY Industries Inc. to
provide that the number of directors shall be seven, pursuant to the
resolution set forth in the Consent Statement. (For complete text, see
Proposal 3 in the Consent Statement.)
[_] CONSENT [_] CONSENT WITHHELD [_] ABSTAIN
PROPOSAL 4: Amend Article IV of the Bylaws of ERLY Industries Inc. to
prohibit the officers of ERLY Industries Inc. from taking certain actions
during the pendency of the special meeting referred to in Proposal 2. (For
complete text, see Proposal 4 in the Consent Statement.)
[_] CONSENT [_] CONSENT WITHHELD [_] ABSTAIN
IN THE ABSENCE OF SPECIFIC INSTRUCTIONS, THE UNDERSIGNED WILL BE DEEMED TO
HAVE CONSENTED TO ALL PROPOSALS.
<PAGE>
PLEASE ACT PROMPTLY. IMPORTANT: THIS CONSENT MUST BE SIGNED AND DATED TO BE
VALID.
Dated: _______________________ , 1997
Signature: __________________________
Signature
(if held jointly): __________________
Title or authority
(if applicable): ____________________
Please sign exactly as your name appears on the stock certificates
evidencing your shares. If your shares are registered in more than one name,
the signature of all such persons should be provided. A corporation should
sign in its full corporate name by a duly authorized officer, stating his/her
title. Trustees, guardians, executors, and administrators should sign in their
official capacity, giving their full title as such. If the shares are held in
the name of a partnership, please have the authorized persons sign on behalf
of the partnership. The consent card votes all shares in all capacities.
PLEASE MARK, SIGN AND DATE THIS CONSENT BEFORE MAILING THIS CONSENT IN THE
ENCLOSED ENVELOPE.
A CONSENT EXECUTED BY A SHAREHOLDER MAY BE REVOKED IN WRITING AT ANY TIME
PRIOR TO THE TIME THAT WRITTEN CONSENTS OF THE NUMBER OF SHARES REQUIRED TO
AUTHORIZE THE PROPOSED ACTION HAVE BEEN FILED WITH THE SECRETARY OF THE
COMPANY.
2
<PAGE>
EXHIBIT 2
GIBSON, DUNN & CRUTCHER LLP
DANIEL S. FLOYD, SBN 123819
KEVIN S. ROSEN, SBN 133304
DANIEL N. SHALLMAN, SBN 180782
333 South Grand Avenue
Los Angeles, California 90071-3197
(213) 229-7000
Attorneys for Plaintiff FARMERS
RICE MILLING COMPANY, INC., a
Louisiana Corporation
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
WESTERN DIVISION
CASE NO.
FARMERS RICE MILLING COMPANY,
INC., a Louisiana Corporation, JURY TRIAL DEMANDED
Derivatively on Behalf of Nominal --------------------
Defendants ERLY INDUSTRIES INC.,
a California Corporation, and VERIFIED DERIVATIVE COMPLAINT FOR:
AMERICAN RICE, INC., a Texas
Corporation, (1) BREACH OF FIDUCIARY DUTY;
Plaintiff, (2) WASTE OF CORPORATE ASSETS;
(3) ILLEGAL CORPORATE LOAN; AND
v.
(4) INJUNCTIVE RELIEF PROHIBITING
DOUGLAS A. MURPHY, GERALD D. ERLY INDUSTRIES AND AMERICAN RICE
MURPHY, and DOES 1 through 100, FROM MAKING ON-GOING PAYMENTS ON
Inclusive, BEHALF OF DEFENDANTS AND REQUIRING
Defendants, ON-GOING INDEMNIFICATION BY THE
DEFENDANTS TO ERLY INDUSTRIES
- and - AND AMERICAN RICE
ERLY INDUSTRIES INC., a
California Corporation, and
AMERICAN RICE, INC., a Texas
Corporation,
Nominal Defendants.
<PAGE>
Plaintiff Farmers Rice Milling Company, Inc. ("Farmers"), on
knowledge as to plaintiff, and otherwise upon information and belief, alleges
as follows:
JURISDICTION AND VENUE
----------------------
1. Complete Diversity of Citizenship: Plaintiff Farmers is a
---------------------------------
corporation incorporated under the laws of the State of Louisiana having its
principal place of business in the State of Louisiana. Defendant Douglas A.
Murphy ("Douglas Murphy") is a citizen of the State of Texas. Defendant Gerald
D. Murphy ("Gerald Murphy") is a citizen of the State of California. Nominal
Defendant Erly Industries Inc. ("ERLY") is a corporation incorporated under the
laws of the State of California having its principal place of business in
California. Nominal Defendant American Rice, Inc. ("ARI") is a corporation
incorporated under the laws of the State of Texas having its principal place of
business in Texas.
2. Amount In Controversy Exceeds $75,000: The damage caused to
-------------------------------------
Erly and ARI by the wrongful acts of Douglas Murphy, Gerald Murphy and the Doe
defendants, exclusive of interest and costs, far exceeds the sum of seventy-five
thousand dollars ($75,000).
3. Venue Is Proper In The Central District Of California:
-----------------------------------------------------
Pursuant to 28 USC (S) 1391(a)(3), venue is proper in the Central District of
California -- Western Division in that all of the defendants are subject to
personal jurisdiction in this district at the time the action is commenced, and
there is no district in which the entire action may otherwise be brought. In
addition, Defendant Gerald Murphy resides in California and the transactions
challenged by this complaint took place in California.
2
<PAGE>
NATURE OF THE CASE
------------------
4. This action is to bring to account two directors of ERLY and
ARI, defendants Douglas Murphy and Gerald Murphy (collectively, "the Murphys"),
who have pursued a reckless course of conduct designed, in contravention of
their fiduciary duties, to benefit themselves financially to the detriment of
the very companies they purport to represent. In derogation of the fiduciary
obligations they owed to ERLY, ARI and their respective shareholders, the
Murphys pledged $1.5 million of ERLY stock as collateral to obtain a personal
--------
interest in a speculative land development on a golf course in Texas ("Murphy
Land Deal"). The Murphys then reneged on the deal and when the holder of the
note sought to foreclose on the stock, the Murphys used ERLY and ARI to fund a
series of legal battles designed to protect their own personal fortunes. Only
the Murphys, not ERLY or ARI, stood to gain from the pledge of ERLY stock for
the Murphy Land Deal. Yet it was ERLY and ARI, not the Murphys, who were called
upon to bail the Murphys out once the deal went sour. This derivative lawsuit
seeks reimbursement to ERLY and ARI of the potential millions in unnecessary
legal expenses resulting from the Murphys' tortious conduct.
THE PARTIES
-----------
5. Plaintiff Farmers is a privately held corporation, organized
and existing under the laws of the State of Louisiana, with its principal place
of business at Baton Rouge, Louisiana. Farmers is the owner of 171,933 shares
of ERLY stock and has been the owner of ERLY stock continuously during the
relevant time period, including during the time the wrongs alleged herein
occurred and to the present. Farmers is also the beneficial owner of ARI
3
<PAGE>
stock and has been the owner of ARI stock continuously during the relevant time
period, including the time the wrongs alleged herein occurred and to the
present.
6. At all times alleged herein, defendant Gerald Murphy was and is
the Chairman of the Board ARI, Chief Executive Officer and Chairman of the Board
of ERLY, and a director of both ARI and ERLY.
7. At all times alleged herein, defendant Douglas Murphy was
President and Chief Operating Officer of ERLY, and since June 1993 served as
President and Chief Executive Officer of ARIZ. Douglas Murphy also has been and
is a director of both companies.
8. Nominal defendant ERLY is a publicly held California
corporation, which owns approximately eighty-one percent (81%) of ARI. ERLY is
principally an international agribusiness company operating through its
subsidiary ARI. ERLY also has operations in international consulting and the
manufacture and sale of forest fire retardant products through its subsidiaries,
Chemonics International, Inc. and Chemonics Fire-Trol, Inc.
9. Nominal defendant ARI is a publicly held Texas corporation,
approximately eight-one (81%) of which is owned by ERLY. ARI is a processor and
marketer of branded rice products in the United States, Saudi Arabia, Haiti and
other rice consuming markets.
10. The true names and capacities, whether individual, corporate,
associates or otherwise of the defendants named herein as Does 1 through 100,
inclusive, are unknown to plaintiff, who therefore sues such defendants by their
fictitious names. Plaintiff will amend this Complaint to insert the true names
and capacities of such Doe defendants, when the name becomes known to them.
Each such
4
<PAGE>
fictitiously named defendant is responsible in some manner and is therefore
liable for the acts and omissions hereinafter alleged.
11. At all times alleged herein, Douglas Murphy, Gerald Murphy and
the Doe defendants in doing or omitting to do the acts and things alleged was
the agent or representative of each other and acted within the course and scope
of such agency and representation.
12. Douglas Murphy, Gerald Murphy and the Doe defendants each had
advance knowledge of, authorized or ratified the acts and conduct of each other
hereinafter alleged.
FACTUAL BACKGROUND
------------------
THE MURPHY LAND DEAL IS HATCHED
-------------------------------
13. This story of greed and betrayal has its genesis in an affluent
enclave of Houston, Texas known as Kingwood. Kingwood, a large scale master
planned community, was developed by the Friendswood Development Company
("Friendswood"), headquartered in Houston. Approximately 196 acres of
Friendswood property located in Kingwood, situated along the prestigious
Kingwood Country Club Golf Course, remained undeveloped. In 1993, Friendswood
approached the Tenzer Company, Inc. ("Tenzer Co."), a developer of active adult
residential communities and single family subdivisions, concerning the
feasibility of developing the 196 acre property as an active adult residential
community. Thereafter, the Tenzer Co. investigated the potential for such a
project and, in coordination with Friendswood, created a plan for the
development of the property.
14. On July 1, 1994, Tenzer Co., as purchaser, entered into a Sale
and Purchase Agreement with Friendswood (and King Ranch, Inc., a venturer with
Friendswood in Kingwood), as seller.
5
<PAGE>
15. The President of Tenzer Co., Michael L. Tenzer ("Tenzer"), knew
that the development of the property would require a substantial investment of
capital -- at least $6 million of additional equity. Tenzer began to search for
one or more investors to furnish the necessary capital.
16. In July of 1994, Tenzer contacted Gerald Murphy (a former
business colleague) to see if he might be interested in investing in Tenzer
Co.'s proposed Kingwood development, then referred to as Kingwood Lake South.
Coincidentally, Gerald Murphy's son, Defendant Douglas Murphy, lived in Kingwood
in the vicinity of the property. Eager to take a personal stake in the venture,
the Murphys committed themselves -- not ARI or ERLY -- to provide substantial
----------
capital to the project.
17. Between August and December 1994, Tenzer Co., and the Murphys
negotiated concerning the various rights and obligations they would have with
one another in the development of the project. It was determined that a limited
partnership would be formed, with Tenzer Co. as general partner and the Murphys
as limited partners. The limited partnership would be called Kingwood Lakes
South, L.P. ("KLS"). In December 1994, another individual investor, Anthony M.
Frank ("Frank"), agreed to invest $500,000 cash to obtain a proportionate
limited partner interest in KLS.
18. It was agreed among the parties that, at the time of the
acquisition of the property from Friendswood by KLS in late December 1994, Mr.
Frank would fund his entire cash commitment of $500,000, the Murphys would fund
$2 million of their aggregate cash commitment of $5.5 million (with the balance
of $3.5 million being funded within several months of the closing of the
acquisition of the
6
<PAGE>
property), and Tenzer Co. would contribute the Purchase and Sale Agreement and
all appurtenant rights to the contract, including all entitlements which had
been obtained by Tenzer Co. The lawyers selected by the Murphys for the venture,
Nathan Wood & Sommers (who are also the attorneys for ARI), then prepared
another revision to a draft of the proposed limited partnership agreement to
show the new capital contribution schedule.
THE MURPHYS RECKLESSLY PLEDGE $1.5 MILLION OF ERLY STOCK
AS COLLATERAL
--------------
19. On or about December 20, 1994, Tenzer traveled to Houston from
Los Angeles to finalize the execution of the Agreement of Limited Partnership,
so as to evidence the agreement reached by Tenzer Co., the Murphys, and Mr.
Frank, as well as to close the acquisition of the real property. At a morning
meeting on December 22, 1994, the date scheduled for the closing with
Friendswood, the Murphys informed Tenzer for the first time that,
notwithstanding their numerous confirmations of their commitment to furnish cash
for the closing of the land purchase, they did not, in fact, have in available
and ready funds the initial $2 million cash portion of their total equity
capital commitment of $5.5 million. Nevertheless, the Murphys assured Tenzer
that they would be able to come up with the cash -- they just needed more time.
20. No longer willing to simply take the Murphys' word that they
would honor their financial commitments to the project, Tenzer Co. sought
additional security. The Murphys in turn were desperate to obtain a personal
interest in a potentially lucrative development and did not want to see Tenzer
Co. walk away from the table and give the opportunity to another investor.
Therefore, in order to assure
7
<PAGE>
Tenzer Co., and to induce it to contribute the Purchase and Sale Agreement to a
venture to include the Murphys, Gerald Murphy agreed to execute and deliver to
KLS his unconditional Promissory Note in the amount of $1.5 million, payable on
or before March 22, 1995.
21. Regardless of the consequences to ERLY and ARI, Gerald Murphy
-------------
agreed to an unconditional pledge to KLS of 333,333 shares owned by him in ERLY,
- -------------------------------------------------------------------------------
a public company, to secure payment of the Promissory Note (the "Murphy Stock
Pledge"). Douglas Murphy, as President and Chief Executive Officer of ERLY and
ARI, was a willing and active participant in the Murphy Stock Pledge. In order
to obtain a personal interest in the Murphy Land Deal, Douglas Murphy knowingly
and/or recklessly encouraged, aided, abetted and ratified the Murphy Stock
Pledge.
22. Regardless of the consequences to ERLY and ARI, Gerald Murphy
further agreed to execute a stock power for the entire block of shares of ERLY,
so that upon a default in payment of the Promissory Note, KLS could immediately
-----------
sell the shares, which it was holding as collateral, for cash to maintain
operations of KLS. Douglas Murphy, as President and Chief Executive Officer of
ERLY and ARI, was a willing and active participant in the agreement to execute
the stock power for the entire block of ERLY shares. In order to obtain a
personal interest in the Murphy Land Deal, Douglas Murphy knowingly and/or
recklessly encouraged, aided, abetted and ratified Gerald Murphy's agreement to
execute the stock power for the entire block of ERLY shares.
23. In his capacity as an officer and director of ERLY, Gerald
Murphy promised to obtain for KLS, and later did obtain, a written opinion by
ERLY's legal counsel that KLS would be entitled to
8
<PAGE>
enforce the Pledge Agreement in accordance to its terms. Douglas Murphy, as
President of ERLY and ARI, was a willing and active participant in obtaining
this legal opinion. In order to obtain a personal interest in the Murphy Land
Deal, Douglas Murphy knowingly and/or recklessly encouraged, aided, abetted and
ratified Gerald Murphy's agreement to obtain the legal opinion.
24. The Murphys' stake in the deal having been saved by the Murphy
--------------------------------------------------------------
Stock Pledge, on or about December 22, 1995, the Agreement of Limited
- ------------
Partnership of KLS (the "Partnership Agreement") was executed by the Murphys,
Tenzer Co. and Frank. In paragraph 3.1(b) of the Partnership Agreement, the
Murphys agreed that: (a) Gerald Murphy would deliver the Promissory Note in the
amount of $1.5 million to KLS; (b) Douglas Murphy would make the initial
$500,000 cash contribution, which was required to close the acquisition of the
property; and (c) The Murphys would "collectively commit, covenant, and agree to
contribute . . ., [an additional] $3,500,000 (or such lesser amount as Tenzer
Co. and the Murphys might agree would be necessary)" as and when called for by
[Tenzer Co.], but in any event prior to the closing of the Acquisition and
Development Loan."
25. After Tenzer Co. assigned to KLS the Purchase and Sale
Agreement, KLS acquired the real estate from Friendswood by paying the
downpayment and executing the purchase money promissory note. At this point,
there was no turning back for the Murphys.
THE MURPHYS RENEGE ON THE DEAL
------------------------------
26. Ultimately, unwilling to put their money where their mouths
were, the Murphys reneged on the deal. Gerald Murphy never made his $1.5
million payment on March 22, 1995 as required by the
9
<PAGE>
Promissory Note. Likewise, Douglas Murphy never made his initial $500,000 cash
contribution.
27. Shortly after Gerald Murphy went into default on the Promissory
Note, Tenzer Co. brought suit on behalf of KLS on April 3, 1995. Predictably,
the lawsuit sought to enforce the Murphy Stock Pledge by foreclosing on the ERLY
stock.
AT THE BEHEST OF THE MURPHYS, ARI AND ERLY COME TO THEIR
--------------------------------------------------------
RESCUE -- THE BRAZORIA COUNTY SUIT
----------------------------------
28. Faced with the threat of a protracted and costly legal battle
which could threaten their own personal fortunes, the Murphys decided to use the
resources of ARI and ERLY as their own personal legal defense fund ("Murphy
Legal Defense"). Immediately after the KLS suit was filed, the Murphys, acting
in their capacity as officers and directors of ARI and ERLY, directed ARI and
ERLY to join them in bringing suit in Brazoria County, Texas (the "Brazoria
County Suit"), a jurisdiction which had no relationship to the Murphy Land Deal
or to any of the parties thereto. The Brazoria County Suit sought an ex parte
-- -----
order restraining KLS from selling the ERLY stock which had been pledged as
collateral for Gerald Murphy's Promissory Note.
29. Why, given the lack of any connection whatsoever between the
Murphy Land Deal and Brazoria County, did the Murphys choose this rural Texas
forum to seek an injunction against the sale of ERLY stock? Simply put, because
ARI has a mill in the heart of Brazoria County which employs over 300 people.
Indeed, the Brazoria County Suit was specifically geared to make this parochial
appeal.
30. Under penalty of perjury, less than four months after he had
agreed to the Murphy Stock Pledge, Douglas Murphy declared that
10
<PAGE>
the foreclosure by KLS of the ERLY stock securing payment of Gerald Murphy's
Promissory Note would adversely affect ARI and ERLY. According to the Original
Petition filed by ARI, ERLY and the Murphys, and sworn to by Douglas Murphy,
"the sale of said stock would place [ARI] in technical default of its financing
and it would materially interfere with the ongoing re-financing which would cost
[ARI] over $9 million a year." Furthermore, the suit claimed that the stock
foreclosure would adversely impact the industrial revenue bond that had been
used to build the ARI plant in Freeport, Texas and thereby bring about the
collapse of the rice plant in Brazoria County. Not surprisingly, the Brazoria
County Court granted the plaintiffs' request for a temporary restraining order.
31. The Brazoria County Suit is at the heart of this derivative
lawsuit because, regardless of the suits' underlying merit, the fact that it was
filed at all represents indisputable proof that the Murphys violated their
fiduciary duties to ARI, ERLY and their respective shareholders:
(a) First, if the complaint, verified by Douglas Murphy as President
of ARI and ERLY, is true, then the Murphys knowingly and/or recklessly
violated their fiduciary duties to ARI an ERLY by entering into a
personal transaction -- the pledge of ERLY stock to save their stake
in the Murphy Land deal -- that threatened such adverse consequences
to ERLY and ARI;
(b) On the other hand, if these adverse consequences were not true,
then the Murphys knowingly and/or recklessly violated their fiduciary
duties to ARI and ERLY by leading
11
<PAGE>
the companies into an expensive lawsuit to protect their own
personal fortunes without any basis whatsoever.
32. Later in the litigation, in connection with a hearing on a
permanent injunction, a deal was struck whereby the Brazoria County Suit would
be transferred to Harris County (Houston). Tenzer Co. (on behalf of KLS) agreed
that it would not undertake any effort to foreclose on the ERLY stock until
August 24, 1995. At that time, Tenzer Co. could petition the court for relief
from the injunction in order to consummate the foreclosure and the sale of the
stock. ARI (not the Murphys) agreed to post a $15,000 bond in connection with
the bond the preliminary injunction that was issued.
33. At the behest of the Murphys, ARI and/or ERLY picked up the
entire tab for the legal bills related to the Brazoria County Suit and the suit
initiated by KLS, including the fees incurred by the Murphys as individual
plaintiffs.
AT THE BEHEST OF THE MURPHYS, ARI AND ERLY LAUNCH STEP TWO IN THE MURPHY LEGAL
------------------------------------------------------------------------------
DEFENSE -- THE FRIENDSWOOD SUIT
-------------------------------
34. Two months before the Murphys, ARI and ERLY were scheduled to
go to trial with KLS on the original suit filed by KLS against the Murphys, the
Murphys enlisted ERLY and ARI in waging a legal battle on another front related
to the Murphy Land Deal: the Murphys, along with ERLY and ARI, filed suit
against Friendswood, the corporate owner of the land to be developed in
Kingwood, as third party defendants.
35. ERLY and ARI had no legitimate interest whatsoever in pursuing
a lawsuit against Friendswood. Indeed, their presence in the pleading caption
was merely a way for the Murphys to wage their own personal legal battles
without spending a dime of their own
12
<PAGE>
money. In addition, it was a transparent attempt to delay the KLS trial.
36. During the course of the Friendswood litigation, Friendswood
asked the court for sanctions against plaintiffs and their counsel based on an
allegation that the lawsuit was frivolous. As a result of the Murphys' actions,
the court imposed stiff sanctions on the Murphys, ARI, ERLY and their attorneys
in the staggering amount of $134,000. Those sanctions were paid for by ARI, not
-----------------------------------------
the Murphys. The sanctions are on appeal, further exposing ARI and ERLY to
- -----------
additional costs and expenses.
THE MURPHYS SUBJECT ERLY AND ARI TO FURTHER LEGAL WOES
------------------------------------------------------
37. Shortly after August 24, 1995, Tenzer Co. (on behalf of KLS)
had the preliminary injunction lifted, thus obtaining permission from the court
to foreclose on the ERLY stock the Murphys pledged to secure the Promissory
Note. Accordingly, Tenzer Co. tendered the stock certificates to Chase Mellon
Bank ("Chase Mellon") -- the transfer agent for ERLY.
38. Subsequently, at the behest of the Murphys, ARI's lawyers
intervened and threatened Chase Mellon in an attempt to stop the transfer.
Chase Mellon then filed an interpleader action.
39. On December 9, 1995, Judge Harris in Harris County Texas
granted partial summary judgment to Tenzer Co. (on behalf of KLS). Immediately
thereafter, at the behest of the Murphys, ARI and ERLY filed another frivolous
lawsuit in Los Angeles Superior Court to enjoin Wedbush Securities from
facilitating the sale. Judge Garcia in Texas, however, suggested that ERLY and
ARI withdraw the lawsuit they had filed in California or face sanctions. The
next day, ERLY and ARI withdrew the lawsuit against Wedbush Securities.
13
<PAGE>
40. In January 1997, the appeal of the summary judgment was
rejected. Shortly thereafter, ARI and ERLY moved to vacate the court's order.
That motion was also denied.
41. Next, the Murphys directed ARI and ERLY to file a lawsuit in
Texas to enjoin KLS from using the proceeds of the sale of stock. That request
for injunctive relief was denied. The sale of the stock occurred shortly
thereafter, and 145,000 shares were sold.
42. At the behest of the Murphys, once Chase Mellon transferred the
shares, ARI and ERLY fired Chase Mellon. Chase Mellon has now sued ARI and
ERLY.
43. All told, the Murphys have already subjected ARI and ERLY to
substantial unnecessary legal expenses and costs (at least $500,000) with no end
in sight the legal woes of ARI and ERLY, precipitated by the misguided Murphy
Legal Defense. ARI and ERLY are also potentially subject to multi-million
dollar claims by Tenzer Co. and Chase Mellon solely as a result of the Murphys'
breaches of fiduciary duty.
44. Defendants Gerald Murphy, Douglas Murphy and the Doe
defendants, by their wrongdoings herein alleged, breached their duties of
loyalty to ERLY and ARI; acted in bad faith; engaged in intentional misconduct;
and engaged in a knowing violation of law.
45. Defendants Gerald Murphy, Douglas Murphy and the Doe defendants
were fully aware that the Murphy Legal Defense was outrageously unfair to ERLY
and ARI and that it was a waste of corporate assets and would damage ERLY and
ARI.
46. By virtue of all of the foregoing, defendants Gerald Murphy,
Douglas Murphy and the Doe defendants are responsible for any and all
liabilities, damages and payments made or incurred by or
14
<PAGE>
as a result of defendants' wrongful acts and conduct, including but not limited
to, the Murphy Stock Pledge and/or the Murphy Legal Defense.
47. The acts and conduct of defendants Gerald Murphy, Douglas
Murphy and the Doe defendants heretofore alleged were oppressive, fraudulent,
and malicious, thereby subjecting these defendants, and each of them, to
punitive and exemplary damages.
DERIVATIVE ALLEGATIONS
----------------------
48. Plaintiff brings this action derivatively in the right of and
for the benefit of ERLY and ARI to redress injuries suffered and to be suffered
by ERLY and ARI as a direct result of the violations of law, breaches of
fiduciary duty, illegal loans, abuse of control, as well as the aiding and
abetting thereof, by the defendants. ERLY and ARI are named as nominal
defendants solely in a derivative capacity.
49. This is not a collusive action to confer jurisdiction on this
Court which it would not otherwise have.
50. Plaintiff will adequately and fairly represent the interests of
ERLY, ARI and their respective shareholders in enforcing and prosecuting their
rights.
51. Plaintiff has not made any demand on the present Board of
Directors of ERLY or ARI to institute this action for the following reasons:
(a) The acts committed by defendants violate Section 315 of the
California Corporations Code in that they constitute an illegal corporate loan
and/or guarantee made by ERLY and ARI to two directors and officers of ERLY and
ARI. Pursuant to Section 316 of the California Corporations Code, suit may be
brought in the name of
15
<PAGE>
the corporation to seek redress for such illegal loan and/or guarantee without
regard to the provisions of Section 800 of the California Corporations Code
which requires derivative plaintiffs to make a demand;
(b) In the alternative, any such demand on the Board of Directors of
ERLY and ARI would have been futile and a useless act for the following reasons:
(i) The Boards of Directors of ERLY and ARI participated in or
approved many of the acts and omissions or were on notice of and/or
recklessly disregarded the wrongs complained of herein;
(ii) The acts complained of herein constitute violations of fiduciary
duties owed to the Boards of Directors of ERLY and ARI and these acts
are incapable of ratification;
(iii) The acts complained of herein constitute violations of law and
breaches of the fiduciary duties owed by the Boards of Directors of
ERLY and ARI and these acts are incapable of ratification;
(iv) The known principal wrongdoers and beneficiaries of the
wrongdoing complained of herein are in a position to, and do, dominate
and control the Boards of Directors of ERLY and ARI. Thus, the Boards
of Directors of ERLY and ARI could neither exercise independent
objective judgment in deciding whether to bring this action nor
vigorously prosecute this action;
(v) The directors of ERLY and ARI cannot be relied upon to reach a
truly independent decision as to whether
16
<PAGE>
to commence the demanded actions against themselves and the officers and
directors responsible for the misconduct alleged in this Complaint, in
that, inter alia, the Board of Directors is totally dominated by defendants
who were personally and directly involved in the misconduct alleged and who
each approved the actions complained of, and to whose directives and views
the Board has consistently acceded and will continue to accede. This
domination of the Boards of Directors of ERLY and ARI by these defendants
has impaired the Boards' ability to validly exercise its business judgment
and rendered it incapable of reaching an independent decision as to whether
to accept plaintiff's demands;
(vi) In order to bring this action for breaching their fiduciary duties,
the members of the Boards of Directors of ERLY and ARI would have been
required to sue themselves and/or their fellow directors and allies in the
top ranks of the companies, who are their good friends and with whom they
have entangling financial alliances, interests and dependencies, which they
would not do. Therefore, the director defendants would not be able to
vigorously prosecute any such action.
(vii) The members of the Boards of Directors of ERLY and ARI, including
each of the defendants herein, receive payments, stock options and other
benefits by virtue of their membership on the Boards and their control of
the two corporations. They have thus benefited from the wrongdoing herein
alleged and have engaged in such conduct
17
<PAGE>
to preserve their positions of control and the perquisites thereof, and are
incapable of exercising independent judgment in deciding whether to bring
this action. The members of each Board also have close personal and
business ties with each other and are, consequently, interested parties and
cannot in good faith exercise independent business judgment to determine
whether to bring this action against themselves and one another.
(viii) The composition of the Boards of Directors of ERLY and ARI are
designed to (and do) make them dependent on and deferential to the top
officers of the Corporation and Chairman of the Board of Directors who as a
practical matter control and dominate the process by which directors are
selected for nomination or renomination to the two Boards. Each non-
defendant director owes his directorship (and the resulting substantial
fees and perks) to the two defendant directors. No non-defendant director
can be independent as he has a direct economic incentive to please the two
director defendants in order to (a) maintain his position on the Board(s);
(b) maintain his position as an officer; and/or (c) continue to receive
substantial consulting fees authorized and approved by the defendant
directors.
(ix) ERLY and ARI has suffered significant losses, and has been exposed
to significant future losses, due to the wrongful acts of the two defendant
directors by pledging ERLY stock as collateral to obtain a personal stake
in a speculative land deal. Yet, with
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full knowledge of these wrongful acts, the non-defendant directors have
taken no action against the defendant directors responsible for the
wrongful conduct to recover for ERLY and/or ARI the damages suffered
thereby;
(x) The acts complained of herein are wrongful and the expenditure of
funds complained of constitutes a waste of ERLY's and/or ARI's assets, and
thus are acts incapable of ratification.
(xi) There is no disinterested majority of either Board of Directors
that is capable of exercising an independent judgment with regard to the
prosecution of this matter.
52. A true copy of this Verified Derivative Complaint will be delivered to
ERLY and ARI after its filing with the Court.
FIRST CAUSE OF ACTION
---------------------
Derivative Claim For Intentional Breach Of Fiduciary
Duties And Waste Of Corporate Assets
------------------------------------
53. Plaintiff incorporates by reference and realleges (P)(P) 1-52 as if
set forth fully herein. This Cause of Action is asserted against all defendants
on behalf of ERLY and ARI.
54. Defendants Douglas Murphy and Gerald Murphy are fiduciaries of ERLY
and ARI and of all of their public shareholders and owe to them the duty to
conduct the business of the Company loyally, faithfully, carefully, diligently
and prudently. These counts are asserted based upon the defendants' acts in
violation of California common law (with respect to ERLY) and Texas common law
(with respect to ARI), which acts constitute breach of fiduciary duty and waste
of ERLY's and ARI's corporate assets.
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55. The defendants, in their roles as executives and directors of ARI and
ERLY, participated in the acts of mismanagement alleged herein, or acted in
reckless disregard of the facts known to them, and failed to exercise due care
and undivided loyalty in connection with the Murphy Land Deal, the Murphy Stock
Pledge, and the Murphy Legal Defense. The defendants knew, or should have known
through reasonable inquiry, of the facts alleged herein including, among others
that the unconditional pledge of ERLY stock to obtain a personal interest in a
speculative land deal would expose ERLY and ARI to substantial risk in the event
of a foreclosure and thereby breached their duty of care, loyalty,
accountability and disclosure to the shareholders of ERLY and ARI by failing to
act as an ordinary or prudent person would have acted in a like position.
56. The defendants, in their capacities as officers and directors of ARI
and ERLY, intentionally breached their fiduciary duties by (a) intentionally
and/or recklessly exposing ERLY and ARI to unnecessary litigation by issuing an
unconditional pledge of ERLY stock to secure a personal interest in a
speculative land deal; and/or (b) directing ERLY and ARI to engage in meritless
litigation designed to protect defendants' own personal fortunes.
57. As a result of defendants' wrongful conduct and wrongful action, ERLY
and ARI have suffered considerable damage to and drastic diminution in the value
of its tangible and intangible assets.
58. The defendants, singly and in concert, engaged in the aforesaid
conduct in intentional breach and/or reckless disregard of their fiduciary
duties to ERLY and ARI.
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59. The defendants conspired to abuse, and did abuse, the control vested
in them by virtue of their high-level positions with ERLY and ARI.
60. By reason of the foregoing, the defendants have caused ERLY and ARI to
waste its valuable assets and otherwise unnecessarily expend its corporate
funds, as a result of which ERLY and ARI have been substantially damaged.
61. ERLY and ARI have been injured by reason of the defendants'
intentional breach and/or reckless disregard of their fiduciary duties to the
corporations. Plaintiff, as a shareholder and representative of ERLY and ARI,
seeks damages and other relief for the corporations as hereinafter set forth.
SECOND CAUSE OF ACTION
----------------------
Derivative Claim For Negligent Breach Of Fiduciary Duties
Against All Defendants
----------------------
62. Except to the extent they allege intentional or reckless conduct by
any defendant, plaintiffs incorporate by reference and reallege (P)(P) 1-61 as
if set forth fully herein.
63. The defendants engaged in the aforesaid conduct without exercising the
reasonable and ordinary care owed to ERLY and ARI by directors, officers,
managing agents, employees, and/or controlling persons of a corporation.
64. ERLY, ARI and their respective shareholders have been injured by
reason of the defendants' negligent breaches of their fiduciary duties.
Plaintiff, as shareholder and representative of ERLY and ARI, seeks damages and
other relief for the corporations as hereinafter set forth.
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THIRD CAUSE OF ACTION
---------------------
Derivative Claim For Waste Of Corporate Assets Against All
Defendants
----------
65. Plaintiff incorporates by reference and realleges (P)(P) 1-64 as if
set forth fully herein. This Cause of Action is asserted against all defendants
on behalf of ERLY and ARI.
66. The defendants' breaches of fiduciary duty have and will continue to
subject ERLY and ARI to suits for, among other things, malicious prosecution and
abuse of process. The costs, expenses and fees incurred defending those suits or
any other suit against ERLY and/or ARI, and any recoveries to be paid by ERLY
and/or ARI, including possible punitive damages resulting from the intentional
misconduct, constitute a further waste of corporate assets arising out of
defendants' misconduct.
67. In addition, defendants' have wasted the corporate assets of ERLY and
ARI by (a) intentionally and/or recklessly exposing ERLY and ARI to unnecessary
litigation by issuing an unconditional pledge of ERLY stock to secure a personal
interest in a speculative land deal; and/or (b) by directing ERLY and ARI to
engage in meritless litigation designed to protect defendants' own personal
fortunes.
68. ERLY and ARI have been injured by reason of defendants' waste of
ERLY's and/or ARI's assets. Plaintiff, as shareholder and representative of ERLY
and ARI, seeks damages and other relief for ERLY and ARI as hereinafter set
forth.
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FOURTH CAUSE OF ACTION
----------------------
Derivative Claim For Violation Of California Corporations
Code Section 315
----------------
69. Plaintiff incorporates by reference and realleges (P)(P) 1-68 as if
set forth fully herein. This Cause of Action is asserted against all defendants
on behalf of ERLY and ARI.
70. By reason of the aforesaid acts, the defendants have violated their
official duties and Section 315 of the California Corporations Code, which
provides, in pertinent part:
(a) A corporation shall not make any loan of money or property to, or
guarantee the obligation of, any director or officer of the corporation or
of its parent, unless the transaction, or an employee benefit plan
authorizing the loans or guarantees after disclosure of the right under
such a plan to include officers or directors, is approved by a majority of
the shareholders entitled to act thereon.
71. ERLY and ARI have made loans and/or guarantees in violation of Section
315 by, among other things, (a) paying for the Murphy Legal Defense and all
related legal actions; and (b) paying for the sanctions incurred in the
Friendswood Action.
72. These illegal loans and/or guarantees were not approved by a majority
of the shareholders entitled to act upon the transactions.
73. Defendants were not entitled to indemnification for expenses incurred
as a result of actions taken on their own behalf and which were not incurred in
the performance of their duties as directors and/or officers.
74. As a proximate result of the violation of Section 315, ERLY, ARI and
their respective shareholders have been injured. Plaintiff, as a shareholder and
representative of ERLY and ARI,
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seeks damages and other relief for the corporations as hereinafter set forth.
WHEREFORE, plaintiff prays for the following relief:
A. Determining that this action is a proper derivative action;
B. Against each defendant for restitution and/or damages in favor
of the plaintiff, on behalf of ERLY and ARI, and awarding punitive and exemplary
damages as appropriate, plus pre-judgment interest;
C. Enjoining defendants from further breaches of their duties to
ERLY and ARI including, but not limited to, enjoining the further distribution
of corporate assets to fund the Murphy Legal Defense and mandating on-going
indemnification by the Murphys for further costs and expenses incurred by ERLY
and ARI related to the Murphy Legal Defense;
D. Extraordinary equitable and/or injunctive relief as permitted
by law, equity and state statutory provisions sued hereunder, including
attaching, impounding, imposing a constructive trust or otherwise restricting
defendants' assets so as to assure that plaintiff has an effective remedy;
E. Awarding plaintiff the costs and disbursements of this action,
including reasonable attorneys', accountants' and experts' fees; and
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F. Granting such other and further relief as this Court may deem
just and proper.
JURY TRIAL DEMAND
-----------------
Plaintiff hereby demands a trial by jury pursuant to Rule 38 of the
Federal Rules of Civil Procedure.
DATED: July 24, 1997
GIBSON, DUNN & CRUTCHER LLP
DANIEL S. FLOYD, SBN 123819
KEVIN S. ROSEN, SBN 133304
DANIEL N. SHALLMAN, SBN 180782
By: /s/ Daniel S. Floyd
----------------------
DANIEL S. FLOYD
Attorneys for Plaintiff FARMERS RICE
MILLING COMPANY, INC.
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VERIFICATION
------------
I, Nanette Kelley, hereby declare as follows:
I am President of Farmers Rice Milling Company, Inc., Plaintiff in the
above-entitled action. I have read the foregoing complaint and know the
contents thereof; I am informed and believe the matters therein are true and on
that ground allege that the matters stated therein are true.
I declare under penalty of perjury that the foregoing is true and
correct and that this verification was executed on July 18, 1997 in Los Angeles,
California.
/s/ Nanette Kelley
---------------------------
Nanette Kelley
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JOINT FILING AGREEMENT
The undersigned hereby agree that the statement on Schedule 13D with
respect to the shares of Common Stock of ERLY Industries Inc., dated July 25,
1997, and any further amendments thereto signed by each of the undersigned shall
be filed on behalf of each of them pursuant to and in accordance with the
provisions of Rule 13d-1(f) under the Securities Exchange Act of 1934.
Date: July 24, 1997 THE POWELL GROUP
By: /s/ Nanette N. Kelley
----------------------------
Name: Nanette N. Kelley
Title: President and Chief Executive Officer
Date: July 24, 1997 FARMERS RICE MILLING COMPANY, INC.
By: /s/ Nanette N. Kelley
----------------------------
Name: Nanette N. Kelley
Title: President and Chief Executive Officer
Date: July 24, 1997 NANETTE N. KELLEY
/s/ Nanette N. Kelley
------------------------------------
Date: July 24, 1997 FIRST GLOBAL SECURITIES, INC.
By: /s/ Noble B. Trenham
---------------------------------
Name: Noble B. Trenham
Title: Co-Chairman
Date: July 24, 1997 NOBLE B. TRENHAM
/s/ Noble B. Trenham
-------------------------------------
