AMERICAN RICE, INC
16825 Northchase Drive
Suite 1600
Houston, Texas 77060
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 31, 1995
To the Shareholders of American Rice, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of American
Rice, Inc. ("ARI") will be held at the Wyndham Hotel, 12400 Greenspoint Drive,
Houston, Texas 77060, on Thursday, August 31, 1995 at 10:00 a.m., Central
Standard Time, for the following purposes:
1. To vote to elect seven directors to the Board of Directors;
2. To approve the ARI Incentive Compensation Plan; and
3. To transact such other business as may properly come before the meeting or
any adjournment(s) thereof.
The Board of Directors has fixed the close of business on July 25, 1995 as the
record date for determination of shareholders entitled to notice of and vote
at such meeting or any adjournment(s) thereof. Only shareholders of record at
the close of business on the said record date are entitled to notice of, and
to vote at, such meeting. The transfer books will not be closed.
You are cordially invited to attend the meeting. If, however, you are unable
to attend, you may vote by proxy. The enclosed proxy is provided for
shareholders who cannot attend the meeting but desire their stock voted. Your
proxy will be returned to you if you are present at the meeting and request a
return of your proxy.
TO INSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN THE
ENCLOSED PROXY AT YOUR EARLIEST CONVENIENCE. THE ENCLOSED PREPAID RETURN
ENVELOPE MAY BE USED FOR THAT PURPOSE.
By Order of the Board of Directors,
Douglas A. Murphy
President
Houston, Texas
August 4, 1995
<PAGE>
AMERICAN RICE, INC
16825 Northchase Drive
Suite 1600
Houston, Texas 77060
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
To be held August 31, 1995
SOLICITATION AND REVOCABILITY OF PROXIES
The accompanying proxy is solicited by the management of American Rice, Inc.
("ARI" or the "Company") at the direction of the Board of Directors for use at
the Annual Meeting of Shareholders of ARI to be held on Thursday, August 31,
1995 (the "Annual Meeting") at the time and place and for the purposes set
forth in the accompanying Notice of Annual Meeting ("Notice") and at any
adjournment(s) thereof.
When proxies in the accompanying form are received properly executed, the
shares will be voted by the persons named therein, unless contrary
instructions are given. The proxy will not be used for the election of all
nominees as directors if authority to do so is withheld on the proxy, and it
will not be used for the election of any individuals whose names are written
in the designated blank spaces on the proxy. When no instruction is indicated
with respect to the election of directors, the proxy will be voted FOR the
election of all nominees as directors. If no instruction is indicated with
respect to the election of all nominees named in Item (1) of the proxy, but
names for one or more nominees are listed in the designated blank spaces on
the proxy, the proxy will be voted FOR the election of all nominees not so
listed.
Any shareholder of ARI has the right to revoke his proxy at any time before
its use by submitting a written revocation to the Secretary or Assistant
Secretary of ARI.
The solicitation of proxies will be by mail, and copies of the Notice, Proxy
Statement and Proxy will be mailed on or about August 4, 1995 to shareholders
of record on the record date for the Annual Meeting. Upon request, additional
copies of the proxy material will be furnished without cost to brokers and
other nominees to be forwarded to the beneficial owners of shares held in
their names. ARI will bear all costs of preparing, printing, assembling,
delivering and mailing the Notice, Proxy Statement, Proxy and Annual Report.
OUTSTANDING STOCK; RECORD DATE
At a special meeting on September 1, 1994, ARI shareholders approved a one-
for-five reverse stock split for all issues of preferred and common stock.
The following share and per share information has been adjusted to reflect
this reverse stock split.
Page 1<PAGE>
The record date for the determination of shareholders entitled to notice of
and to vote at the Annual Meeting is the close of business on July 25, 1995
(the "Record Date"). As of the Record Date, there were 2,443,892 shares of
common stock, $1.00 par value, of ARI ("ARI Common Stock") issued and
outstanding and 777,777 shares of Series A convertible preferred stock, $1.00
par value, of ARI (the "Series A Preferred Stock") issued and outstanding, and
2,800,000 shares of Series B convertible preferred stock, $1.00 par value, of
ARI (the "Series B Preferred Stock") issued and outstanding. Each share of
ARI Common Stock and each share of Series A Preferred Stock is entitled to one
vote on each matter to be acted upon at the Annual Meeting and each share of
Series B Preferred Stock is entitled to two votes on each matter to be acted
upon at the annual meeting. The Articles of Incorporation of ARI do not
provide for voting rights for Series C preferred stock, $1.00 par value, non-
voting, non-convertible (the "Series C Preferred Stock") for the election of
Directors; however, such shares have the right to vote in certain
circumstances, none of which circumstances are the subject of this Proxy
Statement.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the share ownership of ARI's Common Stock (as
defined), the Series A Preferred Stock (as defined), and the Series B
Preferred Stock (as defined) at March 31, 1995 (i) owned by ERLY Industries
Inc. ("ERLY"), the only person or entity known to own more than five percent
of the outstanding voting shares of any of the voting capital stock of the
Company; (ii) each director of the Company; (iii) each executive officer named
in the Summary Compensation Table; (iv) all directors and executive officers
of the Company and its subsidiaries as a group; and (v) all other owners of
five percent or more of ERLY common stock. Except as indicated, each of the
stockholders has sole voting power and investment power with respect to the
shares beneficially owned by such stockholder.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name and Address of Beneficial Owner Title of Class Beneficial Ownership of Class
- ----------------------------------- ------------------------ -------------------- --------
<S> <C> <C> <C>
ERLY Industries Inc. Common Stock 7,155,554(7) 81%
10990 Wilshire Blvd. Series A Preferred Stock 777,777(7) 100
Los Angeles, CA 90024 Series B Preferred Stock 2,800,000(7)(8) 100
Gerald D. Murphy(1) Common Stock 7,155,554(7) 81%
10990 Wilshire Blvd. Series A Preferred Stock 777,777(7) 100
Los Angeles, CA 90024 Series B Preferred Stock 2,800,000(7)(8) 100
Douglas A. Murphy(2) Common Stock 7,155,554(7) 81%
10990 Wilshire Blvd. Series A Preferred Stock 777,777(7) 100
Los Angeles, CA 90024 Series B Preferred Stock 2,800,000(7)(8) 100
William H. Burgess(3) Common Stock 7,155,554(7) 81%
550 Palisades Drive Series A Preferred Stock 777,777(7) 100
Palm Springs, CA 92262 Series B Preferred Stock 2,800,000(7)(8) 100
State Treasurer of the
State of Michigan(4) Common Stock 7,155,554(7) 81%
301 W. Allegan Street Series A Preferred Stock 777,777(7) 100
Lansing, MI 48922 Series B Preferred Stock 2,800,000(7)(8) 100
</TABLE>
Page 2<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name and Address of Beneficial Owner Title of Class Beneficial Ownership of Class
- ----------------------------------- ------------------------ -------------------- --------
<S> <C> <C> <C>
Gentleness(5) Common Stock 7,155,554(7) 81%
P.O. Box N7776 Series A Preferred Stock 777,777(7) 100
Lyford Cay Series B Preferred Stock 2,800,000(7)(8) 100
Nassau, Bahamas
Internationale Nederlanden
(U.S.) Capital Corporation(6) Common Stock 7,155,554(7) 81%
135 E. 57th Street Series A Preferred Stock 777,777(7) 100
New York, NY 10022-2101 Series B Preferred Stock 2,800,000(7)(8) 100
S.C. Bain, Jr., Director Common Stock 4,443(9) -
P.O. Box 250
Bunkie, LA 71322
John M. Howland, Director - - -
16825 Northchase
Suite 1600
Houston, TX 77060
Richard N. McCombs, Director - - -
Executive Vice President and
Chief Financial Officer
16825 Northchase
Suite 1600
Houston, TX 77060
George E. Prchal, Director - - -
16825 Northchase
Suite 1600
Houston, TX 77060
Lee Adams Common Stock 70 -
Senior Vice President
International Marketing
16825 Northchase
Suite 1600
Houston, TX 77060
Bill J. McFarland - - -
Senior Vice President and President,
Comet American Marketing Division
16825 Northchase
Suite 1600
Houston, TX 77060
John S. Poole - - -
Senior Vice President and President,
Comet Rice Division
16825 Northchase
Suite 1600
Houston, TX 77060
All directors and executive
officers as a group (12 persons) Common Stock 7,160,069 81%
</TABLE>
(1) Gerald D. Murphy, Chairman of the Board of ERLY, is the direct and
indirect record and beneficial owner of 1,517,191 shares of ERLY common stock
representing approximately 37.4% of the outstanding shares of ERLY common
stock.
Page 3<PAGE>
(2) Douglas A. Murphy, President and a director of ERLY, is the beneficial
owner of 506,502 shares of ERLY common stock, representing approximately 12.5%
of the outstanding shares of ERLY common stock.
(3) William H. Burgess, a director of ERLY, beneficially owns 283,000 shares
of ERLY common stock, representing approximately 7.6% of the outstanding
shares of ERLY common stock.
(4) The State of Michigan Retirement System beneficially owns 372,368 shares
of ERLY common stock, representing approximately 10.0% of the outstanding
shares of ERLY common stock.
(5) Gentleness beneficially owns 220,000 shares of ERLY common stock,
representing approximately 5.9% of the outstanding shares of ERLY common
stock.
(6) Internationale Nederlanden (U.S.) Capital Corporation owns warrants to
purchase approximately 725,000 shares of ERLY common stock, representing 15%
of ERLY common stock on a fully diluted basis.
(7) ERLY has sole voting and dispositive power over such shares.
(8) ERLY has pledged 2,600,000 of these shares to secure the payment of ARI's
term debt. 200,000 of these shares are pledged to former lenders of ARI to
secure the obligation of ERLY on promissory notes aggregating $3.0 million.
(9) Mr. Bain has sole voting and dispositive power with respect to 296 shares
and shared voting and dispositive power with respect to 4,145 shares.
ELECTION OF DIRECTORS (PROPOSAL NO. 1)
Seven directors are to be elected at the Annual Meeting, each to hold office
until the next Annual Meeting of Shareholders and until his successor shall be
duly qualified and elected. The persons named in the enclosed proxy will vote
the shares covered thereby in favor of the nominees listed below unless
specifically instructed to the contrary. Although the management of ARI does
not contemplate that any of the nominees will be unable to serve, if such a
situation arises before the meeting, the proxies will be voted for a
substitute to be named by the Board of Directors. All of the nominees named
below are now serving as directors of ARI. The affirmative vote of a majority
of the voting stock of ARI represented at the meeting, either in person or by
proxy, will be required to elect each nominee to the Board of Directors of
ARI. Abstentions and broker non-votes are each included in the determination
of the number of shares present and voting but are not counted for purposes of
determining whether a proposal has been approved.
Page 4<PAGE>
NOMINEES
Served as a
Name Age Current Position with ARI Director Since
- --------------- --- ------------------------------- -------------
Gerald D. Murphy 67 Director, Chairman of the Board April 1988
Douglas A. Murphy 39 Director, President and October 1990
Chief Executive Officer
Richard N. McCombs 49 Director, Executive Vice President June 1993
- Finance & Administration,
Secretary and Treasurer
C. Bain, Jr. 46 Director October 1987
William H. Burgess 78 Director April 1988
John M. Howland 47 Director October 1987
George E. Prchal 52 Director June 1993
Gerald D. Murphy has served as Chairman of the Board of the Company since
October 1993, and as a director since 1988. He served as Chairman and Chief
Executive Officer of Comet Rice, Inc. ("Comet"), a wholly owned subsidiary of
ERLY from 1986 until ERLY acquired an additional 33% ownership interest in ARI
through a reverse acquisition by ERLY's wholly-owned subsidiary, Comet, in
1993 (the "Acquisition"). He has also served as President, Chief Executive
Officer and Chairman of the Board of ERLY since 1964. Currently, Mr. Murphy
also serves as a director of Pinkerton's, Inc., a security and investigation
services firm, and High Resolution Sciences, Inc., a technological
corporation. He previously served as a director of Wynn's International,
Inc., and Sizzler Restaurants International, Inc.
Douglas A. Murphy has served as President and Chief Executive Officer of the
Company since June 1993 and as a director since 1990. He was President of
Comet American Marketing, now a division of ARI, from 1986 to 1990 and has
served in various other capacities with Comet since 1982. He has served as
President and as a director of ERLY since 1990. He is also a director advisor
of Compass Bank Houston. Douglas A. Murphy is the son of Gerald D. Murphy.
Richard N. McCombs has served as Executive Vice President of Finance and
Administration, Treasurer, Secretary and a director of the Company since 1993.
In addition, he has served as Managing Director of the ARI-Vinafood joint
venture since September 1994 and as Vice President and Chief Financial Officer
of ERLY since 1990.
S.C. Bain, Jr. has served as a director of ARI since 1987. He has served as
President of Bain, Inc., a farming corporation, since 1985 and has been a
partner at Bain Farms since April 1988.
William H. Burgess has been a director of ARI since 1988 and a director of
ERLY since 1976. In addition, he has been a private business consultant and
the Chairman of CMS Digital, Inc., a privately held company since 1986. From
1978 to 1986, Mr. Burgess was Chairman of International Controls Corp., an
internationally diversified manufacturing company.
John M. Howland has served as a director of ARI since October 1987 and a
consultant to ARI since October 1993. He served as Chairman of the Board of
Page 5<PAGE>
Directors from June 1993 until October 1993 when he resigned to become
President and Chief Executive Officer of Rice Milling and Trading Ltd., Inc.,
a foreign corporation in the business of rice trading and processing. He
served as Chairman of the Board and the Chief Executive Officer and President
of ARI prior to the Acquisition ("Pre-Acquisition ARI") from its inception in
1988 until June 1993 and served in various capacities with a Texas
agricultural cooperative marketing association ( the "ARI Cooperative") from
1983 until its dissolution in 1991.
George E. Prchal has served as a director of ARI since June 1993 and a
consultant to ARI since October 1993 and is presently the Executive Vice
President of Rice Milling and Trading Ltd., Inc. He served as Executive Vice
President of ARI from August 1988 to October 1993 and in various capacities
with the ARI Cooperative from February 1986 until its dissolution in 1991.
From July 1982 to February 1986 he served as Vice President of Marketing and
Sales and then as the President of Comet.
EXECUTIVE OFFICERS OF ARI
The following table sets forth information about the executive officers and
other key employees of ARI as of August 4, 1995 who are not nominees to the
board of directors and immediately below the table is biographical information
for those executive officers and key employees.
Name Age Position(s) with ARI
- -------------------- --- ----------------------------------------------
Lee Adams 54 Senior Vice President - International Marketing
Bill J. McFarland 58 Senior Vice President and President
- Comet American Marketing Division
John S. Poole 49 Senior Vice President and President
- Comet Rice Division
C. Bronson Schultz 53 Vice President of Finance and Data Processing
Joseph E. Westover 50 Vice President and Controller
Lee Adams has served as Senior Vice President of International Marketing of
ARI since June 1993. In addition, he served as Group Vice President of
International Marketing of Pre-Acquisition ARI from October 1987 to June 1993.
He served in various capacities with the ARI Cooperative from 1975 until its
dissolution in 1991 and in various capacities with Comet from 1963 until 1972.
Bill J. McFarland has served as Senior Vice President of ARI and President of
the Comet American Marketing division of ARI since 1993. Mr. McFarland has
served as a director of ERLY since 1986 and Vice President of ERLY since 1976.
He served as President of ERLY Food Group from 1990 to 1993 and as President
of Early California Foods, a division of ERLY, and in various other capacities
with ERLY from 1972 to 1990.
John S. Poole has served as Senior Vice President and President of the Comet
Rice Division of ARI since June 1993 and served as President of Comet from
August 1990 until its liquidation after the Acquisition. He served in various
capacities with Comet from 1970 to 1990.
Page 6<PAGE>
C. Bronson Schultz has served as Vice President of Finance and Data Processing
of ARI since January 1994. He served as Vice President and Chief Financial
Officer of ERLY Juice Inc. from 1988 through 1993, as Vice President of
Finance of Comet from 1974 to 1986 and as Vice President of Finance of Comet
American Marketing from 1986 to 1988.
Joseph E. Westover has served as Vice President and Controller of ARI since
January 1994. From 1983 through 1993, he served as Assistant Vice President
of Finance with ARI and the ARI Cooperative and from 1977 to 1983 in various
positions with the ARI Cooperative.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of ARI (the "Board") held three scheduled meetings
during the year ended March 31, 1995. Each director was in attendance at 75
percent or more of all of the meetings of the Board of Directors and all
committees on which each director served. The Board of Directors has three
committees with specific responsibilities to support the operations of the
full Board. These committees are: the Executive Committee, the Audit
Committee, and the Compensation Committee. The Board of Directors does not
have a nominating committee, as the entire Board acts in this capacity.
Executive Committee
The Board of Directors of ARI has delegated to the Executive Committee the
powers and authority of the Board in the management of the business affairs of
ARI, except that the Executive Committee does not: take any actions which
could await actions by the full Board; approve capital expenditures exceeding
$100,000; or, authorize transactions which would be both material and outside
the ordinary and normal course of business of ARI. Mr. Douglas A. Murphy
serves as Chairman of this Committee, and Messrs. John M. Howland and Gerald
D. Murphy are Committee members. During the fiscal year ended March 31, 1995,
the Executive Committee held no meetings.
Audit Committee
The responsibilities of the Audit Committee include: selection of independent
accountants; review of quarterly and annual financial statements with the
independent accountants; inquiry into the effectiveness of ARI's financial and
accounting functions and internal controls through discussions with ARI's
officers and independent accountants; review of any transactions in which
management or controlling persons of ARI have an interest; and review of, with
ARI's independent accountants, the planning of and results of audits and the
independent accountants' findings and recommendations relating to ARI's
accounting practices, internal controls and accounting procedures. Mr. S. C.
Bain, Jr. is Chairman of this Committee, and Messrs. William H. Burgess and
Richard N. McCombs are Committee members. During the fiscal year ended March
31, 1995, the Audit Committee held two meetings.
Compensation Committee
The Compensation Committee reviews and sets compensation levels of the Chief
Executive Officer and other officers, and issues compensation guidelines for
other members of management and other ARI employees. It is responsible for
Page 7<PAGE>
the administration of ARI's various compensation plans including annual
salaries, bonuses and other benefits provided to executives. Mr. Gerald D.
Murphy is Chairman and Messrs. S. C. Bain, Jr. and William H. Burgess are
committee members. During the fiscal year ended March 31, 1995, this
committee held one meeting.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
As a company registered under Section 12 of the Securities Exchange Act of
1934, the executive officers, directors and beneficial owners of more than 10%
of the Company's common stock have reporting requirements pursuant to Section
16(a) of such act. Based on available information, the Company believes that
all the required filings were made in a timely manner.
EXECUTIVE COMPENSATION
Director Compensation. Directors who are not executive officers of the
Company are paid $2,000 per quarter plus $1,000 for each board meeting
attended. During the fiscal year ended March 31, 1995, Messrs. John M.
Howland and George Prchal each received $100,000 for certain international
marketing services provided to ARI.
Executive Officer Compensation. The following table sets forth information
for the years ended March 31, 1993 to 1995, for the Chief Executive Officer of
ARI and the four other most highly compensated executive officers of the
Company:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation(1)
--------------------------- All
Year Other Restricted Other
Ended Compen- Stock Compen-
Name and Principal Position March 31, Salary Bonus(2) sation(3) Awards(4) sation(5)
- ------------------------------- ------- ------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Douglas A. Murphy 1995 $207,000 $69,552 $5,791 $17,890 $8,914
Director, President and 1994 173,654 50,000 2,000 75,000 15,855
Chief Executive Officer 1993(6) - - - - -
Gerald D. Murphy 1995 $170,500 $57,288 $7,233 $14,736 $9,060
Director 1994 179,167 50,000 - 75,000 196,645
Chairman of the Board 1993 280,000 - 3,284 - 5,627
Bill J. McFarland 1995 $198,000 $55,400 $4,075 $14,263 $7,500
Senior Vice President 1994 135,192 5,000 - 5,000 -
President, CAM Division 1993(6) - - - - -
John S. Poole 1995 $165,000 $46,200 $6,509 $11,886 $7,500
Senior Vice President 1994 155,000 15,000 1,736 15,000 12,034
President, Comet Rice Division 1993 155,000 8,000 4,940 12,750 2,700
Lee Adams 1995 $160,000 $44,800 $9,100 $11,524 $6,017
Senior Vice President 1994 155,000 5,000 6,390 5,000 8,633
International Marketing 1993 150,000 - 4,702 - 11,699
</TABLE>
Page 8<PAGE>
(1) Amounts earned for services performed for ERLY and its other
subsidiaries, not included in the table above, are as follows:
<TABLE>
<CAPTION>
Annual Compensation(1)
--------------------------- All
Year Other Restricted Other
Ended Compen- Stock Compen-
Name March 31, Salary Bonus(2) sation(3) Awards(4) sation(5)
- ------------------------------- ------- ------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Douglas A. Murphy 1995 $23,000 $23,728 - $18,968 -
1994 36,346 - $2,975 - $100,000
1993 195,000 - 3,675 - 5,216
Gerald D. Murphy 1995 $139,500 $62,872 - $29,038 -
1994 110,833 - $588 - $100,000
1993 - - - - -
Bill J. McFarland 1995 - - - - -
1994 $54,808 - $1,815 - $ 11,743
1993 185,000 - 1,650 - 3,700
</TABLE>
(2) In fiscal 1995 bonuses were paid to certain officers of the Company under
an Incentive Compensation Plan (Proposal No. 2 herein) based on the Return on
Equity (as defined in such plan) earned by the Company. Such bonuses are
payable 80% in cash and 20% in common stock of ERLY over a two year period
subject to continuing performance requirements.
(3) Amounts included in this column reflect: (i) the cost of company provided
automobiles relating to personal use, and (ii) reimbursements under the
Executive Medical Plan. Under this Plan, key executive officers are reimbursed
for expenses incurred by them and their dependents for medical and dental care
not covered by other sources.
(4) Amounts include awards of restricted ERLY common stock. The number of
shares of this stock held and market value at March 31, 1995, were as follows:
Name Shares Market Value
- ------------------ --------- ----------
Douglas A. Murphy 20,379 $229,264
Gerald D. Murphy 20,990 236,137
Bill J. McFarland 2,402 27,022
John S. Poole 8,470 95,287
Lee Adams 2,160 24,300
Such shares are restricted for a two-year period from date of issuance.
(5) Substantially all employees are covered by the ERLY Employees' Profit
Sharing Retirement Plan, a defined contribution plan. ARI and ERLY make a
mandatory 1% matching contribution to the plan on a monthly basis and an
Page 9<PAGE>
annual contribution at the discretion of their respective Boards of Directors.
The basis for contributions for executive officers is the same as for other
employees. Amounts listed include company contributions under this plan. In
1994, Douglas A. Murphy and Gerald D. Murphy were each paid a fee of $100,000
for their personal guarantees of $5.0 million of bank debt under an agreement
between ING Capital Bank, ERLY and ERLY Juice Inc. In 1994, Gerald D. Murphy
was also paid a fee of $180,000 for a personal guarantee of an $8 million bank
line of credit to Comet.
(6) Noted individuals were not paid by ARI or Comet in 1993.
Stock Options and Stock Appreciation Rights. The following table presents
information on ERLY common stock options held by the executive officers named
in the Summary Compensation Table at the end of fiscal 1995. During fiscal
1995, Mr. McFarland exercised options granted in 1985 for the purchase of
8,053 shares of ERLY common stock at a price of $3.73 per share. No other
officers exercised any stock options during the year.
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Fiscal 1995
and March 31, 1995 Option/SAR Values
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options/SARs In-The-Money Options/SARs
Acquired on Value at March 31, 1995 at March 31, 1995(2)
Name Exercise(#) Realized(1) Exercisable Unexercisable Exercisable Unexercisable
- --------------- ----------- ---------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Douglas A. Murphy - - 66,550 - $448,547 -
Gerald D. Murphy - - - - - -
Bill J. McFarland 8,053 $60,559 26,620 - 179,419 -
John S. Poole - - 16,638 - 112,140 -
Lee Adams - - - - - -
</TABLE>
(1) Market value of underlying ERLY securities at the exercise date ($11.25),
less the exercise price ($3.73).
(2) Market value of underlying ERLY securities at March 31, 1995 ($11.25),
less the exercise price ($4.51).
Employment Agreement. In connection with the ARI Cooperative's reorganization
as Pre-Acquisition ARI, Pre-Acquisition ARI entered into several employment
agreements with certain Pre-Acquisition ARI employees. Lee Adams' employment
agreement provides that, as an employee, he shall be entitled to certain
benefits for a five-year term commencing (i) on the date of termination, if
termination is by notice of ARI and there has been no Change of Control (as
defined in such employment agreement), (ii) on the occurrence of a Benefits
Event (as defined in such employment agreement) following a Change of Control,
if termination is at the option of the employee, or (iii) on the occurrence of
the last Change of Control preceding the date of termination, if termination
is by notice of ARI. Under the terms of the employment agreement, such
benefits are provided unless termination is both, at the option of the
employee and in the absence of a Change of Control. A Change of Control is
deemed to occur if (i) any person becomes beneficial owner of 25% or more of
Page 10<PAGE>
the voting power of ARI or (ii) during any consecutive years, the individuals
comprising a majority of the Board of Directors at the beginning of such
period shall cease to constitute a majority. Generally, benefits payable
under the employment agreement include: continuation of the employee's base
salary, continuation of the employee's participation in profit sharing,
pension and other executive compensation plans, various health care and
disability plans, the right to a cash bonus in the amount of the bonus last
received if ARI awards a cash bonus to any member of the Executive Group (as
defined in such employment agreement) during such five-year period, and
indemnification for judgments, fines and expenses incurred by the employee by
reason of his serving as an officer. In consideration of these benefits, Mr.
Adams has agreed not to compete with ARI or to disclose any confidential
information of ARI during the five-year period during which he is to receive
such benefits. If ARI or its successor fails to make timely payments as
required by the employment agreement, liquidated damages are set at treble the
amount of such untimely payments. Certain amounts that may be paid under the
employment agreement upon Mr. Adams' termination may be deemed to be "excess
parachute payments" within the meaning of Section 280G of the Internal Revenue
Code and, as such, would not be deductible by ARI for federal income tax
purposes.
Other Compensation. ARI also provides certain non-cash compensation and
personal benefits to executive officers. The incremental cost to ARI of
providing such compensation and personal benefits did not, for the fiscal year
ended March 31, 1995, exceed $25 thousand or 10 percent of compensation for
any individual named in the cash compensation table above, or, with respect to
all executive officers as a group, the amount of $25 thousand times the number
of executive officers or 10 percent of the compensation for such group.
Compensation Committee Interlocks and Insider Participation. Decisions on the
compensation of the Company's executive officers are made by the Compensation
Committee of the Board of Directors. The Compensation Committee consists of
Gerald D. Murphy, who acts as chairman of the committee, William H. Burgess
and S. C. Bain, Jr. Mr. Murphy is Chairman of the Board of Directors of the
Company and is the beneficial owner of 37.4% of ERLY common stock. Mr.
Burgess is a private business consultant, Chairman of CMS Digital, Inc. and a
Director of ERLY. He is the beneficial owner of 7.6% of ERLY common stock.
All decisions by the Compensation Committee were reviewed and approved without
change by the full Board of Directors of the Company. Mr. Gerald D. Murphy
did not participate in any Compensation Committee or Board of Directors
discussions or decisions concerning his own compensation. Except for Mr.
Murphy, no other member of the Compensation Committee is now or ever has been
an officer or employee of the Company or its subsidiaries.
Mr. Murphy and Mr. Burgess are also Directors of ERLY. Both serve on ERLY's
Compensation Committee of the Board of Directors, with Mr. Burgess serving as
chairman. Mr. Bain is President of Bain, Inc. and a partner at Bain Farms.
Report of the Compensation Committee. The Compensation Committee reviews and
sets compensation levels of the Chief Executive Officer and other officers,
and issues compensation guidelines for other members of management and other
ARI employees. It is responsible for the administration of ARI's various
Page 11<PAGE>
compensation plans including annual salaries and other benefits provided to
executives.
Base salary levels of the Chief Executive Officer and other executive officers
are not formally set by the Committee using specific performance goals or
empirical criteria. Rather, base salary levels are set annually based on a
variety of subjective factors such as personal performance, current
responsibilities, salaries of executive officers in other companies, the
performance of the function or the operating unit for which the executive is
responsible, and overall ARI performance.
In considering the amount of base salary for fiscal year 1995 for Mr. Douglas
A. Murphy, Chief Executive Officer, the Compensation Committee specifically
considered the improved financial results of ARI for the two years ended March
31, 1995 and the role he played in the initiation of Haiti operations, the
subsequent performance of the Haiti operation, and the inception of operations
in Vietnam.
In fiscal 1995, ARI's Board of Directors adopted (Proposal No. 2 herein) an
Incentive Compensation Plan (the "Incentive Plan"), pursuant to which certain
key officers of the Company are entitled to receive bonuses that are payable
80% in cash and 20% in common stock if certain specified Returns on Equity (as
defined therein) of ARI are achieved. Bonuses under the Incentive Plan are
70% earned in the year the Return on Equity is 15% or greater and the
remaining 30% is earned in the following fiscal year if the Company achieves a
Return on Equity of 15% or greater in such subsequent fiscal year. Any
portion of the bonus that would otherwise be available under the Incentive
Plan in the subsequent fiscal year will be forfeited upon a participant's
voluntary termination of employment. Furthermore, no shares of stock issued
under the Incentive Plan can be transferred for two years following issuance.
The Incentive Plan is not subject to any provisions of ERISA. See "Proposal
to Approve ARI Incentive Compensation Plan."
Amounts paid in fiscal 1995 under the above described plans and programs for
the Chief Executive Officers and the four most highly compensated executive
officers of ARI are included in the compensation table and related footnotes
presented in the "Executive Officer Compensation" section.
In 1993, the U.S. Treasury Department issued regulations to the Internal
Revenue Code (Section 162(m)) that prevents publicly traded companies from
receiving tax deductions on compensation paid to executive officers in excess
of $1 million. ARI has not paid, and does not currently anticipate paying
compensation at these levels, and therefore does not believe that these
provisions will be relevant to ARI for the foreseeable future.
Compensation Committee
American Rice, Inc.
Gerald D. Murphy
S.C. Bain, Jr.
William H. Burges
Page 12<PAGE>
PROPOSAL TO APPROVE ARI INCENTIVE COMPENSATION PLAN (PROPOSAL NO. 2)
The ARI Incentive Compensation Plan (the "Incentive Plan") was adopted by the
Board of Directors in 1994 as an incentive for the key employees of the
Company to attain a continuity of superior earnings over a sustained period of
time and thus to enhance the long-term value of the capital stock of the
Company to ARI shareholders. Furthermore, this Plan is intended to help the
Company attract and retain persons of outstanding ability.
Key management employees who are department managers, assistant vice-
presidents, vice-presidents, senior or executive vice-presidents or the chief
operating officer may participate in the Incentive Plan on a year to year
basis at the discretion of the Company's chief executive officer. The
Company's chief executive officer and chairman automatically participate in
the Incentive Plan at the levels specified.
Employees who participate in the Incentive Plan will receive a percentage of
their base salary as a bonus based on the Company's Return on Equity as
follows:
Return on Equity
Title or 15.00% 18.00% 21.00% 24.00%
Office (1) to 17.99% to 20.99% to 23.99% to 26.99% 27.00+%
- --------- --------- --------- --------- --------- ---------
Department Manager /
Assistant Vice
President 5% 10% 20% 30% 40%
Vice President 10% 20% 30% 50% 65%
Senior Vice
President 10% 25% 50% 75% 100%
Executive Vice
President 15% 30% 60% 90% 120%
President 15% 30% 60% 105% 135%
Chairman 15% 30% 60% 105% 135%
(1) Plan participants holding more than one of the indicated titles shall not
be entitled to more than one bonus, but rather shall participate at the
highest bonus level indicated.
Bonuses are seventy percent (70%) earned in the year that Return of Equity is
fifteen percent (15%) or greater and the remaining thirty percent (30%) is
earned in the following fiscal year if the Company achieves a Return on Equity
fifteen percent (15%) or greater in such subsequent fiscal year. All bonuses
are payable eighty percent (80%) in cash and twenty percent (20%) in shares of
Page 13<PAGE>
the $.01 par value common stock of ERLY or $1.00 par value common stock of ARI
(the "Incentive Shares").
Any unearned cash bonus and Incentive Shares issuable under the Incentive Plan
will be forfeited upon voluntary termination of employment by a participant.
Further, no Incentive Shares issued under the Incentive Plan can be sold,
transferred, assigned or conveyed for two years following their issuance.
Amounts awarded the Company under the Incentive Plan for the fiscal year ended
March 31, 1995 for the Chief Executive Officer and the four other most highly
compensated executive officers is detailed in the Summary Compensation Table
(see - Executive Compensation). The following table sets forth additional
information regarding amounts awarded under the Incentive Plan for fiscal
1995:
Number of
Employees
in Group Amount
--------- ----------
Executive Group 8 $490,340
Non-Executive Director Group - -
Non-Executive Officer Employee Group 3 50,554
The Incentive Plan is not subject to any provisions of ERISA.
Approval of the Incentive Plan requires the affirmative vote of a majority of
the voting stock present, in person or by proxy, at the annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE INCENTIVE PLAN.
FIVE YEAR SHAREHOLDER RETURN COMPARISON
Set forth below is a graph showing the five year cumulative total return of
ARI stock as compared with the CRSP index of all NASDAQ U.S. stocks and a peer
group index represented by the Standard and Poors index of food stocks. The
graph compares the change over the five year period ended March 31, 1995 of
$100 invested on March 31, 1990 in ARI and in each of the indices assuming
reinvestment of dividends (ARI paid no dividends during this period).
The data presented in tabular form:
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
ARI $100 $41 $16 $41 $82 $40
S & P Foods Stocks $100 $137 $149 $163 $150 $179
NASDAQ U. S. Stocks $100 $114 $146 $167 $180 $20
Page 14<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management. In October 1994, ARI entered into an agreement
with Rice Milling and Trading, Ltd., Inc. ("RMT"), a company which operates a
receiving, processing, storage and bagging facility in Saudi Arabia to receive
and pack ARI products on an exclusive basis and under ARI supervision. Market
shipments under this agreement began in June 1995 and management expects that
RMT will receive, process, store and bag rice shipped by ARI valued in excess
of $20 million annually, of which RMT will retain in excess $1 million
annually. Two directors of ARI, John M. Howland and George E. Prchal, are
executive officers of RMT and are consultants to ARI. During fiscal 1995, the
Company paid $100,000 to each of Mr. Howland and Mr. Prchal for consulting
services.
S. C. Bain, Jr., a director of ARI, sells rough rice to ARI under grower
agreements which contain the same terms or options as ARI's agreements with
other growers. The amount of rice provided by Mr. Bain has not, during any of
the last three years, exceeded one percent of the total volume of rough rice
purchased by ARI.
Transactions with ERLY. As a result of the Acquisition, ERLY increased its
ownership in the combined voting rights of ARI stock outstanding from 48% to
81%. Because of their positions as directors and significant stockholders of
ERLY, Gerald D. Murphy, Douglas A. Murphy, and William H. Burgess can be
deemed to be the beneficial owners of the ARI stock owned by ERLY.
Additionally, Gerald D. Murphy, Douglas A. Murphy and William H. Burgess also
serve as directors of ARI. Gerald D. Murphy is Chairman of the Board of ARI
and Douglas A. Murphy is the President and Chief Executive Officer of ARI.
In connection with the Acquisition, the intercompany payables and receivables
were netted and resulted in a note receivable owed to ARI by ERLY. The note is
payable out of dividends received by ERLY on the Series B Preferred Stock and
bears interest at the rate of 6% per annum. The balance due was approximately
$11.9 million at March 31, 1995.
ARI files a consolidated federal income tax return with ERLY. ARI and ERLY
entered into a Tax Sharing Agreement on May 25, 1993 pursuant to which ARI
will pay to or receive from ERLY the amount of income taxes currently payable
or refundable computed as if ARI filed its annual tax return as a separate
company. ARI's obligation to ERLY under the Tax Sharing Agreement at March 31,
1995 was approximately $1.0 million.
ARI entered into a Management Agreement with ERLY on May 25, 1993 pursuant to
which ERLY provides certain marketing, operating and management services to
ARI. In exchange for such services, ARI pays ERLY a monthly management fee.
The management fee is currently $80,000 a month and is adjusted annually based
on the most recently published consumer price index. The term of the
Management Agreement is two years with an automatic two-year renewal unless
one party notifies the other that it wishes to terminate the Management
Agreement. During fiscal year 1995, ARI paid ERLY $0.9 million in management
fees pursuant to the Management Agreement.
Page 15<PAGE>
The Company has filed a registration statement with the Securities and
Exchange Commission to register $100,000,000 in mortgage notes ("the Notes").
If the Notes are sold, the Company will lend ERLY approximately $10.5 million
in exchange for a promissory note from ERLY bearing interest at the same rate
as the Notes. ERLY will use a portion of the proceeds to partially satisfy
$9.6 million of indebtedness owed by ERLY Juice Inc. and guaranteed by ERLY,
to Internationale Nederlanden (U.S.) Capital Corporation ("ING Capital"). ING
Capital beneficially owns warrants to acquire 15% of the outstanding voting
capital stock of ERLY (on a common stock equivalent basis). In addition, ING
Capital is a participant in the Company's existing term loan. The Company will
also use a portion of the proceeds from the sale of the Notes to retire the
outstanding principal amount of its term loan, and, in connection therewith
ING Capital will receive approximately $23.8 million.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche LLP, independent public accountants, served as
ARI's auditors for the fiscal year ended March 31, 1995. Deloitte & Touche
LLP, or one of its predecessors, has served as ARI's auditors since its
inception in October 1987 and served as Predecessor ARI's auditors since 1978.
A representative of Deloitte & Touche LLP will be present at the Annual
Meeting and will be available to respond to appropriate questions. He will
also be afforded an opportunity to make a statement if he so desires.
PROPOSALS BY SHAREHOLDERS
Any shareholder wishing to present a proposal for consideration at the next
Annual Meeting of Shareholders, anticipated to be held no later than September
20, 1996, must submit the proposal in sufficient time so that it may be
received by ARI at its principal executive offices at the address set forth on
the cover of the Proxy Statement at least 120 days before August 1, 1996, the
anticipated mailing date of the Proxy Statement and Proxy for the 1996 Annual
Meeting of Shareholders, to be included in the proxy statement and proxy
relating to that meeting. Such proposal must also comply with the
requirements as to form and substance established by applicable laws and
regulations
Page 16<PAGE>
OTHER BUSINESS
The management of ARI knows of no other business that will be brought before
the Annual Meeting. If, however, any other matters are properly presented, it
is the intention of the persons named in the accompanying form of proxy to
vote the shares covered thereby in their discretion as they may deem
advisable.
By order of the Board of Directors
Douglas A. Murphy
President
Houston, Texas
August 4, 1995
Page 17<PAGE>
AMERICAN RICE, INC
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of American Rice, Inc. ("ARI") hereby appoints
Douglas A. Murphy and Joseph E. Westover as proxies, each with the power to
act without the other and with full power of substitution for the undersigned
to vote all shares of Common Stock and Preferred Stock of ARI that the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Shareholders of ARI to be held on August 31, 1995, or at any
adjournment(s), as follows:
(1) ELECTION OF { }FOR all nominees listed below { }WITHHOLD AUTHORITY to
DIRECTORS except as marked to the vote for the nominees
contrary below listed below
Nominees: S. C. Bain, Jr. John M. Howland Douglas A. Murphy
William H.Burgess Richard N. McCombs Gerald D. Murphy
George E. Prchal
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
- -----------------------------------------------------------------------------
(2) Ratification of the Company's Incentive Compensation Plan
{ } FOR RATIFICATION { } AGAINST RATIFICATION { } ABSTAIN
(3) With discretionary authority on any matter that may properly come before
the meeting.
ALL SHARES WILL BE VOTED AS DIRECTED HEREIN AND, UNLESS OTHERWISE DIRECTED,
WILL BE VOTED FOR THE ELECTION AS DIRECTORS OF ALL NOMINEES AND FOR
PROPOSALS 2 and 3.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
DATED: , 1995
--------------
- --------------------------------
Signature
- --------------------------------
Signature, if held jointly
YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO VOTE THEREON.
AMERICAN RICE, INC.
INCENTIVE COMPENSATION PLAN
THIS INCENTIVE COMPENSATION PLAN (the "Plan") is adopted as of the 1st day of
April, 1994, by American Rice, Inc., a Texas corporation ("ARI").
1. Purpose of the Plan. The Plan is intended as an incentive for the key
employees of ARI and its subsidiaries (collectively the "Company") to attain a
continuity of superior earnings over a sustained period of time and thus to
enhance the long-term value of the capital stock of the Company to ARI
shareholders. Furthermore, this Plan is intended to help the Company attract
and retain persons of outstanding ability.
2. Effective Date. The Plan shall become effective only after:
(a) it is approved by the Board of Directors;
(b) certain authorized but unissued shares of ERLY Industries Inc, the
Company's parent corporation ("ERLY"), are set aside to fulfill the purposes
of the Plan.
3. Definitions. As used herein, the following terms have the meaning set
forth unless the context clearly indicates to the contrary:
(a) ARI Shares. "ARI Shares" means shares of the Company's $1.00 par value
common stock.
(b) The Company. The "Company" shall mean American Rice, Inc., a corporation
organized under the laws of the State of Texas, its subsidiaries, and any
successors thereto.
(c) The Board of Directors. The "Board of Directors" shall mean the Board of
Directors of the Company as it may be constituted from time to time.
(d) The Committee. The "Committee" shall mean the committee as appointed by
the Board of Directors to administer this Plan. If no Committee is
specifically appointed, the Committee shall be composed of the entire Board of
Directors.
(e) The Employees. The "Employees" shall mean the present or future officers
and employees of the Company.
(f) ERLY Shares. ERLY Shares means shares of the $0.01 par value common
stock of ERLY.
(g) Company Equity. "Company Equity" shall mean total stockholders' equity
as reflected on the Company's audited consolidated balance sheet at the end of
Page 1<PAGE>
the fiscal year immediately preceding each Award Year; provided, however, the
Company Equity, as of the end of such fiscal year shall not include any
increase or decrease in Company Equity related to push down accounting
adjustments to Company Equity required by mergers or acquisitions. Any such
adjustment amount eliminated from Company Equity shall be specifically
approved by the Committee.
(h) Fair Market Value. "Fair Market Value" shall mean with respect to a
Share (i) if traded on the National Association of Securities Dealers, Inc.
(the "NASD") National Market System ("NMS"), the last price of a Share sold on
the last trading day on any relevant date or, if there is no trading on such
date, the next preceding date on which there were sales of Shares, as
published in the NASDAQ National Market Issues report in the Southwestern
Edition of the Wall Street Journal, (ii) if listed on a national securities
exchange (an "exchange"), the mean between the highest price and the lowest
price at which a Share shall have been sold "regular way" on an exchange on
the applicable date or, if there are no sales on said date, then on the next
preceding date on which there were sales of Shares, (iii) if the Shares are
not traded on the NMS or listed on an exchange, the mean between the bid and
asked prices last reported by the NASD for the over-the-counter market on the
applicable date, or, if no bid and asked prices are reported on said date,
then on the next preceding date on which there were such quotations, or (iv)
if the Shares are not traded on the NMS or listed on an exchange and
quotations for the Shares are not reported by the NASD, the fair market value
determined by the Committee.
(i) Incentive Shares. "Incentive Shares" shall mean the Shares to be issued
pursuant to Paragraph 7(d) of this Plan.
(j) The Plan. The "Plan" shall mean the American Rice, Inc. 1994 Incentive
Compensation Plan as presently adopted and as may be amended from time to
time.
(k) Return on Equity. For any Award Year, the term "Return on Equity" for
the Company shall mean the earnings from continuing operations before income
taxes and extraordinary items for the Company divided by the relevant Company
Equity; provided, however, said earnings shall not include any increase or
decrease related to pushdown accounting adjustments required by mergers or
acquisitions or from the sale of ARI's Houston properties.
(l) Shares. "Shares" shall mean either ERLY Shares or ARI Shares. Whether
"Shares" means ERLY Shares or ARI Shares shall be determined by the Company's
Board of Directors in its sole discretion; provided, however, that if ARI
Shares are to be issued pursuant to Paragraph 7(d) of this Plan, the Company
shall acquire such shares by purchases on the open market and shall not issue
treasury shares or authorized but unissued shares in satisfaction of the
Company's obligation under Paragraph 7(d).
4. Plan Committee. (a) The Committee shall select one of its members as its
Chairman and shall hold its meetings at such time and places as it shall deem
advisable. Members of the Committee may, but need not be, employees,
officers, or directors of the Company. The Board of Directors may at any time
Page 2<PAGE>
remove, replace, substitute, or add any one or more members of the Committee.
(b) Subject to the express provisions of this Plan, the Committee shall have
complete authority to interpret the provisions of the Plan, to prescribe,
amend, and rescind rules and regulations relating to the Plan, to determine
the details and provisions of each Incentive Share issued hereunder, and to
make all other determinations necessary or advisable in the Plan's
administration. Determinations of the Committee on matters of interpretation
of the Plan shall be final, binding and conclusive on all Participants.
(c) A majority of the members of the Committee shall constitute a quorum, and
any action taken by a majority present at a meeting at which a quorum is
present or any action taken without a meeting evidenced by a writing executed
by a majority of the whole Committee shall constitute the action of the
Committee.
(d) Company Assistance. The Company shall supply full and timely information
to the Committee on all matters relating to eligible employees, their
employment, death, retirement, disability, or other termination of employment,
and such other pertinent facts as the Committee may require or request.
5. Participation. Any Employee of the Company shall be eligible for
selection to participate in the Plan. Based on recommendations from the
President of the Company the Committee shall select the Employees to
participate in the Plan (the "Participants" or, individually, "Participant").
In determining which Employees shall participate, the President and the
Committee shall take into account the provisions of the Plan, the duties of
the Employee, the Employee's past, present and future contributions to the
success of the Company, and such other factors deemed relevant in connection
with accomplishing the purpose of the Plan. Nothing contained herein to the
contrary withstanding, the Chairman and President of the Company and each of
its subsidiaries and divisions shall participate in the Plan at the levels
specified in Paragraph 7(b) below.
6. Number of Erly Shares Subject to the Plan. (a) The number of ERLY Shares
which may be issued hereunder shall not exceed an aggregate of ____ shares.
(b) In the event that the outstanding shares of ERLY or the Company are
hereafter increased, or if other securities are issued by the Company by
reason of stock split, spin-off, or stock dividend, no adjustment shall be
made to the number of shares issuable pursuant to this Plan.
7. Terms and Conditions of Awards. (a) Each award under this Plan shall be
an award with respect to a period of two consecutive fiscal years, herein
called an Award Period. Each year within an Award Period is herein called an
Award Year. The first Award Period and Award Year shall begin on April 1, 1994
and a new Award Year shall begin on the first day of each succeeding fiscal
year until the Plan is terminated by the Board of Directors. Each subsequent
Award Year shall commence at the termination of the preceding Award Year.
Page 3<PAGE>
(b) Subject to paragraph 7(c) below, Participants in the Plan shall be
eligible to receive the indicated percentage of their base salary as a bonus
based on the Company's Return on Equity during an Award Year for the Company
or its division or subsidiary based on the following formula:
American Rice, Inc.
Return on Equity
Title or 15.00% 18.00% 21.00% 24.00%
Office (1) to 17.99% to 20.99% to 23.99% to 26.99% 27.00+%
- --------- --------- --------- --------- --------- ---------
Department Manager /
Assistant Vice
President 5% 10% 20% 30% 40%
Vice President 10% 20% 30% 50% 65%
Senior Vice
President 10% 25% 50% 75% 100%
Executive Vice
President 15% 30% 60% 90% 120%
President 15% 30% 60% 105% 135%
Chairman 15% 30% 60% 105% 135%
(1) Plan participants holding more than one of the indicated titles shall not
be entitled to more than one bonus, but rather shall participate at the
highest bonus level indicated.
(c) Bonuses for an Award Year shall be payable over an Award Period. For
each Award Period, bonuses shall be seventy percent (70%) earned in the first
Award Year if the Company, division or subsidiary achieves a Return on Equity
of fifteen percent (15%) or greater and the remaining thirty percent (30%) of
the bonus will be earned only if the Company, division or subsidiary achieves
a Return on Equity of at least fifteen percent (15%) in the next succeeding
Award Year during the Award Period. A bonus for an Award Year shall be earned
only if the Participant is an employee of the Company or one of its
subsidiaries or divisions at the end of the Award Year.
(d) Bonuses will be payable not later than forty-five (45) days after the
Company files its annual report on Form 10-K with the United States Securities
and Exchange Commission ("SEC"). All bonuses shall be payable eighty (80%)
percent in cash and twenty (20%) percent in Incentive Shares. The number of
Shares to be issued in payment of the stock portion of the bonus shall be (i)
the dollar value of the bonus to be paid in Incentive Shares divided by (ii)
the average Fair Market Value of a Share during the last five weeks of the
Award Year in which the bonus is earned.
(e) Except as set forth in paragraph 5 above, at the beginning of each
subsequent Award Year the Committee, in its discretion, shall determine and
Page 4<PAGE>
identify the Employees who shall participate in the Plan during the Award
Period beginning with such Award Year.
(f) The Incentive Shares earned by an Employee shall not entitle the Employee
to voting rights or any other rights of a shareholder with respect thereto
until stock certificates representing the Shares are actually issued.
(g) If an Employee holds more than one position in the Company and its
subsidiaries and/or divisions, or if an Employee holds positions in more than
one of the Company, its divisions and subsidiaries, the potential bonus for
an Award Year shall be calculated for each position held with the Company and
each subsidiary and each division during the Award Year, but only the highest
bonus earned shall be paid.
8. Transferability. Except as provided in Paragraph 9(b), Incentive Shares
granted pursuant to the terms of this Plan shall not be transferable for a
period of two years following their issue other than upon the death of a
Participant.
9. Termination; Death; Disability or Retirement.
(a) Any unearned cash bonus and Incentive Shares payable or issuable pursuant
to the terms of this Plan shall be forfeitable upon termination of employment
for any reason and earned payments will be made in accordance with paragraph
7(d).
(b) If any Employee shall die, retire pursuant to the Company's normal
retirement policy, or become permanently and totally disabled as determined in
accordance with the applicable personnel policies, the Employee's payments
earned under the terms of this Plan shall become 100% nonforfeitable on the
date of such death, retirement or disability. In the event of an Employee's
death or mental disability, the Bonus and Incentive Shares will be issued in
accordance herewith to the party or parties to whom the Employee's rights
shall have passed by Will or otherwise by law. No transfer of an Incentive
Share by the Employee by will or by the laws of descent and distribution shall
be effective to bind the Company, unless the Company is furnished a written
notice thereof and an authenticated copy of the will or such other evidence as
the Company may deem necessary to establish the validity of the transfer.
10. Issuance of Stock Certificates. The Company shall not be required to
issue or deliver any certificate for Shares prior to fulfillment of all of the
following conditions, if applicable:
(a) The admission of such Shares to listing on all stock exchanges on which
the Shares are then listed.
(b) The obtaining of any approval or other clearance from any federal or
state governmental agency which the Committee shall in its sole discretion
determine to be necessary, or advisable.
11. Amendment and Termination of the Plan. This Plan may not be amended more
often than once every six months other than to comply with changes to the
Internal Revenue Code.
Page 5<PAGE>
12. Miscellaneous.
(a) Continuing Employment. Nothing contained in the Plan or any related
agreement shall obligate the Company to continue the employment of any
Employee for any period or interfere in any way with the right of the Company
to reduce the Employee's compensation or change the Employee's title or terms
of employment, subject to any employment agreement which may exist from time
to time between the Company and the Employee.
(b) Other Compensation Plans of Company. This Plan has no effect on the
rights and obligations of Employees of the Company or under any other
qualified or nonqualified compensation plan of the Company.
(c) Plan Binding on Successors. This Plan shall be binding on each of the
parties hereto and their successors and assigns.
(d) Severability. If any provision of this Plan is held to be illegal,
invalid, disqualifying or unenforceable under present or future laws, such
provision shall be fully severable; the Plan shall be construed and enforced
as if such illegal, invalid, disqualifying or unenforceable provision had
never comprised a part of the Plan; and the remaining provisions of the Plan
shall continue in full force and effect and shall not be affected by the
illegal, invalid or disqualifying or unenforceable provision of its severance
from this Plan. Furthermore, in lieu of such illegal, invalid or
disqualifying or unenforceable provision, there shall be added automatically
as a part of this Plan a provision as similar in terms to such illegal,
invalid, disqualifying or unenforceable provision a may be possible and be
legal, valid, qualifying and enforceable.
(e) Assignment and Alienation. The Employee's rights under this Plan may not
be assigned or alienated, whether voluntarily or involuntarily, and any
attempted assignment or alienation of such rights shall be null and void.
(f) Gender Interpretation. In all cases where appropriate, words of one
gender include the other genders, the singular includes the plural, and the
plural includes the singular.
(g) Applicable Law. This Plan will be governed by the laws of the State of
Texas.
(h) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered or mailed by
certified or registered mail to the Company at its regular place of business.
Page 6<PAGE>
