================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[X] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ERLY INDUSTRIES INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
THE POWELL GROUP
FARMERS RICE MILLING COMPANY, INC.
NANETTE N. KELLEY
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
[LETTERHEAD OF THE POWELL GROUP] Vote at ERLY Industries'
Annual Meeting
Against Current Management Who Have Been
Found Liable by a Jury for
CONSPIRACY AND FRAUD.
---
October 6, 1997
Dear Fellow ERLY Shareholder:
Over the past several weeks I have had the opportunity, indeed the
pleasure, to speak with many ERLY shareholders regarding The Powell Group's
efforts to maximize the value of our mutual investment in ERLY. Thank you for
your many expressions of support and confidence -- they are important to us,
particularly in light of Gerald Murphy's mud-slinging campaign to divert your
attention from what we believe are the crucial issues in this campaign,
including his record of abysmal performance.
One thing now should be crystal clear to all ERLY shareholders: Gerald
Murphy and his Board of Directors have failed to properly represent your
interests as an ERLY shareholder and they have failed to maximize the value of
your ERLY investment.
The Powell Group is offering ERLY shareholders a unique opportunity to
change things for the better -- a new, highly-qualified and experienced Board of
Directors dedicated to achieving attractive returns for all shareholders and a
well-conceived business plan to achieve that result. Regardless of the size of
your investment, we urge you to take advantage of this unique opportunity -- it
may never come again -- by promptly signing, dating and mailing your BLUE proxy.
ERLY'S RECORD IS CLEAR - CHANGE IS ESSENTIAL
In a last ditch effort to keep his job, Gerald Murphy now wants ERLY
shareholders to believe that management's strategy is working. Just last week,
Mr. Murphy told you that "... we have continued the progress the Company has
made in the last five years." We urge you to closely examine the FACTS. Then,
you be the judge of Mr. Murphy's so-called "progress":
FACT: On August 15, 1997, ERLY reported a huge loss for the first quarter of
ERLY's current fiscal year. For the quarter ended June 30, ERLY reported
a loss of $4.8 million or $.99 per share compared to a loss of $1.25
million or $.27 per share for the comparable quarter of 1996.
Stockholders' equity plummeted as a result of this loss, declining
approximately 18% during the first quarter of the current fiscal year.
FACT: On August 28, 1997, Standard & Poor's lowered its corporate credit
rating for American Rice (ERLY's primary subsidiary) to CCC+ from B and
also lowered its rating on American Rice's $100 million mortgage notes.
FACT: Today, ERLY Industries is burdened with excessive and expensive debt -
ERLY's ratio of total debt (including short-term bank debt) to equity is
over 10 to 1 and ERLY pays (through ARI) approximately 15% in annual
------------
interest charges on the $100 million mortgage notes.
ERLY shareholders should ask themselves if this is the "progress" to which
Mr. Murphy refers. If so, I'm not sure we can afford any more of Mr. Murphy's
"progress". Mr. Murphy doesn't stop there, however, in his effort to get your
vote. Mr. Murphy also touts his management team as having extensive experience
in the food industry. Mr. Murphy goes on to say: "Doug [his son] and I believe
we have a professional management team with unmatched experience in the
industry."
FACT: Mr. Murphy, his son, Doug, their "professional management team" and
ERLY's Board of Directors are responsible for bringing ERLY's
shareholders the following:
X Three Failed Diversification Attempts
X Liquidity Crisis
X Default on Public Debt
X Common Stock Delisting from the NASDAQ National
Market
X No Cash Dividends EVER!
X Failed Relationships
X Failure to Enhance Shareholder Value
Page 2
FACT: In June 1997, Mr. Murphy convinced ERLY to grant him a lucrative
golden parachute employment agreement that will pay him more than
$1,750,000 over five years following a change of control of the
company if his employment is terminated or, in certain circumstances,
even if he voluntarily resigns.
------------------------------
Finally, given ERLY's poor financial results and woeful stock
performance/1/ we are astounded that Murphy is asking shareholders to approve
actions which could diminish your rights and, by ERLY's own admission, possibly
affect negatively the price of your ERLY stock. Many professional investors
believe there is a strong link between good corporate governance practices and
strong financial performance; yet, Mr. Murphy wants your vote to prohibit
cumulative voting and to eliminate your right to act by written consent.
Consider the following admissions contained in ERLY's own materials:
FACT: ERLY admits in its proxy statement:
"...THE PROPOSED AMENDMENTS...COULD...HAVE THE EFFECT OF ENTRENCHING
INCUMBENT MANAGEMENT." (ERLY Proxy Statement, page 6)
"The Amendments, if they are adopted, could also have the effect of
discouraging a third party from making a tender offer or otherwise
attempting to obtain control of [ERLY], even though such an attempt
might be beneficial to [ERLY] and its shareholders...." (ERLY Proxy
Statement, page 7)
"It is possible that one effect of the Amendments, if they are
adopted, would be a reduction in the price of [ERLY's] Common Stock
...." (ERLY Proxy Statement, page 7)
Finally, we were astounded to read in Mr. Murphy's latest letter his lame
excuse for prohibiting cumulative voting: "Elimination of cumulative voting is
necessary to keep Nanette Kelley from becoming a member of your Board." What is
Mr. Murphy afraid of: my voice on the board, an independent voice, dedicated to
protecting shareholder interests instead of Mr. Murphy's own personal interests?
We strongly believe that the FACTS are compelling evidence that change is
essential at ERLY. In what we are convinced is your own best interest, we urge
you to take the important step to institute essential changes at ERLY -- changes
that we believe will maximize your ERLY investment. PLEASE SIGN, DATE AND MAIL
YOUR BLUE PROXY -- PLEASE ACT TODAY!
A QUESTION OF TRUST
Putting aside Mr. Murphy's history of poor business decisions -- decisions
that, in our opinion, are responsible for your woeful stock performance -- the
recent civil jury verdict in Texas raises additional issues for shareholders to
carefully consider.
As you may know, on September 9, 1997, a civil jury in Texas returned a
nearly $18 million verdict against Gerald Murphy, Douglas Murphy, ERLY and
American Rice finding that they committed fraud and were part of a conspiracy
that damaged the plaintiffs. IN FACT, THE ACTIONS OF THE MURPHYS HAVE GIVEN
RISE TO A VERDICT THAT COULD RESULT IN AN AWARD FOR
- --------------------------------------------------------------------------------
/1/ For a ten year period through August 19, 1987, ERLY Stock increased a mere
26.5%, while the returns on the S&P Food Products Companies and the S&P 500
increased 244% and 173%, respectively.
Page 3
DAMAGES AND COSTS AGAINST ERLY AND/OR AMERICAN RICE OF AS MUCH AS $10 MILLION --
ALMOST 50% OF ERLY'S STOCKHOLDERS' EQUITY! YOU SHOULD ASK YOURSELF THE
FOLLOWING:
. Why were ERLY and American Rice involved in litigation relating to the
Murphys' personal failed real estate investment?
--------
. Why did the Murphys take actions which have subjected ERLY and American Rice
to millions of dollars of potential liability and legal costs?
. Does someone found liable by a jury for FRAUD AND CONSPIRACY deserve to be on
the board of directors of this company?
The civil jury has returned its verdict -- now you be the judge. Please
sign, date and mail your BLUE proxy. Also, remember not to sign any card you
may receive from ERLY.
THE CHOICE IS CLEAR -- THE POWELL GROUP
In conclusion, let's set the record straight-for-once and for all. In his
recent letter, Mr. Murphy has manufactured unwarranted personal attacks on me.
Here is the plain, unvarnished truth: IT IS SIMPLY NOT TRUE! What's clear to me
is that Mr. Murphy will stop at nothing and say anything in his last-ditch
efforts to retain control of ERLY. Murphy's allegations are nothing more than a
smoke screen to divert your attention from the facts. Why must Mr. Murphy resort
to such conduct? The answer is simple: ERLY's performance under Mr. Murphy is a
failure and his record is indefensible.
The Powell Group is providing ERLY shareholders with a clear choice - a
team of experienced, successful business people with honesty and integrity,
dedicated to reversing the decline in ERLY's stock and putting ERLY on a course
to achieve attractive returns for all shareholders. Our well-conceived business
plan, outlined in the accompanying sheet, is designed to aggressively address
the three critical problem areas facing ERLY: CASH, CAPITAL AND CONFIDENCE. We
urge you to review it carefully, as we believe it sets forth a blueprint for
ERLY's future success. And, consider carefully the experience and qualifications
of our nominees who have dedicated themselves to one primary objective--
enhancing the value of your investment in ERLY. THE CHOICE IS CLEAR-- THE CHOICE
IS YOURS. PLEASE SIGN, DATE AND MAIL YOUR BLUE PROXY TODAY. EVERY VOTE IS
IMPORTANT AND YOUR VOTE CAN MAKE A DIFFERENCE, SO PLEASE ACT TODAY.
Thank you and call us collect if you have any questions at (504) 922-4663.
D.F. King is also available to answer your questions at (800) 290-6430.
We look forward to acting on your behalf and in your best interests.
Sincerely,
Nanette N. Kelley
NNK/wsr
Enclosure
P.S. None of our directors have been found liable for conspiracy or fraud.
Page 4
- --------------------------------------------------------------------------------
IMPORTANT
. Because only your latest proxy counts, even if you have already executed
a BLUE proxy, it is important that you execute a new BLUE proxy to make
certain that your vote counts. Please do so today, and than you for your
cooperation.
. Management has admitted that eliminating cumulative voting and the
------------------------------------------------------------------
ability to act by written consent may have the effect of entrenching
--------------------------------------------------------------------
current management and may have an adverse impact on ERLY's stock price.
-----------------------------------------------------------------------
We strongly urge a vote in favor of our nominees for the board members,
against the elimination of cumulative voting (Proposal #2) and against
the elimination of the right of shareholders to act by written consent
(Proposal #3).
. If any of your shares are held in the name of a bank, broker or other
nominee, please contact the party responsible for your account and
direct him/her to vote on the BLUE proxy card. You should also return
your BLUE proxy by mail once received.
- --------------------------------------------------------------------------------
The foregoing letter has been sent on behalf of The Powell Group, Farmers
Rice Milling Company, Inc. and Nanette N. Kelley (together "The Powell Group")
in connection with The Powell Group's solicitation of proxies for use at the
Annual Meeting of Shareholders scheduled for Friday, October 17, 1997. As of
the record date for the Annual Meeting, Farmers Rice owned an aggregate of
171,933 shares of the Company's common stock and Nanette N. Kelley owned an
aggregate of 16,400 shares of the Company's common stock, together,
representing in the aggregate approximately 3.6% of the common stock
outstanding as of the record date.
Page 5
ABOUT THE POWELL GROUP
Founded in 1985, The Powell Group is a diversified holding company based in
Baton Rouge, Louisiana. TPG owns and operates subsidiaries in the business of
rice milling, rice farming and rice hull-fired power generation. TPG also has
interests in radio broadcasting, travel management, land development, commercial
real estate development and holdings, timber holdings and residential
construction.
Nanette N. Kelley, elected President and Chief Executive Officer of TPG in
1991, led a restructuring of TPG's business which occurred over the course of
three years. Thereafter, she 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. The strategic
plan has been successful and shareholder value has increased significantly.
The Powell Group's wholly--owned subsidiary, Farmers Rice Milling Company,
Inc., a Louisiana corporation, engages in the purchase and milling of rough rice
and the sale of rice and rice byproducts. Its mill, located approximately five
miles east of Lake Charles, Louisiana, is capable of milling 900 cwts (hundred
weights) of rough paddy rice per hour. Hardy Rice Dryer, a division of Farmers
Rice, operates in Lacassane Louisiana as Louisiana's largest rough rice and
soybean storage facility. Farmers Rice is in the rice commodity business with no
private labels and no packaging in sizes smaller than 25 pound bags. Farmer's
Rice purchases its rough rice from farmers, agricultural cooperatives and
brokers and sells the milled rice to grain exporters in the United States,
foreign governments and other large consumer groups. Farmer's Rice also produces
rice grain and broken rice for brewing and animal feed businesses.
NOMINEES OF THE POWELL GROUP
WILLIAM D. BLAKE: Mr. Blake has served since 1961 as General Manager of
Quatre Parish Company and of John A. Bel Estate and since 1988 as President of
The Lacassane Company. These companies are primarily focused on the
agriculture/land holdings field. Mr. Blake's experience extends particularly
to the rice, timber, oil and gas and real estate industries. Mr. Blake
graduated from Louisiana State University in 1955 with a degree in geology.
EUGUENE A. CAFIERO: Mr. Cafiero 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 CEO of KD Holdings, Inc.
MR. Cafiero is the past president and chief operating officer and vice chairman
of Chrysler Corporation, CEO of Ariadne Australia, Ltd., President and CEO of
Mid-American Communications and President of Kenne Corporation as well as
principal founder of Computerized Security Systems. Mr. Cafiero is a graduate
of Dartmouth College and holds a Master of Science in Industrial Management from
MIT. 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.
NANETTE N. KELLEY: Mrs. Kelley has been the President and Chief Executive
Officer of The Powell Group since 1991. She presently serves on the Board of
Trustees of the Pennington Biomedical Research Foundation, and as Vice Chairman
of General Health Systems, an integrated health care delivery system. She serves
on the Board of Directors of Union Planters Bank and The Lacassane Company. Mrs.
Kelley teaches at Louisiana State University in the undergraduate and MBA
programs. She holds multi-engine and instrument pilot licenses and is active in
philanthropic and community affairs.
ROBERT ARTHUR SEALE: Mr. Seale 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 practiced law with Vinson &
Elkins since 1969, focusing on tax and financial structuring of businesses
involved in mining, aircraft manufacturing, thoroughbred racing and breeding,
banking and real estate development. 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.
JOHN M. SPAIN: Mr. Spain has been the Managing Director of The Powell Group
since 1995. From 1989 to 1995, Mr. Spain served as the Station Manager for
Baton Rouge television station WBRZ-TV. Mr. Spain has twice been awarded the
Peabody Award, considered to be the Pulitzer Prize of Broadcasting. Mr Spain
has chaired the Radio Television News Directors Association, the Baton Rouge
Chamber of Commerce and the Louisiana Arts & Science Center. Mr. Spain also
serves on the boards of various charitable and philanthropic organizations.
THE POWELL GROUP'S PLAN TO INCREASE SHAREHOLDER VALUE
THE POWELL GROUP'S BUSINESS PLAN TO ENHANCE VALUE FOR ALL ERLY SHAREHOLDERS
IS PROPOSED TO SOLVE THE THREE MAJOR CRISES FACING YOUR COMPANY: CAPITAL, CASH
AND CONFIDENCE. We believe that adoption of our plan will restore ERLY's
balance sheet and improve profitability and cash flow. MOST IMPORTANTLY,
HOWEVER, IT IS DESIGNED TO ENHANCE VALUE FOR ALL ERLY SHAREHOLDERS AND REVERSE
THE DISMAL STOCK PERFORMANCE. PLEASE CAREFULLY REVIEW OUR PLAN TO RESTORE ERLY:
- CAPITAL -
. INCREASE SHAREHOLDERS' EQUITY. As the first step in increasing shareholders'
-----------------------------
equity, we will divest operations that we determine are underperforming in order
to pay down debt and strengthen ERLY's balance sheet.
. REDUCE THE COST OF BORROWED FUNDS. We will implement lower cost financing as
---------------------------------
soon as possible to reduce interest costs, subject to our ability to extricate
ERLY from its existing loan arrangements; or, in the alternative, purchase the
mortgage notes in the open market.
. ENTER STRATEGIC NEW MARKETS WITH FOOD PRODUCTS. We intend to aggressively
----------------------------------------------
enter new markets with potential for increased profitability, exploiting, for
example, the strategic relationship between rice and olives. Our focus will be
to increase profitability and we intend to reduce risks in foreign markets
through controlling market diversification.
. ACQUIRE DIVERSIFIED STRATEGIC ASSETS. Following acceptable increases in
------------------------------------
shareholders' equity, profitability, and cash flow, we intend to acquire assets
which integrate vertically into each of ERLY's business lines, but only if they
immediately add to earnings.
. PAY DIVIDENDS. As soon as practicable in light of ERLY's financial situation,
-------------
we will adopt a policy providing for the annual distribution of earnings.
- CASH -
. IMPROVE ERLY'S RELATIONSHIPS WITH SUPPLIERS TO REDUCE RAW SUPPLY COSTS.
----------------------------------------------------------------------
ERLY's current cash flow situation restricts its ability to pay for supplies at
the time of purchase which results in higher raw rice costs and less favorable
payment terms. By reducing interest costs and improving the Company's cash
flow, we will improve payment times to suppliers, thereby reducing purchasing
costs.
. REDUCE OVERHEAD COSTS. Savings will be achieved by closing unnecessary
---------------------
offices (including ERLY's high-priced penthouse office in L.A.), and moving
necessary personnel to less expensive space.
. REDUCE OPERATIONAL COSTS. Disciplined management and budgeting practices will
------------------------
be adopted to reduce Company expenditures.
. RESOLVE OUTSTANDING EXTRAORDINARY LITIGATION. ERLY's exposure from pending
--------------------------------------------
litigation is enormous and must be reduced. We will use our management skills
and best efforts to resolve such litigation, to the extent possible, on
favorable terms.
- CONFIDENCE -
. RESTORE CONFIDENCE WITH THE FINANCIAL COMMUNITY AND WITH INVESTOR
-----------------------------------------------------------------
SHAREHOLDERS. We will launch a public relations campaign for the investment
- ------------
community, focusing on restoring confidence in an effort to increase the market
awareness of, and support for, ERLY stock. We believe these efforts will
increase shareholder value. Shareholder participation at all levels will be
encouraged and we will enact a plan of regular and open communications with all
ERLY shareholders.