Promissory Note

PROMISSORY NOTE


$10,000,000.00 MAY 25, 1993
AMENDED AUGUST 5, 1994
AMENDED , 1995


FOR VALUE RECEIVED, ERLY Industries Inc., a California corporation (the "Maker"), promises to pay to the order of American Rice, Inc., a Texas corporation (the "Payee"), at 16825 Northchase Drive, Suite 1600, Houston, Texas 77060, the principal sum of Ten Million and 00/100 Dollars ($10,000,000.00), in lawful money of the United States of America, together with interest at the rate hereinafter provided on the principal balance from time to time remaining unpaid until this Note shall have been paid in full.


Payment Terms. The unpaid principal balance of this Note and accrued interest thereon shall be payable as follows:


a. Until the Maturity Date (as defined), up to Two Million Eight Hundred Thousand and No/100 Dollars ($2,800,000.00) of cash dividends declared during any calendar year during the term of this Note on the shares of Preferred Stock, Series B, $1.00 par value, issued by Payee and registered during such calendar year in the name of Maker (the "Series B Stock") shall be setoff by Payee against the obligations of Maker under this Note and, as of the date such cash dividends would otherwise be paid on such Series B Stock, shall be deemed to have been paid by Maker and applied by Payee by way of setoff as a payment on this Note.


b. Until the Maturity Date, any payment due Maker by Payee after March 31, 1996 under that certain Tax Agreement, dated May 25, 1993, among Maker, Payee and Comet Rice, Inc. (the "Tax Agreement") may be setoff by Payee against the obligations of Maker under this Note after notice (such notice shall be given by Payee to Maker within 10 days after receipt of the notice for payment sent by Maker to Payee under the Tax Agreement), and the amount of such setoff shall be deemed to have been paid by Maker as a payment on this Note.


c. The unpaid principal balance of this Note, together with accrued and unpaid interest thereon, shall be due and payable on __________, 2005 (the "Maturity Date").


Until the Maturity Date, all payments under this Note by way of setoff shall be made solely in the manner described above and in no event shall Maker have any obligation or liability to make an actual payment in cash or in property to Payee of the holder hereof unless any cash dividend described in clause a. above on the Series B Stock or a payment described in clause b. above under the Tax Agreement is actually received by Maker instead of being setoff by Payee and then Maker's liability hereunder shall be only to hold such amount in trust for the benefit of Payee and to pay to Payee as a payment on this Note such amount that was actually received by Maker. If Maker receives cash dividends on the Series B Stock during any calendar year in excess of Two Million Eight Hundred Thousand and No/100 Dollars ($2,800,000.00)


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or receives any non-cash dividends on the Series B Stock at any time, Payee shall have no right to setoff or apply as a payment on this Note any of such dividends and Maker shall have the right in all events to receive and retain such dividends.


All payments under this Note shall be applied first to accrued and unpaid interest and then to principal.


Interest Rate. The unpaid principal balance of this Note from time to time outstanding shall bear interest until this Note shall have been paid or canceled in accordance with the terms here ...