September 30, 1994
Dear WLR Foods, Inc. Shareholder:
You are cordially invited to attend our annual meeting of
shareholders on Saturday, October 29, 1994, at 10:00 a.m. at
Turner Ashby High School, Bridgewater, Virginia. A map to the
High School is enclosed for your reference. Following the
meeting, we will have a buffet lunch featuring our products.
If you plan to attend the meeting, please sign and return the
enclosed reply postcard.
Also enclosed in this mailing is formal notice of the
meeting, a proxy and a Proxy Statement detailing the matters
upon which the shareholders will act at the annual meeting.
Our Company's Annual Report for fiscal year ended July 2, 1994
is also enclosed.
We urge you to complete, date and sign the enclosed
proxy, and return it as soon as possible, even if you plan to
attend the meeting. You may use the enclosed postage prepaid
envelope to return both your reply postcard and the proxy.
On behalf of everyone at WLR Foods, I thank you for your
continued support. I look forward to seeing you at our annual
meeting.
Sincerely,
James L. Keeler
Chief Executive Officer
and President
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF WLR FOODS, INC.
The annual meeting of shareholders of WLR Foods, Inc.
will be held on Saturday, October 29, 1994, at 10:00 a.m. at
Turner Ashby High School, 800 N. Main Street, Bridgewater,
Virginia, for the following purposes:
1. To elect four Class A directors to serve until the
annual meeting of shareholders in 1997.
2. To ratify the appointment of KPMG Peat Marwick as
independent auditors for the fiscal year ending
July 1, 1995.
3. To approve an Amended and Restated Employee Stock
Purchase Plan adopted by the Company effective
August 30, 1994.
4. To approve a Poultry Producer Stock Purchase Plan
adopted by the Company effective August 30, 1994.
5. To amend the Company's Bylaws to narrow the range of
directors from 9 to 21 to 10 to 12.
6. To amend the Company's Articles of Incorporation to
increase the shareholder vote required for Bylaw
amendments to a two-thirds' vote.
7. To amend the Company's Articles of Incorporation to
authorize 100,000,000 shares of class B common
stock.
8. To transact such other business as may properly come
before the meeting. The Board of Directors knows of
no such business at this time.
Only shareholders of record at the close of business on
September 27, 1994 are entitled to notice of and to vote at
the annual meeting or any adjournments of the annual meeting.
To assure that your shares are represented at the annual
meeting, please complete, date and sign the enclosed proxy,
and return it as soon as possible in the enclosed postage
prepaid envelope. You may revoke your proxy at any time prior
to the commencement of the annual meeting.
By Order of the Board of Directors,
Delbert L. Seitz
Secretary
<PAGE>
WLR FOODS, INC.
P. O. Box 7000
Broadway, Virginia 22815-7000
(703) 896-7001
PROXY STATEMENT
This Proxy Statement is furnished in connection with
the solicitation of proxies for use at the annual meeting of
shareholders of WLR Foods, Inc. (the Company) to be held
Saturday, October 29, 1994, at 10:00 a.m. at Turner Ashby High
School, 800 N. Main Street, Bridgewater, Virginia, and at any
adjournments thereof (the Annual Meeting). The accompanying
proxy is solicited by the Board of Directors of the Company
(the Board). The approximate mailing date of this Proxy
Statement and the accompanying proxy is September 30, 1994.
Our Company's Annual Report for fiscal year ended July 2, 1994
is being mailed to the Company's shareholders concurrently
with this Proxy Statement but should not be considered proxy
solicitation material.
All properly executed proxies delivered pursuant to
this solicitation will be voted at the Annual Meeting
according to the instructions thereon. In the absence of such
instructions, such proxies will be voted "FOR" the proposals
detailed herein. Any person signing and mailing the enclosed
proxy may revoke the proxy at any time prior to the
commencement of the Annual Meeting. For each shareholder who
is a participant in the Company's Dividend Reinvestment and
Stock Purchase Plan and/or Employee Stock Purchase Plan, the
accompanying white proxy covers the shares of Company common
stock in such shareholder's accounts, as well as shares
registered in the shareholder's name.
The cost of the solicitation of proxies will be paid
by the Company. Solicitations will be made by mail, except
that, if necessary, officers, directors and regular employees
of the Company and its affiliates may solicit proxies by
telephone, facsimile or other electronic means or by personal
calls. The Company has retained D.F. King & Co., Inc. to
assist in the solicitation of proxies for a fee of Three
Thousand Five Hundred Dollars ($3,500.00) and reimbursement of
expenses. Brokerage houses and nominees will be requested to
forward the proxy solicitation material to the beneficial
owners of WLR Foods stock held of record by such persons, and
the Company will reimburse them for their charges and expenses
in this regard.
OUTSTANDING SHARES AND VOTING RIGHTS
Only shareholders of record at the close of business
on September 27, 1994 will be entitled to vote at the Annual
Meeting. As of such date, the Company had outstanding
12,196,563 shares of its common stock, no par value, each of
which is entitled to one vote at the Annual Meeting.
The Company believes that, as of September 27, 1994,
Tyson Foods, Inc. and its affiliates (Tyson) owned 600,063
shares. The shares acquired by Tyson were acquired as part of
a plan to make a control share acquisition as described in the
Virginia Control Share Acquisitions Statutes (the Control
Share Statute). Such shares have no voting rights unless
voting rights are granted by a resolution approved by a
majority of votes entitled to be cast by shareholders.
Pursuant to the Control Share Statute, Tyson requested that
the Company conduct a special meeting of shareholders which
was held on May 21, 1994, for the sole purpose of determining
whether the shares already acquired and to be acquired in
connection with Tyson's offer to buy the Company would have
voting rights. By failing to obtain a majority of all votes
entitled to be cast as to its proposal to receive voting
rights, Tyson's shares do not have voting rights until
transferred to a transferee not engaged in a control share
acquisition. The Company takes the position
that the shares now held by Tyson are not eligible to vote
at the annual meeting.
<PAGE>
Tyson has challenged the constitutionality of the
Control Share Statute as part of legal proceedings more fully
described below in the Section entitled "Legal Proceedings".
Should Tyson ultimately prevail on its constitutional
challenge, all of its shares would have voting rights. A
successful Tyson legal challenge to the Company's position as
to Tyson's lack of voting rights could affect the outcome of
the vote on the proposals described herein.
A majority of votes entitled to be cast on matters
considered at the Annual Meeting constitutes a quorum. If a
share is represented for any purpose at the Annual Meeting, it
is deemed to be present for purposes of establishing a quorum.
Abstentions and shares held of record by a broker or its
nominee (Broker Shares) which are voted on any matter are
included in determining the number of votes present or
represented at the Annual Meeting. Conversely, Broker Shares
that are not voted on any matter will not be included in
determining whether a quorum is present.
If a quorum is established, directors will be
elected by a plurality of the votes cast by shareholders at
the Annual Meeting. Votes that are withheld and Broker Shares
that are not voted in the election of directors will not be
included in determining the number of votes cast. For the
following proposals, abstentions will count as opposing votes.
For the ratification of the independent auditors, and the
approval of the Amended and Restated Employee Stock Purchase
Plan, the Poultry Producer Stock Purchase Plan and the Bylaw
amendment to be considered at the Annual Meeting, if a quorum
is established, the proposal will be approved if the votes
cast in favor exceed the votes cast opposing the proposed
action. There is a different vote required to amend the
Articles of Incorporation. For the Articles of Incorporation
amendment proposal, if a quorum is established, the proposal
will be approved if it receives the affirmative vote of a
majority of all votes entitled to be cast on the proposal.
SECURITY OWNERSHIP OF CERTAIN PERSONS
The following table sets forth the number and
percentage of shares of Company common stock held as of
August 31, 1994 by the only persons who, to the knowledge
of the Company, beneficially own 5% or more of the Company's
outstanding common stock.
Name and Address Number Beneficially Owned Percent of Class<F1>
Crestar Bank NA 1,183,333<F2> 9.49%
919 E. Main Street
Richmond, VA 23219,Trustee for Cuddy Farms, Inc.
[FN]
<F1> Based on 12,195,886 shares outstanding as of August 31,
1994 plus 271,782 shares which members of management have
the option to purchase within 60 days of August 31, 1994.
<F2> Shares held for the benefit of Cuddy Farms, Inc. pursuant
to a voting trust dated August 29, 1994, under the terms
of which the Trustee, Crestar Bank NA, is obligated to
vote all shares in accordance with the recommendation of
the Board. In the absence of a recommendation by the
Board as to any proposal, the trustee will vote as
directed by Cuddy Farms, Inc. The Voting Trust, subject
to certain exceptions for early termination, terminates
on August 29, 1998.
<PAGE>
The following table sets forth the number and
percentage of shares of Company common stock held as of August
31, 1994 by each of the Company's directors, each executive
officer of the Company who was required to be named in the
Cash Compensation Table, and by all directors and executive
officers as a group.
Name Number Beneficially Owned Percent of Class<F1>
George E. Bryan 304,046<F2> 2.4%
Charles L. Campbel 8,352<F3> *
Stephen W. Custer 62,102<F4> *
Calvin G. Germroth 12,020<F5> *
William H. Groseclose 2,132<F6> *
Henry L. Holler 25,740<F7> *
J. Craig Hott 70,047<F8> *
James L. Keeler 149,175<F9> 1.2%
Kenneth D. Marshall 46,337<F10> *
Herman D. Mason 197,612<F11> 1.6%
James L. Mason 90,060<F12> *
V. Eugene Misner 63,433<F13> *
Charles W. Wampler, Jr. 348,000<F14> 2.8%
William D. Wampler 600,495<F15> 4.8%
All directors and executive 1,868,109<F16> 15.0%
officers as a group (consisting
of 17 persons, including those
named above)
_____________________________
[FN]
* Denotes percent ownership not exceeding 1% of the class of
common stock.
<F1> Based on 12,195,886 shares outstanding as of August 31, 1994
plus 271,782 shares which members of management have the
option to purchase within 60 days of August 31, 1994.
<F2> Includes 105,264 shares owned directly and 198,782 shares
owned by his wife. Mr. Bryan disclaims beneficial interest
in the shares held by his wife.
<F3> All shares owned directly.
<F4> Includes 33,418 shares owned directly, 9,328 shares owned by
his wife, 17,923 shares held as custodian for Mr. Custer's
three children, and 1,433 shares owned by his daughter who
lives at Mr. Custer's home. Mr. Custer disclaims beneficial
interest in the shares owned by his wife and daughter or
held by him as custodian.
<F5> All shares owned directly and through a self-directed
retirement account.
<PAGE>
<F6> All shares owned directly.
<F7> Includes 2,365 shares owned jointly with his wife, 875
shares owned by his wife through her self-directed
retirement account, and 22,500 shares which Mr. Holler has
the right to purchase within 60 days of August 31, 1994
through the exercise of options.
<F8> Includes 69,847 shares owned by E. E. Hott, Inc., of which
Mr. Hott is an officer and director, and 200 shares held by
his wife as custodian for Mr. Hott's two children. Mr. Hott
disclaims beneficial interest in the shares held by his wife
as custodian.
<F9> Includes 32,312 shares owned directly and through
self-directed retirement accounts, 15,613 shares owned by
his wife directly and through her self-directed retirement
account, and 101,250 shares which Mr. Keeler has the right
to purchase within 60 days of August 31, 1994 through the
exercise of options. Mr. Keeler disclaims beneficial
interest in the shares owned by his wife.
<F10>Includes 495 shares owned directly, 23,342 shares owned
jointly with his wife, and 22,500 shares which Mr. Marshall
has the right to purchase within 60 days of August 31, 1994
through the exercise of options.
<F11>Includes 162,464 shares owned directly and 35,148 shares
held as trustee for the Louise T. Mason Trust. Mr. Mason
disclaims beneficial interest in the shares held by the
Trust.
<F12>Includes 29,785 shares owned directly and through
self-directed retirement accounts, 13,039 shares owned
jointly with his wife, 685 shares owned by his wife through
her self-directed retirement account, 3,051 shares held as
custodian for Mr. Mason's two children, and 43,500 shares
which Mr. Mason has the right to purchase within 60 days of
August 31, 1994 through the exercise of options. Mr. Mason
disclaims beneficial ownership in the shares owned by his
wife or held by him as custodian.
<F13>Includes 840 shares owned through his self-directed
retirement account, 17,998 shares owned jointly with his
wife, 870 shares owned by his wife through her self-directed
retirement account, 225 shares owned by his son who lives in
Dr. Misner's home, and 43,500 shares which Dr. Misner has
the right to purchase within 60 days of August 31, 1994
through the exercise of options. Dr. Misner disclaims
beneficial ownership in the shares owned by his wife and
son.
<F14>Includes 121,350 shares owned directly and as general
partner of Wampler Land, 45,310 shares owned by his wife,
129,646 shares held as trustee of the Charles W. Wampler,
Sr. Family Trust, and 51,694 shares held as trustee of the
Charles W. Wampler, Sr. Charitable Annuity Trust.
Mr. Wampler disclaims beneficial interest in the shares
owned by his wife or held by the Trusts.
<F>15Includes 266,260 shares owned directly and as general
partner of Wampler Land, 134,102 shares owned by his wife,
18,793 shares owned by May Meadows Farms, Inc., of which
Mr. Wampler is an officer and director, 129,646 shares held
as trustee of the Charles W. Wampler, Sr. Family Trust, and
51,694 shares held as trustee of the Charles W. Wampler, Sr.
Charitable Annuity Trust. Mr. Wampler disclaims beneficial
interest in the shares owned by his wife or held by the
Trusts.
<F16>This number does not reflect the sum of all of the preceding
number of shares beneficially owned by all of the above-
named directors and officers since 1,373 shares held by
Charles W. Wampler, Jr. and William D. Wampler as general
partners of Wampler Land, and 181,340 shares held as
trustees by both Charles W. Wampler, Jr. and William D.
Wampler have been taken into account in determining the
number of shares beneficially owned by each of Charles W.
Wampler, Jr. and William D. Wampler, individually. In
addition, this amount includes the 271,782 shares which the
group has the right to purchase within 60 days of August 31,
1994 through the exercise of options.
<PAGE>
PROPOSAL ONE: ELECTION OF DIRECTORS
The term of office for the current Class A directors
expires at the Annual Meeting. The Board of Directors has
nominated such directors, namely J. Craig Hott, Herman D.
Mason, Charles W. Wampler, Jr. and Peter A. W. Green for
election, for a three-year term, by the shareholders at the
Annual Meeting. Messrs. Hott, Mason and Wampler were elected
by shareholders at the 1991 annual meeting. Mr. Green was
elected by the Company's Board of Directors on August 30, 1994
in connection with the Company's purchase of the food division
of Cuddy Farms, Inc. Pursuant to the Cuddy acquisition, the
Company agreed to appoint a Cuddy representative to the Board
to serve until the next annual shareholders' meeting, and the
Board agreed to nominate such representative for election by
the shareholders at such annual meeting.
The persons named as proxies in the accompanying
form of proxy, unless instructed otherwise, intend to vote for
the election of each of these nominees for directors. If any
nominee should become unavailable to serve, the proxy may be
voted for the election of a substitute nominee designated by
the Board. The Board has no reason to believe any of the
nominees will be unable to serve if elected.
Any shareholder entitled to vote for the election of
directors at a meeting may nominate persons for election as
directors only if written notice of such shareholder's intent
to make such nomination is given, either by personal delivery
or by United States mail, postage prepaid, to Delbert L.
Seitz, Secretary, WLR Foods, Inc., P. O. Box 7000, Broadway,
Virginia 22815-7000, not later than (i) with respect to an
election to be held at an annual meeting of shareholders, 90
days in advance of such meeting, and (ii) with respect to any
election to be held at a special meeting of shareholders for
the election of directors, the close of business on the
seventh day following the date on which notice of such meeting
is first given to shareholders. Each such notice must set
forth (i) the name and address of the shareholder who intends
to make the nomination and of the person or persons to be
nominated, (ii) a representation that such shareholder is a
holder of record of stock of the Company entitled to vote at
such meeting and intends to appear in person or by proxy at
the meeting to nominate the person or persons specified in the
notice, (iii) a description of all arrangements or
understanding between such shareholder and each nominee and
any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made
by such shareholder, (iv) such other information regarding
each nominee proposed by such shareholder as would have been
required to be included in a proxy statement filed pursuant to
the proxy rules of the Securities and Exchange Commission if
such nominee had been nominated by the Board of Directors, and
(v) the consent of each nominee to serve as a director of the
Company if elected. The chairman of the shareholders' meeting
may refuse to acknowledge the nomination of any person not
made in compliance with the foregoing procedure.
<PAGE>
The Board recommends election of the Class A
director nominees set forth below.
INFORMATION CONCERNING DIRECTORS AND NOMINEES
Biographical summaries for the four director
nominees and the seven directors continuing in office appear
in the following chart.
<TABLE>
Name and Position Director Principal Occupation
with the Company Age Since During the Last Five
Years
Director Nominees
CLASS A DIRECTORS
(to serve until the 1997 annual meeting of shareholders)
<S> <C> <C> <C>
J. Craig Hott 41 1988 Vice President of Hott's Farming, Inc. and
Hott's Ag-Services, Inc.
Peter A.W. Green 57 1994 President and Chief Executive Officer of Cuddy
International Corporation since November,
1993; previously, President and Chief
Executive Officer of Alcatel Canada Wire, Inc.
Herman D. Mason 73 1984 Retired; previously,
Vice Chairman Chief Executive Officer
of the Board of the Company until 1988
Charles W. Wampler, Jr. 78 1984 Poultry and livestock farmer
Chairman of the Board
</TABLE>
<TABLE>
Directors Continuing in Office
CLASS B DIRECTORS
(to serve until the 1995 annual meeting of shareholders)
<S> <C> <C> <S>
Stephen W. Custer 52 1984 President of Custer Associates, Inc.
(consulting firm)
Calvin G. Germroth 70 1988 Broiler producer
James L. Keeler 59 1988 Chief Executive Officer of the Company since
President February 1988
</TABLE>
<TABLE>
CLASS C DIRECTORS
(to serve until the 1996 annual meeting of shareholders)
<S> <C> <C> <S>
George E. Bryan 72 1984 Poultry and livestock farmer
Charles L. Campbell 46 1988 Commissioner of Revenue for Page
County, Virginia; broiler producer
William H. Groseclose 63 1993 Chairman of Harrisonburg Regional Board and
Winchester Regional Board of First Union
Bank; previously Chief Executive Officer of
Shenandoah Valley region of Dominion Bank
William D. Wampler 66 1984 Poultry and livestock farmer
</TABLE>
<PAGE>
LEGAL PROCEEDINGS
On February 6, 1994, the Company filed suit in the
United States District Court for the Western District of
Virginia, against Tyson Foods, Inc. (Tyson), seeking, among
other things, 1) a declaratory judgment as to the validity of
the Company's Shareholder Protection Rights Plan, and 2) a
declaratory judgment as to the constitutionality of Article
14, Va. Code Sections 13.1-725 et seq. (Affiliated Transactions
Statute), and Article 14.1,Va. Code Sections 13.1-728
et seq. (Control Share Statute), of the
Virginia Stock Corporation Act under the Virginia and United
States Constitutions. In response, on February 28, 1994,
Tyson, joined later by WLR Acquisition Corp., filed
counterclaims against the Company and all directors except
Peter A. W. Green. In their counterclaims, Tyson and WLR
Acquisition Corp. sought, among other things, to invalidate
the Company's Shareholder Protection Rights Plan and certain
severance agreements, and a declaratory judgment that the
Affiliated Transactions Statute, the Control
Share Statute, and other Virginia statutes,
facially and as applied, are unconstitutional under the United
States Constitution.
The District Court ruled in favor of the Company and
its directors with respect to the conduct of the May 21, 1994
special shareholders meeting vote and upheld the
constitutionality of the Virginia statutes. Trial for any
remaining issues was scheduled for September 12 - 15, 1994;
however, those trial dates have been released. The District
Court will issue a final judgment in the litigation based upon
the written court record, as supplemented.
BOARD MEETINGS AND COMMITTEES
The Board met eighteen times during fiscal year
ended July 2, 1994. Each director attended at least 75% of
the aggregate of the total number of Board meetings held while
he was a director and the total number of meetings held while
he was a director by all committees of the Board on which he
served, except George E. Bryan who has been ill.
Nonmanagement directors of the Company received $2,000 for
attending a regularly scheduled Board meeting, $500 for
specially called Board meetings (excluding telephonic
meetings) and $500 for attending committee meetings not held
in conjunction with Board meetings. In addition, non-payroll
directors received an annual retainer of $13,000.
<PAGE>
The Company has a standing Audit Committee which
currently consists of George E. Bryan, Calvin G. Germroth,
William H. Groseclose, and J. Craig Hott. The Audit Committee
met four times since last year's annual meeting. The Audit
Committee recommends to the Board the independent audit firm
to be employed by the Company and meets with the independent
auditor to discuss quality of management and financial,
accounting and internal audit procedures. The Audit Committee
also monitors the Company's compliance with applicable
requirements of the National Association of Securities
Dealers, Inc. relating to independent directors, and reviews,
at least annually, all related party transactions and
potential conflicts of interest, recommending appropriate
action as needed.
The Company has a standing Nominating Committee
which currently consists of Stephen W. Custer, Calvin G.
Germroth and William D. Wampler. The Nominating Committee met
once since last year's annual meeting. The Nominating
Committee proposes to the Board a slate of director nominees
and terms of office for such nominees for the Board to
consider in recommending to the Company's shareholders
director nominees for election. The Nominating Committee also
proposes nominees for Board appointment as vacancies occur and
for Board committee assignments and vacancies.
The Company has a standing Executive Compensation
Committee which currently consists of Charles L. Campbell,
Herman D. Mason and Charles W. Wampler, Jr. The Executive
Compensation Committee met four times since last year's annual
meeting. The Executive Compensation Committee determines the
annual salary, bonus and other benefits of the Chief Executive
Officer and makes decisions relating to awards to executive
officers and other key personnel pursuant to the Company's
Long Term Incentive Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last fiscal year, the Executive
Compensation Committee consisted of Herman D. Mason, Charles
L. Campbell and Charles W. Wampler, Jr. As described in the
following section entitled "Certain Relationships and Related
Transactions," Messrs. Campbell and Wampler are contract
growers for the Company. Additionally, Messrs. Mason and
Wampler were considered as employed by the Company until they
resigned in February, 1994.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has always been fortunate to have
directors who are actively involved in, and knowledgeable
about, the Company's businesses. As a result, the Company has
relationships with certain directors and their families, which
relationships are on the same bases and terms as transactions
with unrelated parties.
The following table identifies (i) amounts in excess
of $60,000 paid by the Company to each of the directors,
members of their immediate family, and entities related to the
directors who were contract growers with the Company during
fiscal year ended July 2, 1994, and (ii) amounts paid to
directors who were contract growers if such payments exceeded
five percent of the director's gross revenues for such
activity during fiscal year ended July 2, 1994. All such
transactions were on the same bases and terms as transactions
with unrelated parties.
<PAGE>
Total Amount Received from the Directors Company
and its Subsidiaries
Charles L. Campbell $ 86,035
Timothy Campbell, his son 63,546
Calvin G. Germroth $ 38,594
J. Craig Hott
Hott's Farming, Inc. $ 287,755
James L. Keeler
Gregory Keeler, his son $ 129,265
Charles W. Wampler, Jr.
Sunny Creek $ 170,203
C. W. Wampler & Sons $ 232,820
William D. Wampler
May Meadows Farm, Inc. $ 205,340
C. W. Wampler & Sons $ 232,820
During fiscal year ended July 2, 1994, the Company
purchased, either directly or through third-party suppliers,
$270,164 of fuel oil and propane from Franklin Oil Co., Inc.,
of which J. Craig Hott is a director and minority shareholder.
The prices and terms were comparable to those of other oil
companies in the area.
During fiscal year ended July 2, 1994, the Company
paid $24,566 to Custer Associates, Inc., a consulting firm
owned by Stephen W. Custer, which assisted with the
Company-wide quality control program. The terms of this
arrangement were competitive and fully disclosed to the Board.
Charles W. Wampler, Jr. and William D. Wampler are
brothers and are uncles of Stephen W. Custer.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
Compensation Philosophy
The Executive Compensation Committee of the
Company's Board of Directors determines the annual salary,
bonus and other benefits of the Company's Chief Executive
Officer and makes decisions relating to stock option awards to
executive officers and other key personnel pursuant to the
Company's Long Term Incentive Plan. The Company's overall
policy regarding executive compensation is to provide
competitive compensation packages that attract and retain
qualified executives and to reward its executives for
financial and operating results, annual and long-term, which
enhance the value of shareholders' investment in the Company.
<PAGE>
Base Salary
The base salary component of executive compensation
within the Company reflects the first goal stated above of
attracting and retaining qualified executives. Based on
available figures, the Company executives' base salaries are
competitive compared to other companies within Virginia and
the industry. Periodic increases in base salary are based one
valuations of past and current performance, competitive
market conditions and Company performance.
Cash Bonus
The Company's Incentive Bonus Program achieves the
second goal of the Company's compensation philosophy, that of
rewarding financial and operating results on an annual basis.
The Company developed the Incentive Bonus Program in 1988 with
the assistance of independent executive compensation
consultants, and the Program has been administered since then
by the Company's Human Resource Department for the benefit of
executive officers and other key personnel. The bonus pool is
determined annually by reference to the Company's return on
equity (ROE), and each individual's specific bonus allocation
is calculated by multiplying ROE (adjusted for accrued
incentive pay and taxes) by his or her base salary and by a
bonus factor which is based on his or her position within the
Company. As borne out in the six-year history of the
Company's Incentive Bonus Program, for years in which the
Company does not have a strong return on equity, a significant
portion of management's annual compensation is reduced. Thus,
bonuses comprise the part of management compensation that is
"at risk" based on the Company's annual performance.
Long-Term Incentive Plan
Rewarding Company executives on a long-term basis is
accomplished through the Company's Long-Term Incentive Plan, a
stock option plan approved by the Company's shareholders in
1988. By encouraging management investment in Company stock,
the Plan aligns management's interests with that of the
shareholders; namely, to enjoy long-term appreciation in the
value of the Company's common stock.
At the Plan's inception, an independent executive
compensation consulting firm recommended the number of options
that should be granted to the Company's executive officers and
other key personnel. The Executive Compensation Committee
awarded options at levels below those initially advised by the
consultants and, since then, have awarded options generally
consistent with the first year's levels.
During the first three years of option grants, all
options were granted at the market price prevailing at the
time of the grant. For different reasons, the option price
has been established above the market price in the last three
years. In 1992, the Committee set the price at the prior
year-end market price rather than the then current market
price. The Committee believed that the prevailing market
price plus $3.38 was more reflective of the true value of the
Company's shares at that time. In 1993, the Company completed
a public offering of common stock priced at $22 in February
and the Committee established the option price in July at $22,
even though the market price on the grant date was $5 lower,
or $17 per share. In 1994, Tyson's tender offer was $30, so
the Committee established the option price at $30 instead of
the 1994 year-end trading value of $25.50.
<PAGE>
Deferred Compensation
The final significant component of the Chief
Executive Officer's compensation is deferred compensation,
serving both goals of providing a competitive compensation
package and rewarding results. Mr. Keeler's deferred
compensation is essentially a retirement plan with payouts
beginning the year after Mr. Keeler retires as Chief Executive
Officer, but payouts are calculated by reference to the
increase in the Company's book value over the term of Mr.
Keeler's service. Specifically, 1.5% of the annual increase
in the Company's book value is allocated annually to a
deferred compensation account which, together with accrued
interest, is payable to him over a five-year period beginning
in the year after his retirement. However, if Mr. Keeler's
employment is terminated involuntarily or because of a change
in control of the Company, the balance of Mr. Keeler's
deferred compensation account becomes payable immediately.
Chief Executive Officer Compensation
For the last fiscal year, Mr. Keeler received a base
salary percentage increase of 2%, the average pay increase for
all employees. This increase maintains a base salary
competitive with chief executive positions within the state
and industry. Though Mr. Keeler's bonus factor was the same
for the last fiscal year as it has been since 1988, his bonus
was lower because the Company's ROE was lower. Mr. Keeler's
deferred compensation allocation was higher than the last
fiscal year because, as described above, deferred compensation
is singularly a function of increase in the Company's book
value. Finally, the number of stock options awarded Mr.
Keeler under the Long Term Incentive Plan was the same as it
has been for the last five years, reflecting a systematic
effort to enhance Mr. Keeler's personal financial interest in
the strong management of the Company.
The bonus and deferred compensation awards for Mr.
Keeler in the last fiscal year are reflected in the Summary
Compensation Table set forth below and are, as already
described, consistent with improvements in the Company's
financial profile. Indeed, since the end of fiscal 1988, the
first year of Mr. Keeler's tenure with the Company, the
Company's total market capitalization has risen from
$84,354,400 to $280,737,864 at the end of fiscal 1994.
Herman D. Mason
Charles L. Campbell
Charles W. Wampler, Jr.
Executive Compensation
Committee Members
SUMMARY COMPENSATION
The Summary Compensation Table below contains
information concerning annual and long-term compensation
provided to the Company's Chief Executive Officer and the
other four most highly compensated executive officers of the
Company for all services rendered to the Company and its
subsidiaries for the fiscal years ending July 2, 1994, July 3,
1993 and June 27, 1992. Messrs. Holler and Marshall first
became executive officers in fiscal year ended July 2, 1994.
Accordingly, their compensation is detailed beginning in that
year.
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
Long Term Other
Annual Compensation Compensation Compensation<F1>
Name and Options
Principal Position Year Salary ($) Bonus ($) Awarded (#) ($)
<S> <C> <C> <C> <C> <C>
James L. Keeler 93-94 $245,096 $159,458 33,750 $229,212
Chief Executive 92-93 236,808 172,783 33,750 178,685
Officer & President 91-92 228,800 58,889 33,750 69,463
James L. Mason 93-94 $172,221 $75,958 14,500 $6,042
President, 92-93 160,610 71,859 14,500 5,220
Wampler-Longacre 91-92 152,250 24,492 14,500 3,935
V. Eugene Misner 93-94 $163,882 $66,638 7,500 $5,929
Vice President 92-93 160,610 71,859 14,500 5,465
Wampler-Longacre 91-92 152,250 24,492 14,500 4,500
Henry L. Holler 93-94 $133,099 $48,107 7,500 $4,951
Vice President
Sales & Marketing
Kenneth D. Marshall 93-94 $133,099 $48,107 7,500 $4,956
Vice President
Plant Operations
_____________________________
<FN>
<F1> Includes Company contributions made to the Company's Profit Sharing and Salary Savings Plan and term
life insurance premiums paid by the Company on behalf of the executive officers; for Mr. Keeler,
"Other Compensation" also includes deferred compensation.
</TABLE>
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
% of Total Potential Realizable
Options Exercise Value at Assumed
Options Granted to or Base Annual Rates of
Granted Employee in Price Expiration Stock Appreciation
(#) Fiscal Year $/Share Date for Option Term
<S> <C> <C> <C> <C> <C> <C>
5% 10%
James L. Keeler 33,750 33.7% $30.0 7/3/99 $85,900 373,545
James L. Mason 14,500 14.5 30.0 7/3/99 36,905 160,486
V. Eugene Misner 7,500 7.5 30.0 7/3/99 19,088 83,010
Henry L. Holler 7,500 7.5 30.0 7/3/99 19,088 83,010
Kenneth D. Marshall 7,500 7.5 30.0 7/3/99 19,088 83,010
</TABLE>
<PAGE>
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Value of
Unexercised
Number of In-The-Money
Unexercised Options<F1> at
Fiscal Fiscal
Shares Year-End (#) Year-End ($)
Acquired Value Exercisable/ Exercisable/
Name On Exercise (#) Realized ($) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
James L. Keeler 33,750 330,581 101,250/67,500 704,531/164,531
James L. Mason 13,500 132,233 43,500/29,000 302,689/70,686
V. Eugene Misner 22,500 231,138 43,500/22,000 302,689/70,686
Henry L. Holler 6,000 49,545 22,500/15,000 156,525/36,562
Kenneth D. Marshall 6,000 51,645 22,500/15,000 156,525/36,562
____________________
<FN>
<F1> Represents the difference between the exercise price of the option and $25.50, the closing price
of the Company's common stock as reported on the NASDAQ/National Market System on July 1, 1994.
</TABLE>
EXECUTIVE AGREEMENTS
The Company has an employment agreement with the
Chief Executive Officer which expires June 27, 1998. The
agreement governs Mr. Keeler's compensation, specifically his
base salary, bonus, perquisites and benefits. Pursuant to the
agreement, during the current fiscal year, Mr. Keeler's base
salary is $249,998 and his bonus factor, discussed under "Cash
Bonus" on page 9 is 3.6, the same as the past five years. In
any event, Mr. Keeler is guaranteed a bonus of $25,000. Mr.
Keeler's deferred compensation allocation will continue to be
calculated at 1.5% of the increase in the Company's book value
over each preceding year, as explained previously under
"Deferred Compensation." Mr. Keeler's perquisites and
benefits are consistent with those provided to the Company's
senior management.
The Company also has entered into severance
agreements with each of James L. Keeler, James L. Mason, V.
Eugene Misner, Henry L. Holler and Kenneth D. Marshall (the
Severance Agreements). Pursuant to the Severance Agreements,
each of these individuals is entitled to certain payments
(described below) if the Company terminates his employment
during a specified period following a "Change in Control" of
the Company.
For purposes of the Severance Agreements, a "Change
in Control" occurs (A) when an individual, entity or group
acquires beneficial ownership of 20% or more of the combined
voting power of the Company's outstanding stock, subject to
certain exceptions set forth in the executive's severance
agreement, (B) when individuals who as of February 4, 1994
constitute the Board of Directors (the "Incumbent Board") and
individuals whose election, or nomination for election by the
shareholders of the Company, was approved by a vote of at
least seventy-five percent of the directors then comprising
the Incumbent Board (who shall after election be considered
members of the Incumbent Board unless such election occurs as
a result of an actual or threatened election contest or other
actual or threatened solicitation of proxies or consents by or
on behalf of a person other than the Company's Board of
Directors) shall cease to constitute a majority of the
Company's Board of Directors, (C) upon the approval by the
shareholders of the Company of a reorganization, merger or
consolidation except in certain instances set forth in the
executive's severance agreement, or (D) upon approval by the
shareholders of the Company of the complete liquidation or
dissolution of the Company or the sale or other disposition of
all or substantially all of the assets of the Company, except
in certain instances set forth in the Severance Agreements.
<PAGE>
The Severance Agreements for each of Messrs. Keeler
and Mason provide that if the Company terminates his
employment during the three year period following a Change in
Control of the Company, other than for death, Cause (willful
and continued failure to perform duties or willful engaging in
illegal conduct: defined more specifically in the Severance
Agreements) or Disability (as defined in the Severance
Agreement), or if he resigns for Good Reason (includes an
adverse change in status or position, a reduction in base
salary or benefits, or relocation: defined more specifically
in the Severance Agreements) during such three year period, he
is entitled to receive an amount in cash (the Severance
Payment) equal to three times his total annual compensation,
which includes: (A) the higher of (x) his annual base salary
on the date of termination or (y) his annual base salary in
effect immediately prior to the Change in Control and (B) an
amount equal to the average of the bonuses awarded to him in
each of the three previous years, including, in the case of
Mr. Keeler, any bonuses awarded pursuant to any deferred
compensation arrangements. In the event that such payments
become subject to an excise tax imposed by Section 4999 of the
Internal Revenue Code (or any similar tax), the employee shall
be entitled to receive a "gross-up" payment in respect of such
taxes and in respect of any taxes on such gross-up payment as
specified in his Severance Agreement. These Severance
Agreements also provide for the continuation of employee
welfare benefits (such as health insurance) for three years
after termination if his employment is terminated during such
three year period. In addition, Mr. Keeler will be entitled
to receive the Severance Payment and other severance benefits
if he resigns for any reason during the 30-day period
immediately following the first anniversary of a Change in
Control. The Severance Agreements for Messrs. Misner, Holler
and Marshall are similar to those described above for
Mr. Mason except they cover a two year period after a Change
in Control, the amount payable is equal to one and one-half
times his total annual compensation, and employee welfare
benefits will continue for one and one-half years if his
employment is terminated during such two year period.
STOCK PRICE PERFORMANCE GRAPH
The graph on the next page presents a comparison of
five-year cumulative total shareholder returns for WLR Foods,
Inc., the S&P 500 Index and a Peer Group Index. The graph
reflects the annual return from the Company's five previous
fiscal years-end, developed with a monthly index, assuming
dividends are reinvested monthly. The graph also assumes an
initial investment of $100 on June 30, 1989. The Peer Group
Index consists of Cagles, Inc., Golden Poultry Co., Inc.,
Hudson Foods, Inc., Pilgrims Pride Corporation and Sanderson
Farms, Inc., companies within the same industry and with
similar equity market capitalization.
<PAGE>
6/89 6/90 6/91 6/92 6/93 6/94
Comp 100 82 75 71 93 91
S&P 500 100 113 117 128 142 140
WLRF 100 106 105 83 103 156
<PAGE>
PROPOSAL TWO: APPOINTMENT OF INDEPENDENT AUDITORS
KPMG Peat Marwick of Richmond, Virginia, were
auditors for the fiscal year ended July 2, 1994, and are being
recommended to the Company's shareholders for appointment as
auditors for the fiscal year ending July 1, 1995. A
representative of KPMG Peat Marwick is expected to attend the
Annual Meeting and will have an opportunity to make a
statement or respond to appropriate questions from
shareholders.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL TWO.
PROPOSAL THREE: APPROVAL OF AMENDED AND RESTATED EMPLOYEE
STOCK PURCHASE PLAN
On August 30, 1994, the Company adopted the Amended
and Restated Employee Stock Purchase Plan (the Employee Plan)
amending the Employee Stock Purchase Plan approved by the
Company's shareholders at last year's annual meeting. The
amendments, which are scheduled to be implemented by
November 1, 1994, or as soon as administratively feasible,
convert that plan into a "tax-qualified" plan, which permits
participating employees to acquire Company common stock
through regular payroll deductions at a discounted price. The
actual purchase price discount will be determined by the Board
from time to time; the Board has established the discount,
effective upon implementation, at ninety percent (90%) of fair
market value. Tax qualification of the plan will also afford
participating employees certain income tax benefits. The text
of the amended and restated plan is set forth in its entirety
as Exhibit A to this Proxy Statement.
As a tax-qualified plan, participating employees
will recognize no income until stock purchased pursuant to the
Plan is disposed of. If the participant does not dispose of
the stock before two (2) years from the date the stock is
purchased, the employee will recognize ordinary income to the
extent of the difference between the option price and the fair
market value at the time the option is granted or the date of
disposition, whichever is less, and capital gain income to the
extent of any appreciation in excess of the fair market value
at the time the stock was purchased. If such stock is
disposed of before the expiration of the two-year period, the
participant will recognize ordinary income to the extent of
the difference between the option price and the fair market
value of the stock at the time of the disposition. The
Company will not be entitled to a compensation deduction for
the value of the discount, unless the participant fails to
satisfy the two-year holding requirement.
No employee owning more than 5% of the total
outstanding stock of the Company may acquire additional shares
under the plan. The maximum amount of stock that can be
acquired by any participating employee under the plan each
year is $25,000, valued at fair market value, excluding any
discount.
The directors and executive officers who will be
allowed to participate in the Plan after it is amended have
not expressed an intent to participate or a level of
participation since no formal communication soliciting
participation has occurred. Communication with all employees,
including directors and executive officers who are eligible,
should occur in late October. Participation by directors and
executive officers will not impact shares currently held in
the Plan.
<PAGE>
The shareholders approved the previous plan at the
1993 shareholders' meeting, in order to permit directors and
executive officers to participate in the plan without
violating the "short-swing profit" rule of Section 16(b) of
the Exchange Act of 1934. That Section requires directors and
executive officers to disgorge profits derived from Company
stock transactions within a six-month period. Accordingly,
the amended and restated plan is being submitted to the
shareholders for approval so as to permit the continued
participation of the directors and executive officers in the
amended and restated plan. Shareholder approval is also
required for the plan to be a tax-qualified plan.
Because the Board believes that its employees should
be rewarded for their service and efforts by means of a
purchase price discount and the tax benefits available under a
tax-qualified plan, and because the Board believes the
continuation of the executive officers' direct financial
interest in the Company serves as an incentive to the
effective management of the Company, the Board recommends
approval of the Employee Plan.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL THREE.
PROPOSAL FOUR: APPROVAL OF POULTRY PRODUCER STOCK
PURCHASE PLAN
On August 30, 1994, the Company adopted the Poultry
Producer Stock Purchase Plan (the Producer Plan) for the
benefit of all poultry producers (currently approximately 900
persons). The Producer Plan is scheduled to be implemented by
November 1, 1994 or as soon as administratively feasible and
the Company can reasonably complete registration under federal
and state securities laws of its common stock for offer and
sale under the Producer Plan. The Company will administer the
Producer Plan after the Annual Meeting, regardless of the
shareholder vote on this Proposal Four, for so long as the
Board deems the Producer Plan to be in the best interest of
the Company. Nevertheless, the Producer Plan is being
submitted for shareholder approval because approval will cause
stock purchases under the Producer Plan by the Company's
directors and executive officers who are also poultry
producers for the Company to be exempt from certain so-called
"short swing profit" rules discussed on the following page.
The material features of the Producer Plan are described
below, but shareholders are encouraged to read the text of the
Producer Plan which is set forth in its entirety as Exhibit B
to this Proxy Statement.
The six directors identified as contract growers in
the section entitled "Certain Relationships and Related
Transactions" are eligible to participate in the Producer
Plan, although none has expressed an intent to participate or
a level of participation since no formal communication
soliciting participation has occurred. Communication with all
contract growers, including directors and executive officers
who are eligible, should occur in late October.
The Producer Plan is a periodic purchase plan by
which poultry producers can acquire Company common stock at a
discounted price, through regular producer pay withholdings.
The maximum amount of stock that may be purchased by any
producer each year is $25,000, valued at fair market value, excluding
any discount. For purposes of this limitation, if any
producer is also a participant in the Employee Plan, all
purchases under both plans will be combined. Stock purchased
by the Producer Plan is credited to producers' accounts, and
the dividends earned by such stock are automatically
reinvested in additional shares of Company stock.
Participants have full voting rights and receive all
shareholder materials, including proxy statements and annual
reports.
<PAGE>
The Producer Plan is essentially the same as the
Employee Plan. However, tax-qualification is available under
the Internal Revenue Code only to employees. Accordingly,
participants will recognize ordinary income at the time the
stock is purchased in the amount of the difference between
option price and the fair market value. Similarly, the
Company will be entitled to a deduction in the same amount.
The Producer Plan is to be administered by the
Company's Director of Shareholder Services. The Administrator
satisfies the Plan's monthly requirement for stock with either
open market purchases or new-issue stock. Stock purchased on
the open market is acquired at prevailing market prices with
participants paying a percentage of the purchase price, but
participants pay no brokerage commissions or administrative
expenses. New issue stock is acquired at a percentage of the
prevailing market price. The discount percentage will be
determined by the Board from time to time; the Board has
established the discount, effective upon implementation, at
ninety percent (90%) of fair market value.
A poultry producer's participation in the Producer
Plan is terminated upon termination of his contractual
arrangement with the Company. During the term of his
contract, a poultry producer may withdraw from and re-enroll
in the Producer Plan at any time, and may change his level of
withholding subject to certain limits. Directors who
participate in the Producer Plan are subject to certain time
restrictions on withdrawals and re-enrollments, however.
The Board can amend any aspect of the Producer Plan,
including the purchase price discount, without shareholder
approval, at any time. No material amendments are currently
contemplated, however.
Because the Producer Plan has not been approved by
shareholders, purchases under the Producer Plan are not exempt
from Section 16(b) of the Exchange Act of 1934 which requires
directors and executive officers to disgorge profits derived
from Company stock transactions within a six-month period. If
the Company's shareholders ratify the Producer Plan, purchases
under the Producer Plan will be exempt from Section 16(b), the
"short swing profit" rule. Because the Board believes that
directors and executive officers who also produce poultry for
the Company should not be effectively prohibited from
participating in the Producer Plan, the Board recommends
approval of the Producer Plan.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL FOUR.
INTRODUCTION TO PROPOSALS
FIVE THROUGH SEVEN
From March 9, 1994 to August 5, 1994, the Company
was the target of an unsolicited tender offer by Tyson Foods,
Inc. (Tyson) to acquire control of the Company. In addition
to the tender offer, Tyson's efforts consisted of, among other
things, a demand for a special shareholders' meeting which was
held on May 21, 1994, direct mailings and visits with the
Company's shareholders and poultry producers, and extensive
litigation, which continues, challenging certain actions taken
by the Board, as well as the constitutionality of certain
Virginia statutes, all of which have been rejected by the
United States District Court.
The Company's shareholders in 1989 approved a
"classified" board so that only approximately one-third of the
board could be changed at one annual meeting. Generally, at
least two annual meetings of shareholders would need to occur
for an acquiring entity to effect a change in a majority of
the members of the board. Due to the current wide-range of
board members contained in the Company Bylaws (9-21) and the
relatively low current number of directors within that range
(11), Tyson proposed to increase the board range to 15 and to
nominate 8 directors to, in effect, gain control of the board
at one annual meeting. Proposals Five and Six, together, are
<PAGE>
designed to prohibit anyone (including Tyson) from changing
board control within one year. The Board believes that
Proposals Five and Six should be approved by shareholders to
ensure that the benefits of a "classified" board are
available, as approved by shareholders in 1989.
Each of Proposals Five through Seven has some
independent anti-takeover effect. In particular, Proposals
Five and Six may discourage potential acquirors, even those
acquirors which are attractive to certain shareholders,
because their provisions would operate to delay the
purchaser's ability to obtain control of the Board by
generally requiring at least two annual meetings of
shareholders to effect a change in a majority of the members
of the Board. Adoption of those Proposals may also discourage
or preclude certain mergers, tender offers or other takeover
attempts, in some cases offering consideration in excess of
the current market value of Company shares, which some or a
majority of holders of the Company's voting stock may deem to
be in their best interests. Finally, because the adoption of
Proposals Five and Six would make it more difficult to effect
transactions involving the Company without the Board's
approval, it could result in increased bargaining power in
negotiating with a potential acquiror to negotiate terms that
are more favorable to management, which may or may not be in
the best interests of the Company's shareholders.
Additional anti-takeover effects specific to
Proposal Seven are discussed in the Summary of Proposal Seven
set forth below.
In addition to Proposals Five through Seven, the
shareholders have previously adopted certain other anti-
takeover measures. Such previously approved measures include
the authorization of a class of preferred stock, the rights
and preferences of which would be determined by the Company, a
staggered or classified Board, and the elimination of
cumulative voting. The Company's Articles of Incorporation
contain the following provisions which may have the effect of
delaying or preventing a change in control of the Company:
(1) the Company's Board of Directors is classified into three
classes, each serving a three-year term, and the terms of each
class are staggered; (2) directors may be removed only for
cause prior to the expiration of their terms; and (3) the
Board may issue preferred stock with rights determined by the
Board, without shareholder approval. The Company's Articles
of Incorporation and Bylaws provide for the elimination of
liability for and indemnification of officers and directors to
the fullest extent permissible by Virginia law. The Bylaws
also establish the time constraints on the presentation of
proposals by shareholders to be submitted to shareholders at
the Company's annual meeting.
The Severance Agreements summarized previously may
discourage or be deemed to be an impediment to a takeover due
to the potential cost of providing the required severance
benefits should a "change in control" occur after which an
executive is terminated.
<PAGE>
The Company adopted a Shareholder Protection Rights Plan in
February of this year which is designed to (1) prevent some
coercive takeover tactics; (2) enable the Board to respond to
unsolicited takeover bids in a more careful and deliberate
manner; (3) encourage or require an acquiring party to
negotiate directly with the Board; and (4) increase the
Board's relative bargaining position on behalf of the Company
and its shareholders. The Plan has the potential to discourage
hostile tender offers and takeovers.
The Company currently has no plans to propose
additional anti-takeover measures in future proxy
solicitations. The Board has voted unanimously in favor of
recommending Proposals Five through Seven to the shareholders.
PROPOSAL FIVE: AMENDMENT TO THE COMPANY'S BYLAWS
Under the Company's current Bylaws, the Board must
consist of between nine and twenty-one directors. Virginia
law permits shareholders, in addition to the Board, to fix the
number of directors within that range. The Board unanimously
recommends that the shareholders amend the Company's Bylaws so
that the Board shall consist of not less than ten (10) nor
more than twelve (12) directors, for several reasons.
First, the amendment conforms the Bylaws to the
current practice of the Board to maintain a small, working
Board. The Board's conscious decision to drop from eighteen
members in 1988 to its current size of eleven reflects the
Company's philosophy of avoiding redundant management expenses
and encouraging responsibility, involvement and accountability
as the necessary consequences of relying on fewer, rather than
more, executives.
Also, the current range permits shareholders to
effect a change in the majority of the Board at one annual
meeting with a simple majority vote. For example, this year,
four of eleven directors are standing for election. Had Tyson
submitted a proposal to increase the Board to fifteen
directors, which in fact Tyson threatened to do, and such
proposal were approved at the annual meeting, a change in the
composition of a majority of the Board could have occurred by
the election of four Tyson-nominated directors running in
opposition to the current Class A directors, plus the election
of four additional directors nominated by Tyson. The effect
of this action would be inconsistent with the action the
Company's shareholders took in 1989 to approve a "classified"
Board so that only approximately one-third of the Board could
be changed at one annual meeting.
Proposal Five, together with Proposal Six, is
designed to prohibit anyone (including Tyson) from changing
Board control within one year. The Board believes that
Proposal Five should be approved by shareholders to ensure
that the benefits of a "classified" board are available, as
approved by shareholders in 1989. By providing this
additional time to the Board and eliminating the possibility
of rapid removal of the Board, the directors of the Company
would be better able to evaulate any proposal to gain control
of the Company and to assess alternatives, and thereby ensure
that the interests of all shareholders are protected.
Proposal Five has some anti-takeover effect.
Proposal Five may discourage potential acquirors, even those
acquirors which are attractive to certain shareholders,
because their provisions would operate to delay the
purchaser's ability to obtain control of the Board by
generally requiring at least two annual meetings of
shareholders to effect a change in a majority of the members
of the Board. Adoption of Proposal Five may also discourage
or preclude certain mergers, tender offers or other takeover
attempts, in some cases offering consideration in excess of
the current market value of Company shares, which some or a
majority of holders of the Company's voting stock may deem to
be in their best interests. Finally, because the adoption of
Proposal Five would make it more difficult to effect
transactions involving the Company without the Board's
approval, it could result in increased bargaining power in
negotiating with a potential acquiror to negotiate terms that
are more favorable to management, which may or may not be in
the best interests of the Company's shareholders.
<PAGE>
The reduction in the Board range and the classified
Board structure will ensure that at any given time a majority
of the members of the Board can be expected to have had prior
experience as directors of the Company. The Board believes
that having directors who have served the Company for a longer
tenure facilitates long-range planning and policy-making and
has a positive impact on customer and employee loyalty.
The full text of this Proposal Five is set forth as
follows:
Section 2 of ARTICLE II of the Bylaws of WLR Foods,
Inc. shall be restated as follows:
Section 2. Number. The Board shall consist of not
less than ten (10) nor more than twelve (12)
directors, the exact number within such minimum and
maximum to be fixed and determined by the Board of
Directors or the shareholders.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL FIVE.
PROPOSAL SIX: AMENDMENT TO THE COMPANY'S ARTICLES
OF INCORPORATION
Under Virginia law, shareholders may amend the
Company's Bylaws at any meeting in which a quorum is
established, if the votes cast in favor of an amendment exceed
the votes cast opposing such amendment, unless the Company's
Articles of Incorporation require a greater vote. The Board
recommends that the Company's Articles of Incorporation be
amended to increase the vote required for Bylaw amendments to
a two-thirds' vote of the shareholders, which would, in
effect, create a "supermajority" voting requirement for Bylaw
amendments. The Bylaws contain several important rules for
the governance of the Company and its Board, including, for
example, the size of the Board and whether directors are
entitled to full protection from liability under Virginia law.
Therefore the Board recommends increasing the vote required to
effect such important shareholder decisions.
Without a two-thirds voting requirement for Bylaw
amendments by shareholders, the board range could be increased
by a majority vote of shareholders to effect a change of board
control within one year instead of two. Proposal Six,
together with Proposal Five, is designed to prohibit anyone
(including Tyson) from changing Board control within one year,
in the absence of support from two-thirds of the shareholders.
The Board believes that Proposal Six should be
approved by shareholders to ensure that the benefits of a
"classified" Board are available, as approved by shareholders
in 1989. By eliminating the possibility of rapid removal of
the Board, the directors of the Company would be better able
to evaluate any proposal to gain control of the Company
and to assess alternatives, and thereby ensure that the
interests of all shareholders are protected.
<PAGE>
Proposal Six has some anti-takeover effect.
Proposal Six may discourage potential acquirors, even those
acquirors which are attractive to certain shareholders,
because their provisions would operate to delay the
purchaser's ability to obtain control of the Board by
generally requiring at least two annual meetings of
shareholders to effect a change in a majority of the members
of the Board. Adoption of Proposal Six may also discourage or
preclude certain mergers, tender offers or other takeover
attempts, in some cases offering consideration in excess of
the current market value of Company shares, which some or a
majority of holders of the Company's voting stock may deem to
be in their best interests. Finally, because the adoption of
Proposal Six would make it more difficult to effect
transactions involving the Company without the Board's
approval, it could result in increased bargaining power in
negotiating with a potential acquiror to negotiate terms that
are more favorable to management, which may or may not be in
the best interests of the Company's shareholders.
The amendment does provide a means by which the
Bylaws can be amended by shareholders by a majority vote
instead of a two-thirds vote. If two-thirds of the directors
recommend a Bylaw amendment to be approved by shareholders,
then such proposal would only require a majority vote instead
of a two-thirds vote. If good reason exists for a Bylaw
amendment which requires shareholder consent, such as changing
the board range, providing a mechanism to lower the
shareholder vote required is appropriate, provided two-thirds
of the directors agree with such proposal. The disadvantage
to shareholders is that potentially a majority of shareholders
would like to change the board size yet two-thirds of the
directors do not support the proposal and therefore two-thirds
of the shareholders must approve the change instead of a
majority. This provision, is intended to maintain the
benefits afforded by a "classified" Board.
[/R]
Because of the importance of the provisions set
forth in the Company's Bylaws, the Board believes a higher
level of shareholder support is appropriate for Bylaw
amendments. Accordingly, The Board recommends that the
Company's Articles of Incorporation be amended to increase the
vote required for Bylaw amendments to a two-thirds' vote of
shareholders.
The full text of this Proposal Six is set forth as
follows:
The following section shall be added to ARTICLE FOUR
of the Articles of Incorporation of WLR Foods, Inc.
(which Article shall be entitled "Amendments" and its
sections be titled and consecutively numbered):
Section Two. Bylaws. The Bylaws may be
amended, in whole or in part, by a two-thirds
(2/3) vote of the Board of Directors, or by the
holders of two-thirds (2/3) of all shares
entitled to vote by each voting group of the
shareholders of the Corporation, at any meeting
of the Board of Directors or of the
shareholders, as the case may be, except that
the shareholder vote for Bylaw amendments that
have been recommended to the shareholders by a
two-thirds (2/3) vote of the Board of Directors
shall require only a majority of all votes
entitled to be cast by each voting group.
Bylaws made or amended by the Board of
Directors may be altered or repealed by the
shareholders according to this Section, but
shall remain in effect unless and until such
action be taken by the shareholders.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL SIX.
<PAGE>
PROPOSAL SEVEN: CLASS B COMMON STOCK
The Company's Articles of Incorporation currently
authorize the issuance of 100,000,000 shares of Common Stock
(the Existing Common Stock), no par value, of which 12,196,563
shares were issued and outstanding as of the date of this
Proxy Statement. The Board recommends that the Company's
Articles of Incorporation be amended to reclassify the
Existing Common Stock as "Class A" Common Stock, and to
authorize the issuance of an additional 100,000,000 shares of
a new "Class B" Common Stock.
If "Class B" Common Stock is issued, an acquiring
party may be required to acquire or make a tender offer for
shares of "Class B" Common Stock in addition to "Class A"
Common Stock as outlined below. This requirement referred to
as a Minority Protection Transaction may discourage or
preclude certain mergers, tender offers or other takeover
attempts due to the additional costs incurred to acquire Class
B Common Stock. However, the purpose for the Minority
Protection Transaction provisions is to provide holders of
Class B Common Stock the opportunity to participate in any
premium paid in the future for a significant block of Class A
Common Stock by a buyer who has not acquired a proportionate
share of Class B Common Stock. This, in turn, should keep the
trading value of Class B Common Stock close, if not identical
to, the value of Class A Common Stock.
The rights, powers and limitations of the Class A
Common Stock and the Class B Common Stock are set forth in
full in Article Two, Section One of the Company's Articles of
Incorporation, as proposed to be amended (the Amended
Articles), set forth as Exhibit C to this Proxy Statement and
incorporated herein by reference. The following summary
should be read in conjunction with, and is qualified in its
entirety by reference to, such Exhibit C.
If the Amendment is adopted by the shareholders, the
Board of Directors intends to prepare and file Articles of
Amendment to the Articles of Incorporation of the Company with
the State Corporation Commission of Virginia (the Commission),
amending the Articles of Incorporation of the Company in
accordance with the Amendment. The Amendment will be
effective immediately upon acceptance of filing by the
Commission. The Board would then be free to issue Class B
Common Stock without any further action on the part of the
shareholders.
The Board of the Company does not presently intend
to authorize a distribution of Class B Common Stock, however,
the Board reserves the right to make such a distribution if
the Amendment is approved by shareholders and filed.
Shareholders should retain all certificates which represent
the Existing Common Stock since pursuant to the Amendment such
certificates will represent shares of Class A Common Stock
immediately upon the effectiveness of the Amendment without
any further action on the part of the holder or the Company.
Under the provisions of the Amendment, the currently
outstanding shares of Existing Common Stock would be
reclassified as Class A Common Stock and would continue to
have their present rights, powers and limitations. As more
fully described below, the new Class B Common Stock will have
certain special characteristics. In particular, the holders
of Class B Common Stock as such will have limited voting
rights, as discussed more fully below, on matters except as
otherwise provided or required by law.
In general, the Amendment should enable the Company
to provide for its long-term growth through the issuance of
Class B Common Stock or other securities convertible into
Class B Common Stock in future financings or acquisitions,
without significantly diluting the current voting power of
existing shareholders. The Board recognizes, however, that
there may be some disadvantages to shareholders resulting from
the Amendment.
<PAGE>
Under the Company's Articles of Incorporation as now
in effect, each share of Existing Common Stock has one
(1) vote per share on all matters, and holders of the Existing
Common Stock are entitled to vote for the election of all
directors and on all other matters submitted to the
shareholders of the Company. There is no provision in the
Company's Articles of Incorporation permitting cumulative
voting. After the Amendment, each share of Class A Common
Stock will continue to entitle the holder thereof to one (1)
vote per share on all matters on which shareholders are
entitled to vote, including the election of directors; the
Class B Common Stock will only entitle the holder thereof to
one-tenth of one vote per share except as otherwise provided
or required by law. Proposal Seven will not affect the
relative voting power of the holders of shares of Existing
Common Stock (to be reclassified as Class A Common Stock).
After the Amendment, actions submitted to a vote of
shareholders will be voted on by holders of both Class A
Common Stock and Class B Common Stock. Under the Amended
Articles and the Virginia Stock Corporation Act, the
affirmative vote of the holders of a majority of the
outstanding shares of both Class A Common Stock and Class B
Common Stock entitled to vote will be required to amend the
Amended Articles.
Each share of Class A Common Stock and Class B
Common Stock will be equal in respect to dividends and other
distributions in cash, stock or property (including
distributions in connection with any recapitalization and upon
liquidation, dissolution or winding up of the Company), except
as described below. Dividends or other distributions payable
on the Common Stock in shares of Common Stock shall be made to
all holders of Common Stock and may be made (i) in shares of
Class B Common Stock to the holders of Class A Common Stock
and to the holders of Class B Common Stock, (ii) in shares of
Class A Common Stock to the holders of Class A Common Stock
and in shares of Class B Common Stock to the holders of
Class B Common Stock, or (iii) in any other authorized class
or series of capital stock to the holders of both classes of
Common Stock. In no event will either Class A Common Stock or
Class B Common Stock be split, subdivided or combined unless
the other is proportionately split, subdivided or combined.
Each holder of Class B Common Stock will be entitled
to receive the same per share consideration as the per share
consideration, if any, received by any holder of the Class A
Common Stock in a merger or consolidation of the Company
(whether or not the Company is the surviving corporation).
After implementation of Proposal Seven, voting
rights disproportionate to equity ownership could be acquired
through acquisitions of Class A Common Stock. The Company's
financial advisors advised the Board that the Class A Common
Stock could therefore trade at a premium to the Class B Common
Stock under certain circumstances. In order to reduce or
eliminate the economic reasons for the Class A Common Stock
and Class B Common Stock to trade at disparate market prices
and to give holders of Class B Common Stock the opportunity to
participate in any premium paid in the future for a
significant block (30% or more) of the Class A Common Stock by
a buyer who has not acquired a proportionate share of the
Class B Common Stock, the Board, upon consultation with the
Company's financial and legal advisors, determined that the
Amendment would include a "Minority Protection" feature, as
described below.
<PAGE>
If any person or group acquires beneficial ownership
of 30% or more of the then issued and outstanding shares of
Class A Common Stock after the effective time of the Amendment
(other than upon the original issuance by the Company, by
operation of law, by will or the laws of descent and
distribution, by gift or by foreclosure of a bona fide loan),
and such person or group (a Related Person) does not then own
an equal or greater percentage of all outstanding shares of
Class B Common Stock, such Related Person must, within a 90-
day period beginning the day after becoming a Related Person,
make a public tender offer to acquire additional shares of
Class B Common Stock (a Minority Protection Transaction). For
purposes of this provision, "beneficial ownership" and "group"
have the meanings of such terms as used in Rule 13d
promulgated under the Securities Exchange Act of 1934, as
amended.
In a Minority Protection Transaction, the Related
Person must offer to acquire from the holders of the Class B
Common Stock that number of shares of additional Class B
Common Stock (the Additional Shares) determined by
(i) multiplying the percentage of outstanding Class A Common
Stock owned by such Related Person which were acquired after
the effective time of the Amendment, by the total number of
shares of Class B Common Stock outstanding on the date such
person or group became a Related Person, and (ii) subtracting
therefrom the total number of shares of Class B Common Stock
owned by such Related Person on such date which were acquired
after the Amendment. The Related Person must acquire all
shares validly tendered or, if the number of shares tendered
exceeds the number determined pursuant to such formula, a pro
rata amount from each tendering holder.
The offer price for any shares required to be
purchased by the Related Person pursuant to this provision is
the greater of (i) the highest price per share paid by the
Related Person for any share of Class A Common Stock in the
six-month period ending on the date such person or group
became a Related Person or (ii) the highest price of a share
of the Class A Common Stock or Class B Common Stock on the
National Association of Securities Dealers, Inc. (NASD)
Automated Quotation System (NASDAQ) (or such other quotation
system or securities exchange constituting the principal
trading market for either class of Common Stock) on the date
such person or group became a Related Person.
A Minority Protection Transaction would also be
required of any Related Person that acquires the next highest
integral multiple of 5% (e.g., 35%, 40%, 45%, etc.) of the
outstanding Class A Common Stock after the effective time of
the Amendment (other than upon original issuance by the
Company, by operation of law, by will or the laws of descent
and distribution, by gift, or by foreclosure of a bona fide
loan), and such Related Person does not own an equal or
greater percentage of all outstanding shares of Class B Common
Stock. Such Related Person would be required to offer to buy
that number of Additional Shares prescribed by the formula set
forth above, even if a previous offer resulted in fewer shares
of Class B Common Stock being tendered than such previous
offer included.
The requirement to engage in a Minority Protection
Transaction is satisfied by making the requisite offer and
purchasing validly tendered shares, even if the number of
shares tendered is less than the number of shares included in
the required offer. The penalty applicable to any Related
Person that fails to make an offer required by the terms of
Article Two, Section One of the Amended Articles, or to
purchase shares validly tendered (after proration, if any),
would be to suspend automatically the voting rights of the
shares of Class A Common Stock owned by such Related Person
and acquired after the effective time of the Amendment until
consummation of an offer as required by the terms of Article
Two, Section One or until divestiture of the shares of Class A
Common Stock that triggered the offer requirement. Neither
the Minority Protection Transaction requirement nor the
related penalty applies to any increase in percentage
ownership of Class A Common Stock resulting solely from a
change in the total amount of Class A Common Stock
outstanding.
<PAGE>
Except as described below, neither the Class A
Common Stock nor the Class B Common Stock will be convertible
into another class of Common Stock or any other security of
the Company.
The Class B Common Stock could be converted into
Class A Common Stock by the Board on a share-for-share basis
if, as a result of the existence of the Class B Common Stock,
the Class A Common Stock or the Class B Common Stock or both
becomes excluded from trading on all principal national
securities exchanges and is also excluded from quotation on
NASDAQ or any other comparable national quotation system then
in use.
In the event of any such conversion of the Class B
Common Stock, certificates which formerly represented
outstanding shares of Class B Common Stock will thereafter be
deemed to represent a like number of shares of Class A Common
Stock and all shares of Common Stock authorized by the Amended
Articles will be deemed to be shares of Class A Common Stock.
Neither the Class A Common Stock nor the Class B
Common Stock will carry any preemptive rights enabling a
holder to subscribe for or receive shares of any class of
stock of the Company or any other securities convertible into
shares of any class of stock of the Company.
The Company's Articles of Incorporation presently
authorize 100,000,000 shares of one class of Common Stock.
The Amendment would increase the authorized number of shares
of Common Stock from 100,000,000 to 200,000,000, authorizing
the issuance of up to 100,000,000 shares of Class A Common
Stock and up to 100,000,000 shares of Class B Common Stock.
After implementation of Proposal Seven, authorized but
unissued shares of both Class A Common Stock and Class B
Common Stock would therefore be available for issuance from
time to time for any proper corporate purpose, including stock
splits, stock dividends, acquisitions, stock option plans and
funding of employee benefit plans. No further action or
authorization by the shareholders would be necessary prior to
the issuance of the additional shares of Class A Common Stock
or Class B Common Stock authorized pursuant to the Amendment
unless applicable laws or regulations would require such
approval in a given instance.
The Company will deliver to the holders of Class B
Common Stock the same proxy statements, annual reports and
other information and reports as it delivers to holders of
Class A Common Stock.
<PAGE>
The Board believes that a capital structure having
two classes of common stock offers a number of potential
benefits described below and that adoption of Proposal Seven
is in the best interests of the Company and all of its
shareholders. Proposal Seven enables the Company to issue
additional Common Stock for financing and acquisition purposes
without significantly diluting the voting power of existing
shareholders. The Amendment should enable the Company to
increase its financial flexibility by providing the Company
the ability to issue additional shares of Class B Common Stock
or other debt or equity securities convertible into Class B
Common Stock in acquisitions or in public or private
securities offerings, without significantly diluting the
voting power of existing shareholders.
The Board of Directors of the Company has given due
consideration to the Amendment and has determined that the
adoption of the Amendment would be in the best interests of
the Company and its shareholders. However, some shareholders
may find the Amendment disadvantageous to the extent that it
favors long-term investors and may discourage takeovers of the
Company. Accordingly, the Board of Directors suggests that
each shareholder carefully read and review the description of
the Amendment and certain effects thereof which are set forth
below.
Implementation of Proposal Seven would provide the
Company with increased flexibility in the future to issue
common equity in connection with acquisitions and to raise
equity capital or to issue convertible debt or convertible
preferred stock as a means to finance future growth without
significantly diluting the voting power of the Company's
existing shareholders. The quotation of the Class B Common
Stock by NASDAQ will create a trading market, the existence of
which could be an important factor in assessing the value of
such stock in connection with and facilitating any such
acquisition, financing or stock option plan.
The Company has no present plans to issue additional
equity securities or convertible securities in any acquisition
or financing transaction after the effectiveness of the
Amendment. If the Company issues any shares, it is more
likely to issue shares of Class B Common Stock. Although the
Class A Common Stock may trade at a premium with respect to
the Class B Common Stock, as discussed below, the Amendment
expressly permits the Board to issue and sell shares of Class
B Common Stock even if the consideration which could be
obtained by issuing or selling Class A Common Stock would be
greater.
The adoption of Proposal Seven would reduce the risk
of a disruption in the continuity of the Company's long-term
plans and objectives that could otherwise result from an
unsolicited hostile acquisition. Thus Proposal Seven may
provide a basis for continuity pursuant to such plans and
objectives, if and when such circumstances arise, and should
reduce the risk that the Company could at some future date be
compelled to consider a potential acquisition of the Company
in an environment that could be dictated to the Company and
the Board by third parties.
Because the Amendment provides that each whole share
of Existing Common Stock will be reclassified and changed into
one share of Class A Common Stock, and because no distribution
of the Class B Common Stock is currently intended, the
ownership interest and voting power of each holder of Existing
Common Stock will be the same immediately after effectiveness
of the Amendment as it was immediately prior thereto. Due to
the limited voting rights of the Class B Common Stock,
subsequent issuances of the Class B Common Stock will not have
a significant affect on the voting power of each holder of
Existing Common Stock.
The Company has been advised by counsel that for
federal income tax purposes (i) the reclassification of
Existing Common Stock into Class A Common Stock will not be
taxable to a shareholder of the Company and (ii) neither the
Class A Common Stock nor the Class B Common Stock will
constitute "Section 306 stock" within the meaning of Section
306(c) of the Internal Revenue Code of 1986, as amended.
Shareholders are urged to seek the advice of their own tax
counsel on this matter and on state income tax matters, and
are likewise encouraged to seek tax advice if, and when, Class
B Common Stock is issued.
Since the Existing Common Stock will be reclassified
as Class A Common Stock with essentially the same rights,
powers and limitations, the redesignation is not an "offer,"
"offer to sell," "offer for sale" or "sale" of a security
within the meaning of Section 2(3) of the Securities Act of
1933, as amended (the Securities Act) and will not involve the
substitution of one security for another under Rule 145
thereunder. In addition, the authorization of the Class B
Common Stock as a stock dividend is not a "sale" of a security
under the Securities Act or Rule 145. Consequently, the
Company has not registered the Class A Common Stock or the
Class B Common Stock under the Securities Act.
<PAGE>
Since there will be no sale of either the Class A
Common Stock or the Class B Common Stock, shareholders will
not be deemed to have purchased such shares separately from
the Existing Common Stock under the Securities Act and Rule
144 thereunder. Shares of Class A Common Stock held
immediately upon effectiveness of the Amendment, other than
any such shares held by affiliates of the Company within the
meaning of the Securities Act, may be offered for sale and
sold in the same manner as the Existing Common Stock without
registration under the Securities Act. Affiliates of the
Company, will continue to be subject to the restrictions
specified in Rule 144 under the Securities Act, with each
class of Common Stock considered separately.
The Existing Common Stock is currently traded on the
NASDAQ National Market System and the Company is in the
process of confirming that the Class A Common Stock can
continue to trade on the NASDAQ National Market System.
Proposal Seven is intended to comply with the requirements of
Rule 19c-4 (the Rule) adopted in July, 1988 by the
Securities and Exchange Commission (SEC) under
the Securities Exchange Act of 1934, as amended. Although a
federal appellate court has vacated such Rule as a rule of the
SEC, the Rule has been adopted as a standard for quotation on
the NASDAQ National Market System by the NASD. The effect of
the Rule is to prohibit the quotation on the NASDAQ National
Market System of equity securities of an issuer if such issuer
"issues any class of security, or takes other corporate
action, with the effect of nullifying, restricting or
disparately reducing the per share voting rights of holders of
an outstanding class or classes of common stock of such
issuer. . . ." The purpose of the Rule is to prohibit stock
issuances and other corporate actions that have a
"disenfranchising effect" on existing shareholders.
The Company presently anticipates that the Class A
Common Stock will be traded on the NASDAQ National Market
System and if Class B Common Stock is issued, it likewise will
be traded on the NASDAQ National Market System. Future
issuances of Class A Common Stock may be prohibited by the
Rule and the Company may be required to seek and obtain NASD
approval in connection with such issuances.
Recently, the SEC released a notice (the Notice) of
proposed rule changes by the New York Stock Exchange, Inc.
(the NYSE), the American Stock Exchange, Inc. (the AMEX) and
the NASD (collectively with the NYSE and the AMEX, the
Markets), relating to their respective rules governing the
voting rights of shareholders of common stock listed on the
NYSE or the AMEX or, in the case of the NASD, included on the
NASD system. The proposed rule changes, if approved by the
SEC and implemented by the Markets, would result in a
uniform shareholder voting rights policy for all three
Markets.
The Notice, which was published in the Federal
Register on August 18, 1994, solicits comments on the proposed
rule changes from interested parties. The comment period was
scheduled to expire on September 8, 1994.
The SEC is considering the proposed
shareholder voting rights policies of the NYSE, the AMEX and
the NASD in conjunction with one another. The Notice
indicates that none of the proposed rule changes will become
effective until the SEC approves the proposed rule
changes of all three Markets.
If the proposed rules were to be adopted in its
current form, a company would have additional flexibility to
issue regular-vote common stock after the issuance of lower-
vote common stock. Thus, in such an instance, the Company
would be permitted to issue additional Class A Common Stock
after issuing Class B Common Stock. Such a result is not
permitted under the current rules.
<PAGE>
There can be no assurance that such rules (or a
modified version thereof) will be adopted in the future.
Legislation or other regulatory developments could make the
Company's Class A Common Stock and Class B Common Stock
ineligible for trading on national securities exchanges and
for quotation on NASDAQ as a result of the Amendment. The
Company is unable to predict whether any such regulatory
proposals will be adopted or whether they will have such
effect.
If legislation is adopted which would make the
Company's Common Stock ineligible for trading on all principal
national securities exchanges and for quotation on NASDAQ, the
Amendment provides that the Board may convert Class B Common
Stock into Class A Common Stock if, as a result of the
existence of the Class B Common Stock, the Class A Common
Stock or the Class B Common Stock or both is excluded from
trading on the New York Stock Exchange, the American Stock
Exchange and all other principal national securities exchanges
then in existence and is also excluded from quotation on
NASDAQ and any other comparable national quotation system then
in existence.
While the Board has determined that implementation
of Proposal Seven is in the best interests of the Company and
its shareholders, the Board recognizes that implementation of
Proposal Seven may affect the decision of certain
institutional investors that would otherwise consider
investing in the Existing Common Stock. The holding of lower-
vote common stock may not be permitted by the investment
policies of certain institutional investors.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL SEVEN.
SHAREHOLDER PROPOSALS
Shareholders are reminded that proposals of
shareholders intended to be presented at the Company's 1995
annual meeting must be received by the Secretary of the
Company, at its principal executive offices, P. O. Box 7000,
Broadway, Virginia 22815-7000, for inclusion in its proxy
statement relating to that meeting, by May 31, 1995.
Upon written request to the Secretary, at the address given on
page one, the Company
shall provide shareholders, without charge, a copy of the
Company's annual
report on Form 10-K for fiscal year ended July 2, 1994.
By Order of the Board of Directors
Delbert L. Seitz
Secretary
September 30, 1994
EXHIBIT A
WLR FOODS, INC.
AMENDED EMPLOYEE STOCK PURCHASE PLAN
1. Establishment of Plan. WLR Foods, Inc. (the "Company,"
which term includes subsidiaries of the Company unless the context
otherwise requires) hereby adopts the WLR Foods, Inc. Amended Employee
Stock Purchase Plan (the "Plan"), effective on August 30, 1994.
2. Purpose. The purpose of the Plan is to provide
eligible employees of the Company a convenient means to acquire shares
of Common Stock through payroll deductions and as otherwise described
herein. The Plan is established as a "qualified" employee stock
purchase plan and, as such, is intended to qualify under Sections
401(a) and 423 of the Internal Revenue Code. Transactions under this
Plan are intended to be exempt under new Rule 16b-3, or its successor
(Rule 16b-3), promulgated pursuant to the Securities Exchange Act of
1934 (the Exchange Act), and, to that end (i) this Plan shall be
submitted for approval by the voting shareholders of the Company at
the next annual meeting of shareholders, and (ii) this Plan provides
for broad-based employee participation and does not discriminate in
favor of highly compensated individuals.
3. The Administrator. The Company's Director of
Shareholder Services, in cooperation with the Human Resources
Department (the Administrator), shall administer the Plan as described
herein. For each eligible employee participating in the Plan
(Participant), the Administrator will establish an individual account
which will reflect the number of shares of Common Stock in such
account, including fractions computed to five decimal places, and cash
to be invested (Participant's Account). The Administrator shall
arrange for the custody of stock certificates, maintain ongoing
records, maintain and circulate Plan information to employees, send
Statements of Accounts (as hereinafter defined) to Participants, and
perform other administrative duties relating to the Plan. Further,
the Administrator shall establish certain administrative procedures
which may be modified from time to time without a formal amendment to
the Plan. Any question or issue of interpretation arising under the
Plan shall be resolved by the Administrator.
4. The Independent Agent. The Company shall retain a
broker-dealer registered under the Exchange Act of the 1934 (the
Exchange Act) to act as an agent of the Company in the open market
purchases of Common Stock under the Plan (Independent Agent).
5. Eligibility and Participation.
(a) Eligibility. Any employee who (1) has satisfied the
Company's ninety-day probationary period, and (2) is regularly
scheduled to work at least twenty (20) hours per week and at least
five (5) months per year shall be eligible to participate in the Plan.
Notwithstanding the foregoing, no employee shall be granted an option
under the Plan (1) if, immediately after the grant, such employee (or
any other person whose stock would be attributed to such employee
pursuant to Section 424(d) of the Internal Revenue Code) would own
stock and/or hold outstanding options to purchase stock possessing
five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any subsidiary or parent
of the Company, or (2) which permits such employee's right to purchase
stock under all employee stock purchase plans (as described in Section
423 of the Code) of the Company and any subsidiary of the Company to
accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000.00) of fair market value of such stock (determined at the
time such option is granted) for any calendar year in which such
option is outstanding at any time.
Further, with respect to Participants who are
"reporting persons" under Section 16 of the Exchange Act (Reporting
Persons), the following eligibility restrictions apply: (i) upon
receipt of a Reporting Person's request for issuance of stock
certificates for Plan shares held on his behalf as described in
Section 11; (ii) upon receipt of a Reporting Person's notice of
withdrawal from the Plan as described in Section 12; or (iii) upon
termination of a Reporting Person as described in Section 13, all
payroll deductions by the Participant and purchases by the
Administrator or Independent Agent under the Plan (except dividend
reinvestment, if applicable) on behalf of such Reporting Person shall
cease until six months have elapsed from the date of such stock
issuance, withdrawal or termination.
(b) Participation. An eligible employee may participate in
the Plan by completing and returning to the Administrator a payroll
deduction form in a format approved from time to time by the
Administrator (Enrollment Form). An employee will become a
Participant in the Plan as soon as administratively feasible following
the Company's receipt of his Enrollment Form.
All payroll deductions shall be in whole-dollar amounts, and
will be credited to such Participant's account under the Plan. The
minimum contribution that may be authorized by a Participant shall be
Five Dollars ($5.00) per week, and the maximum contribution shall be
Four Hundred Dollars ($400.00) per week. A Participant may change the
amount of his authorized payroll deduction by completing a new
Enrollment Form which shall be effective as soon as administratively
feasible following the Company's receipt of such Form. However, a
Participant may not make any additional payments to his account.
If a Participant ceases to receive compensation because of authorized
leave of absence, sick leave, military service or temporary layoff, or
if he becomes temporarily ineligible to participate in the Plan by
reason of change of status of his employment with the Company, his
payroll deduction shall be automatically suspended.
(c) Miscellaneous. No interest will be paid on funds held
by the Company pending investment.
6. Stock Purchases.
(a) Grant of Options. On each payroll date, a
participating employee shall be deemed to have been granted an option
to purchase a maximum number of shares of stock of the Company equal
to an amount determined as follows: 1) the amount the employee has
elected to have withheld, divided by 2) a percentage of the market
value which shall be set by the Company from time to time, but which
in no event shall be less than 85% (the "Purchase Discount"). The
Market Value shall be determined as provided in Paragraphs (d) and (e)
below, of stock of the Company on the last day of such pay period.
(b) Exercise of Options. Unless a Participant withdraws
from the Plan as provided in Section 12, such Participant's option to
purchase shares will be exercised automatically during the Investment
Period or on the Investment Date (both as hereinafter defined) as the
case may be, and the maximum number of shares subject to such option,
computed to five decimal places, will be purchased for such
Participant at the applicable option price with the accumulated
payroll deductions and cash dividends (credited pursuant to Section 7
herein) in such Participant's account. During a Participant's
lifetime, a Participant's option to purchase shares hereunder is
exercisable only by such Participant.
Any cash balance remaining in a Participant's account after
the exercise of the options granted herein will be carried forward in
the Participant's account for the purchase of Common Stock during the
next Investment Period or on the next Investment Date, as the case may
be, unless the Participant withdraws from the Plan as provided in
Section 12 herein. The shares of Common Stock purchased upon exercise
of an option hereunder shall be credited to the Participant's account
under the Plan and shall be deemed to be transferred to the
Participant on the Exercise Date and, except as otherwise provided
herein, the Participant shall have all rights of a stockholder with
respect to such shares. Each share of Common Stock allocated to a
Participant's Account shall be completely vested in the Participant.
However, the Common Stock may be held in the name of the Plan, the
Administrator, or the Administrator's nominee.
(c) Purchases of Stock. The Company will have sole
discretion as to whether Common Stock purchased under the Plan will be
purchased in the open market by the Independent Agent or purchased
directly from the Company from authorized but unissued shares. The
Administrator will notify the Independent Agent prior to the
commencement of the Investment Period (as hereinafter defined) if
shares are to be purchased for the Plan in the open market. The
proceeds of any purchase of authorized but unissued shares will be
used by the Company for general Company purposes. For all purposes
under this Plan, in the event that a date on which a stock price is to
be determined by reference to the National Association of Securities
Dealers Automated Quotations National Market System (NASDAQ/NMS) is
not a trading date, the stock price shall be determined by reference
to NASDAQ/NMS quotations as of the last trading date preceding such
date.
(d) Open Market Purchases. If Common Stock is to be
purchased in the open market, the Independent Agent shall purchase the
stock during a period beginning the first Friday following the end of
the Company's payroll month and ending five (5) trading days
thereafter, or such longer period as may be necessary to satisfy
requirements of Rule 10b-18 of the Exchange Act, if applicable (the
Investment Period). Open market purchases will be made at the lowest
current independent offer quotation reported by the National
Association of Security Dealers Automated Quotations/National Market
System (NASDAQ/NMS). In all other respects, open market purchases
shall be made in such manner as the Independent Agent in its sole
discretion determines. For open market transactions, the
Participants' option price per share will be the Purchase Discount
time the weighted average price, excluding brokerage commissions, paid
by the Independent Agent for all shares purchased during the
Investment Period. Any excess of the actual option purchase price
over the Participant's price per share shall be paid by the Company.
(e) Purchase of New Issue Shares. If the Administrator so
decides, new issue Common Stock shall be purchased for the Plan
directly from the Company on the first Friday following the end of the
Company's payroll month (Investment Date). The price of such new
issue stock shall be the Purchase Discount times the average of the
closing bid and ask prices of the Common Stock as quoted by NASDAQ/NMS
on the Investment Date. If shares are purchased both in the open
market and directly from the Company, the price will be the Purchase
Discount time the weighted average price (as provided in subparagraphs
(d) and (e) of this Section 6) of all shares.
(f) Minimum Exercise Price. Notwithstanding the foregoing,
in no event shall the exercise price be less than the lower of: (1)
Eighty-five percent (85%) of the fair market value of the stock at the
time such option is granted, or (2) Eighty-five percent (85%) of the
fair market value of the stock at the time such stock is purchased.
(g) Maximum Number of Shares. The maximum number of shares
which shall be reserved for sale under the Plan shall be 1,500,000,
subject to adjustment upon changes in capitalization of the Company.
7. Dividend Reinvestment. Cash dividends received on
shares of Common Stock purchased under the Plan will be applied to the
purchase of additional shares during the Investment Period or on the
Investment Date, as the case may be, next following the payment of
dividends by the Company. Cash dividends will be reinvested at the
prices described in subparagraphs (d) and (e) of Section 6. Any stock
dividends or shares issued pursuant to any stock split with respect to
the shares of Common Stock held in a Participant's Account will be
credited to the Participant's Account on a proportionate basis.
8. Voting Rights. The Administrator will not vote Common
Stock held for a Participant's Account. A Participant will have all
rights of a shareholder as soon as there are shares of Common Stock
(whole or fractional) credited to the Participant's Account. Proxy
materials will be forwarded to each Participant of record to be voted
at his discretion, and all other communications from the Company to
its shareholders will be forwarded to each Participant.
9. Expenses. The Company will bear the expense of
administering the Plan and all fees, including brokerage commissions,
of the Independent Agent in connection with its purchase of shares of
Common Stock, as well as the purchase price discount in the event
shares are purchased on the open market.
10. Reports to Participants. The Administrator will render
a quarterly Statement of Account to each Participant no later than
fifteen (15) business days after the end of the Investment Period or
Investment Date, as the case may be, next following the fiscal quarter
to which the Statement of Accounts relates. Such statement will show
the following information for the quarter:
(a) Total amount invested by the Administrator;
(b) Shares of Common Stock allocated to the Participant's
Account;
(c) The cost per share of allocated Common Stock;
(d) The number of shares of Common Stock for which
certificates have been issued, if any; and
(e) The beginning and ending balances in the Participant's
Account.
11. Delivery Except as otherwise provided in this Section
11, a stock certificate will be issued to a Participant for any or all
full shares of Common Stock in the Participant's Account as soon as
administratively feasible following the Company's receipt of the
Participant's written request therefor. Automatic reinvestments of
dividends will continue with respect to any remaining shares or
fraction of share of Common Stock in the Participant's Account as long
as the Participant has not withdrawn from the Plan as described in
Section 12 herein. If the Participant has withdrawn from the Plan, or
subsequently withdraws from the Plan, automatic reinvestments of
dividends will continue only if one or more whole shares of Common
Stock remains in the Participant's Account; otherwise, the Participant
will be deemed terminated and his Account will be closed as described
in Section 13 herein.
Withdrawals may not be made prior to two (2) years from the
date on which such shares were purchased, or upon approval by the
Administrator, in the Administrator's sole discretion. Shares of
Common Stock received upon stock dividends or stock splits shall be
treated as having been purchased on the purchase date of the share to
which they relate.
Notwithstanding anything in this section to the contrary,
stock held by the Plan on the effective date of hereof may be
withdrawn by a Participant at any time prior to the expiration of the
period ending sixty (60) days after the effective date of the Plan.
All shares remaining in a Participant's account at the expiration of
the sixty (60) day period, and all shares credited to a Participant's
account on or after the effective date hereof, shall be subject to the
restrictions set forth herein.
12. Withdrawal from Plan. A Participant may withdraw from
the Plan by ceasing payroll deductions made on his behalf pursuant to
a written notice of withdrawal in a format approved from time to time
by the Administrator (Withdrawal Form). Withdrawal shall be deemed to
have occurred as soon as is administratively feasible for the Company
to effect the withdrawal following the Company's receipt of the
Withdrawal Form. Any funds held for investment on behalf of a
withdrawing Participant as of the date of his withdrawal shall be
invested on his behalf at the next Investment Period or Investment
Date, as the case may be. At the election of the Participant
appropriately noted on the Withdrawal Form, a withdrawing Participant
may elect to have issued to him a stock certificate for any or all
full shares of Common Stock in the Participant's Account, subject to
the restrictions set forth in Section 11. Automatic reinvestment of
dividends will continue with respect to any shares of Common Stock not
withdrawn by the Participant notwithstanding his status as a withdrawn
Participant; provided, however, that if only a fraction of a share
remains in the Participant's Account, the withdrawn Participant will
be deemed terminated and his Account will be closed as described in
Section 13 herein.
13. Termination. Upon termination of employment of a
Participant for any reason, whether by voluntary or involuntary
termination, death or disability, a Participant will be deemed
terminated from the Plan. Any funds held for investment on behalf of
a terminated Participant as of the date of termination shall be
invested on his behalf at the next Investment Period or Investment
Date, as the case may be. A stock certificate for all of the full
shares of Common Stock in the terminated Participant's Account which
have satisfied the two-year holding requirement shall be issued to the
Participant, and a certificate for all remaining full shares shall be
delivered to the Participant within two years from the date such
shares were purchased. Certificates for fractional shares will not be
issued; rather, a cash adjustment will be made for any fraction of a
share based on the closing bid and ask prices of Common Stock as
quoted by NASDAQ/NMS on the termination date.
14. Transferability. Neither payroll deductions credited
to a Participant's Account, nor any rights with regard to the exercise
of an option or to receive stock under the Plan may be assigned,
transferred, pledge or otherwise disposed of in any way by the
Participant other than by will or by the laws of descent and
distribution. Any such attempted assignment, transfer, pledge or
other disposition shall be without effect, except that the Company may
treat such act as an election to withdraw funds as provided in the
preceding paragraph.
15. Amendment and Termination of the Plan. The Company
reserves the right to suspend, modify or terminate the Plan at any
time. Further, the Company shall have the right to change the
purchase price discount, but may not change such discount to less than
85% of the fair market value. The Participants shall be given notice
of the same as soon as possible following such suspension,
modification or termination. No suspension, modification or
termination will affect any Participant's interest in the Plan which
has accrued prior to the date of the same. In the event of the
termination of the Plan, the Administrator will make a distribution of
Common Stock and cash as if each Participant had been terminated,
described in Section 13.
The transactions under this Plan are intended to comply with
Rule 16b-3, and the Company may, but shall not be required to, submit
any proposed Plan amendment to the voting shareholders of the Company
for their approval to assure continued compliance if such amendment
would, with respect to Reporting Persons, (i) materially increase the
benefits accruing under the Plan, (ii) materially increase the number
of securities which may be issued under the Plan or (iii) materially
modify the requirements as to eligibility for participation in the
Plan.
16. Risk of Stock Ownership. The Participant assumes all
risks inherent in the ownership of any Common Stock purchased under
the Plan, whether or not actual stock certificates therefor have been
issued to the Participant. A Participant has no guarantee against a
decline in the price or value of the Common Stock and the Company
assumes no obligation for repurchase of the Participant's Common Stock
purchased under the Plan. A Participant has all the rights of any
other holder of Common Stock with respect to the shares of Common
Stock issued to him under the Plan.
17. Liability of the Company and Administrator. Neither
the Company nor the Administrator shall be liable for any acts done in
good faith or any good faith omission to act, nor shall they be liable
in any event for any claims of liability (a) with respect to the
prices at which Common Stock is purchased for a Participant's Account
and the time which such purchases are made, (b) for any fluctuation in
the market value before or after purchase of Common Stock, (c) for
continuation of a Participant's Account until administratively
feasible to give effect to any notices described herein or (d) with
respect to any tax liability incurred by a Participant in connection
with the Participant's participation in the Plan.
18. Federal Income Taxes. The Administrator shall make
such tax reports to the Internal Revenue Service, the Participants,
and otherwise as required by law.
19. Correspondence. All correspondence and notices to the
Company and Administrator (which shall be effective when actually
received) shall, at the election of the Participant, be hand-delivered
or mailed, postage pre-paid, to either the Director of Human Resources
of the Company or Company subsidiary by which they are employed, or
the Director of Shareholder Services, WLR Foods, Inc., P.O. Box 7000,
Broadway, Virginia 22815-7000.
All correspondences and notices to Participants may, at the
election of the Company or Administrator, (i) be delivered by desktop
delivery, sent by Company mail, or posted in designated places for
employee communication, (ii) be mailed, postage pre-paid, to the
address shown on the Participant's Enrollment Form or such new address
as the Participant provides in writing to the Administrator.
20. Miscellaneous.
(a) General. Except as expressly provided herein, a
Participant shall have no right to draw checks or drafts against his
Participant's Account or to instruct the Administrator to perform any
acts not expressly provided for herein. This Plan shall be governed
by the laws of the Commonwealth of Virginia except to the extent
superseded by federal law.
(b) Rule 16b-3. With respect to any Participant who is a
Reporting Person, transactions under the Plan are intended to comply
with Rule 16b-3. To the extent any provision of the Plan or any
action by a person acting under the Plan fails to so comply, it shall
be deemed null and void to the extent permitted by law and deemed
advisable by the Administrator.
IN WITNESS WHEREOF, the Company has caused this Plan to be
executed on its behalf by its officer duly authorized, as of this
_____ day of ______________________, 1994.
WLR FOODS, INC.
By: ____________________________
Its: ____________________________
19924
EXHIBIT B
WLR FOODS, INC.
POULTRY PRODUCER
STOCK PURCHASE PLAN
1. Establishment of Plan. WLR Foods, Inc. (the "Company,"
which term includes subsidiaries of the Company unless the context
otherwise requires) hereby adopts the WLR Foods, Inc. Poultry Producer
Stock Purchase Plan (the "Plan") to be effective on August 30,
1994, or as soon thereafter as the Company can reasonably complete
registration under federal and state securities laws of shares of its
common stock, no par value (Common Stock) for offer and sale under the
Plan.
2. Purpose. The purpose of the Plan is to provide eligible
poultry producers having contracts with the Company a convenient means
to acquire shares of Common Stock through contract payment
withholdings and as otherwise described herein. The Plan is
established as a "non-qualified" stock purchase plan and, as such, is
not qualified under Section 401(a) of the Internal Revenue Code.
Transactions under this Plan are intended to be exempt under new Rule
16b-3, or its successor (Rule 16b-3), promulgated pursuant
to the Securities Exchange Act of 1934 (the Exchange Act), and, to
that end (i) this Plan shall be submitted for approval by the voting
shareholders of the Company at the next annual meeting of
shareholders, and (ii) this Plan provides for broad-based employee
participation and does not discriminate in favor of highly compensated
individuals.
3. The Administrator. The Company's Director of Shareholder
Services, (the Administrator), shall administer the Plan as described
herein. For each eligible poultry producer participating in the Plan
(Participant), the Administrator will establish an individual account
which will reflect the number of shares of Common Stock in such
account, including fractions computed to five decimal places, and cash
to be invested (Participant's Account). The Administrator shall
arrange for the custody of stock certificates, maintain ongoing
records, maintain and circulate Plan information to employees, send
Statements of Accounts (as hereinafter defined) to Participants, and
perform other administrative duties relating to the Plan. Further,
the Administrator shall establish certain administrative procedures
which may be modified from time to time without a formal amendment to
the Plan. Any question or issue of interpretation arising under the
Plan shall be resolved by the Administrator.
4. The Independent Agent. The Company shall retain a
broker-dealer registered under the Exchange Act of the 1934 (the
Exchange Act) to act as an agent of the Company in the open market
purchases of Common Stock under the Plan (Independent Agent).
5. Eligibility and Participation.
(a) Eligibility. The Plan is available to all poultry
producers having a current grower contract with the Company. If a
Participant withdraws from the Plan pursuant to the provisions hereof,
such producer may rejoin the Plan at any time by completing the steps
required for participation as described in subparagraph (b) of this
Section 5. Notwithstanding anything in this Plan to the
contrary, with respect to Participants who are "reporting persons"
under Section 16 of the Exchange Act (Reporting Persons), the
following eligibility restrictions apply: (i) upon receipt of a
Reporting Person's request for issuance of stock certificates for Plan
shares held on his behalf as described in Section 11; (ii) upon
receipt of a Reporting Person's notice of withdrawal from the Plan as
described in Section 12; or (iii) upon termination of a Reporting
Person's contract as described in Section 13, all withholdings by the
Participant and purchases by the Administrator or Independent Agent
under the Plan (except dividend reinvestment, if applicable) on behalf
of such Reporting Person shall cease until six months have elapsed
from the date of such stock issuance, withdrawal or termination.
(b) Participation. An eligible producer may participate in
the Plan by completing and returning to the Administrator a payment
withholding form in a format approved from time to time by the
Administrator (Enrollment Form). A producer will become a Participant
in the Plan as soon as administratively feasible following the
Company's receipt of his Enrollment Form. All withholdings shall be
rounded to whole-dollar amounts, and will be credited to such
Participant's account. The Participant shall indicate, on its
Enrollment Forms, that percentage of his contract payments he wishes
to have withheld; provided, however, that the maximum number of shares
that may be purchased with such withholdings in any calendar year
shall be $25,000 fair market value, exclusive of any discount. A
Participant may change the amount of his authorized withholding,
subject to the foregoing, by completing a new Enrollment Form which
shall be effective as soon as administratively feasible following the
Company's receipt of such Form. However, a Participant may not make
any additional payments to his account.
(c) Miscellaneous. No interest will be paid on funds held
by the Company pending investment.
6. Stock Purchases.
(a) Grant of Options. On each contract payment date, a
participating producer shall be deemed to have been granted an option
to purchase a maximum number of shares of stock of the Company equal
to an amount determined as follows: 1) the amount the producer has
elected to have withheld, divided by 2) a percentage of the market
value which shall be set by the Company from time to time, but which
in no event shall be less than 85% (the "Purchase Discount"). Market
Value shall be determined as provided in Paragraphs (d) and (e) below,
of stock of the Company on the last day of such pay period.
(b) Exercise of Options. Unless a Participant withdraws
from the Plan as provided in Section 12, such Participant's option to
purchase shares will be exercised automatically during the Investment
Period or on the Investment Date (both as hereinafter defined) as the
case may be, and the maximum number of shares subject to such option,
computed to five decimal places, will be purchased for such
Participant at the applicable option price with the accumulated
payment withholdings and cash dividends (credited pursuant to Section
7 herein) in such Participant's account. During a Participant's
lifetime, a Participant's option to purchase shares hereunder is
exercisable only by such Participant. Any cash balance remaining in a
Participant's account after the exercise of the options granted herein
will be carried forward in the Participant's account for the purchase
of Common Stock during the next Investment Period or on the next
Investment Date, as the case may be, unless the Participant withdraws
from the Plan as provided in Section 12 herein. The shares of Common
Stock purchased upon exercise of an option hereunder shall be credited
to the Participant's account under the Plan and shall be deemed to be
transferred to the Participant on the date such shares are purchased
and, except as otherwise provided herein, the Participant shall have
all rights of a stockholder with respect to such shares. Each full
share of Common Stock allocated to a Participant's Account shall
be completely vested in the Participant. However, the Common Stock
may be held in the name of the Plan, the Administrator, or the
Administrator's nominee.
(c) Purchases of Stock. The Company will have sole discretion as
to whether Common Stock purchased under the Plan will be purchased in
the open market by the Independent Agent or purchased directly from
the Company from authorized but unissued shares. The Administrator
will notify the Independent Agent prior to the commencement of the
Investment Period (as hereinafter defined) if shares are to be
purchased for the Plan in the open market. The proceeds of any
purchase of authorized but unissued shares will be used by the Company
for general Company purposes. For all purposes under this Plan, in
the event that a date on which a stock price is to be determined by
reference to the National Association of Securities Dealers Automated
Quotations National Market System NASDAQ/NMS) is not a trading date,
the stock price shall be determined by reference to NASDAQ/NMS
quotations as of the last trading date preceding such date.
(d) Open Market Purchases. If Common Stock is to be
purchased in the open market, the Independent Agent shall purchase the
stock during a period beginning the first Friday following the end of
the Company's calendar month and ending five (5) trading days
thereafter, or such longer period as may be necessary to satisfy
requirements of Rule 10b-18 of the Exchange Act, if applicable (the
Investment Period). Open market purchases will be made at the lowest
current independent offer quotation reported by NASDAQ/NMS. In all
other respects, open market purchases shall be made in such manner as
the Independent Agent in its sole discretion determines. For open
market transactions, the Participants' option price per share will be
the Purchase Discount times the weighted average price, excluding
brokerage commissions, paid by the Independent Agent for all shares
purchased during the Investment Period. Any excess of the actual
purchase price over the Participant's option price per share shall be
paid by the Company.
(e) Purchase of New Issue Shares. If the Administrator so
decides, new issue Common Stock shall be purchased for the Plan
directly from the Company on the first Friday following the end of the
Company's calendar month (Investment Date). The price of such new
issue stock shall be the Purchase Discount times the average of the
closing bid and ask prices of the Common Stock as quoted by NASDAQ/NMS
on the Investment Date. If shares are purchased both in the open
market and directly from the Company, the price will be the Purchase
Discount times the weighted average price (as described in
subparagraphs (d) and (e) of this Section 6) of all shares.
7. Dividend Reinvestment. Cash dividends received on shares of
Common Stock purchased under the Plan will be applied to the purchase
of additional shares during the Investment Period or on the Investment
Date, as the case may be, next following the payment of dividends by
the Company. Cash dividends will be reinvested at the prices
described in subparagraphs (d) and (e) of Section 6. Any stock
dividends or shares issued pursuant to any stock split with respect to
the shares of Common Stock held in a Participant's Account will be
credited to the Participant's Account on a proportionate basis.
8. Voting Rights. The Administrator will not vote Common Stock
held for a Participant's Account. A Participant will have all rights
of a shareholder as soon as there are shares of Common Stock (whole or
fractional) credited to the Participant's Account. Proxy materials
will be forwarded to each Participant of record to be voted at his
discretion, and all other communications from the Company to its
shareholders will be forwarded to each Participant.
9. Expenses. The Company will bear the expense of
administering the Plan and all fees, including brokerage commissions,
of the Independent Agent in connection with its purchase of shares of
Common Stock, as well as the purchase price discount in the event
shares are purchased on the open market.
10. Reports to Participants. The Administrator will render a
quarterly Statement of Account to each Participant no later than
fifteen (15) business days after the end of the Investment Period or
Investment Date, as the case may be, next following the fiscal quarter
to which the Statement of Accounts relates. Such statement will show
the following information for the quarter:
(a) Total amount invested by the Administrator;
(b) Shares of Common Stock allocated to the Participant's
Account;
(c) The cost per share of allocated Common Stock;
(d) The number of shares of Common Stock for which
certificates have been issued, if any; and
(e) The beginning and ending balances in the Participant's
Account.
11. Delivery of Stock. Except as otherwise provided in this
Section 11, a stock certificate will be issued to a Participant for
any or all full shares of Common Stock in the Participant's Account as
soon as administratively feasible following the Company's receipt
of the Participant's written request therefor. Automatic
reinvestments of dividends will continue with respect to any remaining
shares or fraction of share of Common Stock in the Participant's
Account as long as the Participant has not withdrawn from the Plan as
described in Section 12 herein. If the Participant has withdrawn from
the Plan, or subsequently withdraws from the Plan, automatic
reinvestment of dividends will continue only if one or more whole
shares of Common Stock remains in the Participant's Account;
otherwise, the Participant will be deemed terminated and his Account
will be closed as described in Section 13 herein.
Withdrawals may not be made prior to two (2) years from the
date on which such shares were purchased, or upon approval by the
Administrator, in the Administrator's sole discretion. Shares of
Common Stock received upon stock dividends or stock splits shall
be treated as having been purchased on the purchase date of the share
to which they relate.
12. Withdrawal from Plan. A Participant may withdraw from the
Plan by ceasing contract payment withholdings made on his behalf
pursuant to a written notice of withdrawal in a format approved from
time to time by the Administrator (Withdrawal Form). Withdrawal shall
be deemed to have occurred as soon as is administratively feasible for
the Company to effect the withdrawal following the Company's receipt
of the Withdrawal Form. Any funds held for investment on behalf of a
withdrawing Participant as of the date of his withdrawal shall be
invested on his behalf at the next Investment Period or Investment
Date, as the case may be. At the election of the Participant
appropriately noted on the Withdrawal Form, a withdrawing Participant
may elect to have issued to him a stock certificate for any or all
full shares of Common Stock in the Participant's Account, subject to
the restrictions set forth in Section 11. Automatic reinvestment of
dividends will continue with respect to any shares of Common Stock not
withdrawn by the Participant notwithstanding his status as a withdrawn
Participant; provided, however, that if only a fraction of a share
remains in the Participant's Account, the withdrawn Participant will
be deemed terminated and his Account will be closed as described in
Section 13 herein.
13. Termination. Upon termination of a producer's contract for
any reason, whether by voluntary or involuntary termination, death or
disability, a Participant will be deemed terminated from the Plan.
Any funds held for investment on behalf of a terminated Participant as
of the date of termination shall be invested on his behalf at the next
Investment Period or Investment Date, as the case may be. A stock
certificate for all of the full shares of Common Stock in the
terminated Participant's Account which have satisfied the two-year
holding requirement shall be issued to the Participant, and a
certificate for all remaining full shares shall be delivered to the
Participant within two years from the date such shares were purchased.
Certificates for fractional shares will not be issued; rather, a
cash adjustment will be made for any fraction of a share based on the
closing bid and ask prices of Common Stock as quoted by NASDAQ/NMS on
the termination date.
14. Transferability. Neither contract payment withholdings
credited to a Participant's Account, nor any rights with regard to the
exercise of an option or to receive stock under the Plan may be
assigned, transferred, pledge or otherwise disposed of in any
way by the Participant other than by will or by the laws of descent
and distribution. Any such attempted assignment, transfer, pledge or
other disposition shall be without effect, except that the Company may
treat such act as an election to withdraw funds as provided in the
preceding paragraph.
15. Amendment and Termination of the Plan. The Company reserves
the right to suspend, modify or terminate the Plan at any time.
Further, the Company shall have the right to change the purchase price
discount, but may not change such discount to less than 85% of the
fair market value. The Participants shall be given notice of the same
as soon as possible following such suspension, modification or
termination. No suspension, modification or termination will affect
any Participant's interest in the Plan which has accrued prior to the
date of the same. In the event of the termination of the Plan, the
Administrator will make a distribution of Common Stock and cash as if
each Participant had been terminated, described in Section 13. The
transactions under this Plan are intended to comply with Rule 16b-3,
and the Company may, but shall not be required to, submit any proposed
Plan amendment to the voting shareholders of the Company for their
approval to assure continued compliance if such amendment would, with
respect to Reporting Persons, (i) materially increase the benefits
accruing under the Plan, (ii) materially increase the number of
securities which may be issued under the Plan or (iii) materially
modify the requirements as to eligibility for participation in the
Plan.
16. Risk of Stock Ownership. The Participant assumes all risks
inherent in the ownership of any Common Stock purchased under the
Plan, whether or not actual stock certificates therefor have been
issued to the Participant. A Participant has no guarantee against a
decline in the price or value of the Common Stock and the Company
assumes no obligation for repurchase of the Participant's Common Stock
purchased under the Plan. A Participant has all the rights of any
other holder of Common Stock with respect to the shares of Common
Stock issued to him under the Plan.
17. Liability of the Company and Administrator. Neither the
Company nor the Administrator shall be liable for any acts done in
good faith or any good faith omission to act, nor shall they be liable
in any event for any claims of liability (a) with respect to the
prices at which Common Stock is purchased for a Participant's Account
and the time which such purchases are made, (b) for any fluctuation in
the market value before or after purchase of Common Stock, (c) for
continuation of a Participant's Account until administratively
feasible to give effect to any notices described herein or (d) with
respect to any tax liability incurred by a Participant in connection
with the Participant's participation in the Plan.
18. Federal Income Taxes. The Administrator shall make such tax
reports to the Internal Revenue Service, the Participants, and
otherwise as required by law.
19. Correspondence. All correspondence and notices to the
Company and Administrator (which shall be effective when actually
received) shall be hand-delivered or mailed, postage pre-paid, to the
Director of Shareholder Services, WLR Foods, Inc., P.O. Box 7000,
Broadway, Virginia 22815-7000.
All correspondences and notices to Participants may, at the
election of the Company or Administrator, (i) be delivered by desktop
delivery, sent by Company mail, or posted in designated places for
producer communication, (ii) be mailed, postage pre-paid, to the
address shown on the Participant's Enrollment Form or such new address
as the Participant provides in writing to the Administrator.
20. Miscellaneous.
(a) General. Except as expressly provided herein, a
Participant shall have no right to sell, assign, encumber or otherwise
dispose of his rights in his Participant's Account. A Participant
shall have no right to draw checks or drafts against his Participant's
Account or to instruct the Administrator to perform any acts not
expressly provided for herein. This Plan shall be governed by the
laws of the Commonwealth of Virginia except to the extent superseded
by federal law.
(b) Rule 16b-3. With respect to any Participant who is a
Reporting Person, transactions under the Plan are intended to comply
with Rule 16b-3. To the extent any provision of the Plan or any
action by a person acting under the Plan fails to so comply, it shall
be deemed null and void to the extent permitted by law and deemed
advisable by the Administrator.
IN WITNESS WHEREOF, the Company has caused this Plan to be
executed on its behalf by its officer duly authorized, as of this
day of _________________, 1994.
WLR FOODS, INC.
By: _________________________________
Its: ________________________________
20704
Exhibit C
PROPOSED ARTICLE TWO, SECTION ONE OF THE ARTICLES
OF INCORPORATION OF WLR FOODS, INC.
ARTICLE TWO
Capital Stock
Section One. Authorized Shares. The total number
of shares of all classes of capital stock which the
Corporation shall have authority to issue is two hundred fifty
million (250,000,000), divided into fifty million (50,000,000)
shares of preferred stock without par value, one hundred
million (100,000,000) shares of Class A Common Stock, no par
value (Class A Common Stock), and one hundred million
(100,000,000) shares of Class B Common Stock, no par value
(Class B Common Stock).
Upon the Articles of Amendment of the Articles of
Incorporation becoming effective pursuant to the Virginia
Stock Corporation Act (the Effective Time), and without any
further action on the part of the Corporation or its
shareholders, each whole share of the Corporation's Common
Stock, no par value (the Old Common Stock), then issued
(including shares held in the treasury of the Corporation)
shall automatically be reclassified, changed and converted
into one fully paid and nonassessable share of Class A Common
Stock and certificates previously representing shares of Old
Common Stock shall be deemed to represent the same number of
shares of Class A Common Stock.
(a) Class A Common Stock and Class B Common Stock.
(1) The powers, preferences and rights of
the Class A Common Stock and the Class B Common Stock, and the
qualifications, limitations or restrictions thereof, shall be
in all respects identical, except as otherwise required by law
or expressly provided in this Articles of Incorporation, as
amended.
(2)(i) At each annual or special
meeting of shareholders, each holder of Class A Common Stock
shall be entitled to one (1) vote in person or by proxy for
each share of Class A Common Stock standing in his name on the
stock transfer records of the Corporation in connection with
the election of directors and all other actions submitted to a
vote of shareholders. Each holder of Class B Common Stock
shall be entitled to one-tenth of one vote in person or by
proxy for each share of Class B Common Stock standing in his
name on the stock transfer records of the Corporation in
connection with the election of directors and all other
actions submitted to a vote of shareholders; except as
otherwise provided by this Articles of Incorporation, as
amended, and the Virginia Stock Corporation Act.
(ii) The holders of the Class B
Common Stock shall each be entitled to vote separately as a
class only with respect to (A) proposals to change the par
value of the Class B Common Stock, (B) other amendments to
this Articles of Incorporation that alter or change the
powers, preferences or special rights of the holders of
Class B Common Stock so as to affect them adversely, and
(C) such other matters as may require class voting under the
Virginia Stock Corporation Act.
(iii) The number of authorized shares
of Class B Common Stock may be increased or decreased (but not
below the number of shares then outstanding) by the
affirmative vote of the holders of a majority of the Class A
Common Stock.
(3) Dividends may be declared and paid to the
holders of the Class A Common Stock and the Class B Common
Stock in cash, property, or other securities of the
Corporation out of any net profits or net assets of the
Corporation legally available therefor. If and when dividends
on the Class A Common Stock and the Class B Common Stock are
declared payable from time to time by the Board of Directors,
whether payable in cash, in property or in shares of stock of
the Corporation, the holders of the Class A Common Stock and
the holders of the Class B Common Stock shall be entitled to
share equally, on a per share basis, in such dividends, except
that, dividends or other distributions payable on the Common
Stock in shares of Common Stock shall be made to all holders
of Common Stock and may be made (i) in shares of Class B
Common Stock to the record holders of Class A Common Stock and
to the record holders of Class B Common Stock, (ii) in shares
of Class A Common Stock to the record holders of Class A
Common Stock and in shares of Class B Common Stock to the
record holders of Class B Common Stock or (iii) in any other
authorized class or series of capital stock to the holders of
both classes of Common Stock.
(4)(i) All outstanding shares of Class
B Common Stock may be converted into shares of Class A Common
Stock on a share-for-share basis by the Board of Directors if,
as a result of the existence of the Class B Common Stock,
either the Class A Common Stock or Class B Common Stock is or
both are excluded from trading on the New York Stock Exchange,
the American Stock Exchange and all other principal national
securities exchanges then in use and is also excluded from
quotation on the National Association of Securities Dealers
Automated Quotation System (NASDAQ) and any other comparable
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national quotation system then in use.
(ii) All outstanding shares of Class B
Common Stock shall be converted into shares of Class A Common
Stock on a share-for-share basis if at any time the number of
outstanding shares of Class A Common Stock as reflected on the
stock transfer records of the Corporation falls below 10% of
the aggregate number of outstanding shares of Class A Common
Stock and of Class B Common Stock. For purposes of the
immediately preceding sentence, any shares of Common Stock
repurchased by the Corporation shall no longer be deemed
"outstanding" from and after the date of repurchase.
(iii) In the event of any conversion
of the Class B Common Stock pursuant to subdivision (4)(i) or
(4)(ii), certificates which formerly represented outstanding
shares of Class B Common Stock will thereafter be deemed to
represent a like number of shares of Class A Common Stock and
all authorized shares of Common Stock shall consist of only
Class A Common Stock.
(5)(i) If any person or group acquires
beneficial ownership of 30% or more of the then issued and
outstanding shares of Class A Common Stock after the Effective
Time (other than upon original issuance by the Corporation, by
operation of law, by will or the laws of descent and
distribution, by gift or by foreclosure of a bona fide loan),
and such person or group (a "Related Person") does not own an
equal or greater percentage of the Class B Common Stock
acquired after the record date for the first issuance of Class
B Common Stock (the "Distribution Date"), such person or group
must, within a 90-day period beginning the day after becoming
a Related Person, make a public tender offer in compliance
with all applicable laws and regulations to acquire additional
Class B Common Stock as provided in this subsection (5) of
Article Two, Section One (a "Minority Protection
Transaction").
(ii) In each Minority Protection
Transaction, the Related Person must make a public tender
offer to acquire that number of shares of Class B Common Stock
determined by (A) multiplying the percentage of outstanding
Class A Common Stock beneficially owned on such date and
acquired after the Effective Time by such Related Person by
the total number of shares of Class B Common Stock outstanding
on the date such person or group became a Related Person, and
(B) subtracting therefrom the total number of shares of Class
B Common Stock beneficially owned on such date and acquired
after the Distribution Date by such Related Person (including
shares acquired on such date at or prior to the time such
person or group became a Related Person). The Related Person
must acquire all of such shares validly tendered; provided,
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however, that if the number of shares of Class B Common Stock
tendered to the Related Person exceeds the number of shares
required to be acquired pursuant to the formula set forth in
this clause (ii), the number of shares of Class B Common Stock
acquired from each tendering holder shall be pro rata in
proportion to the total number of shares of Class B Common
Stock tendered by all tendering holders.
(iii) The offer price for any shares
of Class B Common Stock required to be purchased by the
Related Person pursuant to this provision shall be the greater
of (A) the highest price per share paid by the Related Person
for any share of Class A Common Stock in the six-month period
ending on the date such person or group became a Related
Person or (B) the highest bid price of a share of Class A
Common Stock or Class B Common Stock on the NASDAQ National
Market System (or such other exchange or quotation system as
is then the principal trading market for such shares) on the
date such person or group became a Related Person. For
purposes of clause (iv) below, the applicable date for the
calculations required by the preceding sentence shall be the
date on which the Related Person becomes required to engage in
a Minority Protection Transaction. In the event that the
Related Person has acquired Class A Common Stock in the six-
month period ending on the date such person or group becomes a
Related Person for consideration other than cash, the value of
such consideration per share of Class A Common Stock shall be
as determined in good faith by the Board of Directors.
(iv) A Minority Protection
Transaction shall also be required to be effected by any
Related Person that acquires beneficial ownership of the next
higher integral multiple of 5% (e.g., 35%, 40%, 45%, etc.) of
the outstanding shares of Class A Common Stock after the
Effective Time (other than upon issuance or sale by the
Corporation, by operation of law, by will or the laws of
descent and distribution, by gift, or by foreclosure of a bona
fide loan) if such Related Person does not then own an equal
or greater percentage of the shares of Class B Common Stock
acquired after the Distribution Date. Such Related Person
shall be required to make a public tender offer to acquire
that number of shares of Class B Common Stock prescribed by
the formula set forth in clause (ii) above, and must acquire
all shares validly tendered or a pro rata portion thereof, as
specified in said clause (ii), at the price determined
pursuant to clause (iii) above.
(v) If any Related Person fails to make
an offer required by this subsection (5) of Article Two,
Section One, or to purchase shares validly tendered and not
withdrawn (after proration, if any), such Related Person shall
not be entitled to vote any shares of Class A Common Stock
4
beneficially owned by such Related Person and acquired by such
Related Person after the Effective Time unless and until such
requirements are complied with or unless and until all shares
of Class A Common Stock causing such offer requirement to be
effective are no longer beneficially owned by such Related
Person.
(vi) The Minority Protection
Transaction requirement shall not apply to any increase in
percentage ownership of Class A Common Stock resulting solely
from a change in the total amount of Class A Common Stock
outstanding, provided that any acquisition after such change
which results in any person or group owning 30% or more of the
Class A Common Stock excluding, in the case of the numerator
but not of the denominator of the calculation of such
percentage, shares of Class A Common Stock held by such
Related Person immediately after the Effective Time, shall be
subject to any Minority Protection Transaction requirement
that would be imposed with respect to a Related Person
pursuant to this subsection (5) of Article Two, Section One.
(vii) All calculations with respect to
percentage ownership of issued and outstanding shares of
either class of Common Stock will be based upon the numbers of
issued and outstanding shares reported by the Corporation on
the last filed of (A) the Corporation's most recent annual
report on Form 10-K, (B) its most recent Quarterly Report on
Form 10-Q, or (C) if any, its most recent Current Report on
Form 8-K.
(viii) For purposes of this subsection
(5) of this Article Two, Section One, the term "person" means
a natural person, company, government, or political
subdivision, agency or instrumentality of a government, or
other entity. "Beneficial ownership" shall be determined
pursuant to Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended (the 1934 Act), or any
successor regulation. The formation or existence of a "group"
shall be determined pursuant to Rule 13d-5(b) under the 1934
Act or any successor regulation.
(6) Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or
involuntary, the remaining net assets of the Corporation shall
be distributed pro rata to the holders of the Class A Common
Stock and the Class B Common Stock in accordance with their
respective rights and interests.
(7) In the event of a merger or
consolidation of the Corporation with or into another entity
(whether or not the Corporation is the surviving entity), the
holders of Class B Common Stock shall be entitled to receive
5
the same per share consideration as the per share
consideration, if any, received by any holder of the Class A
Common Stock in such merger or consolidation.
(8) If the Corporation shall in any
manner split, subdivide or combine the outstanding shares of
Class A Common Stock or Class B Common Stock, the outstanding
shares of the other such class of Common Stock shall be
proportionally subdivided or combined in the same manner and
on the same basis as the outstanding shares of the other class
of Common Stock have been split, subdivided or combined.
(9) No holder of shares of Class A Common
Stock or Class B Common Stock shall, by reason of such
holding, have any preemptive right to subscribe to any
additional issue of stock of any class or series of the
Corporation or to any security of the Corporation convertible
into such stock.
(10) The Board of Directors shall have the
power to issue and sell all or any part of any class of stock
herein or hereafter authorized to such persons, firms,
associations or corporations, and for such consideration as
the Board of Directors shall from time to time, in its sole
discretion, determine, whether or not greater consideration
could be received upon the issue or sale of the same number of
shares of another class, and as otherwise permitted by law.
(11) The Board of Directors shall have the
power to purchase any class of stock herein or hereafter
authorized from such persons, firms, associations or
corporations, and for such consideration as the Board of
Directors shall from time to time, in its sole discretion,
determine, whether or not less consideration could be paid
upon the purchase of the same number of shares of another
class, and as otherwise permitted by law.
6
