October 3, 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 October 3, 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
1
<PAGE>
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.
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. If Tyson's shares are included as
opposing votes as to any of the proposals and the outcome would
vary from the actual vote taken excluding the Tyson shares, the
Company would resolve the voting rights issue prior to amending
the Articles of Incorporation or implementing the Amended and
Restated Employee Stock Purchase Plan and the Poultry Producer
Stock Purchase Plan as described herein. Therefore, the Company
will test the votes on each proposal as if Tyson's shares are
eligible, but voting against all proposals.
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. 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. For
the foregoing proposals, votes that are withheld and Broker
Shares that are not voted will not be included in determining the
number of votes cast, and therefore will have no effect in the
outcome of the proposals. For the following proposals,
abstentions will count as opposing votes. For the Articles of
Incorporation amendment proposals, if a quorum is established,
the proposals will be approved if they receive the affirmative
vote of a majority of all votes entitled to be cast on the
proposals.
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.
2
<PAGE>
<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.
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. Campbell 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 1,868,109<F16> 15.0%
executive 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.
3
<PAGE>
<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.
<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.
4
<PAGE
<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.
<F15>Includes 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.
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
5
<PAGE>
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.
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>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------
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, Chief Executive Officer
Vice Chairman of the Company until 1988
of the Board
Charles W. Wampler, Jr. 78 1984 Poultry and livestock farmer
Chairman of the Board
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Directors Continuing in Office
CLASS B DIRECTORS
(to serve until the 1995 annual meeting of shareholders)
<S> <C> <C> <C>
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>
<CAPTION>
CLASS C DIRECTORS
(to serve until the 1996 annual meeting of shareholders)
<S> <C> <C> <C>
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>
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 AcquisitionCorp.,
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.
7
<PAGE>
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.
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 Com-
mittee 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.
8
<PAGE>
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.
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
9
<PAGE>
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.
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 on
evaluations 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
10
<PAGE>
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.
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
$280,737,864 at the end of fiscal 1994.
Herman D. Mason
Charles L. Campbell
Charles W. Wampler, Jr.
Executive Compensation Committee Members
SUMMARY COMPENSATION
The Summary Compensation Table below contains
information concerning annual and long-term compensation provided
to the Company's Chief Executive Officer and the other four most
highly compensated executive officers of the Company for all
services rendered to the Company and its subsidiaries for the
fiscal years ending July 2, 1994, July 3, 1993 and June 27, 1992.
Messrs. Holler and Marshall first became executive officers in
fiscal year ended July 2, 1994. Accordingly, their compensation
is detailed beginning in that year.
11
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Other
Annual Compensation Compensation Compensation<F1>
---------------------------------------- ------------ ----------------
Name and Options
Principal Position Year Salary ($) 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
<CAPTION>
% 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
5% 10%
<S> <C> <C> <C> <C> <C> <C>
James L. Keeler 33,750 33.7% $30.0 7/3/99 $85,900 373,545
James L. Mason 14,500 14.5 30.0 7/3/99 36,905 160,486
V. Eugene Misner 7,500 7.5 30.0 7/3/99 19,088 83,010
Henry L. Holler 7,500 7.5 30.0 7/3/99 19,088 83,010
Kenneth D. Marshall 7,500 7.5 30.0 7/3/99 19,088 83,010
</TABLE>
12
<PAGE>
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
Value of
Unexercised
Number of In-The-Money
Unexercised Options<F1> at
Fiscal Fiscal
Shares Year-End (#) Year-End ($)
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
13
<PAGE>
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.
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 here
signs 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.
14
<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
15
<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.
16
<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
17
<PAGE>
Company stock. Participants have full voting rights and receive
all shareholder materials, including proxy statements and annual
reports.
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.
18
<PAGE>
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 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. The over-all effect of the
Proposals is to render the accomplishment of a merger or other
takeover more difficult, even if the terms of the transaction are
favored by a majority of the independent shareholders and these
terms represent a significant premium to the existing market
price. 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.
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
19
<PAGE>
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
20
<PAGE>
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.
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.
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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.
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.
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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.
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
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diluting the current voting power of existing shareholders. The
Board recognizes, however, that there may be some disadvantages
to shareholders resulting from the Amendment.
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.
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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
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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.
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.
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.
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<PAGE>
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 received an opinion from its counsel,
Wharton Aldhizer & Weaver, 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
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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.
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.
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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.
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.
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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
October 3, 1994
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Exhibit A
WLR FOODS, INC.
AMENDED AND RESTATED 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 and Restated Employee Stock Purchase Plan (the Plan),
effective on August 30, 1994, to be implemented by November 1,
1994, or as soon as administratively feasible.
2. Purpose. The purpose of the Plan is to provide
eligible employees of the Company a convenient means to acquire
shares of the Company's common stock, no par value (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
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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), valued at fair market
value, exclusive of any discount, (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 amount of a Participant's contribution shall be
subject to the limitations set forth in Section 6(a) above. 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 a 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. Subject to the limitations
set forth in Section 6(f), on the first Friday of each calendar
month (the Option 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
during the period beginning on the Option Date and ending on the
last Friday of the calendar month, divided by 2) a percentage of
the market value of the stock as of the Option Date, which
percentage shall be set by the Company from time to time but
which in no event shall be less than 85% (the Employee Purchase
Ratio). Market value shall be determined as provided in
Paragraphs (d) and (e) below.
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<PAGE>
(b) Exercise of Options. A 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 suchParticipant.
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 of
the calendar month and ending five (5) trading days thereafter,
or such longer period as may be necessary to satisfy the
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 Employee Purchase Ratio 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 of the calendar month (Investment Date). The price of
such new issue stock shall be the Employee Purchase Ratio times
3
<PAGE>
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 Employee Purchase Ratio times 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 option 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.
4
<PAGE>
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 reinvestment 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, except upon
the termination of a Participant's employment, 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 hereof may
be withdrawn by a Participant at any time prior to the expiration
of the period ending sixty (60) days after the date the Plan is
implemented. 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
implementation 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.
Notwithstanding the foregoing, a Participant's
payroll deductions may be suspended upon request or as provided
in Section 5(b). In such event, a Participant will not be deemed
terminated from the Plan provided at least one full share remains
in the Plan.
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 shall be issued to the Participant.
5
<PAGE>
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, pledged 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 Section 12.
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 Employee Purchase Ratio, but may not change such ratio
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.
6
<PAGE>
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.
7
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: ______________________________________
-8-<PAGE>
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) effective on August 30,
1994, to be implemented by November 1, 1994, or as soonthereafter
as is administratively feasible and 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 this Plan shall be submitted for
approval by the voting shareholders of the Company at the next
annual meeting of shareholders.
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 producers, 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
1
<PAGE>
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.
The Participant shall indicate, on his
Enrollment Form, that percentage of his contract payments he
wishes to have withheld; provided, however, that the maximum
amount of stock that may be purchased with such withholdings in
any calendar year shall be $25,000, valued at fair market value,
exclusive of any discount. In the case of a Participant who is
also a participant in the Company's Employee Stock Purchase Plan,
both plans shall be combined for purposes of the foregoing
limitation. All withholdings shall be rounded to whole-dollar
amounts, and will be credited to such Participant's account. 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. Subject to the limitations
set forth in Section 6(f), on the first Friday of each calendar
month (the Option 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
during the period beginning on the Option Date and ending on the
last Friday of the calendar month, divided by 2) a percentage of
the market value of the stock as of the Option Date, which
percentage shall be set by the Company from time to time but
which in no event shall be less than 85% (the Producer Purchase
Ratio) as of the Option Date. Market value shall be determined
as provided in Paragraphs (d) and (e) below.
(b) Exercise of Options. A 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.
2
<PAGE>
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 of
the calendar month and ending five (5) trading days thereafter,
or such longer period as may be necessary to satisfy the
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 Producer's
Purchase Ratio 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 of the calendar month (Investment Date). The price of
such new issue stock shall be the Producer's Purchase Ratio 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 Producer's Purchase Ratio times the
weighted average price (as described in subparagraphs (d) and (e)
of this Section 6) of all shares.
(f) Minimum Exercise Price. Notwithstanding the
foregoing, in no event shall the option 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.
3
<PAGE>
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 reinvestment 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.
4
<PAGE>
Withdrawals may not be made prior to two (2) years
from the date on which such shares were purchased, except upon
the termination of a Participant's contract 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
to have terminated participation and his account will be closed
as described in Section 13 herein.
Notwithstanding the foregoing, a Participant's
payment withholdings may be suspended upon request. In such
event, a Participant will not be deemed terminated from the Plan
provided at least one full share remains in the Plan.
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 shall be issued to the Participant.
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, pledged 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 Section 12.
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 Producer's Purchase Ratio, but may not change such
ratio 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.
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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 correspondence and notices to Participants
may, at the election of the Company or Administrator, (i) be
delivered, 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
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<PAGE>
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: _______________________________________
7
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 these 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<PAGE>
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 these 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.
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(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 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
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<PAGE>
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, 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
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<PAGE>
(after proration, if any), such Related Person shall not be
entitled to vote any shares of Class A Common Stock 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 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.
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<PAGE>
(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.
5
