September 30, 1994
Dear WLR Foods, Inc. Shareholder:
You are cordially invited to attend our annual meeting of
shareholders on Saturday, October 29, 1994, at 10:00 a.m. at Turner
Ashby High School, Bridgewater, Virginia. A map to the High School is
enclosed for your reference. Following the meeting, we will have a
buffet lunch featuring our products. If you plan to attend the
meeting, please sign and return the enclosed reply postcard.
Also enclosed in this mailing is formal notice of the meeting, a
proxy and a Proxy Statement detailing the matters upon which the
shareholders will act at the annual meeting. Our Company's Annual
Report for fiscal year ended July 2, 1994 is also enclosed.
We urge you to complete, date and sign the enclosed proxy, and
return it as soon as possible, even if you plan to attend the meeting.
You may use the enclosed postage prepaid envelope to return both your
reply postcard and the proxy.
On behalf of everyone at WLR Foods, I thank you for your
continued support. I look forward to seeing you at our annual
meeting.
Sincerely,
James L. Keeler
Chief Executive Officer
and President
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF WLR FOODS, INC.
The annual meeting of shareholders of WLR Foods, Inc. will be
held on Saturday, October 29, 1994, at 10:00 a.m. at Turner Ashby High
School, 800 N. Main Street, Bridgewater, Virginia, for the following
purposes:
1. To elect four Class A directors to serve until the annual
meeting of shareholders in 1997.
2. To ratify the appointment of KPMG Peat Marwick as
independent auditors for the fiscal year ending July 1,
1995.
3. To approve an Amended and Restated Employee Stock
Purchase Plan adopted by the Company effective August 30,
1994.
4. To approve a Poultry Producer Stock Purchase Plan adopted
by the Company effective August 30, 1994.
5. To amend the Company's Bylaws to narrow the range of the
number of directors of the Company to from 10 to
12 directors.
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
Septtember 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
PROXY STATEMENT
This Proxy Statement is furnished in connection with the
solicitation of proxies for use at the annual meeting of shareholders
of WLR Foods, Inc. (the Company) to be held Saturday, October 29,
1994, at 10:00 a.m. at Turner Ashby High School, 800 N. Main Street,
Bridgewater, Virginia, and at any adjournments thereof (the Annual
Meeting). The accompanying proxy is solicited by the Board of
Directors of the Company (the Board). The approximate mailing date of
this Proxy Statement and the accompanying proxy is September 30, 1994.
Our Company's Annual Report for fiscal year ended July 2, 1994 is
being mailed to the Company's shareholders concurrently with this
Proxy Statement but should not be considered proxy solicitation
material.
All properly executed proxies delivered pursuant to this
solicitation will be voted at the Annual Meeting according to the
instructions thereon. In the absence of such instructions, such
proxies will be voted "FOR" the proposals detailed herein. Any person
signing and mailing the enclosed proxy may revoke the proxy at any
time prior to the commencement of the Annual Meeting. For each
shareholder who is a participant in the Company's Dividend
Reinvestment and Stock Purchase Plan and/or Employee Stock Purchase
Plan, the accompanying white proxy covers the shares of Company common
stock in such shareholder's accounts, as well as shares registered in
the shareholder's name.
The cost of the solicitation of proxies will be paid by the
Company. Solicitations will be made by mail, except that, if
necessary, officers, directors and regular employees of the Company
and its affiliates may solicit proxies by telephone, facsimile or
other electronic means or by personal calls. The Company has retained
D.F. King & Co., Inc. to assist in the solicitation of proxies for a
fee of Three Thousand Five Hundred Dollars ($3,500.00) and
reimbursement of
-1-
<PAGE>
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. Pursuant to the
Virginia Control Share Acquisitions Statute (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 acquired or to be acquired in
connection with Tyson's attempt to buy the Company would have voting
rights. Tyson did not receive the requisite amount of shareholder
votes at that special meeting and the Company takes the position that
the shares now held by Tyson are not eligible to vote at the Annual
Meeting.
A majority of votes entitled to be cast on matters considered at
the Annual Meeting constitutes a quorum. If a share is represented
for any purpose at the Annual Meeting, it is deemed to be present for
purposes of establishing a quorum. Abstentions and shares held of
record by a broker or its nominee (Broker Shares) which are voted on
any matter are included in determining the number of votes present or
represented at the Annual Meeting. Conversely, Broker Shares that are
not voted on any matter will not be included in determining whether a
quorum is present. If a quorum is established, directors will be
elected by a plurality of the votes cast by shareholders at the Annual
Meeting. Votes that are withheld and Broker Shares that are not voted
in the election of directors will not be included in determining the
number of votes cast. For the ratification of the independent
auditors, and the approval of the Amended and Restated Employee Stock
Purchase Plan and the Poultry Producer Stock Purchase Plan to be
-2-
<PAGE>
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 Articles of Incorporation
amendment proposal, if a quorum is established, the proposal will be
approved if it receives the affirmative vote of a majority of all
votes entitled to be cast on the proposal For such proposals,
abstentions will count as opposing votes.
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%
Corporate Trust Administration
10th Floor
919 E. Main Street
Richmond, VA 23219
Trustee for Cuddy Farms, Inc.
______________________________________________________________________
[FN]
<F1> Based on 12,195,886 shares outstanding as of August 31, 1994 plus
271,782 shares which members of management have the option to
purchase within 60 days of August 31, 1994.
<F2> Shares held for the benefit of Cuddy Farms, Inc. pursuant to a
voting trust dated August 29, 1994, under the terms of which the
Trustee, Crestar Bank NA, is obligated to vote all shares in
accordance with the recommendation of the Board. In the absence
of a recommendation by the Board as to any proposal, the trustee
will vote as directed by Cuddy Farms, Inc. The Voting Trust,
subject to certain exceptions for early termination, terminates
on August 29, 1998.
-3-
<PAGE>
The following table sets forth the number and percentage of
shares of Company common stock held as of August 31, 1994 by each of
the Company's directors, each executive officer of the Company who was
required to be named in the Cash Compensation Table, and by all
directors and executive officers as a group.
______________________________________________________________________
Name Number Beneficially Owned Percent of Class<F1>
______________________________________________________________________
George E. Bryan 304,046<F2> 2.4%
Charles L. 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 executive
officers as a group 1,868,109<F16> 15.0%
(consisting of 17 persons,
including those
named above)
-4-
<PAGE>
[FN]
* Denotes percent ownership not exceeding 1% of the class of common
stock.
<F1> Based on 12,195,886 shares outstanding as of August 31, 1994 plus
271,782 shares which members of management have the option to
purchase within 60 days of August 31, 1994.
<F2> Includes 105,264 shares owned directly and 198,782 shares owned
by his wife. Mr. Bryan disclaims beneficial interest in the
shares held by his wife.
<F3> All shares owned directly.
<F4> Includes 33,418 shares owned directly, 9,328 shares owned by his
wife, 17,923 shares held as custodian for Mr. Custer's three
children, and 1,433 shares owned by his daughter who lives at Mr.
Custer's home. Mr. Custer disclaims beneficial interest in the
shares owned by his wife and daughter or held by him as
custodian.
<F5> All shares owned directly and through a self-directed retirement
account.
<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
-5-
<PAGE>
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 a
account, 17,998 shares owned jointly with his wife, 870 shares
owned by his wife through her self-directed retirement account,
225 shares owned by his son who lives in Dr. Misner's home, and
43,500 shares which Dr. Misner has the right to purchase within
60 days of August 31, 1994 through the exercise of options. Dr.
Misner disclaims beneficial ownership in the shares owned by his
wife and son.
<F14>Includes 121,350 shares owned directly and as general partner of
Wampler Land, 45,310 shares owned by his wife, 129,646 shares
held as trustee of the Charles W. Wampler, Sr. Family Trust, and
51,694 shares held as trustee of the Charles W. Wampler, Sr. C
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
-6-
<PAGE>
of Cuddy Farms, Inc. Pursuant to the Cuddy acquisition, the Company
agreed to appoint a Cuddy representative to the Board to serve until
the next annual shareholders' meeting, and the Board agreed to
nominate such representative for election by the shareholders at such
annual meeting.
The persons named as proxies in the accompanying form of proxy,
unless instructed otherwise, intend to vote for the election of each
of these nominees for directors. If any nominee should become
unavailable to serve, the proxy may be voted for the election of a
substitute nominee designated by the Board. The Board has no reason
to believe any of the nominees will be unable to serve if elected.
Any shareholder entitled to vote for the election of directors at
a meeting may nominate persons for election as directors only if
written notice of such shareholder's intent to make such nomination is
given, either by personal delivery or by United States mail, postage
prepaid, to Delbert L. Seitz, Secretary, WLR Foods, Inc., P. O. Box
7000, Broadway, Virginia 22815-7000, not later than (i) with respect
to an election to be held at an annual meeting of shareholders, 90
days in advance of such meeting, and (ii) with respect to any election
to be held at a special meeting of shareholders for the election of
directors, the close of business on the seventh day following the date
on which notice of such meeting is first given to shareholders. Each
such notice must set forth (i) the name and address of the shareholder
who intends to make the nomination and of the person or persons to be
nominated, (ii) a representation that such shareholder is a holder of
record of stock of the Company entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice, (iii) a description of all
arrangements or understanding between such shareholder and each
nominee and any other person or persons (naming such person or
persons) pursuant to which the nomination or nominations are to be
made by such shareholder, (iv) such other information regarding each
nominee proposed by such shareholder as would have been required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission if such nominee had been nominated
by the Board of Directors, and (v) the consent of each nominee to
serve as a director of the Company if elected. The chairman
-7-
<PAGE>
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.
______________________________________________________________________
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)
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
Vice Chairman Executive Officer of the
of the Board Company until 1988
Charles W. Wampler, Jr. 78 1984 Poultry and livestock
Chairman of the Board farmer
-8-
<PAGE>
Directors Continuing in Office
CLASS B DIRECTORS
(to serve until the 1995 annual meeting of shareholders)
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
President the Company since February
1988
CLASS C DIRECTORS
(to serve until the 1996 annual meeting of shareholders)
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
______________________________________________________________________
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. (Virginia Affiliated
Transactions Statute), and Article 14.1, Va. Code Sections 13.1-728 et
seq. (Virginia Control Share Acquisitions Statute), of the Virginia
Stock Corporation Act under the Virginia and United States
Constitutions. In response, on February 28, 1994, Tyson, joined later
-9-
<PAGE>
by WLR Acquisition Corp., filed counterclaims against the Company and
all directors except Peter A. W. Green. In their counterclaims, Tyson
and WLR Acquisition Corp. sought, among other things, to invalidate
the Company's Shareholder Protection Rights Plan and certain severance
agreements, and a declaratory judgment that the Virginia Affiliated
Transactions Statute, the Virginia Control Share Acquisitions Statute,
and other Virginia statutes, facially and as applied, are
constitutional 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 constitutionality of the
Virginia statutes. Trial for any remaining issues was scheduled for
September 12 - 15, 1994; however, those trial dates have been
released. The District Court will issue a final judgment in the
litigation based upon the written court record, as supplemented.
BOARD MEETINGS AND COMMITTEES
The Board met eighteen times during fiscal year ended July 2,
1994. Each director attended at least 75% of the aggregate of the
total number of Board meetings held while he was a director and the
total number of meetings held while he was a director by all
committees of the Board on which he served, except George E. Bryan who
has been ill. Nonmanagement directors of the Company received $2,000
for attending a regularly scheduled Board meeting and $500 for special
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
-10-
<PAGE>
the National Association of Securities Dealers, Inc. relating to
independent directors, and reviews, at least annually, all related
party transactions and potential conflicts of interest, recommending
appropriate action as needed.
The Company has a standing Nominating Committee which currently
consists of Stephen W. Custer, Calvin G. Germroth and William D.
Wampler. The Nominating Committee met once since last year's annual
meeting. The Nominating Committee proposes to the Board a slate of
director nominees and terms of office for such nominees for the Board
to consider in recommending to the Company's shareholders director
nominees for election. The Nominating Committee also proposes
nominees for Board appointment as vacancies occur and for Board
committee assignments and vacancies.
The Company has a standing Executive Compensation Committee which
currently consists of Charles L. Campbell, Herman D. Mason and Charles
W. Wampler, Jr. The Executive Compensation Committee met four times
since last year's annual meeting. The Executive Compensation
Committee determines the annual salary, bonus and other benefits of
the Chief Executive Officer and makes decisions relating to awards to
executive officers and other key personnel pursuant to the Company's
Long Term Incentive Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last fiscal year, the Executive Compensation Committee
consisted of Herman D. Mason, Charles L. Campbell and Charles W.
Wampler, Jr. As described in the following section entitled "Certain
Relationships and Related Transactions," Messrs. Campbell and Wampler
are contract growers for the Company. Additionally, Messrs. Mason and
Wampler were considered as employed by the Company until they resigned
in February, 1994.
-11-
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has always been fortunate to have directors who are
actively involved in, and knowledgeable about, the Company's
businesses. As a result, the Company has relationships with certain
directors and their families, which relationships are on the same
bases and terms as transactions with unrelated parties.
The following table identifies (i) amounts in excess of $60,000
paid by the Company to each of the directors, members of their
immediate family, and entities related to the directors who were
contract growers with the Company during fiscal year ended July 2,
1994, and (ii) amounts paid to directors who were contract growers if
such payments exceeded five percent of the director's gross revenues
for such activity during fiscal year ended July 2, 1994.
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
-12-
<PAGE>
During fiscal year ended July 2, 1994, the Company purchased,
either directly or through third-party suppliers, $270,164 of fuel oil
and propane from Franklin Oil Co., Inc., of which J. Craig Hott is a
director and minority shareholder. The prices and terms were
comparable to those of other oil companies in the area.
During fiscal year ended July 2, 1994, the Company paid $24,566
to Custer Associates, Inc., a consulting firm owned by Stephen W.
Custer, which assisted with the Company-wide quality control program.
The terms of this arrangement were competitive and fully disclosed to
the Board.
Charles W. Wampler, Jr. and William D. Wampler are brothers and
are uncles of Stephen W. Custer.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
Compensation Philosophy
The Executive Compensation Committee of the Company's Board of
Directors determines the annual salary, bonus and other benefits of
the Company's Chief Executive Officer and makes decisions relating to
stock option awards to executive officers and other key personnel
pursuant to the Company's Long Term Incentive Plan. The Company's
overall policy regarding executive compensation is to provide
competitive compensation packages that attract and retain qualified
executives and to reward its executives for financial and operating
results, annual and long-term, which enhance the value of
shareholders' investment in the Company.
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.
-13-
<PAGE>
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.
-14-
<PAGE>
During the first three years of option grants, all options were
granted at the market price prevailing at the time of the grant. For
different reasons, the option price has been established above the
market price in the last three years. In 1992, the Committee set the
price at the prior year-end market price rather than the then current
market price. The Committee believed that the prevailing market price
plus $3.38 was more reflective of the true value of the Company's
shares at that time. In 1993, the Company completed a public offering
of common stock priced at $22 in February and the Committee
established the option price in July at $22, even though the market
price on the grant date was $5 lower, or $17 per share. In 1994,
Tyson's tender offer was $30, so the Committee established the option
price at $30 instead of the 1994 year-end trading value of $25.50.
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
-15-
<PAGE>
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 on
the next page 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 $280,737,864 at the end of fiscal 1994.
Herman D. Mason
Charles L. Campbell
Charles W. Wampler, Jr.
Executive Compensation Committee Members
SUMMARY COMPENSATION
The Summary Compensation Table on the next page contains
information concerning annual and long-term compensation provided to
the Company's Chief Executive Officer and the other four most highly
compensated executive officers of the Company for all services
rendered to the Company and its subsidiaries for the fiscal years
ending July 2, 1994, July 3, 1993 and June 27, 1992. Messrs. Holler
and Marshall first became executive officers in fiscal year ended July
2, 1994. Accordingly, their compensation is detailed beginning in
that year.
-16-
<PAGE>
SUMMARY COMPENSATION TABLE
______________________________________________________________________
Long Term Other
Annual Compensation Compensation Compensation<F1>
__________________________ ___________ ____________
Name and Options
Principal Position Year Salary($) Bonus($) Awarded (#) ($)
______________________________________________________________________
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 H. 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.
-17-
<PAGE>
<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
<S>
<C> <C> <C> <C> <C> 5% 10%
James L. Keeler 33,750 33.7% $30.0 7/3/99 $85,900 373,545
James L. Mason 14,500 14.5 30.0 7/3/99 36,905 160,486
V. Eugene Misner 7,500 7.5 30.0 7/3/99 19,088 83,010
Henry H. Holler 7,500 7.5 30.0 7/3/99 19,088 83,010
Kenneth D. Marshall 7,500 7.5 30.0 7/3/99 19,088 83,010
______________________________________________________________________
</TABLE>
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
Value of
Unexercised
Number of In-The-Money
Unexercised Options<F1>at
Fiscal Fiscal
Shares Year-End (#) Year-End ($)
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 H. 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>
-18-
<PAGE>
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 16 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 H. Holler
and Kenny 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.
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 (as defined in the Severance Agreement) or Disability
(as defined in the Severance Agreement), or if he resigns for Good
Reason (as defined in the Severance Agreement) 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
-19-
<PAGE>
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.
-20-
<PAGE>
[Stock Price Performance Graph]
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
-21-
<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.
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
-22-
<PAGE>
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 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.
-23-
<PAGE>
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 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 is $25,000, valued at fair
market value, excluding any discount. For purposes of this
limitation, if any producer is also a participant in the Employee
Plan, all purchases under both plans will be combined. Stock
purchased by the Producer Plan is credited to producers' accounts, and
the dividends earned by such stock are automatically reinvested in
additional shares of Company stock. Participants have full voting
rights and receive all shareholder materials, including proxy
statements and annual reports.
-24-
<PAGE>
The Producer Plan is essentially the same as the Employee Plan.
However, tax-qualification is available under the Internal Revenue
Code only to employees. Accordingly, participants will recognize
ordinary income at the time the stock is purchased in the amount of
the difference between option price and the fair market value.
Similarly, the Company will be entitled to a deduction in the same
amount.
The Producer Plan is to be administered by the Company's Director
of Shareholder Services. The Administrator satisfies the Plan's
monthly requirement for stock with either open market purchases or
new-issue stock. Stock purchased on the open market is acquired at
prevailing market prices with participants paying a percentage of the
purchase price, but participants pay no brokerage commissions or
administrative expenses. New issue stock is acquired at a percentage
of the prevailing market price. The discount percentage will be
determined by the Board from time to time; the Board has established
the discount, effective upon implementation, at ninety percent (90%)
of fair market value.
A poultry producer's participation in the Producer Plan is
terminated upon termination of his contractual arrangement with the
Company. During the term of his contract, a poultry producer may
withdraw from and re-enroll in the Producer Plan at any time, and may
change his level of withholding subject to certain limits. Directors
who participate in the Producer Plan are subject to certain time
restrictions on withdrawals and re-enrollments, however.
The Board can amend any aspect of the Producer Plan, including
the purchase price discount, without shareholder approval, at any
time. No material amendments are currently contemplated, however.
Because the Producer Plan has not been approved by shareholders,
purchases under the Producer Plan are not exempt from Section 16(b) of
the Exchange Act of 1934 which requires directors and executive
officers to disgorge profits derived from Company stock transactions
within a six-month period. If the Company's shareholders ratify the
Producer Plan, purchases under the Producer Plan will be exempt from
Section 16(b), the "short swing profit" rule.
-25-
<PAGE>
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.
Each of Proposals Five through Seven has some independent
anti-takeover effect. In particular, Proposals Five and Six may
discourage potential acquirors, even those acquirors which are
attractive to certain shareholders, because their provisions would
operate to delay the purchaser's ability to obtain control of the
Board by generally requiring at least two annual meetings of
shareholders to effect a change in a majority of the members of the
Board. Adoption of those Proposals may also deter certain mergers,
tender offers or other takeover attempts which some or a majority of
holders of the Company's voting stock may deem to be in their best
interests. Finally, because the adoption of Proposals Five and Six
would make it more difficult to effect transactions involving the
Company without the Board's approval, it could result in increased
bargaining power in negotiating with a potential acquiror to negotiate
terms that are more favorable to management, which may or may no be in
the best interests of the Company's shareholders.
-26-
<PAGE>
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 currently, however, 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
-27-
<PAGE>
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.
The adoption of Proposal Five requires that any bylaw change be
approved by a two-thirds vote instead of a majority vote by the
shareholders unless two-thirds of the Board recommend such change to
the 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.
-28-
<PAGE>
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.
In the absence of a two-thirds vote of shareholders, a majority
of the Company's directors could not be removed until at least two
annual meetings of shareholders (instead of one) have occurred, unless
such removal was for cause and the requisite vote was obtained. 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 evaluate any proposal to gain control
of the Company and to assess alternatives, and thereby ensure that the
interests of all shareholders are protected.
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:
-29-
<PAGE>
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.
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.
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
-30-
<PAGE>
Incorporation of the Company in accordance with the Amendment. The
Amendment will be effective immediately upon acceptance of filing by
the Commission. The Board would then be free to issue Class B Common
Stock without any further action on the part of the shareholders.
The Board of the Company does not presently intend to authorize a
distribution of Class B Common Stock, however, the Board reserves the
right to make such a distribution if the Amendment is approved by
shareholders and filed. Shareholders should retain all certificates
which represent the Existing Common Stock since pursuant to the
Amendment such certificates will represent shares of Class A Common
Stock immediately upon the effectiveness of the Amendment without any
further action on the part of the holder or the Company.
Under the provisions of the Amendment, the currently outstanding
shares of Existing Common Stock would be reclassified as Class A
Common Stock and would continue to have their present rights, powers
and limitations. As more fully described below, the new Class B
Common Stock will have certain special characteristics. In
particular, the holders of Class B Common Stock as such will have
limited voting rights, as discussed more fully below, on matters
except as otherwise provided or required by law.
In general, the Amendment should enable the Company to provide
for its long-term growth through the issuance of Class B Common Stock
or other securities convertible into Class B Common Stock in future
financings or acquisitions, without significantly diluting the current
voting power of existing shareholders. The Board recognizes, however,
that there may be some disadvantages to shareholders resulting from
the Amendment.
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
-31-
<PAGE>
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 Six 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).
-32-
<PAGE>
After implementation of Proposal Six, 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.
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
-33-
<PAGE>
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
-34-
<PAGE>
consummation of an offer as required by the terms of Article Two,
Section One or until divestiture of the shares of Class A Common Stock
that triggered the offer requirement. Neither the Minority Protection
Transaction requirement nor the related penalty applies to any
increase in percentage ownership of Class A Common Stock resulting
solely from a change in the total amount of Class A Common Stock
outstanding.
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.
-35-
<PAGE>
After implementation of Proposal Six, 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 Six is in the best interests of the Company
and all of its shareholders. Proposal Six enables the Company to
issue additional Common Stock for financing and acquisition purposes
without significantly diluting the voting power of existing
shareholders. The Amendment should enable the Company to increase its
financial flexibility by providing the Company the ability to issue
additional shares of Class B Common Stock or other debt or equity
securities convertible into Class B Common Stock in acquisitions or in
public or private securities offerings, without significantly diluting
the voting power of existing shareholders.
The Board of Directors of the Company has given due consideration
to the Amendment and has determined that the adoption of the Amendment
would be in the best interests of the Company and its shareholders.
However, some shareholders may find the Amendment disadvantageous to
the extent that it favors long-term investors and may discourage
takeovers of the Company. Accordingly, the Board of Directors
suggests that each shareholder carefully read and review the
description of the Amendment and certain effects thereof which are set
forth below.
-36-
<PAGE>
Implementation of Proposal Six 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 Six 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 Six 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
-37-
<PAGE>
rights of the Class B Common Stock, subsequent issuances of the Class
B Common Stock will not have a significant affect on the voting power
of each holder of Existing Common Stock.
The Company has been advised by counsel that, in general, 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.
Since the Existing Common Stock will be reclassified as Class A
Common Stock with essentially the same rights, powers and limitations,
the redesignation is not an "offer," "offer to sell," "offer for sale"
or "sale" of a security within the meaning of Section 2(3) of the
Securities Act of 1933, as amended (the "Securities Act") and will not
involve the substitution of one security for another under Rule 145
thereunder. In addition, the authorization of the Class B Common
Stock as a stock dividend is not a "sale" of a security under the
Securities Act or Rule 145. Consequently, the Company has not
registered the Class A Common Stock or the Class B Common Stock under
the Securities Act.
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.
-38-
<PAGE>
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 Six is intended to comply with the
requirements of Rule 19c-4 (the "Rule") adopted in July, 1988 by the
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 Commission 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.
-39-
<PAGE>
The Commission 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 Commission 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 addition 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
Six is in the best interests of the Company and its shareholders, the
Board recognizes that implementation of Proposal Six may result in
certain disadvantages, including the following:
-40-
<PAGE>
Implementation of Proposal Six may affect the decision of certain
institutional investors that would otherwise consider investing in the
Existing Common Stock. The holding of lower-vote common stock may not
be permitted by the investment policies of certain institutional
investors.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL SEVEN.
SHAREHOLDER PROPOSALS
Shareholders are reminded that proposals of shareholders intended
to be presented at the Company's 1995 annual meeting must be received
by the Secretary of the Company, at its principal executive offices,
P. O. Box 7000, Broadway, Virginia 22815-7000, for inclusion in its
proxy statement relating to that meeting, by May 31, 1995.
Upon written request to the Secretary, at the address given on page
one, the Company shall provide shareholders, without charge, a copy of
the Company's annual report on Form 10-K for fiscal year ended July 2,
1994.
By Order of the Board of Directors
Delbert L. Seitz
Secretary
September 30, 1994
20300
Exhibit A
WLR FOODS, INC.
AMENDED EMPLOYEE STOCK PURCHASE PLAN
1. Establishment of Plan. WLR Foods, Inc. (the "Company,"
which term includes subsidiaries of the Company unless the context
otherwise requires) hereby adopts the WLR Foods, Inc. Amended Employee
Stock Purchase Plan (the "Plan"), effective on August 30, 1994, 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 Common Stock through payroll deductions and as otherwise described
herein. The Plan is established as a "qualified" employee stock
purchase plan and, as such, is intended to qualify under Sections
401(a) and 423 of the Internal Revenue Code. Transactions under this
Plan are intended to be exempt under new Rule 16b-3, or its successor
(Rule 16b-3), promulgated pursuant to the Securities Exchange Act of
1934 (the Exchange Act), and, to that end (i) this Plan shall be
submitted for approval by the voting shareholders of the Company at
the next annual meeting of shareholders, and (ii) this Plan provides
for broad-based employee participation and does not discriminate in
favor of highly compensated individuals.
3. The Administrator. The Company's Director of
Shareholder Services, in cooperation with the Human Resources
Department (the Administrator), shall administer the Plan as described
herein. For each eligible employee participating in the Plan
(Participant), the Administrator will establish an individual account
which will reflect the number of shares of Common Stock in such
account, including fractions computed to five decimal places, and cash
to be invested (Participant's Account). The Administrator shall
arrange for the custody of stock certificates, maintain ongoing
records, maintain and circulate Plan information to employees, send
Statements of Accounts (as hereinafter defined) to Participants, and
perform other administrative duties relating to the Plan. Further,
the Administrator shall establish certain administrative procedures
which may be modified from time to time without a formal amendment to
the Plan. Any question or issue of interpretation arising under the
Plan shall be resolved by the Administrator.
4. The Independent Agent. The Company shall retain a
broker-dealer registered under the Exchange Act of the 1934 (the
Exchange Act) to act as an agent of the Company in the open market
purchases of Common Stock under the Plan (Independent Agent).
5. Eligibility and Participation.
(a) Eligibility. Any employee who (1) has satisfied the
Company's ninety-day probationary period, and (2) is regularly
scheduled to work at least twenty (20) hours per week and at least
five (5) months per year shall be eligible to participate in the Plan.
Notwithstanding the foregoing, no employee shall be granted an option
under the Plan (1) if, immediately after the grant, such employee (or
any other person whose stock would be attributed to such employee
pursuant to Section 424(d) of the Internal Revenue Code) would own
stock and/or hold outstanding options to purchase stock possessing
five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any subsidiary or parent
of the Company, or (2) which permits such employee's right to purchase
stock under all employee stock purchase plans (as described in Section
423 of the Code) of the Company and any subsidiary of the Company to
accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000.00) of fair market value of such stock (determined at the
time such option is granted) for any calendar year in which such
option is outstanding at any time.
Further, with respect to Participants who are
"reporting persons" under Section 16 of the Exchange Act (Reporting
Persons), the following eligibility restrictions apply: (i) upon
receipt of a Reporting Person's request for issuance of stock
certificates for Plan shares held on his behalf as described in
Section 11; (ii) upon receipt of a Reporting Person's notice of
withdrawal from the Plan as described in Section 12; or (iii) upon
termination of a Reporting Person as described in Section 13, all
payroll deductions by the Participant and purchases by the
Administrator or Independent Agent under the Plan (except dividend
reinvestment, if applicable) on behalf of such Reporting Person shall
cease until six months have elapsed from the date of such stock
issuance, withdrawal or termination.
(b) Participation. An eligible employee may participate in
the Plan by completing and returning to the Administrator a payroll
deduction form in a format approved from time to time by the
Administrator (Enrollment Form). An employee will become a
Participant in the Plan as soon as administratively feasible following
the Company's receipt of his Enrollment Form.
All payroll deductions shall be in whole-dollar amounts, and
will be credited to such Participant's account under the Plan. The
minimum contribution that may be authorized by a Participant shall be
Five Dollars ($5.00) per week, and the 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 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.
(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 such Participant.
Any cash balance remaining in a Participant's account after
the exercise of the options granted herein will be carried forward in
the Participant's account for the purchase of Common Stock during the
next Investment Period or on the next Investment Date, as the case may
be, unless the Participant withdraws from the Plan as provided in
Section 12 herein.
The shares of Common Stock purchased upon exercise of an
option hereunder shall be credited to the Participant's account under
the Plan and shall be deemed to be transferred to the Participant on
the Exercise Date and, except as otherwise provided herein, the
Participant shall have all rights of a stockholder with respect to
such shares. Each share of Common Stock allocated to a Participant's
Account shall be completely vested in the Participant. However, the
Common Stock may be held in the name of the Plan, the Administrator,
or the Administrator's nominee.
(c) Purchases of Stock. The Company will have sole
discretion as to whether Common Stock purchased under the Plan will be
purchased in the open market by the Independent Agent or purchased
directly from the Company from authorized but unissued shares. The
Administrator will notify the Independent Agent prior to the
commencement of the Investment Period (as hereinafter defined) if
shares are to be purchased for the Plan in the open market. The
proceeds of any purchase of authorized but unissued shares will be
used by the Company for general Company purposes. For all purposes
under this Plan, in the event that a date on which a stock price is to
be determined by reference to the National Association of Securities
Dealers Automated Quotations National Market System (NASDAQ/NMS) is
not a trading date, the stock price shall be determined by reference
to NASDAQ/NMS quotations as of the last trading date preceding such
date.
(d) Open Market Purchases. If Common Stock is to be
purchased in the open market, the Independent Agent shall purchase the
stock during a period beginning the first Friday 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 option purchase price over the Participant's price per share
shall be paid by the Company.
(e) Purchase of New Issue Shares. If the Administrator so
decides, new issue Common Stock shall be purchased for the Plan
directly from the Company on the first Friday of the calendar month
(Investment Date). The price of such new issue stock shall be the
Employee 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 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 exercise price be less than the lower
of: (1) Eighty-five percent (85%) of the fair market value of the
stock at the time such option is granted, or (2) Eighty-five percent
(85%) of the fair market value of the stock at the time such stock is
purchased.
(g) Maximum Number of Shares. The maximum number of
shares which shall be reserved for sale under the Plan shall be
1,500,000, subject to adjustment upon changes in capitalization of the
Company.
7. Dividend Reinvestment. Cash dividends received on
shares of Common Stock purchased under the Plan will be applied to the
purchase of additional shares during the Investment Period or on the
Investment Date, as the case may be, next following the payment of
dividends by the Company. Cash dividends will be reinvested at the
prices described in subparagraphs (d) and (e) of Section 6. Any stock
dividends or shares issued pursuant to any stock split with respect to
the shares of Common Stock held in a Participant's Account will be
credited to the Participant's Account on a proportionate basis.
8. Voting Rights. The Administrator will not vote Common
Stock held for a Participant's Account. A Participant will have all
rights of a shareholder as soon as there are shares of Common Stock
(whole or fractional) credited to the Participant's Account. Proxy
materials will be forwarded to each Participant of record to be voted
at his discretion, and all other communications from the Company to
its shareholders will be forwarded to each Participant.
9. Expenses. The Company will bear the expense of
administering the Plan and all fees, including brokerage commissions,
of the Independent Agent in connection with its purchase of shares of
Common Stock, as well as the purchase price discount in the event
shares are purchased on the open market..
10. Reports to Participants. The Administrator will render a
quarterly Statement of Account to each Participant no later than
fifteen (15) business days after the end of the Investment Period or
Investment Date, as the case may be, next following the fiscal quarter
to which the Statement of Accounts relates. Such statement will show
the following information for the quarter:
(a) Total amount invested by the Administrator;
(b) Shares of Common Stock allocated to the Participant's
Account;
(c) The cost per share of allocated Common Stock;
(d) The number of shares of Common Stock for which certificates
have been issued, if any; and
(e) The beginning and ending balances in the Participant's
Account.
11. Delivery Except as otherwise provided in this Section 11,
a stock certificate will be issued to a Participant for any or all
full shares of Common Stock in the Participant's Account as soon as
administratively feasible following the Company's receipt of the
Participant's written request therefor. Automatic reinvestments of
dividends will continue with respect to any remaining shares or
fraction of share of Common Stock in the Participant's Account as long
as the Participant has not withdrawn from the Plan as described in
Section 12 herein. If the Participant has withdrawn from the Plan, or
subsequently withdraws from the Plan, automatic reinvestments of
dividends will continue only if one or more whole shares of Common
Stock remains in the Participant's Account; otherwise, the Participant
will be deemed terminated and his Account will be closed as described
in Section 13 herein.
Withdrawals may not be made prior to two (2) years from the
date on which such shares were purchased, 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 of 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. Certificates for fractional shares will
not be issued; rather, a cash adjustment will be made for any fraction
of a share based on the closing bid and ask prices of Common Stock as
quoted by NASDAQ/NMS on the termination date.
14. Transferability. Neither payroll deductions credited
to a Participant's Account, nor any rights with regard to the exercise
of an option or to receive stock under the Plan may be assigned,
transferred, pledge or otherwise disposed of in any way by the
Participant other than by will or by the laws of descent and
distribution. Any such attempted assignment, transfer, pledge or
other disposition shall be without effect, except that the Company may
treat such act as an election to withdraw funds as provided in the
preceding paragraph.
15. Amendment and Termination of the Plan. The Company
reserves the right to suspend, modify or terminate the Plan at any
time. Further, the Company shall have the right to change the
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.
19. Correspondence. All correspondence and notices to the
Company and Administrator (which shall be effective when actually
received) shall, at the election of the Participant, be hand-delivered
or mailed, postage pre-paid, to either the Director of Human Resources
of the Company or Company subsidiary by which they are employed, or
the Director of Shareholder Services, WLR Foods, Inc., P.O. Box 7000,
Broadway, Virginia 22815-7000.
All correspondences and notices to Participants may, at the
election of the Company or Administrator, (i) be delivered by desktop
delivery, sent by Company mail, or posted in designated places for
employee communication, (ii) be mailed, postage pre-paid, to the
address shown on the Participant's Enrollment Form or such new address
as the Participant provides in writing to the Administrator.
20. Miscellaneous.
(a) General. Except as expressly provided herein, a
Participant shall have no right to draw checks or drafts against his
Participant's Account or to instruct the Administrator to perform any
acts not expressly provided for herein. This Plan shall be governed
by the laws of the Commonwealth of Virginia except to the extent
superseded by federal law.
(b) Rule 16b-3. With respect to any Participant who is a
Reporting Person, transactions under the Plan are intended to comply
with Rule 16b-3. To the extent any provision of the Plan or any
action by a person acting under the Plan fails to so comply, it shall
be deemed null and void to the extent permitted by law and deemed
advisable by the Administrator.
IN WITNESS WHEREOF, the Company has caused this Plan to be
executed on its behalf by its officer duly authorized, as of this
_____ day of _______________________, 1994.
WLR FOODS, INC.
By: ______________________________________
Its: ______________________________________
19924
Exhibit B
WLR FOODS, INC.
POULTRY PRODUCER
STOCK PURCHASE PLAN
1. Establishment of Plan. WLR Foods, Inc. (the "Company,"
which term includes subsidiaries of the Company unless the context
otherwise requires) hereby adopts the WLR Foods, Inc. Poultry Producer
Stock Purchase Plan (the "Plan") effective on August 30, 1994, to be
implemented by November 1, 1994, or as soon thereafter 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 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 number of shares that may be
purchased with such withholdings in any calendar year shall be $25,000
fair market value, exclusive of any discount. 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.
The shares of Common Stock purchased upon exercise of an option
hereunder shall be credited to the Participant's account under the
Plan and shall be deemed to be transferred to the Participant on the
date such shares are purchased and, except as otherwise provided
herein, the Participant shall have all rights of a stockholder with
respect to such shares. Each full share of Common Stock allocated to a
Participant's Account shall be completely vested in the Participant.
However, the Common Stock may be held in the name of the Plan, the
Administrator, or the Administrator's nominee.
(c) Purchases of Stock. The Company will have sole discretion
as to whether Common Stock purchased under the Plan will be purchased
in the open market by the Independent Agent or purchased directly from
the Company from authorized but unissued shares. The Administrator
will notify the Independent Agent prior to the commencement of the
Investment Period (as hereinafter defined) if shares are to be
purchased for the Plan in the open market. The proceeds of any
purchase of authorized but unissued shares will be used by the Company
for general Company purposes. For all purposes under this Plan, in
the event that a date on which a stock price is to be determined by
reference to the National Association of Securities Dealers Automated
Quotations National Market System (NASDAQ/NMS) is not a trading date,
the stock price shall be determined by reference to NASDAQ/NMS
quotations as of the last trading date preceding such date.
(d) Open Market Purchases. If Common Stock is to be
purchased in the open market, the Independent Agent shall purchase the
stock during a period beginning the first Friday following the last
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 following the last
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 exercise price be less than the lower
of: (1) Eighty-five percent (85%) of the fair market value of the
stock at the time such option is granted, or (2) Eighty-five percent
(85%) of the fair market value of the stock at the time such stock is
purchased.
(g) Maximum Number of Shares. The maximum number of
shares which shall be reserved for sale under the Plan shall be
1,500,000, subject to adjustment upon changes in capitalization of the
Company.
7. Dividend Reinvestment. Cash dividends received on shares of
Common Stock purchased under the Plan will be applied to the purchase
of additional shares during the Investment Period or on the Investment
Date, as the case may be, next following the payment of dividends by
the Company. Cash dividends will be reinvested at the prices
described in subparagraphs (d) and (e) of Section 6. Any stock
dividends or shares issued pursuant to any stock split with respect to
the shares of Common Stock held in a Participant's Account will be
credited to the Participant's Account on a proportionate basis.
8. Voting Rights. The Administrator will not vote Common Stock
held for a Participant's Account. A Participant will have all rights
of a shareholder as soon as there are shares of Common Stock (whole or
fractional) credited to the Participant's Account. Proxy materials
will be forwarded to each Participant of record to be voted at his
discretion, and all other communications from the Company to its
shareholders will be forwarded to each Participant.
9. Expenses. The Company will bear the expense of
administering the Plan and all fees, including brokerage commissions,
of the Independent Agent in connection with its purchase of shares of
Common Stock, as well as the purchase price discount in the event
shares are purchased on the open market.
10. Reports to Participants. The Administrator will render a
quarterly Statement of Account to each Participant no later than
fifteen (15) business days after the end of the Investment Period or
Investment Date, as the case may be, next following the fiscal quarter
to which the Statement of Accounts relates. Such statement will show
the following information for the quarter:
(a) Total amount invested by the Administrator;
(b) Shares of Common Stock allocated to the Participant's
Account;
(c) The cost per share of allocated Common Stock;
(d) The number of shares of Common Stock for which
certificates have been issued, if any; and
(e) The beginning and ending balances in the Participant's
Account.
11. Delivery of Stock. Except as otherwise provided in this
Section 11, a stock certificate will be issued to a Participant for
any or all full shares of Common Stock in the Participant's Account as
soon as administratively feasible following the Company's receipt of
the Participant's written request therefor. Automatic reinvestments
of dividends will continue with respect to any remaining shares or
fraction of share of Common Stock in the Participant's Account as long
as the Participant has not withdrawn from the Plan as described in
Section 12 herein. If the Participant has withdrawn from the Plan, or
subsequently withdraws from the Plan, automatic reinvestment of
dividends will continue only if one or more whole shares of Common
Stock remains in the Participant's Account; otherwise, the Participant
will be deemed terminated and his Account will be closed as described
in Section 13 herein.
Withdrawals may not be made prior to two (2) years from the
date on which such shares were purchased, 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, pledge or otherwise disposed of in any way by
the Participant other than by will or by the laws of descent and
distribution. Any such attempted assignment, transfer, pledge or
other disposition shall be without effect, except that the Company may
treat such act as an election to withdraw funds as provided in the
preceding paragraph.
15. Amendment and Termination of the Plan. The Company reserves
the right to suspend, modify or terminate the Plan at any time.
Further, the Company shall have the right to change the 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.
The transactions under this Plan are intended to comply with Rule
16b-3, and the Company may, but shall not be required to, submit any
proposed Plan amendment to the voting shareholders of the Company for
their approval to assure continued compliance if such amendment would,
with respect to Reporting Persons, (i) materially increase the
benefits accruing under the Plan, (ii) materially increase the number
of securities which may be issued under the Plan or (iii) materially
modify the requirements as to eligibility for participation in the
Plan.
16. Risk of Stock Ownership. The Participant assumes all risks
inherent in the ownership of any Common Stock purchased under the
Plan, whether or not actual stock certificates therefor have been
issued to the Participant. A Participant has no guarantee against a
decline in the price or value of the Common Stock and the Company
assumes no obligation for repurchase of the Participant's Common Stock
purchased under the Plan. A Participant has all the rights of any
other holder of Common Stock with respect to the shares of Common
Stock issued to him under the Plan.
17. Liability of the Company and Administrator. Neither the
Company nor the Administrator shall be liable for any acts done in
good faith or any good faith omission to act, nor shall they be liable
in any event for any claims of liability (a) with respect to the
prices at which Common Stock is purchased for a Participant's Account
and the time which such purchases are made, (b) for any fluctuation in
the market value before or after purchase of Common Stock, (c) for
continuation of a Participant's Account until administratively
feasible to give effect to any notices described herein or (d) with
respect to any tax liability incurred by a Participant in connection
with the Participant's participation in the Plan.
18. Federal Income Taxes. The Administrator shall make such tax
reports to the Internal Revenue Service, the Participants, and
otherwise as required by law.
19. Correspondence. All correspondence and notices to the
Company and Administrator (which shall be effective when actually
received) shall be hand-delivered or mailed, postage pre-paid, to the
Director of Shareholder Services, WLR Foods, Inc., P.O. Box 7000,
Broadway, Virginia 22815-7000.
All correspondences and notices to Participants may, at the
election of the Company or Administrator, (i) be delivered, sent by
Company mail, or posted in designated places for producer
communication, (ii) be mailed, postage pre-paid, to the address shown
on the Participant's Enrollment Form or such new address as the
Participant provides in writing to the Administrator.
20. Miscellaneous.
(a) General. Except as expressly provided herein, a
Participant shall have no right to sell, assign, encumber or otherwise
dispose of his rights in his Participant's Account. A
Participant shall have no right to draw checks or drafts against his
Participant's Account or to instruct the Administrator to perform any
acts not expressly provided for herein. This Plan shall be governed
by the laws of the Commonwealth of Virginia except to the extent
superseded by federal law.
(b) Rule 16b-3. With respect to any Participant who is a
Reporting Person, transactions under the Plan are intended to comply
with Rule 16b-3. To the extent any provision of the Plan or any
action by a person acting under the Plan fails to so comply, it shall
be deemed null and void to the extent permitted by law and deemed
advisable by the Administrator.
IN WITNESS WHEREOF, the Company has caused this Plan to be
executed on its behalf by its officer duly authorized, as of this
______ day of_________________, 1994.
WLR FOODS, INC.
By: ______________________________________
Its: ______________________________________
20704
EXHIBIT C
PROPOSED ARTICLE TWO, SECTION ONE OF THE ARTICLES
OF INCORPORATION OF WLR FOODS, INC.
ARTICLE TWO
Capital Stock
Section One. Authorized Shares. The total number of shares
of all classes of capital stock which the Corporation shall have
authority to issue is two hundred fifty million (250,000,000), divided
into fifty million (50,000,000) shares of preferred stock without par
value, one hundred million (100,000,000) shares of Class A Common
Stock, no par value ("Class A Common Stock"), and one hundred million
(100,000,000) shares of Class B Common Stock, no par value ("Class B
Common Stock").
Upon the Articles of Amendment of the Articles of
Incorporation becoming effective pursuant to the Virginia Stock
Corporation Act (the "Effective Time"), and without any further action
on the part of the Corporation or its shareholders, each whole share
of the Corporation's Common Stock, no par value (the "Old Common
Stock"), then issued (including shares held in the treasury of the
Corporation) shall automatically be reclassified, changed and
converted into one fully paid and nonassessable share of Class A
Common Stock and certificates previously representing shares of Old
Common Stock shall be deemed to represent the same number of shares of
Class A Common Stock.
(a) Class A Common Stock and Class B Common Stock.
(1) The powers, preferences and rights of the Class A
Common Stock and the Class B Common Stock, and the qualifications,
limitations or restrictions thereof, shall be in all respects
identical, except as otherwise required by law or expressly provided
in this Articles of Incorporation, as amended.
(2)(i) At each annual or special meeting of
shareholders, each holder of Class A Common Stock shall be entitled to
one (1) vote in person or by proxy for each share of Class A Common
Stock standing in his name on the stock transfer records of the
Corporation in connection with the election of directors and all other
actions submitted to a vote of shareholders. Each holder of Class B
Common Stock shall be entitled to one-tenth of one vote in person or
by proxy for each share of Class B Common Stock standing in his name
on the stock transfer records of the Corporation in connection with
the election of directors and all other actions submitted to a vote of
shareholders; except as otherwise provided by this Articles of
Incorporation, as amended, and the Virginia Stock Corporation Act.
(ii) The holders of the Class B Common Stock shall
each be entitled to vote separately as a class only with respect to
(A) proposals to change the par value of the Class B Common Stock, (B)
other amendments to this Articles of Incorporation that alter or
change the powers, preferences or special rights of the holders of
Class B Common Stock so as to affect them adversely, and (C) such
other matters as may require class voting under the Virginia Stock
Corporation Act.
(iii) The number of authorized shares of Class B
Common Stock may be increased or decreased (but not below the number
of shares then outstanding) by the affirmative vote of the holders of
a majority of the Class A Common Stock.
(3) Dividends may be declared and paid to the holders of
the Class A Common Stock and the Class B Common Stock in cash,
property, or other securities of the Corporation out of any net
profits or net assets of the Corporation legally available therefor.
If and when dividends on the Class A Common Stock and the Class B
Common Stock are declared payable from time to time by the Board of
Directors, whether payable in cash, in property or in shares of stock
of the Corporation, the holders of the Class A Common Stock and the
holders of the Class B Common Stock shall be entitled to share
equally, on a per share basis, in such dividends, except that,
dividends or other distributions payable on the Common Stock in shares
of Common Stock shall be made to all holders of Common Stock and may
be made (i) in shares of Class B Common Stock to the record holders of
Class A Common Stock and to the record holders of Class B Common
Stock, (ii) in shares of Class A Common Stock to the record holders of
Class A Common Stock and in shares of Class B Common Stock to the
record holders of Class B Common Stock or (iii) in any other
authorized class or series of capital stock to the holders of both
classes of Common Stock.
(4)(i) All outstanding shares of Class B Common Stock may
be converted into shares of Class A Common Stock on a share-for-share
basis by the Board of Directors if, as a result of the existence of
the Class B Common Stock, either the Class A Common Stock or Class B
Common Stock is or both are excluded from trading on the New York
Stock Exchange, the American Stock Exchange and all other principal
national securities exchanges then in use and is also excluded from
quotation on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") and any other comparable national
quotation system then in use.
(ii) All outstanding shares of Class B Common Stock shall
be converted into shares of Class A Common Stock on a share-for-share
basis if at any time the number of outstanding shares of Class A
Common Stock as reflected on the stock transfer records of the
Corporation falls below 10% of the aggregate number of outstanding
shares of Class A Common Stock and of Class B Common Stock. For
purposes of the immediately preceding sentence, any shares of Common
Stock repurchased by the Corporation shall no longer be deemed
"outstanding" from and after the date of repurchase.
(iii) In the event of any conversion of the Class B Common
Stock pursuant to subdivision (4)(i) or (4)(ii), certificates which
formerly represented outstanding shares of Class B Common Stock will
thereafter be deemed to represent a like number of shares of Class A
Common Stock and all authorized shares of Common Stock shall consist
of only Class A Common Stock.
(5)(i) If any person or group acquires beneficial ownership
of 30% or more of the then issued and outstanding shares of Class A
Common Stock after the Effective Time (other than upon original
issuance by the Corporation, by operation of law, by will or the laws
of descent and distribution, by gift or by foreclosure of a bona fide
loan), and such person or group (a "Related Person") does not own an
equal or greater percentage of the Class B Common Stock acquired after
the record date for the first issuance of Class B Common Stock (the
"Distribution Date"), such person or group must, within a 90-day
period beginning the day after becoming a Related Person, make a
public tender offer in compliance with all applicable laws and
regulations to acquire additional Class B Common Stock as provided in
this subsection (5) of Article Two, Section One (a "Minority
Protection Transaction").
(ii) In each Minority Protection Transaction, the
Related Person must make a public tender offer to acquire that number
of shares of Class B Common Stock determined by (A) multiplying the
percentage of outstanding Class A Common Stock beneficially owned on
such date and acquired after the Effective Time by such Related Person
by the total number of shares of Class B Common Stock outstanding on
the date such person or group became a Related Person, and (B)
subtracting therefrom the total number of shares of Class B Common
Stock beneficially owned on such date and acquired after the
Distribution Date by such Related Person (including shares acquired on
such date at or prior to the time such person or group became a
Related Person). The Related Person must acquire all of such shares
validly tendered; provided, however, that if the number of shares of
Class B Common Stock tendered to the Related Person exceeds the number
of shares required to be acquired pursuant to the formula set forth in
this clause (ii), the number of shares of Class B Common Stock
acquired from each tendering holder shall be pro rata in proportion to
the total number of shares of Class B Common Stock tendered by all
tendering holders.
(iii) The offer price for any shares of Class B Common
Stock required to be purchased by the Related Person pursuant to this
provision shall be the greater of (A) the highest price per share paid
by the Related Person for any share of Class A Common Stock in the
six-month period ending on the date such person or group became a
Related Person or (B) the highest bid price of a share of Class A
Common Stock or Class B Common Stock on the NASDAQ National Market
System (or such other exchange or quotation system as is then the
principal trading market for such shares) on the date such person or
group became a Related Person. For purposes of clause (iv) below, the
applicable date for the calculations required by the preceding
sentence shall be the date on which the Related Person becomes
required to engage in a Minority Protection Transaction. In the event
that the Related Person has acquired Class A Common Stock in the
six-month period ending on the date such person or group becomes a
Related Person for consideration other than cash, the value of such
consideration per share of Class A Common Stock shall be as determined
in good faith by the Board of Directors.
(iv) A Minority Protection Transaction shall also be
required to be effected by any Related Person that acquires beneficial
ownership of the next higher integral multiple of 5% (e.g., 35%, 40%,
45%, etc.) of the outstanding shares of Class A Common Stock after the
Effective Time (other than upon issuance or sale by the Corporation,
by operation of law, by will or the laws of descent and distribution,
by gift, or by foreclosure of a bona fide loan) if such Related Person
does not then own an equal or greater percentage of the shares of
Class B Common Stock acquired after the Distribution Date. Such
Related Person shall be required to make a public tender offer to
acquire that number of shares of Class B Common Stock prescribed by
the formula set forth in clause (ii) above, and must acquire all
shares validly tendered or a pro rata portion thereof, as specified in
said clause (ii), at the price determined pursuant to clause (iii)
above.
(v) If any Related Person fails to make an offer
required by this subsection (5) of Article Two, Section One, or to
purchase shares validly tendered and not withdrawn (after proration,
if any), such Related Person shall not be entitled to vote any shares
of Class A Common Stock 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.
(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.
