WLR FOODS, INC.
--------------------------------------------------
October 2, 1995
Dear WLR Foods, Inc. Shareholder:
You are cordially invited to attend our annual meeting of
shareholders on Saturday, October 28, 1995 at 10:00 a.m. at Turner
Ashby High School, Bridgewater, Virginia. A map to the High School is
on the back of this proxy. 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 1, 1995 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 28, 1995, at 10:00 a.m. at Turner Ashby High
School, 800 N. Main Street, Bridgewater, Virginia, for the following
purposes:
1. To elect three Class B directors to serve until the annual
meeting of shareholders in 1998.
2. To ratify the appointment of KPMG Peat Marwick, LLP as
independent auditors for the fiscal year ending June 29,
1996.
3. To transact such other business as may properly come before
the meeting. The Board of Directors knows of no such
business at this time.
Only shareholders of record at the close of business on
September 1, 1995 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
(540) 896-7001
PROXY STATEMENT
This Proxy Statement is furnished in connection with the
solicitation of proxies for use at the annual meeting of shareholders
of WLR Foods, Inc. (the Company) to be held Saturday, October 28,
1995, at 10:00 a.m. at Turner Ashby High School, 800 N. Main Street,
Bridgewater, Virginia, and at any adjournments thereof (the Annual
Meeting). The accompanying proxy is solicited by the Board of
Directors of the Company (the Board). The approximate mailing date of
this Proxy Statement and the accompanying proxy is October 2, 1995.
Our Company's Annual Report for fiscal year ended July 1, 1995 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, Employee Stock Purchase Plan
and/or Poultry Producer Stock Purchase Plan, the accompanying blue
proxy covers the shares of Company common stock in such shareholder's
accounts, as well as shares registered in the shareholder's name.
The cost of the solicitation of proxies will be paid by the
Company. Solicitations will be made by mail, except that, if
necessary, officers, directors and regular employees of the Company
and its affiliates may solicit proxies by telephone, facsimile or
other electronic means or by personal calls. The Company has retained
D.F. King & Co., Inc. to assist in the solicitation of proxies for a
fee of Three Thousand Five Hundred Dollars ($3,500.00) and
reimbursement of expenses. Brokerage houses and nominees will be
requested to forward the proxy solicitation material to the beneficial
owners of WLR Foods stock held of record by such persons, and the
Company will reimburse them for their charges and expenses in this
regard.
OUTSTANDING SHARES AND VOTING RIGHTS
Only shareholders of record at the close of business on
September 1, 1995 will be entitled to vote at the Annual Meeting. As
of such date, the Company had outstanding 17,216,068 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 1, 1995, Tyson
Foods, Inc. and its affiliates (Tyson) own shares of WLR Foods stock
which were acquired as part of a plan to make a control share
acquisition as described in the Virginia Control Share Acquisitions
Statutes (the Control Share Statute). Pursuant to the Control Share
Statute, such shares have no voting rights unless voting rights are
granted by a resolution approved by a majority of votes entitled to be
cast by shareholders. Accordingly, Tyson requested that the Company
conduct a special meeting of shareholders which was held on May 21,
1994, for the sole purpose of determining whether the shares already
acquired and to be acquired in connection with Tyson's offer to buy
the Company would have voting rights. By failing to obtain a majority
of all votes entitled to be cast as to its proposal to receive voting
rights, Tyson's shares do not have voting rights until
<PAGE>
transferred to a transferee not engaged in a control share
acquisition. The Company takes the position that the shares now held
by Tyson are not eligible to vote at the annual meeting.
Tyson has challenged the constitutionality of the Control
Share Statute as part of legal proceedings more fully described below
in the Section entitled "Legal Proceedings". In addition, Tyson has
advised the Company that it believes it is entitled to vote its
shares, irrespective of the outcome of the pending legal proceedings
regarding the constitutionality of the Control Share Statute, because
it is not now engaged in a "control share acquisition." Should Tyson
ultimately prevail on this constitutional challenge, all of its shares
would have voting rights.
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, and
the proposal for the ratification of the independent auditors will be
approved if the votes cast in favor of the proposal exceed the votes
cast opposing. Votes that are withheld and Broker Shares that are not
voted will not be included in determining the number of votes cast.
SECURITY OWNERSHIP OF CERTAIN PERSONS
The following table sets forth the number and percentage of
shares of Company common stock held as of July 1, 1995 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 Percent of
Owned Class<F1>
- --------------------------------------------------------------------
Crestar Bank NA 1,774,999<F2> 10.0%
919 E. Main Street
Richmond, VA 23219, Trustee for Cuddy Farms, Inc.
[FN]
<F1> Based on 17,297,671 shares outstanding as of July 1, 1995 plus
424,875 shares which members of management have the option to
purchase within 60 days of July 1, 1995.
<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. Cuddy Farms, Inc. may not transfer its
interest in the Cuddy Voting Trust except (a) to pledge, mortgage
or otherwise encumber its interest or (b) to transfer its
interest to Cuddy International Corporation or a wholly owned
subsidiary of Cuddy International Corporation.
-2-
<PAGE>
The following table sets forth the number and percentage of
shares of Company common stock held as of July 1, 1995 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.
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Name Number Beneficially Percent of Class<F1>
Owned
- ----------------------------------------------------------------------
George E. Bryan 2,217,170 <F2>,<F3> 12.5%
Charles L. Campbell 1,787,527 <F2>,<F4> 10.1%
Stephen W. Custer 1,865,001 <F2>,<F5> 10.5%
Calvin G. Germroth 1,793,029 <F2>,<F6> 10.1%
William H. Groseclose 1,778,213 <F2>,<F7> 10.0%
Henry L. Holler 40,458 <F8> *
J. Craig Hott 1,880,069 <F2>,<F9> 10.6%
James L. Keeler 2,000,650 <F2>,<F10> 11.3%
Kenneth D. Marshall 71,365 <F11> *
Herman D. Mason 2,068,183 <F2>,<F12> 11.7%
James L. Mason 139,600 <F13> *
V. Eugene Misner 94,879 <F14> *
Charles W. Wampler, Jr. 2,295,621 <F2>,<F15> 13.0%
William D. Wampler 2,678,117 <F2>,<F16> 15.1%
All directors and executive 4,593,549 <F17> 25.9%
officers as a group (consisting
of 17 persons, including those
named above)
_____________________________
* Denotes percent ownership not exceeding 1% of the class of common
stock.
[FN]
<F1> Based on 17,297,671 shares outstanding as of July 1, 1995 plus
424,875 shares which members of management have the option to
purchase within 60 days of July 1, 1995.
<F2> Includes 1,774,999 shares held by Crestar Bank, NA, Voting
Trustee for the benefit of Cuddy Farms, Inc. which must vote its
shares pursuant to the Cuddy Voting Trust in accordance with the
recommendation of the Board of Directors of the Company as to any
proposal to be submitted to shareholders. Each director
disclaims beneficial ownership in the shares owned by the Cuddy
Voting Trust.
<F3> Includes 143,998 shares owned directly and 298,173 shares owned
by his wife. Mr. Bryan disclaims beneficial interest in the
shares held by his wife.
-3-
<PAGE>
<F4> All shares owned directly, except for shares owned by the Cuddy
Voting Trust, as set forth in Note 2.
<F5> Includes 46,977 shares owned directly, 13,992 shares owned by his
wife, 26,884 shares held as custodian for Mr. Custer's two
children, and 2,149 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.
<F6> All shares owned directly and through his self-directed
retirement account, except for shares owned by the Cuddy Voting
Trust, as set forth in Note 2.
<F7> All shares owned directly and through his self-directed
retirement account, except for shares owned by the Cuddy Voting
Trust, as set forth in Note 2.
<F8> Includes 5,396 shares owned jointly with his wife, 1,312 shares
through his self-directed retirement account, and 33,750 shares
which Mr. Holler has the right to purchase within 60 days of
July 1, 1995 through the exercise of options.
<F9> Includes 104,770 shares owned by E. E. Hott, Inc., of which
Mr. Hott is an officer and director, and 300 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.
<F10>Includes 50,142 shares owned directly and through self-directed
retirement accounts, 23,634 shares owned by his wife directly and
through her self-directed retirement account, and 151,875 shares
which Mr. Keeler has the right to purchase within 60 days of July
1, 1995 through the exercise of options. Mr. Keeler disclaims
beneficial interest in the shares owned by his wife.
<F11>Includes 882 shares owned directly, 36,733 shares owned jointly
with his wife, and 33,750 shares which Mr. Marshall has the right
to purchase within 60 days of July 1, 1995.
<F12>Includes 240,642 shares owned directly and 52,722 shares held as
trustee for the Louise T. Mason Trust. Mr. Mason disclaims
beneficial interest in the shares held by the Trust.
<F13>Includes 47,963 shares owned directly and through his
self-directed retirement account, 20,146 shares owned jointly
with his wife, 1,027 shares owned by his wife through her
self-directed retirement account, 5,214 shares held as custodian
for Mr. Mason's two children, and 65,250 shares which Mr. Mason
has the right to purchase within 60 days of July 1, 1995
through the exercise of options. Mr. Mason disclaims beneficial
ownership in the shares owned by his wife or held by him as
custodian.
<F14>Includes 1,260 shares owned through his self-directed retirement
account, 30,227 shares owned jointly with his wife, 1,305 shares
owned by his wife through her self-directed retirement account,
337 shares owned by his son who lives in Dr. Misner's home, and
61,750 shares which Dr. Misner has the right to purchase within
60 days of July 1, 1995 through the exercise of options.
Dr. Misner disclaims beneficial ownership in the shares owned by
his wife and son.
<F15>Includes 179,645 shares owned directly and as general partner of
Wampler Land, 67,965 shares owned by his wife, 194,469 shares
held as trustee of the Charles W. Wampler, Sr.
-4-
<PAGE>
Family Trust, and 78,543 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>Includes 400,764 shares owned directly and as general partner of
Wampler Land, 201,153 shares owned by his wife, 28,189 shares
owned by May Meadows Farms, Inc., of which Mr. Wampler is an
officer and director, 194,469 shares held as trustee of the
Charles W. Wampler, Sr. Family Trust, and 78,543 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.
<F17>This number does not reflect the sum of all of the preceding
numbers of shares beneficially owned by all of the above-named
directors and officers since it includes officers other than
those named. Also, 2,080 shares held by Charles W. Wampler, Jr.
and William D. Wampler as general partners of Wampler Land, and
273,012 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, and
the 1,774,999 shares held by the Cuddy Voting Trust have been
taken into account in determining the number of shares
beneficially owned by each of the directors. In addition, this
amount includes the 424,875 shares which the group has the right
to purchase within 60 days of July 1, 1995 through the exercise
of options.
PROPOSAL ONE: ELECTION OF DIRECTORS
The term of office for the current Class B directors expires
at the Annual Meeting. The Board of Directors has nominated such
directors, namely Stephen W. Custer, Calvin G. Germroth and James L.
Keeler for election, for a three-year term, by the shareholders at the
Annual Meeting. Messrs. Custer, Germroth and Keeler were elected by
shareholders at the 1992 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)
-5-
<PAGE>
pursuant to which the nomination or nominations are to be made by such
shareholder, (iv) such other information regarding each nominee
proposed by such shareholder as would have been required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission if such nominee had been nominated
by the Board of Directors, and (v) the consent of each nominee to
serve as a director of the Company if elected. The chairman of the
shareholders' meeting may refuse to acknowledge the nomination of any
person not made in compliance with the foregoing procedure.
The Board recommends election of the Class B
director nominees set forth below.
INFORMATION CONCERNING DIRECTORS AND NOMINEES
Biographical summaries for the three 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
- ----------------------------------------------------------------------
Directors Continuing in Office
CLASS B DIRECTORS
(to serve until the 1998 annual meeting of shareholders)
Stephen W. Custer 53 1984 President of Custer Associates, Inc.
(consulting firm)
Calvin G. Germroth 71 1988 Broiler producer
James L. Keeler 60 1988 Chief Executive Officer of the Company
President since February 1988
CLASS C DIRECTORS
(to serve until the 1996 annual meeting of shareholders)
George E. Bryan 73 1984 Poultry and livestock farmer
Charles L. Campbell 47 1988 Commissioner of Revenue for Page
County, Virginia; broiler producer
William H. Groseclose 64 1993 Chairman of Harrisonburg Regional
Board and Winchester Regional
Board of First Union National Bank
of Virginia; previously Chief
Executive Officer of Shenandoah
Valley region of Dominion Bank
William D. Wampler 67 1984 Poultry and livestock farmer
-6-
<PAGE>
Director Nominees
CLASS A DIRECTORS
(to serve until the 1997 annual meeting of shareholders)
J. Craig Hott 42 1988 Vice President of Hott's Farming,
Inc. and Hott's Ag-Services, Inc.
Herman D. Mason 74 1984 Retired; previously, Chief Executive
Vice Chairman Officer of the Company until 1988
of the Board
Charles W. Wampler, Jr. 79 1984 Poultry and livestock farmer
Chairman of the Board
LEGAL PROCEEDINGS
On February 6, 1994, the Company filed suit in the United
States District Court for the Western District of Virginia, against
Tyson Foods, Inc. (Tyson), seeking, among other things, 1) a
declaratory judgment as to the validity of the Company's Shareholder
Protection Rights Plan, and 2) a declaratory judgment as to the
constitutionality of Article 14, Va. Code Sections 13.1-725 et
seq. (Affiliated Transactions Statute), and Article 14.1, Va. Code
Sections 13.1-728 et seq. (Control Share Statute), of the
Virginia Stock Corporation Act under the Virginia and United States
Constitutions. In response, on February 28, 1994, Tyson, joined
later by WLR Acquisition Corp., filed counterclaims against the
Company and all directors. In their counterclaims, Tyson and WLR
Acquisition Corp. sought, among other things, to invalidate the
Company's Shareholder Protection Rights Plan and certain severance
agreements, and a declaratory judgment that the Affiliated
Transactions Statute, the Control Share Statute, and other Virginia
statutes, facially and as applied, are unconstitutional under the
United States Constitution.
The District Court issued a final ruling on December 6, 1994
in favor of the Company and its directors with respect to the conduct
of the May 21, 1994 special shareholders meeting vote, and upheld the
constitutionality of the Virginia statutes. Tyson appealed the ruling
to the United States Court of Appeals for the Fourth Circuit. Oral
arguments were heard by the Fourth Circuit on July 13, 1995, but no
decision has yet been issued.
BOARD MEETINGS AND COMMITTEES
The Board met twelve times during fiscal year ended July 1,
1995, six of which times were for regularly scheduled meetings. 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. Nonmanagement directors of the Company received
$2,000 for attending a regularly scheduled Board meeting, $500 for
specially called Board meetings (excluding telephonic meetings) and
$500 for attending committee meetings not held in conjunction with
Board meetings. In addition, non-payroll directors received an annual
retainer of $13,000.
As previously reported, Peter A. W. Green resigned as a
director in April, 1995 for reasons unrelated to his association with
the Company.
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<PAGE>
The Company has a standing Audit Committee which currently
consists of George E. Bryan, Calvin G. Germroth, William H.
Groseclose, and J. Craig Hott. The Audit Committee met three times
since last year's annual meeting. The Audit Committee recommends to
the Board the independent audit firm to be employed by the Company and
meets with the independent auditor to discuss quality of management
and financial, accounting and internal audit procedures. The Audit
Committee also monitors the Company's compliance with applicable
requirements of the National Association of Securities Dealers, Inc.
relating to independent directors, and reviews, at least annually, all
related party transactions and potential conflicts of interest,
recommending appropriate action as needed.
The Company has a standing Nominating Committee which
currently consists of Stephen W. Custer, Calvin G. Germroth and
William D. Wampler. The Nominating Committee has not met 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
twice 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 employed by
the Company until their resignation in February, 1994.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has always been fortunate to have directors who
are actively involved in, and knowledgeable about, the Company's
businesses. As a result, the Company has relationships with certain
directors and their families.
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 1,
1995, 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 1, 1995. All such
transactions were on the same bases and terms as transactions with
unrelated parties.
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<PAGE>
- -----------------------------------------------------------------
Total Amount Received from the
Directors Company and its Subsidiaries
- -----------------------------------------------------------------
Charles L. Campbell $ 91,725
Timothy Campbell, his son 63,422
Calvin G. Germroth $ 36,591
J. Craig Hott
Hott's Farming, Inc. $ 271,161
James L. Keeler
Gregory Keeler, his son $ 206,910
Charles W. Wampler, Jr.
C. W. Wampler & Sons $ 189,323
William D. Wampler
May Meadows Farm, Inc. $ 152,867
C. W. Wampler & Sons $ 189,323
During fiscal year ended July 1, 1995, the Company
purchased, either directly or through third-party suppliers, $256,404
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 1, 1995, the Company paid
$7,543 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, both annual and long-term, which enhance the value of
shareholders' investment in the Company.
-9-
<PAGE>
Base Salary
The base salary component of executive compensation within
the Company reflects the first goal stated above of attracting and
retaining qualified executives. Based on available figures, the
Company executives' base salaries are competitive with other companies
within Virginia and the industry. Companies considered in determining
executive compensation are not the same as the peer group reflected in
the Stock Price Performance Graph due to the Committee's belief that,
unlike the performance of stock traded on a national market, executive
compensation should be evaluated in comparison with similar companies
in the same geographic area. Periodic increases in base salary are
based on evaluations of past and current performance, competitive
market conditions and Company performance.
With respect to the chief executive officer, the Committee
believes that a significant portion of annual compensation should be
directly tied to Company performance, and that adjustments to base
salary should be consistent with Company-wide salary adjustments.
Accordingly, the Committee has historically adjusted the base salary
of the chief executive officer according to the average percentage
increase for all Company employees.
Cash Bonus
The Company's Incentive Bonus Program focuses on 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 seven-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.
-10-
<PAGE>
During the first three years of option grants, all options
were granted at the market price prevailing at the time of the grant.
Due to special circumstances in each of 1992, 1993 and 1994, the
option price was established above the market price in those 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 ($2.25 as
adjusted for the 3-for-2 stock split on May 12, 1995) 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 ($14.67 split-effected) in February and the Committee
established the option price in July at $22 ($14.67 split-effected),
even though the market price on the grant date was $5 lower, or $17
($11.33 split-effected) per share. In 1994, the Company was the
target of an unsolicited tender offer by Tyson Foods, Inc. of $30 per
share; consequently the Committee established the option price at $30
($20 split-effected) instead of the 1994 year-end trading value of
$25.50 ($17 split-effected). In the last fiscal year, the Committee
returned to its original practice, establishing the exercise price of
$15, based on the current market price after the 3-for-2 stock split
on May 12, 1995 of $14.375.
During the last fiscal year, the Company again engaged the
services of a compensation consulting firm to review the Company's
Long-Term Incentive Plan. The consultants made several
recommendations regarding the level of options granted, the term of
the options and whether the Company should grant incentive stock
options (ISOs) or non-qualified options as in the past. The granting
of ISOs would permit executives to defer the income tax consequences
of their options with no impact on the Company's earnings. The
consultants also recommended that the Company implement a supplemental
employee retirement plan (SERP) in order for executive compensation to
be more competitive with companies of similar size.
Due to current fiscal restraints, the Company deferred
implementation of the SERP recommended by the consultant. The Company
accepted the recommendation, beginning in fiscal year 1995, to grant
options with a term of ten years rather than five years as in the
past, and to grant ISOs to the extent permitted by the current
Internal Revenue Code, neither of which recommendations will affect
the Company's earnings.
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 due to earnings 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 maintained a base salary competitive with chief
executive positions within the state and industry. Though Mr.
Keeler's
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<PAGE>
bonus factor has remained constant 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 due to an
increase in interest rates. Finally, the number of stock options
awarded James Keeler and James Mason under the Long Term Incentive
Plan was increased from the level of the past five years, reflecting a
systematic effort to enhance the executives' personal financial
interest in the strong management of the Company.
Limitation on Deductibility of Certain Compensation for Federal Income
Tax Purposes
Section 162(m) of the Internal Revenue Code, enacted as part
of the Omnibus Budget Reconciliation Act of 1993, limits the annual
compensation deduction for federal income tax purposes of publicly
held companies, such as WLR Foods, Inc., to $1 million for
compensation paid to each of its chief executive officer and its four
highest compensated executive officers other than the chief executive
officer. However, this limit, which is effective for tax years
beginning January 1, 1994 and thereafter, does not apply to
"performance-based" compensation as defined in that section and the
regulations thereunder.
The Company does not anticipate that the total compensation
paid to any executive, including the chief executive officer, will
exceed the $1 million limit, although an executive's compensation
could exceed such limit if the executive were to exercise all
outstanding stock options. Moreover, options granted pursuant to the
Company's Long-Term Incentive Plan currently qualify as performance-
based compensation, and are therefore not subject to the limitation,
because such options are based on a stock price that is no less than
fair market value at the time of the grant. Consequently the amount
of compensation an executive can receive pursuant to the Long-Term
Incentive Plan is based solely on subsequent increases in the value of
the stock. Accordingly, Section 162(m) is expected to have no impact
on the Company during the current fiscal year.
Herman D. Mason
Charles L. Campbell
Charles W. Wampler, Jr.
Executive Compensation Committee
Members
SUMMARY COMPENSATION
The Summary Compensation Table below contains information
concerning annual and long-term compensation provided to the Company's
Chief Executive Officer and the other four most highly compensated
executive officers of the Company for all services rendered to the
Company and its subsidiaries for the fiscal years ending July 1, 1995,
July 2, 1994 and July 3, 1993. Messrs. Holler and Marshall first
became executive officers in fiscal year ended July 2, 1994.
Accordingly, their compensation is detailed beginning in that year.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Long Term Other
Annual Compensation Compensation<F1> Compensation<F2>
Name and Options
Principal Position Year Salary ($) Bonus ($) Awarded (#) ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
James L. Keeler 94-95 $249,998 $116,693 60,000 $237,301
Chief Executive 93-94 245,096 159,458 50,625 229,212
Officer & President 92-93 236,808 172,783 50,625 178,685
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<PAGE>
James L. Mason 94-95 $181,866 $57,861 30,000 $4,711
President, 93-94 172,221 75,958 21,750 6,042
Wampler-Longacre 92-93 160,608 71,859 21,750 5,220
V. Eugene Misner 94-95 $170,311 $43,348 11,250 $4,579
Vice President 93-94 163,882 66,638 11,250 5,929
Live Production 92-93 160,610 71,859 21,750 5,465
Wampler-Longacre
Henry L. Holler 94-95 $138,321 $43,348 11,250 $4,481
Vice President 93-94 133,099 48,107 11,250 4,951
Sales & Marketing
Wampler-Longacre
Kenneth D. Marshall 94-95 $138,321 $35,206 0 $4,559
Vice President 93-94 133,099 48,107 11,250 4,956
Plant Operations
Wampler-Longacre
_____________________________
<FN>
<F1> Options granted in fiscal years ending in 1994 and 1993 have been
adjusted to give effect to the 3-for-2 stock split on May 12,
1995.
<F2> 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. Company
contributions to the Profit Sharing and Salary Savings Plan on
behalf of the named Executives were $4,589 for Mr. Keeler, $4,135
for Mr. Mason, $4,003 for Mr. Misner, $3,992 for Mr. Holler, and
$4,070 for Mr. Marshall. The Company paid life insurance
premiums of $576 for each of Messrs. Keeler, Mason and Misner,
and $489 for each of Messrs. Holler and Marshall. For
Mr. Keeler, Other Compensation also includes deferred
compensation of $232,136.
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
- --------------------------------------------------------------------------------
% of Total
Options Exercise
Options Granted to or Base
Granted Employee in Price Expiration Grant Date
(#) Fiscal Year $/Share Date Present Value<F1>
- -----------------------------------------------------------------------------
James L. Keeler 60,000 36.8% $15.0 7/1/05 290,400
James L. Mason 30,000 18.4 15.0 7/1/05 145,200
V. Eugene Misner 11,250 6.9 15.0 7/1/05 54,450
Henry L. Holler 11,250 6.9 15.0 7/1/05 54,450
Kenneth D. Marshall 0 0.0 n/a n/a 0
______________________________
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<PAGE>
[FN]
<F1> The values shown reflect a standard application of the Black-
Scholes Option Pricing Model, assuming a risk-free rate of return
of 5.9%, an annualized volatility factor of 33% and an annualized
dividend rate as of the grant date of 24 cents per share. Values
shown do not take into account risk factors such as
nontransferability and restrictions on exerciseability. The
Black-Scholes Model is a commonly utilized model for valuing
options which assumes that the possibilities of future stock
returns (dividends plus stock value appreciation) resemble a bell
shaped curve. The model applies a statistical analysis to the
Company's historical data to project the value of the options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
- -----------------------------------------------------------------------------
Value of
Number of Unexercised
Unexercised In-The-Money
Options at Options<F2> at
Fiscal<F1> Fiscal
Shares Year-End (#) Year-End ($)
Acquired<F1> Value Exercisable/ Exercisable/
Name On Exercise (#) Realized ($) Unexercisable Unexercisable
- -------------------------------------------------------------------------------
James L. Keeler 50,625 163,477 151,875/110,625 248,974/0
James L. Mason 21,750 70,234 65,250/51,750 106,967/0
V. Eugene Misner 21,750 77,031 61,750/26,000 106,967/0
Henry L. Holler 11,250 41,953 33,750/22,500 55,328/0
Kenneth D. Marshall 11,250 41,953 33,750/11,250 55,328/0
____________________
[FN]
<F1> Adjusted to give effect to the May 12, 1995 3-for-2 stock split.
<F2> Represents the difference between the exercise price of the
option and $14.375 the closing price of the Company's common
stock as reported on the NASDAQ/National Market System on
June 30, 1995.
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 $256,248 and his
bonus factor, discussed under "Cash Bonus" on page 11 has been
increased for the first time in six years from 3.6 to 4.0. In any
event, Mr. Keeler is guaranteed a bonus of $25,000. Mr. Keeler's
deferred compensation allocation will be calculated at 1.5% of the
increase in the Company's book value over each preceding year, as
explained previously under "Deferred Compensation." The Company has
also agreed to provide group health insurance coverage to Mr. Keeler
and his wife for the remainder of their lives, provided he does not
retire before age 65. Mr. Keeler's perquisites and benefits are
consistent with those provided to the Company's senior management.
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<PAGE>
The Company has entered into severance agreements with each
of James L. Keeler, James L. Mason, V. Eugene Misner and Henry L.
Holler (the Severance Agreements). Pursuant to the Severance
Agreements, each of these individuals is entitled to certain payments
(described below) if the Company terminates his employment during a
specified period following a "Change in Control" of the Company.
For purposes of the Severance Agreements, a "Change in
Control" occurs (A) when an individual, entity or group acquires
beneficial ownership of 20% or more of the combined voting power of
the Company's outstanding stock, subject to certain exceptions set
forth in the executive's severance agreement, (B) when individuals
who, as of February 4, 1994, constituted the Board of Directors (the
"Incumbent Board") and individuals whose election, or nomination for
election by the shareholders of the Company, was approved by a vote of
at least seventy-five percent of the directors then comprising the
Incumbent Board (who shall after election be considered members of the
Incumbent Board unless such election occurs as a result of an actual
or threatened election contest or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other
than the Company's Board of Directors) shall cease to constitute a
majority of the Company's Board of Directors, (C) upon the approval by
the shareholders of the Company of a reorganization, merger or
consolidation except in certain instances set forth in the executive's
severance agreement, or (D) upon approval by the shareholders of the
Company of the complete liquidation or dissolution of the Company or
the sale or other disposition of all or substantially all of the
assets of the Company, except in certain instances set forth in the
Severance Agreements.
The Severance Agreements for each of Messrs. Keeler and
Mason provide that if the Company terminates his employment during the
three year period following a Change in Control of the Company, other
than for death, Cause (willful and continued failure to perform duties
or willful engaging in illegal conduct, defined more specifically in
the Severance Agreements) or Disability (as defined in the Severance
Agreement), or if he resigns for Good Reason (includes an adverse
change in status or position, a reduction in base salary or benefits,
or relocation, defined more specifically in the Severance Agreements)
during such three year period, he is entitled to receive an amount in
cash (the Severance Payment) equal to three times his total annual
compensation, which includes: (A) the higher of (x) his annual base
salary on the date of termination or (y) his annual base salary in
effect immediately prior to the Change in Control and (B) an amount
equal to the average of the bonuses awarded to him in each of the
three previous years, including, in the case of Mr. Keeler, any
bonuses awarded pursuant to any deferred compensation arrangements.
In the event that such payments become subject to an excise tax
imposed by Section 4999 of the Internal Revenue Code (or any similar
tax), the employee shall be entitled to receive a "gross-up" payment
in respect of such taxes and in respect of any taxes on such gross-up
payment as specified in his Severance Agreement. These Severance
Agreements also provide for the continuation of employee welfare
benefits (such as health insurance) for three years after termination
if his employment is terminated during such three year period. In
addition, Mr. Keeler will be entitled to receive the Severance Payment
and other severance benefits if he resigns for any reason during the
30-day period immediately following the first anniversary of a Change
in Control. The Severance Agreements for Messrs. Misner, and Holler
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.
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<PAGE>
In connection with his retirement as an officer of the
Company on July 3, 1995, the Company has agreed to pay to Kenneth D.
Marshall retirement benefits in the amount of $69,161 and a bonus for
fiscal year 1994-95 in the amount of $35,206. In addition, the
Company has agreed to compensate Mr. Marshall for his accumulated but
unused vacation and sick leave, and will continue to provide group
health insurance coverage for Mr. Marshall and his wife until
Mr. Marshall reaches age 65. Pursuant to the terms of the Company's
Long-Term Incentive Plan, Mr. Marshall must exercise all vested stock
options within three years of his date of retirement.
STOCK PRICE PERFORMANCE GRAPH
The graph on this 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, 1990. 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.
[GRAPH]
6/90 6/91 6/92 6/93 6/94 6/95
Comp 100 91 87 113 112 129
S&P 500 100 107 122 138 140 177
WLRF 100 99 79 97 148 127
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<PAGE>
PROPOSAL TWO: APPOINTMENT OF INDEPENDENT AUDITORS
KPMG Peat Marwick, LLP of Richmond, Virginia, were auditors
for the fiscal year ended July 1, 1995, and are being recommended to
the Company's shareholders for appointment as auditors for the fiscal
year ending June 29, 1996. A representative of KPMG Peat Marwick, LLP
is expected to attend the Annual Meeting and will have an opportunity
to make a statement or respond to appropriate questions from
shareholders.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL TWO.
SHAREHOLDER PROPOSALS
Shareholders are reminded that proposals of shareholders
intended to be presented at the Company's 1996 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 June 4, 1996.
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 1, 1995.
By Order of the Board of Directors
Delbert L. Seitz
Secretary
October 2, 1995
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