September 27, 1999
Dear WLR Foods, Inc. Shareholder:
You are cordially invited to attend our annual meeting of
shareholders on Saturday, October 30, 1999, 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 Statement. Following the meeting, we will
have a 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 the fiscal year ended July 3, 1999 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,
/s/ James L. Keeler
James L. Keeler
Chief Executive Officer
and President
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF WLR FOODS, INC.
The annual meeting of the shareholders of WLR Foods, Inc. will be
held on Saturday, October 30, 1999, at 10:00 a.m. at Turner Ashby High
School, 800 N. Main Street, Bridgewater, Virginia, for the following
purposes:
1. To elect one Class A director to serve until the annual
meeting of shareholders in 2000 and to elect three
Class C directors to serve until the annual meeting of
shareholders in 2002.
2. To ratify the appointment of KPMG LLP as independent
auditors for the fiscal year ending July 1, 2000.
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
3, 1999 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,
/s/ Jane T. Brookshire
Jane T. Brookshire
Secretary
Broadway, Virginia
September 27, 1999
<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 30,
1999, 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 27, 1999.
Our Company's Annual Report for the fiscal year ended July 3, 1999 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.
<PAGE>
OUTSTANDING SHARES AND VOTING RIGHTS
Only shareholders of record at the close of business on
September 3, 1999 will be entitled to vote at the Annual Meeting. As
of such date, the Company had outstanding 16,557,582 shares of its
common stock, no par value, each of which is entitled to one 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 the 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.
<PAGE>
2
PRINCIPAL STOCKHOLDERS AND
SHARE OWNERSHIP OF MANAGEMENT
The following table sets forth the number and percentage of
shares of Company common stock held as of July 2, 1999 by: (i) each
person who is known to the Company to beneficially own more than 5% of
the outstanding shares of common stock of the Company, (ii) each of
the Company s directors (iii) the executive officers named in the
Summary Compensation Table on page 9, and (iv) by all directors and
executive officers as a group.
- -----------------------------------------------------------
Number
Beneficially Percent
Name Owned of Class(1)
- -----------------------------------------------------------
William D. Wampler 828,869<F2> 5.01
P.O. Box 7000
Broadway, VA 22815-7000
Keith E. Alessi 15,454<F3> *
Jane T. Brookshire 40,148<F4> *
Charles L. Campbell 17,021<F5> *
Katherine K. Clark 1,547<F5> *
Stephen W. Custer 38,085<F5> *
William H. Groseclose, Jr. 11,655<F6> *
J. Craig Hott 109,989<F7> *
James L. Keeler 259,420<F8> 1.55
Dale S. Lam 4,123<F9> *
Ruth J. Mack 0<F10> *
Ronald E. Morris 10,463<F11> *
Walter F. Shafer, III 21,280<F12> *
Phillip C. Stone 104,682<F13> *
All directors and executive 1,462,736<F14> 8.72
officers as a group
(consisting of 13 persons,
including those named above
but excluding Ruth J. Mack)
<PAGE>
3
* Denotes percent ownership not exceeding 1% of the class of
common stock.
[FN]
<F1> Based on 16,541,691 shares outstanding as of July 2, 1999 plus
shares which members of management have the option to purchase
within 60 days of July 2, 1999.
<F2> Includes 321,087 shares owned directly and as general partner of
Wampler Land, 204,260 shares owned by his wife, 28,517 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 80,536 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.
<F3> Includes 12,000 owned jointly with his wife and 3,454 shares
held as trustee of the Keith E. Alessi Trust.
<F4> Includes 8,714 owned directly, through the WLR Foods, Inc.
Employee Stock Purchase Plan and her retirement accounts, 1 share
owned jointly with her husband, 1,433 shares held by her husband
through his self-directed retirement account, and 30,000 shares
which Ms. Brookshire has the right to purchase within 60 days of
July 2, 1999 through the exercise of options. Ms. Brookshire
disclaims beneficial interest in the shares held by her husband.
<F5> All shares owned directly.
<F6> All shares owned directly and through his self-directed
retirement account.
<F7> Includes 105,992 shares owned by E. E. Hott, Inc., of which
Mr. Hott is an officer and director, 3,847 shares owned
jointly with his wife, and 150 shares held by his wife as
custodian for Mr. Hott's son. Mr. Hott disclaims beneficial
interest in the shares held by his wife as custodian.
<F8> Includes 55,498 shares owned directly and through the Employee
Stock Purchase Plan and his retirement accounts, 23,922 shares
owned by his wife directly and through her self-directed
retirement account, and 180,000 shares which Mr. Keeler has the
right to purchase within 60 days of July 2, 1999 through the
exercise of options. Mr. Keeler disclaims beneficial interest in
the shares owned by his wife.
<PAGE>
4
<F9> Includes 3,388 shares owned directly, through the WLR Foods, Inc.
Employee Stock Purchase Plan or through his self-directed
retirement accounts, 235 shares held by his wife through her
self-directed retirement account, and 500 shares which Mr. Lam
has the right to purchase within 60 days of July 2, 1999 through
the exercise of options. Mr. Lam disclaims beneficial interest
in the shares held by his wife.
<F10> Ms. Mack ceased to be an officer of the Company on March 30,
1999.
<F11> Includes 130 shares owned through the WLR Foods, Inc. Employee
Stock Purchase Plan, 5,000 shares owned by his wife, and 5,333
shares which Mr. Morris has the right to purchase within 60 days
of July 2, 1999 through the exercise of options. Mr. Morris
disclaims beneficial interest in the shares held by his wife.
<F12> Includes 9,613 shares owned directly and through the WLR Foods,
Inc. Employee Stock Purchase Plan and 11,667 shares which Mr.
Shafer has the right to purchase within 60 days of July 2, 1999
through the exercise of options.
<F13> Includes 185 shares owned directly and 104,497 shares owned by
Bridgewater College, of which Mr. Stone is president. Mr. Stone
disclaims beneficial interest in the shares owned by Bridgewater
College.
<F14> Includes 227,500 shares which the group has the right to
purchase within 60 days of July 2, 1999 through the exercise
of options.
</FN>
PROPOSAL ONE: ELECTION OF DIRECTORS
The term of office for the current Class C directors expires
at the Annual Meeting. The Board of Directors has nominated such
directors, namely Charles L. Campbell, William H. Groseclose, Jr. and
William D. Wampler for election, for a three-year term, by the
shareholders at the Annual Meeting.
In April, 1999, the Board appointed Phillip C. Stone to the
Board of Directors, and has nominated Mr. Stone for election to a one-
year term as a Class A director, to serve until the 2000 annual
meeting of the shareholders. Messrs. Campbell, Groseclose and Wampler
were elected by the shareholders at the 1996 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
<PAGE>
5
unavailable, which the Company does not expect, the proxy may be voted
for the election of a substitute nominee designated by the Board.
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 Jane T. Brookshire, 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 understandings
between such shareholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by such shareholder, (iv)
such other information regarding each nominee proposed by such
shareholder as would have been required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and
Exchange Commission if such nominee had been nominated by the Board of
Directors, and (v) the consent of each nominee to serve as a director
of the Company if elected. The chairman of the shareholders' meeting
may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
The Board recommends election of the
director nominees set forth below.
<PAGE>
6
INFORMATION CONCERNING DIRECTORS AND NOMINEES
Biographical summaries for the four director nominees and
the five directors continuing in office appear in the following chart.
- -----------------------------------------------------------------
Principal Occupation
Name and Position Director During the Last Five with
the Company Age Since Years
- -----------------------------------------------------------------
DIRECTOR NOMINEES
Class A Director
(to serve until the 2000 annual meeting of shareholders)
Phillip C. Stone 57 1999 President of
Bridgewater College,
Bridgewater,Virginia
since 1994
Class C Directors
(to serve until the 2002 annual meeting of shareholders)
Charles L. Campbell 51 1988 Commissioner of Revenue
for Page County,
Virginia; broiler
producer
William H. Groseclose, Jr. 68 1993 Chairman of
Harrisonburg Regional
Board and Winchester
Regional Board of First
Union National Bank;
previously Chief
Executive Officer of
Shenandoah Valley
region of Dominion Bank
William D. Wampler 71 1984 Poultry and livestock
farmer
<PAGE>
7
DIRECTORS CONTINUING IN OFFICE
Class A Directors
(to serve until the 2000 annual meeting of shareholders)
Keith E. Alessi 45 1998 Chairman, President and
Chief Executive Officer
of TeleSpectrum
Worldwide, Inc. since
March, 1998.
Previously, Chairman,
President and Chief
Executive Officer of
Jackson Hewitt, Inc.
from 1996 to 1998, and,
at various times,
President, Chief
Operating Officer and
Chief Financial Officer
of Farm Fresh, Inc.
Mr. Alessi also serves
on the boards of
directors of Cort
Business Services Corp.
and Town Sports
International, Inc.
J. Craig Hott 46 1988 Vice President of
Hott's Farming, Inc.
and Hott's Ag-Services,
Inc.
Class B Directors
(to serve until the 2001 annual meeting of shareholders)
Katherine K. Clark 42 1998 Founder, Chief
Executive Officer and
Director of Landmark
Systems Corporation
Stephen W. Custer 57 1984 President of Custer
Associates, Inc.
(consulting firm)
James L. Keeler 64 1988 Chief Executive Officer
of the Company since
President February 1988
<PAGE>
8
BOARD MEETINGS AND COMMITTEES
The Board met eight times during the fiscal year ended July
3, 1999. Each director attended at least 75% of the aggregate of the
total number of Board meetings and meetings of all committees of the
Board on which he or she served except for Phillip C. Stone, who was
traveling abroad at the time of the sole meeting of the Board held
since he became a director. Mr. Stone attended the sole committee
meeting held since becoming a director by teleconference from Europe.
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 payable in shares of the Company s common stock.
The Company has a standing Audit Committee which currently
consists of Keith E. Alessi, Stephen W. Custer and J. Craig Hott. The
Audit Committee oversees the accounting, auditing and financial
reporting practices of the Company, recommending to the Board the
independent audit firm to be employed by the Company and meeting with
the independent auditors to discuss quality of management and
financial reporting 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 Charles L. Campbell, Katherine K. Clark and
Stephen W. Custer. 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 Nominating Committee
met twice during the fiscal year ended July 3, 1999. In recent years
the Nominating Committee has focused on increasing the independence of
the Board, culminating in the appointment of Katherine K. Clark and
Keith A. Alessi in the year ending June 27, 1998, and Phillip C. Stone
in the year ending July 3, 1999.
The Company has a standing Executive Compensation Committee
which currently consists of Katherine K. Clark, William H. Groseclose,
Jr. and Phillip C. Stone. The Executive Compensation Committee met
three times during the last fiscal year. The Executive Compensation
<PAGE>
9
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
James L. Keeler and William H. Groseclose, Jr., both serve
on the Board of Trustees of Bridgewater College, of which Phillip C.
Stone is President. The Board of Trustees responsibilities include
establishing the compensation for Mr. Stone.
CERTAIN TRANSACTIONS
The Company s directors and officers are actively involved in,
and knowledgeable about, the Company's businesses. This is largely a
result of the relationship between the Company and certain of its
directors and their families.
The following table identifies (i) amounts in excess of $60,000
paid by the Company to each of the directors and executive officers,
members of their immediate family, and entities related to the
directors and executive officers who were contract growers with the
Company during the fiscal year ended July 3, 1999, and (ii) amounts
paid to entities related to directors and executive officers which
were contract growers if such payments exceeded five percent of such
entities' gross revenues for such activity during the fiscal year
ended July 3, 1999. All such transactions were on the same bases and
terms as transactions with unrelated parties.
- -----------------------------------------------------------------
Directors and Total Amount Received from the
Executive Officers Company and its Subsidiaries
- ----------------------------------------------------------------
Charles L. Campbell, Director $ 84,702
Timothy Campbell, his son 69,566
J. Craig Hott, Director
Hott's Farming, Inc. $261,627
James L. Keeler, President, Chief
Executive Officer and Director
Gregory Keeler, his son $162,619
William D. Wampler, Director
C. W. Wampler & Sons $160,996
William D. Wampler is an uncle of Stephen W. Custer.
<PAGE>
10
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16 of the Securities Exchange Act of 1934, the
Company's directors, executive officers and beneficial owners of more
than 10% of the outstanding common stock are required to file reports
with the Securities and Exchange Commission concerning their ownership
of and transactions in common stock. Based on copies of those reports
and related information furnished to the Company, the Company believes
that all such filing requirements were complied with in a timely
manner for the fiscal year ended July 3, 1999, except for the filing
of a Form 4 to report the purchase by Mr. Morris s wife, in May, 1998,
of 2,000 shares of WLR Foods stock. A Form 4 was filed promptly upon
discovery of the omission.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
Compensation Philosophy
The Executive Compensation Committee of the Company's Board
of Directors establishes 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 goals regarding executive compensation include providing
competitive compensation packages that attract and retain qualified
executives, and rewarding its executives for financial and operating
results, both annual and long-term, which enhance the value of
shareholders' investment in the Company.
Base Salary
Executive Officers salaries are determined by evaluating
the responsibilities of their positions and their performance, and by
reference to salaries paid in the competitive marketplace for
comparable executive ability and experience. 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. Individual salary
increases, which are considered annually, are based on evaluations of
past and current performance, market conditions and company
performance. Based on available figures, the Company Executives base
salaries are generally more conservative than salaries of executives
in other companies within Virginia and the industry.
<PAGE>
11
With respect to the Chief Executive Officer, the Committee
believes that a significant portion of annual compensation should be
tied directly to Company performance, and that adjustments to base
salary should be consistent with Company wide salary adjustments.
This philosophy was evident in prior years when, because of challenges
presented by industry conditions, executive base salaries remained
constant except for changes resulting from promotions.
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 Resources
Department for the benefit of executive officers and other key
personnel. The bonus pool is determined annually by reference to the
Company's operating 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. Thus, bonuses comprise a significant part of management
compensation that is "at risk" based on the Company's annual
performance. As borne out in more recent years, for years in which
the Company did not have a strong return on equity, a significant
portion of management's annual compensation was reduced.
Long-Term Incentive Plan
The Company's Long-Term Incentive Plan, a stock option plan
approved by the Company's shareholders at the 1998 annual meeting,
rewards Company executives on a long-term basis and provides an
incentive for executive officers to maximize long-term shareholder
value. By encouraging management investment in Company stock, the
Plan aligns management's interests with those of the shareholders:
namely, to enjoy long-term appreciation in the value of the Company's
common stock.
The Company has, twice during the past several years,
engaged independent executive compensation consulting firms to review
the Company's compensation package, including its Long-Term Incentive
Plan. Since the inception of the first Long-Term Incentive Plan in
1988, the Company has consistently awarded options at levels below
those recommended by the consultants. In 1995, 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 permits executives to defer the income tax
consequences of their options with no impact on the Company's
<PAGE>
12
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.
In fiscal year 1995, the Company began granting options with
a term of 10 years rather than 5 years as in the past, and began
granting ISOs to the extent permitted by the current Internal Revenue
Code, neither of which affect the Company's earnings. While the
Company deferred implementation of the SERP recommended by the
consultants, the Company did establish the 1995 Nonqualified Deferred
Compensation Plan. See "Deferred Compensation" below.
Deferred Compensation
The final significant component of the Chief Executive
Officer's compensation is deferred compensation, serving to provide a
competitive compensation package and reward operating 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 to a deferred compensation account which,
together with accrued interest, is payable to him in one or more
installments beginning in the year after his retirement. However, if
Mr. Keeler's employment is terminated after a change in control of the
Company, the balance of Mr. Keeler's deferred compensation account
becomes payable immediately.
In 1995, the Company established the 1995 Nonqualified
Deferred Compensation Plan (Nonqualified Plan). The purpose of this
nonqualified, unfunded plan is to permit certain members of management
and other employees to supplement their retirement savings beyond the
limits imposed by federal tax law on the Company's Profit Sharing and
Salary Savings Plan and Trust (Profit Sharing Plan). Pursuant to the
Nonqualified Plan, employees may elect to defer a portion of their
salary and bonus until their retirement or other termination. The
Company does not contribute to the Plan. However, to the extent that
deferrals under the Nonqualified Plan reduce a participant's
compensation base for purposes of the Company's contribution to the
Profit Sharing Plan, the Company will credit to the participant's
Nonqualified Plan account an amount equal to the difference between
the Company's actual contribution to the Profit Sharing Plan and the
amount which the Company would have contributed had the participant
not elected to defer an additional amount under the Nonqualified Plan.
<PAGE>
13
Chief Executive Officer Compensation
Mr. Keeler's base salary for the current fiscal year is
$301,738. This base salary is competitive with chief executive
positions within the state and industry. Like all Company executives,
Mr. Keeler's bonus is a function of the Company's ROE, and his bonus
factor has remained at 4.0 for the past 5 years. Mr. Keeler's
deferred compensation allocation is singularly a function of an
increase in the Company's book value. The number of stock options,
which are tied solely to Company performance, awarded to Mr. Keeler
under the Long-Term Incentive Plan remained at the same level as for
the past four years.
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 does not apply to "performance-based" compensation
as defined in that section and the regulations thereunder.
The Company does not anticipate that the total annual
compensation paid to any executive, including the Chief Executive
Officer, will exceed the $1 million limit. Moreover, options granted
pursuant to the 1998 Long-Term Incentive Plan qualify as performance-
based compensation, and will therefore not be subject to the
limitation. Accordingly, Section 162(m) is expected to have no impact
on the Company during the current fiscal year.
William H. Groseclose, Jr.
Katherine K. Clark
Phillip C. Stone
Executive Compensation Committee Members
SUMMARY COMPENSATION
The Summary Compensation Table below contains information
concerning annual and long-term compensation provided to the Company's
Chief Executive Officer, and the four other most highly compensated
executive officers of the Company, and an additional person who would
have been among the four other most highly compensated executive
officers had she been serving as an executive officer at the end of
the last fiscal year, for all services rendered to the Company and its
subsidiaries for the fiscal years ending July 3, 1999, June 27, 1998
and June 28, 1997.
<PAGE>
14
SUMMARY COMPENSATION TABLE
Long Term Other
Annual Comp Comp Comp<F2>
----------------------------- --------- -------
Name and Other
Principal Position Year Salary($) Bonus Annual Options ($)
<F1> ($) Comp($)
- --------------------------------------------------------------------
James L. Keeler 98-99 297,868 325,201 0 60,000 258,624<F3>
Chief Executive 97-98 267,248 0 0 60,000 3,595
Officer & President 96-97 266,402 0 0 60,000 3,368
Dale S. Lam 98-99 143,779 85,960 0 18,500 2,673
Chief Financial
Officer, Treasurer
Jane T. Brookshire 98-99 150,887 61,785 0 10,000 4,089
Vice President 97-98 131,115 0 0 10,000 2,570
Administration, 96-97 111,846 0 0 10,000 2,237
Secretary
Ronald E. Morris 98-99 168,187 91,663 0 10,000 4,578
Vice President 97-98 139,039 0 0 10,000 1,500
Turkey Operations
Wampler Foods, Inc.
Walter F. Shafer,III 98-99 168,187 91,663 0 10,000 4,578
Vice President 97-98 138,654 0 0 10,000 2,715
Chicken Operations
Wampler Foods, Inc.
Ruth J. Mack(4) 98-99 166,365 0 0 0 3,327
Executive VP 97-98 185,000 0 54,149 11,250 71
Sales and Marketing 96-97 24,904 25,000 3,413 11,250 0
Wampler Foods, Inc.
- -------------------
[FN]
<F1> Includes 53 weeks for the fiscal year ending July 3, 1999, and
52 weeks for fiscal years ending June 27, 1998 and June 28,
1997.
<F2> Includes Company contributions made to the Company's Profit
Sharing and Salary Savings Plan of $5,220 for Mr. Keeler,
$2,673 for Mr. Lam, $4,089 for Ms. Brookshire, $4,578 for
Messrs. Morris and Shafer, and $3,327 for Ms. Mack.
<F3> Includes $253,404 of deferred compensation which is based on
increases in the Company s book value due to earnings.
<F4> Ms. Mack ceased to be an officer of the Company on March 30,
1999.
</FN>
<PAGE>
15
OPTION GRANTS IN LAST FISCAL YEAR
% of Total
Options Exercise
Granted to or Base
Options Employee in Price Expire Grant Date
Name Granted Fiscal Year Share($) Date Present Value
($)<F1>
- ----------------------------------------------------------------------
James L. Keeler 60,000 44.8 8.281 07/03/09 351,883
Dale S. Lam 8,500 6.3 9.219 11/12/08 47,380
10,000 7.5 8.281 07/03/09 58,647
Jane T. Brookshire 10,000 7.5 8.281 07/03/09 58,647
Ronald E. Morris 10,000 7.5 8.281 07/03/09 58,647
Walter F. Shafer,III 10,000 7.5 8.281 07/03/09 58,647
Ruth J. Mack 0 0.0 N/A N/A 0
- --------------------
[FN]
<F1> The values shown reflect a standard application of the Black-Scholes
Option Pricing Model, assuming a risk-free rate of return of 5.5%
and an annualized volatility factor of 55%. Values shown do not take
into account risk factors such as nontransferability and restrictions
on exercisability. The Black-Scholes Model is a commonly utilized
model for valuing options which assumes that the possibilities of
future stock returns (dividends plus stock value appreciation)resemble
a bell shaped curve. The model applies a statistical analysis to the
Company's historical data to project the value of the options.
</FN>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
- ------------------------------------------------------------------------
Value of
Number of Unexercised
Unexercised In-The-Money
Options at Options at
Fiscal<F1> Fiscal
Shares Year-End Year-End
Acquired Value Exercisable/ Exercisable/
Name On Exercise Realized($) Unexercisable Unexercisable($)
- ------------------------------------------------------------------------
James L. Keeler 0 0 180,000/120,000 28,120/56,240
Dale S. Lam 0 0 500/ 19,500 703/ 1,406
Jane T. Brookshire 0 0 30,000/ 20,000 4,686/ 9,374
Ronald E. Morris 0 0 5,333/ 17,667 4,686/ 9,374
Walter F. Shafer, III 0 0 11,667/ 18,333 4,686/ 9,374
Ruth J. Mack 0 0 0/ 0 0/ 0
- ---------------------
[FN]
<F1> Adjusted to give effect to the May 12, 1995 3-for-2 stock split.
</FN>
EXECUTIVE AGREEMENTS
In 1998 the Company entered into a three-year employment
agreement with the Chief Executive Officer, which expires at the end
of Fiscal Year 2001. The agreement governs Mr. Keeler's compensation,
specifically his base salary, bonus, perquisites and benefits. Mr.
Keeler's base salary was increased by 3.25% for the current fiscal
year, the average increase for all employees, and his bonus factor,
discussed under "Cash Bonus" on page 7 remains at 4.0. 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
<PAGE>
16
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.
Under the terms of the 1998 Employment Agreement, Mr. Keeler will
serve as President and Chief Executive Officer of the Company for the
first two years of the contract. The third year is anticipated to be
a transition year, and the position and duties may be adjusted by the
Board of Directors. Under the Agreement, Mr. Keeler agrees to work
with the Board of Directors in identifying a successor, but also
agrees to give serious consideration to an extension of the Employment
Agreement if the Board requests additional time to identify a
successor.
The Company has entered into severance agreements with each of
the executive officers named in the Summary Compensation Table on page
9 (the Severance Agreements). Pursuant to the Severance Agreements,
each of these individuals is entitled to certain payments (described
below) if the Company terminates his or her employment during a
specified period following a "Change in Control" of the Company. The
Severance Agreement for Ms. Mack terminated once she was no longer
employed by 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 provide that if the Company terminates
an executive officer s employment during the three year period
following a Change in Control of the Company, other than for death,
<PAGE>
17
Cause (willful and continued failure to perform duties or willfully
engaging in illegal conduct, defined more specifically in the
Severance Agreements) or Disability (as defined in the Severance
Agreement), or if he or she 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 or she is entitled to
receive an amount in cash (the Severance Payment) equal to three times
his or her total annual compensation, which includes: (A) the higher
of (x) his or her annual base salary on the date of termination or (y)
his or her 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 or her 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 executive 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 the
Severance Agreement. These Severance Agreements also provide for the
payment in cash of the difference between the Termination Fair Market
Value (as defined in the Severance Agreements) and the exercise price,
of all unvested stock options, and for the continuation of employee
welfare benefits (such as health insurance) for three years after
termination if his or her 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.
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 July 2, 1994. The Peer
Group Index consists of Cagles, Inc., Pilgrims Pride Corporation and
Sanderson Farms, Inc., companies within the same industry and with
similar equity market capitalization.
<PAGE>
18
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
Among WLR Foods, Comparable Companies, and the S & P 500
Compsite S&P 500 WLR Foods
JUN-94 100 100 100
JUN-95 116.533 112.617 82.933
JUN-96 129.188 150.951 80.769
JUN-97 166.048 199.235 47.120
JUN-98 216.500 255.214 38.668
JUN-99 287.613 308.981 47.424
PROPOSAL TWO: APPOINTMENT OF INDEPENDENT AUDITORS
KPMG LLP of Richmond, Virginia, were auditors for the fiscal
year ended July 3, 1999, and are being recommended to the Company's
shareholders for appointment as auditors for the fiscal year ending
July 1, 2000. A representative of KPMG 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 2000 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 26, 2000.
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 3,
1999.
By Order of the Board of Directors
/s/ Jane T. Brookshire
Jane T. Brookshire
Secretary
September 27, 1999
<PAGE>
19
