10-K405

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(X)    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
          OF 1934
          For the fiscal year ended July 1, 2000

OR

          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
          ACT OF 1934
          For the transition period from __________ to ___________

Commission File Number 0-17060

WLR FOODS, INC.
(Exact name of registrant as specified in its charter)

           Virginia                                                             54-1295923
(State or other jurisdiction                                                                   (I.R.S. Employer
of incorporation or organization)                                                         Identification No.)

P.O. Box 7000
Broadway, Virginia 22815
(Address of principal executive offices)

540-896-7001
Registrant's telephone number, including area code

          Securities registered pursuant                                                                                                  Name of exchange on which
          to Section 12(b) of the Act:                                                                                                        registered
                              N/A                                                                                                                                                      N/A

Securities registered pursuant to Section 12(g) of the Act:

Common Stock - no par value
(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
  (X)  Yes      _____  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.          X   

The aggregate value of the voting stock held by non-affiliates of the registrant as of September 1, 2000 was approximately $69,827,246. As of that date 16,194,081 shares of the registrant's common stock were issued and outstanding.

PART I

Item 1.      BUSINESS.

General
WLR Foods, Inc. (with its subsidiaries, "WLR" or the "Company") was incorporated in the Commonwealth of Virginia in 1984. WLR is a leading producer, processor and marketer of poultry-based products, including fresh, frozen and further processed chicken and turkey. The Company markets products under its Wampler Foods(R) brand trademark and under various private labels to customers in the retail, foodservice and institutional markets, as well as to export customers in more than 60 countries. In 2000, WLR was ranked the fourth largest turkey producer by Turkey World magazine, the twelfthlargest chicken producer by Broiler Industry magazine, and the seventh largest poultry company by Poultry magazine. Company sales for fiscal 2000 were $833 million, including approximately $403 million of chicken segment sales and $422 million of turkey segment sales, and representing approximately 584 million pounds and 436 million pounds of poultry products in the chicken and turkey segments, respectively. Remaining sales were comprised of revenues from the Company's protein conversion plants.

The Company markets a full line of chicken and turkey products, including individually packaged fresh and frozen whole birds, fresh and frozen bulk parts, fresh and frozen tray packs of individual parts and a large assortment of further processed products. By offering a broad array of products, the Company is able to shift production among whole birds, parts and further processed products in response to changes in customer demands and product prices. WLR is also actively expanding its offering of further processed products, which offers consumers added convenience and taste while generating higher margins for WLR, and for which grain costs represent a smaller percentage of overall production cost. Further processed products include a variety of salads, turkey burgers and sausage, ground turkey and chicken and various fully cooked breast products.

WLR markets branded and private label poultry products to retail, fast food, foodservice and institutional customers throughout the United States with an emphasis on the East Coast. The Company is positioning itself as a full-service supplier to these customers for poultry-based products, offering a broad assortment of branded and private label products across multiple price points. In addition, WLR continues to expand its export sales, which have grown from approximately 4% of total Company sales in 1990 to approximately 10% of sales in 2000.

The Company is vertically integrated and controls the growing of its poultry, and the processing, preparation, packaging and marketing of its products. Such integration enables WLR to ensure a consistently high degree of product quality, and to adjust its product mix to changes in the prices of products, changes in customer requirements and to geographic imbalances in supply. As an integrated producer, the Company also is able to reduce operating costs, improve operating efficiency and deliver a higher yield of harvestable birds to its processing plants through improvements in processing facilities, automation and the active monitoring and management of its breeder stock, hatching and growing conditions and feed components.

Through July 1998, the Company operated a cold storage and ice manufacturing and distribution business through its Cassco Ice and Cold Storage, Inc. (Cassco) operating subsidiary. In July 1998, the Company sold its Cassco subsidiary. The Company also sold its Goldsboro, North Carolina chicken complex in August 1998. The volume produced at the Goldsboro complex was replaced by the conversion of the Marshville, North Carolina turkey complex to chicken processing, which was completed in the first fiscal quarter of 1999.

On September 27, 2000, the Company entered into an Agreement and Plan of Merger with Pilgrim's Pride Corporation ("Pilgrim's") whereby the Company will become a wholly-owned subsidiary of Pilgrim's and the Company's shareholders will receive $14.25 cash for each share of Company common stock owned by them at the effective time of the merger. The Company's Board of Directors has unanimously approved the agreement. The agreement is subject to regulatory and shareholder approvals and other customary closing conditions. The merger is expected to be completed as soon as practicable thereafter.

Poultry Production
WLR Foods' primary operations include the breeding, hatching, grow-out and processing of turkeys and chickens. For fiscal 2000, WLR Foods produced approximately 442 million pounds of dressed turkey and 723 million pounds of dressed chicken.

WLR Foods purchases breeder stock turkey eggs which it hatches and places with growers who supply labor and housing to produce breeder flocks. These breeder flocks produce eggs that are taken to the company-owned turkey hatchery for incubation and hatching into poults, providing approximately 69% of the Company's poult supply. The balance of the Company's poults are purchased from a third party. In its chicken operations, WLR Foods purchases breeder flock chicks and places them with growers who supply labor and housing to raise the birds. The birds are then moved to breeder farms where they begin providing eggs, which are in turn transported to company-owned hatcheries. Once hatched, day-old poults and chicks are inspected and vaccinated against common poultry diseases. In total, WLR Foods contracts with 173 breeder growers who grow approximately one-half of WLR Foods' turkey, and all of WLR Foods' chicken, breeder flocks.

After hatching and vaccination, poults and chicks are transported to one of WLR Foods' approximately 900 contract growers located in Virginia, West Virginia, Pennsylvania, Maryland, North Carolina and South Carolina who supply labor and housing to raise the turkeys and chickens to maturity. WLR Foods supplies feed primarily from company-owned feedmills and provides grower support through WLR Foods' technicians and veterinarians.

Grow-out and breeder farms provide WLR Foods with approximately 53 million square feet of growing facilities. These farms typically are grower-owned and operate under contract with WLR Foods, providing facilities, utilities and labor. Contract growers are compensated on a cost-based formula and several incentive-based formulas. Approximately 97% of WLR Foods' turkeys and 100% of its chickens are raised by contract growers, with the balance grown by independent growers and company-owned farms. WLR Foods strives to maintain good contract grower relationships and believes the availability of contract growers is sufficient for anticipated needs.

An important factor in the grow-out of poultry is the rate at which poultry converts feed into body weight. The Company purchases it primary feed ingredients on the open market. These ingredients consist primarily of corn and soybean meal. Because the quality and composition of feed is critical to the feed conversion rate, WLR Foods formulates and manufactures a majority of its feed at one of its four feedmills. WLR Foods has an annual feed manufacturing capacity of approximately 2 million tons and anticipates no difficulty in meeting the Company's feed requirements in the future.

Once the turkeys and chickens reach marketable weight, they are transported to one of the Company's seven poultry processing plants. These plants utilize modern, highly automated equipment to process and package the turkeys and chickens for sale or preparation for further processing. Some further processing, such as deboning, skinning and ground turkey is also conducted in a number of these processing plants. Additional further processing, including grinding, marinating, spicing and cooking to produce delicatessen products, frankfurters, meat salads and foodservice products is conducted at the Company's further processing plant.

Processing and Other
The non-edible by-products of WLR Foods' poultry processing plants are sent to either of its two protein conversion plants, except for by-products from the Marshville, North Carolina processing plant, which are sold to a third party vendor. The Company's two protein conversion plants convert the non-edible by-products into feed ingredients for use in its own operations or for sale to pet food manufacturers.

The following table shows approximate sales revenues by operating segment from WLR Foods' products for the last three fiscal years.

(Dollars in Millions)	Fiscal 2000	Fiscal 1999	Fiscal 1998
Chicken segment	$ 403	$ 453	$ 389
Turkey segment	422	428	546
Other	8	7	11
Total Net Sales	$ 833	$ 888	$ 946

Competition
The poultry industry is highly competitive. WLR Foods markets its products in competition with both larger and smaller poultry companies on the basis of price, quality and service, with WLR Foods' greatest competition coming from four or five of the country's larger poultry producers and processors. The pricing of poultry products is so competitive that any company with a cost advantage is in a favorable competitive position. Seasonal increases in production and customer buying patterns contribute to fluctuations in prices which are controlled more by supply and demand than by cost of production. WLR Foods primarily markets its chicken and turkey products in the highly competitive eastern sections of the United States.

Seasonality
In general, the Company's sales are relatively stable throughout the year. However, demand for chicken and further processed products is typically strongest in May through August while demand for turkey products is typically strongest in September through December. Management responds to this seasonality by attempting to manage operating volumes and inventory levels, and the associated working capital requirements, to meet expected demand. As a consequence, the Company's short-term borrowings typically peak in the third and fourth quarters of each fiscal year, reflecting the buildup of turkey product inventories.

Trademarks and Patents
The Company's Wampler Foods subsidiary markets products under the trademarks WAMPLER FOODS and WAMPLER FOODS and design, both of which are registered with the U.S. Patent and Trademark Office. Wampler Foods continues to market its products under the trademarks TRIM FREE and THE DELI ROAST COLLECTION and design, both of which are federally registered trademarks. Products are also sold under the ROUND HILL, FARMER'S CHOICE, EASY CARVERS and WAMPLER, IT'S REALLY THAT GOOD ... FOR YOUR BUSINESS trademarks. Wampler Foods markets its export and foreign military sales under the COLONEL ROCKINGHAM design, ROCKINGHAM and SHENVALLEY trademarks, as well as the WAMPLER FOODS trademark.

Government Contracts
WLR Foods' government contracts are a small percent of its total sales, consisting of bids on particular products for delivery at specified locations. Contracts are generally bid, and the product delivered, within a one to two month period. These contracts include both chicken and turkey products and can involve further processed products. WLR Foods had $0.8 million of governmental contracts outstanding as of July 1, 2000, compared to approximately $0.2 million as of July 3, 1999.

Foreign Sales
WLR Foods' export sales constituted approximately 10% of its total annual sales in each of fiscal 2000, 1999 and 1998. Wampler Foods has a full-time staffed export sales office which coordinates export sales efforts on behalf of WLR Foods. Export sales originate from that office and use independent brokers as needed. Sales are made to customers in over 60 countries.

Transportation
Transportation logistics, including the availability of transportation equipment and the efficiency of transportation systems, are key elements in the raising of poultry, transporting feed to the contract growers, transporting poultry to the processing plants, and transporting products to customers. Delivery of the Company's products to its customers is generally performed by third party refrigerated trucking companies. WLR Foods has contracts with two railroad companies for the delivery of feed ingredients to WLR Foods' feedmills.

Raw Materials
WLR Foods' largest cost is for basic feed ingredients, namely corn and soybean meal. Feed grains are commodities and, as such, are subject to volatile price changes caused by weather, size of harvest, changes in demand, transportation and storage costs and the agricultural policies of the United States and foreign governments. Although WLR Foods can, and sometimes does, purchase grain in the forward markets, it cannot completely eliminate the potential adverse effect of grain price increases. The Company uses futures contracts, grain options and forward purchases to hedge the risk of fluctuating grain prices. The gains and losses from hedging transactions become part of the cost of the related inventory items, and are expensed during the time period for which the hedge was intended.

Environmental and Other Regulatory Compliance
WLR Foods' facilities and operations are subject to the regulatory jurisdiction of various federal agencies, including the Food and Drug Administration, Department of Agriculture, Environmental Protection Agency, Occupational Safety and Health Administration, and of corresponding state agencies in Virginia, West Virginia, North Carolina and Pennsylvania. All environmental permits, such as air, water and solid waste disposal permits, are issued by appropriate state agencies.

A total of thirteen environmental permits or registrations are held by Wampler Foods' Virginia facilities, all but one of which were issued by the Virginia Department of Environmental Quality. The Hinton turkey processing facility holds an air permit which regulates certain combustion equipment and a water permit which regulates the treatment of process wastewater and stormwater. The Harrisonburg turkey processing facility holds an air permit which regulates certain combustion equipment and a water permit issued by the Harrisonburg Regional Sewer Authority requiring pretreatment of its process wastewater to meet certain effluent standards. Additionally, it has a general permit for stormwater. Wampler Foods' Timberville chicken processing and protein conversion facility holds a water permit which regulates the discharge of process wastewater and the disposition of stormwater, and an air permit which regulates the operation of its protein conversion facility, as well as certain combustion equipment. Wampler's recent connection to a private wastewater treatment system effectively ends the requirement for a waste permit at its Timberville facility, other than the one addressing stormwater. The chicken processing facility in Alma/Stanley holds a registration certificate for its combustion equipment and a water permit which regulates the discharge of process wastewater and stormwater. Finally, the Broadway and Harrisonburg feedmills hold air permits which were issued primarily for the control and abatement of dust, as well as general permits for stormwater. In addition to the thirteen environmental permits held by Wampler Foods, WLR Foods holds a Virginia Pollution Abatement permit which allows Wampler Foods' Virginia facilities to land apply certain wastewater biosolids generated by the facilities' wastewater treatment systems.

In West Virginia, Wampler Foods' Moorefield facilities hold four environmental permits, all of which were issued by the West Virginia Department of Commerce, Labor & Environmental Resources. The chicken processing and protein conversion facility holds a water permit which regulates the discharge of process wastewater and an air permit which regulates the operation of the Company's protein conversion facility. The Moorefield feedmill holds one air permit which was issued primarily for the control and abatement of dust.  The Moorefield hatchery and truck garage has a permit for stormwater.

Wampler Foods' North Carolina facilities hold a total of six environmental permits, all of which were issued by the North Carolina Department of Environment, Health & Natural Resources. The Marshville processing plant holds an industrial wastewater discharge permit which requires processed wastewater to be pretreated prior to discharge to a regional sewer system, and a stormwater permit which regulates stormwater discharges. In addition, the Marshville facility holds a stormwater permit which regulates cooling water and boiler blowdown discharges and a land application permit for food processing biosolids. The Wingate feedmill holds a stormwater permit which regulates stormwater discharges and an air permit which regulates emissions from boilers, bagfilters, and related equipment.

Pennsylvania facilities owned by Wampler Foods hold a total of four environmental permits. The Franconia further processing plant holds two permits: a water permit for the treatment of process wastewater, and an air permit to regulate operation of certain combustion equipment.  The New Oxford turkey processing facility holds two air permits which regulate combustion equipment. All of the Pennsylvania permits were issued by the Pennsylvania Department of Environmental Resources.

In addition to the foregoing environmental permits, and where not otherwise addressed above, all facilities have taken steps to ensure compliance with stormwater regulations. Where applicable, facilities have applied for the necessary group, individual or general storm water permit in accordance with state and federal guidelines. Further, each facility has registered aboveground and underground storage tanks in accordance with relevant state and federal regulations.

Management believes that all facilities and operations are currently in compliance with environmental and regulatory standards. Compliance has not had a materially adverse effect upon WLR Foods' earnings or competitive position in the past, and it is not anticipated to have a materially adverse effect in the future.

Employees
WLR Foods employed approximately 7,000 persons as of July 1, 2000, none of whom were covered by a collective bargaining agreement.

Cautionary Statement Concerning Forward Looking Information
This report contains certain forward-looking statements which are based on management's current views and assumptions, and involve risks and uncertainties that could significantly affect expected results. WLR Foods' actual results may differ materially from those in the forward-looking statements. For example, operating results may be affected by external factors such as: actions of competitors, changes in laws and regulations, including changes in governmental interpretations of existing regulations and changes in accounting standards, customer demand and fluctuations in cost and availability of feed ingredients.

Item 2.      PROPERTIES.

WLR Foods' seven poultry processing facilities and one further processing plant are located in Virginia, West Virginia, Pennsylvania and North Carolina. The processing facilities consist of three turkey facilities and four chicken facilities having a total slaughter capacity of approximately 450,000 turkeys per week (single shift) and 3.65 million chickens per week (double shift). WLR Foods owns and operates four feedmills with a total production capacity of approximately 2 million tons of finished feed per year; a turkey hatchery with a production capacity of approximately 350,000 poults per week and three chicken hatcheries with a total production capacity of approximately 4.0 million chicks per week; and two protein conversion plants with a total production capacity of 5,500 tons of raw product weekly. The diversity, number and geographic proximity of its processing and support facilities provide WLR Foods with operating flexibility and enable it to alter the size and mix of poultry processed among the various facilities as market conditions change. The Company's assets are depreciated on a straight-line basis, based on the following asset lives:

Land Improvements                    10-20 years
Buildings & Improvements       15-20 years
Machinery & Equipment              3-8 years
Transportation Equipment           3-5 years

Item 3.      LEGAL PROCEEDINGS.

As previously reported, in February 1999, the Attorney General of the State of West Virginia filed suit against WLR Foods and its Wampler Foods, Inc. subsidiary in the Circuit Court of Hardy County, West Virginia. The Second Amended Complaint and Motion for Preliminary Injunction alleged that Wampler provided substandard chicks and feed to broiler growers who raise chicks for Wampler, in violation of the West Virginia Consumer Credit and Protection Act; and that Wampler exercised monopoly control over the market for broiler growers' services in several West Virginia counties, in violation of the West Virginia Antitrust Act. Beyond seeking injunction relief, the suit requests treble damages and a $100,000 civil penalty for alleged violations of the West Virginia Antitrust Act, civil penalties of $5,000 for each alleged violation of the West Virginia Consumer Credit and Protection Act, and other unspecified damages.

On February 14, 2000, the Circuit Court dismissed the suit, ruling that the West Virginia Consumer Credit and Protection Act did not apply and that the claimed violations of the West Virginia Antitrust Act lacked essential elements as a matter of law. The West Virginia Attorney General has filed a petition for appeal with the West Virginia Supreme Court, and the Company has filed its brief in opposition to the appeal. A decision as to whether an appeal will be granted is not expected before late October or November.

The lawsuit is not expected to have a material effect on the Company’s financial statements. The Company continues to believe the suit is without merit, and intends to continue defending it vigorously.

On August 7, 2000, five employees of Wampler Foods, Inc. filed a collective action against Wampler Foods in the United States District Court for the Northern District of West Virginia, Elkins Division, under the federal Fair Labor Standards Act of 1938 (FLSA). The complaint alleges that Wampler Foods permitted plaintiffs and others similarly situated to work "off the clock" without credit or compensation. The suit seeks damages of an unspecified amount, including hourly and overtime compensation for unrecorded work time.

The Company believes the FLSA suit is without merit, and intends to defend it vigorously. The suit is not expected to have a material effect on the Company’s financial statements.

There were no other material pending legal proceedings during the fiscal year ended July 1, 2000, other than ordinary routine litigation incidental to the Company’s business.

Item 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to the shareholders of the Company during the fourth quarter of the fiscal year ended July 1, 2000.

PART II

Item 5.      MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.

Public trading of shares of WLR Foods' common stock commenced on May 10, 1988. The stock was included in NASDAQ as of September 12, 1988, and was included in NASDAQ/National Market System as of March 7, 1989.

The following table sets forth the range of high and low bid information for the stock, as well as information regarding dividends declared by WLR Foods, for each full quarterly period within the two most recent fiscal years:

2000	High	Low
First Quarter	$8.25	$6.63
Second Quarter	7.13	5.50
Third Quarter	6.22	5.25
Fourth Quarter	5.63	3.63
1999
First Quarter	$9.13	$6.25
Second Quarter	9.13	7.25
Third Quarter	9.63	7.25
Fourth Quarter	8.38	6.50

The Company paid no cash dividends to its shareholders during the last two fiscal years. The Company’s current credit facility restricts the payment of dividends. In view of such restriction, and other relevant factors, it is unlikely that the Company will pay a dividend in the foreseeable future.

As of September 1, 2000, the approximate number of shareholders of record was 3,820.

Item 6.      SELECTED FINANCIAL DATA.

WLR Foods, Inc. and Subsidiaries Financial Highlights
Dollars in thousands, except per share data
	July 1,	July 3,	June 27,	June 28,	June 29,	July 1,
Fiscal year ended:	2000	1999	1998	1997	1996	1995
OPERATIONS
Net sales	$ 832,728	$ 888,086	$ 945,967	$ 994,591	$ 978,258	$ 890,815
Cost of sales	726,253	750,942	876,287	948,060	889,904	776,945
Gross profit	106,475	137,144	69,680	46,531	88,354	113,870
Selling, general and administrative expenses	99,958	98,478	91,745	89,657	91,167	84,877
Operating income (loss)	6,517	38,666	(22,065)	(43,126)	(2,813)	28,993
Interest expense	4,968	10,931	22,539	12,804	8,922	6,386
Other (income) expense, net	(1,280)	(8,214)	(106)	(1,792)	129	(311)
Total other (income) expense, net	3,688	2,717	22,433	11,012	9,051	6,075
Earnings (loss) before income taxes and minority interest	2,829	35,949	(44,498)	(54,138)	(11,864)	22,918
Income tax expense (benefit)	596	13,211	(16,352)	(19,577)	(4,381)	8,614
Minority interest	-	-	66	47	32	55
Net earnings (loss) from continuing operations	2,233	22,738	(28,212)	(34,608)	(7,515)	14,249
Earnings from discontinued operations, net of tax	-	664	2,858	2,425	2,829	1,884
Gain on disposal of discontinued operations, net of tax	-	17,927	-	-	-	-
Total earnings from discontinued operations	-	18,591	2,858	2,425	2,829	1,884
Extraordinary charge on early extinguishment of debt, net of tax	-	(2,559)	-	-	-	-
Net earnings (loss)	2,233	38,770	(25,354)	(32,183)	(4,686)	16,133
Less preferred stock dividends	-	-	-	-	-	-
Net earnings (loss) available to
Common shareholders	$ 2,233	$ 38,770	$ (25,354)	$ (32,183)	$ (4,686)	$ 16,133
PER COMMON SHARE
Basic earnings (loss), continuing operations	$ 0.13	$ 1.35	$ (1.72)	$ (1.99)	$ (0.42)	$ 0.79
Basic earnings, discontinued operations	-	1.11	0.17	0.14	0.16	0.10
Basic loss, extraordinary charge	-	(0.15)	-	-	-	-
Total basic earnings (loss) per common share	0.13	2.31	(1.55)	(1.85)	(0.26)	0.89
Diluted earnings (loss), continuing operations	0.13	1.34	(1.72)	(1.99)	(0.42)	0.79
Diluted earnings, discontinued operations	-	1.10	0.17	0.14	0.16	0.10
Diluted loss, extraordinary charge	-	(0.15)	-	-	-	-
Total diluted earnings (loss) per common share	$ 0.13	$ 2.29	$ (1.55)	$ (1.85)	$ (0.26)	$ 0.89
Cash dividends declared	-	-	-	0.12	0.24	0.22
Book value (based on actual shares outstanding)	8.90	8.70	6.33	7.89	10.00	10.47
Year-end stock price	4.63	8.19	7.00	8.50	14.00	14.38
FINANCIAL POSITION AT END OF YEAR
Working capital (deficit)	$ 92,413	$ 84,016	$ 118,695	$ (31,397)	$ 144,621	$ 120,562
Property, plant and equipment, net	102,070	107,945	153,702	159,426	176,691	174,163
Total assets	283,515	289,097	381,742	416,728	451,121	372,525
Long-term debt, excluding current maturities	51,036	48,845	189,225	5,040	138,510	106,481
Common stock subject to repurchase	-	-	-	4,438	17,750	17,750
Preferred shareholders' equity (1)	-	-	-	-	-	-
Common shareholders' equity	$ 144,004	$ 143,935	$ 103,891	$ 126,558	$ 159,010	$ 163,344
ANALYTICAL & OTHER INFORMATION
Current ratio ( compared to 1)	2.14	1.95	2.40	0.89	2.18	2.67
Total debt/total capitalization (2)	28.4%	27.2%	65.0%	61.2%	55.1%	44.7%
Return on beginning total equity (3)	1.6%	21.9%	NMF	NMF	NMF	10.3%
Capital expenditures	$ 12,225	$ 22,072	$ 22,149	$ 11,245	$ 18,771	$ 17,251
Depreciation expense	17,844	19,653	25,901	28,088	28,243	24,817
Amortization expense	830	2,102	2,420	500	742	598
Interest expense	4,968	10,931	22,635	13,143	9,359	6,666
Cash dividends declared: Common stock	-	-	-	2,078	4,233	4,073
Preferred stock	-	-	-	-	-	-
Market capitalization of common stock at year end	$ 74,878	$ 135,435	$ 114,800	$ 141,075	$ 247,547	$ 248,654

Financial Highlights - Continued

Dollars in thousands, except per share data
	July 2,	July 3,	June 27,	June 29,
Fiscal year ended:	1994	1993	1992	1991
OPERATIONS
Net sales	$ 709,703	$ 603,634	$ 503,877	$ 491,618
Cost of sales	625,180	529,791	449,785	429,430
Gross profit	84,523	73,843	54,092	62,188
Selling, general and administrative expenses	57,373	51,141	44,794	46,733
Operating income (loss)	27,150	22,702	9,298	15,455
Interest expense	4,816	3,660	2,523	619
Other (income) expense, net	(342)	(494)	(142)	(347)
Total other (income) expense, net	4,474	3,166	2,381	272
Earnings (loss) before income taxes and minority interest	22,676	19,536	6,917	15,183
Income tax expense (benefit)	8,446	6,850	2,587	5,741
Minority interest	38	43	25	33
Net earnings (loss) from continuing operations	14,192	12,643	4,305	9,409
Earnings from discontinued operations, net of tax	2,359	1,964	1,591	1,272
Gain on disposal of discontinued operations, net of tax	-	-	-	-
Total earnings from discontinued operations	2,359	1,964	1,591	1,272
Extraordinary charge on early extinguishment of debt, net of tax	-	-	-	-
Net earnings (loss)	16,551	14,607	5,896	10,681
Less preferred stock dividends	-	1,389	982	-
Net earnings (loss) available to common shareholders	$ 16,551	$ 13,218	$ 4,914	$ 10,681
PER COMMON SHARE
Basic earnings (loss), continuing operations	$ 0.85	$ 0.79	$ 0.23	$ 0.59
Basic earnings, discontinued operations	0.14	0.14	0.11	0.08
Basic loss, extraordinary charge	-	-	-	-
Total basic earnings (loss) per common share	0.99	0.93	0.34	0.67
Diluted earnings (loss), continuing operations	0.85	0.78	0.23	0.59
Diluted earnings, discontinued operations	0.14	0.14	0.11	0.08
Diluted loss, extraordinary charge	-	-	-	-
Total diluted earnings (loss) per common share	$ 0.99	$ 0.92	$ 0.34	$ 0.67
Cash dividends declared	0.21	0.21	0.21	0.21
Book value (based on actual shares outstanding)	9.45	8.66	6.44	7.33
Year-end stock price	17.00	11.33	9.67	12.00
FINANCIAL POSITION AT END OF YEAR
Working capital (deficit)	$ 69,989	$ 57,509	$ 40,337	$ 49,532
Property, plant and equipment, net	139,854	140,540	113,017	88,807
Total assets	283,051	265,626	207,736	175,329
Long-term debt, excluding current maturities	46,368	52,253	38,148	18,678
Common stock subject to repurchase	-	-	-	-
Preferred shareholders' equity (1)	-	-	29,507	-
Common shareholders' equity	$ 156,157	$ 142,255	$ 81,881	$ 115,625
ANALYTICAL & OTHER INFORMATION
Current ratio ( compared to 1)	2.02	1.92	1.80	2.42
Total debt/total capitalization (2)	28.4%	33.5%	32.0%	16.1%
Return on beginning total equity (3)	11.6%	13.1%	5.1%	9.9%
Capital expenditures	$ 19,186	$ 31,766	$ 36,107	$ 29,471
Depreciation expense	21,333	18,115	14,041	11,544
Amortization expense	520	445	168	-
Interest expense	4,989	3,816	2,755	928
Cash dividends declared: Common stock	3,513	3,124	2,854	3,314
Preferred stock	-	1,389	982	-
Market capitalization of common stock at year end	$ 280,738	$ 186,168	$ 122,942	$ 189,378

All information reflects the stock dividends issued in May 1997 and August 1997, and the three-for-two stock split in the form of a 50% stock dividend declared on February 28, 1995.

(1) In March 1993, the Company repurchased all the preferred stock issued in January 1992.
(2) Common stock subject to repurchase classified as debt.
(3) For 1999, return on beginning total equity is based on net earnings from continuing operations.

Item 7.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

General

WLR Foods, Inc. (WLR Foods or the Company) is a fully integrated processor of chicken and turkey products, controlling all aspects of production from the hatching of eggs and live bird grow-out, through processing, sales and distribution. Consistent with other poultry processors, the Company is subject to fluctuations in commodity prices for chicken and turkey products, as well as for corn and soybean meal, the primary grain ingredients in the feed for its birds.

Chicken pricing during fiscal 2000 was among the lowest on record, with pricing for the year ended July 1, 2000 down 11.7%, or approximately $51 million, from the levels seen in the prior fiscal year. The industry suffered throughout the year from excess supplies driven by increased production within the industry that began in the latter part of fiscal 1999. Fiscal 1999 chicken segment pricing was 1.6% below fiscal 1998.

Turkey pricing during fiscal 2000 continued to increase modestly over the prior fiscal year levels, with pricing increasing 1.6%, or approximately $7 million, when compared to fiscal 1999. Fiscal 1999 pricing increased 2.0% when compared to fiscal 1998, when prices were very unfavorable by historical standards.

Grain prices continued to be favorable in fiscal 2000, with declines in corn costs more than offsetting increases in the cost of soybean meal, resulting in a net savings to the Company of approximately $2 million when compared to the prior fiscal year. In fiscal 1999, corn and soybean meal costs declined considerably from fiscal 1998, saving the company approximately $50 million in feed costs. The fiscal 1998 grain pricing was the last of three continuous years of very high grain costs.

Pending Transaction
On September 27, 2000, the Company entered into an Agreement and Plan of Merger with Pilgrim's Pride Corporation ("Pilgrim's") whereby the Company will become a wholly-owned subsidiary of Pilgrim's and the Company's shareholders will receive $14.25cash for each share of Company common stock owned by them at the effective time of the merger. The Company's Board of Directors has unanimously approved the agreement. The agreement is subject to regulatory and shareholder approvals and other customary closing conditions. The merger is expected to be completed as soon as practicable thereafter.

RESULTS OF OPERATIONS

The Company’s results are reported on a consolidated basis. Portions of the following discussions of operating results pertain to the chicken and turkey segments, which account for over 98% of the Company’s revenues. Any revenues and expenses not included in the chicken and turkey segments are reported in the Company’s other segment for purposes of segment reporting.

Fiscal 2000 Compared to Fiscal 1999
Net sales from continuing operations were $832.7 million, a decrease of $55.4 million, or 6.2% from fiscal 1999. The decrease is from lower chicken and turkey segment sales of $49.5 million and $6.0 million, respectively, offset slightly by an increase in other segment sales of $0.1 million.

The chicken segment net sales decline of $49.5 million, or 10.9%, to $403.1 million for fiscal 2000 is primarily due to decreased poultry product sales of $50.6 million, partially offset by an increase in other sales, primarily outside feed sales, of approximately $1.1 million. The $50.6 million decrease, or 11.6%, in poultry product sales, primarily chicken, was the result of price decreases of 11.7%, offset partially by increases in volume of 0.1%.

The turkey segment net sales decline of $6.0 million, or 1.4%, to $421.6 million in fiscal 2000 is the result of lower poultry product sales of $4.4 million, combined with a decrease in other sales of $1.6 million. The $4.4 million decrease, or 1.0%, in poultry product sales, primarily turkey, was the result of lower volumes of 2.6%, offset partially by increased pricing of 1.6%. The $1.6 million decline in other sales is primarily the result of the discontinuation of the Company’s Pennsylvania distribution business, a non-core poultry business, in the prior fiscal year.

Cost of sales on continuing operations was $726.3 million, a decrease of $24.7 million, or 3.3% from fiscal 1999. Cost of sales in the chicken segment decreased 1.4%, or $5.3 million, to $377.8 million in fiscal 2000. This decrease is primarily due to improvements in processing costs at the Marshville facility, which was converted from turkey processing to chicken processing during fiscal 1999. In the turkey segment, cost of sales decreased 5.4%, or $19.5 million, to $344.4 million in fiscal 2000. This decrease is primarily the result of improved operating costs at the Franconia further processing facility of approximately $5 million and improved grain costs of approximately $2 million, coupled with decreased volumes in poultry product sales of approximately 2.6% from the prior year. Partially offsetting the decreases in chicken and turkey segment cost of sales is a $0.1 million increase in other segment cost of sales.

Gross profits on continuing operations were $106.5 million, a decrease of $30.7 million, or 22.4% from fiscal 1999. The net effect of product pricing was a decline of approximately $44.2 million for the year, with lower chicken pricing of $51.0 million partially offset by improved turkey prices of $6.8 million. Lower grain costs for corn and soybean meal contributed approximately $2.3 million of improvements. Other improvements of approximately $11.2 million in gross profits were primarily the result of lower plant costs at the Franconia and Marshville facilities.

Selling, general and administrative expenses on continuing operations for fiscal 2000 were $100.0 million, an increase of $1.5 million, or 1.5%, when compared to the prior year. The increase is primarily the result of increased promotional spending of $7.6 million, partially offset by lower delivery expenses of approximately $2.0 million, lower bonus incentives of approximately $2.0 million, and one-time charges in the prior fiscal year of approximately $2.1 million, primarily for the write-down of assets at the Company’s Monroe facility that was sold during the year.

Interest expense from continuing operations was $5.0 million for fiscal 2000, a decrease of $6.0 million, or 54.6%, when compared to fiscal 1999. The decrease is the result of substantially lower debt levels and lower interest rates.

In the prior year, other income included the gain on the sale of the Goldsboro, North Carolina complex. The Goldsboro complex, consisting of a chicken processing plant, feed mill and hatchery, was sold on August 14, 1998, for approximately $38 million in net proceeds, which were used to reduce long- term debt. The pre-tax gain on the sale was approximately $8 million.

The effective tax rates for continuing operations for fiscal 2000 and fiscal 1999 were 21.1% and 36.7%, respectively. The decrease is the result of changes in job tax credits, prior year adjustments, and a lower federal statutory rate.

Net earnings from continuing operations were $2.2 million (or $0.13 per diluted share) for fiscal 2000, a decrease of $20.5 million as compared to the net earnings from continuing operations of $22.7 million (or $1.34 per diluted share) for fiscal 1999. Chicken net earnings were $33.3 million lower than fiscal 1999, offset partially by an increase in turkey net earnings of $12.4 million. The remaining $0.4 million increase in net earnings was in the Company’s other segment.

Fiscal 1999 Compared to Fiscal 1998
Net sales from continuing operations were $888.1 million, a decrease of $57.9 million, or 6.1% from fiscal 1998. The decrease is from lower turkey segment and other segment sales of $118.6 million and $3.3 million, respectively, partially offset by an increase in chicken segment sales of $64.0 million.

The turkey segment net sales decline of $118.6 million, or 21.7%, to $427.6 million in sales for fiscal 1999 is the result of the discontinuation of the distribution business, which reduced sales approximately $40 million, a decrease in outside feed sales of approximately $24 million at the Marshville plant, which was converted to chicken processing, with the balance primarily from reduced volumes in turkey production. Poultry products, primarily turkey, are the largest component of turkey segment revenues. Poultry product sales in the turkey segment decreased 10.9%, or $51.5 million, to $422.4 million in fiscal 1999. The 10.9% decrease is a result of decreased volumes of 12.9%, primarily the result of planned cutbacks at the Marshville facility, offset by increased prices of 2.0%.

In the chicken segment, the increase in net sales of $64.0 million, or 16.5%, to $452.5 million in fiscal 1999 is due to increased poultry product sales of approximately $54 million and increased outside feed sales of approximately $11 million. The $54 million increase, or 14.0%, in net sales of poultry products, primarily chicken, resulted in fiscal 1999 poultry product sales of $437.6 million. The 14.0% increase was the result of a volume increase of 15.6%, offset by a 1.6% decrease in pricing.

Cost of sales on continuing operations was $750.9 million, a decrease of $125.4 million, or 14.3% from fiscal 1998. Cost of sales in the turkey segment decreased 30.8%, or $161.7 million, to $363.9 million in fiscal 1999. This decrease is primarily the result of planned decreases in production and sales volumes in turkey products, coupled with the closing of the distribution business. Lower costs of corn and soybean meal also lowered costs by approximately $20 million, as the average delivered cost of corn and soybean meal declined approximately 16% and 34%, respectively, over fiscal 1998. In the chicken segment, cost of sales increased 12.3%, or $41.9 million, to $383.1 million in fiscal 1999. This increase is primarily attributable to increased poultry pounds sold and additional outside feed sales, partially offset by lower costs of corn and soybean meal, which reduced cost of sales in the chicken segment approximately $30 million.

Gross profits on continuing operations were $137.1 million, an increase of $67.5 million, or 96.8% from fiscal 1998. Lower grain costs for corn and soybean meal contributed approximately $50 million of the improvement. Improved live performance in both turkey and chicken improved gross profits by over $10 million during the year. The net effect of product pricing was an improvement of $3.5 million for the year, with higher turkey pricing of $9.6 million more than offsetting lower chicken prices of $6.1 million.

Selling, general and administrative expenses on continuing operations for fiscal 1999 were $98.5 million, an increase of $6.7 million, or 7.3%. The increase includes two one-time charges: a non-cash charge of $1.5 million during the first quarter for assets, primarily at the Monroe facility, that could not be utilized in the Company’s turkey operations, and $0.6 million for one time deferred compensation accruals. Additionally, employee incentives based upon profitability resulted in an additional $2.0 million in expense during the year. There were no employee incentives in fiscal 1998.

Interest expense from continuing operations was $10.9 million for fiscal 1999, a decrease of $11.6 million when compared to fiscal 1998. The decrease is the result of substantially lower debt levels and lower interest rates resulting from a new credit facility in November 1998.

The gain on the sale of the Goldsboro complex resulted from the Company’s sale, on August 14, 1998, of its Goldsboro, North Carolina chicken processing plant, feed mill and hatchery for approximately $38 million in net proceeds, which were used to reduce long term debt. The pre-tax gain on the sale was approximately $8 million.

The effective tax rate for continuing operations was 36.7% for both fiscal 1999 and 1998.

Net earnings on continuing operations were $22.7 million (or $1.34 per diluted share) for fiscal 1999, an increase of $50.9 million as compared to the net loss of $28.2 million (or $1.72 per diluted share) for fiscal 1998. Turkey and chicken segment net income improved $33.1 million and $16.1 million, respectively.

On July 31, 1998 the Company sold its Cassco Ice and Cold Storage, Inc. subsidiary for approximately $55 million in net proceeds. The net proceeds from the sale were used to reduce long-term debt. The after-tax Cassco income from discontinued operations was $0.7 million in fiscal 1999 compared to $2.9 million for fiscal 1998. During the first quarter of fiscal 1999, the Company recorded a $15.5 million after-tax gain on the sale. Additional consideration was received in the third and fourth quarters of fiscal 1999; the final after-tax gain for the Cassco sale was $17.9 million.

During fiscal 1999, the Company recorded extraordinary after-tax charges of $2.6 million for the early extinguishment of debt, with $1.6 million of the charge in the first quarter and $1.0 million in the second quarter of the year. In the first quarter, the permanent reduction in long-term debt resulting from the sale of the Cassco subsidiary and the Goldsboro complex resulted in an extraordinary after-tax charge of $1.6 million to write-off capitalized debt costs. In conjunction with the November 20, 1998 debt refinancing during the second quarter, the Company recorded an extraordinary after-tax charge of $1.0 million to write off the remaining capitalized debt costs pertaining to the refinanced credit facility.

Net earnings for fiscal 1999 were $38.8 million, or $2.29 per diluted share, and included: after-tax income of $0.7 million, or $0.04 per diluted share from the Company’s Cassco Ice & Cold Storage subsidiary; an after-tax gain of $17.9 million or $1.06 per diluted share on the sale of Cassco; and an after-tax, non-cash write-off totaling $2.6 million, or $0.15 per diluted share, on early extinguishment of debt. The net loss for fiscal 1998 was $25.4 million, or $1.55 per diluted share, and included after-tax income of $2.9 million, or $0.17 per diluted share from the Cassco subsidiary.

Financial Condition and Liquidity
The Company’s capital resources historically have included funds from operations, the public offering of common stock, bank lines of credit and other borrowings. The primary uses of cash have been to provide funds for operations, make expenditures for capital improvements, equipment and facilities, repay indebtedness, repurchase shares of common stock, and make acquisitions.

On July 1, 2000, the Company had net working capital of $92.4 million, compared to net working capital of $84.0 million on July 3, 1999. Accounts receivable and total inventory, on July 1, 2000, were $0.5 million and $4.3 million higher, respectively, when compared to the end of fiscal year 1999. Live inventories increased $3.0 million and feed inventories increased $2.4 million, both primarily attributable to increased feed costs at the end of the fiscal year. Processed and supply inventories decreased $0.9 million and $0.2 million, respectively.

Operating activities generated cash of $6.3 million in fiscal 2000, $71.1 million in fiscal 1999, and $30.1 million in fiscal 1998. The decrease in cash generated in fiscal 2000 as compared to fiscal 1999 is primarily due to decreased earnings, coupled with increased inventory levels, lower deferred income taxes, increased accounts receivables, and decreased accrued expenses. The increase in cash generated in fiscal 1999 as compared to fiscal 1998 resulted primarily from increased earnings.

Capital expenditures were $12.2 million in fiscal 2000. The Company also leased equipment totaling $2.7 million using operating leases. Capital expenditures in fiscal 1999 totaled $22.1 million and operating lease payments totaled $2.3 million. Capital expenditures in fiscal years 2000 and 1999 were generally for normal replacements and upgrades of existing assets, except for $9.7 million in fiscal 1999 in expenditures to convert the Marshville turkey complex to chicken processing. The Company expects capital expenditures in fiscal 2001 to range from $12 to $15 million to cover normal replacement and upgrades of existing facilities.

Total debt to total capital at July 1, 2000 was 28.4%, a slight increase from 27.2% at July 3, 1999. Debt levels increased during fiscal 2000, from $53.9 million at fiscal 1999 year-end to $57.1 million on July 1, 2000. The increase of $3.2 million is the result of $12.2 million in capital expenditures, $2.7 million for repurchase of company stock, offset partially by $0.9 million of proceeds from the sale of property, plant and equipment and $3.7 million collected on notes receivable, with the remaining $7.1 million primarily the result of cash flow from continuing operations.

Accounting Matters
The Financial Accounting Standards Board issued Statement No. 133, "Accounting for Derivative instruments and Hedging Activities" in June 1998. The statement establishes accounting and reporting standards for derivative instruments and hedging activities and requires, among other things, that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. The Company anticipates that the adoption of this statement, which will occur in fiscal 2001, will result primarily in quarterly fluctuations to accumulated other comprehensive income, which is a component of shareholder’s equity, but will not have a significant impact on the Company’s consolidated statements of operations. The Company anticipates that the implementation of this statement on July 2, 2000 will result in a charge of approximately $3.3 million to accumulated other comprehensive income, representing the deferred losses on grain options and futures contracts at July 1, 2000.

Item 7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risks relating to the Company's operations result primarily from changes in interest rates and commodity prices. To address these risks, the Company enters into various hedging transactions as described below. The Company does not use financial instruments for trading purposes and is not party to any leveraged derivatives.

Interest Rate Sensitivity
The Company may hedge exposures to changes in interest rates on certain of its financial instruments by entering into interest rate cap agreements to effectively limit the Company's exposure to increases in interest rates. As of July 1, 2000, there were no outstanding interest rate cap agreements.

The table below provides information about the Company's derivative financial instruments and other financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates.

	Expected Maturity Date
Liabilities:							Fair
Dollars in thousands	2001	2002	2003	2004	2005	Total	Value
Liabilities:
Long-term debt, including Current Portion
Fixed Rate	$ 202	$ 214	$ 89	$ 95	$ 50	$ 650	$ 650
Average interest rate	6.00%	6.00%	6.00%	6.00%	6.00%	6.00%
Variable Rate	$ 5,850	$ 50,588	$ 0	$ 0	$ 0	$ 56,438	$ 56,438
Average interest rate	8.07%	8.09%	0	0	0	8.09%

Commodity Price Sensitivity
The Company is a purchaser of certain commodities, primarily corn and soybean meal. The Company uses commodity futures contracts, grain options and forward purchasing for hedging purposes to reduce the effect of changing commodity prices on a portion of its commodity purchases. The contracts that effectively meet risk reduction and correlation criteria are recorded using hedge accounting. Gains and losses on hedge transactions are recorded as a component of the underlying inventory purchase and are expensed during the time period for which the hedge was intended.

The following table provides information about the Company's corn, soybean meal, other feed ingredient inventory option contracts and futures contracts that are sensitive to changes in commodity prices. For inventory, the table presents the carrying amount and fair value at July 1, 2000. For the futures contracts the table presents the notional amounts in bushels, the weighted average contract prices, and the total dollar contract amount by expected maturity dates, the latest of which occurs in December 2000. Contract amounts are used to calculate the contractual payments and quantity of corn and soybean meal to be exchanged under the futures contracts. There were no outstanding soybean meal positions on July 1, 2000.  For option contracts, the table presents the notional and fair value in dollars. There were no outstanding option contracts on July 3, 1999.

On Balance Sheet Commodity Position
and Related Derivatives	2000		1999
	Carrying	Fair	Carrying	Fair
Dollars in thousands	Amount	Value	Amount	Value
Corn, Soybean Meal and Other Feed
Ingredient Inventory	$ 13,249	$ 13,249	$ 11,050	$ 11,050
	Contractual	Fair	Contractual	Fair
Related Derivatives	Amount	Value	Amount	Value
Corn Futures Contracts
Contract Volumes (100,000 bushels)	3		100
Weighted Average Price (per bushel)	$ 2.08	$ 2.53	$ 2.31	$ 2.06
Contract Amount (dollars in thousands)	550	671	23,194	20,679
Corn Option Contracts
Contract Amount (dollars in thousands)	$ 1,095	$(2,340)	-	-

Item 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Consolidated Financial Statements and Notes to Consolidated Financial Statements
WLR Foods, Inc. and Subsidiaries Consolidated Statements of Operations

Dollars in thousands, except per share data
Fiscal years ended July 1, 2000, July 3, 1999, and June 27, 1998	2000	1999	1998
Net sales	$ 832,728	$ 888,086	$ 945,967
Cost of sales	726,253	750,942	876,287
Gross profit	106,475	137,144	69,680
Selling, general and administrative expenses	99,958	98,478	91,745
Operating income (loss)	6,517	38,666	(22,065)
Other (income) expense:
Interest expense (Note 4)	4,968	10,931	22,539
Gain on sale of Goldsboro complex (Note 13)	-	(7,699)	-
Other income, net	(1,280)	(515)	(106)
Other expense, net	3,688	2,717	22,433
Earnings (loss) before income taxes and minority interest	2,829	35,949	(44,498)
Income tax expense (benefit) (Note 6)	596	13,211	(16,352)
Minority interest in net earnings of consolidated subsidiary	-	-	66
Net earnings (loss) from continuing operations	$ 2,233	$ 22,738	$ (28,212)
Earnings from discontinued operations, net of tax (Note 12)	-	664	2,858
Gain on disposal of discontinued operations, net of tax (Note 12)	-	17,927	-
Total earnings from discontinued operations	-	18,591	2,858
Extraordinary charge on early extinguishment of debt, net of tax (Note 4)	-	(2,559)	-
Net earnings (loss)	$ 2,233	$ 38,770	$ (25,354)
Basic net earnings (loss) per common share, continuing operations	$ 0.13	$ 1.35	$ (1.72)
Basic earnings per common share, discontinued operations	-	1.11	0.17
Basic loss per common share, extinguishment of debt	-	(0.15)	-
Total basic earnings (loss) per common share	$ 0.13	$ 2.31	$ (1.55)
Diluted net earnings (loss) per common share, continuing operations	$ 0.13	$ 1.34	$ (1.72)
Diluted earnings per common share, discontinued operations	-	1.10	0.17
Diluted loss per common share, extinguishment of debt	-	(0.15)	-
Total diluted earnings (loss) per common share	$ 0.13	$ 2.29	$ (1.55)
See accompanying Notes to Consolidated Financial Statements.

WLR Foods, Inc. and Subsidiaries Consolidated Balance Sheets

Dollars in thousands
July 1, 2000 and July 3, 1999	2000	1999
Assets
Current Assets
Cash and cash equivalents	$ 85	$ 210
Accounts receivable, less allowance for doubtful accounts
of $1,628 and $1,909	59,541	59,026
Inventories (Note 2)	110,980	106,679
Income taxes receivable	323	355
Prepaid expenses	2,670	2,574
Other current assets	39	3,853
Total current assets	173,638	172,697
Property, plant and equipment, net (Note 3)	102,070	107,945
Deferred income taxes (Note 6)	2,910	3,009
Other assets	4,897	5,446
Total Assets	$ 283,515	$ 289,097
Liabilities and Shareholders' Equity
Current Liabilities
Current maturities of long-term debt (Note 4)	$ 6,052	$ 5,046
Excess checks over bank balances	14,014	13,912
Trade accounts payable	24,627	26,500
Accrued payroll and related benefits	15,148	24,729
Other accrued expenses	12,659	8,677
Deferred income taxes (Note 6)	8,725	9,817
Total current liabilities	81,225	88,681
Long-term debt, excluding current maturities (Note 4)	51,036	48,845
Other liabilities	7,250	7,636
Commitments and other matters (Notes 9, 14 and 17)
Shareholders' Equity (Notes 7 and 8)
Common stock, no par value (authorized 100,000,000 shares, issued and outstanding 16,172,410 and 16,541,691 shares)	66,961	69,125
Additional paid-in capital	2,974	2,974
Retained earnings	74,069	71,836
Total shareholders' equity	144,004	143,935
Total Liabilities and Shareholders' Equity	$ 283,515	$ 289,097
See accompanying Notes to Consolidated Financial Statements.

WLR Foods, Inc. and Subsidiaries Consolidated Statements of Shareholders' Equity

			Additional
Dollars in thousands	Common Stock		Paid-In	Retained
Fiscal years ended July 1, 2000, July 3, 1999, and June 27, 1998	Shares	Amount	Capital	Earnings	Total
Balance at June 28, 1997	16,597	$ 64,206	$ 2,974	$ 59,378	$ 126,558
Net loss	-	-	-	(25,354)	(25,354)
Stock dividend	102	958	-	(958)	-
Common stock issued	147	2,710	-	-	2,710
Common stock repurchased	(446)	(23)	-	-	(23)
Balance at June 27, 1998	16,400	67,851	2,974	33,066	103,891
Net earnings	-	-	-	38,770	38,770
Common stock repurchased	(17)	(152)	-	-	(152)
Common stock issued	159	1,426	-	-	1,426
Balance at July 3, 1999	16,542	69,125	2,974	71,836	143,935
Net earnings	-	-	-	2,233	2,233
Common stock repurchased	(470)	(2,719)	-	-	(2,719)
Common stock issued	100	555	-	-	555
Balance at July 1, 2000	16,172	$ 66,961	$ 2,974	$ 74,069	$ 144,004

See accompanying Notes to Consolidated Financial Statements

WLR Foods, Inc. and Subsidiaries Consolidated Statements of Cash Flows

Dollars in thousands
Fiscal years ended July 1, 2000, July 3, 1999, and June 27, 1998	2000	1999	1998
Cash Flows from Operating Activities:
Net earnings (loss)	$ 2,233	$ 38,770	$ (25,354)
Adjustments to reconcile net earnings (loss) to net cash provided
by operating activities:
Extraordinary loss on early extinguishment of debt, net of tax	-	2,559	-
Depreciation and amortization	18,674	21,755	28,321
(Gain) loss on sales of property, plant and equipment	(631)	1,159	916
Gain on sale of Goldsboro complex	-	(7,699)	-
Gain on sale of discontinued operation	-	(28,187)	-
Deferred income taxes	(993)	14,419	(14,974)
Other, net	-	107	(592)
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable	(515)	8,355	5
(Increase) decrease in inventories	(4,301)	12,234	37,520
(Increase) decrease in prepaid expenses	(96)	(704)	341
Decrease in other current assets	96	106	3,655
(Increase) decrease in long-term assets	(281)	(170)	815
Decrease in accounts payable	(1,873)	(655)	(6,263)
Increase (decrease) in accrued expenses and other	(5,985)	9,042	5,675
Net cash provided by operating activities	6,328	71,091	30,065
Cash Flows from Investing Activities:
Additions to property, plant and equipment	(12,225)	(22,072)	(22,149)
Acquisition of businesses	-	-	(650)
Proceeds from notes receivable	3,750	-	-
Proceeds from sale of Goldsboro complex	-	37,582	-
Proceeds from sale of discontinued operation	-	55,068	-
Proceeds from sales of property, plant and equipment	887	1,245	1,706
Net cash provided by (used in) investing activities	(7,588)	71,823	(21,093)
Cash Flows from Financing Activities:
Proceeds from issuance of revolver and long-term debt	730,430	634,724	41,485
Payments on revolver and long-term debt	(727,233)	(780,482)	(35,234)
Financing costs paid	-	(1,969)	(5,401)
Notes payable to banks	-	-	(4,031)
Issuance of common stock	555	701	892
Repurchase of common stock	(2,719)	-	(4,438)
Increase (decrease) in excess checks over bank balances	102	3,987	(2,193)
Net cash provided by (used in) financing activities	1,135	(143,039)	(8,920)
Increase (decrease) in cash and cash equivalents	(125)	(125)	52
Cash and cash equivalents at beginning of fiscal year	210	335	283
Cash and cash equivalents at end of fiscal year	$ 85	$ 210	$ 335
Supplemental cash flow information:
Cash paid (received) for:
Interest	$ 4,403	$ 13,366	$ 15,365
Income taxes	2,404	6,204	(3,139)

Non-cash financing activities:

In fiscal 1999:
The Company recorded 142,384 stock warrants at a value of $904,136 which related to the February 1998 debt refinancing.

The Company had 28,180 stock warrants expire at a value of $178,943 when a portion of the February 1998 debt was repaid in the first quarter.

The Company incurred an extraordinary charge on early extinguishment of debt in the amount of $4.1 million.

The Company recorded a note receivable in the amount of $3,750,000 for the sale of its Monroe division, due in fiscal year 2000.

In fiscal 1998:
The Company issued 102,296 shares as a stock dividend in the first quarter.

The Company issued 889,898 stock warrants in the third quarter relating to the debt refinancing; of these 266,969 were immediately exercisable and were recorded at a value of $1,695,256.

See accompanying Notes to Consolidated Financial Statements.

WLR Foods, Inc. and Subsidiaries Notes to Consolidated Financial Statements

1.      Summary of Significant Accounting Policies and Other Information

Organization
WLR Foods, Inc. and subsidiaries (WLR Foods or the Company) are primarily engaged in fully integrated turkey and chicken production, processing, further processing and marketing. The Company’s operations are predominantly located in the mid-Atlantic region of the United States. WLR Foods sells products through a variety of selected national and international retail, foodservice and institutional markets.

Fiscal Year
The Company’s fiscal year ends on the Saturday closest to June 30. Fiscal years 2000, 1999 and 1998 ended on July 1, July 3, and June 27, respectively, and included 52 weeks in fiscal year 2000, 53 weeks in fiscal year 1999 and 52 weeks in fiscal year 1998.

Principles of Consolidation and Presentation
The accompanying consolidated financial statements include the accounts of WLR Foods and all of its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Inventories
Inventories of feed, grain, eggs, packaging supplies, processed poultry and meat products are stated at the lower of cost or market as determined by the first-in, first-out valuation method. Live poultry and breeder flocks consist of poultry raised for slaughter and breeders. Poultry raised for slaughter are stated at the lower of average cost or market. Breeders are stated at average cost less accumulated amortization. The cost of breeders is accumulated during their development stage and then amortized into the cost of the eggs produced over the egg production cycle of the breeders. The Company has four methods of purchasing grain: cash purchasing, forward purchasing, grain options, and hedging with futures contracts. Each purchasing method creates varying degrees of risk for WLR Foods. The Company uses futures contracts, grain options and forward purchases to hedge the risk of fluctuating grain prices. The gains or losses from hedging transactions become part of the cost of the related inventory items and are expensed during the time period for which the hedge was intended.

Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method over the useful lives of the respective assets. In general, the estimated useful lives for computing depreciation are: 15 to 20 years for buildings and improvements; 3 to 8 years for machinery and equipment; and 3 to 5 years for transportation equipment. The costs of maintenance and repairs are charged to operations, while costs associated with renewals, improvements and major replacements are capitalized.

Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income for the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Advertising and Promotion Expenses
Advertising and promotion expenses are charged to operations in the period incurred.

Financial Instruments
The estimated fair value of financial instruments has been determined by the Company using available market information. Except for financial instruments used for hedging and debt instruments (Notes 2 and 4), the carrying amounts of all other financial instruments approximate their fair values due to their short maturities.

Stock-Based Compensation
As permitted under SFAS No. 123, Accounting for Stock-Based Compensation, the Company continues to account for employee stock option plans using the intrinsic value method of accounting and provides the pro-forma disclosures of SFAS No. 123.

Use of Estimates
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Recently Issued Accounting Standards
In June 1998, SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, was issued. The Company adopted SFAS 133 on July 2, 2000. The Company anticipates that the adoption of this statement, which will occur in fiscal 2001, will result primarily in quarterly fluctuations to accumulated other comprehensive income, which is a component of shareholder’s equity, but will not have a significant impact on the Company’s consolidated statements of operations. The Company anticipates that the implementation of this statement on July 2, 2000 will result in a charge of approximately $3.3 million to accumulated other comprehensive income, representing the deferred losses on grain options and futures contracts on July 1, 2000.

2.      Inventories

A summary of inventories at July 1, 2000 and July 3, 1999 follows:
Dollars in thousands	2000	1999
Live poultry and breeder flocks	$ 51,283	$ 48,275
Processed poultry and meat products	30,655	31,510
Packaging supplies, parts and other	12,654	12,859
Feed, grain and eggs	16,388	14,035
Total inventories	$ 110,980	$ 106,679

The cost of grain, the principal feed ingredient for live birds, is subject to price changes caused by weather, size of harvest, changes in demand, transportation and storage costs. To reduce the risks of price fluctuations, the Company has entered into grain option and futures contracts. As of July 1, 2000, the Company had $3.4 million of deferred losses on option contracts. There were no deferred amounts relating to options for fiscal year 1999. The notional amount of grain futures contracts at July 1, 2000 and July 3, 1999 was $0.5 million and $23.2 million, respectively. The fair value of grain futures contracts used in hedging at July 1, 2000 and July 3, 1999 was $0.6 million and $20.6 million, respectively. The Company had $0.1 million of deferred gains on futures contracts at July 1, 2000 and $2.6 million of deferred losses on futures contracts at July 3, 1999. The notional amount and fair value of open grain options at July 1, 2000 was $1.1 million and ($2.3) million, respectively. There were no open grain option contracts at July 3, 1999.

3.      Property, Plant and Equipment

WLR Foods' investment in property, plant and equipment at July 1, 2000 and July 3, 1999 was as follows:

Dollars in thousands	2000	1999
Land and improvements	$ 18,520	$ 18,198
Buildings and improvements	98,531	97,670
Machinery and equipment	162,993	156,281
Transportation equipment	18,518	22,020
Construction in progress	3,846	2,382
	302,408	296,551
Less accumulated depreciation	200,338	188,606
Property, plant and equipment, net	$ 102,070	$ 107,945

4.      Long-Term Debt and Bank Revolving Credits

Long-term debt and other credit facilities at July 1, 2000 and July 3, 1999 consisted of the following obligations:

Dollars in thousands	2000	1999
Variable Rate Note:
Secured Bank Term Note due 2001	$ 40,435	$ 49,000
Revolving Credit Note:
Secured Bank Revolving Credit Note due 2001	15,811	3,753
Other Notes:
Notes with various terms and rates	842	1,138
Total long-term debt	57,088	53,891
Less current maturities of long-term debt	6,052	5,046
Long-term debt, excluding current maturities	$ 51,036	$ 48,845

The Company refinanced certain term notes and revolving credit notes due in 2000 as of November 20, 1998. The new facility is a three-year financing agreement that provides a total borrowing capacity of $150 million. The agreement includes a $50 million term loan and $100 million revolving credit facility. Both facilities have a maturity date of November 20, 2001 and are secured by virtually all of the Company’s assets. The carrying value of all debt approximates fair value at July 1, 2000, based on quoted market prices for similar issues.

At July 1, 2000, borrowings on the term loan, which had $40.4 million outstanding, were based on LIBOR of 6.68% plus the applicable margin of 140 basis points for a total rate of 8.08%. Revolving credit borrowings totaled $15.8 million as of July 1, 2000, with $15.0 million tied to LIBOR of 6.66% plus the 140 basis point applicable margin for a total rate of 8.06%. The remaining $0.8 million in revolving credit borrowings was based on the prime rate of 9.5%. At the end of each quarter, the applicable margin is adjusted based upon certain Company performance metrics.

Principal payments of $1.25 to $1.5 million are required at the end of each fiscal quarter, and began with the fourth quarter of fiscal 1999 for the term loan portion of the credit facility. Additionally, principal payments are required from the proceeds of asset sales in excess of $1.0 million annually and for substantial new issuances of common stock.

During the first quarter of fiscal year 1999, the Company recorded an extraordinary charge of $2.6 million ($1.6 million after tax) for the early extinguishment of debt resulting from the permanent reduction of its prior credit facility due to the sale of its Cassco Ice & Cold Storage, Inc. subsidiary and its Goldsboro, North Carolina chicken complex. The Company also recorded an extraordinary non-cash charge to write off the remaining unamortized debt issue costs of the prior credit facility during the second quarter of fiscal 1999 of $1.5 million ($1.0 million after tax). This charge is also shown as an extraordinary item for the early extinguishment of debt. Total charges for the early extinguishment of debt during fiscal 1999 were $4.1 million ($2.6 million after tax).

The Company incurred approximately $2.0 million in costs to establish the new credit facility. These costs have been capitalized, included in other assets, and are being amortized to interest expense over the life of the new facility.

In relation to the debt refinancing in fiscal year 1998, warrants totaling 320,363 are outstanding and exercisable with an exercise price of $0.01.

In connection with the refinancing, an interest rate swap and an interest rate cap that were required under the prior credit facility were assigned from First Union National Bank to the Bank of Montreal. Accordingly, the swap was marked to market as of November 20, 1998, with a non-cash charge of $0.6 million recorded as interest expense. As of July 1, 2000, the interest rate swap and the interest rate cap were no longer outstanding.

The Company’s credit agreement with its lenders contains restrictive covenants. As of July 1, 2000, the Company was in compliance with all covenants.

Required annual principal repayments of long-term debt with original maturities of greater than one year are as follows:

Dollars in thousands
Fiscal 2001     $ 6,052
Fiscal 2002      50,802
Fiscal 2003             89
Fiscal 2004             95
Fiscal 2005             50
Total            $57,088

5.      Employee Benefits

The Company maintains a Profit Sharing and Salary Savings Plan that is available to substantially all employees who meet certain age and service requirements. In fiscal year 1998, most participants could contribute up to 15% of their salary. Under the Company's restated plan, most participants could contribute up to 20% of their salary for fiscal years 1999 and 2000. For each employee dollar contributed (limited to the first 4% of an employee's compensation), the Company contributes a matching amount of 50 cents. The Company can also make additional contributions at its discretion. WLR Foods' total contributions under this plan were approximately $1.4 million, $2.4 million and $1.6 million, for fiscal 2000, 1999 and 1998, respectively.

6.      Income Taxes

The provision for income taxes for continuing operations was as follows for fiscal years 2000, 1999 and 1998:

Dollars in thousands	2000	1999	1998
Current:
Federal	$ 1,373	$ 3,908	$ -
State	216	2,178	166
	1,589	6,086	166
Deferred:
Federal	(866)	6,664	(14,625)
State	(127)	461	(1,893)
	(993)	7,125	(16,518)
Total tax expense (benefit)	$ 596	$ 13,211	$ (16,352)

The provision for income taxes for continuing operations differs from the amounts resulting from applying the federal statutory tax rates (34% for fiscal 2000, and 35% for fiscal 1999 and 1998) to earnings (loss) before income taxes and minority interest as follows for fiscal years 2000, 1999 and 1998:

Dollars in thousands	2000	1999	1998
Taxes computed using federal
statutory tax rates	$ 962	$ 12,582	$ (15,574)
State income taxes,
net of federal tax effect	59	1,715	(1,123)
Work opportunity tax credit	(218)	(293)	(97)
Foreign sales corporation	(153)	(344)	(221)
Other, net	(54)	(449)	663
Total tax expense (benefit)	$ 596	$ 13,211	$ (16,352)
Effective tax rate	21.1%	36.7%	36.7%

Income tax expense (benefit) is included in the financial statements as follows for fiscal years 2000, 1999 and 1998:

Dollars in thousands	2000	1999	1998
Continuing operations	$ 596	$ 13,211	$ (16,352)
Discontinued operations	-	10,667	1,671
Extraordinary charge	-	(1,569)	-
	$ 596	$ 22,309	$ (14,681)

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at July 1, 2000 and July 3, 1999 are listed below:

Dollars in thousands	2000	1999
Deferred tax liabilities:
Inventories, principally due to the
Accounting for live inventories
on the farm price method for
tax purposes	$ (13,357)	$ (13,577)
Plant and equipment, principally
due to differences in depreciation
and capitalized interest	(1,963)	(2,854)
Employee benefit deduction	(497)	(1,326)
Gross deferred tax liabilities	(15,817)	(17,757)
Deferred tax assets:
Net operating loss carryforwards	$ 1,217	$ 1,230
Insurance accruals, principally due to
Timing of payments versus the
Recording of expenses	2,768	3,085
Deferred compensation, principally due
to accrual for financial reporting purposes	1,362	1,356
Tax credits	2,269	2,544
Financing costs, principally due to
Accrual for financial purposes	642	642
Compensated absences, principally due
to accrual for financial reporting purposes	1,000	972
Accounts receivable, principally due to
Allowance for doubtful accounts	635	745
Other	109	375
Gross deferred tax assets	10,002	10,949
Net deferred tax (liability) asset	$ (5,815)	$ (6,808)

In assessing the recoverability of deferred tax assets, management considers whether it is reasonably probable that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent on the generation of future taxable income, during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the future expectation of taxable income and reversal of deferred tax liabilities, management believes it is more likely than not that the Company will realize the benefits of these deductible differences as reflected at July 1, 2000 and July 3, 1999.

7.      Shareholders’ Equity

In February 1994, the Board of Directors approved the adoption of the Shareholder Protection Rights Plan (the Plan) wherein one right attaches to and trades with each share of common stock. Each right entitles the registered holder to purchase from the Company, at an exercise price of $45.33, the number of shares of common stock or participating preferred stock having a market value of twice the exercise price. Such participating preferred stock is designed to have economic and voting terms similar to those of one share of common stock. Rights will separate from the common stock and become exercisable following the earlier of 1) the date a person or group acquires 15% or more of the outstanding stock, or 2) the 10^th business day (or such later date the Board may decide) after any person commences a tender offer that would result in such person or group holding a total of 15% or more of the common stock. Additionally, in either case, rights owned by the acquiring person or group would automatically become void.

If a person acquires between 15% and 50% of the outstanding common stock, the Board may, in lieu of allowing rights to be exercised, require each outstanding right to be exchanged for one share of common stock or participating preferred stock. A provision in the Plan allows for rights holders to acquire stock of the acquiring person or group, in the event a change in control of the Company has occurred.

The rights are redeemable by the Company at $0.01 per right prior to becoming exercisable and expire 10 years from issuance. WLR Foods has 100,000,000 shares of common stock authorized, with 16,172,410 outstanding on July 1, 2000 and 16,541,691 outstanding on July 3, 1999. Additionally, there are 50,000,000 shares of preferred stock authorized with none outstanding as of July 1, 2000 or July 3, 1999.

8.      Stock Option and Stock Purchase Plans

Stock Option Plan
WLR Foods Stock Option Plan was adopted by the Board of Directors in accordance with the Long-Term Incentive Plan which was ratified by the shareholders of the Company on October 31, 1998. The Plan provides for the granting of incentive or nonqualified common stock options. The option price under the Plan shall not be less than the fair market value of the common shares as of the date of the grant. The options vest after three years, with one-third vesting each year after the date of grant. The options are exercisable at varying dates not to exceed 10 years from the date of grant. The changes in the outstanding common shares under option for fiscal 2000, 1999 and 1998 are listed below:

	Common shares	Weighted Average
	under option	Exercise Price
Outstanding at June 28, 1997	710,666	$13.85
Canceled or expired	(226,041)	$14.29
Granted in fiscal 1998	158,750	$ 6.88
Outstanding at June 27, 1998	643,375	$11.98
Canceled or expired	(262,126)	$13.85
Exercised	(5,833)	$ 8.31
Granted in fiscal 1999	144,000	$ 8.34
Outstanding at July 3, 1999	519,416	$10.07
Canceled or expired	(27,000)	$ 8.96
Granted in fiscal 2000	215,250	$ 5.05
Outstanding at July 1, 2000	707,666	$ 8.58

There were 327,497, 270,416, and 343,374 shares exercisable under option with weighted average exercise prices of $11.17, $12.06, and $15.08 at fiscal year end 2000, 1999 and 1998, respectively. The following table summarizes information about stock options outstanding as of July 1, 2000:

Stock Options Outstanding:			Stock Options Exercisable:
		Weighted Average
		Remaining Contractual
Exercise Price	Shares	Life (Years)	Shares
$ 5.047	213,000	9.8	-
6.875	105,000	8.0	69,998
8.281	126,500	9.0	-
8.310	88,500	7.0	88,500
9.219	8,500	8.4	2,833
14.125	88,666	5.5	88,666
15.000	77,500	4.6	77,500
Total	707,666		327,497

Accounting for Stock Option Plan
The Company has elected to account for its employee stock option plan using the intrinsic value method of accounting. Accordingly, no compensation cost has been recognized in the accompanying consolidated financial statements because the exercise price of the stock options equals the market price of the underlying stock on the date of grant. Pro forma information regarding net earnings (loss) and net earnings (loss) per share is required by SFAS No. 123. Assuming the Company accounted for its employee stock options using the fair value method, the Company's net earnings (loss) and net earnings (loss) per share from continuing operations would approximate the pro forma amounts indicated below:

	Fiscal years ended
Dollars in thousands, except per share data	July 1, 2000	July 3, 1999	June 27, 1998
Net earnings (loss) from continuing operations
As Reported	$ 2,233	$ 22,738	$ (28,212)
Pro Forma	$ 1,838	$ 22,292	$ (28,537)
Net earnings (loss) per common share from continuing operations
As Reported, basic	$ 0.13	$ 1.35	$ (1.72)
As Reported, diluted	$ 0.13	$ 1.34	$ (1.72)
Pro Forma, basic	$ 0.11	$ 1.33	$ (1.74)
Pro Forma, diluted	$ 0.11	$ 1.32	$ (1.74)

Note: The pro forma disclosures shown may not be representative of the effects on reported net earnings in future years.

The fair value of each stock option grant used to compute pro forma net earnings (loss) and net earnings (loss) per share disclosures is estimated at the time of the grant using the Black-Scholes option-pricing model. The weighted-average assumptions used in the model are as follows:

	2000	1999	1998
Expected dividend yield	0.0%	0.0%	0.0%
Expected volatility	54%	55%	31%
Risk-free interest rate	6.5%	5.5%	5.7%
Expected term (in years)	10	10	10

Using these assumptions in the Black-Scholes model, the weighted average fair value of options granted was $0.7 million, $0.8 million, and $0.6 million in fiscal years 2000, 1999 and 1998, respectively. On October 29, 1994, the shareholders of WLR Foods approved the Poultry Producer Stock Purchase Plan and amended and restated the Employee Stock Purchase Plan. These plans allow contract producers and employees to purchase stock at a 10% discount from the market price. All shares must be held in the plans for a period of two years. Upon termination of employment or contract, participants are terminated from the respective plans.

9.      Leases

WLR Foods has entered into various operating lease agreements for machinery and equipment. The leases are noncancelable and expire on various dates through 2006. Total rent expense was approximately $3.4 million, $3.4 million, and $5.1 million for fiscal 2000, 1999 and 1998, respectively. The following schedule presents the future minimum rental payments required under the operating leases that have initial or remaining noncancelable lease terms in excess of one year as of July 1, 2000:

Dollars in thousands
Fiscal 2001	$ 2,399
Fiscal 2002	1,347
Fiscal 2003	623
Fiscal 2004	150
Fiscal 2005	36
Fiscal 2006	12
Total minimum lease payments	$ 4,567

10.      Related Party Transactions

Certain directors of WLR Foods are contract growers of live poultry for the Company. In addition, a WLR Foods director is a director/officer of a company which supplies fuel and related products to certain locations of the Company.

Transactions with these related parties during the past three fiscal years are as follows:

(Dollars in thousands)	Purchases from Related parties
Fiscal 2000	$ 700
Fiscal 1999	967
Fiscal 1998	1,381

In management's opinion, all related party transactions are conducted under normal business conditions, with no preferential treatment given to related parties.

11.      Earnings Per Share

The following is a reconciliation between the calculation of basic and diluted net earnings (loss) per share:

Dollars in thousands	2000	1999	1998
Numerator:
Net earnings (loss) from
continuing operations	$ 2,233	$ 22,738	$ (28,212)
Denominator:
Weighted average common
shares outstanding	16,419	16,479	16,315
Effect of outstanding stock warrants	320	300	88
Basic weighted average common shares outstanding	16,739	16,779	16,403
Basic net earnings (loss) from continuing
operations per common share	$ 0.13	$ 1.35	$ (1.72)
Numerator:
Net earnings (loss) from
continuing operations	$ 2,233	$ 22,738	$ (28,212)
Denominator:
Weighted average common
shares outstanding	16,419	16,479	16,315
Effect of outstanding stock options	22	11	-
Effect of outstanding stock warrants	320	407	88
Diluted weighted average common shares outstanding	16,761	16,897	16,403
Diluted net earnings (loss) from continuing
operations per common share	$ 0.13	$ 1.34	$ (1.72)

Options to purchase 707,666, 519,416 and 643,375 shares of common stock, at prices between $5.05 and $15.00, $6.88 and $15.00, and $6.88 and $20.00 per share were outstanding in 2000, 1999, and 1998, respectively. The outstanding options were not included in the computation of diluted earnings per share for fiscal year 1998 because the effect of including these options would have been anti-dilutive.

12.      Discontinued Operations

During fiscal year 1998, the Company's Board of Directors adopted a plan to discontinue operations of its subsidiary, Cassco Ice & Cold Storage. The transaction involved the sale of the division and was completed on July 31, 1998. Net proceeds of approximately $55 million were received, resulting in a gain of approximately $28 million ($18 million after tax). Earnings from discontinued operations in fiscal year 1999 were approximately $1 million ($0.7 million after tax). Accordingly, the operating results of the Cassco Ice operations have been segregated from continuing operations and reported as separate line items on the consolidated statement of operations.

Operating results of discontinued operations were as follows:

Dollars in thousands	2000	1999	1998
Net sales	$ -	$ 4,641	$ 22,063
Income before tax	-	1,071	4,529
Income tax expense	-	407	1,671
Net earnings	$ -	$ 664	$ 2,858

13.      Sale of Assets

On August 14, 1998, the Company completed the sale of its Goldsboro, North Carolina chicken complex. Net proceeds of approximately $38 million were received in exchange for assets totaling approximately $30 million. The gain of approximately $8 million ($5 million after tax) is included in the results of operations for fiscal year 1999. The Company also completed the sale of its Monroe, North Carolina processing plant in fiscal year 1999. The sale resulted in a loss of approximately $1.5 million ($0.9 million after tax).

14.      Contingencies

The Company is a defendant in a pending litigation proceeding in the state of West Virginia alleging violations of the West Virginia Consumer Credit Protection Act and West Virginia Antitrust Law. The suit alleges, among other things, that the Company provided substandard chicks and feed to growers who raise chickens for the Company in West Virginia. The suit was dismissed by the Hardy County Circuit Court and is currently being appealed before the West Virginia Supreme Court. While any potential damages in the suit cannot be determined, the lawsuit is not expected to have a material effect on the Company’s consolidated financial statements. The Company believes the suit is without merit and intends to defend it vigorously.

15.      Segment, Geographic, and Major Customer Information

In fiscal year 1999, the Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." This statement requires companies to report certain information about operating segments in their financial statements and establishes standards for related disclosures about products and services, geographic areas and major customers.

The Company has two reportable segments: Chicken and Turkey. The third segment, Other, includes revenues from the Company's protein conversion plants, unallocated corporate-related items and other miscellaneous items. Chicken segment revenues are primarily sales of chicken-related products, such as retail traypack items, whole birds cut up for fast-food restaurants and portion-controlled products for foodservice distributors. Turkey segment revenues are primarily sales of turkey-related products and further processed products, including both turkey and chicken items, produced at the Company's further processing plants. These items include fresh and frozen whole birds and parts, including retail traypack items, turkey burgers and a full line of further processed products, including deli meats, frankfurters and salads. To better utilize its feed manufacturing capabilities, the Company sells feed to other users, primarily from its Marshville, North Carolina feedmill. Sales from this mill were included in Turkey segment sales through the first quarter of fiscal 1999, when the complex was converted to chicken processing. Each segment is evaluated by management based on operating profit (loss) and net earnings (loss).

The following tables set forth specific operating information about each segment as reviewed by the Company's management. Net earnings (loss) for segment reporting is presented on the same basis as that used for consolidated net earnings (loss). The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Administrative services provided by the corporate offices are primarily allocated to the individual segments based on levels of inventories and property, plant and equipment. Due to certain assets which are shared between segments, management evaluates assets and capital expenditures on a consolidated basis; therefore, such information is not presented on a segment basis.

Dollars in thousands	Chicken	Turkey	Other	Elimina-	Total
Year ended July 1, 2000				tions
External segment revenues	$ 403,060	$ 421,616	$ 8,052	$ -	$ 832,728
Intersegment revenues	-	-	12,655	(12,655)	-
Total revenues	403,060	421,616	20,707	(12,655)	832,728
Interest expense	2,520	2,549	-	(101)	4,968
Interest income	-	205	145	(101)	249
Income taxes (benefit)	(6,718)	5,675	1,639	-	596
Net earnings (loss) from continuing operations	(11,078)	9,360	3,951	-	2,233
Depreciation expense	9,852	6,678	1,314	-	17,844
Year ended July 3, 1999
External segment revenues	$ 452,513	$ 427,637	$ 7,936	$ -	$ 888,086
Intersegment revenues	-	-	12,882	(12,882)	-
Total revenues	452,513	427,637	20,818	(12,882)	888,086
Interest expense	4,974	6,060	-	(103)	10,931
Gain on sale of Goldsboro complex	7,699	-	-	-	7,699
Interest income	1	103	299	(103)	300
Income taxes (benefit)	13,561	(1,861)	1,511	-	13,211
Net earnings (loss) from continuing operations	22,193	(3,046)	3,591	-	22,738
Extraordinary charge	-	-	(2,559)	-	(2,559)
Depreciation expense	9,754	8,218	1,408	-	19,380
Year ended June 27, 1998
External segment revenues	$ 388,559	$ 546,256	$ 11,152	$ -	$ 945,967
Intersegment revenues	22,912	-	13,460	(36,372)	-
Total revenues	411,471	546,256	24,612	(36,372)	945,967
Interest expense	8,239	14,376	13	(89)	22,539
Interest income	70	6	88	(89)	75
Income taxes (benefit)	3,277	(20,563)	934	-	(16,352)
Net earnings (loss) from continuing operations	6,085	(36,158)	1,927	(66)	(28,212)
Depreciation expense	9,432	11,169	2,242	-	22,843

A reconciliation of total segment earnings (loss) to consolidated net earnings (loss) is as follows:

	July 1, 2000	July 3, 1999	June 27, 1998
Segment earnings (loss)	$ 2,233	$ 22,738	$ (28,212)
Unallocated:
Earnings from discontinued operations, net of tax	-	664	2,858
Gain on sale of discontinued operations, net of tax	-	17,927	-
Extraordinary charge on early extinguishment of debt, net of tax	-	(2,559)	-
Net earnings (loss)	$ 2,233	$ 38,770	$ (25,354)

Geographic Information.
No individual foreign country accounts for 10% or more of sales to external customers.

Major Customers.
Revenues from one customer represented approximately $129 million and $113 million, or 16% and 13%, of total Company net sales in fiscal years 2000 and 1999, respectively. No customer represented 10% or more of total Company's net sales in fiscal year 1998.

16.      Selected Quarterly Financial Data (Unaudited)

The unaudited summary of quarterly results of continuing operations for fiscal 2000 and 1999 follows:

Dollars in thousands, except per share data
Fiscal year ended July 1, 2000	First	Second	Third	Fourth
Net sales	$ 202,007	$ 218,803	$ 199,182	$ 212,736
Operating income (loss)	4,946	8,233	(6,961)	299
Net earnings (loss) from continuing operations	2,543	4,784	(4,970)	(124)
Per share data:
Diluted earnings (loss) from continuing operations per common share	$ 0.15	$ 0.28	$ (0.30)	$ (0.01)
Fiscal year ended July 3, 1999	First	Second	Third	Fourth
Net sales	$ 237,941	$ 229,276	$ 192,881	$ 227,988
Operating income	15,889	15,094	759	6,924
Net earnings (loss) from continuing operations	11,717	7,222	(127)	3,926
Per share data:
Diluted earnings (loss) from continuing operations per common share	$ 0.70	$ 0.43	$ (0.01)	$ 0.23

Per share calculations are based on each stand alone period presented; therefore, the annual per share results may not be the sum of the four quarters.

17.      Subsequent Event

On September 27, 2000, the Company entered into an Agreement and Plan of Merger with Pilgrim's Pride Corporation ("Pilgrim's") whereby the Company will become a wholly-owned subsidiary of Pilgrim's and the Company's shareholders will receive $14.25cash for each share of Company common stock owned by them at the effective time of the merger. The Company's Board of Directors has unanimously approved the agreement. The agreement is subject to regulatory and shareholder approvals and other customary closing conditions. The merger is expected to be completed as soon as practicable thereafter.

Independent Auditors’ Report

The Board of Directors and Shareholders
WLR Foods, Inc.:

We have audited the accompanying consolidated balance sheets of WLR Foods, Inc. and subsidiaries as of July 1, 2000 and July 3, 1999 and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the fiscal years in the three-year period ended July 1, 2000. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of WLR Foods, Inc. and subsidiaries as of July 1, 2000 and July 3, 1999 and the results of their operations and their cash flows for each of the fiscal years in the three-year period ended July 1, 2000, in conformity with accounting principles generally accepted in the United States of America.

KPMG LLP
Richmond, Virginia
August 11, 2000, except as to Note 17, which is as of September 27, 2000

INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE

The Board of Directors and Shareholders
WLR Foods, Inc.:

Under date of August 11, 2000, except as to Note 17, which is as of September 27, 2000, we reported on the consolidated balance sheets of WLR Foods, Inc. and subsidiaries as of July 1, 2000 and July 3, 1999, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the fiscal years in the three-year period ended July 1, 2000.  These consolidated financial statements and our report thereon are included in the July 1, 2000 annual report on Form 10-K of WLR Foods, Inc.  In connection with our audits of the aforementioned consolidated financial statements, we also audited the related financial statement schedule as listed in Item 14(a) of this Form 10-K.  This financial statement schedule is the responsibility of the Company's management.  Our responsibility is to express an opinion on this financial statement schedule based on our audits.

In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

KPMG LLP

Richmond, Virginia
August 11, 2000

WLR FOODS, INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR FISCAL YEARS ENDED JULY 1, 2000, JULY 3, 1999 AND JUNE 27, 1998 (in thousands)
		Charged to
	Balance at	cost and		Balance
	Beginning	other	Charged to	at end of
Description	of period	expenses	accounts	period
Fiscal year ended July 1, 2000
Allowance for Doubtful Accounts	$1,909	$1,060	$1,341	$1,628
Total	$1,909	$1,060	$1,341	$1,628
Fiscal year ended July 3, 1999
Allowance for Doubtful Accounts	$1,515	$1,056	$662	$1,909
Total	$1,515	$1,056	$662	$1,909
Fiscal year ended June 27, 1998
Allowance for Doubtful Accounts	$1,550	$828	$863	$1,515
Total	$1,550	$828	$863	$1,515

Schedules not included in this Item have been omitted because they are either not applicable or the information is included in the Consolidated Financial Statements or notes thereto.

Item 9.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

There were no changes in or disagreements with accountants on accounting and financial disclosure during WLR Foods' two most recent fiscal years or any subsequent interim period.

PART III

Item 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Directors of the Company
The following information is given regarding WLR Foods’ Directors.

Name and Position		Director	Principal Occupation
with the Company	Age	Since	During the Last 5 Years
Class A Directors
(to serve until the 2000 annual meeting of shareholders)
J. Craig Hott	47	1988	Vice President of Hott's Farming, Inc. and Hott's Ag-Services, Inc.
Marie C. Johns	48	2000	President of Verizon - Washington DC Inc. Previously, President and Chief Executive Officer of Bell Atlantic - Washington, D.C., Inc.; and Vice President, External Affairs for Bell Atlantic-Washington.
Phillip C. Stone	58	1999	President of Bridgewater College, Bridgewater, Virginia since 1994
Class B Directors
(to serve until the 2001 annual meeting of shareholders)
Katherine K. Clark	43	1998	Founder and Chief Executive Officer of Landmark Systems Corporation
Stephen W. Custer	58	1984	President of Custer Associates, Inc. (consulting firm)
James L. Keeler	65	1988	Chief Executive Officer of the company since February 1988
President
Class C Directors
(to serve until the 2002 annual meeting of shareholders)
Charles L. Campbell	52	1988	Commissioner of Revenue for Page County, Virginia; broiler producer
William H. Groseclose, Jr.	69	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	72	1984	Poultry and livestock farmer

Executive Officers of the Company
The following information is given regarding WLR Foods’ Executive Officers.

Name and Position		Principal Occupation
with the Company	Age	During the Last 5 Years
James L. Keeler                   President, Chief Executive Officer	65	Chief Executive Officer since February 1988
Jane T. Brookshire                       Vice President of Administration, Secretary	54	Vice President of Administration since November 1998, previously Vice President of Human Resources from 1993 to 1998.
Dale S. Lam                                Chief Financial Officer, Vice President of Finance, Treasurer	37	Chief Financial Officer since November 1998, Vice President of Finance and Treasurer since August 1988, previously Controller. Co-owner and Treasurer of Office Products, Inc. from 1989 to 1997.
Ronald E. Morris                          Vice President of Turkey Operations for Wampler Foods, Inc.	47	Vice President of Turkey Operations for Wampler Foods, Inc. since November 1997; previously, Complex manager for Marshville, North Carolina Turkey Complex for Wampler Foods, Inc. from 1996 to 1997 and Complex Manager for Butterball from 1994 to 1996.
Walter F. Shaffer, III                    Vice President of Chicken Operations for Wampler Foods, Inc.	42	Vice President of Chicken Operations for Wampler Foods, Inc. since 1997; previously, Director of Chicken Operations for Wampler Foods, Inc. from 1996 to 1997, Director of Chicken Processing for Wampler Foods, Inc. from 1995 to 1996, and Plant Manager of Moorefield Chicken operations for Wampler Foods, Inc. from 1991 to 1995.
John A. Turner                            Vice President of Sales and Marketing for Wampler Foods, Inc.	49	Vice President of Sales and Marketing for Wampler Foods, Inc. since June, 1999; previously, Vice President of Sales and Marketing for Hatfield Quality Meats from 1996 to 1998, and President, Consumer Consumer Products Division of Rich Products Corporation from 1990 to 1996.

Item 11. EXECUTIVE COMPENSATION.

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.

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 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, providing a competitive compensation package and rewarding 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.

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.

Chief Executive Officer Compensation
Mr. Keeler’s base salary for the current fiscal year is $310,790. 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, the benefit of which is tied solely to Company performance, awarded to Mr. Keeler under the Long-Term Incentive Plan increased proportionately with the increase in the number of options granted to all members of management, reflecting a systematic effort to enhance management's personal financial interest in Company proformance.

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 five other 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, 2000, July 3, 1999 and June 27, 1998.

SUMMARY COMPENSATION TABLE
					Long-Term	Other
		Annual Compensation			Compensation	Compensation (2)
Name and				Other Annual
Principal Position	Year	Salary($)1	Bonus($)	Compensation ($)	Options	($)
James L. Keeler	99-00	301,738	0	0	90,000	29,498  (3)
Chief Executive	98-99	297,868	325,201	0	60,000	258,635
Officer & President	97-98	267,248	0	0	60,000	3,595
Dale S. Lam	99-00	175,000	0	0	15,000	3,200
Chief Financial	98-99	143,779	85,960	0	18,500	2,683
Officer, Treasurer
Jane T. Brookshire	99-00	175,000	0	0	15,000	3,200
Vice President	98-99	150,887	61,785	0	10,000	4,099
Administration,	97-98	131,115	0	0	10,000	2,570
Secretary
Ronald E. Morris	99-00	180,000	0	0	15,000	3,200
Vice President	98-99	168,187	91,663	0	10,000	4,589
Turkey Operations	97-98	139,039	0	0	10,000	1,500
Wampler Foods, Inc.
Walter F. Shafer, III	99-00	180,000	0	0	15,000	3,200
Vice President	98-99	168,187	91,663	0	10,000	4,578
Chicken Operations	97-98	138,654	0	0	10,000	2,715
Wampler Foods, Inc.
John A. Turner	99-00	220,000	0	0	15,000	3,200
Vice President	98-99	20,000	10,200	0	10,000	0
Sales and Marketing
Wampler Foods, Inc.

1   Includes 53 weeks for the fiscal year ending July 3, 1999, and 52 weeks for fiscal years ending July 1, 2000 and June 27, 1998.

2   Includes Company contributions made to the Company's Profit Sharing and Salary Savings Plan of $3,200 for each of Messrs. Keeler, Lam, Morris, Shafer and Turner, and Ms. Brookshire.

3   Includes $26,298 of deferred compensation which is based on increases in the Company’s book value due to earnings.

OPTION GRANTS IN LAST FISCAL YEAR
		% of Total
		Options	Exercise
		Granted to	or Base
	Options	Employee in	Price	Expiration	Grant Date
Name	Granted	Fiscal Year	Share ($)	Date	Present Value ($)1
James L. Keeler	90,000	67.2	5.0469	4/24/10	295,870
Dale S. Lam	15,000	11.2	5.0469	4/24/10	49,312
Jane T. Brookshire	15,000	11.2	5.0469	4/24/10	49,312
Ronald E. Morris	15,000	11.2	5.0469	4/24/10	49,312
Walter F. Shafer, III	15,000	11.2	5.0469	4/24/10	49,312
John A. Turner	15,000	11.2	5.0469	4/24/10	49,312

1 The values shown reflect a standard application of the Black-Scholes Option Pricing Model, assuming a risk-free rate of return of 6.5% and an annualized volatility factor of 54%. 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.

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 (1)	Fiscal
	Shares		Year-End	Year-End
	Acquired	Value	Exercisable/	Exercisable/
Name	On Exercise	Realized ($)	Unexercisable	Unexercisable
James L. Keeler	0	0	220,000/170,000	$0/0
Dale S. Lam	0	0	3,833/31,167	0/0
Jane T. Brookshire	0	0	36,666/28,334	0/0
Ronald E. Morris	0	0	9,666/28,334	0/0
Walter F. Shafer, III	0	0	16,666/28,334	0/0
John A. Turner	0	0	0/25,000	0/0

(1) Adjusted to give effect to the May 12, 1995 3-for-2 stock split.

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 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.

Under the terms of the 1998 Employment Agreement, Mr. Keeler served 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 above Summary Compensation Table (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.

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, 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.

The Company has also entered into Termination of Severance Agreements with Messrs. Keeler and Lam in connection with the pending merger with Pilgrim's Pride, which would provide Messrs. Keeler and Lam with lump sum severance payments of $900,000 and $447,750, respectively, upon completion of the merger. The Termination Agreements, which are conditional upon consumation of the merger, would replace the Severance Agreements described above with respect to those two executives, and would significantly reduce the cost to the Company of their severance benefits.

STOCK PRICE PERFORMANCE TABLE

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 1, 1995. 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.

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
Among WLR Foods, Comparable Companies, and the S & P 500

	Jun-95	Jun-96	Jun-97	Jun-98	Jun-99	Jun-00
Composite	100	111.26	143.94	177.06	227.6	97.735
S&P 500	100	126.01	169.74	220.94	271.21	290.88
WLR Foods	100	99.112	58.664	48.142	59.042	33.609

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

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 1, 2000 (i) by each of the Company's directors, (ii) by the executive officers named in the Summary Compensation Table, and (iii) by all directors and executive officers as a group.

	Number	Percent
Name	Beneficially Owned	of Class (1)
Jane T. Brookshire	51,300 (2)	*
Charles L. Campbell	19,137 (3)	*
Katherine K. Clark	3,663 (3)	*
Stephen W. Custer	40,201 (4)	*
William H. Groseclose, Jr.	13,771 (4)	*
J. Craig Hott	111,106 (5)	*
Marie C. Johns	662 (3)	*
James L. Keeler	320,379 (6)	1.95
Dale S. Lam	12,748 (7)	*
Ronald E. Morris	18,369 (8)	*
Walter F. Shafer, III	34,222 (9)	*
Phillip C. Stone	107,799 (10)	*
John A. Turner	6,116 (11)	*
William D. Wampler	765,937 (12)	4.73
All directors and executive	1,505,410 (13)	9.12
officers as a group
(consisting of 14 persons)

(*)     Denotes percent ownership not exceeding 1% of the class of common stock.

(1)      Based on 16,176,910 shares outstanding as of July 1, 2000 plus shares which members of management have the option to purchase within 60 days of July 1, 2000.

(2)     Includes 9,867 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 39,999 shares which Ms. Brookshire has the right to purchase within 60 days of July 1, 2000 through the exercise of options. Ms. Brookshire disclaims beneficial interest in the shares held by her husband.

(3)     All shares owned directly.

(4)     All shares owned directly and through his self-directed retirement account.

(5)     Includes 105,992 shares owned by E. E. Hott, Inc., of which Mr. Hott is an officer and director, 4,964 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.

(6)     Includes 56,457 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 240,000 shares which Mr. Keeler has the right to purchase within  60 days of July 1, 2000 through the exercise of options. Mr. Keeler disclaims beneficial interest in the shares owned by his wife.

(7)     Includes 5,347 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 7,166 shares which Mr. Lam has the right to purchase within 60 days of July 1, 2000 through the exercise of options. Mr. Lam disclaims beneficial interest in the shares held by his wife.

(8)     Includes 370 shares owned through the WLR Foods, Inc. Employee Stock Purchase Plan, 5,000 shares owned by his wife, and 12,999         shares which Mr. Morris has the right to purchase within 60 days of July 1, 2000 through the exercise of options. Mr. Morris disclaims beneficial interest in the shares held by his wife.

(9)     Includes 14,223 shares owned directly and through the WLR Foods, Inc. Employee Stock Purchase Plan and 19,999 shares which Mr.  Shafer has the right to purchase within 60 days of July 1, 2000 through the exercise of options.

(10)   Includes 2,302 shares owned directly and 105,497 shares owned by Bridgewater College, of which Mr. Stone is president. Mr. Stone disclaims beneficial interest in the shares owned by Bridgewater College.

(11)    Includes 179 shares owned directly, 2,604 shares owned jointly with his wife and 3,333 shares which Mr. Turner has the right to purchase  within 60 days of July 1, 2000 through the exercise of options.

(13)    Includes 258,155 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.

(14)    Includes 323,496 shares which the group has the right to purchase within 60 days of July 1, 2000 through the exercise of options.

Item 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

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 1, 2000, 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 1, 2000. 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	$82,959
Timothy Campbell, his son	$71,264
J. Craig Hott, Director
Hott's Farming, Inc.	$234,440
James L. Keeler, President, Chief
Executive Officer and Director
Gregory Keeler, his son	$165,085
William D. Wampler, Director
C. W. Wampler & Sons	$146,469

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 1, 2000.

PART IV

Item 14.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)   Financial Statements, Financial Statement Schedule and Exhibits

Financial Statements

Consolidated Statements of Operations - Fiscal years ended July 1, 2000, July 3, 1999 and June 27, 1998

Consolidated Balance Sheets - July 1, 2000 and July 3, 1999

Consolidated Statements of Shareholders' Equity - Fiscal years ended July 1, 2000, July 3, 1999 and June 27, 1998

Consolidated Statements of Cash Flows - Fiscal years ended July 1, 2000, July 3, 1999 and June 27, 1998

Notes to Consolidated Financial Statements - Fiscal years ended July 1, 2000, July 3, 1999 and June 27, 1998

Independent Auditors' Report

Financial Statement Schedule

Independent Auditors' Report on Schedule

Schedule II - Valuation and Qualifying Accounts

Schedules not included in this Item have been omitted because they are either not applicable or the information is included in the Consolidated Financial Statements or notes thereto.

(b) Reports on Form 8-K

None

(c) Exhibits

See Exhibit Index.

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

          WLR Foods, Inc.

          By:____/s/ James L. Keeler_____________
                      Its President & Chief Executive Officer
                      Date: September 29, 2000

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

                ____/s/ James L. Keeler___________
                      President & Chief Executive Officer
                              Date: September 29, 2000

           ____/s/ Dale S. Lam________________
                      Chief Financial Officer and Treasurer
                              Date: September 29, 2000

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature                                                                      Title

___________________________                       Director
          Charles L. Campbell*

___________________________                       Director
          Katherine K. Clark*

___________________________                       Director
          Stephen W. Custer*

___________________________                       Director
         William H. Groseclose, Jr.*

___________________________                       Director
         J. Craig Hott*

___________________________                       Director
         Marie C. Johns*

___________________________                       Director
         James L. Keeler

___________________________                       Director
        Phillip C. Stone*

___________________________                       Director
        William D. Wampler*

*By ___/s/ Dale S. Lam_________
           Dale S. Lam, attorney-in-fact

EXHIBIT INDEX

2           Agreement and Plan of Merger dated September 27, 2000

3.1       Articles of Incorporation of the Registrant, restated effective May 30, 1995, incorporated by reference to Exhibit 3.1 of Form 10-K filed with the Securities and Exchange Commission on October 2, 1995.

3.2       Bylaws of the Registrant, as amended on November 2,1994, incorporated by reference to Exhibit 3.2 of Form 10-K filed with the Securities     and Exchange Commission on October 2, 1995.

4.1       Specimen Stock Certificate incorporated by reference to Exhibit 4 of Form 10-K filed with the Securities and Exchange Commission on September 27, 1990.

4.2       Shareholder Protection Rights Agreement, dated as of February 4, 1994, which includes as Exhibit A the forms of Rights Certificate and Election to Exercise and as Exhibit B the Form of Certificate of Designation and Terms of the Participating Preferred Stock incorporated by reference to Exhibit 1 of Form 8-A filed with the Securities and Exchange Commission on September 30, 1993.

4.3       Warrant Holders Rights Agreement, dated as of February 25, 1998, incorporated by reference to Exhibit 2.5 of Form 10-Q, filed with the Securities and Exchange Commission on May 11, 1998.

4.4       Form of Warrant to Purchase Common Stock at $0.1 Per Share, incorporated by reference to Exhibit 2.6 of Form 10-Q, filed with the securities and Exchange Commission on May 11, 1998.

4.5       Credit Agreement, dated as of November 20, 1998, incorporated by reference to Exhibit 2.1 of Form 10-Q filed with the Securities and Exchange Commission on February 9, 1999.

4.6       Form of Revolving Credit Note, dated as of November 20, 1998, incorporated by reference to Exhibit 2.2 of Form 10-Q filed with the securities and Exchange Commission on February 9, 1999.

4.7       Form of Term Credit Note, dated as of November 20, 1998, incorporated by reference to Exhibit 2.3 of Form 10-Q filed with the Securities and Exchange Commission on February 9, 1999.

4.8       First Amendment, dated as of February 25, 1999, to the Credit Agreement dated as of November 20, 1998, incorporated by reference to Exhibit 4.8 of Form 10-K filed with the Securities and Exchange Commission on September 29, 1999.

4.9       Second Amendment, dated as of July 1, 1999, to the Credit Agreement dated as of November 20, 1998, incorporated by reference to Exhibit 4.9 to 10-K filed with the Securities and Exchange Commission on September 29, 1999.

4.10     Third Amendment, dated as of September 14, 1999, to the Credit Agreement dated as of November 20, 1998, incorporated by reference to Exhibit 4.10 to 10-K filed with the Securities and Exchange Commission on September 29, 1999.

4.11     Fourth Amendment, dated as of May _____, 2000, to the Credit Agreement dated as of November 20, 1998.

10.1     Employment Agreement, dated June 23, 1998 between the Registrant and James L. Keeler (Deferred Compensation Agreement attached thereto as Exhibit A), incorporated by reference to Exhibit 10.1 of Form 10-K filed with the Securities and Exchange Commission on  September 25, 1998.

10.2     Executive Cash Bonus Program, incorporated by reference to Exhibit 10.7 of Form 10-K filed with the Securities and Exchange Commission on September 30, 1993.

10.3     1998 Long-Term Incentive Plan, incorporated by reference to Appendix A to the Company's definitive proxy statement (Schedule 14A), filed with the Securities and Exchange Commission on September 30, 1998.

10.4     Severance Agreement, dated February 4, 1994 between the Registrant and James L. Keeler, incorporated by reference to Exhibit 10.4 of Form 10-Q filed with the Securities and Exchange Commission on February 15, 1994.

10.5     Severance Agreement, dated May 13, 1997 between the Registrant and Jane T. Brookshire, incorporated by reference to Exhibit 10.18 of Form 10-K filed with the Securities and Exchange Commission on September 26, 1997.

10.6     Severance Agreement, dated November 2, 1998 between the Registrant and Dale S. Lam, incorporated by reference to Exhibit 10.6 of Form 10-K filed with the Securities and Exchange Commission on September 29, 1999.

10.7     Severance Agreement, dated February 6, 1998 between the Registrant and Ronald E. Morris, incorporated by reference to Exhibit 10.8 of form 10-K filed with the Securities and Exchange Commission on September 25, 1998.

10.8     Severance Agreement, dated February 6, 1998 between the Registrant and Walter F. Shafer, III, incorporated by reference to Exhibit 10.9 of Form 10-K filed with the Securities and Exchange Commission on September 25, 1998.

10.9     Severance Agreement, dated June 1, 1999 between the Registrant and John A. Turner, incorporated by reference to Exhibit 10.9 to Form 10-K filed with the Securities and Exchange Commission on September 29, 1999.

10.10   Deferred Compensation Agreement, dated February 4, 1994, between the Registrant and William D. Wampler, incorporated by reference to Exhibit 10.12 of Form 10-Q filed with the Securities and Exchange Commission on February 15, 1994.

10.11   1995 Nonqualified Deferred Compensation Plan, incorporated by reference to Exhibit 10.16 of Form 10-K filed with the SEC on September 29, 1996.

10.12    Amendment No. One to 1995 Deferred Compensation Plan, incorporated by reference to Exhibit 10.17 of Form 10-K filed with the SEC on September 29, 1996.

10.13    Trust Under WLR Foods, Inc. Nonqualified Deferred Compensation Plan, incorporated by reference to Exhibit 10.18 of Form 10-K filed with the SEC on September 29, 1996.

10.14    Description of Plan to Issue Stock for Director Compensation, incorporated by reference to Exhibit 10.19 of Form 10-K filed with the SEC on September 29, 1996.

10.15    Termination of Severance Agreement, dated September 27, 2000, between the registrant and James L. Keeler

10.16   Termination of Severance Agreement, dated September 27, 2000, between the registrant and Dale S. Lam

21        List of Subsidiaries of the Registrant.

23        Consent of Independent Certified Public Accountants.

24.1     Power of Attorney, incorporated by reference to Exhibit 24.1 to Form 10-K, filed with the Securities and Exchange Commission on September 25, 1998.

24.2     Power of Attorney of Phillip C. Stone, incorporated by reference to Exhibit 24.3 of Form 10-K filed with the Securities and Exchange   Commission on September 29, 1999.

24.3     Power of Attorney of Marie C. Johns.

27        Financial Data Schedule.

EX-2

Exhibit 2

AGREEMENT AND PLAN OF MERGER

Among

PILGRIM’S PRIDE CORPORATION,

PPC ACQUISITION CORP.

and

WLR FOODS, INC.


Dated September 27, 2000

TABLE OF CONTENTS

Section                                                                                                                                                              Page
ARTICLE I          THE MERGER ......................................................................................................................1
           1.01.      The Merger .................................................................................................................................1
           1.02.      Effective Time; Closing ................................................................................................................1
           1.03.      Effect of the Merger .....................................................................................................................2
           1.04.      Articles of Incorporation; Bylaws .................................................................................................2
           1.05.      Directors and Officers ..................................................................................................................2
ARTICLE II         CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES ...............................2
           2.01.      Conversion of Securities ...............................................................................................................2
           2.02.      Employee Stock Options; Warrants ..............................................................................................3
           2.03.      Surrender of Shares; Stock Transfer Books ..................................................................................3
ARTICLE III        REPRESENTATIONS AND WARRANTIES OF THE TARGET .........................................5
           3.01.      Organization, Qualification and Corporate Power; Subsidiaries ......................................................5
           3.02.      Articles of Incorporation and Bylaws ............................................................................................6
           3.03.      Capitalization ...............................................................................................................................6
           3.04.      Authority Relative to This Agreement ............................................................................................7
           3.05.      No Conflict; Required Filings and Consents ..................................................................................7
           3.06.      Permits; Compliance ....................................................................................................................8
           3.07.      SEC Filings; Financial Statements .................................................................................................8
           3.08.      Absence of Certain Changes or Events .........................................................................................9
           3.09.      Absence of Litigation .................................................................................................................10
           3.10.      Employee Benefit Plans; Agreements ..........................................................................................10
           3.11.      Labor Matters ...........................................................................................................................12
           3.12.      Taxes ........................................................................................................................................13
           3.13.      Environmental Matters ...............................................................................................................13
           3.14.      Opinion of Financial Advisor ......................................................................................................16
           3.15.      Brokers .....................................................................................................................................16
           3.16.      Tangible Property ......................................................................................................................17
           3.17.      Real Property ............................................................................................................................17
           3.18.      Intellectual Property ...................................................................................................................19
           3.19.      Board Recommendation; State Takeover Statutes ......................................................................19
           3.20.      Contracts ..................................................................................................................................19
           3.21.      Inventory ...................................................................................................................................20
           3.22.      Product Liability .........................................................................................................................20
           3.23.      Customers .................................................................................................................................21
           3.24.      Insurance ...................................................................................................................................21
           3.25.      Proxy Statement .........................................................................................................................21
           3.26.      Rights Agreement. ......................................................................................................................21
           3.27.      Fees and Expenses of Transactions .............................................................................................22
ARTICLE IV         REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND ACQUIROR SUB .22
           4.01.      Corporate Organization ..............................................................................................................22
           4.02.      Authority Relative to This Agreement ..........................................................................................22
           4.03.      No Conflict; Required Filings and Consents ................................................................................22
           4.04.      Proxy Statement .........................................................................................................................23
           4.05.      Acquiror and Acquiror Sub Holdings in Company Stock .............................................................23
           4.06.      Financing ...................................................................................................................................23
ARTICLE V          CONDUCT OF BUSINESS PENDING THE MERGER ...................................................24
           5.01.      Conduct of Business by the Target Pending the Merger ..............................................................24
ARTICLE VI         ADDITIONAL AGREEMENTS ........................................................................................25
           6.01.      Stockholders’ Meeting ..............................................................................................................25
           6.02.      Proxy Statement ........................................................................................................................26
           6.03.      Appropriate Action; Consents; Filings ........................................................................................26
           6.04.      Access to Information; Confidentiality ........................................................................................27
           6.05.      No Solicitation of Transactions ..................................................................................................27
           6.06.      Directors’ and Officers’ Indemnification .....................................................................................28
           6.07.      Obligations of Acquiror Sub ......................................................................................................29
           6.08.      Public Announcements ..............................................................................................................30
           6.09.      Delivery of SEC Documents ......................................................................................................30
           6.10.      Notification of Certain Matters ..................................................................................................30
           6.11.      Further Action ..........................................................................................................................30
           6.12.      Postponement of Annual Meeting ..............................................................................................30
           6.13.      Letters of Accountants ..............................................................................................................30
           6.14.      Continuation of Benefits ............................................................................................................31
           6.15.      Severance Policy and Other Agreements ...................................................................................31
           6.16.      Grower Relations ......................................................................................................................31
           6.17.      Environmental Assessments .......................................................................................................31
ARTICLE VII        CONDITIONS TO THE MERGER ..................................................................................32
           7.01.      Conditions to the Obligations of Each Party ...............................................................................32
           7.02.      Conditions to the Obligations of Acquiror and Acquiror Sub ......................................................33
           7.03.      Conditions to the Obligations of the Target ................................................................................34
ARTICLE VIII       TERMINATION, AMENDMENT AND WAIVER ..........................................................34
           8.01.      Termination ..............................................................................................................................34
           8.02.      Fees and Expenses ...................................................................................................................36
           8.03.      Amendment ..............................................................................................................................37
           8.04.      Waiver .....................................................................................................................................37
ARTICLE IX          GENERAL PROVISIONS ...............................................................................................38
           9.01.      Non-Survival of Representations, Warranties and Agreements ...................................................38
           9.02.      Notices ....................................................................................................................................38
           9.03.      Certain Definitions ....................................................................................................................39
           9.04.      Severability ..............................................................................................................................40
           9.05.      Assignment; Binding Effect; Benefit ...........................................................................................40
           9.06.      Incorporation of Schedules .......................................................................................................40
           9.07.      Specific Performance ...............................................................................................................40
           9.08.      Governing Law ........................................................................................................................40
           9.09.      Headings .................................................................................................................................41
           9.10.      Counterparts ...........................................................................................................................41
           9.11.      Waiver of Jury Trial .................................................................................................................41
           9.12.      Entire Agreement .....................................................................................................................41

DEFINED TERMS

Term                                                                                                         Location
Acquiror                                                                                                   Introductory paragraph
Acquiror Expenses                                                                                   8.02
Acquiror Sub                                                                                            Introductory paragraph
affiliate                                                                                                      9.03
Agreement                                                                                                Introductory paragraph
Alternative Proposal Fee                                                                          8.02
Articles of Merger                                                                                    1.02
beneficial owner                                                                                       9.03
Blue Sky Laws                                                                                         3.05
Business Combination Transaction                                                            8.02
business day                                                                                             9.03
Certificates                                                                                               2.03
Claim                                                                                                       3.09
Cleanup                                                                                                   3.13
Closing                                                                                                    1.02
Code                                                                                                       3.10
Company                                                                                                 Introductory paragraph
Company Banker                                                                                    3.14
Company Class B Common Stock                                                          3.03
Company Common Stock                                                                       2.01
Company Disclosure Schedule                                                                 Article III
Company Employment Contracts                                                             3.10
Company Expenses                                                                                 8.02
Company Options                                                                                   2.02
Company Permits                                                                                    3.06
Company Plans                                                                                       3.03
Company Preferred Stock                                                                       3.03
Company SEC Reports                                                                           3.07
Company Shareholders’ Meeting                                                             6.01
Company Subsidiary                                                                               3.01
Company Warrants                                                                                 3.03
Confidentiality Agreement                                                                        6.04
Corporation Commission                                                                         1.02
Effective Time                                                                                          1.02
Environment                                                                                             3.13
Environment, Health and Safety Liabilities                                                3.13
Environmental Law                                                                                  3.13
ERISA                                                                                                     3.10
Exchange Act                                                                                           3.05
Facility                                                                                                     3.13
GAAP                                                                                                     3.07
Governmental Authority                                                                           3.06
Hazardous Activity                                                                                  3.13
Hazardous Material                                                                                 3.13
HSR Act                                                                                                  3.05
Indemnified Parties                                                                                  6.06
Intellectual Property                                                                                 3.18
IRS                                                                                                          3.10
Laws                                                                                                        3.05
Major Customers                                                                                    3.23
Material Adverse Effect                                                                           3.01
Material Contract                                                                                    3.19
Merger                                                                                                    Recitals
Merger Consideration                                                                             2.01
Most Recent Balance Sheet                                                                    3.07
Most Recent Financial Statements                                                           3.07
Occupational Safety and Health Law                                                       3.13
Order                                                                                                      3.09
Paying Agent                                                                                           2.03
person                                                                                                     9.03
Phase I Assessment                                                                                6.17
Phase II Assessment                                                                               6.17
Plans                                                                                                       3.10
Proxy Statement                                                                                     3.25
Release                                                                                                   3.13
Rights Agreement                                                                                   3.26
SEC                                                                                                        2.03
Securities Act                                                                                          3.07
Security Interest                                                                                     3.17
Shares                                                                                                    2.01
subsidiaries                                                                                             9.03
subsidiary                                                                                               9.03
Surviving Corporation                                                                            1.01
Takeover Proposal                                                                                6.05
Terminating Acquiror Breach                                                                 8.01
Terminating Company Breach                                                                8.01
Third Party Provisions                                                                            9.05
Transactions                                                                                           Recitals
Virginia Law                                                                                           Recitals

                    AGREEMENT AND PLAN OF MERGER, dated as of September 27, 2000 (this “Agreement”), by and among Pilgrim’s Pride Corporation, a Delaware corporation (“Acquiror”), PPC Acquisition Corp., a Virginia corporation and a direct, wholly owned subsidiary of Acquiror (“Acquiror Sub”), and WLR Foods, Inc., a Virginia corporation (the “Company”).

                    WHEREAS, Acquiror Sub, upon the terms and subject to the conditions of this Agreement and in accordance with the Stock Corporation Act of the Commonwealth of Virginia (“Virginia Law”), will merge with and into the Company (the “Merger”);

                    WHEREAS, the Board of Directors of the Company has unanimously (i) determined that the Merger is in the best interests of the Company and its shareholders and approved and adopted this Agreement and the transactions contemplated hereby (the “Transactions”) and (ii) recommended approval and adoption of this Agreement and approval of the Merger by, and directed that this Agreement and the Merger be submitted to a vote of, the shareholders of the Company; and

                    WHEREAS, the Boards of Directors of Acquiror and Acquiror Sub have determined that the Merger is in the best interests of Acquiror, Acquiror Sub and their stockholders and have approved and adopted this Agreement and the Transactions.

                    NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Acquiror, Acquiror Sub and the Company hereby agree as follows:

ARTICLE I

THE MERGER

                    SECTION 1.01.  The Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with Virginia Law, at the Effective Time (as hereinafter defined), Acquiror Sub shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Acquiror Sub shall cease and the Company shall continue as the surviving corporation of the Merger (the “Surviving Corporation”). The name of the Surviving Corporation shall be Pilgrim’s Pride Corporation of Virginia, Inc.

                    SECTION 1.02.  Effective Time; Closing. As promptly as practicable and in no event later than the twentieth business day following the satisfaction or waiver of the conditions set forth in Article VII (or such other date as may be agreed in writing by each of the parties hereto), the parties hereto shall cause the Merger to be consummated by filing articles of merger (the “Articles of Merger”) with the State Corporation Commission of the Commonwealth of Virginia (the “Corporation Commission”) in such form as is required by, and executed in accordance with the relevant provisions of, Virginia Law. The term “Effective Time” means the date and time of the approval of the Articles of Merger by the Corporation Commission (or such later time as may be agreed in writing by each of the parties hereto and specified in the Articles of Merger). Immediately prior to the filing of the Articles of Merger, a closing (the “Closing”) will be held at the offices of Baker & McKenzie in Dallas, Texas (or such other place and time as the parties may agree).

                    SECTION 1.03.  Effect of the Merger. The effect of the Merger shall be as provided in the applicable provisions of Virginia Law.

                    SECTION 1.04.  Articles of Incorporation; Bylaws. (a) At the Effective Time, the Articles of Incorporation of the Company, as in effect immediately prior to the Effective Time, shall be amended as of the Effective Time by operation of this Agreement and by virtue of the Merger without any further action by the shareholders or directors of the Surviving Corporation to read the same in its entirety the Articles of Incorporation of Acquiror Sub, as in effect immediately prior to the Effective Time, except that Article 1 thereof shall be amended to read in its entirety as follows: "1. The name of the corporation is Pilgrim’s Pride Corporation of Virginia, Inc."

                    (b)      At the Effective Time, the Bylaws of Acquiror Sub, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation until thereafter amended as provided by law, the Articles of Incorporation of the Surviving Corporation and such Bylaws.

                    SECTION 1.05.  Directors and Officers. The directors of Acquiror Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Articles of Incorporation and Bylaws of the Surviving Corporation until a successor is elected or appointed and has qualified or until the earliest of such director’s death, resignation, removal or disqualification, and the officers of the Company (other than the Chief Executive Officer and Chief Financial Officer) immediately prior to the Effective Time and the Chief Executive Officer and Chief Financial Officer of Acquiror Sub immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified, or as otherwise provided in the Bylaws of the Surviving Corporation.

ARTICLE II

CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES

                    SECTION 2.01.  Conversion of Securities. At the Effective Time, by virtue of the Merger and without any action on the part of Acquiror Sub, the Company or the holders of any of the following shares of capital stock:

                    (a)      Each share of Class A Common Stock, no par value, of the Company (“Company Common Stock”; shares of Company Common Stock being hereinafter collectively referred to as the “Shares”) issued and outstanding immediately prior to the Effective Time (other than any Shares to be canceled pursuant to Section 2.01(b)) shall be canceled and shall be converted automatically into the right to receive an amount equal to $14.25 in cash (the “Merger Consideration”) payable, without interest, to the holder of such Share, upon surrender, in the manner provided in Section 2.03, of the certificate that formerly evidenced such Share, less any required withholding taxes;

                    (b)      Each Share held in the treasury of the Company and each Share owned by Acquiror Sub, Acquiror or any direct or indirect wholly owned subsidiary of Acquiror or of the Company immediately prior to the Effective Time shall be canceled without any conversion thereof and no payment or distribution shall be made with respect thereto; and

                    (c)      Each share of Common Stock of Acquiror Sub issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of Common Stock, no par value, of the Surviving Corporation.

                    SECTION 2.02.  Employee Stock Options; Warrants. (a) At the Effective Time, each outstanding option to purchase Shares (a “Company Option”) granted under Company’s 1998 Long Term Incentive Plan and 1988 Long Term Incentive Plan, whether or not then exercisable, shall be canceled by the Company, and each holder of a canceled Company Option shall be entitled to receive no later than the later of (x) the Effective Time and (y) 10 days after the receipt of a release and waiver from such holder as described in the final sentence of this subsection (a), from the Surviving Corporation, in consideration for the cancellation of such Company Option, an amount in cash equal to the product of (i) the number of Shares previously subject to such Company Option and (ii) the excess, if any, of the Merger Consideration over the exercise price per Share previously subject to such Company Option, less any required withholding taxes. The Company shall obtain from each person named in Section 2.02 of the Company Disclosure Schedule, and shall use its best efforts to obtain from each other holder of a Company Option, a release and waiver effective as of the Effective Time of each such person’s rights under the terms of any Company Option.

                    (b)      At the Effective Time, pursuant to the terms of each outstanding warrant granted to First Union National Bank and Harris Trust and Savings Bank (a “Company Warrant”), each holder of a Company Warrant shall be entitled to receive promptly upon exercise thereof subsequent to the Closing from the Surviving Corporation an amount in cash equal to the product of (i) the number of Shares previously subject to such Company Warrant and (ii) the excess, if any, of the Merger Consideration over the exercise price per Share previously subject to such Company Warrant, less any required withholding taxes.

                    SECTION 2.03.  Surrender of Shares; Stock Transfer Books. (a) Prior to the Effective Time, Acquiror Sub shall designate a bank or trust company reasonably satisfactory to the Company to act as agent (the “Paying Agent”) for the holders of Shares in connection with the Merger to receive the funds to which holders of Shares shall become entitled pursuant to Section 2.01(a). At the Effective Time, Acquiror shall cause the Surviving Corporation to have sufficient funds to deposit, and shall cause the Surviving Corporation to deposit in trust with the Paying Agent, cash in the aggregate amount equal to the product of (i) the number of Shares outstanding immediately prior to the Effective Time (other than Shares owned by Acquiror or Acquiror Sub) and (ii) the Merger Consideration. Such funds shall be invested by the Paying Agent as directed by the Surviving Corporation, provided that such investments shall be in obligations of or guaranteed by the United States of America or of any agency thereof and backed by the full faith and credit of the United States of America, in commercial paper obligations rated A-1 or P-1 or better by Moody’s Investors Services, Inc. or Standard & Poor’s Corporation, respectively, or in deposit accounts, certificates of deposit or banker’s acceptances of, repurchase or reverse repurchase agreements with, or Eurodollar time deposits purchased from, commercial banks with capital, surplus and undivided profits aggregating in excess of $100 million (based on the most recent financial statements of such bank which are then publicly available at the Securities and Exchange Commission (the “SEC”) or otherwise); provided, however, that no loss on any investment made pursuant to this Section 2.03 shall relieve Acquiror or the Surviving Corporation of its obligation to pay the Merger Consideration for each Share outstanding immediately prior to the Effective Time.

                    (b)      Promptly after the Effective Time, Acquiror shall cause the Surviving Corporation to mail to each person who was, at the Effective Time, a holder of record of Shares entitled to receive the Merger Consideration pursuant to Section 2.01(a) a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the certificates evidencing such Shares (the “Certificates”) shall pass, only upon proper delivery of the Certificates to the Paying Agent) and instructions for use in effecting the surrender of the Certificates pursuant to such letter of transmittal. Upon surrender to the Paying Agent of a Certificate, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such Certificate shall be entitled to receive in exchange therefor, subject to any required withholding taxes, the Merger Consideration for each Share formerly evidenced by such Certificate, and such Certificate shall then be canceled. No interest shall accrue or be paid on the Merger Consideration payable upon the surrender of any Certificate for the benefit of the holder of such Certificate. If payment of the Merger Consideration is to be made to a person other than the person in whose name the surrendered Certificate is registered on the stock transfer books of the Company, it shall be a condition of payment that the Certificate so surrendered shall be endorsed properly or otherwise be in proper form for transfer and that the person requesting such payment shall have paid all transfer and other taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of the Surviving Corporation that such taxes either have been paid or are not applicable. If a mutilated Certificate is surrendered to the Paying Agent or the holder of a Certificate submits an affidavit to the Paying Agent stating that the Certificate has been lost, destroyed or wrongfully taken, then such holder shall, if required by the Surviving Corporation, furnish an indemnity bond sufficient in the reasonable judgment of the Surviving Corporation to protect Acquiror, the Surviving Corporation and the Paying Agent from any loss that any of them may suffer. The Surviving Corporation shall pay all charges and expenses, including those of the Paying Agent, in connection with the distribution of the Merger Consideration.

                    (c)      At any time following the sixth month after the Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds which had been made available to the Paying Agent and not disbursed to holders of Shares (including, without limitation, all interest and other income received by the Paying Agent in respect of all funds made available to it) and, thereafter, such holders shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat and other similar laws) only as general creditors thereof with respect to any Merger Consideration that may be payable upon due surrender of the Certificates held by them. Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying Agent shall be liable to any holder of a Share for any Merger Consideration properly delivered in respect of such Share to a public official pursuant to any abandoned property, escheat or other similar law.

                    (d)      At the Effective Time, the stock transfer books of the Company shall be closed and, thereafter, there shall be no further registration of transfers of Shares on the records of the Company. From and after the Effective Time, the holders of Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares except as otherwise provided herein or by applicable law.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

                    Except as set forth in the Disclosure Schedule delivered by the Company and signed by the Company and Acquiror for identification prior to the execution and delivery of this Agreement (the “Company Disclosure Schedule”), which shall be numbered in such a way as to correspond with the section references below and the disclosure made shall relate only to the representations and warranties made within the relevant section, the Company hereby represents and warrants to Acquiror and Acquiror Sub that:

                    SECTION 3.01.  Organization, Qualification and Corporate Power; Subsidiaries. The Company is a corporation, and each subsidiary of the Company (a “Company Subsidiary”) is a corporation or partnership, in each case duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has the requisite corporate or partnership power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted. The Company and each Company Subsidiary are duly qualified or licensed as a foreign corporation or partnership to do business, and are in good standing, in each jurisdiction where the character of the properties owned, leased or operated by them or the nature of their business makes such qualification or licensing necessary, except for such failures to be so qualified or licensed and in good standing that could not reasonably be expected to have a Material Adverse Effect on the Company. As used in this Agreement, the term “Material Adverse Effect” means with respect to any person, any change or effect that, individually or when taken together with all such other changes or effects, is materially adverse to the condition (financial or other), business, operations, properties, assets, liabilities or results of operations of such person and its subsidiaries, taken as a whole, or to the transactions contemplated by this Agreement. A true and correct list of all Company Subsidiaries, together with the jurisdiction of organization of each Company Subsidiary and the percentage of the outstanding capital stock or other equity interests of each Company Subsidiary owned by the Company and each other Company Subsidiary, is set forth in Section 3.01 of the Company Disclosure Schedule. Except as disclosed in Section 3.01 of the Company Disclosure Schedule, the Company does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity.

                    SECTION 3.02.  Articles of Incorporation and Bylaws. The Company has heretofore furnished to Acquiror a complete and correct copy of the Articles of Incorporation and Bylaws or equivalent organizational documents, each as amended to date, of the Company and each Company Subsidiary. Neither the Company nor any Company Subsidiary is in violation of any provision of its Articles of Incorporation, Bylaws or equivalent organizational documents.

                    SECTION 3.03.  Capitalization. The authorized capital stock of the Company consists of 100,000,000 shares of Company Common Stock, 100,000,000 shares of Class B Common Stock, no par value (“Company Class B Common Stock”), and 50,000,000 shares of preferred stock, no par value (“Company Preferred Stock”). As of September 26, 2000, (a) 16,203,403 shares of Company Common Stock were issued and outstanding, all of which are validly issued, fully paid and nonassessable and not subject to preemptive rights, (b) 700,750 shares of Company Common Stock were issuable pursuant to outstanding Company Options and (c) 320,364 shares of Company Common Stock were issuable pursuant to outstanding Company Warrants. The number of Company Options and Company Warrants, and the exercise prices thereof, as of September 26, 2000, are set forth in Section 3.03 of the Company Disclosure Schedule. No shares of Company Class B Common Stock or Company Preferred Stock are issued and outstanding. Except as set forth in Section 3.03 of the Company Disclosure Schedule, there are no options, warrants or other rights, agreements, arrangements or commitments of any character (including, without limitation, stock appreciation rights) relating to the issued or unissued capital stock of, or other equity interests in, the Company or any Company Subsidiary obligating the Company or any Company Subsidiary to issue or sell any shares of capital stock of, or other equity interests in, the Company or any Company Subsidiary or pay any amounts of money as a result thereof. Between September 26, 2000 and the date of this Agreement, no shares of Company Common Stock have been issued by the Company, except shares issued pursuant to the Company Plans (as defined below) and shares issued pursuant to the exercise of the Company Options and Company Warrants, in each case in accordance with their respective terms as in effect on the date hereof, and no Company Options have been granted. There are no outstanding contractual obligations of the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any shares of Company Common Stock or any capital stock of, or any equity interest in, any Company Subsidiary. No shareholder of the Company or any Company Subsidiary will have any dissenter’s rights, rights of appraisal or similar rights under Virginia Law in connection with the Merger or the Transactions. Except as described in Section 3.03 of the Company Disclosure Schedule, each outstanding share of capital stock of, or other equity interest in, each Company Subsidiary is duly authorized, validly issued, fully paid and nonassessable. The Company’s Poultry Producer Stock Purchase Plan, Amended and Restated Employee Stock Purchase Plan, Dividend Reinvestment and Stock Purchase Plan and Plan to Issue Stock for Director Compensation (collectively, the “Company Plans”) have been suspended, and no stock will be issued under any such plan except as reflected in this Section 3.03. As of the Effective Time, the sum of the number of shares of Company Common Stock then outstanding plus the maximum number of shares of Company Common Stock then issuable (assuming acceleration of any vesting provisions) upon the exercise of Company Options and Company Warrants, shall not exceed 17,155,317, and no shares of Company Common Stock will be issuable pursuant to any of the Company Plans. The maximum amount payable by the Company pursuant to Sections 2.01 and 2.02 is $239,628,752.

                    SECTION 3.04.  Authority Relative to This Agreement. The Company has all necessary corporate power and authority to execute and deliver this Agreement and, with respect to the Merger, upon the approval and adoption of this Agreement and the Merger by the Company’s shareholders in accordance with this Agreement and Virginia Law, to perform its obligations hereunder and to consummate the Transactions. The execution and delivery of this Agreement by the Company and the consummation by the Company of the Transactions have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the Transactions (other than, with respect to the Merger, the approval and adoption of this Agreement and the Merger by the holders of two thirds of the then outstanding shares of Company Common Stock and the filing and recordation of appropriate Articles of Merger with the Corporation Commission as required by Virginia Law). This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery of this Agreement by Acquiror and Acquiror Sub, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms.

                    SECTION 3.05.  No Conflict; Required Filings and Consents. (a) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, nor will the transfer of any assets by the Company or any Company Subsidiary, subject to (x) with respect to the Merger, obtaining the requisite approval and adoption of this Agreement and the Merger by the Company’s shareholders in accordance with this Agreement and Virginia Law, and (y) obtaining the consents, approvals, authorizations and permits and making the filings described in Section 3.05(b) and Section 3.05(b) of the Company Disclosure Schedule, (i) conflict with or violate the Articles of Incorporation, Bylaws or equivalent organizational documents of the Company or any Company Subsidiary, (ii) conflict with or violate any domestic (federal, state or local) or foreign law, rule, regulation, order, judgment or decree (collectively, “Laws”) applicable to the Company or any Company Subsidiary or by which any property or asset of the Company or any Company Subsidiary is bound or affected, or (iii) except as specified in Section 3.05(a)(iii) of the Company Disclosure Schedule, result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, unilateral amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of the Company or any Company Subsidiary, or result in the payment of any amounts as a result of such transactions, or require the consent of any third party pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any Company Subsidiary is a party or by which the Company or any Company Subsidiary or any property or asset of the Company or any Company Subsidiary is bound or affected, except for such conflicts, violations, breaches, defaults, rights, liens and consents which could not reasonably be expected to have a Material Adverse Effect on the Company.

                    (b)      The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), state securities or “blue sky” laws (“Blue Sky Laws”), the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) and the rules and regulations promulgated thereunder, and filing and recordation of appropriate Articles of Merger with the Corporation Commission as required by Virginia Law, (ii) as specified in Section 3.05(b) of the Company Disclosure Schedule and (iii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, could not prevent or delay consummation of the Merger, or otherwise prevent the Company from performing its obligations under this Agreement.

                    SECTION 3.06.  Permits; Compliance. Except as disclosed in Section 3.06 of the Company Disclosure Schedule, each of the Company and the Company Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals and orders of any United States (federal, state or local) or foreign government, or governmental, regulatory or administrative authority, agency or commission or court of competent jurisdiction (“Governmental Authority”) necessary for the Company or any Company Subsidiary to own, lease and operate its properties or to carry on its business as it is now being conducted, except for those which the failure to possess could not reasonably be expected to have a Material Adverse Effect on the Company (the “Company Permits”), and no suspension or cancellation of any of the Company Permits is pending or, to the knowledge of the Company, threatened. Except as disclosed in Section 3.06 of the Company Disclosure Schedule, the Company and each Company Subsidiary are in compliance in all material respects with all applicable Laws and Company Permits.

                    SECTION 3.07.  SEC Filings; Financial Statements. (a) Except as set forth in Section 3.07(a) of the Company Disclosure Schedule, the Company has timely filed all forms, reports and documents required to be filed by it with the SEC since July 1, 1995 (collectively, the “Company SEC Reports”). The Company SEC Reports (i) were prepared in all material respects in accordance with the requirements of the Securities Act of 1933, as amended (the “Securities Act”), and the Exchange Act, as the case may be, and the rules and regulations thereunder and (ii) did not, at the time they were filed (or at the effective date thereof in the case of registration statements), contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. No Company Subsidiary is currently required to file any form, report or other document with the SEC.

                    (b)      The Company has delivered to Acquiror true and correct copies of its audited financial statements as of and for the fiscal year ended July 1, 2000 (the “Most Recent Financial Statements”). Each of the Most Recent Financial Statements and the financial statements (including, in each case, any notes thereto) contained in the Company SEC Reports was prepared in accordance with United States generally accepted accounting principles applied on a consistent basis (“GAAP”) throughout the periods indicated (except as may be indicated in the notes thereto and except that financial statements included with interim reports do not contain all GAAP notes to such financial statements) and each fairly presented in all material respects the financial position, results of operations and changes in shareholders’ equity and cash flows of the Company as at the respective dates thereof and for the respective periods indicated therein (subject, in the case of unaudited statements, to normal and recurring year-end adjustments which were not and could not reasonably be expected to have a Material Adverse Effect on the Company).

                    (c)      Except (i) to the extent set forth on the balance sheet as of July 1, 2000 included in the Most Recent Financial Statements (the “Most Recent Balance Sheet”) of the Company and the consolidated Company Subsidiaries, or (ii) as set forth in Section 3.07(c) of the Company Disclosure Schedule, neither the Company nor any Company Subsidiary has any liability or obligation of any nature (whether accrued, absolute, contingent or otherwise) which would be required to be reflected on a balance sheet, or in the notes thereto, prepared in accordance with GAAP, except for liabilities and obligations incurred in the ordinary course of business consistent with past practice since July 1, 2000, which would not, individually or in the aggregate, be material in amount. As of September 25, 2000, the aggregate amount of indebtedness for borrowed money of the Company and the Company Subsidiaries is $53,387,749. Other than for working capital borrowed in the ordinary course of business in accordance with past practice, no additional indebtedness for borrowed money has been incurred between September 25, 2000 and the date hereof.

                    (d)      The Company has heretofore furnished to Acquiror complete and correct copies of all amendments and modifications (if any) that have not been filed by the Company with the SEC to all agreements, documents and other instruments that previously had been filed by the Company as exhibits to the Company SEC Reports and are currently in effect.

                    (e)      The receivables of the Company and the Company Subsidiaries, either reflected on the Most Recent Balance Sheet or created subsequent to July 1, 2000 are, to the extent not previously collected in full, true and valid receivables, created in the ordinary course of the business of the Company and the Company Subsidiaries. Since July 1, 2000, neither the Company nor any Company Subsidiary has (i) permitted or agreed to any extension in the time for payment of receivables other than in the ordinary course of business and consistent with past practice or (ii) changed its collection practices with respect to the receivables, including, without limitation, granted discounts in return for the early collection thereof other than in the ordinary course of business and consistent with past practice.

                    SECTION 3.08.  Absence of Certain Changes or Events. Since July 1, 2000, except as expressly contemplated by this Agreement or as disclosed pursuant to Section 3.08 of the Company Disclosure Schedule, the Company and the Company Subsidiaries have conducted their business only in the ordinary course and in a manner consistent with past practice and, since July 1, 2000, there has not been (a) any event or events (whether or not covered by insurance) that could reasonably be expected to have a Material Adverse Effect on the Company, (b) any material change by the Company in its accounting methods, principles or practices, (c) any entry by the Company or any Company Subsidiary into any commitment or transaction material to the Company, except in the ordinary course of business and consistent with past practice, (d) any declaration, setting aside or payment of any dividend or distribution in respect of any capital stock or equity interests of the Company or the Company Subsidiaries or any redemption, purchase or other acquisition of any of the Company’s or the Company Subsidiaries’ securities, (e) any increase in, amendment to or establishment of any bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, stock option, stock purchase or other employee benefit plan, (f) any general increase in compensation, bonus, severance or termination pay or other benefits payable to the employees of the Company or the Company Subsidiaries or, except for increases in the ordinary course of business in connection with periodic reviews and in amounts consistent with past practice, any specific increase in the compensation, bonus or other benefits payable to such employees, (g) any payment by the Company or any Company Subsidiary of a bonus to any employee of the Company or any Company Subsidiary, (h) any operation of the business of the Company and the Company Subsidiaries other than in the ordinary course, consistent with past practice; (i) any incurrence of indebtedness for borrowed money or assumption or guarantee of indebtedness for borrowed money by the Company or any Company Subsidiary (other than loans from the Company to any wholly owned Company Subsidiary or from any wholly owned Company Subsidiary to the Company or any other wholly owned Company Subsidiary), or the grant of any lien on the assets of the Company or the Company Subsidiaries to secure indebtedness for borrowed money, (j) any sale or transfer of any assets of the Company or the Company Subsidiaries other than in the ordinary course of business and consistent with past practice, or (k) any loan, advance or capital contribution to or investment in any person in an aggregate amount in excess of $100,000 by the Company or any Company Subsidiary (excluding any loan, advance or capital contribution to, or investment in, the Company or any wholly owned Company Subsidiary).

                    SECTION 3.09.  Absence of Litigation. Except as disclosed in Section 3.09(a) of the Company Disclosure Schedule, there is no claim, action, suit, proceeding or investigation (“Claim”) pending or, to the best knowledge of the Company, threatened against the Company or any Company Subsidiary, by, on behalf of or before any arbitrator or Governmental Authority which (a) could reasonably be expected to have a Material Adverse Effect on the Company or (b) seeks to and is reasonably likely to significantly delay or prevent the consummation of the Merger. Except as disclosed in Section 3.09(b) of the Company Disclosure Schedule, there is no Claim pending or, to the best knowledge of the Company, threatened against the Company or any Company Subsidiary, by, on behalf of or before any arbitrator or Governmental Authority. The Most Recent Balance Sheet included reasonable loss reserves with respect to each Claim disclosed in Section 3.09 of the Company Disclosure Schedule. Neither the Company or any Company Subsidiary nor any property or asset of the Company or any Company Subsidiary is subject to or in violation of any order, executive order, writ, stay, decree, judgment, determination, award or injunction (each an “Order”) that could reasonably be expected to have a Material Adverse Effect on the Company.

                    SECTION 3.10.  Employee Benefit Plans; Agreements. (a) Section 3.10 of the Company Disclosure Schedule lists all plans, programs and arrangements providing benefits and maintained for the benefit of any current or former employee, officer or director of the Company or any Company Subsidiary, whether or not such plan, program or arrangement is subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (the “Plans”). The Company has given or made available to Acquiror a true and complete copy of each Plan document, each material document prepared in connection with each Plan, including any applicable trust agreement, insurance contract or other funding medium, all amendments with respect to such Plan documents, the most recent summary plan description, actuarial report, and determination letter issued by the Internal Revenue Service (“IRS”), Form 5500 with all related schedules filed for the prior three (3) years in respect of each such Plan subject to the annual reporting requirements of ERISA, and each Company Employment Contract (as defined herein). Neither the Company nor any Company Subsidiary presently (nor have they at any time in the past) maintains, contributes to or has any liability (including current or potential withdrawal liability) with respect to any multi-employer plan within the meaning of ERISA. None of the Plans, other than those as described in Section 3.10(a) of the Company Disclosure Schedule, promises or provides retiree medical or life insurance benefits to any person other than continued medical coverage required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, the costs for which are borne by the former employee or beneficiary. Neither the Company nor any Company Subsidiary is a participating employer in any Plan to which more than one employer makes contributions.

                    (b)      Each Plan complies, in both form and operation, in all material respects, with its written terms, and, as applicable with ERISA, the Internal Revenue Code of 1986, as amended (the “Code”), and other applicable Law, and no condition exists or event has occurred with respect to any such Plan which would result in any material liability, fine or penalty for the Company or any Company Subsidiary. Each Plan is legally valid and binding and in full force and effect. Each Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the IRS to the effect that it is so qualified and nothing has occurred since the date of such letter to affect the qualified status of such Plan. The Company has not incurred any direct or indirect material liability under, arising out of or by operation of Title IV of ERISA in connection with the termination of, or withdrawal from, any Plan or other retirement plan or arrangement and, as of the date hereof, no fact exists or event has occurred that could reasonably be expected to give rise to any such liability. No Plan is or has been covered by Title IV of ERISA or Section 412 of the Code. No Plan is being audited or investigated by any government agency or subject to any pending or threatened Claim. Neither the Company nor any fiduciary of any Plan has engaged in a non-exempt prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code. No event has occurred with respect to which the Company or any Company Subsidiary could be liable for a tax imposed by any of Sections 4972, 4976, 4977, 4979, 4980 or 4980B of the Code, or for a civil penalty under Section 502(d) of ERISA.

                    (c)      The Company and the Company Subsidiaries have complied in all material respects with all Laws pertaining to employment practices, including wage and hour laws, the Americans with Disabilities Act, discrimination laws and the Worker Adjustment Retraining Notification Act, and, except as disclosed in Section 3.10(c) of the Company Disclosure Schedule, no fact or event exists that could give rise to liability under such Laws, except for such occurrences, noncompliances and liabilities as could not reasonably be expected to have a Material Adverse Effect on the Company.

                    (d)      Section 3.10 of the Company Disclosure Schedule sets forth the name of each officer or employee of the Company or any Company Subsidiary with an annual base compensation greater than $75,000, the annual base compensation applicable to each such officer or employee and a complete and accurate list of each (the items described in subsections (i) through (iv) below, collectively, the “Company Employment Contracts”):

                              (i)      employment, severance, or collective bargaining agreement not terminable without liability or obligation on 60 days' or less notice;

                              (ii)     agreement with any director, affiliate, executive officer, or other key employee (or any member of the immediate family of any of the foregoing), agent, or contractor of the Company or any subsidiary of the Company, the benefits of which are contingent, or the terms of which are materially altered, on the occurrence of a transaction involving the Company or any Company Subsidiary of the Company of the nature of any of the transactions contemplated by this Agreement or relating to an actual or potential change in control of the Company or any Company Subsidiary, or providing any term of employment or other compensation guarantee or extending severance benefits or other benefits after termination not comparable to benefits available to employees, agents, or contractors generally;

                              (iii)    agreement, plan, or arrangement under which any person may receive payments that may be subject to the tax imposed by Section 4999 of the Code or included in the determination of such person's “parachute payment” under Section 280G of the Code; and

                              (iv)    agreement or plan, including any stock option plan, stock appreciation right plan, restricted stock plan, or stock purchase plan, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement.

                    SECTION 3.11.  Labor Matters. Neither the Company nor any Company Subsidiary is a party to any collective bargaining agreement or other labor union contract applicable to persons employed by the Company or any Company Subsidiary. Neither the Company nor any Company Subsidiary is the subject of any Claim which is pending, or to the Company’s knowledge, threatened, asserting that the Company or any Company Subsidiary has committed an unfair labor practice (within the meaning of the National Labor Relations Act or applicable state statutes) or seeking to compel the Company or any Company Subsidiary to bargain with any labor organization as to wages or conditions of employment. No strike or other labor dispute involving the Company or any Company Subsidiary is pending or, to the Company’s knowledge, threatened. To the Company’s knowledge, there is no activity involving any employees of the Company or any Company Subsidiary seeking to certify a collective bargaining unit or engaging in any other organizational activity. To the Company’s knowledge, as of the date hereof and except as described in Section 3.11 of the Company Disclosure Schedule, no executive, key employee, or group of employees has any plans to terminate employment with the Company or any Company Subsidiary.

                    SECTION 3.12.  Taxes. The Company and each of the Company Subsidiaries have (i) filed all federal, state, local and foreign tax returns required to be filed by them prior to the date of this Agreement (taking into account extensions), (ii) paid or accrued all taxes shown to be due on such returns and paid all applicable ad valorem and value added taxes as are due and (iii) paid or accrued all taxes for which a notice of assessment or collection has been received (other than amounts being contested in good faith by appropriate proceedings), except in the case of clause (i), (ii) or (iii) for any such filings, payments or accruals which could not reasonably be expected to have a Material Adverse Effect on the Company. Except as set forth in Section 3.12 of the Company Disclosure Schedule, neither the IRS nor any other federal, state, local or foreign taxing authority has asserted any Claim for taxes, or to the best knowledge of the Company, is threatening to assert any Claims for taxes, which Claims could reasonably be expected to have a Material Adverse Effect on the Company. The Company has open years for federal, state and foreign income tax returns only as set forth in Section 3.12 of the Company Disclosure Schedule. The Company and each Company Subsidiary have withheld or collected and paid over to the appropriate governmental authorities (or are properly holding for such payment) all taxes required by law to be withheld or collected, except for amounts which could not reasonably be expected to have a Material Adverse Effect on the Company. There are no liens for taxes upon the assets of the Company or any Company Subsidiary (other than liens for taxes that are not yet due or that are being contested in good faith by appropriate proceedings), except for liens which could not reasonably be expected to have a Material Adverse Effect on the Company.

                    SECTION 3.13.  Environmental Matters. (a) For purposes of this Agreement, the following terms shall have the following meanings: (i) “Cleanup” means any investigative, monitoring, cleanup, removal, containment or other remedial or response action required by any Environmental Law or Occupational Safety and Health Law, and the terms “removal,” “remedial” and “response action” include the types of activities covered by the United States Comprehensive Environmental Response, Compensation, and Liability Act; (ii) “Environment” means soil, land surface or subsurface strata, surface waters (including navigable water and ocean waters), groundwaters, drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life and any other similar medium or natural resource; (iii) “Environmental, Health and Safety Liabilities” means any cost, damages, expense, liability, obligation or other responsibility (whether known or unknown, whether absolute, accrued, contingent, choate, inchoate or otherwise, whether due or to become due, and whether or not required to be reflected on a balance sheet prepared in accordance with GAAP) arising from or under Environmental Law or Occupational Safety and Health Law, including those consisting of or relating to (1) any environmental, health or safety matter or condition (including on-site or off-site contamination, occupational safety and health and regulation of any chemical substance or product), (2) any fine, penalty, judgment, award, settlement, Claim, damages, loss, demand and response, investigative, monitoring, remedial or inspection cost or expense arising under Environmental Law or Occupational Safety and Health Law, (3) financial responsibility under any Environmental Law or Occupational Safety and Health Law for Cleanup costs or corrective action, (whether or not such Cleanup has been required or requested by any Governmental Authority or other person) and for any natural resource damage, or (4) any other compliance, corrective or remedial measures required under any Environmental Law or Occupational Safety and Health Law; (iv) “Environmental Law” means the United States Comprehensive Environmental Response, Compensation, and Liability Act and any other Law that requires or relates to (1) advising appropriate Governmental Authorities, employees or the public of intended or actual Releases of Hazardous Materials, violations of discharge or emission limits or other prohibitions and the commencement of activities, such as resource extraction or construction, that could have significant impact on the Environment, (2) preventing or reducing to acceptable levels the Release of Hazardous Materials into the Environment, (3) reducing the quantities, preventing the Release or minimizing the hazardous characteristics of wastes that are generated, (4) assuring that products are designed, formulated, packaged and used so that they do not present unreasonable risks to human health or the Environment when used or disposed of, (5) protecting resources, species or ecological amenities, (6) reducing to acceptable levels the risks inherent in the transportation of Hazardous Materials or other potentially harmful substances, (7) Cleanup of Hazardous Materials that have been Released, preventing the threat of Release or paying the costs of such Cleanup or prevention, or (8) making responsible parties pay private parties, or groups of them, for damages done to their health or the Environment, or permitting self-appointed representatives of the public interest to recover for injuries done to public assets; (v) “Facility” means any real property (including all parcels and tracts of land in which the Company and each Company Subsidiary have a fee simple estate or a leasehold estate, and all improvements, easements and appurtenances thereto) or tangible personal property interest owned or operated by the Company and each Company Subsidiary, including such real property and tangible personal property used or operated by the Company and each Company Subsidiary at the locations listed in Section 3.17(b) or (c) of the Company Disclosure Schedule, and, for purposes of this Section 3.13 and the definition of “Hazardous Activity,” the term also includes any Real Property or tangible personal property interest formerly owned or operated by the Company and each Company Subsidiary or any predecessor person; (vi) “Hazardous Activity” means the distribution, generation, handling, importing, management, manufacturing, processing, production, refinement, Release, storage, transfer, transportation, treatment or use (including any withdrawal or other use of groundwater) of Hazardous Materials in, on, under, about or from any of the Facilities or any part thereof into the Environment, and any other act, business, operation or thing that increases the danger, or risk of danger, or poses an unreasonable risk of harm to individuals or property on or off the Facilities, or that may affect the value of any of the Facilities or the assets of the Company and the Company Subsidiaries; (vii) “Hazardous Material” means any waste or other substance that is listed, defined, designated, or classified as, or otherwise determined to be, hazardous, radioactive, toxic, a pollutant or a contaminant under or pursuant to any Environmental Law, including any admixture or solution thereof, and specifically including petroleum and all derivatives thereof or synthetic substitutes therefor and asbestos or asbestos-containing materials; (viii) “Occupational Safety and Health Law” means any Law designed to provide safe and healthful working conditions and to reduce occupational safety and health hazards, and any program, whether governmental or private (such as those promulgated or sponsored by industry associations and insurance companies), designed to provide safe and healthful working conditions; and (ix) “Release” means any spilling, leaking, emitting, discharging, depositing, escaping, leaching, dumping or other releasing into the Environment, whether intentional or unintentional.

                    (b)      Except as described in Section 3.13 of the Company Disclosure Schedule, the Company and each Company Subsidiary are, and at all times have been, in compliance with, and have not been and are not in violation of or liable under, any Environmental Law or Occupational Safety and Health Law. Except as described in Section 3.13 of the Company Disclosure Schedule, the Company does not have any basis to expect, nor has the Company and each Company Subsidiary or any other person for whose conduct any of them is or may be held responsible received, any actual or threatened Order, notice or other communication from (i) any Governmental Authority or other person acting in the public interest or (ii) the current or prior owner or operator of any Facility, of any actual or potential violation or failure to comply with any Environmental Law, or of any actual or threatened obligation to undertake or bear the cost of any Environmental, Health and Safety Liabilities with respect to any Facility or other property or asset (whether real, personal or mixed) in which the Company or any Company Subsidiary has had an interest, or with respect to any property or Facility at or to which Hazardous Materials were generated, manufactured, refined, transferred, imported, used, or processed by the Company or any Company Subsidiary or any other person for whose conduct it is or may be held responsible, or from which Hazardous Materials have been transported, treated, stored, handled, transferred, disposed, recycled or received.

                    (c)      Except as described in Section 3.13 of the Company Disclosure Schedule, there are no pending or, to the Company’s knowledge, threatened, Claims, charges, mortgages, liens, security interests or other restrictions of any nature, resulting from any Environmental, Health and Safety Liabilities or arising under or pursuant to any Environmental Law or Occupational Safety and Health Law, with respect to or affecting any Facilities or any other properties and assets (whether real, personal or mixed) in which the Company or any Company Subsidiary has or had an interest.

                    (d)      Except as described in Section 3.13 of the Company Disclosure Schedule, the Company and each Company Subsidiary have no basis to expect, nor has it or any other person for whose conduct it is or may be held responsible, received, any citation, directive, inquiry, notice, Order, summons, warning or other communication that relates to Hazardous Activity, Hazardous Materials or any actual, alleged, possible or potential violation of or failure to comply with any Environmental Law or Occupational Safety and Health Law, or of any actual, alleged, possible or potential obligation to undertake or bear the cost of any Environmental, Health and Safety Liabilities with respect to any Facility or other property or asset (whether real, personal or mixed) in which the Company or any Company Subsidiary had an interest, or with respect to any property or facility to or by which Hazardous Materials were generated, manufactured, refined, transferred, imported, used or processed by the Company or any Company Subsidiary or any other person for whose conduct it is or may be held responsible, have been transported, treated, stored, handled, transferred, disposed, recycled or received.

                    (e)      Except as described in Section 3.13 of the Company Disclosure Schedule, neither the Company nor any Company Subsidiary nor any other person for whose conduct it is or may be held responsible has any Environmental, Health and Safety Liabilities with respect to any Facility or with respect to any other property or asset (whether real, personal or mixed) in which the Company or any Company Subsidiary (or any predecessor), has or had an interest, or at any property geologically or hydrologically adjoining any Facility or any such other property or asset.

                    (f)      Except as described in Section 3.13 of the Company Disclosure Schedule, no Hazardous Materials are present on or in the environment at any Facility or at any geologically or hydrologically adjoining property, including any Hazardous Materials contained in barrels, above or underground storage tanks, landfills, land deposits, dumps, equipment (whether moveable or fixed) or other containers, either temporary or permanent, and deposited or located in land, water, sumps, or any other part of any Facility or such adjoining property, or incorporated into any structure therein or thereon. None of the Company, the Company Subsidiaries, each other person for whose conduct any of them is or may be held responsible and to the Company’s knowledge any other person, has permitted or conducted, or is aware of, any Hazardous Activity conducted with respect to any Facility or other property or asset (whether real, personal or mixed) in which the Company or any Company Subsidiary has or had an interest.

                    (g)      Except as described in Section 3.13 of the Company Disclosure Schedule, there has been no Release or, to the Company’s knowledge, threat of Release, of any Hazardous Materials at or from any Facility or at any other location where any Hazardous Materials were generated, manufactured, refined, transferred, produced, imported, used or processed from or by any Facility, or from any other property or asset (whether real, personal or mixed) in which the Company or any Company Subsidiary has or had an interest, or any geologically or hydrologically adjoining property, whether by the Company, any Company Subsidiary or any other person.

                    (h)      The Company and each Company Subsidiary have delivered or made available to Acquiror true and complete copies and results of any reports, studies, analyses, tests or monitoring possessed or initiated by the Company and each Company Subsidiary pertaining to Hazardous Materials or Hazardous Activities in, on, or under any Facilities, or concerning compliance by the Company, any Company Subsidiary, or any other person for whose conduct they are or may be held responsible, with Environmental and Occupational Safety and Health Laws.

                    SECTION 3.14.  Opinion of Financial Advisor. The Company has received the written opinion of BMO Nesbitt Burns Corp. (“Company Banker”) on the date of this Agreement to the effect that the consideration to be paid by Acquiror in the Merger is fair from a financial point of view to the Company’s shareholders (other than Acquiror, Acquiror Sub and their affiliates) as of the date thereof.

                    SECTION 3.15.  Brokers. No broker, finder or investment banker (other than Company Banker) is entitled to any brokerage, finder’s or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the Company or any Company Subsidiary. The Company has heretofore furnished to Acquiror a correct copy of all agreements between the Company and Company Banker pursuant to which such firm would be entitled to any payment relating to the Transactions.

                     SECTION 3.16.  Tangible Property. The Company and the Company Subsidiaries have good and marketable title to all of their tangible properties and assets required to conduct their respective businesses, with only such exceptions as could not reasonably be expected to have a Material Adverse Effect on the Company. All of the assets of the Company and the Company Subsidiaries have been maintained and repaired for their continued operation and are in good operating condition, reasonable wear and tear excepted, and usable in the ordinary course of business, except where the failure to be in such repair or condition or so usable could reasonably be expected to have a Material Adverse Effect on the Company.

                    SECTION 3.17.  Real Property. (a) For purposes of this Agreement, the term “Security Interest” means any mortgage, pledge, lien, encumbrance, charge, or other security interest, other than (A) mechanic's, materialmen's, and similar liens, (B) liens for taxes not yet due and payable or for taxes that the taxpayer is contesting in good faith through appropriate proceedings and (C) purchase money liens and liens securing rental payments under capital lease arrangements.

                    (b)      Section 3.17(b) of the Company Disclosure Schedule lists and describes briefly all real property that the Company or any Company Subsidiary owns or owned within the last three years. With respect to each such parcel of owned real property that the Company or any Company Subsidiary owns, except as disclosed in Section 3.17(b) of the Company Disclosure Schedule, (i) the identified owner has good and marketable title to the parcel of real property, free and clear of any Security Interest, easement, covenant, or other restriction, except for installments of special assessments not yet delinquent and recorded easements, covenants, and other restrictions which do not impair the current use, occupancy, or value, or the marketability of title, of the property subject thereto; (ii) there are no pending or, to the knowledge of the Company, threatened special assessments, condemnation proceedings, Claims or administrative actions relating to the property or other matters adversely affecting the current use, occupancy, or value thereof; (iii) the legal description for the parcel contained in the deed thereof describes such parcel fully and adequately, the buildings and improvements are located within the boundary lines of the described parcels of land, are not in violation of applicable setback requirements, zoning laws, and ordinances (and none of the properties or buildings or improvements thereon are subject to "permitted non-conforming use" or "permitted non-conforming structure" classifications), and do not encroach on any easement which may burden the land, and the land does not serve any adjoining property for any purpose inconsistent with the use of the land, and the property is not located within any flood plain or subject to any similar type restriction for which any permits or licenses necessary to the use thereof have not been obtained; (iv) all facilities have received all approvals of Governmental Authorities (including licenses and permits) required in connection with the ownership or operation thereof and have been operated and maintained in all material respects in accordance with applicable Laws; (v) there are no leases, subleases, licenses, concessions, or other agreements, written or oral, granting to any party or parties the right of use or occupancy of any portion of the parcel of real property; (vi) there are no outstanding options or rights of first refusal to purchase the parcel of real property, or any portion thereof or interest therein; (vii) there are no parties (other than the Company and each Company Subsidiary) in possession of the parcel of real property; (viii) all facilities located on the parcel of real property are supplied with utilities and other services necessary for the operation of such facilities, including gas, electricity, water, telephone, sanitary sewer, and storm sewer, all of which services are adequate in accordance with all applicable laws, ordinances, rules, and regulations and are provided via public roads or via permanent, irrevocable, appurtenant easements benefiting the parcel of real property; (ix) each parcel of real property abuts on and has direct vehicular access to a public road, or has access to a public road via a permanent, irrevocable, appurtenant easement benefiting the parcel of real property, and access to the property is provided by paved public right-of-way with adequate curb cuts available; and (x) to the knowledge of the Company, all buildings, other improvements and facilities owned by the Company or any Company Subsidiary are structurally sound, are in good operating condition and repair, and are free from material defects, and such buildings, other improvements and facilities are sufficient for the continued conduct of the business of the Company after the consummation of this transaction in substantially the same manner as conducted before the consummation of this transaction.

                    (c)       Section 3.17(c) of the Disclosure Schedule lists and describes briefly all real property leased or subleased to the Company or any Company Subsidiary. The Company has delivered to the Acquiror correct and complete copies of the leases and subleases listed in Section 3.17(c) of the Company Disclosure Schedule. With respect to each such lease and sublease, except as disclosed in Section 3.17(c) of the Company Disclosure Schedule: (i) such lease or sublease is legal, valid, binding, enforceable, and in full force and effect; (ii) such lease or sublease will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby; (iii) no party to the lease or sublease is in breach or default, and no event has occurred which, with notice or lapse of time, would constitute a breach or default or permit termination, modification, or acceleration thereunder; (iv) no party to the lease or sublease has repudiated any provision thereof; (v) there are no disputes, oral agreements, or forbearance programs in effect as to the lease or sublease; (vi) with respect to each sublease, the representations and warranties set forth in subsections (i) through (v) above are true and correct with respect to the underlying lease; (vii) neither the Company nor any Company Subsidiary has assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest in the leasehold or subleasehold; (viii) all facilities leased or subleased thereunder have received all approvals of Governmental Authorities (including licenses and permits) required in connection with the operation thereof and have been operated and maintained in all material respects in accordance with applicable Laws; (ix) all facilities leased or subleased thereunder are supplied with utilities and other services necessary for the operation of said facilities; (x) the owner of the facility leased or subleased has good and marketable title to the parcel of real property; and (xi) to the knowledge of the Company, all buildings, other improvements and facilities leased by the Company or any Company Subsidiary are structurally sound, are in good operating condition and repair, and are free from material defects, and such buildings, other improvements and facilities are sufficient for the continued conduct of the business of the Company after the consummation of this transaction in substantially the same manner as conducted before the consummation of this transaction.

                    SECTION 3.18.  Intellectual Property. The Company and the Company Subsidiaries own or have a valid license to use all inventories, patents, trademarks, service marks, trade names, copyrights, trade secrets, software, mailing lists and other intellectual property rights (collectively, the “Intellectual Property”) necessary to carry on their respective businesses as currently conducted; and neither the Company nor any Company Subsidiary has received any notice of infringement of or conflict with, and, to the Company’s knowledge, there are no infringements of or conflicts with, the rights of others with respect to the use of any of the Intellectual Property that, in either such case, has had or could reasonably be expected to have a Material Adverse Effect on the Company.

                    SECTION 3.19. Board Recommendation; State Takeover Statutes. At a meeting duly called and held in compliance with Virginia Law, the Board of Directors of the Company has unanimously adopted a resolution that, in accordance with the directors’ good faith busines judgment of the best interests of the Company, (i) the Merger is approved and (ii) this Agreement and the Transactions are approved and recommending approval and adoption of this Agreement and the Transactions by the shareholders of the Company. Such approval is sufficient to render inapplicable to the Merger and the other Transactions the provisions of Section 13.1-728.1 of Virginia Law. No other state takeover statute or similar statute or regulation applies or purports to apply to the Merger, this Agreement or any Transaction, and no provision of the articles of incorporation, bylaws or other governing instruments of the Company or any Company Subsidiary would, directly or indirectly, restrict or impair the ability of Acquiror to vote, or otherwise to exercise the rights of a stockholder with respect to, shares of the Company and the Company Subsidiaries that may be acquired or controlled by Acquiror.

                    SECTION 3.20.  Contracts. (a) Section 3.20(a) of the Company Disclosure Schedule lists each contract to which the Company or any Company Subsidiary is a party (each such contract referred to in subsections (i) through (vi) below, a “Material Contract”): (i) that is required by its terms or is currently expected to result in the payment or receipt by the Company or any Company Subsidiary of more than $100,000; (ii) for the purchase or sale of raw materials, commodities, supplies, products, or other personal property, or for the furnishing or receipt of services, the performance of which will extend over a period of more than one year, result in a material loss to the Company or any Company Subsidiary, or involve consideration in excess of $100,000; (iii) under which the consequences of a default or termination could reasonably be expected to have a Material Adverse Effect on the Company (each of which is identified in Section 3.20(a)(iii) of the Company Disclosure Schedule); (iv) all material agreements relating to joint ventures, partnerships and equity or debt investments (each of which is identified in Section 3.20(a)(iv) of the Company Disclosure Schedule); (v) all noncompetition agreements, limitations on the Company’s or any Company Subsidiary’s ability to provide services or products to any customer or potential customer or similar restrictions on their respective businesses (each of which is identified in Section 3.20(a)(v) of the Company Disclosure Schedule); and (vi) all agreements, notes, bonds, indentures or other instruments governing indebtedness for borrowed money, and any guarantee thereof or the pledge of any assets or other security therefor (each of which is identified in Section 3.20(a)(vi) of the Company Disclosure Schedule). Each Material Contract is in full force and effect and is enforceable against the parties thereto (other than the Company) in accordance with its terms and no condition or state of facts exists that, with notice or the passage of time, or both, would constitute a material default by the Company or, to the knowledge of the Company, any third party under such Material Contracts. The Company has duly complied in all material respects with the provision of each Material Contract to which it is a party.

                    (b)      Except as set forth in Section 3.20(b) to the Company Disclosure Schedule, no shareholder that to the knowledge of the Company beneficially owns in excess of 5% of the Company Common Stock, officer, director, employee or agent (or any member of the immediate family of any of the foregoing) of the Company or any Company Subsidiary or any affiliate of any officer or director of the Company or any Company Subsidiary (i) has any interest in any assets or property (whether real or personal, tangible or intangible) of or used in the business of the Company or any Company Subsidiary (other than as an owner of outstanding securities of the Company), (ii) is indebted or otherwise obligated to the Company (other than expense advances in the ordinary course of business) or (iii) has any direct or indirect interest of any nature whatsoever in any person or business which competes with, conducts any business similar to, has any arrangement or agreement (including arrangements regarding the shared use of personnel or facilities) with (whether as a customer or supplier or otherwise), or is involved in any way with, the Company or any Company Subsidiary. The Company is not indebted or otherwise obligated to any such person described above, except for amounts due under normal arrangements applicable to all employees generally as to salary or reimbursement of ordinary business expenses not unusual in amount or significance. As of the date of this Agreement, to the knowledge of the Company, there are no losses, claims, damages, costs, expenses, liabilities or judgments which would entitle any director, officer or employee (or any member of the immediate family of any of the foregoing) of the Company or any Company Subsidiary to indemnification by the Company or any Company Subsidiary under applicable Law, the certificate of incorporation (or similar instrument) or bylaws (or similar instrument) of the Company or any Company Subsidiary or any insurance policy maintained by the Company or any Company Subsidiary.

                    SECTION 3.21.  Inventory. The inventory of the Company and each Company Subsidiary consists of raw materials and supplies, manufactured and purchased parts, goods in process, and finished goods, all of which is merchantable and fit for the purpose for which it was procured or manufactured, and none of which is slow-moving, obsolete, damaged, or defective, subject only to the reserve for inventory writedown set forth on the face of the Most Recent Balance Sheet (rather than in any notes thereto) as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company. The inventory of the Company and each Company Subsidiary existing on the date of the Most Recent Balance Sheet was recorded on the Most Recent Balance Sheet at the lower of its cost or its market value.

                    SECTION 3.22.  Product Liability. Except as disclosed in Section 3.22 of the Company Disclosure Schedule, neither the Company nor any Company Subsidiary has any liability (and, to the Company’s knowledge, there are no grounds for any present or future Claim or demand against any of them giving rise to any liability) arising out of any injury to individuals or property as a result of the ownership, possession, use or consumption of any product manufactured, sold or delivered by the Company or any Company Subsidiary, that could reasonably be expected to have a Material Adverse Effect on the Company.

                    SECTION 3.23.  Customers. Section 3.23 of the Company Disclosure Schedule contains a list of (a) for each of the Company’s three most recent fiscal years, the Company’s and the Company Subsidiaries’ top 25 customers determined by each of turkey product sales and chicken product sales during such year, plus all other customers to which sales during such year represented at least 1% of either the turkey product or chicken product sales of the Company and the Company Subsidiaries for such year (the “Major Customers”) and (b) the amount of revenues attributable to each Major Customer in such fiscal year. The Company has previously provided to Acquiror a schedule of each of the Company’s and the Company Subsidiaries’ long-term pricing commitments for the Major Customers for the fiscal year ending July 1, 2000, and no material reduction in any such commitment has occurred subsequent to July 1, 2000. Except as indicated on Section 3.23 of the Company Disclosure Schedule, none of the Major Customers has terminated or materially altered its relationship with the Company or any Company Subsidiary since July 1, 2000, or, to the Company’s knowledge, threatened to do so or otherwise notified the Company or any Company Subsidiary of its intention to do so, and there has been no material dispute with any of the Major Customers since July 1, 2000.

                    SECTION 3.24.  Insurance. The Company and each Company Subsidiary is insured for such amounts and upon such terms as required by any contractual or legal obligation binding on any of them. Section 3.24 of the Company Disclosure Schedule contains a complete listing of all insurance (and all self-insurance arrangements) maintained by the Company and each Company Subsidiary as of the date hereof, or, if not currently maintained, that provides coverage for any current or contingent claim, indicating the form of coverage, name of carrier and broker, coverage limits and premium, expiration dates, deductibles, and all endorsements.

                    SECTION 3.25.  Proxy Statement. The proxy statement to be sent to the shareholders of the Company in connection with the Company Shareholders’ Meeting (as hereinafter defined) (such proxy statement, as amended and supplemented, being referred to herein as the “Proxy Statement”), excluding any information supplied by Acquiror for inclusion therein, will not, on the date the Proxy Statement (or any amendment or supplement thereto) is first mailed to shareholders of the Company, at the time of the Company Shareholders’ Meeting and at the Closing, contain any statement which, at such time and in light of the circumstances under which it is made, is false or misleading with respect to any material fact, or omits to state any material fact required to be stated therein or necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Company Shareholders’ Meeting which shall have become false or misleading.

                    SECTION 3.26.  Rights Agreement. The Company has provided Acquiror with a complete and correct copy of that certain Shareholder Protection Rights Agreement dated as of February 4, 1994, by and between the Company and First Union National Bank of North Carolina (the “Rights Agreement”), including all amendments and exhibits thereto. None of the execution or delivery of this Agreement or the consummation of the Merger or any Transaction will cause the occurrence of the Separation Time, a Flip-in Date, a Flip-over Transaction or Event or a Stock Acquisition Date (as each such term is defined in the Rights Agreement) or will cause the Rights (as such term is defined in the Rights Agreement) to become exercisable under the Rights Agreement, and no event or circumstance described in this sentence has occurred. The Expiration Time (as such term is defined in the Rights Agreement) shall occur at the Effective Time.

                    SECTION 3.27.  Fees and Expenses of Transactions. The fees and expenses of the attorneys, accountants, brokers, investment bankers and advisors retained by the Company or any Company Subsidiary in connection with the transactions contemplated by this Agreement do not exceed the amount set forth in Section 3.27 of the Company Disclosure Schedule.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF ACQUIROR
AND ACQUIROR SUB

                    Acquiror and Acquiror Sub hereby, jointly and severally, represent and warrant to the Company that:

                    SECTION 4.01.  Corporate Organization. Each of Acquiror and Acquiror Sub is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the requisite corporate power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to have such power, authority and governmental approvals could not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of Acquiror and Acquiror Sub to perform their obligations hereunder and to consummate the Transactions.

                   SECTION 4.02.  Authority Relative to This Agreement. Each of Acquiror and Acquiror Sub has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transactions. The execution and delivery of this Agreement by Acquiror and Acquiror Sub and the consummation by Acquiror and Acquiror Sub of the Transactions have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of Acquiror or Acquiror Sub are necessary to authorize this Agreement or to consummate the Transactions (other than with respect to the Merger, the filing and recordation of appropriate Articles of Merger with the Corporation Commission, as required by Virginia Law). This Agreement has been duly and validly executed and delivered by Acquiror and Acquiror Sub and, assuming the due authorization, execution and delivery of this Agreement by the Company, constitutes a legal, valid and binding obligation of each of Acquiror and Acquiror Sub enforceable against each of Acquiror and Acquiror Sub in accordance with its terms.

                    SECTION 4.03.  No Conflict; Required Filings and Consents. (a) The execution and delivery of this Agreement by Acquiror and Acquiror Sub do not, and the performance of this Agreement by Acquiror and Acquiror Sub will not, (i) conflict with or violate the Articles of Incorporation or Bylaws of either Acquiror or Acquiror Sub, (ii) conflict with or violate any Law applicable to Acquiror or Acquiror Sub or by which any property or asset of either of them is bound or affected, or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of Acquiror or Acquiror Sub or require the consent of any third party pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Acquiror or Acquiror Sub is a party or by which Acquiror or Acquiror Sub or any property or asset of either of them is bound or affected, except for any such conflicts, violations, breaches, defaults or other occurrences which would not, individually or in the aggregate, prevent Acquiror and Acquiror Sub from performing their respective obligations under this Agreement and consummating the Transactions.

                    (b)      The execution and delivery of this Agreement by Acquiror and Acquiror Sub do not, and the performance of this Agreement by Acquiror and Acquiror Sub will not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) pursuant to the Exchange Act, Blue Sky Laws, the HSR Act and filing and recordation of appropriate Articles of Merger with the Corporation Commission as required by Virginia Law and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, could not reasonably be expected to prevent or delay consummation of the Transactions or otherwise prevent Acquiror or Acquiror Sub from performing their respective obligations under this Agreement.

                    SECTION 4.04.  Proxy Statement. The information supplied by Acquiror for inclusion in the Proxy Statement will not, on the date the Proxy Statement (or any amendment or supplement thereto) is first mailed to shareholders of the Company, at the time of the Company Shareholders’ Meeting and at the Effective Time, contain any statement which, at such time and in light of the circumstances under which it is made, is false or misleading with respect to any material fact, or omits to state any material fact required to be stated therein or necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Company Shareholders’ Meeting which shall have become false or misleading.

                    SECTION 4.05.  Acquiror and Acquiror Sub Holdings in Company Stock. Acquiror and Acquiror Sub, as of September 26, 2000 and the date hereof, own no shares of Company Common Stock.

                    SECTION 4.06.  Financing. Acquiror (a) has received fully executed written commitments, copies of which have been provided to the Company, to provide any funds necessary (together with other financing currently available to the Company) to satisfy all of Acquiror’s and Acquiror Sub’s obligations under this Agreement and in connection with the transaction contemplated hereby, and (b) subject to the satisfaction of the conditions to Acquiror’s and Acquiror Sub’s obligations stated in Article VII, will have at the Closing the necessary financing to perform such obligations.

ARTICLE V

CONDUCT OF BUSINESS PENDING THE MERGER

                    SECTION 5.01.  Conduct of Business by the Company Pending the Merger. The Company covenants and agrees that, between the date of this Agreement and the Effective Time, except as set forth in Section 5.01 of the Company Disclosure Schedule or as expressly contemplated by any other provision of this Agreement, unless Acquiror shall otherwise agree in writing, (a) the business of the Company and the Company Subsidiaries shall be conducted only in, and the Company and the Company Subsidiaries shall not take any action except in, the ordinary course of business and in a manner substantially consistent with past practice, (b) the Company shall use all reasonable efforts to preserve substantially intact its business organization, to keep available the services of the current officers, employees and consultants of the Company and the Company Subsidiaries and to preserve the current relationships of the Company and the Company Subsidiaries with customers, suppliers and other persons with which the Company or any Company Subsidiary has significant business relations and (c) the Company shall not, and shall not permit any Company Subsidiary to:

                              (i)      amend or otherwise change its articles of incorporation or bylaws or comparable organizational documents;

                              (ii)     issue, sell, pledge, dispose of, grant, encumber, or authorize the issuance, sale, pledge, disposition, grant or encumbrance of, (A) any shares of capital stock of the Company or any Company Subsidiary of any class, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including, without limitation, any phantom interest), of the Company (except for the issuance of up to 8,300 shares of Company Common Stock pursuant to the Company Plans, the issuance of rights pursuant to the Rights Agreement and the issuance of shares of capital stock pursuant to currently outstanding Company Options, Company Warrants and rights pursuant to the Rights Agreement, in each case in accordance with the terms thereof as in effect on the date hereof) or any Company Subsidiary, or (B) any of the Company’s or any Company Subsidiaries’ assets except for sales in the ordinary course of business and in a manner consistent with past practice;

                              (iii)    declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock;

                              (iv)    reclassify, combine, split, divide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock;

                              (v)     (A) acquire (including, without limitation, by merger, consolidation, or acquisition of stock or assets) any interest in any corporation, partnership, other business organization or any division thereof or any assets, other than the acquisition of assets in the ordinary course of business consistent with past practice; (B) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any person, or make any loans or advances, except for indebtedness incurred in the ordinary course of business and consistent with past practice (1) in a principal amount not, in the aggregate, in excess of $100,000 and repayable without premium or penalty or (2) to fund the purchase of inventory and other working capital items; (C) enter into any contract or agreement material to the business, results of operations or financial condition of the Company other than in the ordinary course of business, consistent with past practice; (D) authorize any individual capital expenditure in excess of $100,000, or capital expenditures in the aggregate in excess of $1,000,000 in any month; or (E) enter into or amend any contract, agreement, commitment or arrangement with respect to any matter set forth in this subsection (v);

                              (vi)    increase the compensation payable or to become payable to any director, officer or other employee, or grant any bonus, to, or grant any severance or termination pay to, or enter into any employment or severance agreement with any director, officer or other employee of the Company or any Company Subsidiary or enter into or amend any collective bargaining agreement, or establish, adopt, enter into or amend any bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation or other plan, trust or fund for the benefit of any director, officer or class of employees, except as contemplated by the last sentence of Section 2.02(a);

                              (vii)   settle or compromise any pending or threatened litigation which is material or which relates to the transactions contemplated hereby, provided that nothing in this Section 5.01(c)(vii) will prohibit the Company from settling or compromising any such litigation if, after consultation with counsel, the Company believes that such action is necessary to comply with its fiduciary duties; or

                              (viii) engage in any practice, take any action, or enter into any transaction of the sort described in Section 3.08 above; or

                              (ix)    otherwise take any action or willfully omit to take any commercially reasonable action that could reasonably be expected to make any representation or warranty in Article III above untrue or incorrect in any material respect at any time, including as of the Effective Time, as if made as of such time.

ARTICLE VI

ADDITIONAL AGREEMENTS

                    SECTION 6.01.  Shareholders’ Meeting. The Company shall, in accordance with applicable law and the Company’s Articles of Incorporation and Bylaws, (i) duly call, give notice of, convene and hold a special meeting of its shareholders as soon as practicable following execution of this Agreement for the purpose of considering and taking action on this Agreement and the Merger (the “Company Shareholders’ Meeting”) and (ii) unless this Agreement has been terminated pursuant to Section 8.01(d) hereof, include in the Proxy Statement the unanimous recommendation of the Board of Directors of the Company that the shareholders of the Company approve and adopt this Agreement and the Merger and use its reasonable best efforts to obtain such approval and adoption.

                    SECTION 6.02.  Proxy Statement. As promptly as practicable after the execution of this Agreement, the Company shall file the Proxy Statement with the SEC under the Exchange Act, and shall use its reasonable best efforts to have the Proxy Statement cleared by the SEC. Acquiror, Acquiror Sub and the Company shall cooperate with each other in the preparation of the Proxy Statement, and the Company shall notify Acquiror of the receipt of any comments of the SEC with respect to the Proxy Statement and of any requests by the SEC for any amendment or supplement thereto or for additional information and shall provide to Acquiror promptly copies of all correspondence between the Company or any representative of the Company and the SEC. The Company shall give Acquiror and its counsel the opportunity to review the Proxy Statement prior to its being filed with the SEC and shall give Acquiror and its counsel the opportunity to review all amendments and supplements to the Proxy Statement and all responses to requests for additional information and replies to comments prior to their being filed with, or sent to, the SEC. Each of the Company, Acquiror and Acquiror Sub agrees to use its reasonable best efforts, after consultation with the other parties hereto, to respond promptly to all such comments of and requests by the SEC and to cause the Proxy Statement and all required amendments and supplements thereto to be mailed to the holders of Shares entitled to vote at the Shareholders Meeting at the earliest practicable time.

                    SECTION 6.03.  Appropriate Action; Consents; Filings. (a) The Company, Acquiror and Acquiror Sub shall use their best efforts to (i) take, or cause to be taken, all appropriate action, and do, or cause to be done, all things necessary, proper or advisable under applicable Law or required to be taken by any Governmental Authority or otherwise to consummate and make effective the Transactions as promptly as practicable, (ii) obtain from any Governmental Authorities any consents, licenses, permits, waivers, approvals, authorizations or orders required to be obtained or made by Acquiror or the Company or any of their subsidiaries in connection with the authorization, execution and delivery of this Agreement and the consummation of the Transactions, including, without limitation, the Merger, and (iii) as promptly as practicable, make all necessary filings, and thereafter make any other required submissions, with respect to this Agreement and the Merger required under (A) the Exchange Act and any other applicable federal or state securities Laws, (B) Virginia Law, (C) the HSR Act and any related governmental request thereunder, and (D) any other applicable Law; provided that Acquiror and the Company shall cooperate with each other in connection with the making of all such filings, including providing copies of all such documents to the non-filing party and its advisors prior to filing and, if requested, accepting all reasonable additions, deletions or changes suggested in connection therewith. The Company and Acquiror shall use reasonable best efforts to furnish to each other all information required for any application or other filing to be made pursuant to the rules and regulations of any applicable Law (including all information required to be included in the Proxy Statement) in connection with the transactions contemplated by this Agreement.

                    (b)      Each of Acquiror and the Company shall give (or shall cause their respective subsidiaries to give) any notices to third parties, and use, and cause their respective subsidiaries to use, their commercially reasonable efforts to obtain any third party consents, (A) necessary to consummate the Transactions, (B) disclosed or required to be disclosed in the Company Disclosure Schedule or (C) required to prevent any state of events that could reasonably be expected to cause a Material Adverse Effect to occur prior to or after the Effective Time. If Acquiror or the Company shall fail to obtain any third party consent described in the foregoing sentence, it shall use its best efforts, and shall take any such actions reasonably requested by the other party, to minimize any adverse effect upon the Company and Acquiror, their respective subsidiaries, and their respective businesses resulting, or which could reasonably be expected to result after the Effective Time, from the failure to obtain such consent.

                    (c)      From the date of this Agreement until the Effective Time, each party shall promptly notify the other party of any pending, or to the best knowledge of the first party, threatened, action, proceeding or investigation by or before any Governmental Authority or any other person (i) challenging or seeking material damages in connection with the Merger or the conversion of the Company Common Stock into cash pursuant to the Merger or (ii) seeking to restrain or prohibit the consummation of the Merger or otherwise limit the right of Acquiror or Acquiror Sub to own or operate all or any portion of the businesses or assets of the Company, which in either case could reasonably be expected to have a Material Adverse Effect on the Company prior to the Effective Time, or a Material Adverse Effect on Acquiror and Acquiror Sub (including the Surviving Corporation) after the Effective Time.

                    SECTION 6.04.  Access to Information; Confidentiality. Subject to the confidentiality agreement, dated August 28, 2000, between the Company and Acquiror (the “Confidentiality Agreement”), from the date hereof to the Effective Time, the Company will provide to Acquiror, during normal business hours and upon reasonable notice, access to all information and documents which Acquiror may reasonably request regarding the business, assets, liabilities, employees and other aspects of the Company.

                    SECTION 6.05.  No Solicitation of Transactions. (a) The Company shall not, directly or indirectly, and shall not permit any of its or the Company Subsidiaries’ officers, directors, employees, agents or representatives (including, without limitation, investment bankers, attorneys and accountants) to, (i) solicit, initiate or encourage the submission of any proposal that either constitutes a Business Combination Transaction (as such term is defined in Section 8.02) or may reasonably be expected to lead to a Business Combination Transaction with the Company, other than the Merger (a “Takeover Proposal”), or (ii) participate in any discussions or negotiations regarding, or furnish to any other person any information with respect to, or otherwise cooperate in any way with, or assist or participate in, facilitate or encourage, any effort or attempt by any other person to do or seek any of the foregoing; provided, however, that nothing contained in this Section 6.05 shall prohibit the Company from furnishing information to, or entering into discussions or negotiations with, any person in connection with a bona fide unsolicited written Takeover Proposal by such person that involves consideration to the Company’s shareholders with a value that the Company’s Board of Directors in good faith reasonably believes, after receiving advice from the Company Banker, is superior to the consideration provided for in the Merger (after taking into consideration the liability in respect of the Alternative Proposal Fee) received by the Company after the date of this Agreement and prior to receipt of shareholder approval of the Merger in accordance with Virginia Law, if, and only to the extent that, (1) the Company’s Board of Directors, based on the advice of independent legal counsel of the Company and the Company Banker, determines in its good faith business judgment that such action is required in order for such Board of Directors to satisfy its duties to the Company imposed by Virginia Law and (2) at least three business days prior to furnishing such information to, or entering into discussions or negotiations with, such person, the Company (A) gives Acquiror prior written notice (which shall include a copy of such written Takeover Proposal) of the Company’s intention to furnish such information or begin such discussions and (B) receives from such person an executed confidentiality agreement on terms no less favorable to the Company than those contained in the Confidentiality Agreement. The Company agrees not to release any third party from, or waive any provision of, any confidentiality agreement to which the Company is a party. The Company immediately shall cease and cause to be terminated all existing discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing.

                    (b)      Neither the Board of Directors of the Company nor any committee thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to Acquiror, the approval (including, without limitation, any resolution providing for such approval) or recommendation by such Board of Directors or such committee of this Agreement or the Merger or (ii) approve or recommend, or propose to approve or recommend, any Takeover Proposal, except, in either case, at or after the termination of this Agreement pursuant to Section 8.01(d).

                    (c)      Nothing contained in this Section 6.05 shall prohibit the Company from taking and disclosing to its shareholders a position contemplated by Rule 14e-2(a) under the Exchange Act with respect to any tender or exchange offer; provided, however, that neither the Company nor its Board of Directors nor any committee thereof, shall, except as permitted by Section 6.05(b), withdraw or modify, or propose to withdraw or modify, its approval or recommendation with respect to this Agreement or the Merger (including, without limitation, any resolution providing for such approval), or approve or recommend, or propose to approve or recommend, any Takeover Proposal.

                    SECTION 6.06.  Directors’ and Officers’ Indemnification. (a) The Articles of Incorporation and Bylaws of the Surviving Corporation shall contain provisions no less favorable with respect to indemnification than are set forth in the Articles of Incorporation and Bylaws of the Company, which provisions shall not be amended, repealed or otherwise modified for a period of six (6) years from the Effective Time in any manner that would affect adversely the rights thereunder of individuals who at any time prior to the Effective Time were directors or officers of the Company or any of the Company Subsidiaries, unless such modification shall be required by Virginia Law.

                     (b)      From and after the Effective Time, Acquiror shall indemnify, defend and hold harmless each person who is now, or has been at any time prior to the date of this Agreement or who becomes prior to the Effective Time, an officer or director of the Company or any of the Company Subsidiaries (collectively, the “Indemnified Parties”) against all losses, expenses (including reasonable attorneys’ fees), claims, damages, liabilities or amounts that are paid in settlement of, with the approval of the Surviving Corporation (which approval shall not unreasonably be withheld), or otherwise in connection with, any threatened or actual Claim, based in whole or in part on or arising in whole or in part out of the fact that the Indemnified Party (or the Person controlled by the Indemnified Party) is or was a director or officer of the Company or any of the Company Subsidiaries and pertaining to any matter existing or arising out of actions or omissions occurring at or prior to the Effective Time (including, without limitation, any Claim arising out of this Agreement or any of the transactions contemplated hereby), whether asserted or claimed prior to, at or after the Effective Time, in each case to the fullest extent permitted under Law, and shall pay any expenses, as incurred, in advance of the final disposition of any such action or proceeding to each Indemnified Party to the fullest extent permitted under Law. Without limiting the foregoing, in the event any such Claim is brought against any of the Indemnified Parties, (i) such Indemnified Parties may retain counsel (including local counsel) satisfactory to them and which shall be reasonably satisfactory to Acquiror and Acquiror shall pay all reasonable fees and expenses of such counsel for such Indemnified Parties; and (ii) the Surviving Corporation shall use all reasonable efforts to assist in the defense of any such Claim, provided that Acquiror shall not be liable for any settlement effected without its written consent, which consent, however, shall not be unreasonably withheld. The Indemnified Parties as a group shall retain only one law firm (plus appropriate local counsel) to represent them with respect to each such Claim unless there is, as determined by counsel to the Indemnified Parties, under applicable standards of professional conduct, a conflict or a reasonable likelihood of a conflict on any significant issue between the positions of any two or more Indemnified Parties at the expense of Acquiror.

                    (c)      For a period of six years after the Effective Time, Acquiror shall cause to be maintained in effect the Company’s current policy of Directors’ and Officers’ Liability Insurance (provided that Acquiror may substitute therefor one or more policies of at least the same coverage and amounts containing terms and conditions which are no less advantageous in any material respect) with respect to claims arising from facts or events that occurred before the Effective Time to the extent available at an annual premium not in excess of 200% of the last annual premium paid by the Company prior to the date hereof. If Acquiror is unable to obtain the insurance required by this Section 6.06(c) at an annual premium not in excess of the foregoing amount, then it shall obtain the greatest amount of comparable insurance then reasonably available to it for an annual premium not in excess of the foregoing amount.

                    SECTION 6.07.  Obligations of Acquiror Sub. Acquiror shall take all action necessary to cause Acquiror Sub to perform its obligations under this Agreement and to consummate the Merger on the terms and subject to conditions set forth in this Agreement.

                    SECTION 6.08.  Public Announcements. Acquiror and the Company shall consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement or any Transaction and shall not issue any such press release or make any such public statement prior to such consultation; provided, however, that the press release announcing this Agreement shall be in the form previously agreed to by Acquiror and the Company. Prior to the Effective Time, the Company will not issue any other press release or otherwise make any public statements regarding its business, except to the extent that (i) such statement is not prohibited by Section 6.05 and (ii) the Company’s Board of Directors determines in good faith, based upon the advice of outside legal counsel, that any such communication is required to satisfy its duties to the Company.

                    SECTION 6.09.  Delivery of SEC Documents. The Company shall promptly deliver to Acquiror true and correct copies of any report, statement or schedule filed with the SEC subsequent to the date of this Agreement.

                     SECTION 6.10.  Notification of Certain Matters. The Company shall give prompt notice to Acquiror, and Acquiror shall give prompt notice to the Company, of (i) the occurrence, or non-occurrence, of any event the occurrence, or non-occurrence, of which would be likely to cause any representation or warranty contained in this Agreement to be untrue or inaccurate and (ii) any failure of the Company, Acquiror or Acquiror Sub, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 6.10 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice.

                    SECTION 6.11.  Further Action. At any time and from time to time, each party to this Agreement agrees, subject to the terms and conditions of this Agreement, to take such actions and to execute and deliver such documents as may be necessary to effectuate the purposes of this Agreement at the earliest practicable time.

                    SECTION 6.12.  Postponement of Annual Meeting. The Company shall as soon as possible after the date of this Agreement indefinitely postpone its annual meeting of shareholders currently scheduled for October 28, 2000, and shall take no action unless compelled by legal process to reschedule such annual meeting or to call a special meeting of shareholders of the Company, except in accordance with this Agreement, unless and until this Agreement has been terminated in accordance with its terms.

                     SECTION 6.13.  Letters of Accountants. The Company shall use its reasonable best efforts to cause to be delivered to Acquiror “comfort” letters of KPMG LLP, the Company’s independent public accountants, dated and delivered on the date on which the Proxy Statement is mailed to the Company’s shareholders and on the date of the Closing, each addressed to Acquiror, in form and substance reasonably satisfactory to Acquiror and reasonably customary in scope and substance for letters delivered by independent public accountants in connection with transactions such as those contemplated by this Agreement.

                    SECTION 6.14.  Continuation of Benefits. (a) Acquiror agrees that, during the period commencing at the Effective Time and ending on the first anniversary thereof, the employees of the Company and the Company Subsidiaries will continue to be provided with benefits under employee benefit plans that are no less favorable in the aggregate than those currently provided by Acquiror to its similarly situated employees.

                    (b)      Employees of the Company (and, after the Merger, the Surviving Corporation) shall be given credit for all actual service with the Company and the Company Subsidiaries under all employee benefit plans, programs and policies of the Surviving Corporation or Acquiror in which they become participants for all purposes thereunder, except to the extent that such crediting would produce duplication of benefits.

                    (c)      From and after the Effective Time, Acquiror shall, to the extent permitted under the relevant plan and within Acquiror’s control, (i) cause any pre-existing condition or limitation and any eligibility waiting periods (to the extent such limitations or waiting periods did not apply to the employees of the Company under its plans in existence as of the date hereof) under any group health plans of Acquiror to be waived with respect to employees of the Company and their eligible dependents and (ii) give each employee of the Company credit for the plan year in which the Effective Time occurs toward applicable deductions and annual out-of-pocket limits for health expenses incurred prior to the Effective Time (or such later date on which participation commences) during the applicable plan year.

                    SECTION 6.15.  Severance Policy and Other Agreements. Acquiror shall honor or cause to be honored all severance and retention agreements and employment agreements with the Company’s directors, officers and employees set forth in Section 6.15(a) of the Company Disclosure Schedule. The Company represents and warrants that it has provided to Acquiror true and complete copies of such agreements. Except as set forth in Section 6.15(b) of the Company Disclosure Schedule, the Company represents and warrants that it has taken all necessary action to ensure that no payments or amounts due will be in excess of applicable tax deductibility limits or will give rise to any excise taxes.

                    SECTION 6.16.  Grower Relations. Acquiror shall comply with the terms of all existing grower contracts.

                    SECTION 6.17.  Environmental Assessments. On or before October 6, 2000, the Company shall deliver to Acquiror a Phase I environmental assessment audit conducted after September 1, 2000 by Nova Consulting Group, Inc. or Patton, Harris, Rust and Associates conducted in accordance with all applicable American Society for Testing and Materials standards (including ASTM E1527-00 Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process) (a “Phase I Assessment”) on each parcel of real property identified as a “2000 Phase I” property on Section 6.17 of the Company Disclosure Schedule, which the Company represents and warrants constitute all parcels of real property identified on Section 3.17(b) or (c) of the Company Disclosure Schedule that are or have been used for any purpose other than (i) idle land, (ii) growing crops, (iii) as a turkey breeder farm, (iv) growing out chickens and/or turkeys, (v) as a leased residential apartment or (vi) as the location of communication towers to the extent identified on Section 6.17 of the Company Disclosure Schedule. Acquiror shall determine no later than ten business days after receipt of all Phase I Assessments required above, whether any recommended or otherwise suggested Phase II Assessments (as defined below) are waived with respect to the closing condition set forth in Section 7.02(f) below. Acquiror shall notify the Company in writing of its determination no later than such tenth business day, and such notice shall identify the Phase II Assessments that should be obtained by the Company, or acknowledge that the closing condition set forth in Section 7.02(f) is satisfied. As soon as possible after receipt of any such notice from Acquiror identifying any Phase II Assessments to be obtained, but in no event later than ten business days after receipt of such notice, the Company shall deliver to Acquiror a Phase II environmental assessment audit conducted after September 1, 2000 by Nova Consulting Group, Inc. or Patton, Harris, Rust and Associates in accordance with all applicable American Society for Testing and Materials standards (including ASTM E1903-97 Standard Practice for Environmental Site Assessments: Phase II Environmental Site Assessment Process) (a “Phase II Assessment”), to the extent recommended or otherwise suggested by any of the Phase I Assessments referred to above in this Section 6.17 and not waived by Acquiror. Acquiror shall notify the Company in writing of its determination, no later than five business days after receipt of all such Phase II Assessments, as to whether the closing condition in Section 7.02(f) is satisfied. All such Phase I and Phase II Assessments shall be performed for the mutual benefit of Acquiror and the Company. All costs and expenses associated with the Phase I and Phase II Assessments shall be paid by the Company. If Acquiror is required by this Section 6.17 to provide any notice but fails to do so, the Company shall promptly notify Acquiror of such failure, and Acquiror shall provide the required notice within three business days of receipt of such notification by the Company.

ARTICLE VII

CONDITIONS TO THE MERGER

                    SECTION 7.01.  Conditions to the Obligations of Each Party. The obligations of the Company, Acquiror and Acquiror Sub to consummate the Merger are subject to the satisfaction of the following conditions:

                              (a)      this Agreement and the Transactions contemplated hereby shall have been approved and adopted by the affirmative vote of the shareholders of the Company in accordance with Virginia Law and the Company’s Articles of Incorporation and Bylaws and the rules of the National Association of Securities Dealers, Inc.;

                              (b)      no Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Order or statute, rule or regulation which is in effect and which has the effect of making the Merger illegal or otherwise prohibiting consummation of the Merger; and

                              (c)      any applicable waiting period under the HSR Act relating to the Merger shall have expired or been terminated.

                    SECTION 7.02.  Conditions to the Obligations of Acquiror and Acquiror Sub. The obligations of Acquiror and Acquiror Sub to consummate the Merger are subject to the satisfaction of the following further conditions:

                              (a)      the Company shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it at or prior to the Effective Time and each of the representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects (except that where any statement in a representation or warranty expressly includes a standard of materiality, such statement shall be true and correct in all respects) as of the Effective Time as though made on and as of the Effective Time, except that those representations and warranties which address matters only as of a particular date shall remain true and correct as of such date, and Acquiror shall have received a certificate of an executive officer of the Company to that effect;

                              (b)      since the date of this Agreement, no material adverse change in the financial condition, results of operations or business of the Company and the Company Subsidiaries, taken as a whole, shall have occurred, and neither the Company nor any Company Subsidiary shall have suffered any damage, destruction or loss materially affecting the business or properties of the Company and the Company Subsidiaries, taken as a whole;

                              (c)      Acquiror shall have received the “comfort” letters contemplated by Section 6.13 above;

                              (d)      The Company shall have terminated its Poultry Producer Stock Purchase Plan, Amended and Restated Employee Stock Purchase Plan, Dividend Reinvestment and Stock Purchase Plan and Plan to Issue Stock for Director Compensation in accordance with the terms of each such plan;

                              (e)      The Company shall have obtained the consent of each other person and Governmental Authority (in a form reasonably satisfactory to Acquiror) whose consent shall be required in connection with the Merger under all agreements and Laws to which the Company or any Company Subsidiary is a party or bound, other than consents the failure of which to obtain could not reasonably be expected to have a Material Adverse Effect on the Surviving Corporation or Acquiror; and

                              (f)       The Company shall have delivered to Acquiror the Phase I and Phase II Assessments within the time periods and as otherwise required by Section 6.17 hereof, and all recognized environmental conditions or concerns identified in any of such Phase I or Phase II Assessments shall not and could not reasonably be expected to result in remediation costs, liabilities and/or necessary compliance expenditures in the aggregate (taking into consideration all other expected remediation costs, liabilities and/or necessary compliance expenditures identified in such Phase I or Phase II Assessments) in excess of $1,000,000.

                    SECTION 7.03.  Conditions to the Obligations of the Company. The obligations of the Company to consummate the Merger are subject to the satisfaction of the following further condition: Acquiror and Acquiror Sub shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by them at or prior to the Effective Time and each of the representations and warranties of Acquiror and Acquiror Sub contained in this Agreement shall be true and correct in all material respects (except that where any statement in a representation or warranty expressly includes a standard of materiality, such statement shall be true and correct in all respects) as of the Effective Time, as though made on and as of the Effective Time, except that those representations and warranties which address matters only as of a particular date shall remain true and correct as of such date, and the Company shall have received a certificate of an executive officer of Acquiror to that effect.

ARTICLE VIII

TERMINATION, AMENDMENT AND WAIVER

                    SECTION 8.01.  Termination. This Agreement may be terminated and the Merger and the other Transactions may be abandoned at any time prior to the Effective Time, notwithstanding any requisite approval and adoption of this Agreement and the Transactions, as follows:

                              (a)      by mutual written consent duly authorized by the Boards of Directors of each of Acquiror, Acquiror Sub and the Company;

                              (b)      by either Acquiror or the Company, if either (i) the Effective Time shall not have occurred on or before March 30, 2001 (or such later date as shall be agreed to in writing by Acquiror and the Company); provided, however, that the right to terminate this Agreement under this Section 8.01(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date; or (ii) there shall be any Order which is final and nonappealable preventing the consummation of the Merger, except if the party relying on such Order has not complied with its obligations under Section 6.03(a);

                              (c)      by Acquiror, if (i) the Board of Directors of the Company withdraws, or modifies in any respect adverse to Acquiror, its approval or recommendation of this Agreement or the Merger or shall have resolved to do so, (ii) the Board of Directors of the Company shall have recommended to the shareholders of the Company any Takeover Proposal or resolved to do so, or (iii) a tender offer or exchange offer for 20% or more of the outstanding shares of capital stock of the Company is announced or commenced, and the Board of Directors of the Company fails, within ten business days, to recommend against the shareholders of the Company tendering their shares into such tender offer or exchange offer;

                              (d)      by the Company, if the Company’s Board of Directors determines in its good faith business judgment (subject to compliance with Section 6.05), after consultation with independent legal counsel, that such termination is required in order for such Board of Directors to satisfy its duties to the Company imposed by Virginia Law by reason of a Takeover Proposal; provided that any termination of this Agreement by the Company pursuant to this Section 8.01(d) shall not be effective until the Company has made payment of the full fee required by Section 8.02(a) hereof;

                              (e)      by Acquiror or the Company, if the shareholders of the Company shall have failed to approve and adopt this Agreement and the Merger at a meeting (including any adjournment or postponements) duly convened therefor;

                              (f)      by Acquiror, upon a breach of any representation, warranty, covenant or agreement on the part of the Company set forth in this Agreement, or if any representation or warranty of the Company shall have become untrue, in either case such that the conditions set forth in Section 7.02(a) would not be satisfied (a “Terminating Company Breach”); provided, however, that, if such Terminating Company Breach is curable by the Company through the exercise of its best efforts and for so long as the Company continues to exercise such best efforts, Acquiror may not terminate this Agreement under this Section 8.01(f);

                              (g)      by Acquiror, (i) if on or before October 6, 2000 the Company fails to deliver to Acquiror any Phase I Assessment as required by Section 6.17 hereof, Acquiror provides notice of such failure and the Company fails to deliver all such Phase I Assessments within three business days after such notice, (ii) if on or before the tenth business day following a notice from Acquiror with respect thereto as required by Section 6.17 hereof, the Company fails to deliver to Acquiror any Phase II Assessment as required by Section 6.17 hereof, Acquiror provides notice of such failure and the Company fails to deliver all such Phase II Assessments within three business days after such notice, or (iii) at any time prior to the fifth business day following the delivery of all Phase II Assessments required by Section 6.17 hereof (or, if no such Phase II Assessments are so required, the tenth business day following the delivery of all Phase I Assessments required by Section 6.17 hereof), if any Phase I or Phase II Assessments identify any recognized environmental conditions or concerns that would or could reasonably be expected to result in remediation costs, liabilities and/or necessary compliance expenditures in the aggregate (taking into consideration all other expected remediation costs, liabilities and/or necessary compliance expenditures identified in the Phase I or Phase II Assessments) in excess of $1,000,000; or

                              (h)      by the Company, upon breach of any representations, warranty, covenant or agreement on the part of Acquiror set forth in this Agreement, or if any representation or warranty of Acquiror shall have become untrue, in either case such that the conditions set forth in Section 7.03 would not be satisfied (“Terminating Acquiror Breach”); provided, however, that, if such Terminating Acquiror Breach is curable by Acquiror through best efforts and for so long as Acquiror continues to exercise such best efforts, the Company may not terminate this Agreement under this Section 8.01(h). Acquiror’s agreement to deliver written notices as required by Section 6.17 shall not be considered curable, except as provided in the last sentence of Section 6.17.

                    SECTION 8.02.  Fees and Expenses. (a) The Company shall pay Acquiror a fee (an “Alternative Proposal Fee”) equal to the sum of $10,000,000, less any Acquiror Expenses previously paid by the Company, if:

                    (i)      this Agreement is terminated pursuant to Section 8.01(c) or (d); or

                    (ii)     this Agreement is terminated pursuant to Section 8.01(e), and any Business Combination Transaction is thereafter consummated (or an agreement with respect thereto is entered into) within 12 months of such termination.

As used herein, the term “Business Combination Transaction” shall mean any of the following involving the Company: (1) any merger, consolidation, share exchange, business combination or other similar transaction (other than the Transactions); (2) any sale, lease, exchange, transfer or other disposition (other than a pledge or mortgage) of 20% or more of the assets of the Company in a single transaction or series of related transactions; (3) the acquisition by a person or entity or any “group” (as such term is defined under Section 13(d) of the Exchange Act and the rules and regulations thereunder) of beneficial ownership of 20% or more of the shares of Company Common Stock, whether by tender offer, exchange offer or otherwise; (4) the adoption by the Company of a plan of liquidation or the declaration or payment of an extraordinary dividend; or (5) the repurchase by the Company or any Company Subsidiary of 20% or more of the Shares.

                              (b)      Acquiror shall be entitled to receive the Acquiror Expenses in immediately available funds in the event that this Agreement is terminated by Acquiror pursuant to Section 8.01(b)(i) (subject to the proviso thereof), Section 8.01(e) or Section 8.01(g). The Company shall be entitled to receive the Company Expenses in immediately available funds in the event that this Agreement is terminated by the Company pursuant to Section 8.01(b)(i) (subject to the proviso thereof) or Section 8.01(h) due to a failure by Acquiror to obtain the financing necessary to consummate the Transactions, unless at the time of such termination Acquiror would have been entitled to terminate this Agreement pursuant to Section 8.01(g).

                              (c)      In the event of termination of this Agreement and the abandonment of the Merger pursuant to Section 8.01, all obligations of the parties hereto shall terminate except the obligations of the parties pursuant to this Section 8.02 and Sections 8.03, 8.04, 9.02, 9.03, 9.04, 9.05, 9.06, 9.07, 9.08, 9.09, 9.10, 9.11 and 9.12 and pursuant to the Confidentiality Agreement. No termination of this Agreement pursuant to Section 8.01(f) or 8.01(h) shall prejudice the ability of a non-breaching party from seeking damages from any other party for any breach of this Agreement, including, without limitation, attorneys’ fees and the right to pursue any remedy at law or in equity. Notwithstanding the foregoing, if either party is required to file suit to seek the Alternative Proposal Fee, Acquiror Expenses or Company Expenses, and it ultimately succeeds on the merits, it shall be entitled to all expenses, including attorneys’ fees, which it has incurred in enforcing its rights under this Section 8.02.

                              (d)      As used herein, “Acquiror Expenses” means all out-of-pocket expenses and fees actually incurred or accrued by Acquiror or Acquiror Sub or on their respective behalf in connection with the Transactions prior to the termination of this Agreement (including, without limitation, all fees and expenses of counsel, financial advisors, banks or other entities providing financing to Acquiror (including financing, commitment and other fees payable thereto), accountants, environmental and other experts and consultants to Acquiror and its affiliates, and all printing and advertising expenses) and in connection with the negotiation, preparation, execution, performance and termination of this Agreement, the structuring of the Transactions, any agreements relating thereto and any filings to be made in connection therewith.

                              (e)      As used herein, “Company Expenses” means all out-of-pocket expenses and fees actually incurred or accrued by the Company or on its behalf in connection with the Transactions prior to the termination of this Agreement (including, without limitation, all fees and expenses of counsel, financial advisors, accountants, environmental and other experts and consultants to the Company and its affiliates, and all printing and advertising expenses) and in connection with the negotiation, preparation, execution, performance and termination of this Agreement, the structuring of the Transactions, any agreements relating thereto and any filings to be made in connection therewith.

                              (f)      Except as set forth in this Section or elsewhere in this Agreement and except that the Company shall reimburse Acquiror for one-half of the HSR Act filing fee, all costs and expenses incurred in connection with this Agreement and the Transactions shall be paid by the party incurring such expenses, whether or not any Transaction is consummated.

                    SECTION 8.03.  Amendment. This Agreement may be amended by the parties hereto by action taken by or on behalf of their respective Boards of Directors at any time prior to the Effective Time; provided, however, that, after the approval and adoption of this Agreement by the shareholders of the Company, no amendment may be made which would violate Virginia Law. This Agreement may not be amended except by an instrument in writing signed by the parties hereto.

                    SECTION 8.04.  Waiver. At any time prior to the Effective Time, any party hereto may (a) extend the time for the performance of any obligation or other act of any other party hereto, (b) waive any inaccuracy in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance with any agreement or condition contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby.

ARTICLE IX

GENERAL PROVISIONS

                    SECTION 9.01.  Non-Survival of Representations, Warranties and Agreements. The representations, warranties and agreements in this Agreement and any certificate delivered pursuant hereto by any person shall terminate at the Effective Time, except that the agreements set forth in Articles I and II and Section 6.06 shall survive the Effective Time indefinitely.

                    SECTION 9.02.  Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, facsimile, telegram or telex or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9.02):

                    if to Acquiror or Acquiror Sub:

                    Pilgrim’s Pride Corporation
                    110 South Texas
                    Pittsburg, Texas 75686-0093
                    Attention: Richard A. Cogdill
                    Facsimile: (903) 855-4934

                    with a copy to:

                    Baker & McKenzie
                    4500 Trammell Crow Center
                    2001 Ross Avenue
                    Dallas, Texas 75201
                    Attention: Alan G. Harvey
                    Facsimile: (214) 978-3099

                    if to the Company:

                    WLR Foods, Inc.
                    P.O. Box 7000
                    Broadway, Virginia 22815
                    Attention: James L. Keeler
                    Facsimile: (540) 896-0496

                    with a copy to:

                    Wharton Aldhizer & Weaver PLC
                    100 South Mason Street
                    P.O. Box 20028
                    Harrisonburg, Virginia 22801-7528
                    Attention: John W. Flora
                    Facsimile: (540) 434-5502

                    SECTION 9.03.  Certain Definitions. For purposes of this Agreement, the term:

                    (a)      “affiliate” of a specified person means a person who, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such specified person;

                    (b)      “beneficial owner” with respect to any shares means a person who shall be deemed to be the beneficial owner of such shares (i) which such person or any of its affiliates or associates (as such term is defined in Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly or indirectly, (ii) which such person or any of its affiliates or associates has, directly or indirectly, (A) the right to acquire (whether such right is exercisable immediately or subject only to the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of consideration rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding, (iii) which are beneficially owned, directly or indirectly, by any other persons with whom such person or any of its affiliates or associates or any person with whom such person or any of its affiliates or associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any such shares, or (iv) pursuant to Section 13(d) of the Exchange Act and any rules or regulations promulgated thereunder;

                    (c)       “business day” means any day on which the principal offices of the SEC in Washington, D.C. are open to accept filings, or, in the case of determining a date when any payment is due, any day on which banks are not required or authorized to close in New York, New York;

                    (d)       “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly or as trustee or executor, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, as trustee or executor, by contract or credit arrangement or otherwise;

                    (e)       “person” means an individual, corporation, partnership, limited partnership, syndicate, person (including, without limitation, a “person” as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government; and

                    (f)      “subsidiary” or “subsidiaries” of any person means any corporation, partnership, joint venture or other legal entity of which such person (either alone or through or together with any other subsidiary), owns or has rights to acquire, directly or indirectly, more than 50% of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity.

                    SECTION 9.04.  Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of Law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the Transactions be consummated as originally contemplated to the fullest extent possible.

                    SECTION 9.05.  Assignment; Binding Effect; Benefit. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Notwithstanding anything contained in this Agreement to the contrary, except for the provisions of Article II and Section 6.06 (collectively, the “Third Party Provisions”), nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement.

                    SECTION 9.06.  Incorporation of Schedules. The Company Disclosure Schedule referred to herein and signed for identification by the parties hereto is hereby incorporated herein and made a part hereof for all purposes as if fully set forth herein.

                    SECTION 9.07.  Specific Performance. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity.

                    SECTION 9.08.  Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE RULES OF CONFLICTS OF LAW THEREOF. ALL ACTIONS AND PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE HEARD AND DETERMINED IN ANY COURT SITTING IN THE STATE OF DELAWARE.

                    SECTION 9.09.  Headings. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

                    SECTION 9.10.  Counterparts. This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

                    SECTION 9.11.  Waiver of Jury Trial. Each of Acquiror, the Company and Acquiror Sub hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or the actions of Acquiror, the Company or Acquiror Sub in the negotiation, administration, performance and enforcement thereof.

                    SECTION 9.12.  Entire Agreement. This Agreement, the Company Disclosure Schedule, the Confidentiality Agreement and any documents delivered by the parties in connection herewith constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings among the parties with respect thereto. No addition to or modification of any provision of this Agreement shall be binding upon any party hereto unless made in writing and signed by all parties hereto.

[Signature page follows.]

                    IN WITNESS WHEREOF, Acquiror, Acquiror Sub and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

                                                                       PILGRIM’S PRIDE CORPORATION

                                                                       By  /s/ Lonnie Bo Pilgram
                                                                             Lonnie “Bo” Pilgrim
                                                                             Chairman of the Board

                                                                       PPC ACQUISITION CORP.

                                                                       By  /s/ Lonnie Bo Pilgram
                                                                             Lonnie “Bo” Pilgrim
                                                                             Chairman of the Board

                                                                       WLR FOODS, INC.

                                                                       By  /s/ James L. Keeler
                                                                       Name:  James L. Keeler
                                                                       Title:  CEO and President

EXHIBIT A

ARTICLES OF INCORPORATION
OF THE SURVIVING CORPORATION

ARTICLE ONE
NAME

The name of the Corporation is Pilgrim’s Pride Corporation of Virginia, Inc.

ARTICLE TWO
CAPITAL STOCK

          Section One. Authorized Shares. The Corporation shall have authority to issue Fifty Million (50,000,000) shares of Common Stock, par value of $0.00001 per share.

          At each annual or special meeting of shareholders, each holder of Common Stock shall be entitled to one (1) vote in person or by proxy for each share of Common Stock standing in his name on the stock transfer records of the Corporation in connection with the election of directors and all other actions submitted to a vote of shareholders.
Dividends may be declared and paid to the holders of the Common Stock in cash, property, or other securities of the Corporation out of any net profits or net assets of the Corporation legally available therefor.

          All calculations with respect to percentage ownership of issued and outstanding shares of Common Stock will be based upon the numbers of issued and outstanding shares reported by the Corporation on the last filed of (A) the Corporation’s most recent annual report on Form 10-K, (B) its most recent Quarterly Report on Form 10-Q, or (C) if any, its most recent Current Report on Form 8-K.

          Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the remaining net assets of the Corporation shall be distributed pro rata to the holders of the Common Stock in accordance with their rights and interests.

          Section Two. Preemptive Rights. No holder of any shares of Common Stock of the Corporation shall have any right as such holder (other than such right, if any, as the Board of Directors in its discretion may determine) to purchase, subscribe for or otherwise acquire any unissued shares, or any option rights, or securities having conversion or option rights, of the Corporation now or hereafter authorized.

ARTICLE THREE
REGISTERED AGENT

          The name of the Corporation’s registered agent is Commonwealth Legal Services Corporation. The registered agent is a professional corporation of attorneys registered under Section 54.1-3902 of the Code of Virginia. The registered office address, which is the business office of the registered agent, is 4701 Cox Road, Suite 301, Glen Allen, Virginia 23060-6802, in the county of Henrico.

ARTICLE FOUR
BOARD OF DIRECTORS

          Section One. Board of Directors. The Board of Directors shall have power to manage and administer the business and affairs of the Corporation. Except as expressly limited by law, all corporate powers of the Corporation shall be vested in and may be exercised by the Board of Directors.

          Section Two. Number. The Board shall consist of three (3) directors.

          Section Three. Removal. Shareholders may remove one or more directors only with cause, defined as willful misconduct or knowing violation of criminal law or of any federal or state securities law. However, shareholders may remove one or more directors with or without cause upon a recommendation for removal without cause from the Board of Directors passed by a two-thirds vote of the Board of Directors.

ARTICLE FIVE
LIMITATION OF LIABILITY AND INDEMNIFICATION

          Section One. Limitation or Elimination of Liability. To the full extent that the Virginia Stock Corporation Act, as it exists on the date hereof or may hereafter be amended, permits the limitation or elimination of the liability of directors or officers, a director or officer of the Corporation shall not be liable to the Corporation or its shareholders for any monetary damages in excess of one dollar.

          Section Two. Indemnification. The Corporation shall indemnify a director or officer of the Corporation who is or was a party to any proceeding by reason of the fact that he is or was such a director or officer or is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against all liabilities and expenses incurred in the proceeding except such liabilities and expenses as are incurred because of his willful misconduct or knowing violation of the criminal law.

          Section 3. Determination to Indemnify. Subject to the provisions of Section 7 of this Article, a determination to indemnify a director or officer under Section 2 of this Article shall be made, in the first instance, by a majority vote of a quorum of the Board of Directors, such quorum consisting of disinterested directors. If a quorum of disinterested directors cannot be obtained, then the determination shall be made by a majority vote of a committee designated by the Board of Directors (in which designation interested directors may participate), the committee to consist solely of two or more disinterested directors. If such a committee cannot be designated, the determination shall be made by special legal counsel selected by a majority vote of a quorum consisting of disinterested directors, or, if the same cannot be obtained, by the committee described above. If neither a quorum consisting of disinterested directors or the committee described above can be obtained, the selection of special legal counsel shall be made by majority vote of the Board of Directors (in which selection interested directors may participate). Notwithstanding any other provision of the Article, in any instance, the determination to indemnify a director or officer may be made by vote of the shareholders, except that any shares owned, or voted under the control of, directors or officers who are parties to the proceeding may not be voted.

          Section 4. Advances and Reimbursements of Expenses. Once a determination to indemnify has been made pursuant to the provisions of Section 3 of this Article, the Corporation shall make advances for expenses of, and reimbursements for expenses incurred by, any director or officer in any proceeding described in Section 2 of this Article, upon receipt of an undertaking from the director or officer to repay the same if it is ultimately determined that he is not entitled to indemnification. Such undertaking shall be an unlimited, unsecured general obligation of the director or officer and shall be accepted without reference to his ability to make repayment. The director or officer also shall furnish the Corporation with a written statement of his good faith belief that he has met the standard of conduct described in Va. Code 13.1-697, as amended.

          Section 5. Indemnification of Agents and Employees. The Board of Directors may cause the Corporation to indemnify and make advances and reimbursements to any person not specified in Section 2 of this Article who was or is a party to any proceeding by reason of the fact that he is or was an employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, to the same extent as if such person were specified as one to whom indemnification is granted in Section 2. The provisions of Section 2 through 4 of this Article shall be applicable to any indemnification, determination, advancements and reimbursements provided pursuant to this Section.

          Section 6. Indemnification Insurance. The Corporation may purchase and maintain insurance to indemnify it against the whole or any portion of the liability assumed by it in accordance with this Article, and also may procure insurance in such amounts as the Board of Directors may determine on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against liability asserted against or incurred by any such person in any such capacity or arising from his status as such, whether or not the Corporation would have power to indemnify him against such liability under the provisions of this Article.

          Section 7. Changes in the Board Composition. In the event there has been a change in the composition of a majority of the Board of Directors after the date of the alleged act or omission with respect to which indemnification is claimed, any determination as to indemnification, advancement or reimbursement of expenses with respect to any claim for indemnification made pursuant to Sections 2 or 5 of this Article shall be made by special legal counsel agreed upon by the Board of Directors and the proposed indemnitee. If the Board of Directors and the proposed indemnitee are unable to agree upon such special legal counsel, the Board of Directors and the proposed indemnitee each shall select a nominee, and the nominee shall select such special legal counsel.

           Section 8. Applicability of this Article. The provisions of this Article shall be applicable to all actions, claims, suits or proceedings commenced after the adoption hereof, whether arising from any action taken or failure to act before or after such adoption. No amendment, modification or repeal of this Article shall diminish the rights provided hereby or diminish the right to indemnification with respect to any claim, issue or matter in any then pending or subsequent proceeding that is based in any material respect on any alleged action or failure to act prior to such amendment, modification or appeal. Reference herein to directors, officers, employees or agents shall include former directors, officers, employees and agents and their respective heirs, executors and administrators.

ARTICLE SIX
AMENDMENTS

          Where a shareholder vote is required by Virginia law, the Articles of Incorporation of the Corporation shall be amended by approval of the holders of a majority of all votes entitled to be cast provided such amendment has been recommended for approval to the shareholders of the Corporation by a majority of the Board of Directors. Where no shareholder vote is required by Virginia law, the Articles of Incorporation of the Corporation shall be amended by a vote of the Corporation’s Board of Directors without shareholder action.

ARTICLE SEVEN
AFFILIATED TRANSACTIONS

          Pursuant to Virginia Code Section 13.1-727, the Corporation expressly elects not to be governed by Title 13.1, Chapter 9, Article 14, Affiliated Transactions, as amended, of the Virginia Code.

ARTICLE EIGHT
CONTROL SHARE ACQUISITIONS

          Pursuant to Virginia Code Section 13.1-728.2, the Corporation expressly elects not to be governed by Title 13.1, Chapter 9, Article 14.1, Control Share Acquisitions, as amended, of the Virginia Code with respect to acquisitions of shares of the Corporation.

EX-4.11

Exhibit 4.11

Wampler Foods, Inc.
"Fourth Amendment To Credit Agreement

          This Fourth Amendment to Credit Agreement (herein, the "Amendment") is entered into as of May ___, 2000 between Wampler Foods, Inc., a Virginia corporation (the "Company"), WLR Foods, Inc., a Virginia corporation (the "Parent"), each of the Lenders party to the Credit Agreement (as such term is defined below) and Harris Trust and Savings Bank, as a Lender and in its capacity as agent under the Credit Agreement (the "Administrative Agent").

Preliminary Statements

          A.      The Company, the Parent and the Lenders have entered into that certain Credit Agreement, dated as of November 20, 1998 (said Credit Agreement as heretofore amended being referred to herein as the "Credit Agreement"). All capitalized terms used herein without definition shall have the same meanings herein as such terms have in the Credit Agreement.

          B.      The Company has requested that the Lenders modify the financial covenant requiring the maintenance of a minimum Fixed Charge Coverage Ratio and the Lenders are willing to do so under the terms and conditions set forth in this Amendment.

          Now, Therefore, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

Section 1.     Amendment.

          Effective upon the acceptance hereof by the Required Lenders in the spaces provided for that purpose below, Section 8.10 of the Credit Agreement shall be amended in its entirety and as so amended shall be restated to read as follows:

          Section 8.10.     Fixed Charge Coverage Ratio. The Parent shall not, as of the close of each quarterly
          accounting period of the Parent specified below, permit the Fixed Charge Coverage Ratio to be less than:

AS OF CLOSE OF EACH FISCAL QUARTER OCCURRING DURING PERIOD FROM AND INCLUDING:	TO AND INCLUDING:	FIXED CHARGE COVERAGE RATIO SHALL NOT BE LESS THAN:
the 4th fiscal quarter of fiscal year 1999	the 3rd fiscal quarter	1.0 to 1.0
	of fiscal year 2000
the 4th fiscal quarter of fiscal year 2000	Same date (compliance at level	0.75 to 1.0
	to immediate right required as
	Of only quarterly close to
	immediate left)
the 1st fiscal quarter of fiscal year 2001	Same date (compliance at level	0.50 to 1.0
	to immediate right required as
	Of only quarterly close to
	immediate left)
the 2nd fiscal quarter of fiscal year 2001	the 3rd fiscal quarter of fiscal	1.05 to 1.0
	year 2001
the 4th fiscal quarter of fiscal year 2001	All fiscal quarters thereafter	1.10 to 1.0

Section 2.     Conditions Precedent.

          The effectiveness of this Amendment is subject to the satisfaction of all of the following conditions precedent:

                    (a)     The Company, the Parent, the Administrative Agent and the Required Lenders shall have executed and
          delivered this Amendment.

                    (b)     Legal matters incident to the execution and delivery of this Amendment shall be satisfactory to the Required
          Lenders and their counsel.

Section 3.     Representations.

          In order to induce the Lenders to execute and deliver this Amendment, the Company and Parent each hereby represents to each Lender that as of the date hereof, after giving effect to this Amendment, the representations and warranties set forth in Section 6 of the Credit Agreement are true and correct in all material respects (except that the representations contained in Section 6.5 shall be deemed to refer to the most recent financial statements of the Parent and Company delivered to the Administrative Agent) and no Default or Event of Default has occurred and is continuing under the Credit Agreement.

Section 4.     Miscellaneous.

          (a)     Each of the Company and the Parent acknowledges and agrees that all of the Collateral Documents to which it is a party remain in full force and effect for the benefit and security of, among other things, the Obligations.

           (b)     Except as specifically amended herein, the Credit Agreement shall continue in full force and effect in accordance with its original terms. Reference to this specific Amendment need not be made in the Credit Agreement, the Notes, or any other instrument or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant to or with respect to the Credit Agreement, any reference in any of such items to the Credit Agreement being sufficient to refer to the Credit Agreement as amended hereby.

          (c)     The Company agrees to pay on demand all reasonable costs and expenses of or incurred by the Administrative Agent in connection with the negotiation, preparation, execution and delivery of this Amendment, as and to the extent provided in Section 12.4 of the Credit Agreement.

          (d)     This Amendment may be executed in any number of counterparts, and by the different parties on different counterpart signature pages, all of which taken together shall constitute one and the same agreement. Any of the parties hereto may execute this Amendment by signing any such counterpart and each of such counterparts shall for all purposes be deemed to be an original. This Amendment shall be governed by the internal laws of the State of Illinois.

Dated as of May 19, 2000.

                                                                                                      Wampler Foods, Inc.

                                                                                                      By: /s/ Dale S. Lam

                                                                                                      Name: Dale S. Lam

                                                                                                      Title: Treasurer

                                                                                                      WLR Foods, Inc.

                                                                                                      By: /s/ Dale S. Lam

                                                                                                      Name: Dale S. Lam

                                                                                                      Title: Treasurer

Accepted and agreed to as of the date and year last above written.

                                                                                                      Harris Trust And Savings Bank,
                                                                                                      in its individual capacity as a Lender and as
                                                                                                      Administrative Agent

                                                                                                      By: /s/ William P. Robin

                                                                                                      Name: William P. Robin

                                                                                                      Title: Vice President

                                                                                                      P n C BAnk National Association

                                                                                                      By: /s/ Daniel J. Paull

                                                                                                      Name: Daniel J. Paull

                                                                                                      Title: Vice President

                                                                                                      Bank of America, N.A.

                                                                                                      (successor by merger to "NationsBank,
                                                                                                      N.A.")

                                                                                                      By: /s/ Steven R. Kluemper

                                                                                                      Name: Steven R. Kluemper

                                                                                                      Title: Vice President

                                                                                                      U.S. Bancorp AG Credit, Inc.

                                                                                                      By:___________________________________

                                                                                                      Name:_________________________________

                                                                                                      Title:__________________________________

                                                                                                      The CIT Group/Business Credit, Inc.

                                                                                                      By: /s/ Jay Nomina

                                                                                                      Name: Jay Nomina

                                                                                                      Title: Vice President

                                                                                                      Blue Ridge Farm Credit, ACA

                                                                                                      By: /s/ C. McCheyne Swortzel

                                                                                                      Name: C. McCheyne Swortzel

                                                                                                      Title: Regional Lending Manager

                                                                                                      Branch Banking and Trust Company of Virginia

                                                                                                      By:___________________________________

                                                                                                      Name:_________________________________

                                                                                                      Title:__________________________________

                                                                                                      Mercantile Bank National Association

                                                                                                      By:___________________________________

                                                                                                      Name:_________________________________

                                                                                                      Title:__________________________________

EX-10.15

Exhibit 10.15

TERMINATION OF SEVERANCE AND EMPLOYMENT AGREEMENT

                    THIS TERMINATION OF SEVERANCE AND EMPLOYMENT AGREEMENT ("Agreement") is made this 27^th day of September, 2000, by and between WLR FOODS, INC., a Virginia corporation (the "Company") and JAMES L. KEELER ("Mr. Keeler"), who agree as follows:

RECITALS:

                    A.     The Company and Mr. Keeler entered into a letter agreement dated February 4, 1994 ("Severance Agreement") , that provides, among other things, that the Company shall be obligated to pay Mr. Keeler certain severance benefits, as set forth therein, in the event of a termination of his employment within thirty-six (36) months after a Change In Control of the Company has occurred.

                    B.      The Company has entered into an Amended and Restated Employment Agreement dated June 23, 1998 with Mr. Keeler ("Employment Agreement").

                    C.     The Company has entered into an Agreement And Plan Of Merger with Pilgrim’s Pride Corporation, a Delaware corporation ("Pilgrim’s), with such merger to be consummated on the Effective Date, as defined therein (the "Merger Agreement"). Such merger, if consummated, will constitute a Change In Control of the Company as set forth in the Severance Agreement.

                    D.      The parties desire to terminate the Severance Agreement and the Employment Agreement as provided herein.

                    NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is acknowledged, the parties hereto agree as follows:

                    1.     Payment. In consideration for the execution of this Agreement, the Company agrees to pay Mr. Keeler the sum of Nine Hundred Thousand Dollars ($900,000.00), to be paid on the Effective Date by wire transfer to an account designated in writing by Mr. Keeler.

                    2.      Elimination of Severance Payment. In consideration of the payment made to Mr. Keeler by the Company in Section 1 above, the parties agree that the Severance Agreement will be terminated in its entirety, and Mr. Keeler shall resign from all positions with the Company and its affiliates on the Effective Date.

                    3.      Termination of Employment Agreement. In further consideration for the payment referred to in Section 1, Mr. Keeler agrees to terminate his Employment Agreement, provided however, that the Company obtains assurances from Pilgrim’s that the obligation to provide continuing health care coverage as provided for in Section 6 of the Employment Agreement for Mr. Keeler and his wife for their respective lives will be deemed to have survived and be assumed by Pilgrim’s.

                    4.      Condition Precedent. Notwithstanding anything to the contrary herein, the terms of this Agreement are expressly contingent upon the consummation of the sale transaction provided for in the Merger Agreement; in the event such transaction is not consummated for any reason on the Effective Date, or the payment as contemplated in Section 1 is not made as provided herein, all such terms of the Severance Agreement and the Employment Agreement shall remain in full force and effect.

                    5.      Successors; Binding Agreement. This Agreement shall inure to the benefit of and be enforceable by Mr. Keeler, his personal legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees.

                    This Agreement shall be binding on the Company and its successors and assigns.

                    6.      Fees and Expenses. The Company shall reimburse Mr. Keeler, on a current basis, for all reasonable legal fees and related expenses incurred by him (a) in connection with contesting or disputing any terms or conditions of this Agreement or incurred by Mr. Keeler in attempting to collect payment under this Agreement, or (b) in seeking to obtain or enforce any right or benefit provided by this Agreement, in each case regardless of whether or not his claim is upheld by a court of competent jurisdiction; provided, however, Mr. Keeler shall be required to repay such amounts to the Company to the extent that a court issues a final and non-appealable order setting forth the determination taken by Mr. Keeler was frivolous or advanced by him in bad faith.

                    7.      Governing Law and Venue. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the Commonwealth of Virginia (exclusive of its conflict of laws provision). Venue for any proceeding related to the performance or interpretation of this Agreement, or in any way arising out of this Agreement, shall be either the Circuit Court of Rockingham County, Virginia or the United States District Court for the Western District of Virginia, Harrisonburg Division.

                    IN WITNESS WHEREOF, the undersigned has caused this Agreement to be executed on its behalf as thereunto duly authorized; and

                    WITNESS the following signature and seal.

                                                                                                  WLR FOODS, INC., a Virginia corporation

                                                                                                  By: __________________________________

                                                                                                  Its: __________________________________

                                                                                                  _____________________________________
                                                                                                                          James L. Keeler

EX-10.16

Exhibit 10.16

TERMINATION OF SEVERANCE AGREEMENT

                    THIS TERMINATION OF SEVERANCE AGREEMENT ("Agreement") is made this 27^th day of September, 2000, by and between WLR FOODS, INC., a Virginia corporation (the "Company") and DALE S. LAM ("Mr. Lam"), who agree as follows:

RECITALS:

                    A.    The Company and Mr. Lam entered into a letter agreement dated November 2, 1998 ("Severance Agreement") , that provides, among other things, that the Company shall be obligated to pay Mr. Lam certain severance benefits, as set forth therein, in the event of a termination of his employment within thirty-six (36) months after a Change In Control of the Company has occurred.

                    B.     The Company has entered into an Agreement And Plan Of Merger with Pilgrim’s Pride Corporation, a Delaware corporation, with such merger to be consummated on the Effective Date, as defined therein. Such merger, if consummated, will constitute a Change In Control of the Company as set forth in the Severance Agreement.

                    C.     The parties desire to terminate the Severance Agreement as provided herein.

                    NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is acknowledged, the parties hereto agree as follows:

                    1.     Payment. In consideration for the execution of this Agreement, the Company agrees to pay Mr. Lam the sum of Four Hundred Forty-Seven Thousand, Seven Hundred Fifty Dollars ($447,750.00), to be paid on the Effective Date by wire transfer to an account designated in writing by Mr. Lam.

                    2.     Elimination of Severance Payment. In consideration of the payment made to Mr. Lam by the Company in Section 1 above, the parties agree that the Severance Agreement will be terminated in its entirety, and Mr. Lam shall resign from all positions with the Company and its affiliates on the Effective Date.

                    3.     Condition Precedent. Notwithstanding anything to the contrary herein, the terms of this Agreement are expressly contingent upon the consummation of the sale transaction provided for in the Purchase Agreement between the Company and Pilgrim’s Pride Corp., as contemplated in such Agreement; in the event such transaction is not consummated for any reason on the Effective Date, or the payment as contemplated in Section 1 is not made as provided herein, all such terms of the Severance Agreement as originally set forth in the letter dated November 2, 1998 shall remain in full force and effect.

                    4.     Successors; Binding Agreement. This Agreement shall inure to the benefit of and be enforceable by Mr. Lam, his personal legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees.

                    This Agreement shall be binding on the Company and its successors and assigns.

                    5.     Fees and Expenses. The Company shall reimburse Mr. Lam, on a current basis, for all reasonable legal fees and related expenses incurred by him (a) in connection with contesting or disputing any terms or conditions of this Agreement or incurred by Mr. Lam in attempting to collect payment under this Agreement, or (b) in seeking to obtain or enforce any right or benefit provided by this Agreement, in each case regardless of whether or not his claim is upheld by a court of competent jurisdiction; provided, however, Mr. Lam shall be required to repay such amounts to the Company to the extent that a court issues a final and non-appealable order setting forth the determination taken by Mr. Lam was frivolous or advanced by him in bad faith.

                    6.     Governing Law and Venue. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the Commonwealth of Virginia (exclusive of its conflict of laws provision). Venue for any proceeding related to the performance or interpretation of this Agreement, or in any way arising out of this Agreement, shall be either the Circuit Court of Rockingham County, Virginia or the United States District Court for the Western District of Virginia, Harrisonburg Division.

                    WITNESS the following signatures and seals; and

                     IN WITNESS WHEREOF, the undersigned has caused this Addendum to be executed on its behalf as thereunto duly authorized.

                                                                                 WLR FOODS, INC., a Virginia corporation

                                                                                 By: __________________________________

                                                                                 Its: __________________________________

                                                                                _____________________________________
                                                                                                         Dale S. Lam

EX-21

Exhibit 21

Subsidiary                                                             State of Incorporation

Wampler Foods, Inc.                                                            Virginia
P.O. Box 7275
Broadway, Virginia 22815

EX-23

Exhibit 23

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors
WLR Foods, Inc.:

We consent to incorporation by reference in the registration statements on Form S-8 (No. 33-63364 and No. 33-55649), on Form S-3 (No. 33-56775) and on Form S-3(D) (No. 33-54692) of WLR Foods, Inc. of our reports dated August 11, 2000, except for note 17, which is as of September 27, 2000,  relating to the consolidated balance sheets of WLR Foods, Inc. and subsidiaries as of July 1, 2000 and July 3, 1999, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the fiscal years in the three-year period ended July 1, 2000, and the related schedule, which reports appear in the July 1, 2000 annual report on Form 10-K of WLR Foods, Inc.

 
Richmond, Virginia
September 29, 2000

EX-24.3

Exhibit 24.3

SPECIAL POWER OF ATTORNEY

                         The undersigned director of WLR Foods, Inc., a Virginia corporation, and its subsidiaries (WLR Foods) appoints James L. Keeler and Dale S. Lam, or either of them (with full power to each of them to act alone) as his attorney-in-fact and agent for him in his capacity as a director of WLR Foods, and authorizes such persons, on behalf of WLR Foods or on his behalf individually, to sign and file any and all WLR Foods' registration statements, reports, schedules and other filings, and all amendments thereto, required or permitted to be filed under federal or state securities laws, including without limitation Forms 3, 4 and 5, registration statements, Form 10-K annual reports, Form 10-Q quarterly reports and Form 8-K current reports, with all exhibits and any and all documents required to be filed with respect thereto, with the Securities and Exchange Commission, National Association of Securities Dealers, and any regulatory authority for any U.S. state or territory, and he hereby ratifies and confirms all that his attorneys-in-fact and agents or each of them may lawfully do or cause to be done by virtue hereof.

                         WITNESS the following signatures and seals.

                         March 7, 2000                                                          /s/ Marie C. Johns            (SEAL)
                                 Date                                                                                  Marie C. Johns