-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, FNUPX2pyuHSYdv8+gAOMHbGNva3jsz7LaoUqfwXMtgt97VO34GGAW5SuBKfdOyr3 sG49Oz9prhHEbpcPTT7T/w== 0000891836-94-000009.txt : 19940315 0000891836-94-000009.hdr.sgml : 19940315 ACCESSION NUMBER: 0000891836-94-000009 CONFORMED SUBMISSION TYPE: SC 14D9 PUBLIC DOCUMENT COUNT: 17 FILED AS OF DATE: 19940314 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: WLR FOODS INC CENTRAL INDEX KEY: 0000760775 STANDARD INDUSTRIAL CLASSIFICATION: 2015 IRS NUMBER: 541295923 STATE OF INCORPORATION: VA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 14D9 SEC ACT: 34 SEC FILE NUMBER: 005-39722 FILM NUMBER: 94515751 BUSINESS ADDRESS: STREET 1: HWY 33 WEST STREET 2: P O BOX 228 CITY: HINTON STATE: VA ZIP: 22831 BUSINESS PHONE: 7038674001 MAIL ADDRESS: STREET 1: P.O. BOX 228 STREET 2: P O BOX 7000 CITY: BROADWAY STATE: VA ZIP: 22815-7000 FORMER COMPANY: FORMER CONFORMED NAME: WAMPLER LONGACRE ROCKINGHAM INC DATE OF NAME CHANGE: 19881114 FORMER COMPANY: FORMER CONFORMED NAME: WAMPLER LONGACRE INC DATE OF NAME CHANGE: 19880209 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: WLR FOODS INC CENTRAL INDEX KEY: 0000760775 STANDARD INDUSTRIAL CLASSIFICATION: 2015 IRS NUMBER: 541295923 STATE OF INCORPORATION: VA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 14D9 BUSINESS ADDRESS: STREET 1: HWY 33 WEST STREET 2: P O BOX 228 CITY: HINTON STATE: VA ZIP: 22831 BUSINESS PHONE: 7038674001 MAIL ADDRESS: STREET 1: P.O. BOX 228 STREET 2: P O BOX 7000 CITY: BROADWAY STATE: VA ZIP: 22815-7000 FORMER COMPANY: FORMER CONFORMED NAME: WAMPLER LONGACRE ROCKINGHAM INC DATE OF NAME CHANGE: 19881114 FORMER COMPANY: FORMER CONFORMED NAME: WAMPLER LONGACRE INC DATE OF NAME CHANGE: 19880209 SC 14D9 1 WLR FOODS SCHEDULE 14D9 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 14D-9 Solicitation/Recommendation Statement Pursuant to Section 14(d)(4) of the Securities Exchange Act of 1934 WLR FOODS, INC. (Name of Subject Company) WLR FOODS, INC. (Name of Person(s) Filing Statement) Common Stock, No Par Value (including the associated preferred stock purchase rights) (Title of Class of Securities) 929286 10 2 (CUSIP Number of Class of Securities) Delbert L. Seitz Chief Financial Officer WLR Foods, Inc. P.O. Box 7000 Broadway, Virginia 22815 (703) 896-7001 (Name, address and telephone number of person authorized to receive notice and communications on behalf of the person(s) filing statement) Copies to: Neil T. Anderson, Esq. John W. Flora, Esq. Sullivan & Cromwell Wharton, Aldhizer & Weaver 125 Broad Street 100 South Mason Street New York, New York 10004 Harrisonburg, Virginia 22801 (212) 558-4000 (703) 434-0316 1 Item 1. Security and Subject Company. The name of the subject company is WLR Foods, Inc., a Virginia corporation (the "Company"). The principal executive offices of the Company are located at P.O. Box 7000, Broadway, Virginia 22815. The class of equity securities to which this statement relates is the Common Stock, no par value, together with associated preferred stock purchase rights (collectively, the "Shares"), of the Company. Item 2. Tender Offer of the Bidder. This statement relates to the tender offer disclosed in the Schedule 14D-1, dated March 9, 1994 (the "Schedule 14D-1"), of the bidder, Tyson Foods, Inc., a Delaware corporation (the "Bidder"), to, through its wholly-owned subsidiary, WLR Acquisition Corp., purchase all of the outstanding Shares upon the terms and subject to the conditions set forth in the Offer to Purchase, dated March 9, 1994, and the related Letter of Transmittal (together, the "Offer"). The Offer to Purchase states that the principal executive offices of the Bidder are located at 2210 West Oaklawn Drive, Springdale, Arkansas 72762-6999. Item 3. Identity and Background. (a) The name and business address of the Company, which is the person filing this statement, are set forth in Item 1 above. (b)(1) Certain contracts, agreements, arrangements, or understandings between the Company and its executive officers, directors or affiliates are described in the sections entitled "Executive Agreements," "Security Ownership of Certain Beneficial Owners and Management" and "Certain Relationships and Related Transactions" in the Company's Proxy Statement for the Annual Meeting of Shareholders held on October 23, 1993 (the "Proxy Statement"). A copy of the relevant portions of the Proxy Statement is filed as Exhibit 1 hereto and the portions of such Proxy Statement referred to above are incorporated herein by reference. On February 4, 1994, the Board of Directors of the Company, following publication of Bidder's unsolicited offer to acquire the Company and after consideration of the potentially destabilizing effects of the pendency of such a proposal on the morale and retention of Company employees, approved the entry by the Company into severance agreements with executives and certain other employees of the Company and the adoption by the Company of a severance policy applicable to the Company's other salaried and hourly clerical employees. Generally, the form of severance agreement (the "Form of Severance Agreement") provides that if the Company terminates the executive's employment during a specified period following a "Change in Control" of the Company (the "Period"), other than for death, Cause (as defined in the executive's severance agreement) or Disability (as defined in the executive's severance agreement), or if the executive resigns for Good Reason (as defined in the executive's severance agreement) during the Period, the executive will be entitled to receive an amount in cash (the "Severance Payment") equal to a certain number times (the "Multiplier") the executive's total annual compensation, which includes: (A) the higher of (x) the executive's annual base salary on the date of termination or (y) the executive's annual base salary in effect immediately prior to the Change in Control and (B) an amount equal to the 2 average of the bonuses awarded to him in each of the three (3) previous years, including any bonuses awarded pursuant to any Deferred Compensation Arrangements. In addition, if during the Period the executive's employment with the Company is terminated for any reason other than retirement, the Company shall pay him an amount in cash equal to the difference between the Termination Fair Market Value (as defined in the executive's severance agreement) and the exercise price of all options granted to him under the Company's Restated Long Term Incentive Plan or any plan succeeding thereto and which do not become exercisable prior to their expiration. In the event that such payments to the executive become subject to an excise tax imposed by Section 4999 of the Internal Revenue Code (or any similar tax), the executive shall also 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 executive's severance agreement. If the executive's employment is terminated during the Period (a) by the Company other than for Cause or Disability or (b) by the executive for Good Reason, the Company shall maintain in force, for the benefit of the executive and the executive's dependents, for a period terminating on the earlier of three years from the date of termination or the commencement date of equivalent benefits from a new employer, all insured and self-insured employee welfare benefit plans in which the executive was entitled to participate immediately prior to the date of termination. The executive's severance agreement also provides for the reimbursement by the Company, on a current basis, of any reasonable legal fees and related expenses incurred by him in connection with the executive's severance agreement following a Change in Control subject to a requirement that the executive repay any such amounts to the extent that a court issues a final, non-appealable order setting forth the determination that the position taken by him was frivolous or advanced in bad faith. 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 combined voting power of the Company's outstanding stock, subject to certain exceptions set forth in the executive's severance agreement, (B) when individuals who as of February 4, 1994 constitute the Board of Directors (the "Incumbent Board") and individuals whose election, or nomination for election by the shareholders of the Company, was approved by a vote of at least seventy-five percent of the directors then comprising the Incumbent Board (who shall after election be considered members of the Incumbent Board unless such election occurs as a result of an actual or 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 executive's severance agreement. The Company has entered into a severance agreement in the general form of the Form of Severance Agreement, dated February 4, 1994, with James L. Keeler, President and Chief Executive Officer of the Company. Mr. Keeler's severance agreement provides for a Period equal to 36 months and a Multiplier equal to three (3). 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 entered into severance agreements in the general form as the Form of Severance Agreement, dated February 4, 1994, with Delbert L. Seitz, Chief Financial Officer, Secretary 3 and Treasurer, and James L. Mason, President of Wampler-Longacre, Inc. Both of these severance agreements provide for a Period equal to 36 months and a Multiplier equal to three (3). The Company has entered into severance agreements in the general form as the Form of Severance Agreement (the "Class III Agreements"), dated February 4, 1994, with John J. Broaddus, President of Cassco Ice & Cold Storage, V. Eugene Misner, Vice President of Live Production, Henry L. Holler, Vice President of Sales and Marketing, Jane T. Brookshire, Vice President of Human Resources, Kenneth Marshall, Vice President of Plant Operations and three other executives (who are not executive officers) of the Company. These severance agreements provide for a Period equal to 24 months and a Multiplier equal to one and one-half (1.5). However, the welfare plan benefits for these executives, such as health insurance, are extended for a maximum of one and one-half (1.5) years, not three (3) years. Copies of Mr. Keeler's severance agreement, together with severance agreements for Messrs. Seitz and Mason and the form of Class III Agreement, are filed as Exhibits 2 to 5 hereto and are incorporated herein by reference. The foregoing description of Mr. Keeler's severance agreement and the descriptions of the Company's other severance agreements are qualified in their entirety by reference to the text of such severance agreements. The Company has calculated that the maximum aggregate lump sum amount that could be payable pursuant to all of the severance agreements described above, together with additional severance agreements with certain other employees who are not executive officers, assuming termination of each of these employees but exclusive of any "gross-up" payments and fringe benefit costs, is approximately $7.3 million. In connection with the termination of their employment (other than as directors) of the Company, Charles W. Wampler, Jr., Herman D. Mason, George E. Bryan and William D. Wampler each were provided individual deferred compensation agreements (the "Deferred Compensation Agreements") which provide post-retirement health insurance coverage for life for these directors and their families. Copies of the Deferred Compensation Agreements are filed as Exhibits 6 to 9 hereto and are incorporated herein by reference. The foregoing description of the Deferred Compensation Agreements is qualified in its entirety by reference to the Deferred Compensation Agreements. (2) To the best knowledge of the Company, there are no material contracts, agreements, arrangements or understandings or any actual or potential conflicts of interest, between the Company, its executive officers, directors or affiliates, on the one hand, and the Bidder, its executive officers, directors or affiliates, on the other hand. Item 4. The Solicitation or Recommendation. (a) At a meeting of the Board of Directors of the Company held on March 11, 1994, the Board carefully considered the Company's business, financial condition and prospects, the terms and conditions of the Offer and other matters, including presentations by its legal and financial advisors. The Board had earlier met on January 28, 1994 and February 4, 1994 to consider the Bidder's unsolicited proposal to negotiate the purchase of the Company for $30 per Share, which the Board, after receiving advice from its management and professional advisors, unanimously determined to reject. 4 At the March 11 meeting, the Company's Board of Directors unanimously concluded, among other things, that the Offer is inadequate and not in the best interests of the Company and its shareholders. Accordingly, the Board unanimously recommends that the Company's shareholders reject the Offer and not tender their Shares pursuant to the Offer. A copy of a letter to shareholders communicating the Board's recommendation and a form of press release announcing such recommendation are filed as Exhibits 10 and 11 hereto, respectively, and are incorporated herein by reference. (b) In reaching the conclusions referred to in Item 4(a), the Board took into account numerous factors, including but not limited to the following: (i) The Board's familiarity with the business, financial condition, prospects and current business strategy of the Company, the nature of the industries in which the Company operates and the Company's strong position in these industries and the Board's belief that the Offer does not reflect the long-term values inherent in the Company. In this regard, the Board particularly considered: -- The recent completion of the Company's five-year, $133.7 million capital expenditure program which increased production from 1988 levels by 115% and the Board's belief that substantial benefits from that capital expenditure program will be realized in increasing amounts in the coming quarters. -- The recent encouraging signs in demand for poultry products, which are reflected in prices which are currently higher than last year. -- Numerous recent and planned organizational changes, including the recent reorganization of the Company's poultry subsidiaries into a single company, that has already produced substantial annual labor and benefit savings and that should produce additional savings to the Company. -- The growth of the Company by building its own facilities and by buying good companies and that all of the prior acquisitions by the Company, such as Cassco Ice & Cold Storage and Round Hill Foods, have been friendly. -- The recent work regarding the Company's marketing and export programs, whose benefits should be for the Company, not the Bidder. (ii) The opinion of Goldman, Sachs & Co. ("Goldman Sachs"), the Company's financial advisor, after reviewing with the Board many of the factors referred to herein and other financial criteria used in assessing an offer, that the Offer is inadequate. (iii) The numerous conditions to which the Offer is subject. Eleven general conditions and many more sub-conditions must be satisfied or waived before the Bidder is obligated to consummate the Offer. 5 (iv) The disruptive effect consummation of the Offer could have on the Company's employees, creditors, customers and suppliers and the communities where the Company operates. (v) The fact that acceptance of the Offer would give rise to substantial tax liability for many of the Company's shareholders. (vi) The extent of interest in acquiring the Company by other entities communicated to the Company and its financial advisors since the announcement of Bidder's interest in acquiring the Company. Item 5. Persons Retained, Employed or to be Compensated. The Company has retained Goldman Sachs and Wheat, First Securities, Inc. ("Wheat") as the Company's financial advisors in connection with the evaluation of and response to the Offer and other matters arising in connection therewith. In addition, the Company has retained Burson-Marsteller ("B-M") and D.F. King & Co., Inc. ("D.F. King") to assist the Company in connection with its communications with shareholders with respect to, and to provide other services to the Company in connection with, the Offer. (a) Goldman, Sachs & Co. and Wheat, First Securities, Inc. Pursuant to two separate letter agreements, each dated January 28, 1994 (the "Letter Agreements"), the Company has retained Goldman Sachs and Wheat as financial advisors with respect to the offer contained in the Bidder's letter of January 24, 1994. Pursuant to these agreements, the Company has agreed to pay: (a) a fee of $200,000 to Goldman Sachs and a fee of $75,000 to Wheat, each payable on the date of the letter agreement (which amounts have been paid), (b) an additional fee of $1,000,000 to Goldman Sachs and an additional fee of $250,000 to Wheat (less any fees payable pursuant to clause (a) above), each payable on January 26, 1995, in the event that the Letter Agreements are not terminated prior to April 26, 1994 and neither the Bidder nor any other party has acquired a majority of the Shares by January 26, 1995 and (c) in the event a majority of the outstanding Shares are acquired by the Bidder or any other person or any group (including the Company), in one or a series of transactions, by means of a tender offer or merger, private or open market purchases of stock or otherwise, or if all or substantially all of the assets of the Company are transferred, in one or a series of transactions, by means of a sale, distribution or liquidation, an additional fee equal to 0.75%, in the case of Goldman Sachs, and 0.15%, in the case of Wheat, of the aggregate value of the offer contained in the Bidder's January 24, 1994 offer (which contemplated the same $30 per Share consideration as the Offer), plus 2%, in the case of Goldman Sachs, and 0.40%, in the case of Wheat, of the amount by which the aggregate value of the transaction(s) exceed the aggregate value of the Bidder's January 24, 1994 offer (the "Transaction Fee"). For purposes of the preceding sentence, the phrase "aggregate value" shall be deemed to include amounts paid by the purchaser or the Company with respect to contingently issuable shares, including, without limitation, shares issuable pursuant to options, warrants and convertible securities. If at least 50% of the outstanding Shares is acquired by the Bidder or any other person or group, including the Company, such aggregate value shall be determined as if such acquisition were of 100% of the Shares (including all contingently issuable shares). Apart from the specific transactions contemplated by clause (c) above, the Company has also agreed to retain Goldman Sachs and Wheat as 6 financial advisors pursuant to a separate letter agreement on customary terms and conditions (the "Advisory Fee") in connection with any merger, combination, acquisition of stock or assets, recapitalization, distribution, divestiture, liquidation or other similar transaction involving the Company or certain of its related entities. Pursuant to the Letter Agreements, the following amounts shall be deducted from the Transaction Fee and the Advisory Fee to be received by Goldman Sachs: (i) any fees paid to Goldman Sachs pursuant to clauses (a) and (b) in the preceding paragraph and (ii) an amount equal to 20% of the amount of the Transaction Fee and the Advisory Fee to be received by Goldman Sachs, representing the fee to be paid to Wheat. Any Advisory Fee payable to Goldman Sachs shall be deducted from the amount payable to Goldman Sachs pursuant to clause (b) in the preceding paragraph. Any fees payable to Wheat pursuant to clauses (a) and (b) in the preceding paragraph shall be deducted from the Transaction Fee and the Advisory Fee to be received by Wheat. Any Advisory Fee payable to Wheat shall be deducted from the amount payable to Wheat pursuant to clause (b) in the preceding paragraph. Pursuant to the Letter Agreements, the Company has agreed to retain Goldman Sachs and Wheat as the Company's financial advisors (pursuant to separate letter agreements) if the Company becomes the subject of, or is threatened with, a contested proxy solicitation by the Bidder or any other party, and amounts payable to Goldman Sachs and Wheat in such capacity shall be a credit against any amount payable to Goldman Sachs and Wheat pursuant to clauses (b) and (c) in the second preceding paragraph. The Company has also agreed to reimburse Goldman Sachs and Wheat periodically for their respective reasonable out-of-pocket expenses, including the fees and disbursements of legal counsel plus any sales, use or similar taxes (including additions to such taxes, if any) arising in connection with their engagement by the Company. In addition, the Company has agreed to indemnify Goldman Sachs and Wheat against certain liabilities, including liabilities under the federal securities laws. The Letter Agreements may be terminated at any time by either party thereto, with or without cause, effective upon receipt of written notice by the non-terminating party. Goldman Sachs and Wheat shall be entitled to the fee set forth above if, at any time prior to the expiration of one year after such termination, a transaction of the type contemplated by clause (c) above is consummated and, in the case of a transaction contemplated by clause (c), there was contact with the acquiring party, or any affiliate thereof, regarding such a transaction during the period of Goldman Sachs' or Wheat's engagement. Copies of the Letter Agreements are filed as Exhibits 12 and 13 hereto and are incorporated herein by reference. The foregoing description of the Letter Agreements is qualified in its entirety by reference to the Letter Agreements. (b) Burson-Marsteller and D.F. King & Co., Inc. The Company has also retained B-M and D.F. King to assist the Company in connection with its communications with shareholders with respect to, and to provide other services to the Company in connection with, the Offer. The Company will pay B-M and D.F. King reasonable and customary compensation for their services and will reimburse B-M and D.F. King for their reasonable out-of-pocket expenses incurred in connection therewith. 7 Item 6. Recent Transactions and Intent with Respect to Securities. (a) To the best of the Company's knowledge, no transactions in Shares have been effected during the past 60 days by the Company or by any executive officer, director, affiliate or subsidiary of the Company, except for nominal periodic acquisitions under the Company's Dividend Reinvestment Plan and Employee Stock Purchase Plan. (b) To the best of the Company's knowledge, none of the Company's executive officers, directors, affiliates or subsidiaries presently intends to tender to the Bidder pursuant to the Offer or sell any Shares that are held of record or beneficially owned by such persons, but rather such persons presently intend to continue to hold such securities. Item 7. Certain Negotiations and Transactions by the Subject Company. (a) The Company, consistent with its long-range strategy and past practices, continues to discuss possible strategic acquisitions by the Company of third parties. If any such discussions lead to a transaction, the consummation of any such transaction could include the issuance of voting securities of the Company, possibly in a merger or stock exchange transaction. Consummation of such a transaction might also involve issuance of debt securities or the payment of cash or other consideration by the Company. Except as contemplated by the prior paragraph, no negotiation is being undertaken or is underway by the Company in response to the Offer which relates to or would result in: (1) An extraordinary transaction such as a merger or reorganization, involving the Company or any subsidiary of the Company; (2) A purchase, sale or transfer of a material amount of assets by the Company or any subsidiary of the Company; (3) A tender offer for or other acquisition of securities by or of the Company; or (4) Any material change in the present capitalization or dividend policy of the Company. (b) The Company has not entered into any transaction, board resolution, agreement in principle or signed contract in response to the Offer which relates to or would result in one or more of the matters referred to in Item 7(a)(1), (2), (3) or (4). Item 8. Additional Information to be Furnished. (a) The Rights Agreement. On February 4, 1994, the Board of Directors of the Company declared a dividend payable February 14, 1994 of one right (a "Right") for each outstanding share of common stock, no par value ("Common Stock"), of the Company held of record at the close of business on February 14, 1994 (the "Record Time"), or issued thereafter and prior to the Separation Time 8 (as hereinafter defined) and thereafter pursuant to options and convertible securities outstanding at the Separation Time. The Rights were issued pursuant to a Shareholder Protection Rights Agreement, dated as of February 4, 1994 (the "Rights Agreement"), between the Company and First Union National Bank of North Carolina, as Rights Agent (the "Rights Agent"). Each Right entitles its registered holder to purchase from the Company, after the Separation Time, one one-hundredth of a share of Participating Preferred Stock, no par value ("Participating Preferred Stock"), for $68.00 (the "Exercise Price"), subject to adjustment. The Rights will be evidenced by the Common Stock certificates until the close of business on the earlier of (either, the "Separation Time") (i) the tenth business day (or such later date as the Board of Directors of the Company may from time to time fix by resolution adopted prior to the Separation Time that would otherwise have occurred) after the date on which any Person (as defined in the Rights Agreement) commences a tender or exchange offer which, if consummated, would result in such Person's becoming an Acquiring Person, as defined below, and (ii) the first date (the "Flip-in Date") of public announcement by the Company or any Person that such Person has become an Acquiring Person, other than as a result of a Flip-over Transaction or Event (as defined below); provided that if the foregoing results in the Separation Time being prior to the Record Time, the Separation Time shall be the Record Time; and provided further that if a tender or exchange offer referred to in clause (i) is cancelled, terminated or otherwise withdrawn prior to the Separation Time without the purchase of any shares of stock pursuant thereto, such offer shall be deemed never to have been made. An Acquiring Person is any Person having Beneficial Ownership (as defined in the Rights Agreement) of 15% or more of the outstanding shares of Common Stock, which term shall not include (i) the Company, any wholly-owned subsidiary of the Company or any employee stock ownership or other employee benefit plan of the Company, (ii) any person who shall become the Beneficial Owner of 15% or more of the outstanding Common Stock solely as a result of an acquisition of Common Stock by the Company, until such time as such Person acquires additional Common Stock, other than through a dividend or stock split, (iii) any Person who becomes an Acquiring Person without any plan or intent to seek or affect control of the Company if such Person, upon notice by the Company, promptly divests sufficient securities such that such 15% or greater Beneficial Ownership ceases or (iv) any Person who Beneficially Owns shares of Common Stock consisting solely of (A) shares acquired pursuant to the grant or exercise of an option granted by the Company in connection with an agreement to merge with, or acquire, the Company at a time at which there is no Acquiring Person, (B) shares owned by such Person and its Affiliates and Associates at the time of such grant and (C) shares, amounting to less than 1% of the outstanding Common Stock, acquired by Affiliates and Associates of such Person after the time of such grant. The Rights Agreement provides that, until the Separation Time, the Rights will be transferred with and only with the Common Stock. Common Stock certificates issued after the Record Time but prior to the Separation Time shall evidence one Right for each share of Common Stock represented thereby and shall contain a legend incorporating by reference the terms of the Rights Agreement (as such may be amended from time to time). Notwith- standing the absence of the aforementioned legend, certificates evidencing shares of Common Stock outstanding at the Record Time shall also evidence one Right for each share of Common Stock evidenced thereby. Promptly following the Separation Time, separate certificates evidencing the Rights ("Rights Certificates") will be mailed to holders of record of Common Stock at the Separation Time. The Rights will not be exercisable until the Business Day (as defined in the Rights Agreement) following the Separation Time. The Rights will expire on the earliest of (i) the Exchange Time (as defined below), (ii) the close of business on February 14, 2004, (iii) the date on which the 9 Rights are redeemed as described below and (iv) upon the merger of the Company into another corporation pursuant to an agreement entered into when there is no Acquiring Person (in any such case, the "Expiration Time"). The Exercise Price and the number of Rights outstanding, or in certain circumstances the securities purchasable upon exercise of the Rights, are subject to adjustment from time to time to prevent dilution in the event of a Common Stock dividend on, or a subdivision or a combination into a smaller number of shares of, Common Stock, or the issuance or distribution of any securities or assets in respect of, in lieu of or in exchange for Common Stock. In the event that prior to the Expiration Time a Flip-in Date occurs, the Company shall take such action as shall be necessary to ensure and provide that each Right (other than Rights Beneficially Owned by the Acquiring Person or any affiliate or associate thereof, which Rights shall become void) shall constitute the right to purchase from the Company, upon the exercise thereof in accordance with the terms of the Rights Agreement, that number of shares of Common Stock or Participating Preferred Stock of the Company having an aggregate Market Price (as defined in the Rights Agreement), on the date of the public announcement of an Acquiring Person's becoming such (the "Stock Acquisition Date") that gave rise to the Flip-in Date, equal to twice the Exercise Price for an amount in cash equal to the then current Exercise Price. In addition, the Board of Directors of the Company may, at its option, at any time after a Flip-in Date and prior to the time that an Acquiring Person becomes the Beneficial Owner of more than 50% of the outstanding shares of Common Stock, elect to exchange all (but not less than all) the then outstanding Rights (other than Rights Beneficially Owned by the Acquiring Person or any affiliate or associate thereof, which Rights become void) for shares of Common Stock at an exchange ratio of one share of Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date of the Separation Time (the "Exchange Ratio"). Immediately upon such action by the Board of Directors (the "Exchange Time"), the right to exercise the Rights will terminate and each Right will thereafter represent only the right to receive a number of shares of Common Stock equal to the Exchange Ratio. Whenever the Company shall become obligated under the preceding paragraph to issue shares of Common Stock upon exercise of or in exchange for Rights, the Company, at its option, may substitute therefor shares of Participating Preferred Stock, at a ratio of one one-hundredth of a share of Participating Preferred Stock for each share of Common Stock so issuable. In the event that prior to the Expiration Time the Company enters into, consummates or permits to occur a transaction or series of transactions after the time an Acquiring Person has become such in which, directly or indirectly, (i) the Company shall consolidate or merge or participate in a binding share exchange with any other Person if, at the time of the consolidation, merger or share exchange or at the time the Company enters into an agreement with respect to such consolidation, merger or share exchange, the Acquiring Person controls the Board of Directors of the Company and any term of or arrangement concerning the treatment of shares of capital stock in such merger, consolidation or share exchange relating to the Acquiring Person is not identical to the terms and arrangements relating to other holders of Common Stock or (ii) the Company shall sell or otherwise transfer (or one or more of its subsidiaries shall sell or otherwise transfer) assets (A) aggregating more than 50% of the assets (measured by either book value or fair market value) or (B) generating more than 50% of the operating income or cash flow, of the Company and its subsidiaries (taken as a whole) to any other Person (other than the Company or one or more of its wholly owned subsidiaries) or to two or more such Persons 10 which are affiliated or otherwise acting in concert, if, at the time of such sale or transfer of assets or at the time the Company (or any such subsidiary) enters into an agreement with respect to such sale or transfer, the Acquiring Person controls the Board of Directors of the Company (a "Flip-over Transaction or Event"), the Company shall take such action as shall be necessary to ensure, and shall not enter into, consummate or permit to occur such Flip-over Transaction or Event until it shall have entered into a supplemental agreement with the Person engaging in such Flip-over Transaction or Event or the parent corporation thereof (the "Flip-over Entity"), for the benefit of the holders of the Rights, providing, that upon consummation or occurrence of the Flip-over Transaction or Event (i) each Right shall thereafter constitute the right to purchase from the Flip-over Entity, upon exercise thereof in accordance with the terms of the Rights Agreement, that number of shares of common stock of the Flip-over Entity having an aggregate Market Price on the date of consummation or occurrence of such Flip-over Transaction or Event equal to twice the Exercise Price for an amount in cash equal to the then current Exercise Price and (ii) the Flip-over Entity shall thereafter be liable for, and shall assume, by virtue of such Flip-over Transaction or Event and such supplemental agreement, all the obligations and duties of the Company pursuant to the Rights Agreement. For purposes of the foregoing description, the term "Acquiring Person" shall include any Acquiring Person and its Affiliates and Associates counted together as a single Person. The Board of Directors of the Company may, at its option, at any time prior to the Flip-in Date, redeem all (but not less than all) the then outstanding Rights at a price of $0.01 per Right (the "Redemption Price"), as provided in the Rights Agreement. Immediately upon the action of the Board of Directors of the Company electing to redeem the Rights, without any further action and without any notice, the right to exercise the Rights will terminate and each Right will thereafter represent only the right to receive the Redemption Price in cash for each Right so held. The holders of Rights will, solely by reason of their ownership of Rights, have no rights as shareholders of the Company, including, without limitation, the right to vote or to receive dividends. As of February 1, 1994 there were 10,967,193 shares of Common Stock outstanding. As long as the Rights are attached to the Common Stock, the Company will issue one Right with each new share of Common Stock so that all such shares will have Rights attached. The Company's Board of Directors has reserved for issuance upon exercise of the Rights 110,000 shares of Participating Preferred Stock. The Rights Agreement (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) is attached as Exhibit 14 hereto and is incorporated herein by reference. The foregoing description of the Rights is qualified in its entirety by reference to the Rights Agreement and such exhibits thereto. 11 (b) Virginia Affiliated Transactions Statute. The Virginia affiliated transactions statutes (Article 14, Va. Code Secs. 13.1-725 et seq.) (the "Virginia Affiliated Transactions Statute") may have the effect of significantly delaying the Bidder's ability to acquire the entire equity interest in the Company. In general, the Virginia Affiliated Transactions Statute prevents the Company from engaging in any "affiliated transaction" (defined as a variety of transactions, including mergers, as set forth below) with any "interested shareholder" (defined generally as a person who "beneficially owns" (as such term is defined in the Virginia Affiliated Transactions Statute) more than ten percent (10%) of any class of the Company's outstanding voting shares or an "affiliate" or "associate" (as such terms are defined in the Virginia Affiliated Transactions Statute) of the Company and at any time within the preceding three years was an interested shareholder of the Company) for three years following the date such person became an interested shareholder (the "determination date") unless such transaction is approved by the affirmative vote of a majority (but not less than two) of the "disinterested directors" of the Board of Directors of the Company and by the affirmative vote of the holders of two- thirds of the voting shares other than shares beneficially owned by the interested shareholder. For purposes of the Virginia Affiliated Transactions Statute, a "disinterested director" means with respect to any interested shareholder (i) any member of the Board of Directors of the Company who was a member of the Board of Directors before the later of January 1, 1988 and the determination date, and (ii) any member of the Board of Directors of the Company who was recommended for election by, or was elected to fill a vacancy and received the affirmative vote of, a majority of the disinterested directors then on the Board. The Virginia Affiliated Transactions Statute provides that during the three-year period following the date a person becomes an interested shareholder, the Company may not merge with an interested shareholder or with any other corporation that immediately after the merger would be an "affiliate" (as such term is defined in the Virginia Affiliated Transactions Statute) of an interested shareholder that was an interested shareholder immediately before the merger. In addition, during this three- year period, the Company may not engage in certain other transactions, including, without limitation, (i) any share exchange pursuant to Sec. 13.1-717 of the Virginia Stock Corporation Act in which an interested shareholder acquires voting shares of the Company or any of its subsidiaries, (ii) except for transactions in the ordinary course of business, any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any interested shareholder of any assets of the corporation or of any of its subsidiaries having an aggregate market value in excess of five percent (5%) of the Company's consolidated net worth as of the date of the most recently available financial statements, or any guaranty by the Company or any of its subsidiaries of indebtedness of any interested shareholder in an amount in excess of five percent (5%) of the Company's consolidated net worth as of the date of the most recently available financial statements, (iii) the sale or other disposition by the Company or any of its subsidiaries to an interested shareholder (in one transaction or in a series of transactions) of any voting shares of the Company or any of its subsidiaries having an aggregate fair market value in excess of five percent (5%) of the aggregate fair market value of all outstanding voting shares of the Company as of the determination date except pursuant to a share dividend or the exercise of rights or warrants distributed or offered on a basis affording substantially proportionate treatment to all holders of the same class or series of voting shares, (iv) the dissolution of the Company if proposed by or on behalf of an interested shareholder, or (v) any reclassification of securities, including any reverse stock split, or recapitalization of the Company, or any merger of the Company with any of its subsidiaries or any distribution or other transaction, whether or not with or into or otherwise involving an interested shareholder, which has the effect, directly or indirectly (in one transaction or a series of transactions), 12 of increasing by more than five percent (5%) the percentage of the outstanding voting shares of the Company or any of its subsidiaries beneficially owned by any interested shareholder. According to the Offer to Purchase, the Bidder beneficially owns approximately 5.47% of the total number of Shares outstanding as of February 1, 1994. If the Bidder makes any acquisition of Shares that causes it to become an interested shareholder without approval by a majority of the disinterested directors prior to the Bidder's determination date or if the proposed merger is not approved by the affirmative vote of a majority (but not less than two) of the disinterested directors of the Board of Directors of the Company and by the affirmative vote of the holders of two-thirds of the voting shares other than shares beneficially owned by the interested shareholder, the Bidder will be unable to effect a merger with the Company until three years after such determination date and will be prevented from engaging, or causing the Company to engage, in certain transactions during such period. The foregoing description of the Virginia Affiliated Transactions Statute is qualified in its entirety by reference to the Virginia Affiliated Transactions Statute. (c) Virginia Control Share Acquisitions Statute. Under certain circumstances, the Virginia Control Share Acquisitions Statute (Article 14, Va. Code Secs. 13.1-728.1 et seq.) (the "Virginia Control Share Acquisitions Statute") may have the effect of eliminating all voting rights attached to shares acquired by the Bidder, and may subject such shares to redemption by the Company. In summary terms, a "control share acquisition" is the direct or indirect acquisition, other than an "excepted acquisition" (as defined in the Virginia Control Share Acquisitions Statute), by any person of "beneficial ownership" (as defined in the Virginia Control Share Acquisitions Statute) of shares of the Company that, except for the Virginia Control Share Acquisitions Statute, would have voting rights and would, when added to all other shares of the Company which then have voting rights and are beneficially owned by such person, would cause such person to become entitled, immediately upon acquisition of such shares, to vote or direct the vote of, shares having voting power within any of the following ranges of the votes entitled to be cast in an election of directors: (i) one-fifth or more but less than one-third of such votes; (ii) one-third or more but less than a majority of such votes; or (iii) a majority or more of such votes. Pursuant to the Virginia Control Share Acquisitions Statute, shares acquired in a control share acquisition have no voting rights unless voting rights are granted by resolution of the shareholders of the Company. For such a resolution to be adopted, it must be approved by a majority of all the votes which could be cast in a vote on the election of directors by all the outstanding shares other than "interested shares." Interested shares are not entitled to vote on the resolution and, for purposes of determining whether a quorum exists, are disregarded. "Interested shares" means the shares of the Company the voting power of which in an election of directors may be exercised or directed by any of the following persons: (i) a person who has made or proposes to make a control share acquisition (an "acquiring person") with respect to a control share acquisition, (ii) any officer of the Company, or (iii) any employee of the Company. An acquiring person may, after any control share acquisition or before any proposed one, deliver a control share acquisition statement to the Company setting forth, among other things, certain information regarding the acquiring person, its holdings of shares of the Company and details of such person's control share acquisition or proposed control share acquisition. If the acquiring person so requests at the time of delivery of a control share acquisition statement and gives an undertaking to pay 13 the Company's expenses of a special meeting, within ten (10) days thereafter the directors of the Company shall (subject to certain limited exceptions) call a special meeting of shareholders for the purpose of considering the voting rights to be granted the shares acquired or to be acquired in the control share acquisition. Such a special meeting shall be held within fifty days after receipt by the Company of such request (subject to certain conditions and notice requirements set forth therein). The Company's by-laws provide that the record date for any such special meeting shall be the date on which the Acquiring Person (as defined in the Virginia Control Share Acquisitions Statute) requests such special meeting. As authorized in the Company's by-laws, the shares acquired in such control share acquisition with respect to which no control share acquisition statement has been filed with the Company, or shares acquired in such control share acquisition with respect to which the shareholders have failed to grant voting rights at a special meeting or, if no special meeting for such purpose has been convened, at an annual meeting may, at any time during the period ending sixty (60) days after the last acquisition of such shares by the acquiring person, be redeemed by the Company at the redemption price set forth in the Virginia Control Share Acquisitions Statute. The foregoing description of the Virginia Control Share Acquisitions Statute is qualified in its entirety by reference to the Virginia Control Share Acquisitions Statute. (d) Litigation. In connection with its adoption of the Rights Plan, the Company filed a lawsuit on February 6, 1994 against the Bidder in U.S. District Court for the Western District of Virginia. The Company's amended complaint (the "Company's Amended Complaint") seeks, among other relief, (i) a declaratory judgment that the Rights Plan is valid, lawful and binding and was adopted in full compliance with applicable law and that any Rights to be issued pursuant to the Rights Plan are valid, binding and legally enforceable under state and federal law and (ii) a declaratory judgment that Article 14, Va. Code Secs. 13.1-725 et seq. (Virginia Affiliated Transactions Statute), and Article 14.1, Va. Code Secs. 13.1- 728.1 et seq. (Virginia Control Share Acquisitions Statute), of the Virginia Stock Corporation Act are constitutional under the Virginia and the United States Constitutions and valid under any other applicable law. On February 28, 1994, the Bidder filed in U.S. District Court for the Western District of Virginia an answer and counterclaims against the Company (the "Bidder's Counterclaim"), seeking in those counterclaims, among other relief, to invalidate the Company's Rights Plan and certain Severance Agreements and seeking a declaration that the Virginia Affiliated Transactions Statute, on its face and as applied, and the Virginia Control Share Acquisitions Statute, as applied, are unconstitutional. Copies of the Company's Amended Complaint and the Bidder's Counterclaim are filed as Exhibits 15 and 16 hereto, respectively, and are incorporated herein by reference. The foregoing description of the Company's Amended Complaint and the Bidder's Counterclaim is qualified in its entirety by reference to the Company's Amended Complaint and the Bidder's Counterclaim. Item 9. Material to be Filed as Exhibits. Exhibit 1 -- Excerpts from the Company's Proxy Statement for the Annual Meeting of Shareholders held on October 23, 1993. 14 Exhibit 2 -- Severance Agreement, dated February 4, 1994, between the Company and James L. Keeler. Exhibit 3 -- Severance Agreement, dated February 4, 1994, between the Company and Delbert L. Seitz. Exhibit 4 -- Severance Agreement, dated February 4, 1994, between the Company and James L. Mason. Exhibit 5 -- Form of Class III Agreement. Exhibit 6 -- Deferred Compensation Agreement, dated February 4, 1994, between the Company and Charles W. Wampler, Jr. Exhibit 7 -- Deferred Compensation Agreement, dated February 4, 1994, between the Company and Herman D. Mason. Exhibit 8 -- Deferred Compensation Agreement, dated February 4, 1994, between the Company and George E. Bryan. Exhibit 9 -- Deferred Compensation Agreement, dated February 4, 1994, between the Company and William D. Wampler. Exhibit 10 -- Form of Letter to Shareholders of the Company, dated March 14, 1994.* Exhibit 11 -- Form of Press Release, dated March 14, 1994. Exhibit 12 -- Letter Agreement, dated January 28, 1994, from Goldman, Sachs & Co. to the Company. Exhibit 13 -- Letter Agreement, dated January 28, 1994, from Wheat, First Securities, Inc. to the Company. Exhibit 14 -- Shareholder Protection Rights Agreement, dated as of February 4, 1994, between the Company and First Union National Bank of North Carolina. Exhibit 15 -- The Company's Amended Complaint. Exhibit 16 -- The Bidder's Counterclaim. * Included in copies mailed to shareholders. 15 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: March 14, 1994 WLR FOODS, INC. By: /s/ James L. Keeler Name: James L. Keeler Title: President and Chief Executive Officer EX-99.1 2 WLR FOODS 14D9 EX-99.1 WHICH IS EXHIBIT 1 1 EXHIBIT 1 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth the number and percentage of shares of common stock held as of July 3, 1993 by each of the Company's directors, each executive officer named in the Summary Compensation Table on page 12, and by all directors and executive officers as a group. William D. Wampler, a director of the Company, is the only person who, to the knowledge of the Company, is the beneficial owner of 5% or more of the Company's outstanding shares of common stock. Mr. Wampler's address is Route 8, Box 112, Harrisonburg, Virginia 22801, and his stockholdings are reported with the other directors' stockholdings in the following table.
Number Beneficially Percent of Name Owned Class John J. Broaddus 30,519 1 * George E. Bryan 314,046 2 2.8% Charles L. Campbell 8,352 3 * Stephen W. Custer 67,089 4 * Calvin G. Germroth 12,020 5 * William H. Groseclose 100 6 * J. Craig Hott 70,047 7 * James L. Keeler 140,883 8 1.3% Herman D. Mason 200,487 9 1.8% James L. Mason 84,729 10 * V. Eugene Misner 62,422 11 * Delbert L. Seitz 16,350 12 * Charles W. Wampler, Jr. 342,424 13 3.1% William D. Wampler 608,550 14 5.4% 14 directors and executive 1,780,881 15 15.9% officers as a group ____________________ * Denotes percent ownership not exceeding one percent of the class of common stock. 2 1 Includes 28,019 shares owned directly and 2,500 shares which Mr. Broaddus has the option to purchase within 60 days of July 3, 1993 through the exercise of options. 2 Includes 115,264 shares owned directly and 198,782 shares owned by his wife. Mr. Bryan disclaims beneficial interest in the shares held by his wife. 3 All shares owned directly. 4 Includes 33,418 shares owned directly, 9,428 shares owned by his wife, 22,810 shares held as custodian for Mr. Custer's three children, and 1,433 shares owned by his daughter who lives at Mr. Custer's home. Mr. Custer disclaims beneficial interest in the shares owned by his wife and daughter or held by him as custodian. 5 All shares owned directly and through a self-directed retirement account. 6 All shares owned directly. 7 Includes 69,847 shares owned by E.E. Hott, Inc., of which Mr. Hott is an officer and director, and 200 shares held by his wife as custodian for Mr. Hott's two children. Mr. Hott disclaims beneficial interest in the shares held by his wife as custodian. 8 Includes 24,164 shares owned directly and through self-directed retirement accounts, 15,469 shares owned by his wife directly and through her self-directed retirement account, and 101,250 shares which Mr. Keeler has the right to purchase within 60 days of July 3, 1993 through the exercise of options. Mr. Keeler disclaims beneficial interest in the shares owned by his wife. 9 Includes 165,339 shares owned directly and 35,148 shares held as trustee for the Louise T. Mason Trust. Mr. Mason disclaims beneficial interest in the shares held by the Trust. 10 Includes 39,059 shares owned directly and through self-directed retirement accounts, 685 shares owned by his wife through her self-directed retirement account, 2,485 shares held as custodian for Mr. Mason's two children, and 42,500 shares which Mr. Mason has the right to purchase within 60 days of July 3, 1993 through the exercise of options. Mr. Mason disclaims beneficial ownership in the shares owned by his wife or held by him as custodian. 11 Includes 10,797 shares owned directly, 125 owned by his son who lives at Dr. Misner's house, and 51,500 shares which Dr. Misner has the right to purchase within 60 days of July 3, 1993 through the exercise of options. Dr. Misner disclaims beneficial ownership in the shares owned by his son. 12 Includes 350 shares owned jointly with his wife and 16,000 shares which Mr. Seitz has the right to purchase within 60 days of July 3, 1993 through the exercise of options. 3 13 Includes 121,327 shares owned directly and as general partner of Wampler Land, 45,310 shares owned by his wife, 129,646 shares held as trustee of the Charles W. Wampler, Sr. Family Trust, and 46,141 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 280,333 shares owned directly and as general partner of Wampler Land, 133,637 shares owned by his wife, 18,793 shares owned by May Meadows Farms, Inc., of which Mr. Wampler is an officer and director, 129,646 shares held as trustee of the Charles W. Wampler, Sr. Family Trust, and 46,141 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. 15 Excludes 1,350 shares held by Charles W. Wampler, Jr. and William D. Wampler as general partners of Wampler Land, and 175,787 shares held as trustees by both Charles W. Wampler, Jr. and William D. Wampler; includes 213,750 shares which the group has the right to purchase within 60 days of July 3, 1993 through the exercise of options.
4 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The following table identifies (i) amounts in excess of $60,000 paid by the Company to each of the directors, members of their immediate family, and entities related to the directors who were contract growers with the Company during fiscal year ended July 3, 1993, and (ii) amounts paid to directors who were contract growers if such payments exceeded five percent of the director's gross revenues for such activity during fiscal year ended July 3, 1993. All such transactions were on the same bases and terms as transactions with unrelated parties.
Directors Total Amount Received from the Company and its Subsidiaries Charles L. Campbell $92,446 Timothy Campbell, his son $65,413 Calvin G. Germroth $35,519 J. Craig Hott Hott's Farming, Inc. $251,986 James L. Keeler Gregory Keeler, his son $94,086 Charles W. Wampler, Jr. Sunny Creek $155,087 C.W. Wampler & Sons $206,602 William D. Wampler May Meadows Farm, Inc. $184,725 C.W. Wampler & Sons $206,602 During fiscal year ended July 3, 1993, the Company purchased, either directly or through third-party suppliers, $801,542 worth of fuel oil and propane from Franklin Oil Co., Inc., of which J. Craig Hott is a director and minority shareholder. The prices and terms were comparable to those of other oil companies in the area. During fiscal year ended July 3, 1993, the Company paid $34,029 to Custer Associates, Inc., a consulting firm owned by Stephen W. Custer, which assisted with the Company-wide quality control program. The terms of this arrangement were competitive and fully disclosed to the Board. Charles W. Wampler, Jr. and William D. Wampler are brothers and are uncles of Stephen W. Custer. 5 EXECUTIVE AGREEMENTS The Company has an employment agreement with the Chief Executive Officer which expires June 27, 1998. The agreement governs Mr. Keeler's compensation, specifically his base salary, bonus, perquisites and benefits. Pursuant to the agreement, during the current fiscal year, Mr. Keeler's base salary is $245,096 and his bonus factor, discussed under "Cash Bonus" on page 9, is 3.6, the same as the past five years. In any event, Mr. Keeler is guaranteed a bonus of $25,000. Mr. Keeler's deferred compensation allocation will continue to be calculated at 1.5% of the increase in the Company's book value over each year, as explained under "Deferred Compensation" on page 10. Mr. Keeler's perquisites and benefits are consistent with those provided to the Company's senior management. In the event of a change in control of the Company, Mr. Keeler's nonvested stock options automatically vest and his deferred compensation account becomes immediately payable. The Company has conditional employment contracts with the other four most highly compensated executive officers named on page 12 which become effective upon a change in control of the Company. Pursuant to these agreements, the Company, or its successor, will continue to employ the executives for a one-year term during which the executives will be compensated at the same level at which they were compensated immediately prior to the change in control. Further, nonvested stock options automatically vest in the event of a change in the control. The agreements also provide that if the executives' employment is involuntarily terminated without cause during the one- year term, the executives will nevertheless be entitled to the above- described compensation.
EX-10.1 3 WLR FOODS 14D9 EX-10.1 WHICH IS EXHIBIT 2 1 EXHIBIT 2 [Letterhead of WLR Foods, Inc.] February 4, 1994 James L. Keeler President and Chief Executive Officer WLR Foods, Inc. P.O. Box 7000 Broadway, Virginia 22815 Dear Mr. Keeler: WLR Foods, Inc., a Virginia corporation (the "Company"), considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders. In this connection, the Company recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control (as defined herein) may arise and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its shareholders. Accordingly, the Board of Directors of the Company (the "Board") has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management to their assigned duties without distraction in circumstances arising from the possibility of a Change in Control of the Company. In particular, the Board believes it important, should the Company or its shareholders receive a proposal for transfer of control of the Company, that you be able to assess and advise the Board whether such proposal would be in the best interests of the Company and its shareholders and to take such other action regarding such proposal as the Board might determine to be appropriate, without being influenced by the uncertainties of your own situation. In order to induce you to remain in the employ of the Company, this letter agreement ("Agreement"), which has been approved by the Board, sets forth the severance benefits which the Company agrees will be provided to you in the event your employment with the Company is terminated subsequent to a Change in Control of the Company under the circumstances described below. 1. Coordination with Employment Agreement. (i) You have previously entered into a five-year Employment Agreement with the Company dated July 4, 1993. Pursuant to such Employment Agreement, the Company agreed to employ you, and you agreed to be employed by the Company, as President and Chief Executive Officer until termination of the Employment Agreement on June 27, 1998. (ii) Notwithstanding the terms of this Agreement, the July 4, 1993 Employment Agreement shall continue in full force and effect. To the extent that any provision of any other agreement between the Company or any of its subsidiaries and you, (including, without limitation, your 2 Employment Agreement, dated July 4, 1993), shall limit, qualify or be inconsistent with any provision of this Agreement, then for purposes of this Agreement, while the same shall remain in force, the provision of such other agreement shall be deemed to have been superseded, and to be of no force or effect, as if such other agreement had been formally amended to the extent necessary to accomplish such purpose. 2. Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect until December 31, 1997; provided, however, that commencing on January 1, 1998 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one (1) additional year unless at least ninety (90) days prior to such January 1st date, the Company or you shall have given notice that this Agreement shall not be extended; and provided, further, that, notwithstanding the delivery of any such notice, this Agreement shall continue in effect for a period of thirty-six (36) months after a Change in Control of the Company if such Change in Control shall have occurred while this Agreement is in effect. Notwithstanding anything in this Section 2 to the contrary, this Agreement shall terminate if you or the Company terminate your employment prior to a Change in Control of the Company. 3. Change in Control. For the purpose of this Agreement, a "Change in Control" shall mean: (i) The acquisition by any individual, entity or group (within the meaning of Section 13 (d) (3) or 14 (d) (2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of either the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that in no event may the following acquisitions constitute a Change in Control: (a) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (b) any acquisition by the Company, (c) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, (d) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (a), (b) and (c) of paragraph (iii) of this Section 3 are satisfied, or (e) any sale or other disposition of all or substantially all of the assets of the Company, if , following such sale or other disposition, the conditions described in (1), (2) and (3) of paragraph (iv) of this Section 3 are satisfied; or (ii) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least seventy-five percent (75%) of the directors then comprising the Incumbent Board shall be considered as though such individual were a 3 member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (iii) Approval by the shareholders of the Company of a reorganization, merger or consolidation, unless, in each case following such reorganization, merger or consolidation, (a) more than sixty percent (60%) of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership immediately prior to such reorganization, merger or consolidation, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (b) no Person (excluding the Company, any employee benefit plan (or related trust) of the Company or a corporation resulting from such reorganization, merger or consolidation) beneficially owns, directly or indirectly, thirty-nine percent (39%) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors, and (c) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (iv) Approval by the shareholders of the Company of (a) a complete liquidation or dissolution of the Company or (b) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation with respect to which following such sale or other disposition, (1) more than sixty percent (60%) of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding the Company and any employee benefit plan (or related trust) of the Company or such corporation) beneficially owns, directly or indirectly, thirty-nine percent (39%) or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding 4 voting securities of such corporation entitled to vote generally in the election of directors and (3) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition of assets of the Company. (v) Notwithstanding anything in the paragraphs (i) - (iv) of this Section 3 to the contrary, no Change in Control shall be deemed to have occurred for purposes of this Agreement by virtue of any transaction which results in you, or a group of Persons which includes you, acquiring, directly or indirectly, twenty percent (20%) or more of the combined voting power of the Company's Voting Securities. 4. Termination Following Change in Control. If any of the events described in Section 3 hereof constituting a Change in Control of the Company shall have occurred, you shall be entitled to the benefits provided in Section 5 hereof upon the termination of your employment with the Company within thirty-six (36) months after such Change in Control, unless such termination is (a) because of your death, (b) by the Company for Cause or Disability or (c) by you other than for Good Reason (as all such capitalized terms are hereinafter defined). (i) Disability. Termination by the Company of your employment based on "Disability" shall mean termination because of your absence from your duties with the Company on a full time basis for one hundred eighty (180) consecutive days as a result of your incapacity due to physical or mental illness, unless within thirty (30) days after Notice of Termination (as hereinafter defined) is given to you following such absence, you shall have returned to the full time performance of your duties. (ii) Cause. Termination by the Company of your employment for "Cause" shall mean termination upon (a) the willful and continued failure by you to perform substantially your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to you by the Chairman of the Board or President of the Company which specifically identifies the manner(s) in which such executive believes that you have not substantially performed your duties, or (b) the willful engaging by you in illegal conduct which is materially and demonstrably injurious to the Company. For purposes of this paragraph (ii), no act, or failure to act, on your part shall be considered "willful" unless done, or failed to be done, by you in bad faith and without reasonable belief that your action or omission was in, or not opposed to, the best interests of the Company. Any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by you in good faith and in the best interests of the Company. It is also expressly understood that your attention to matters not directly related to the business of the Company shall not provide a basis for termination for Cause so long as the Board has approved your engagement in such activities. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative 5 vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of the conduct set forth above in clauses (a) or (b) of this paragraph (ii) and specifying the particulars thereof in detail. (iii) Good Reason. Termination by you of your employment for "Good Reason" shall mean termination based on: (A) a determination by you, in your reasonable judgment, that there has been an adverse change in your status or position(s) as an executive officer of the Company as in effect immediately prior to the Change in Control, including, without limitation, any adverse change in your status or position as a result of a diminution in your duties or responsibilities (other than, if applicable, any such change directly attributable to the fact that the Company is no longer publicly owned) or the assignment to you of any duties or responsibilities which are inconsistent with such status or position(s), or any removal of you from, or any failure to reappoint or reelect you to, such positions(s) (except in connection with the termination of your employment for Cause or Disability or as a result of your death or by you other than for Good Reason); (B) a reduction by the Company in your base salary as in effect immediately prior to the Change in Control; (C) the failure by the Company to continue in effect any Plan (as hereinafter defined) in which you are participating at the time of the Change in Control of the Company (or Plans providing you with at least substantially similar benefits) other than as a result of the normal expiration of any such Plan in accordance with its terms as in effect at the time of the Change in Control, or the taking of any action, or the failure to act, by the Company which would adversely affect your continued participation in any of such Plans on at least as favorable a basis to you as is the case on the date of the Change in Control or which would materially reduce your benefits in the future under any of such Plans or deprive you of any material benefit enjoyed by you at the time of the Change in Control; (D) the failure by the Company to provide and credit you with the number of paid vacation days to which you are then entitled in accordance with the Company's normal vacation policy as in effect immediately prior to the Change in Control; (E) the Company's requiring you to be based at any office that is greater than thirty (30) miles from where your office is located immediately prior to the Change in Control except for required travel on the Company's business to an extent substantially consistent with the business travel obligations which you undertook on behalf of the Company prior to the Change in Control; (F) the failure by the Company to obtain from any Successor (as hereinafter defined) the assent to this Agreement contemplated by Section 6 hereof; 6 (G) any purported termination by the Company of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of paragraph (iv) below (and, if applicable, paragraph (ii) above); and for purposes of this Agreement, no such purported termination shall be effective; or (H) any refusal by the Company to continue to allow you to attend to matters or engage in activities not directly related to the business of the Company which, prior to the Change in Control, you were permitted by the Board to attend to or engage in. Anything in this Agreement to the contrary notwithstanding, a termination by you for any reason during the thirty (30) day period immediately following the first anniversary of a Change in Control of the Company ("Window Period") shall be deemed a termination for Good Reason for all purposes of this Agreement. For purposes of this Agreement, "Plan" shall mean any compensation plan such as the Company Incentive Bonus Plan and your Deferred Compensation Agreement with the Company dated July 4, 1993, or any employee benefit plan such as a thrift, pension, profit sharing, medical, disability, accident, life insurance plan or a relocation plan or policy or any other plan, program or policy of the Company intended to benefit employees, except for the Company Restated Long-Term Incentive Plan. (iv) Notice of Termination. Any purported termination by the Company or by you following a Change in Control shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon. (v) Date of Termination. "Date of Termination" following a Change in Control shall mean (a) if your employment is to be terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the performance of your duties on a full-time basis during such thirty (30) day period), (b) if your employment is to be terminated by the Company for Cause or by you pursuant to Sections 4(iii)(F) or 6 hereof or for any other Good Reason, the date specified in the Notice of Termination, (c) if your employment is to be terminated by the Company for any reason other than Cause, the date specified in the Notice of Termination, which in no event shall be a date earlier than ninety (90) days after the date on which a Notice of Termination is given, unless an earlier date has been expressly agreed to by you in writing either in advance of, or after, receiving such Notice of Termination, or (d) if your employment is terminated on account of your death, the day after your death. In the case of termination of your employment by the Company for Cause, if you have not previously expressly agreed in writing to the termination, then within thirty (30) days after receipt by you of the Notice of Termination with respect thereto, you may notify the Company that a dispute exists concerning the termination, in which event the Date of Termination shall be the date set either by mutual written agreement of the parties or by such court having the matter before it. During the pendency of any such dispute, the Company will continue to pay you your full compensation in effect just prior to the time the Notice of Termination is given and 7 until the dispute is resolved. However, if such court issues a final and non-appealable order finding that the Company had Cause to terminate you then you must return all compensation paid to you after the Date of Termination specified in the Notice of Termination previously received by you. 5. Compensation Upon Termination or During Disability; Other Agreements. (i) During any period following a Change in Control of the Company that you fail to perform your duties as a result of incapacity due to physical or mental illness, you shall continue to receive your base salary at the rate then in effect and any benefits or awards under any Plans shall continue to accrue during such period, to the extent not inconsistent with such Plans, until your employment is terminated pursuant to and in accordance with paragraphs 4(iv) - 4(v) hereof. Thereafter, your benefits shall be determined in accordance with the Plans then in effect. (ii) If your employment is terminated for Cause following a Change in Control of the Company, the Company shall pay to you your base salary through the Date of Termination at the rate in effect just prior to the time a Notice of Termination is given plus any benefits or awards (including both the cash and stock components) which pursuant to the terms of any Plans have been earned or become payable, but which have not yet been paid to you. Thereupon the Company shall have no further obligations to you under this Agreement. (iii) Subject to Section 8 hereof, if, within thirty-six (36) months after a Change in Control of the Company has occurred, your employment by the Company is terminated other than on account of your death and is terminated (a) by the Company other than for Cause or Disability or (b) by you for Good Reason, including any termination by you during the Window Period, then the Company shall pay to you, no later than the fifth (5th) day following the Date of Termination, without regard to any contrary provisions of any Plan, the following: (A) your base salary through the Date of Termination at the rate in effect just prior to the time a Notice of Termination is given plus any benefits or awards (including both the cash and stock components) which pursuant to the terms of any Plans have been earned or become payable, but which have not yet been paid to you (including amounts which previously had been deferred at your request); (B) an amount in cash equal to three times the sum of (i) the higher of (a) your annual base salary on the Date of Termination or (b) your annual base salary in effect immediately prior to the Change in Control plus (ii) an amount equal to the average of the bonuses awarded to you in each of the three previous years. For the purposes of this calculation, the bonuses in (ii) shall include any bonuses awarded pursuant to any deferred compensation arrangement. For the purposes of this Agreement, the term "base salary" shall include any amounts deducted by the Company with respect to you or for your account pursuant to Sections 125 and 401(k) of the Internal Revenue Code of 1986, as amended (the "Code"). 8 (iv) If, within thirty-six (36) months after a Change in Control of the Company has occurred, your employment by the Company is terminated for any reason other than retirement, the Company shall pay to you, on the date specified below, an amount ("Spread") in cash equal to the Termination Fair Market Value (as hereinafter defined) less the exercise price of all options which were granted to you pursuant to the Company's Restated Long-Term Incentive Plan or any Plan succeeding thereto, and which shall not become exercisable prior to (a) the end of the one (1) year period immediately following the Date of Termination if your employment is terminated on account of your death, or (b) the end of the third (3rd) month following the Date of Termination if your employment is terminated for any reason other than death. The Company shall make such payment upon the fifth (5th) day following such Date of Termination; provided, however, that if you terminate your employment during the Window Period, then such payment shall be made on the earlier of your death or the first (1st) day of the seventh (7th) month following such Date of Termination. For the purposes of this Agreement, the "Termination Fair Market Value" shall be the higher of (a) the highest price of the Company's stock as quoted on the NASDAQ, or any other exchange complying with the requirements of the Securities and Exchange Act of 1934, as amended, within the period beginning ninety (90) days prior to the Date of Termination and ending upon such Date of Termination, and (b) the highest price of the Company's stock as quoted on the NASDAQ, or any other exchange complying with the requirements of the Securities and Exchange Act of 1934, as amended, within the period beginning ninety (90) days prior to a Change of Control and ending upon the date of a Change of Control. (v) If, within thirty-six (36) months after a Change in Control of the Company has occurred, your employment by the Company is terminated (a) by the Company other than for Cause or Disability, or (b) by you for Good Reason, then the Company shall maintain in full force and effect, for the continued benefit of you and your dependents for a period terminating on the earliest of (a) three (3) years after the Date of Termination, or (b) the commencement date of equivalent benefits from a new employer, all insured and self-insured employee welfare benefit Plans in which you were entitled to participate immediately prior to the Date of Termination, provided that your continued participation is possible under the general terms and provisions of such Plans (and any applicable funding media) and you continue to pay an amount equal to your regular contribution under such Plans for such participation. If three years after the Date of Termination you have not previously received, nor are then receiving, equivalent benefits from a new employer, the Company shall offer you continuation coverage under COBRA as prescribed under Section 4980B of the Code. At the expiration of such continuation coverage (or, if COBRA continuation coverage is not applicable to the Plan, then upon the expiration of the three (3) year period beginning on the Termination Date), the Company shall arrange, at its sole cost and expense, to enable you to convert your and your dependents' coverage under such plans to individual policies and programs upon the same terms as employees of the Company may apply for such conversions. In the event that your participation in any such Plan is barred, the Company, at its sole cost and expense, shall arrange to have issued for the benefit of you and your dependents individual 9 policies of insurance providing benefits substantially similar (on an after-tax basis) to those which you otherwise would have been entitled to receive under such Plans pursuant to this paragraph (v) or, if such insurance is not available at a reasonable cost to the Company, the Company shall otherwise provide you and your dependents with equivalent benefits (on an after-tax basis). You shall not be required to pay any premiums or other charges in an amount greater than that which you would have paid in order to participate in such Plans. (vi) Except as specifically provided in paragraph (v) above, the amount of any payment provided for in this Section 5 shall not be reduced, offset or subject to recovery by the Company by reason of any compensation earned by you as the result of employment by another employer after the Date of Termination, or otherwise. (vii) In the event that you become entitled to the payments provided by paragraphs (iii) and (iv) of Section 5 hereof (the "Agreement Payments"), if any of the Agreement Payments will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed), the Company shall pay to you at the time specified in paragraph (viii) below an additional amount (the "Gross-up Payment") such that the net amount retained by you, after deduction of any Excise Tax on the Total Payments (as hereinafter defined) and any federal, state and local income tax and Excise Tax upon the Gross-up Payment provided for by this paragraph (vii), but before deduction for any federal, state or local income tax on the Agreement Payments, shall be equal to the sum of (a) the Total Payments and (b) an amount equal to the product of any deductions disallowed because of the inclusion of the Gross-up Payment in your adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-up Payment is to be made. For purposes of determining whether any of the Agreement Payments will be subject to the Excise Tax and the amount of such Excise Tax, (a) any other payments or benefits received or to be received by you in connection with a Change in Control of the Company or your termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control of the Company or any person affiliated with the Company or such person) (which, together with the Agreement Payments, shall constitute the "Total Payments") shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the Company's independent auditors such other payments or benefits (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax; (b) the amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (1) the total amount of the Total Payments or (2) the amount of excess parachute payments within the meaning of Section 280G(b)(1) of the Code (after applying clause (a), above); and (c) the value of any non-cash benefits 10 or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-up Payment, you shall be deemed to (a) pay federal income taxes at the highest marginal rate of federal income taxation for the calendar year in which the Gross-up Payment is to be made, (b) pay the applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes (determined without regard to limitations on deductions based upon the amount of your adjusted gross income), and (c) have otherwise allowable deductions for federal income tax purposes at least equal to those disallowed because of the inclusion of the Gross-up Payment in your adjusted gross income. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time the Gross-up Payment is made, you shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-up Payment attributable to such reduction (plus the portion of the Gross-up Payment attributable to the Excise Tax and federal state and local income tax imposed on the portion of the Gross-up Payment being repaid by you if such repayment results in a reduction in Excise Tax and/or a federal and state and local income tax deduction), plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time the Gross-up Payment is made (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-up Payment), the Company shall make an additional Gross-up Payment in respect of such excess (plus any interest payable with respect to such excess at the rate provided in Section 1274(b)(2)(B) of the Code) at the time that the amount of such excess is finally determined. (viii) The Gross-up Payment or portion thereof provided for in paragraph (vii) above shall be paid not later than the thirtieth (30th) day following payment of any amounts under paragraphs (iii) and (iv) of Section 5; provided, however, that if the amount of such Gross-up Payment or portion thereof cannot be finally determined on or before such day, the Company shall pay to you on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined, but in no event later than the forty-fifth (45th) day after payment of any amounts under paragraphs (iii) and (iv) of Section 5. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to you, payable on the fifth (5th) day after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). 6. Successors; Binding Agreement. 11 (i) The Company will seek, by written request at least five (5) business days prior to the time a Person becomes a Successor (as hereinafter defined), to have such Person, by agreement in form and substance satisfactory to you, assent to the fulfillment of the Company's obligations under this Agreement. Failure of such Person to furnish such assent by the later of (a) three (3) business days prior to the time such Person becomes a Successor or (b) two (2) business days after such Person receives a written request to so assent shall constitute Good Reason for termination by you of your employment if a Change in Control of the Company occurs or has occurred. For purposes of this Agreement, "Successor" shall mean any Person that succeeds to, or has the practical ability to control (either immediately or with the passage of time), the Company's business directly, by merger or consolidation, or indirectly, by purchase of the Company's Voting Securities or otherwise. (ii) This Agreement shall inure to the benefit of and be enforceable by your personal legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if no such designee exists, to your estate. (iii) For purposes of this Agreement, the "Company" shall include any subsidiaries of the Company and any corporation or other entity which is the surviving or continuing entity in respect of any merger, consolidation or form of business combination in which the Company ceases to exist; provided, however, for purposes of determining whether a Change in Control has occurred herein, the term "Company" shall refer to WLR Foods, , Inc. or its successor(s). 7. Fees and Expenses; Mitigation. (i) The Company shall reimburse you, on a current basis, for all reasonable legal fees and related expenses incurred by you in connection with the Agreement following a Change in Control of the Company, including without limitation, (a) all such fees and expenses, if any, incurred in contesting or disputing any termination of your employment or incurred by you in seeking advice with respect to the matters set forth in Section 8 hereof or (b) your seeking to obtain or enforce any right or benefit provided by this Agreement, in each case, regardless of whether or not your claim is upheld by a court of competent jurisdiction; provided, however, you shall be required to repay any such amounts to the Company to the extent that a court issues a final and non-appealable order setting forth the determination that the position taken by you was frivolous or advanced by you in bad faith. (ii) You shall not be required to mitigate the amount of any payment the Company becomes obligated to make to you in connection with this Agreement, by seeking other employment or otherwise. 8. Taxes. Subject to the provisions of Section 5(vii), all payments to be made to you under this Agreement will be subject to required withholding of federal, state and local income and employment taxes. 12 9. Survival. The respective obligations of, and benefits afforded to, the Company and you as provided in Sections 5, 6(ii), 7, 8, 12 and 14 of this Agreement shall survive termination of this Agreement. 10. Notice. For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid and addressed, in the case of the Company, to the address set forth on the first page of this Agreement or, in the case of the undersigned employee, to the address set forth below his signature, provided that all notices to the Company shall be directed to the attention of the Chairman of the Board or President of the Company, with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 11. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is agreed to in a writing signed by you and the Chairman of the Board or President of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. 12. Governing Law and Venue. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the Commonwealth of Virginia. 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. 13. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 14. Employee's Commitment. You agree that subsequent to your period of employment with the Company, you will not at any time communicate or disclose to any unauthorized person, without the written consent of the Company, any proprietary processes of the Company or other confidential information concerning its business, affairs, products, suppliers or customers which, if disclosed, would have a material adverse effect upon the business or operations of the Company taken as a whole; it being understood, however, that the obligations under this Section 14 shall not apply to the extent that the aforesaid matters (a) are disclosed in circumstances where you are legally required to do so or (b) become generally known to, and available for use by, the public otherwise than by your wrongful act or omission. 13 If this letter correctly sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely, WLR Foods, Inc. By____/s/ Herman D. Mason______ Herman D. Mason By____/s/ Charles W. Wampler, Jr.___ Charles W. Wampler, Jr. By___/s/ Charles L. Campbell______ Charles L. Campbell Members of the Executive Compensation Committee By___/s/ Charles W. Wampler, Jr.____ Chairman of the Board Agreed to this 4th day of February, 1994. ____/s/ James L. Keeler____ James L. Keeler EX-10.2 4 WLR FOODS 14D9 EX-10.2 WHICH IS EXHIBIT 3 1 EXHIBIT 3 [Letterhead of WLR Foods, Inc.] February 4, 1994 Delbert L. Seitz Chief Financial Officer and Secretary-Treasurer WLR Foods, Inc. P.O. Box 7000 Broadway, Virginia 22815 Dear Mr. Seitz: WLR Foods, Inc., a Virginia corporation (the "Company"), considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders. In this connection, the Company recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control (as defined herein) may arise and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its shareholders. Accordingly, the Board of Directors of the Company (the "Board") has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management to their assigned duties without distraction in circumstances arising from the possibility of a Change in Control of the Company. In particular, the Board believes it important, should the Company or its shareholders receive a proposal for transfer of control of the Company, that you be able to assess and advise the Board whether such proposal would be in the best interests of the Company and its shareholders and to take such other action regarding such proposal as the Board might determine to be appropriate, without being influenced by the uncertainties of your own situation. In order to induce you to remain in the employ of the Company, this letter agreement ("Agreement"), which has been approved by the Board, sets forth the severance benefits which the Company agrees will be provided to you in the event your employment with the Company is terminated subsequent to a Change in Control of the Company under the circumstances described below. 1. Agreement to Provide Services; Right to Terminate. (i) Except as otherwise provided in paragraph (ii) below, the Company or you may terminate your employment at any time following a Change in Control as defined herein, subject to the Company's providing the benefits hereinafter specified in accordance with the terms hereof. (ii) In the event a Person (as hereinafter defined) makes an offer which, if accepted by the Company and subsequently consummated, would constitute a Change in Control, you agree that you will not leave the employ of the Company (other than as a result of Disability or upon Retirement, as such terms are hereinafter defined) and will render the services contemplated in the recitals to this Agreement until such 2 Change in Control offer has been abandoned or terminated or a Change in Control has occurred. For the purposes of this Agreement, Retirement shall mean a termination of your employment by you on or after you have reached age sixty-five (65) and have completed at least five (5) years of service for the Company (including any service for a predecessor of the Company where such prior service is recognized by the Company for the purpose of awarding other benefits). For purposes of this Section 1, "years of service" shall be defined as in the WLR Profit Sharing and Salary Savings Plan. 2. Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect until December 31, 1994; provided, however, that commencing on January 1, 1995 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one (1) additional year unless at least ninety (90) days prior to such January 1st date, the Company or you shall have given notice that this Agreement shall not be extended; and provided, further, that, notwithstanding the delivery of any such notice, this Agreement shall continue in effect for a period of thirty-six (36) months after a Change in Control, if such Change in Control shall have occurred while this Agreement is in effect. Notwithstanding anything in this Section 2 to the contrary, this Agreement shall terminate if you or the Company terminate your employment prior to a Change in Control of the Company. 3. Change in Control. For the purpose of this Agreement, a "Change in Control" shall mean: (i) The acquisition by any individual, entity or group (within the meaning of Section 13 (d)(3) or 14 (d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of either the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that in no event may the following acquisitions constitute a Change in Control: (a) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (b) any acquisition by the Company, (c) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, (d) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (a), (b) and (c) of paragraph (iii) of this Section 3 are satisfied, or (e) any sale or other disposition of all or substantially all of the assets of the Company, if , following such sale or other disposition, the conditions described in (1), (2) and (3) of paragraph (iv) of this Section 3 are satisfied; or (ii) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination 3 for election by the Company's shareholders, was approved by a vote of at least seventy-five percent (75%) of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (iii) Approval by the shareholders of the Company of a reorganization, merger or consolidation, unless, in each case following such reorganization, merger or consolidation, (a) more than sixty percent (60%) of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership immediately prior to such reorganization, merger or consolidation, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (b) no Person (excluding the Company, any employee benefit plan (or related trust) of the Company or a corporation resulting from such reorganization, merger or consolidation) beneficially owns, directly or indirectly, thirty-nine percent (39%) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors, and (c) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (iv) Approval by the shareholders of the Company of (a) a complete liquidation or dissolution of the Company or (b) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation with respect to which following such sale or other disposition, (1) more than sixty percent (60%) of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding the Company and any employee benefit plan (or related trust) of the Company or such corporation) 4 beneficially owns, directly or indirectly, thirty-nine percent (39%) or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (3) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition of assets of the Company. (v) Notwithstanding anything in the paragraphs (i) - (iv) of this Section 3 to the contrary, no Change in Control shall be deemed to have occurred for purposes of this Agreement by virtue of any transaction which results in you, or a group of Persons which includes you, acquiring, directly or indirectly, twenty percent (20%) or more of the combined voting power of the Company's Voting Securities. 4. Termination Following Change in Control. If any of the events described in Section 3 hereof constituting a Change in Control of the Company shall have occurred, you shall be entitled to the benefits provided in Section 5 hereof upon the termination of your employment with the Company within thirty-six (36) months after such Change in Control, unless such termination is (a) because of your death, (b) by the Company for Cause or Disability or (c) by you other than for Good Reason (as all such capitalized terms are hereinafter defined). (i) Disability. Termination by the Company of your employment based on "Disability" shall mean termination because of your absence from your duties with the Company on a full time basis for one hundred eighty (180) consecutive days as a result of your incapacity due to physical or mental illness, unless within thirty (30) days after Notice of Termination (as hereinafter defined) is given to you following such absence, you shall have returned to the full time performance of your duties. (ii) Cause. Termination by the Company of your employment for "Cause" shall mean termination upon (a) the willful and continued failure by you to perform substantially your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to you by the Chairman of the Board or President of the Company which specifically identifies the manner(s) in which such executive believes that you have not substantially performed your duties, or (b) the willful engaging by you in illegal conduct which is materially and demonstrably injurious to the Company. For purposes of this paragraph (ii), no act, or failure to act, on your part shall be considered "willful" unless done, or failed to be done, by you in bad faith and without reasonable belief that your action or omission was in, or not opposed to, the best interests of the Company. Any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by you in good faith and in the best interests of the Company. It is also expressly understood that your attention to matters not directly related to the business of the Company shall not provide a basis for termination for Cause so long as the Board has approved your engagement in such 5 activities. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of the conduct set forth above in clauses (a) or (b) of this paragraph (ii) and specifying the particulars thereof in detail. (iii) Good Reason. Termination by you of your employment for "Good Reason" shall mean termination based on: (A) a determination by you, in your reasonable judgment, that there has been an adverse change in your status or position(s) as an executive officer of the Company as in effect immediately prior to the Change in Control, including, without limitation, any adverse change in your status or position as a result of a diminution in your duties or responsibilities (other than, if applicable, any such change directly attributable to the fact that the Company is no longer publicly owned) or the assignment to you of any duties or responsibilities which are inconsistent with such status or position(s), or any removal of you from, or any failure to reappoint or reelect you to, such positions(s) (except in connection with the termination of your employment for Cause or Disability or as a result of your death or by you other than for Good Reason); (B) a reduction by the Company in your base salary as in effect immediately prior to the Change in Control; (C) the failure by the Company to continue in effect any Plan (as hereinafter defined) in which you are participating at the time of the Change in Control of the Company (or Plans providing you with at least substantially similar benefits) other than as a result of the normal expiration of any such Plan in accordance with its terms as in effect at the time of the Change in Control, or the taking of any action, or the failure to act, by the Company which would adversely affect your continued participation in any of such Plans on at least as favorable a basis to you as is the case on the date of the Change in Control or which would materially reduce your benefits in the future under any of such Plans or deprive you of any material benefit enjoyed by you at the time of the Change in Control; (D) the failure by the Company to provide and credit you with the number of paid vacation days to which you are then entitled in accordance with the Company's normal vacation policy as in effect immediately prior to the Change in Control; (E) the Company's requiring you to be based at any office that is greater than thirty (30) miles from where your office is located immediately prior to the Change in Control except for required travel on the Company's business to an extent substantially consistent with the business travel obligations which you undertook on behalf of the Company prior to the Change in Control; 6 (F) the failure by the Company to obtain from any Successor (as hereinafter defined) the assent to this Agreement contemplated by Section 6 hereof; (G) any purported termination by the Company of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of paragraph (iv) below (and, if applicable, paragraph (ii) above); and for purposes of this Agreement, no such purported termination shall be effective; or (H) any refusal by the Company to continue to allow you to attend to matters or engage in activities not directly related to the business of the Company which, prior to the Change in Control, you were permitted by the Board to attend to or engage in. For purposes of this Agreement, "Plan" shall mean any compensation plan such as the Company Incentive Bonus Plan or any employee benefit plan such as a thrift, pension, profit sharing, medical, disability, accident, life insurance plan or a relocation plan or policy or any other plan, program or policy of the Company intended to benefit employees, except for the Company Restated Long-Term Incentive Plan. (iv) Notice of Termination. Any purported termination by the Company or by you following a Change in Control shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon. (v) Date of Termination. "Date of Termination" following a Change in Control shall mean (a) if your employment is to be terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the performance of your duties on a full-time basis during such thirty (30) day period), (b) if your employment is to be terminated by the Company for Cause or by you pursuant to Sections 4(iii)(F) or 6 hereof or for any other Good Reason, the date specified in the Notice of Termination, (c) if your employment is to be terminated by the Company for any reason other than Cause, the date specified in the Notice of Termination, which in no event shall be a date earlier than ninety (90) days after the date on which a Notice of Termination is given, unless an earlier date has been expressly agreed to by you in writing either in advance of, or after, receiving such Notice of Termination, or (d) if your employment is terminated on account of your death, the day after your death. In the case of termination of your employment by the Company for Cause, if you have not previously expressly agreed in writing to the termination, then within thirty (30) days after receipt by you of the Notice of Termination with respect thereto, you may notify the Company that a dispute exists concerning the termination, in which event the Date of Termination shall be the date set either by mutual written agreement of the parties or by such court having the matter before it. During the pendency of any such dispute, the Company will continue to pay you your full compensation in effect just prior to the time the Notice of Termination is given and until the dispute is resolved. However, if such court issues a final and non-appealable order finding that the Company had Cause to terminate you then you must return all compensation paid to you after the Date of 7 Termination specified in the Notice of Termination previously received by you. 5. Compensation Upon Termination or During Disability; Other Agreements. (i) During any period following a Change in Control of the Company that you fail to perform your duties as a result of incapacity due to physical or mental illness, you shall continue to receive your base salary at the rate then in effect and any benefits or awards under any Plans shall continue to accrue during such period, to the extent not inconsistent with such Plans, until your employment is terminated pursuant to and in accordance with paragraphs 4(iv) - 4(v) hereof. Thereafter, your benefits shall be determined in accordance with the Plans then in effect. (ii) If your employment is terminated for Cause following a Change in Control of the Company, the Company shall pay to you your base salary through the Date of Termination at the rate in effect just prior to the time a Notice of Termination is given plus any benefits or awards (including both the cash and stock components) which pursuant to the terms of any Plans have been earned or become payable, but which have not yet been paid to you. Thereupon the Company shall have no further obligations to you under this Agreement. (iii) Subject to Section 8 hereof, if, within thirty-six (36) months after a Change in Control of the Company has occurred, your employment by the Company is terminated other than on account of your death and is terminated (a) by the Company other than for Cause or Disability or (b) by you for Good Reason, then the Company shall pay to you, no later than the fifth (5th) day following the Date of Termination, without regard to any contrary provisions of any Plan, the following: (A) your base salary through the Date of Termination at the rate in effect just prior to the time a Notice of Termination is given plus any benefits or awards (including both the cash and stock components) which pursuant to the terms of any Plans have been earned or become payable, but which have not yet been paid to you (including amounts which previously had been deferred at your request); (B) an amount in cash equal to three times the sum of (i) the higher of (a) your annual base salary on the Date of Termination or (b) your annual base salary in effect immediately prior to the Change in Control plus (ii) an amount equal to the average of the bonuses awarded to you in each of the three previous years. For the purposes of this Agreement, the term "base salary" shall include any amounts deducted by the Company with respect to you or for your account pursuant to Sections 125 and 401(k) of the Internal Revenue Code of 1986, as amended (the "Code"). (iv) If, within thirty-six (36) months after a Change in Control of the Company has occurred, your employment by the Company is terminated for any reason other than retirement, the Company shall pay to you, on the date specified below, an amount ("Spread") in cash equal to the 8 Termination Fair Market Value (as hereinafter defined) less the exercise price of all options which were granted to you pursuant to the Company's Restated Long-Term Incentive Plan or any Plan succeeding thereto, and which shall not become exercisable prior to (a) the end of the one (1) year period immediately following the Date of Termination if your employment is terminated on account of your death, or (b) the end of the third (3rd) month following the Date of Termination if your employment is terminated for any reason other than death. The Company shall make such payment upon the fifth (5th) day following such Date of Termination. For the purposes of this Agreement, the "Termination Fair Market Value" shall be the higher of (a) the highest price of the Company's stock as quoted on the NASDAQ, or any other exchange complying with the requirements of the Securities and Exchange Act of 1934, as amended, within the period beginning ninety (90) days prior to the Date of Termination and ending upon such Date of Termination, and (b) the highest price of the Company's stock as quoted on the NASDAQ, or any other exchange complying with the requirements of the Securities and Exchange Act of 1934, as amended, within the period beginning ninety (90) days prior to a Change of Control and ending upon the date of a Change of Control. (v) If, within thirty-six (36) months after a Change in Control of the Company has occurred, your employment by the Company is terminated (a) by the Company other than for Cause or Disability, or (b) by you for Good Reason, then the Company shall maintain in full force and effect, for the continued benefit of you and your dependents for a period terminating on the earliest of (a) three (3) years after the Date of Termination or (b) the commencement date of equivalent benefits from a new employer, insured and self-insured employee welfare benefit Plans in which you were entitled to participate immediately prior to the Date of Termination, provided that your continued participation is possible under the general terms and provisions of such Plans (and any applicable funding media) and you continue to pay an amount equal to your regular contribution under such Plans for such participation. If three (3) years after the Date of Termination you have not previously received, nor are then receiving, equivalent benefits from a new employer, the Company shall offer you continuation coverage under COBRA as prescribed under Section 4980B of the Code. At the expiration of such continuation coverage (or, if COBRA continuation coverage is not applicable to the Plan, then upon the expiration of the three (3) year period beginning on the Termination Date) the Company shall arrange, at its sole cost and expense, to enable you to convert you and your dependents' coverage under such plans to individual policies and programs upon the same terms as employees of the Company may apply for such conversions. In the event that your participation in any such Plan is barred, the Company, at its sole cost and expense, shall arrange to have issued for the benefit of you and your dependents individual policies of insurance providing benefits substantially similar (on an after-tax basis) to those which you otherwise would have been entitled to receive under such Plans pursuant to this paragraph (v) or, if such insurance is not available at a reasonable cost to the Company, the Company shall 9 otherwise provide you and your dependents with equivalent benefits (on an after-tax basis). You shall not be required to pay any premiums or other charges in an amount greater than that which you would have paid in order to participate in such Plans. (vi) Except as specifically provided in paragraph (v) above, the amount of any payment provided for in this Section 5 shall not be reduced, offset or subject to recovery by the Company by reason of any compensation earned by you as the result of employment by another employer after the Date of Termination, or otherwise. (vii) In the event that you become entitled to the payments provided by paragraphs (iii) and (iv) of Section 5(iii) hereof (the "Agreement Payments"), if any of the Agreement Payments will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed), the Company shall pay to you at the time specified in paragraph (viii) below an additional amount (the "Gross-up Payment") such that the net amount retained by you, after deduction of any Excise Tax on the Total Payments (as hereinafter defined) and any federal, state and local income tax and Excise Tax upon the Gross-up Payment provided for by this paragraph (vii), but before deduction for any federal, state or local income tax on the Agreement Payments, shall be equal to the sum of (a) the Total Payments and (b) an amount equal to the product of any deductions disallowed because of the inclusion of the Gross-up Payment in your adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-up Payment is to be made. For purposes of determining whether any of the Agreement Payments will be subject to the Excise Tax and the amount of such Excise Tax, (a) any other payments or benefits received or to be received by you in connection with a Change in Control of the Company or your termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control of the Company or any person affiliated with the Company or such person) (which, together with the Agreement Payments, shall constitute the "Total Payments") shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the Company's independent auditors such other payments or benefits (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax; (b) the amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (1) the total amount of the Total Payments or (2) the amount of excess parachute payments within the meaning of Section 280G(b)(1) of the Code (after applying clause (a), above); and (c) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. 10 For purposes of determining the amount of the Gross-up Payment, you shall be deemed to (a) pay federal income taxes at the highest marginal rate of federal income taxation for the calendar year in which the Gross-up Payment is to be made, (b) pay the applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes (determined without regard to limitations on deductions based upon the amount of your adjusted gross income), and (c) have otherwise allowable deductions for federal income tax purposes at least equal to those disallowed because of the inclusion of the Gross-up Payment in your adjusted gross income. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time the Gross-up Payment is made, you shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-up Payment attributable to such reduction (plus the portion of the Gross-up Payment attributable to the Excise Tax and federal state and local income tax imposed on the portion of the Gross-up Payment being repaid by you if such repayment results in a reduction in Excise Tax and/or a federal and state and local income tax deduction), plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time the Gross-up Payment is made (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-up Payment), the Company shall make an additional Gross-up Payment in respect of such excess (plus any interest payable with respect to such excess at the rate provided in Section 1274(b)(2)(B) of the Code) at the time that the amount of such excess is finally determined. (viii) The Gross-up Payment or portion thereof provided for in paragraph (vii) above shall be paid not later than the thirtieth (30th) day following payment of any amounts under paragraphs (iii) and (iv) of Section 5; provided, however, that if the amount of such Gross-up Payment or portion thereof cannot be finally determined on or before such day, the Company shall pay to you on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined, but in no event later than the forty-fifth (45th) day after payment of any amounts under paragraphs (iii) and (iv) of Section 5. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to you, payable on the fifth (5th) day after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). 6. Successors; Binding Agreement. (i) The Company will seek, by written request at least five (5) business days prior to the time a Person becomes a Successor (as hereinafter defined), to have such Person, by agreement in form and substance satisfactory to you, assent to the fulfillment of the Company's obligations under this Agreement. Failure of such Person to furnish 11 such assent by the later of (a) three (3) business days prior to the time such Person becomes a Successor or (b) two (2) business days after such Person receives a written request to so assent shall constitute Good Reason for termination by you of your employment if a Change in Control of the Company occurs or has occurred. For purposes of this Agreement, "Successor" shall mean any Person that succeeds to, or has the practical ability to control (either immediately or with the passage of time), the Company's business directly, by merger or consolidation, or indirectly, by purchase of the Company's Voting Securities or otherwise. (ii) This Agreement shall inure to the benefit of and be enforceable by your personal legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if no such designee exists, to your estate. (iii) For purposes of this Agreement, the "Company" shall include any subsidiaries of the Company and any corporation or other entity which is the surviving or continuing entity in respect of any merger, consolidation or form of business combination in which the Company ceases to exist; provided, however, for purposes of determining whether a Change in Control has occurred herein, the term "Company" shall refer to WLR Foods, , Inc. or its successor(s). 7. Fees and Expenses; Mitigation. (i) The Company shall reimburse you, on a current basis, for all reasonable legal fees and related expenses incurred by you in connection with the Agreement following a Change in Control of the Company, including without limitation, (a) all such fees and expenses, if any, incurred in contesting or disputing any termination of your employment or incurred by you in seeking advice with respect to the matters set forth in Section 8 hereof or (b) your seeking to obtain or enforce any right or benefit provided by this Agreement, in each case, regardless of whether or not your claim is upheld by a court of competent jurisdiction; provided, however, you shall be required to repay any such amounts to the Company to the extent that a court issues a final and non-appealable order setting forth the determination that the position taken by you was frivolous or advanced by you in bad faith. (ii) You shall not be required to mitigate the amount of any payment the Company becomes obligated to make to you in connection with this Agreement, by seeking other employment or otherwise. 8. Taxes. Subject to the provisions of Section 5(vii), all payments to be made to you under this Agreement will be subject to required withholding of federal, state and local income and employment taxes. 9. Survival. The respective obligations of, and benefits afforded to, the Company and you as provided in Sections 5, 6(ii), 7, 8, 12 and 14 of this Agreement shall survive termination of this Agreement. 12 10. Notice. For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid and addressed, in the case of the Company, to the address set forth on the first page of this Agreement or, in the case of the undersigned employee, to the address set forth below his signature, provided that all notices to the Company shall be directed to the attention of the Chairman of the Board or President of the Company, with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 11. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is agreed to in a writing signed by you and the Chairman of the Board or President of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. 12. Governing Law and Venue. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the Commonwealth of Virginia. 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. 13. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 14. Employee's Commitment. You agree that subsequent to your period of employment with the Company, you will not at any time communicate or disclose to any unauthorized person, without the written consent of the Company, any proprietary processes of the Company or other confidential information concerning its business, affairs, products, suppliers or customers which, if disclosed, would have a material adverse effect upon the business or operations of the Company, taken as a whole; it being understood, however, that the obligations under this Section 14 shall not apply to the extent that the aforesaid matters (a) are disclosed in circumstances where you are legally required to do so or (b) become generally known to, and available for use by, the public otherwise than by your wrongful act or omission. 15. Related Agreements. To the extent that any provision of any other agreement between the Company and you shall limit, qualify or be inconsistent with any provision of this Agreement, then for purposes of this Agreement, while the same shall remain in force, the provision of such other agreement shall be deemed to have been superseded, and to be 13 of no force or effect, as if such other agreement had been formally amended to the extent necessary to accomplish such purpose. Notwithstanding the effect of the preceding sentence, the conditional Employment Agreement, renewed on June 26, 1992 between the Company and you is hereby cancelled and shall be of no force or effect. If this letter correctly sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely, WLR Foods, Inc. By______/s/ Herman D. Mason_____ Herman D. Mason, Chair Executive Compensation Committee WLR Foods, Inc. Agreed to this 4th day of February, 1994. _____/s/ Delbert L. Seitz____ Delbert L. Seitz Rt. 1, Box 685 Port Republic, Va 24471 EX-10.3 5 WLR FOODS 14D9 EX-10.3 WHICH IS EXHIBIT 4 1 EXHIBIT 4 [Letterhead of WLR Foods, Inc.] February 4, 1994 James L. Mason President of Wampler-Longacre, Inc. Executive Vice President of WLR Foods, Inc. Wampler-Longacre, Inc. P.O. Box 7275 Broadway, Virginia 22815 Dear Mr. Mason: WLR Foods, Inc., a Virginia corporation (the "Company"), considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders. In this connection, the Company recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control (as defined herein) may arise and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its shareholders. Accordingly, the Board of Directors of the Company (the "Board") has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management to their assigned duties without distraction in circumstances arising from the possibility of a Change in Control of the Company. In particular, the Board believes it important, should the Company or its shareholders receive a proposal for transfer of control of the Company, that you be able to assess and advise the Board whether such proposal would be in the best interests of the Company and its shareholders and to take such other action regarding such proposal as the Board might determine to be appropriate, without being influenced by the uncertainties of your own situation. In order to induce you to remain in the employ of the Company, this letter agreement ("Agreement"), which has been approved by the Board, sets forth the severance benefits which the Company agrees will be provided to you in the event your employment with the Company is terminated subsequent to a Change in Control of the Company under the circumstances described below. 1. Agreement to Provide Services; Right to Terminate. (i) Except as otherwise provided in paragraph (ii) below, the Company or you may terminate your employment at any time following a Change in Control as defined herein, subject to the Company's providing the benefits hereinafter specified in accordance with the terms hereof. (ii) In the event a Person (as hereinafter defined) makes an offer which, if accepted by the Company and subsequently consummated, would constitute a Change in Control, you agree that you will not leave the employ of the Company (other than as a result of Disability or upon Retirement, as such terms are hereinafter defined) and will render the 2 services contemplated in the recitals to this Agreement until such Change in Control offer has been abandoned or terminated or a Change in Control has occurred. For the purposes of this Agreement, Retirement shall mean a termination of your employment by you on or after you have reached age sixty-five (65) and have completed at least five (5) years of service for the Company (including any service for a predecessor of the Company where such prior service is recognized by the Company for the purpose of awarding other benefits). For purposes of this Section 1, "years of service" shall be defined as in the WLR Profit Sharing and Salary Savings Plan. 2. Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect until December 31, 1994; provided, however, that commencing on January 1, 1995 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one (1) additional year unless at least ninety (90) days prior to such January 1st date, the Company or you shall have given notice that this Agreement shall not be extended; and provided, further, that, notwithstanding the delivery of any such notice, this Agreement shall continue in effect for a period of thirty-six (36) months after a Change in Control, if such Change in Control shall have occurred while this Agreement is in effect. Notwithstanding anything in this Section 2 to the contrary, this Agreement shall terminate if you or the Company terminate your employment prior to a Change in Control of the Company. 3. Change in Control. For the purpose of this Agreement, a "Change in Control" shall mean: (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of either the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that in no event may the following acquisitions constitute a Change in Control: (a) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (b) any acquisition by the Company, (c) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, (d) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (a), (b) and (c) of paragraph (iii) of this Section 3 are satisfied, or (e) any sale or other disposition of all or substantially all of the assets of the Company, if, following such sale or other disposition, the conditions described in (1), (2) and (3) of paragraph (iv) of this Section 3 are satisfied; or (ii) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming 3 a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least seventy-five percent (75%) of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (iii) Approval by the shareholders of the Company of a reorganization, merger or consolidation, unless, in each case following such reorganization, merger or consolidation, (a) more than sixty percent (60%) of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership immediately prior to such reorganization, merger or consolidation, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (b) no Person (excluding the Company, any employee benefit plan (or related trust) of the Company or a corporation resulting from such reorganization, merger or consolidation) beneficially owns, directly or indirectly, thirty-nine percent (39%) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors, and (c) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (iv) Approval by the shareholders of the Company of (a) a complete liquidation or dissolution of the Company or (b) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation with respect to which following such sale or other disposition, (1) more than sixty percent (60%) of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding the Company and any employee 4 benefit plan (or related trust) of the Company or such corporation) beneficially owns, directly or indirectly, thirty-nine percent (39%) or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (3) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition of assets of the Company. (v) Notwithstanding anything in the paragraphs (i) - (iv) of this Section 3 to the contrary, no Change in Control shall be deemed to have occurred for purposes of this Agreement by virtue of any transaction which results in you, or a group of Persons which includes you, acquiring, directly or indirectly, twenty percent (20%) or more of the combined voting power of the Company's Voting Securities. 4. Termination Following Change in Control. If any of the events described in Section 3 hereof constituting a Change in Control of the Company shall have occurred, you shall be entitled to the benefits provided in Section 5 hereof upon the termination of your employment with the Company within thirty-six (36) months after such Change in Control, unless such termination is (a) because of your death, (b) by the Company for Cause or Disability or (c) by you other than for Good Reason (as all such capitalized terms are hereinafter defined). (i) Disability. Termination by the Company of your employment based on "Disability" shall mean termination because of your absence from your duties with the Company on a full time basis for one hundred eighty (180) consecutive days as a result of your incapacity due to physical or mental illness, unless within thirty (30) days after Notice of Termination (as hereinafter defined) is given to you following such absence, you shall have returned to the full time performance of your duties. (ii) Cause. Termination by the Company of your employment for "Cause" shall mean termination upon (a) the willful and continued failure by you to perform substantially your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to you by the Chairman of the Board or President of the Company which specifically identifies the manner(s) in which such executive believes that you have not substantially performed your duties, or (b) the willful engaging by you in illegal conduct which is materially and demonstrably injurious to the Company. For purposes of this paragraph (ii), no act, or failure to act, on your part shall be considered "willful" unless done, or failed to be done, by you in bad faith and without reasonable belief that your action or omission was in, or not opposed to, the best interests of the Company. Any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by you in good faith and in the best interests of the Company. It is also expressly understood that your attention to matters not directly related to the business of the Company shall not provide a basis for termination for 5 Cause so long as the Board has approved your engagement in such activities. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of the conduct set forth above in clauses (a) or (b) of this paragraph (ii) and specifying the particulars thereof in detail. (iii) Good Reason. Termination by you of your employment for "Good Reason" shall mean termination based on: (A) a determination by you, in your reasonable judgment, that there has been an adverse change in your status or position(s) as an executive officer of the Company as in effect immediately prior to the Change in Control, including, without limitation, any adverse change in your status or position as a result of a diminution in your duties or responsibilities (other than, if applicable, any such change directly attributable to the fact that the Company is no longer publicly owned) or the assignment to you of any duties or responsibilities which are inconsistent with such status or position(s), or any removal of you from, or any failure to reappoint or reelect you to, such positions(s) (except in connection with the termination of your employment for Cause or Disability or as a result of your death or by you other than for Good Reason); (B) a reduction by the Company in your base salary as in effect immediately prior to the Change in Control; (C) the failure by the Company to continue in effect any Plan (as hereinafter defined) in which you are participating at the time of the Change in Control of the Company (or Plans providing you with at least substantially similar benefits) other than as a result of the normal expiration of any such Plan in accordance with its terms as in effect at the time of the Change in Control, or the taking of any action, or the failure to act, by the Company which would adversely affect your continued participation in any of such Plans on at least as favorable a basis to you as is the case on the date of the Change in Control or which would materially reduce your benefits in the future under any of such Plans or deprive you of any material benefit enjoyed by you at the time of the Change in Control; ( D) the failure by the Company to provide and credit you with the number of paid vacation days to which you are then entitled in accordance with the Company's normal vacation policy as in effect immediately prior to the Change in Control; (E) the Company's requiring you to be based at any office that is greater than thirty (30) miles from where your office is located immediately prior to the Change in Control except for required travel on the Company's business to an extent substantially consistent with the business travel obligations which you undertook on behalf of the Company prior to the Change in Control; 6 (F) the failure by the Company to obtain from any Successor (as hereinafter defined) the assent to this Agreement contemplated by Section 6 hereof; (G) any purported termination by the Company of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of paragraph (iv) below (and, if applicable, paragraph (ii) above); and for purposes of this Agreement, no such purported termination shall be effective; or (H) any refusal by the Company to continue to allow you to attend to matters or engage in activities not directly related to the business of the Company which, prior to the Change in Control, you were permitted by the Board to attend to or engage in. For purposes of this Agreement, "Plan" shall mean any compensation plan such as the Company Incentive Bonus Plan or any employee benefit plan such as a thrift, pension, profit sharing, medical, disability, accident, life insurance plan or a relocation plan or policy or any other plan, program or policy of the Company intended to benefit employees, except for the Company Restated Long-Term Incentive Plan. (iv) Notice of Termination. Any purported termination by the Company or by you following a Change in Control shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon. (v) Date of Termination. "Date of Termination" following a Change in Control shall mean (a) if your employment is to be terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the performance of your duties on a full-time basis during such thirty (30) day period), (b) if your employment is to be terminated by the Company for Cause or by you pursuant to Sections 4(iii)(F) or 6 hereof or for any other Good Reason, the date specified in the Notice of Termination, (c) if your employment is to be terminated by the Company for any reason other than Cause, the date specified in the Notice of Termination, which in no event shall be a date earlier than ninety (90) days after the date on which a Notice of Termination is given, unless an earlier date has been expressly agreed to by you in writing either in advance of, or after, receiving such Notice of Termination, or (d) if your employment is terminated on account of your death, the day after your death. In the case of termination of your employment by the Company for Cause, if you have not previously expressly agreed in writing to the termination, then within thirty (30) days after receipt by you of the Notice of Termination with respect thereto, you may notify the Company that a dispute exists concerning the termination, in which event the Date of Termination shall be the date set either by mutual written agreement of the parties or by such court having the matter before it. During the pendency of any such dispute, the Company will continue to pay you your full compensation in effect just prior to the time the Notice of Termination is given and until the dispute is resolved. However, if such court issues a final and non-appealable order finding that the Company had Cause to terminate you then you must return all compensation paid to you after the Date of 7 Termination specified in the Notice of Termination previously received by you. 5. Compensation Upon Termination or During Disability; Other Agreements. (i) During any period following a Change in Control of the Company that you fail to perform your duties as a result of incapacity due to physical or mental illness, you shall continue to receive your base salary at the rate then in effect and any benefits or awards under any Plans shall continue to accrue during such period, to the extent not inconsistent with such Plans, until your employment is terminated pursuant to and in accordance with paragraphs 4(iv) - 4(v) hereof. Thereafter, your benefits shall be determined in accordance with the Plans then in effect. (ii) If your employment is terminated for Cause following a Change in Control of the Company, the Company shall pay to you your base salary through the Date of Termination at the rate in effect just prior to the time a Notice of Termination is given plus any benefits or awards (including both the cash and stock components) which pursuant to the terms of any Plans have been earned or become payable, but which have not yet been paid to you. Thereupon the Company shall have no further obligations to you under this Agreement. (iii) Subject to Section 8 hereof, if, within thirty-six (36) months after a Change in Control of the Company has occurred, your employment by the Company is terminated other than on account of your death and is terminated (a) by the Company other than for Cause or Disability or (b) by you for Good Reason, then the Company shall pay to you, no later than the fifth (5th) day following the Date of Termination, without regard to any contrary provisions of any Plan, the following: (A) your base salary through the Date of Termination at the rate in effect just prior to the time a Notice of Termination is given plus any benefits or awards (including both the cash and stock components) which pursuant to the terms of any Plans have been earned or become payable, but which have not yet been paid to you (including amounts which previously had been deferred at your request); (B) an amount in cash equal to three times the sum of (i) the higher of (a) your annual base salary on the Date of Termination or (b) your annual base salary in effect immediately prior to the Change in Control plus (ii) an amount equal to the average of the bonuses awarded to you in each of the three previous years. For the purposes of this Agreement, the term "base salary" shall include any amounts deducted by the Company with respect to you or for your account pursuant to Sections 125 and 401(k) of the Internal Revenue Code of 1986, as amended (the "Code"). (iv) If, within thirty-six (36) months after a Change in Control of the Company has occurred, your employment by the Company is terminated for any reason other than retirement, the Company shall pay to you, on the date specified below, an amount ("Spread") in cash equal to the 8 Termination Fair Market Value (as hereinafter defined) less the exercise price of all options which were granted to you pursuant to the Company's Restated Long-Term Incentive Plan or any Plan succeeding thereto, and which shall not become exercisable prior to (a) the end of the one (1) year period immediately following the Date of Termination if your employment is terminated on account of your death, or (b) the end of the third (3rd) month following the Date of Termination if your employment is terminated for any reason other than death. The Company shall make such payment upon the fifth (5th) day following such Date of Termination. For the purposes of this Agreement, the "Termination Fair Market Value" shall be the higher of (a) the highest price of the Company's stock as quoted on the NASDAQ, or any other exchange complying with the requirements of the Securities and Exchange Act of 1934, as amended, within the period beginning ninety (90) days prior to the Date of Termination and ending upon such Date of Termination, and (b) the highest price of the Company's stock as quoted on the NASDAQ, or any other exchange complying with the requirements of the Securities and Exchange Act of 1934, as amended, within the period beginning ninety (90) days prior to a Change of Control and ending upon the date of a Change of Control. (v) If, within thirty-six (36) months after a Change in Control of the Company has occurred, your employment by the Company is terminated (a) by the Company other than for Cause or Disability, or (b) by you for Good Reason, then the Company shall maintain in full force and effect, for the continued benefit of you and your dependents for a period terminating on the earliest of (a) three (3) years after the Date of Termination or (b) the commencement date of equivalent benefits from a new employer, insured and self-insured employee welfare benefit Plans in which you were entitled to participate immediately prior to the Date of Termination, provided that your continued participation is possible under the general terms and provisions of such Plans (and any applicable funding media) and you continue to pay an amount equal to your regular contribution under such Plans for such participation. If three (3) years after the Date of Termination you have not previously received, nor are then receiving, equivalent benefits from a new employer, the Company shall offer you continuation coverage under COBRA as prescribed under Section 4980B of the Code. At the expiration of such continuation coverage (or, if COBRA continuation coverage is not applicable to the Plan, then upon the expiration of the three (3) year period beginning on the Termination Date) the Company shall arrange, at its sole cost and expense, to enable you to convert you and your dependents' coverage under such plans to individual policies and programs upon the same terms as employees of the Company may apply for such conversions. In the event that your participation in any such Plan is barred, the Company, at its sole cost and expense, shall arrange to have issued for the benefit of you and your dependents individual policies of insurance providing benefits substantially similar (on an after-tax basis) to those which you otherwise would have been entitled to receive under such Plans pursuant to this paragraph (v) or, if such insurance is not available at a reasonable cost to the Company, the Company shall 9 otherwise provide you and your dependents with equivalent benefits (on an after-tax basis). You shall not be required to pay any premiums or other charges in an amount greater than that which you would have paid in order to participate in such Plans. (vi) Except as specifically provided in paragraph (v) above, the amount of any payment provided for in this Section 5 shall not be reduced, offset or subject to recovery by the Company by reason of any compensation earned by you as the result of employment by another employer after the Date of Termination, or otherwise. (vii) In the event that you become entitled to the payments provided by paragraphs (iii) and (iv) of Section 5(iii) hereof (the "Agreement Payments"), if any of the Agreement Payments will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed), the Company shall pay to you at the time specified in paragraph (viii) below an additional amount (the "Gross-up Payment") such that the net amount retained by you, after deduction of any Excise Tax on the Total Payments (as hereinafter defined) and any federal, state and local income tax and Excise Tax upon the Gross-up Payment provided for by this paragraph (vii), but before deduction for any federal, state or local income tax on the Agreement Payments, shall be equal to the sum of (a) the Total Payments and (b) an amount equal to the product of any deductions disallowed because of the inclusion of the Gross-up Payment in your adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-up Payment is to be made. For purposes of determining whether any of the Agreement Payments will be subject to the Excise Tax and the amount of such Excise Tax, (a) any other payments or benefits received or to be received by you in connection with a Change in Control of the Company or your termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control of the Company or any person affiliated with the Company or such person) (which, together with the Agreement Payments, shall constitute the "Total Payments") shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the Company's independent auditors such other payments or benefits (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax; (b) the amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (1) the total amount of the Total Payments or (2) the amount of excess parachute payments within the meaning of Section 280G(b)(1) of the Code (after applying clause (a), above); and (c) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. 10 For purposes of determining the amount of the Gross-up Payment, you shall be deemed to (a) pay federal income taxes at the highest marginal rate of federal income taxation for the calendar year in which the Gross-up Payment is to be made, (b) pay the applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes (determined without regard to limitations on deductions based upon the amount of your adjusted gross income), and (c) have otherwise allowable deductions for federal income tax purposes at least equal to those disallowed because of the inclusion of the Gross-up Payment in your adjusted gross income. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time the Gross-up Payment is made, you shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-up Payment attributable to such reduction (plus the portion of the Gross-up Payment attributable to the Excise Tax and federal state and local income tax imposed on the portion of the Gross-up Payment being repaid by you if such repayment results in a reduction in Excise Tax and/or a federal and state and local income tax deduction), plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time the Gross-up Payment is made (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-up Payment), the Company shall make an additional Gross-up Payment in respect of such excess (plus any interest payable with respect to such excess at the rate provided in Section 1274(b)(2)(B) of the Code) at the time that the amount of such excess is finally determined. (viii) The Gross-up Payment or portion thereof provided for in paragraph (vii) above shall be paid not later than the thirtieth (30th) day following payment of any amounts under paragraphs (iii) and (iv) of Section 5; provided, however, that if the amount of such Gross-up Payment or portion thereof cannot be finally determined on or before such day, the Company shall pay to you on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined, but in no event later than the forty-fifth (45th) day after payment of any amounts under paragraphs (iii) and (iv) of Section 5. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to you, payable on the fifth (5th) day after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). 6. Successors; Binding Agreement. (i) The Company will seek, by written request at least five (5) business days prior to the time a Person becomes a Successor (as hereinafter defined), to have such Person, by agreement in form and substance satisfactory to you, assent to the fulfillment of the Company's obligations under this Agreement. Failure of such Person to furnish 11 such assent by the later of (a) three (3) business days prior to the time such Person becomes a Successor or (b) two (2) business days after such Person receives a written request to so assent shall constitute Good Reason for termination by you of your employment if a Change in Control of the Company occurs or has occurred. For purposes of this Agreement, "Successor" shall mean any Person that succeeds to, or has the practical ability to control (either immediately or with the passage of time), the Company's business directly, by merger or consolidation, or indirectly, by purchase of the Company's Voting Securities or otherwise. (ii) This Agreement shall inure to the benefit of and be enforceable by your personal legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if no such designee exists, to your estate. (iii) For purposes of this Agreement, the "Company" shall include any subsidiaries of the Company and any corporation or other entity which is the surviving or continuing entity in respect of any merger, consolidation or form of business combination in which the Company ceases to exist; provided, however, for purposes of determining whether a Change in Control has occurred herein, the term "Company" shall refer to WLR Foods, , Inc. or its successor(s). 7. Fees and Expenses; Mitigation. (i) The Company shall reimburse you, on a current basis, for all reasonable legal fees and related expenses incurred by you in connection with the Agreement following a Change in Control of the Company, including without limitation, (a) all such fees and expenses, if any, incurred in contesting or disputing any termination of your employment or incurred by you in seeking advice with respect to the matters set forth in Section 8 hereof or (b) your seeking to obtain or enforce any right or benefit provided by this Agreement, in each case, regardless of whether or not your claim is upheld by a court of competent jurisdiction; provided, however, you shall be required to repay any such amounts to the Company to the extent that a court issues a final and non-appealable order setting forth the determination that the position taken by you was frivolous or advanced by you in bad faith. (ii) You shall not be required to mitigate the amount of any payment the Company becomes obligated to make to you in connection with this Agreement, by seeking other employment or otherwise. 8. Taxes. Subject to the provisions of Section 5(vii), all payments to be made to you under this Agreement will be subject to required withholding of federal, state and local income and employment taxes. 9. Survival. The respective obligations of, and benefits afforded to, the Company and you as provided in Sections 5, 6(ii), 7, 8, 12 and 14 of this Agreement shall survive termination of this Agreement. 12 10. Notice. For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid and addressed, in the case of the Company, to the address set forth on the first page of this Agreement or, in the case of the undersigned employee, to the address set forth below his signature, provided that all notices to the Company shall be directed to the attention of the Chairman of the Board or President of the Company, with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 11. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is agreed to in a writing signed by you and the Chairman of the Board or President of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. 12. Governing Law and Venue. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the Commonwealth of Virginia. 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. 13. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 14. Employee's Commitment. You agree that subsequent to your period of employment with the Company, you will not at any time communicate or disclose to any unauthorized person, without the written consent of the Company, any proprietary processes of the Company or other confidential information concerning its business, affairs, products, suppliers or customers which, if disclosed, would have a material adverse effect upon the business or operations of the Company, taken as a whole; it being understood, however, that the obligations under this Section 14 shall not apply to the extent that the aforesaid matters (a) are disclosed in circumstances where you are legally required to do so or (b) become generally known to, and available for use by, the public otherwise than by your wrongful act or omission. 15. Related Agreements. To the extent that any provision of any other agreement between the Company and you shall limit, qualify or be inconsistent with any provision of this Agreement, then for purposes of this Agreement, while the same shall remain in force, the provision of such other agreement shall be deemed to have been superseded, and to be 13 of no force or effect, as if such other agreement had been formally amended to the extent necessary to accomplish such purpose. Notwithstanding the effect of the preceding sentence, the conditional Employment Agreement, renewed on June 26, 1992 between the Company and you is hereby cancelled and shall be of no force or effect. If this letter correctly sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely, WLR Foods, Inc. By ___/s/ Charles W. Wampler, Jr.___ Charles W. Wampler, Jr. Chairman of the Board WLR Foods, Inc. Agreed to this 4th day of February, 1994. _____/s/ James L. Mason_____ James L. Mason EX-10.4 6 WLR FOODS 14D9 EX-10.4 WHICH IS EXHIBIT 5 1 EXHIBIT 5 [FORM OF CLASS III AGREEMENT] February 4, 1994 [Name of Employee] [Title of Employee] [Address] Dear [Name of Employee]: WLR Foods, Inc., a Virginia corporation (the "Company"), considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders. In this connection, the Company recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control (as defined herein) may arise and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its shareholders. Accordingly, the Board of Directors of the Company (the "Board") has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management to their assigned duties without distraction in circumstances arising from the possibility of a Change in Control of the Company. In particular, the Board believes it important, should the Company or its shareholders receive a proposal for transfer of control of the Company, that you be able to assess and advise the Board whether such proposal would be in the best interests of the Company and its shareholders and to take such other action regarding such proposal as the Board might determine to be appropriate, without being influenced by the uncertainties of your own situation. In order to induce you to remain in the employ of the Company, this letter agreement ("Agreement"), which has been approved by the Board, sets forth the severance benefits which the Company agrees will be provided to you in the event your employment with the Company is terminated subsequent to a Change in Control of the Company under the circumstances described below. 2 1. Agreement to Provide Services; Right to Terminate. (i) Except as otherwise provided in paragraph (ii) below, the Company or you may terminate your employment at any time following a "Change in Control" as defined herein, subject to the Company's providing the benefits hereinafter specified in accordance with the terms hereof. (ii) In the event a Person (as hereinafter defined) makes an offer which, if accepted by the Company and subsequently consummated, would constitute a Change in Control, you agree that you will not leave the employ of the Company (other than as a result of Disability or upon Retirement, as such terms are hereinafter defined) and will render the services contemplated in the recitals to this Agreement until such Change in Control offer has been abandoned or terminated or a Change in Control has occurred. For the purposes of this Agreement, Retirement shall mean a termination of your employment by you on or after you have reached age sixty-five (65) and have completed at least five (5) years of service for the Company (including any service for a predecessor of the Company where such prior service is recognized by the Company for the purpose of awarding other benefits). For purposes of this Section 1, "years of service" shall be defined as in the WLR Profit Sharing and Salary Savings Plan. 2. Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect until December 31, 1994; provided, however, that commencing on January 1, 1995 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one (1) additional year unless at least ninety (90) days prior to such January 1st date, the Company or you shall have given notice that this Agreement shall not be extended; and provided, further, that, notwithstanding the delivery of any such notice, this Agreement shall continue in effect for a period of twenty-four (24) months after a Change in Control, if such Change in Control shall have occurred while this Agreement is in effect. Notwithstanding anything in this Section 2 to the contrary, this Agreement shall terminate if you or the Company terminate your employment prior to a Change in Control of the Company. 3. Change in Control. For the purpose of this Agreement, a "Change in Control" shall mean: (i) The acquisition by any individual, entity or group (within the meaning of Section 13 (d) (3) or 14 (d) (2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of either the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that in no event may the following acquisitions constitute a Change in Control: (a) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (b) any acquisition by the Company, (c) any 3 acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, (d) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (a), (b) and (c) of paragraph (iii) of this Section 3 are satisfied, or (e) any sale or other disposition of all or substantially all of the assets of the Company, if , following such sale or other disposition, the conditions described in (1), (2) and (3) of paragraph (iv) of this Section 3 are satisfied; or (ii) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least seventy-five percent (75%) of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (iii) Approval by the shareholders of the Company of a reorganization, merger or consolidation, unless, in each case following such reorganization, merger or consolidation, (a) more than sixty percent (60%) of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership immediately prior to such reorganization, merger or consolidation, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (b) no Person (excluding the Company, any employee benefit plan (or related trust) of the Company or a corporation resulting from such reorganization, merger or consolidation) beneficially owns, directly or indirectly, thirty-nine percent (39%) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors, and (c) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (iv) Approval by the shareholders of the Company of (a) a complete liquidation or dissolution of the Company or (b) the sale or other disposition of all or substantially all of 4 the assets of the Company, other than to a corporation with respect to which following such sale or other disposition, (1) more than sixty percent (60%) of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding the Company and any employee benefit plan (or related trust) of the Company or such corporation) beneficially owns, directly or indirectly, thirty-nine percent (39%) or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (3) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition of assets of the Company. (v) Notwithstanding anything in the paragraphs (i) - (iv) of this Section 3 to the contrary, no Change in Control shall be deemed to have occurred for purposes of this Agreement by virtue of any transaction which results in you, or a group of Persons which includes you, acquiring, directly or indirectly, twenty percent (20%) or more of the combined voting power of the Company's Voting Securities. 4. Termination Following Change in Control. If any of the events described in Section 3 hereof constituting a Change in Control of the Company shall have occurred, you shall be entitled to the benefits provided in Section 5 hereof upon the termination of your employment with the Company within twenty-four (24) months after such Change in Control, unless such termination is (a) because of your death, (b) by the Company for Cause or Disability or (c) by you other than for Good Reason (as all such capitalized terms are hereinafter defined). (i) Disability. Termination by the Company of your employment based on "Disability" shall mean termination because of your absence from your duties with the Company on a full time basis for one hundred eighty (180) consecutive days as a result of your incapacity due to physical or mental illness, unless within thirty (30) days after Notice of Termination (as hereinafter defined) is given to you following such absence, you shall have returned to the full time performance of your duties. (ii) Cause. Termination by the Company of your employment for "Cause" shall mean termination upon (a) the willful and continued failure by you to perform substantially your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to you by the Chairman of the Board or President of the Company which specifically identifies the 5 manner(s) in which such executive believes that you have not substantially performed your duties, or (b) the willful engaging by you in illegal conduct which is materially and demonstrably injurious to the Company. For purposes of this paragraph (ii), no act, or failure to act, on your part shall be considered "willful" unless done, or failed to be done, by you in bad faith and without reasonable belief that your action or omission was in, or not opposed to, the best interests of the Company. Any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by you in good faith and in the best interests of the Company. It is also expressly understood that your attention to matters not directly related to the business of the Company shall not provide a basis for termination for Cause so long as the Board has approved your engagement in such activities. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of the conduct set forth above in clauses (a) or (b) of this paragraph (ii) and specifying the particulars thereof in detail. (iii) Good Reason. Termination by you of your employment for "Good Reason" shall mean termination based on: (A) a determination by you, in your reasonable judgment, that there has been an adverse change in your status or position(s) as [an executive officer][a member of the senior management] of the Company as in effect immediately prior to the Change in Control, including, without limitation, any adverse change in your status or position as a result of a diminution in your duties or responsibilities (other than, if applicable, any such change directly attributable to the fact that the Company is no longer publicly owned) or the assignment to you of any duties or responsibilities which are inconsistent with such status or position(s), or any removal of you from, or any failure to reappoint or reelect you to, such positions(s) (except in connection with the termination of your employment for Cause or Disability or as a result of your death or by you other than for Good Reason); (B) a reduction by the Company in your base salary as in effect immediately prior to the Change in Control; (C) the failure by the Company to continue in effect any Plan (as hereinafter defined) in which you are participating at the time of the Change in Control of the Company (or Plans providing you with at least substantially similar benefits) other than as a result of the normal expiration of any such Plan in accordance with its terms as in effect at the time of the Change in Control, or the taking of any action, or the failure to act, by the Company which would adversely affect your continued participation in any of such Plans on at least as favorable a basis to you as is the case on the date of the Change in Control or which would 6 materially reduce your benefits in the future under any of such Plans or deprive you of any material benefit enjoyed by you at the time of the Change in Control; (D) the failure by the Company to provide and credit you with the number of paid vacation days to which you are then entitled in accordance with the Company's normal vacation policy as in effect immediately prior to the Change in Control; (E) the Company's requiring you to be based at any office that is greater than thirty (30) miles from where your office is located immediately prior to the Change in Control except for required travel on the Company's business to an extent substantially consistent with the business travel obligations which you undertook on behalf of the Company prior to the Change in Control; (F) the failure by the Company to obtain from any Successor (as hereinafter defined) the assent to this Agreement contemplated by Section 6 hereof; (G) any purported termination by the Company of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of paragraph (iv) below (and, if applicable, paragraph (ii) above); and for purposes of this Agreement, no such purported termination shall be effective; or (H) any refusal by the Company to continue to allow you to attend to matters or engage in activities not directly related to the business of the Company which, prior to the Change in Control, you were permitted by the Board to attend to or engage in. For purposes of this Agreement, "Plan" shall mean any compensation plan such as the Company Incentive Bonus Plan or any employee benefit plan such as a thrift, pension, profit sharing, medical, disability, accident, life insurance plan or a relocation plan or policy or any other plan, program or policy of the Company intended to benefit employees, except for the Company Restated Long-Term Incentive Plan. (iv) Notice of Termination. Any purported termination by the Company or by you following a Change in Control shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon. (v) Date of Termination. "Date of Termination" following a Change in Control shall mean (a) if your employment is to be terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the performance of your duties on a full-time basis during such thirty (30) day period), (b) if your employment is to be terminated by the Company for Cause or by you pursuant to Sections 4(iii)(F) or 6 hereof or for any other Good Reason, the date specified in the Notice of Termination, (c) if your employment is to be terminated by the Company for any reason other 7 than Cause, the date specified in the Notice of Termination, which in no event shall be a date earlier than ninety (90) days after the date on which a Notice of Termination is given, unless an earlier date has been expressly agreed to by you in writing either in advance of, or after, receiving such Notice of Termination or (d) if your employment is terminated on account of your death, the day after your death. In the case of termination of your employment by the Company for Cause, if you have not previously expressly agreed in writing to the termination, then within thirty (30) days after receipt by you of the Notice of Termination with respect thereto, you may notify the Company that a dispute exists concerning the termination, in which event the Date of Termination shall be the date set either by mutual written agreement of the parties or by such court having the matter before it. During the pendency of any such dispute, the Company will continue to pay you your full compensation in effect just prior to the time the Notice of Termination is given and until the dispute is resolved. However, if such court issues a final and non-appealable order finding that the Company had Cause to terminate you then you must return all compensation paid to you after the Date of Termination specified in the Notice of Termination previously received by you. 5. Compensation Upon Termination or During Disability; Other Agreements. (i) During any period following a Change in Control of the Company that you fail to perform your duties as a result of incapacity due to physical or mental illness, you shall continue to receive your base salary at the rate then in effect and any benefits or awards under any Plans shall continue to accrue during such period, to the extent not inconsistent with such Plans, until your employment is terminated pursuant to and in accordance with paragraphs 4(iv) - 4(v) hereof. Thereafter, your benefits shall be determined in accordance with the Plans then in effect. (ii) If your employment is terminated for Cause following a Change in Control of the Company, the Company shall pay to you your base salary through the Date of Termination at the rate in effect just prior to the time a Notice of Termination is given plus any benefits or awards (including both the cash and stock components) which pursuant to the terms of any Plans have been earned or become payable, but which have not yet been paid to you. Thereupon the Company shall have no further obligations to you under this Agreement. (iii) Subject to Section 8 hereof, if, within twenty-four (24) months after a Change in Control of the Company has occurred, your employment by the Company is terminated other than on account of your death and is terminated (a) by the Company other than for Cause or Disability or (b) by you for Good Reason, then the Company shall pay to you, no later than the fifth (5th) day following the Date of Termination, without regard to any contrary provisions of any Plan, the following: (A) your base salary through the Date of Termination at the rate in effect just prior to the time a Notice of Termination is given plus any benefits or awards (including both the cash and stock components) which pursuant to the terms of any Plans have 8 been earned or become payable, but which have not yet been paid to you (including amounts which previously had been deferred at your request); (B) an amount in cash equal to one and one-half (1.5) times the sum of (i) the higher of (a) your annual base salary on the Date of Termination or (b) your annual base salary in effect immediately prior to the Change in Control plus (ii) an amount equal to the average of the bonuses awarded to you in each of the three previous years. For the purposes of this Agreement, the term "base salary" shall include any amounts deducted by the Company with respect to you or for your account pursuant to Sections 125 and 401(k) of the Internal Revenue Code of 1986, as amended (the "Code"). (iv) If, within twenty-four (24) months after a Change in Control of the Company has occurred, your employment by the Company is terminated for any reason other than retirement, the Company shall pay to you, on the date specified below, an amount ("Spread") in cash equal to the Termination Fair Market Value (as hereinafter defined) less the exercise price of all options which were granted to you pursuant to the Company's Restated Long-Term Incentive Plan or any Plan succeeding thereto, and which shall not become exercisable prior to (a) the end of the one (1) year period immediately following the Date of Termination if your employment is terminated on account of your death, or (b) the end of the third (3rd) month following the Date of Termination if your employment is terminated for any reason other than death. The Company shall make such payment upon the fifth (5th) day following such Date of Termination. For the purposes of this Agreement, the "Termination Fair Market Value" shall be the higher of (a) the highest price of the Company's stock as quoted on the NASDAQ, or any other exchange complying with the requirements of the Securities and Exchange Act of 1934, as amended, within the period beginning ninety (90) days prior to the Date of Termination and ending upon such Date of Termination, and (b) the highest price of the Company's stock as quoted on the NASDAQ, or any other exchange complying with the requirements of the Securities and Exchange Act of 1934, as amended, within the period beginning ninety (90) days prior to a Change of Control and ending upon the date of a Change of Control. (v) If, within twenty-four (24) months after a Change in Control of the Company has occurred, your employment by the Company is terminated (a) by the Company other than for Cause or Disability, or (b) by you for Good Reason, then the Company shall maintain in full force and effect, for the continued benefit of you and your dependents for a period terminating on the earliest of (a) one and one-half (1.5) years after the Date of Termination or (b) the commencement date of equivalent benefits from a new employer, insured and self-insured employee welfare benefit Plans in which you were entitled to participate immediately prior to the Date of Termination, provided that your continued participation is possible under the general terms and provisions of such Plans (and any applicable funding media) and you continue to pay an amount equal to your regular contribution under such Plans 9 for such participation. If one and one-half (1.5) years after the Termination Date, you have not previously received, nor are then receiving, equivalent benefits from a new employer, the Company shall offer you continuation coverage under COBRA as prescribed under Section 4980B of the Code. At the expiration of such continuation coverage (or, if COBRA continuation coverage is not applicable to the Plan, then upon the expiration of the one and one-half (1.5) year period beginning on the Termination Date) the Company shall arrange, at its sole cost and expense, to enable you to convert you and your dependents' coverage under such plans to individual policies and programs upon the same terms as employees of the Company may apply for such conversions. In the event that your participation in any such Plan is barred, the Company, at its sole cost and expense, shall arrange to have issued for the benefit of you and your dependents individual policies of insurance providing benefits substantially similar (on an after-tax basis) to those which you otherwise would have been entitled to receive under such Plans pursuant to this paragraph (v) or, if such insurance is not available at a reasonable cost to the Company, the Company shall otherwise provide you and your dependents with equivalent benefits (on an after-tax basis). You shall not be required to pay any premiums or other charges in an amount greater than that which you would have paid in order to participate in such Plans. (vi) Except as specifically provided in paragraph (v) above, the amount of any payment provided for in this Section 5 shall not be reduced, offset or subject to recovery by the Company by reason of any compensation earned by you as the result of employment by another employer after the Date of Termination, or otherwise. (vii) In the event that you become entitled to the payments provided by paragraphs (iii) and (iv) of Section 5 hereof (the "Agreement Payments"), if any of the Agreement Payments will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed), the Company shall pay to you at the time specified in paragraph (viii) below an additional amount (the "Gross-up Payment") such that the net amount retained by you, after deduction of any Excise Tax on the Total Payments (as hereinafter defined) and any federal, state and local income tax and Excise Tax upon the Gross-up Payment provided for by this paragraph (vii), but before deduction for any federal, state or local income tax on the Agreement Payments, shall be equal to the sum of (a) the Total Payments and (b) an amount equal to the product of any deductions disallowed because of the inclusion of the Gross-up Payment in your adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-up Payment is to be made. For purposes of determining whether any of the Agreement Payments will be subject to the Excise Tax and the amount of such Excise Tax, (a) any other payments or benefits received or to be received by you in connection with a Change in Control of the Company or your termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control of the Company or any person affiliated with the Company or such person) (which, together with the Agreement Payments, shall constitute the "Total Payments") shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess 10 parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the Company's independent auditors such other payments or benefits (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax; (b) the amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (1) the total amount of the Total Payments or (2) the amount of excess parachute payments within the meaning of Section 280G(b)(1) of the Code (after applying clause (a), above); and (c) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-up Payment, you shall be deemed to (a) pay federal income taxes at the highest marginal rate of federal income taxation for the calendar year in which the Gross-up Payment is to be made, (b) pay the applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes (determined without regard to limitations on deductions based upon the amount of your adjusted gross income), and (c) have otherwise allowable deductions for federal income tax purposes at least equal to those disallowed because of the inclusion of the Gross-up Payment in your adjusted gross income. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time the Gross-up Payment is made, you shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-up Payment attributable to such reduction (plus the portion of the Gross-up Payment attributable to the Excise Tax and federal state and local income tax imposed on the portion of the Gross-up Payment being repaid by you if such repayment results in a reduction in Excise Tax and/or a federal and state and local income tax deduction), plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time the Gross-up Payment is made (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross- up Payment), the Company shall make an additional Gross-up Payment in respect of such excess (plus any interest payable with respect to such excess at the rate provided in Section 1274(b)(2)(B) of the Code) at the time that the amount of such excess is finally determined. (viii) The Gross-up Payment or portion thereof provided for in paragraph (vii) above shall be paid not later than the thirtieth (30th) day following payment of any amounts under paragraphs (iii) and (iv) of Section 5; provided, however, that if the amount of such Gross-up Payment or portion thereof cannot be finally determined on or before such day, the Company shall pay to you on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such 11 payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined, but in no event later than the forty-fifth (45th) day after payment of any amounts under paragraphs (iii) and (iv) of Section 5. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to you, payable on the fifth (5th) day after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). 6. Successors; Binding Agreement. (i) The Company will seek, by written request at least five (5) business days prior to the time a Person becomes a Successor (as hereinafter defined), to have such Person, by agreement in form and substance satisfactory to you, assent to the fulfillment of the Company's obligations under this Agreement. Failure of such Person to furnish such assent by the later of (a) three (3) business days prior to the time such Person becomes a Successor or (b) two (2) business days after such Person receives a written request to so assent shall constitute Good Reason for termination by you of your employment if a Change in Control of the Company occurs or has occurred. For purposes of this Agreement, "Successor" shall mean any Person that succeeds to, or has the practical ability to control (either immediately or with the passage of time), the Company's business directly, by merger or consolidation, or indirectly, by purchase of the Company's Voting Securities or otherwise. (ii) This Agreement shall inure to the benefit of and be enforceable by your personal legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if no such designee exists, to your estate. (iii) For purposes of this Agreement, the "Company" shall include any subsidiary of the Company and any corporation or other entity which is the surviving or continuing entity in respect of any merger, consolidation or form of business combination in which the Company ceases to exist; provided, however, for purposes of determing whether a Change in Control has occurred herein, the term "Company" shall refer to WLR Foods, , Inc. or its successor(s). 7. Fees and Expenses; Mitigation. (i) The Company shall reimburse you, on a current basis, for all reasonable legal fees and related expenses incurred by you in connection with the Agreement following a Change in Control of the Company, including without limitation, (a) all such fees and expenses, if any, incurred in contesting or disputing any termination of your employment or incurred by you in seeking advice with respect to the matters set forth in Section 8 hereof or (b) your seeking to obtain or enforce any right or benefit provided by this Agreement, in each case, 12 regardless of whether or not your claim is upheld by a court of competent jurisdiction; provided, however, you shall be required to repay any such amounts to the Company to the extent that a court issues a final and non- appealable order setting forth the determination that the position taken by you was frivolous or advanced by you in bad faith. (ii) You shall not be required to mitigate the amount of any payment the Company becomes obligated to make to you in connection with this Agreement, by seeking other employment or otherwise. 8. Taxes. Subject to the provisions of Section 5(vii), all payments to be made to you under this Agreement will be subject to required withholding of federal, state and local income and employment taxes. 9. Survival. The respective obligations of, and benefits afforded to, the Company and you as provided in Sections 5, 6(ii), 7, 8, 12 and 14 of this Agreement shall survive termination of this Agreement. 10. Notice. For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid and addressed, in the case of the Company, to the address set forth on the first page of this Agreement or, in the case of the undersigned employee, to the address set forth below his signature, provided that all notices to the Company shall be directed to the attention of the Chairman of the Board or President of the Company, with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 11. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is agreed to in a writing signed by you and the Chairman of the Board or President of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. 12. Governing Law and Venue. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the Commonwealth of Virginia. 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. 13 13. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 14. Employee's Commitment. You agree that subsequent to your period of employment with the Company, you will not at any time communicate or disclose to any unauthorized person, without the written consent of the Company, any proprietary processes of the Company or other confidential information concerning its business, affairs, products, suppliers or customers which, if disclosed, would have a material adverse effect upon the business or operations of the Company, taken as a whole; it being understood, however, that the obligations under this Section 14 shall not apply to the extent that the aforesaid matters (a) are disclosed in circumstances where you are legally required to do so or (b) become generally known to, and available for use by, the public otherwise than by your wrongful act or omission. 15. Related Agreements. To the extent that any provision of any other agreement between the Company and you shall limit, qualify or be inconsistent with any provision of this Agreement, then for purposes of this Agreement, while the same shall remain in force, the provision of such other agreement shall be deemed to have been superseded, and to be of no force or effect, as if such other agreement had been formally amended to the extent necessary to accomplish such purpose. If this letter correctly sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely, WLR Foods, Inc. By___________________________________ Herman D. Mason, Chair Executive Compensation Committee WLR Foods, Inc. Agreed to this 4th day of February, 1994. ______________________________________ [Name of Employee] ______________________________________ ______________________________________ EX-10.5 7 WLR FOODS 14D9 EX-10.5 WHICH IS EXHIBIT 6 1 EXHIBIT 6 DEFERRED COMPENSATION AGREEMENT This Deferred Compensation Agreement ("Agreement") is made this 4th day of February, 1994, by and between WLR FOODS, INC., a Virginia corporation ("WLR") and CHARLES W. WAMPLER, Jr.("Wampler"). R E C I T A L S: 1. Wampler has been employed by WLR in various capacities since 1936 and during this period has rendered many valuable services to WLR. 2. Contemporaneous with the execution of this Agreement, Wampler has submitted his resignation as an employee of WLR. 3. In recognition of past services, WLR desires to provide Wampler with deferred compensation as provided herein. NOW, THEREFORE, in consideration of services performed in the past and other good and valuable consideration, the receipt of which is hereby acknowledged, it is agreed as followed: 1. WLR agrees that effective upon Wampler's retirement from service with WLR, WLR shall maintain in full force and effect for the continued benefit of Wampler and his spouse for their lifetime all employee welfare benefits plans in which Wampler was entitled to participate immediately prior to his retirement, provided that such continued participation is possible under the general terms and provisions of such plan (and any applicable funding media) and that Wampler continues to pay an amount equal to his regular contribution under such plan(s) for such participation. If such continuing participation is no longer possible under the general terms and provisions of such plan(s), WLR, at its sole cost and expense, shall arrange to have issued for the benefit of Wampler and his spouse, individual policies of insurance providing benefits substantially similar (on an after-tax basis) to those which Wampler would have otherwise been entitled to receive under such plan(s) or, if such insurance is not available at a reasonable cost to WLR, WLR shall otherwise provide Wampler and his spouse with equivalent benefits (on an after-tax basis). Wampler shall not be required to pay any premiums or other charges in an amount greater than which he would have paid in order to participate in such plan(s) as an active employee. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf as thereunto duly authorized WITNESS the following signature and seal. WLR FOODS, INC. By:____/s/ James L. Keeler______ President _____/s/ Charles W. Wampler, Jr.____ CHARLES W. WAMPLER, Jr. EX-10.6 8 WLR FOODS 14D9 EX-10.6 WHICH IS EXHIBIT 7 1 EXHIBIT 7 DEFERRED COMPENSATION AGREEMENT This Deferred Compensation Agreement ("Agreement") is made this 4th day of February, 1994, by and between WLR FOODS, INC., a Virginia corporation ("WLR") and HERMAN D. MASON ("Mason"). R E C I T A L S: 1. Mason has been employed by WLR in various capacities since 1959 and during this period has rendered many valuable services to WLR. 2. Contemporaneous with the execution of this Agreement, Mason has submitted his resignation as an employee of WLR. 3. In recognition of past services, WLR desires to provide Mason with deferred compensation as provided herein. NOW, THEREFORE, in consideration of services performed in the past and other good and valuable consideration, the receipt of which is hereby acknowledged, it is agreed as followed: 1. WLR agrees that effective upon Mason's retirement from service with WLR, WLR shall maintain in full force and effect for the continued benefit of Mason and his spouse for their lifetime all employee welfare benefits plans in which Mason was entitled to participate immediately prior to his retirement, provided that such continued participation is possible under the general terms and provisions of such plan (and any applicable funding media) and that Mason continues to pay an amount equal to his regular contribution under such plan(s) for such participation. If such continuing participation is no longer possible under the general terms and provisions of such plan(s), WLR, at its sole cost and expense, shall arrange to have issued for the benefit of Mason and his spouse, individual policies of insurance providing benefits substantially similar (on an after-tax basis) to those which Mason would have otherwise been entitled to receive under such plan(s) or, if such insurance is not available at a reasonable cost to WLR, WLR shall otherwise provide Mason and his spouse with equivalent benefits (on an after-tax basis). Mason shall not be required to pay any premiums or other charges in an amount greater than which he would have paid in order to participate in such plan(s) as an active employee. 2. To the extent that any provision of any other agreement between WLR and Mason shall limit, qualify or be inconsistent with any provisions herein, then for purposes of this Agreement, while the same shall remain in force, the inconsistent provisions of such other agreement shall be deemed to have been superseded and be of no force or effect. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf as thereunto duly authorized WITNESS the following signature and seal. WLR FOODS, INC. By:______/s/James L. Keeler_____ President ______/s/ Herman D. Mason____ HERMAN D. MASON EX-10.7 9 WLR FOODS 14D9 EX-10.7 WHICH IS EXHIBIT 8 1 EXHIBIT 8 DEFERRED COMPENSATION AGREEMENT This Deferred Compensation Agreement ("Agreement") is made this 4th day of February, 1994, by and between WLR FOODS, INC., a Virginia corporation ("WLR") and GEORGE E. BRYAN ("Bryan"). R E C I T A L S: 1. Bryan has been employed by WLR in various capacities since 1959 and during this period has rendered many valuable services to WLR. 2. Contemporaneous with the execution of this Agreement, Bryan has submitted his resignation as an employee of WLR. 3. In recognition of past services, WLR desires to provide Bryan with deferred compensation as provided herein. NOW, THEREFORE, in consideration of services performed in the past and other good and valuable consideration, the receipt of which is hereby acknowledged, it is agreed as followed: 1. WLR agrees that effective upon Bryan's retirement from service with WLR, WLR shall maintain in full force and effect for the continued benefit of Bryan and his spouse for their lifetime all employee welfare benefits plans in which Bryan was entitled to participate immediately prior to his retirement, provided that such continued participation is possible under the general terms and provisions of such plan (and any applicable funding media) and that Bryan continues to pay an amount equal to his regular contribution under such plan(s) for such participation. If such continuing participation is no longer possible under the general terms and provisions of such plan(s), WLR, at its sole cost and expense, shall arrange to have issued for the benefit of Bryan and his spouse, individual policies of insurance providing benefits substantially similar (on an after-tax basis) to those which Bryan would have otherwise been entitled to receive under such plan(s) or, if such insurance is not available at a reasonable cost to WLR, WLR shall otherwise provide Bryan and his spouse with equivalent benefits (on an after-tax basis). Bryan shall not be required to pay any premiums or other charges in an amount greater than which he would have paid in order to participate in such plan(s) as an active employee. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf as thereunto duly authorized WITNESS the following signature and seal. WLR FOODS, INC. By:___/s/ James L. Keeler_____ President ____/s/ George E. Bryan____ GEORGE E. BRYAN EX-10.8 10 WLR FOODS 14D9 EX-10.8 WHICH IS EXHIBIT 9 1 EXHIBIT 9 DEFERRED COMPENSATION AGREEMENT This Deferred Compensation Agreement ("Agreement") is made this 4th day of February, 1994, by and between WLR FOODS, INC., a Virginia corporation ("WLR") and WILLIAM D. WAMPLER ("Wampler"). R E C I T A L S: 1. Wampler has been employed by WLR in various capacities since 1959 and during this period has rendered many valuable services to WLR. 2. Contemporaneous with the execution of this Agreement, Wampler has submitted his resignation as an employee of WLR. 3. In recognition of past services, WLR desires to provide Wampler with deferred compensation as provided herein. NOW, THEREFORE, in consideration of services performed in the past and other good and valuable consideration, the receipt of which is hereby acknowledged, it is agreed as followed: 1. WLR agrees that effective upon Wampler's retirement from service with WLR, WLR shall maintain in full force and effect for the continued benefit of Wampler and his spouse for their lifetime all employee welfare benefits plans in which Wampler was entitled to participate immediately prior to his retirement, provided that such continued participation is possible under the general terms and provisions of such plan (and any applicable funding media) and that Wampler continues to pay an amount equal to his regular contribution under such plan(s) for such participation. If such continuing participation is no longer possible under the general terms and provisions of such plan(s), WLR, at its sole cost and expense, shall arrange to have issued for the benefit of Wampler and his spouse, individual policies of insurance providing benefits substantially similar (on an after-tax basis) to those which Wampler would have otherwise been entitled to receive under such plan(s) or, if such insurance is not available at a reasonable cost to WLR, WLR shall otherwise provide Wampler and his spouse with equivalent benefits (on an after-tax basis). Wampler shall not be required to pay any premiums or other charges in an amount greater than which he would have paid in order to participate in such plan(s) as an active employee. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf as thereunto duly authorized WITNESS the following signature and seal. WLR FOODS, INC. By:_____/s/ James L. Keeler______ President _____/s/ William D. Wampler___ WILLIAM D. WAMPLER EX-20 11 WLR FOODS 14D9 EX-20 WHICH IS EXHIBIT 10 1 EXHIBIT 10 [Form of Letter to Shareholders] March 14, 1994 Dear Fellow Shareholder: On March 9, 1994, Tyson Foods, Inc. (Tyson) began a hostile tender offer to buy your shares of stock in WLR Foods, Inc. You will be getting the offer papers in the mail soon, if you have not already. AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT TYSON'S OFFER IS INADEQUATE AND NOT IN THE BEST INTERESTS OF WLR FOODS AND ITS SHAREHOLDERS AND SHOULD BE REJECTED. ACCORDINGLY, WE STRONGLY URGE YOU NOT TO TENDER YOUR SHARES TO TYSON. Your Board believes Tyson's unsolicited offer, which is full of conditions on its obligations to complete the offer, seeks to deny you the true long- term value of your stock. It also jeopardizes the security and interests of our employees, producers, customers, suppliers and the communities where we operate. In short, Tyson's hostile tender offer is nothing more than an attempt to profit from the undervalued assets of your Company at your expense, disregarding the best interests not only of shareholders, but also of WLR Foods employees, producers, communities and customers. When you think about whether to sell your stock in WLR Foods, you probably will think about a lot of things. You think about a strong home-grown company selling out to a group from Arkansas. You think about people whose dedication and talent have created WLR Foods and each day made it the success it is, the same people whose livelihoods, lifestyles and future would change if Tyson takes over. You may think about ending your own relationship with WLR Foods -- as family, producer or employee, or even as a member of a community where WLR Foods is a supportive local institution. You may think about the taxes you'd have to pay on the profit you make. And let's be honest, you think about the price. TYSON TIMED ITS OFFER TO SEIZE WLR FOODS VALUE BEFORE THE MARKET FULLY REFLECTS THE BENEFITS OF ALL WE'VE DONE TO INCREASE SHAREHOLDER VALUE. WLR Foods Board of Directors and management has taken decisive action to build your Company and your investment and, we now see the poultry cycle beginning to turn in our favor. Evidently, Tyson recognizes that WLR Foods investments are already producing positive results and will continue to do so in the future. But these investments have 2 only been partially reflected in the stock market. We strongly believe that selling now will deprive you of the chance to see more value generated in the future and will ensure that Tyson captures these long-term benefits for itself. The Board believes the value of this Company is lower today than it would be in the future. We are enthusiastic about the prospects for WLR Foods and urge you to consider the following: o WLR Foods just completed a five year, $133.7 million capital expenditure program which dramatically increased production from 1988 levels by 115%. The start-up costs and initial inefficiencies affected earnings in recent years, but the benefits of these investments will soon begin to be fully realized. o Poultry has always been a cyclical industry, and 1993 and early 1994 showed signs of improvement from the low poultry cycle WLR Foods has endured for the last several years. If historical patterns hold true, an improvement in the poultry cycle is imminent which should lead to greater profitability for your company. o WLR Foods reorganized its poultry subsidiaries into one company in late September 1993. This restructuring has great potential for increased production efficiency and lower administrative costs. Already it has produced substantial annual labor and benefit savings. And other savings are on their way which should improve our bottom line. o WLR Foods has expanded through internal growth and by buying good companies. All of our acquisitions, such as Cassco Ice and Round Hill, have been friendly. Selling now closes the book on our opportunity to realize the benefits of our recent acquisitions and other business opportunities. o In recent years, we've worked hard on our marketing and export program. These programs are young, strong and growing. Again, we want our shareholders to reap these benefits, not Tyson. In short, WLR Foods just got bigger and leaner and the price of our product appears to be getting stronger. We strongly believe that the Tyson conditional offer doesn't reflect the true value of WLR Foods and your investment. It's simple economics -- you just don't sell when you are undervalued. 3 We've heard from many of you with questions about how a hostile tender offer works. You should know that you are not hurt by taking your time to respond to their offer. Tyson's offer cannot expire before April 8, 1994, and, given all the conditions in Tyson's offer, it is likely the deadline will be pushed back even further. You will be notified of any change in this deadline. WLR Foods Board of Directors reached its conclusion to reject Tyson's offer, and is strongly recommending you do the same, after closely analyzing the offer with the Company's management and professional advisors. The Board is committed to having all shareholders treated fairly. This is why it adopted the Shareholder Protection Rights Plan and has enhanced the protection available to the Company under Virginia's Control Share Acquisitions Statute. A more detailed description of the Board's recommendation and certain actions it has taken is set forth in the Solicitation/Recommendation Statement on Schedule 14D-9 which we enclose for you. We urge you to read the Schedule 14D-9 carefully and completely. You should know that not one member of the Board of Directors intends to tender even one single share of stock to Tyson. We urge you to do the same. Remember, Tyson wouldn't make this offer unless they believed it was in Tyson's own interest to do so. WLR Foods has an exciting future which we are just beginning to realize. If you believe WLR Foods stock is an appreciating asset, and it is clear that Tyson believes so, ask yourself if it makes sense to sell before you've realized that appreciation. We don't think so -- and we urge you to reject the Tyson offer. Thank you for your many expressions of support and commitment to WLR Foods. We assure you that the Board will continue to act with only one goal in mind: to provide you with superior value while protecting our shareholders, employees, producers, communities, customers and suppliers. 4 If you have questions along the way, call us at (703) 896-7001. You may also call D.F. King & Co., Inc., which is assisting us, at 800-669-5550. Sincerely yours, WLR FOODS, INC. Charles W. Wampler, Jr. James L. Keeler Chairman, Board of Directors President and Chief Executive Officer Herman D. Mason William D. Wampler Vice Chairman, Board of Directors Director George E. Bryan Stephen W. Custer Director Director Charles L. Campbell William H. Groseclose Director Director Calvin G. Germroth J. Craig Hott Director Director EX-99.2 12 WLR FOODS 14D9 EX-99.2 WHICH IS EXHIBIT 11 1 EXHIBIT 11 [Form of Press Release] FOR IMMEDIATE RELEASE Contacts: Gail Price, Director of Corporate Communications 703-896-0403 Robert Grieves Burson-Marsteller Phone: 212-614-4951 Pager: 800-759-8255, Pin# 43549 WLR FOODS DIRECTORS UNANIMOUSLY URGE SHAREHOLDERS NOT TO TENDER TO TYSON Broadway, Virginia, March 14, 1994 -- The board of directors of WLR Foods Inc. (NASDAQ: WLRF) unanimously recommended today that shareholders reject Tyson Foods, Inc.'s highly conditional offer for all of the outstanding shares (together with the associated rights) of WLR Foods at $30 per share. The board unanimously urged that shareholders not tender any shares to Tyson Foods. In response to a hostile tender offer commenced on March 9, 1994, by Tyson Foods, through its wholly-owned subsidiary, WLR Acquisition Corp., Charles W. Wampler, Jr., chairman of the board of directors and James L. Keeler, president and chief executive officer of WLR Foods, sent a letter to WLR Foods shareholders explaining the reasons for the board's decision to recommend that the shareholders not sell any of their shares to Tyson Foods. According to the letter to shareholders, the board of directors "unanimously determined that Tyson's offer is inadequate and should be rejected." Messrs. Wampler and Keeler stated in this letter, among other things, that shareholders should reject Tyson Foods' hostile tender offer for the following reasons: o WLR Foods just completed a five year, $133.7 million capital expenditure program which dramatically increased production from 1988 levels by 115%. The start-up costs and initial inefficiencies affected earnings in recent years, but the benefits of these investments will soon begin to be fully realized. o Poultry has always been a cyclical industry, and 1993 and early 1994 showed signs of improvement from the low poultry cycle WLR Foods has endured for the last several years. If historical patterns hold true, an improvement in the poultry cycle is imminent which should lead to greater profitability for your company. o WLR Foods reorganized its poultry subsidiaries into one company in late September 1993. This restructuring has great potential for increased production efficiency and lower administrative costs. Already it has produced substantial annual labor and benefit savings. And other savings are on their way which should improve our bottom line. 2 o WLR Foods has expanded through internal growth and by buying good companies. All of our acquisitions, such as Cassco Ice and Round Hill, have been friendly. Selling now closes the book on our opportunity to realize the benefits of our recent acquisitions and other business opportunities. o In recent years, we've worked hard on our marketing and export program. These programs are young, strong and growing. Again, we want our shareholders to reap these benefits, not Tyson. WLR Foods pointed out that Tyson Foods' hostile tender offer seeks to deny shareholders the true value of their investment in WLR Foods and jeopardizes the security and interests of WLR Foods employees, producers, customers, suppliers and the communities where WLR Foods operates. The letter went on to state that, "Tyson's hostile tender offer is nothing more than an attempt to profit from the undervalued assets of your Company at [shareholders'] expense, disregarding the best interests not only of shareholders, but also of WLR Foods employees, producers, communities and customers." WLR Foods is a fully integrated provider of high quality turkey and chicken products primarily under the Wampler-Longacre(c) label and retail ice under the Cassco(c) label. The company, with current annual revenues of approximately $650 million, exports to more than 40 countries and has processing operations in Virginia, West Virginia and Pennsylvania, close to its major mid-Atlantic markets. A copy of the letter sent to shareholders is attached. ### EX-99.3 13 WLR FOODS 14D9 EX-99.3 WHICH IS EXHIBIT 12 1 EXHIBIT 12 [Letterhead of Goldman, Sachs & Co.] PERSONAL AND CONFIDENTIAL January 28, 1994 Mr. James L. Keeler President and Chief Executive Officer WLR Foods, Inc. Highway 33 West P.O. Box 228 Hinton, VA 22831 Dear Jim: We are pleased to confirm the arrangements under which Goldman, Sachs & Co. ("Goldman Sachs") is engaged by WLR Foods, Inc. (the "Company") as financial advisor with respect to the offer which Tyson Foods, Inc. ("Tyson") made on January 24, 1994 for the stock (including any shares issuable upon the exercise of outstanding options) of the Company (the "Offer"). We understand that, in addition to Goldman Sachs, you have selected Wheat First Butcher & Singer ("Wheat First") to act as an advisor to WLR. If and when you so request, we will also undertake a study to enable us to render our opinion as to the fairness of the financial consideration to be received by stockholders of the Company or the Company, as the case may be, in connection with a transaction described in clause (c) of the following paragraph. The nature and scope of our investigation as well as the scope, form and substance of our opinion shall be such as we consider appropriate. If requested our opinion will be in written form. Our compensation for the services referred to above will be as follows: (a) A fee of $200,000 in cash payable forthwith. (b) An additional fee of $1,000,000, less any fees payable pursuant to clause (a) above, payable on January 26, 1995, in the event that this letter agreement is not terminated prior to April 26, 1994 and that neither Tyson nor any other party 2 has acquired a majority of the stock of WLR by January 26, 1995. (c) If a majority of the outstanding stock of the Company is acquired by Tyson or any other person or group, including the Company, in one or a series of transactions by means of a tender offer or merger, private or open market purchases of stock or otherwise, or if all or substantially all of the assets of the Company are transferred, in one or a series of transactions, by way of a sale, distribution or liquidation, the Company shall pay, or cause to be paid, to us an additional fee equal to 0.75% of the aggregate value of the Offer, plus 2% of the amount by which the aggregate value of the transaction(s) exceeds the aggregate value of the Offer; it being understood, however, that such aggregate value shall be deemed to include amounts paid by the purchaser or the Company with respect to contingently issuable shares, including, without limitation, shares issuable pursuant to options, warrants and convertible securities. If at least 50% of the outstanding stock of the Company is acquired by Tyson or any other person or group, including the Company, such aggregate value shall be determined as if such acquisition were of 100% of the stock of the Company (including all contingently issuable shares). (d) The fees in clauses (a) through (c) above do not include any services Goldman Sachs may render in the future as financial advisor to the Company with respect to any specific transaction other than those referenced in clause (c). In the event that the Company or any other entity formed or owned in substantial part or controlled by the Company or one or more members of senior management of the Company or any employee benefit plan of the Company or any of its subsidiaries (a "Related Entity") effects (other than in the ordinary course of business) a transaction or series of transactions, including, but not limited to a merger or other combination, acquisition of 3 stock or assets, recapitalization, distribution, divestiture, liquidation or other similar transaction, you agree to retain Goldman Sachs as the Company's financial advisor with respect to any such transaction pursuant to a separate letter agreement with Goldman Sachs on customary terms and conditions. The following amount shall be deducted from the amount payable to us pursuant to clauses (c) and (d) of the above paragraph: (i) any fees paid to us pursuant to clauses (a) and (b) of the above paragraph and (ii) an amount equal to 20% of the amount calculated pursuant to clauses (c) or (d) representing the fee to be paid to Wheat First Butcher & Singer. Any amount paid to us pursuant to clause (d) above shall be deducted from the amount payable to us pursuant to clause (b) above. Any fees payable pursuant to subparagraphs (c) and (d) above shall be paid to us in cash at the consummation of the particular transaction giving rise to such fee. Except as otherwise provided, the aggregate value of a transaction shall be the value of the aggregate consideration paid or received by the Company or its stockholders as the case may be. In the case of an asset transaction, aggregate value shall include the net value of any current assets not sold. Amounts paid into escrow and contingent payments in connection with any transaction will be included as part of the aggregate value. Fees on amounts paid into escrow will be payable upon receipt by the Company of such escrowed amounts. If the consideration in connection with any transaction may be increased by payments related to future events, the portion of our fee relating to such contingent payments will be calculated and payable if and when such contingent payments are made. If any portion of the aggregate consideration is paid in the form of securities, the value of such securities, for purposes of calculating the transaction fee, will be determined by the average of the last sales prices for such securities on the five trading days ending five days prior to the consummation of the transaction. If such securities do not have an existing public trading market, the value of 4 the securities shall be the mutually agreed upon fair market value on the day prior to the consummation of the transaction. In the event that the Company becomes the subject of, or is threatened with, a contested proxy solicitation by Tyson or any other party, you agree to retain Goldman Sachs as the Company's financial advisor with regard to such proxy solicitation pursuant to a separate letter agreement with Goldman Sachs on customary terms and conditions. Until the time such a letter agreement is entered into, the provisions of Annex A to this letter shall apply with respect to any matters arising in connection with such proxy solicitation. Any amount payable to us pursuant to such letter agreement shall be a credit against the fees payable to us pursuant to clauses (b) and (c) of the fourth paragraph of this letter agreement. You also agree to reimburse us periodically for our reasonable out-of- pocket expenses, including the fees and disbursements of our attorneys, plus any sales, use or similar taxes (including additions to such taxes, if any) arising in connection with any matter referred to in this letter. It is understood that Goldman Sachs will seek your approval before retaining counsel and that such approval shall not be unreasonably withheld. In order to coordinate most effectively our efforts together during the period of our engagement hereunder, neither the Company nor its management will initiate any discussions looking toward any transaction as contemplated hereby, except through Goldman Sachs. In the event the Company or its management receives an inquiry concerning any such transaction, they will promptly inform Goldman Sachs of such inquiry in order that we can assess such inquiry and assist the Company in any resulting negotiations. Goldman Sachs will not contact any party to initiate any discussions looking toward a transaction as contemplated in this letter without the consent of the Company. In the event that members of the Goldman Sachs Team representing the Company receive an inquiry concerning a transaction as contemplated hereby, they shall so inform the Company. 5 In connection with engagements such as this, it is our firm policy to receive indemnification. The Company agrees to the provisions with respect to our indemnity and other matters set forth in Annex A which is incorporated by reference into this letter. Our services may be terminated by you or us at any time with or without cause effective upon receipt of written notice to that effect. We will be entitled to the transaction fee set forth above if at any time prior to the expiration of one year after such termination a transaction of the type contemplated by subparagraph (c) is consummated and, in the case of a transaction contemplated by subparagraph (c), there was contact with the acquiring party, or any affiliate thereof, regarding such a transaction during the period of our engagement. Please note that any written or oral opinion or advice provided by Goldman Sachs in connection with our engagement is exclusively for the information of the Board of Directors and senior management of the Company and may not be disclosed to any third party or circulated or referred to publicly without our prior written consent. As you know, Goldman Sachs is a full service securities firm and as such may from time to time effect transactions, for its own account or the account of customers, and hold positions in securities or options on securities of the Company and other companies which may be the subject of the engagement contemplated by this letter. 6 Please confirm that the foregoing is in accordance with your understanding by signing and returning to us the enclosed copy of this letter, which shall become a binding agreement upon our receipt. Very truly yours, Confirmed: /s/ Goldman, Sachs & Co. GOLDMAN, SACHS & CO. WLR FOODS, INC. By: /s/ James L. Keeler Date: 2/4/94 7 Name of Client: WLR Foods, Inc. Date: January 28, 1994 Annex A In the event that Goldman Sachs becomes involved in any capacity in any action, proceeding or investigation brought by or against any person, including stockholders of the Company, in connection with or as a result of either our engagement or any matter referred to in this letter, the Company periodically will reimburse Goldman Sachs for its legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith. The Company also will indemnify and hold Goldman Sachs harmless against any and all losses, claims, damages or liabilities to any such person in connection with or as a result of either our engagement or any matter referred to in this letter, except to the extent that any such loss, claim, damage or liability results from the gross negligence or bad faith of Goldman Sachs in performing the services that are the subject of this letter. If for any reason the foregoing indemnification is unavailable to Goldman Sachs or insufficient to hold it harmless, then the Company shall contribute to the amount paid or payable by Goldman Sachs as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative economic interests of the Company and its stockholders on the one hand and Goldman Sachs on the other hand in the matters contemplated by this letter as well as the relative fault of the Company and Goldman Sachs with respect to such loss, claim, damage or liability and any other relevant equitable considerations. The reimbursement, indemnity and contribution obligations of the Company under this paragraph shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any affiliate of Goldman Sachs and the partners, directors, agents, employees and controlling persons (if any), as the case may be, of Goldman Sachs and any such affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Company, Goldman Sachs, any such affiliate and any such person. The Company also agrees that neither Goldman Sachs nor any of such affiliates, partners, directors, agents, employees or controlling persons shall have any liability to the Company or any person asserting claims on behalf of or in right of the Company in connection with or as a result of either our engagement or any matter referred to in this letter except to the extent that any 8 losses, claims, damages, liabilities or expenses incurred by the Company result from the gross negligence or bad faith of Goldman Sachs in performing the services that are the subject of this letter. The provisions of this Annex A shall survive any termination or completion of the engagement provided by this letter agreement and this letter agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of law. EX-99.4 14 WLR FOODS 14D9 EX-99.4 WHICH IS EXHIBIT 13 1 EXHIBIT 13 [Letterhead of Wheat First Butcher & Singer] January 28, 1994 PERSONAL AND CONFIDENTIAL Mr. James L. Keeler President and Chief Executive Officer WLR Foods, Inc. Highway 33 West P.O. Box 228 Hinton, VA 22831 Dear Jim: We are pleased to confirm the arrangements under which Wheat, First Securities, Inc. ("Wheat") is engaged by WLR Foods, Inc. (the "Company") as financial advisor with respect to the offer which Tyson Foods, Inc. ("Tyson") made on January 24, 1994 for the stock (including any shares issuable upon the exercise of outstanding options) of the Company (the "Offer"). We understand that, in addition to Wheat, you have selected Goldman, Sachs & Co. ("Goldman Sachs") to act as an advisor to WLR. Our compensation for the services referred to above will be as follows: (a) A fee of $75,000 in cash payable forthwith. (b) An additional fee of $250,000, less any fees payable pursuant to clause (a) above, payable on January 26, 1995, in the event that this letter agreement is not terminated prior to April 26, 1994, and that neither Tyson nor any other party has acquired a majority of the stock of WLR by January 26, 1995. (c) If a majority of the outstanding stock of the Company is acquired by Tyson or any other person or group, including the Company, in one or a series of transactions by means of a tender offer or merger, private or open 2 market purchases of stock or otherwise, or if all or substantially all of the assets of the Company are transferred, in one or a series of transactions, by way of a sale, distribution or liquidation, the Company shall pay, or cause to be paid, to us an additional fee equal to .15% of the aggregate value of the Offer, plus .40% of the amount by which the aggregate value of the transaction(s) exceeds the aggregate value of the Offer; it being understood, however, that such aggregate value shall be deemed to include amounts paid by the purchaser of the Company with respect to contingently issuable shares, including, without limitation, shares issuable pursuant to options, warrants and convertible securities. If at least 50% of the outstanding stock of the Company is acquired by Tyson or any other person or group, including the Company, such aggregate value shall be determined as if such acquisition were of 100% of the stock of the Company (including all contingently issuable shares). (d) The fees in clauses (a) through (c) above do not include any services Wheat may render in the future as financial advisor to the Company with respect to any specific transaction other than those referenced in clause (c). In the event that the Company or any other entity formed or owned in substantial part or controlled by the Company or one or more members of senior management of the Company or any employee benefit plan of the Company or any of its subsidiaries (a "Related Entity") effects (other than in the ordinary course of business) a transaction or series of transactions, including, but not limited to a merger or other combination, acquisition of stock or assets, recapitalization, distribution, divestiture, liquidation or other similar transaction, you agree to retain Wheat as the Company's financial advisor with respect to any such transaction pursuant to a separate letter 3 agreement with Wheat on customary terms and conditions. The following amount shall be deducted from the amount payable to us pursuant to clauses (c) and (d) of the above paragraph: any fees paid to us pursuant to clauses (a) and (b) of the above paragraph. Any amount paid to us pursuant to clause (d) above shall be deducted from the amount payable to us pursuant to clause (b) above. Any fees payable pursuant to subparagraphs (c) and (d) above shall be paid to us in cash at the consummation of the particular transaction giving rise to such fee. Except as otherwise provided, the aggregate value of a transaction shall be the value of the aggregate consideration paid or received by the Company or its stockholders as the case may be. In the case of an asset transaction, aggregate value shall include the net value of any current assets not sold. Amounts paid into escrow and contingent payments in connection with any transaction will be included as part of the aggregate value. Fees on amounts paid into escrow will be payable upon receipt by the Company of such escrowed amounts. If the consideration in connection with any transaction may be increased by payments related to future events, the portion of our fee relating to such contingent payments will be calculated and payable if and when such contingent payments are made. If any portion of the aggregate consideration is paid in the form of securities, the value of such securities, for purposes of calculating the transaction fee, will be determined by the average of the last sales prices for such securities on the five trading days ending five days prior to the consummation of the transaction. If such securities do not have an existing public trading market, the value of the securities shall be the mutually agreed upon fair market value on the day prior to the consummation of the transaction. In the event that the Company becomes the subject of, or is threatened with, a contested proxy solicitation by Tyson or any other party, you agree to retain Wheat as the Company's financial advisor with regard to such proxy solicitation pursuant to a separate letter agreement with Wheat on customary terms and conditions. Until the time 4 such a letter agreement is entered into, the provisions of Annex A to this letter shall apply with respect to any matters arising in connection with such proxy solicitation. Any amount payable to us pursuant to such letter agreement shall be a credit against the fees payable to us pursuant to clauses (b) and (c) of the third paragraph of this letter agreement. You also agree to reimburse us periodically for our reasonable out- of-pocket expenses, including the fees and disbursements of our attorneys, plus any sales, use or similar taxes (including additions to such taxes, if any) arising in connection with any matter referred to in this letter. It is understood that Wheat will seek your approval before retaining counsel and that such approval shall not be unreasonably withheld. In order to coordinate most effectively our efforts together during the period of our engagement hereunder, neither the Company nor its management will initiate any discussions looking toward any transaction as contemplated hereby, except through Goldman Sachs. In the event the Company or its management receives an inquiry concerning any such transaction, they will promptly inform Goldman Sachs of such inquiry in order that we can assess such inquiry and assist the Company in any resulting negotiations. Wheat will not contact any party to initiate any discussions looking toward a transaction as contemplated in this letter without the consent of the Company. In the event that members of the Wheat Team representing the Company receive an inquiry concerning a transaction as contemplated hereby, they shall so inform the Company. In connection with engagements such as this, it is our firm policy to receive indemnification. The Company agrees to the provisions with respect to our indemnity and other matters set forth in Annex A which is incorporated by reference into this letter. Our services may be terminated by you or us at any time with or without cause effective upon receipt of written notice to that effect. We will be entitled to the transaction fee set forth above if at any time prior to the expiration of one year after such termination a transaction of the type contemplated by subparagraph (c) is consummated and, in the case of a transaction contemplated by 5 subparagraph (c), there was contact with the acquiring party, or any affiliate thereof, regarding such a transaction during the period of our engagement. Please note that any written or oral opinion or advice provided by Wheat in connection with our engagement is exclusively for the information of the Board of Directors and senior management of the Company and may not be disclosed to any third party or circulated or referred to publicly without our prior written consent. As you know, Wheat is a full service securities firm and as such may from time to time effect transactions, for its own account or the account of customers, and hold positions in securities or options on securities of the Company and other companies which may be the subject of the engagement contemplated by this letter. Please confirm that the foregoing is in accordance with your understanding by signing and returning to us the enclosed copy of this letter, which shall become a binding agreement upon our receipt. Very truly yours, WHEAT, FIRST SECURITIES, INC. By: /s/ Allen S. Morton Managing Director Accepted and Agreed to as of the date first written above: WLR FOODS, INC. By: /s/ James L. Keeler President 6 Name of Client: WLR Foods, Inc. Date: January 28, 1994 Annex A In the event that Wheat becomes involved in any capacity in any action, proceeding or investigation brought by or against any person, including stockholders of the Company, in connection with or as a result of either our engagement or any matter referred to in this letter, the Company periodically will reimburse Wheat for its legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith. The Company also will indemnify and hold Wheat harmless against any and all losses, claims, damages or liabilities to any such person in connection with or as a result of either our engagement or any matter referred to in this letter, except to the extent that any such loss, claim, damage or liability results from the gross negligence or bad faith of Wheat in performing the services that are the subject of this letter. If for any reason the foregoing indemnification is unavailable to Wheat or insufficient to hold it harmless, then the Company shall contribute to the amount paid or payable by Wheat as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative economic interests of the Company and its stockholders on the one hand and Wheat on the other hand in the matters contemplated by this letter as well as the relative fault of the Company and Wheat with respect to such loss, claim, damage or liability and any other relevant equitable considerations. The reimbursement, indemnity and contribution obligations of the Company under this paragraph shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any affiliate of Wheat and the directors, agents, employees and controlling persons (if any), as the case may be, of Wheat and any such affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Company, Wheat, any such affiliate and any such person. The Company also agrees that neither Wheat nor any of such affiliates, directors, agents, employees or controlling persons shall have any liability to the Company or any person asserting claims on behalf of or in right of the Company in connection with or as a result of either our engagement or any matter referred to in this letter except to the extent that any losses, claims, damages, liabilities or expenses incurred by the Company result from the gross negligence or bad faith of Wheat in performing the services that are the subject of 7 this letter. The provisions of this Annex A shall survive any termination or completion of the engagement provided by this letter agreement and this letter agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia without regard to principles of conflicts of laws. EX-4 15 WLR FOODS 14D9 EX-4 WHICH IS EXHIBIT 14 EXHIBIT 14 SHAREHOLDER PROTECTION RIGHTS AGREEMENT dated as of February 4, 1994 between WLR FOODS, INC. and FIRST UNION NATIONAL BANK OF NORTH CAROLINA as Rights Agent i SHAREHOLDER PROTECTION RIGHTS AGREEMENT Table of Contents Page Article I CERTAIN DEFINITIONS Section 1.1 Certain Definitions .................... 2 Article II THE RIGHTS Section 2.1 Summary of Rights ...................... 9 Section 2.2 Legend on Common Stock Certificates ......................... 10 Section 2.3 Exercise of Rights; Separation of Rights ................. 10 Section 2.4 Adjustments to Exercise Price; Number of Rights ..................... 13 Section 2.5 Date on Which Exercise is Effective ............................ 15 Section 2.6 Execution, Authentication, Delivery and Dating of Rights Certificates ......................... 16 Section 2.7 Registration, Registration of Transfer and Exchange ................ 17 Section 2.8 Mutilated, Destroyed, Lost and Stolen Rights Certificates ........... 18 Section 2.9 Persons Deemed Owners .................. 19 Section 2.10 Delivery and Cancellation of Certificates ......................... 19 Section 2.11 Agreement of Rights Holders ............ 20 Article III ADJUSTMENTS TO THE RIGHTS IN THE EVENT OF CERTAIN TRANSACTIONS Section 3.1 Flip-in ................................ 21 Section 3.2 Flip-over .............................. 25 Article IV THE RIGHTS AGENT Section 4.1 General ................................ 26 Section 4.2 Merger or Consolidation or Change of Name of Rights Agent ................. 27 Section 4.3 Duties of Rights Agent ................. 28 Section 4.4 Change of Rights Agent ................. 31 ii Article V MISCELLANEOUS Section 5.1 Redemption ............................. 32 Section 5.2 Expiration ............................. 33 Section 5.3 Issuance of New Rights Certificates ......................... 33 Section 5.4 Supplements and Amendments ............. 34 Section 5.5 Fractional Shares ...................... 35 Section 5.6 Rights of Action ....................... 35 Section 5.7 Holder of Rights Not Deemed a Shareholder .......................... 36 Section 5.8 Notice of Proposed Actions ............. 36 Section 5.9 Notices ................................ 36 Section 5.10 Suspension of Exercisability .......... 37 Section 5.11 Costs of Enforcement .................. 38 Section 5.12 Successors ............................ 38 Section 5.13 Benefits of this Agreement ............ 38 Section 5.14 Determination and Actions by the Board of Directors, etc.......... 39 Section 5.15 Descriptive Headings .................. 39 Section 5.16 Governing Law ......................... 39 Section 5.17 Counterparts .......................... 39 Section 5.18 Severability .......................... 39 EXHIBITS Exhibit A Form of Rights Certificate (Together with Form of Election to Exercise) Exhibit B Form of Certificate of Designation and Terms of Participating Preferred Stock 1 SHAREHOLDER PROTECTION RIGHTS AGREEMENT SHAREHOLDER PROTECTION RIGHTS AGREEMENT (as amended from time to time, this "Agreement"), dated as of February 4, 1994, between WLR Foods, Inc., a Virginia corporation (the "Company"), and First Union National Bank of North Carolina, as Rights Agent (the "Rights Agent", which term shall include any successor Rights Agent hereunder). WITNESSETH: WHEREAS, the Board of Directors of the Company has (a) authorized and declared a dividend of one right ("Right") in respect of each share of Common Stock (as hereinafter defined) held of record as of the close of business on February 14, 1994 (the "Record Time") and (b) authorized the issuance of one Right in respect of each share of Common Stock issued after the Record Time and prior to the Separation Time (as hereinafter defined) and, to the extent provided in Section 5.3, each share of Common Stock issued after the Separation Time; WHEREAS, subject to the terms hereof, each Right entitles the holder thereof, after the Separation Time, to purchase securities of the Company (or, in certain cases, of certain other entities) pursuant to the terms and subject to the conditions set forth herein; and 2 WHEREAS, the Company desires to appoint the Rights Agent to act on behalf of the Company, and the Rights Agent is willing so to act, in connection with the issuance, transfer, exchange and replacement of Rights Certificates (as hereinafter defined), the exercise of Rights and other matters referred to herein; NOW THEREFORE, in consideration of the premises and the respective agreements set forth herein, the parties hereby agree as follows: ARTICLE I CERTAIN DEFINITIONS 1.1 Certain Definitions. For purposes of this Agreement, the following terms have the meanings indicated: "Acquiring Person" shall mean any Person who is a Beneficial Owner of 15% or more of the outstanding shares of Common Stock; provided, however, that the term "Acquiring Person" shall not include any Person (i) who shall become the Beneficial Owner of 15% or more of the outstanding shares of Common Stock solely as a result of an acquisition by the Company of shares of Common Stock, until such time thereafter as such Person shall become the Beneficial Owner (other than by means of a stock dividend or stock split) of any additional shares of Common Stock, (ii) who is the Beneficial Owner of 15% or more of the outstanding shares of Common Stock but who acquired Beneficial Ownership of shares of Common Stock without any plan or intention to seek or 3 affect control of the Company, if such Person promptly enters into an irrevocable commitment promptly to divest, and thereafter promptly divests (without exercising or retaining any power, including voting, with respect to such shares), sufficient shares of Common Stock (or securities convertible into, exchangeable into or exercisable for Common Stock) so that such Person ceases to be the Beneficial Owner of 15% or more of the outstanding shares of Common Stock or (iii) who Beneficially Owns shares of Common Stock consisting solely of one or more of (A) shares of Common Stock Beneficially Owned pursuant to the grant or exercise of an option granted to such Person by the Company in connection with an agreement to merge with, or acquire, the Company at a time at which there is no Acquiring Person, (B) shares of Common Stock (or securities convertible into, exchangeable into or exercisable for Common Stock), Beneficially Owned by such Person or its Affiliates or Associates at the time of grant of such option or (C) shares of Common Stock (or securities convertible into, exchangeable into or exercisable for Common Stock) acquired by Affiliates or Associates of such Person after the time of such grant which, in the aggregate, amount to less than 1% of the outstanding shares of Common Stock. In addition, the Company, any wholly-owned Subsidiary of the Company and any employee stock ownership or other employee benefit plan of 4 the Company or a wholly-owned Subsidiary of the Company shall not be an Acquiring Person. "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 under the Securities Exchange Act of 1934, as such Rule is in effect on the date of this Agreement. A Person shall be deemed the "Beneficial Owner", and to have "Beneficial Ownership" of, and to "Beneficially Own", any securities as to which such Person or any of such Person's Affiliates or Associates is or may be deemed to be the beneficial owner of pursuant to Rule 13d-3 and 13d- 5 under the Securities Exchange Act, as such Rules are in effect on the date of this Agreement as well as any securities as to which such Person or any of such Person's Affiliates or Associates has the right to become Beneficial Owner (whether such right is exercisable immediately or only after the passage of time or the occurrence of conditions) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, rights (other than the Rights), warrants or options, or otherwise; provided, however, that a Person shall not be deemed the "Beneficial Owner", or to have "Beneficial Ownership" of, or to "Beneficially Own", any security (i) solely because such security has been tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates or Associates until such tendered 5 security is accepted for payment or exchange or (ii) solely because such Person or any of such Person's Affiliates or Associates has or shares the power to vote or direct the voting of such security pursuant to a revocable proxy given in response to a public proxy or consent solicitation made to more than ten holders of shares of a class of stock of the Company registered under Section 12 of the Securities Exchange Act of 1934 and pursuant to, and in accordance with, the applicable rules and regulations under the Securities Exchange Act of 1934, except if such power (or the arrangements relating thereto) is then reportable under Item 6 of Schedule 13D under the Securities Exchange Act of 1934 (or any similar provision of a comparable or successor report). For purposes of this Agreement, in determining the percentage of the outstanding shares of Common Stock with respect to which a Person is the Beneficial Owner, all shares as to which such Person is deemed the Beneficial Owner shall be deemed outstanding. "Business Day" shall mean any day other than a Saturday, Sunday or a day on which banking institutions in The City of New York are generally authorized or obligated by law or executive order to close. "Close of business" on any given date shall mean 5:00 p.m. Eastern Standard time on such date (or, if such date is not a Business Day, 5:00 p.m. Eastern Standard time on the next succeeding Business Day) at which the 6 office of the transfer agent for the Common Stock (or, after the Separation Time, the office of the Rights Agent) are closed to the public. "Common Stock" shall mean the shares of Common Stock, no par value, of the Company. "Exchange Time" shall mean the time at which the right to exercise the Rights shall terminate pursuant to Section 3.1(c) hereof. "Exercise Price" shall mean, as of any date, the price at which a holder may purchase the securities issuable upon exercise of one whole Right. Until adjustment thereof in accordance with the terms hereof, the Exercise Price shall equal $68.00. "Expiration Time" shall mean the earliest of (i) the Exchange Time, (ii) the Redemption Time, (iii) the close of business on the tenth- year anniversary of the Record Time and (iv) upon the merger of the Company into another corporation pursuant to an agreement entered into when there is no Acquiring Person. "Flip-in Date" shall mean any Stock Acquisition Date which is not the result of a Flip-over Transaction or Event. "Flip-over Entity," for purposes of Section 3.2, shall mean (i) in the case of a Flip-over Transaction or Event described in clause (i) of the definition thereof, the Person issuing any securities into which shares of Common 7 Stock are being converted or exchanged and, if no such securities are being issued, the other party to such Flip-over Transaction or Event and (ii) in the case of a Flip-over Transaction or Event referred to in clause (ii) of the definition thereof, the Person receiving the greatest portion of the assets or earning power being transferred in such Flip-over Transaction or Event, provided in all cases if such Person is a subsidiary of a corporation, the parent corporation shall be the Flip-Over Entity. "Flip-over Stock" shall mean the capital stock (or similar equity interest) with the greatest voting power in respect of the election of directors (or other persons similarly responsible for direction of the business and affairs) of the Flip-Over Entity. "Flip-over Transaction or Event" shall mean a transaction or series of transactions after the time when an Acquiring Person has become such in which, directly or indirectly, (i) the Company shall consolidate or merge or participate in a share exchange with any other Person if, at the time of the consolidation, merger or share exchange or at the time the Company enters into any agreement with respect to any such consolidation, merger or share exchange, the Acquiring Person controls the Board of Directors of the Company and any term of or arrangement concerning the treatment of shares of capital stock in such consolidation, merger or share exchange relating to the Acquiring Person is 8 not identical to the terms and arrangements relating to other holders of the Common Stock or (ii) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer) assets (A) aggregating more than 50% of the assets (measured by either book value or fair market value) or (B) generating more than 50% of the operating income or cash flow, of the Company and its Subsidiaries (taken as a whole) to any Person (other than the Company or one or more of its wholly owned Subsidiaries) or to two or more such Persons which are Affiliates or Asso- ciates or otherwise acting in concert, if, at the time of the entry by the Company (or any such Subsidiary) into an agreement with respect to such sale or transfer of assets, the Acquiring Person controls the Board of Directors of the Company. For purposes of the foregoing description, the term "Acquiring Person" shall include any Acquiring Person and its Affiliates and Associates counted together as a single Person. "Market Price" per share of any securities on any date shall mean the average of the daily closing prices per share of such securities (determined as described below) on each of the 20 consecutive Trading Days through and including the Trading Day immediately preceding such date; provided, however, that if an event of a type analogous to any of the events described in Section 2.4 hereof shall have caused the closing prices used to determine the Market Price 9 on any Trading Days during such period of 20 Trading Days not to be fully comparable with the closing price on such date, each such closing price so used shall be appropriately adjusted in order to make it fully comparable with the closing price on such date. The closing price per share of any securities on any date shall be the last reported sale price, regular way, or, in case no such sale takes place or is quoted on such date, the average of the closing bid and asked prices, regular way, for each share of such securities, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange, Inc. or, if the securities are not listed or admitted to trading on the New York Stock Exchange, Inc., as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the securities are listed or admitted to trading or, if the securities are not listed or admitted to trading on any national securities exchange, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or such other system then in use, or, if on any such date the securities are not listed or admitted to trading on any national securities exchange or quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the securities 10 selected by the Board of Directors of the Company; provided, however, that if on any such date the securities are not listed or admitted to trading on a national securities exchange or traded in the over-the- counter market, the closing price per share of such securities on such date shall mean the fair value per share of securities on such date as determined in good faith by the Board of Directors of the Company, after consultation with a nationally recognized investment banking firm, and set forth in a certificate delivered to the Rights Agent. "Person" shall mean any individual, firm, partnership, association, group (as such term is used in Rule 13d-5 under the Securities Exchange Act of 1934, as such Rule is in effect on the date of this Agreement), corporation or other entity. "Preferred Stock" shall mean the series of Participating Preferred Stock, no par value, of the Company created by a Certificate of Designation and Terms in substantially the form set forth in Exhibit B hereto appropriately completed. "Redemption Price" shall mean an amount equal to one cent, $0.01. "Redemption Time" shall mean the time at which the right to exercise the Rights shall terminate pursuant to Section 5.1 hereof. 11 "Separation Time" shall mean the close of business on the earlier of (i) the tenth business day (or such later date as the Board of Directors of the Company may from time to time fix by resolution adopted prior to the Separation Time that would otherwise have occurred) after the date on which any Person commences a tender or exchange offer which, if consummated, would result in such Person's becoming an Acquiring Person and (ii) the Flip-in Date; provided, that if the foregoing results in the Separation Time being prior to the Record Time, the Separation Time shall be the Record Time and provided further, that if any tender or exchange offer referred to in clause (i) of this paragraph is cancelled, terminated or otherwise withdrawn prior to the Separation Time without the purchase of any shares of Common Stock pursuant thereto, such offer shall be deemed, for purposes of this paragraph, never to have been made. "Stock Acquisition Date" shall mean the first date of public announcement by the Company (by any means) that an Acquiring Person has become such. "Subsidiary" of any specified Person shall mean any corporation or other entity of which a majority of the voting power of the equity securities or a majority of the equity interest is Beneficially Owned, directly or indirectly, by such Person. "Trading Day," when used with respect to any securities, shall mean a day on which the New York Stock 12 Exchange, Inc. is open for the transaction of business or, if such securities are not listed or admitted to trading on the New York Stock Exchange, Inc., a day on which the principal national securities exchange on which such securities are listed or admitted to trading is open for the transaction of business or, if such securities are not listed or admitted to trading on any national securities exchange, a Business Day. ARTICLE II THE RIGHTS 2.1 Summary of Rights. As soon as practicable after the Record Time, the Company will mail a letter summarizing the terms of the Rights to each holder of record of Common Stock as of the Record Time, at such holder's address as shown by the records of the Company. 2.2 Legend on Common Stock Certificates. Certificates for the Common Stock issued after the Record Time but prior to the Separation Time shall evidence one Right for each share of Common Stock represented thereby and shall have impressed on, printed on, written on or otherwise affixed to them the following legend: Until the Separation Time (as defined in the Rights Agreement referred to below), this certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Rights Agreement, dated as of February 4, 1994 (as such may be amended from time to time, the "Rights Agreement"), between WLR Foods, Inc. (the "Com- pany") and First Union National Bank of North Carolina, as Rights Agent, the terms of which are 13 hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights may be redeemed, may be exchanged for shares of Common Stock or other securities or assets of the Company or a Subsidiary of the Company, may expire, may become void (if they are "Beneficially Owned" by an "Acquiring Person" or an Affiliate or Associate thereof, as such terms are defined in the Rights Agreement, or by any transferee of any of the foregoing) or may be evidenced by separate certificates and may no longer be evidenced by this certificate. The Company will mail or arrange for the mailing of a copy of the Rights Agreement to the holder of this certificate without charge within five days after the receipt of a written request therefor. Certificates representing shares of Common Stock that are issued and outstanding at the Record Time shall evidence one Right for each share of Common Stock evidenced thereby notwithstanding the absence of the foregoing legend. 2.3 Exercise of Rights; Separation of Rights. (a) Subject to Sections 3.1, 5.1 and 5.10 and subject to adjustment as herein set forth, each Right will entitle the holder thereof, after the Separation Time and prior to the Expiration Time, to purchase, for the Exercise Price, one one-hundredth of a share of Preferred Stock. (b) Until the Separation Time, (i) no Right may be exercised and (ii) each Right will be evidenced by the certificate for the associated share of Common Stock (together, in the case of certificates issued prior to the Record Time, with the letter mailed to the record holder thereof pursuant to Section 2.1) and will be transferable only together with, and will be transferred by a transfer 14 (whether with or without such letter) of, such associated share. (c) Subject to the terms hereof, after the Separation Time and prior to the Expiration Time, the Rights (i) may be exercised and (ii) may be transferred independent of shares of Common Stock. Promptly following the Separation Time, the Rights Agent will mail to each holder of record of Common Stock as of the Separation Time (other than any Person whose Rights have become void pursuant to Section 3.1(b)), at such holder's address as shown by the records of the Company (the Company hereby agreeing to furnish copies of such records to the Rights Agent for this purpose), (x) a certificate (a "Rights Certificate") in substantially the form of Exhibit A hereto appropriately completed, representing the number of Rights held by such holder at the Separation Time and having such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any national securities exchange or quotation system on which the Rights may from time to time be listed or traded, or to conform to usage, and (y) a disclosure statement describing the Rights. 15 (d) Subject to the terms hereof, Rights may be exercised on any Business Day after the Separation Time and prior to the Expiration Time by submitting to the Rights Agent the Rights Certificate evidencing such Rights with an Election to Exercise (an "Election to Exercise") substan- tially in the form attached to the Rights Certificate duly completed, accompanied by payment in cash, or by certified or official bank check or money order payable to the order of the Company, of a sum equal to the Exercise Price multiplied by the number of Rights being exercised and a sum sufficient to cover any transfer tax or charge which may be payable in respect of any transfer involved in the transfer or delivery of Rights Certificates or the issuance or delivery of certificates for shares or depositary receipts (or both) in a name other than that of the holder of the Rights being exercised. (e) Upon receipt of a Rights Certificate, with an Election to Exercise accompanied by payment as set forth in Section 2.3(d), and subject to the terms hereof, the Rights Agent will thereupon promptly (i)(A) requisition from a transfer agent stock certificates evidencing such number of shares or other securities to be purchased (the Company hereby irrevocably authorizing its transfer agents to comply with all such requisitions) and (B) if the Company elects pursuant to Section 5.5 not to issue certificates representing fractional shares, requisition from the 16 depositary selected by the Company depositary receipts representing the frac- tional shares to be purchased or requisition from the Company the amount of cash to be paid in lieu of fractional shares in accordance with Section 5.5 and (ii) after receipt of such certificates, depositary receipts and/or cash, deliver the same to or upon the order of the registered holder of such Rights Certificate, registered (in the case of certificates or depositary receipts) in such name or names as may be designated by such holder. (f) In case the holder of any Rights shall exercise less than all the Rights evidenced by such holder's Rights Certificate, a new Rights Certificate evidencing the Rights remaining unexercised will be issued by the Rights Agent to such holder or to such holder's duly authorized assigns. (g) The Company covenants and agrees that it will (i) take all such action as may be necessary to ensure that all shares delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares (subject to payment of the Exercise Price), be duly and validly authorized, executed, issued and delivered and fully paid and nonassessable; (ii) take all such action as may be necessary to comply with any applicable requirements of the Securities Act of 1933 or the Securities Exchange Act of 1934, and the rules and regulations thereunder, and any other applicable law, rule or regulation, in connection with 17 the issuance of any shares upon exercise of Rights; and (iii) pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the original issuance or delivery of the Rights Certificates or of any shares issued upon the exercise of Rights, provided that the Company shall not be required to pay any transfer tax or charge which may be payable in respect of any transfer involved in the transfer or delivery of Rights Certificates or the issuance or delivery of certificates for shares in a name other than that of the holder of the Rights being transferred or exercised. 2.4 Adjustments to Exercise Price; Number of Rights. (a) In the event the Company shall at any time after the Record Time and prior to the Separation Time (i) declare or pay a dividend on Common Stock payable in Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares of Common Stock, (x) the Exercise Price in effect after such adjustment will be equal to the Exercise Price in effect immediately prior to such adjustment divided by the number of shares of Common Stock (the "Expansion Factor") that a holder of one share of Common Stock immediately prior to such dividend, subdivision or combination would hold thereafter as a result thereof and (y) each Right held prior to such adjustment will become that number of Rights equal to the Expansion Factor, and the adjusted 18 number of Rights will be deemed to be distributed among the shares of Common Stock with respect to which the original Rights were associated (if they remain outstanding) and the shares issued in respect of such dividend, subdivision or combination, so that each such share of Common Stock will have exactly one Right associated with it. Each adjustment made pursuant to this paragraph shall be made as of the payment or effective date for the applicable dividend, subdivision or combination. In the event the Company shall at any time after the Record Time and prior to the Separation Time issue any shares of Common Stock otherwise than in a transaction referred to in the preceding paragraph, each such share of Common Stock so issued shall automatically have one new Right associated with it, which Right shall be evidenced by the certificate representing such share. To the extent provided in Section 5.3, Rights shall be issued by the Company in respect of shares of Common Stock that are issued or sold by the Company after the Separation Time. (b) In the event the Company shall at any time after the Record Time and prior to the Separation Time issue or distribute any securities or assets in respect of, in lieu of or in exchange for Common Stock (other than pursuant to a regular periodic cash dividend or a dividend paid solely in Common Stock) whether by dividend, in a reclassification or recapitalization (including any such 19 transaction involving a merger, consolidation or share exchange), or other- wise, the Company shall make such adjustments, if any, in the Exercise Price, number of Rights and/or securities or other property purchasable upon exercise of Rights as the Board of Directors of the Company, in its sole discretion, may deem to be appropriate under the circumstances in order to adequately protect the interests of the holders of Rights generally, and the Company and the Rights Agent shall amend this Agreement as necessary to provide for such adjustments. (c) Each adjustment to the Exercise Price made pursuant to this Section 2.4 shall be calculated to the nearest cent. Whenever an adjustment to the Exercise Price is made pursuant to this Section 2.4, the Company shall (i) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (ii) promptly file with the Rights Agent and with each transfer agent for the Common Stock a copy of such certificate and (iii) mail a brief summary thereof to each holder of Rights. (d) Irrespective of any adjustment or change in the securities purchasable upon exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the securities so purchasable which were expressed in the initial Rights Certificates issued hereunder. 20 2.5 Date on Which Exercise is Effective. Each person in whose name any certificate for shares is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the shares represented thereby on, and such certificate shall be dated, the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Exercise Price for such Rights (and any applicable taxes and other governmental charges payable by the exercising holder hereunder) was made; provided, however, that if the date of such surrender and payment is a date upon which the stock transfer books of the Company are closed, such person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding Business Day on which the stock transfer books of the Company are open. 2.6 Execution, Authentication, Delivery and Dating of Rights Certificates. (a) The Rights Certificates shall be executed on behalf of the Company by its Chairman of the Board, President, Chief Executive Officer, Chief Operating Officer, Vice Chairman of the Board, or Executive Vice President, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Rights Certificates may be manual or facsimile. 21 Rights Certificates bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the countersignature and delivery of such Rights Certificates. Promptly after the Company learns of the Separation Time, the Company will notify the Rights Agent of such Separation Time and will deliver Rights Certificates executed by the Company to the Rights Agent for countersignature, and, subject to Section 3.1(b), the Rights Agent shall manually countersign and deliver such Rights Certificates to the holders of the Rights pursuant to Section 2.3(c) hereof. No Rights Certificate shall be valid for any purpose unless manually countersigned by the Rights Agent. (b) Each Rights Certificate shall be dated the date of countersignature thereof. 2.7 Registration, Registration of Transfer and Exchange. (a) After the Separation Time, the Company will cause to be kept a register (the "Rights Register") in which, subject to such reasonable regulations as it may prescribe, the Company will provide for the registration and transfer of Rights. The Rights Agent is hereby appointed "Rights Registrar" for the purpose of maintaining the Rights Register for the Company and registering Rights and 22 transfers of Rights after the Separation Time as herein provided. In the event that the Rights Agent shall cease to be the Rights Registrar, the Rights Agent will have the right to examine the Rights Register at all reasonable times after the Separation Time. After the Separation Time and prior to the Expiration Time, upon surrender for registration of transfer or exchange of any Rights Certificate, and subject to the provisions of Section 2.7(c) and (d), the Company will execute, and the Rights Agent will countersign and deliver, in the name of the holder or the designated transferee or transferees, as required pursuant to the holder's instructions, one or more new Rights Certificates evidencing the same aggregate number of Rights as did the Rights Certificate so surrendered. (b) Except as otherwise provided in Section 3.1(b), all Rights issued upon any registration of transfer or exchange of Rights Certificates shall be the valid obligations of the Company, and such Rights shall be entitled to the same benefits under this Agreement as the Rights surrendered upon such registration of transfer or exchange. (c) Every Rights Certificate surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company or the Rights Agent, as the 23 case may be, duly executed by the holder thereof or such holder's attorney duly authorized in writing. As a condition to the issuance of any new Rights Certificate under this Section 2.7, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto. (d) The Company shall not be required to register the transfer or exchange of any Rights after such Rights have become void under Section 3.1(b), been exchanged under Section 3.1(c) or been redeemed or terminated under Section 5.1. 2.8 Mutilated, Destroyed, Lost and Stolen Rights Certificates. (a) If any mutilated Rights Certificate is surrendered to the Rights Agent prior to the Expiration Time, then, subject to Sections 3.1(b) and 5.1, the Company shall execute and the Rights Agent shall countersign and deliver in exchange therefor a new Rights Certificate evidencing the same number of Rights as did the Rights Certificate so surrendered. (b) If there shall be delivered to the Company and the Rights Agent prior to the Expiration Time (i) evidence to their satisfaction of the destruction, loss or theft of any Rights Certificate and (ii) such security or indemnity as may be required by them to save each of them and any of their agents harmless, then, subject to Sections 3.1(b) and 5.1 and in the absence of notice to the Company 24 or the Rights Agent that such Rights Certificate has been acquired by a bona fide purchaser, the Company shall execute and upon its request the Rights Agent shall countersign and deliver, in lieu of any such destroyed, lost or stolen Rights Certificate, a new Rights Certificate evidencing the same number of Rights as did the Rights Certificate so destroyed, lost or stolen. (c) As a condition to the issuance of any new Rights Certificate under this Section 2.8, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Rights Agent) connected therewith. (d) Every new Rights Certificate issued pursuant to this Section 2.8 in lieu of any destroyed, lost or stolen Rights Certificate shall evidence an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Rights Certificate shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Agreement equally and proportionately with any and all other Rights duly issued hereunder. 2.9 Persons Deemed Owners. Prior to due presentment of a Rights Certificate (or, prior to the Separation Time, the associated Common Stock certificate) for registration of transfer, the Company, the Rights Agent and any agent of the Company or the Rights Agent may deem and treat 25 the person in whose name such Rights Certificate (or, prior to the Separation Time, such Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby for all purposes whatsoever, including the payment of the Redemption Price and neither the Company nor the Rights Agent shall be affected by any notice to the contrary. As used in this Agreement, unless the context otherwise requires, the term "holder" of any Rights shall mean the registered holder of such Rights (or, prior to the Separation Time, the associated shares of Common Stock). 2.10 Delivery and Cancellation of Certificates. All Rights Certificates surrendered upon exercise or for registration of transfer or exchange shall, if surrendered to any person other than the Rights Agent, be delivered to the Rights Agent and, in any case, shall be promptly can- celled by the Rights Agent. The Company may at any time deliver to the Rights Agent for cancellation any Rights Certificates previously counter- signed and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Rights Certificates so delivered shall be promptly cancelled by the Rights Agent. No Rights Certificates shall be countersigned in lieu of or in exchange for any Rights Certificates cancelled as provided in this Section 2.10, except as expressly permitted by this Agreement. The Rights Agent shall destroy all cancelled 26 Rights Certificates and deliver a certificate of destruction to the Company. 2.11 Agreement of Rights Holders. Every holder of Rights by accepting the same consents and agrees with the Company and the Rights Agent and with every other holder of Rights that: (a) prior to the Separation Time, each Right will be transferable only together with, and will be transferred by a transfer of, the associated share of Common Stock; (b) after the Separation Time, the Rights Certificates will be transferable only on the Rights Register as provided herein; (c) prior to due presentment of a Rights Certificate (or, prior to the Separation Time, the associated Common Stock certificate) for registration of transfer, the Company, the Rights Agent and any agent of the Company or the Rights Agent may deem and treat the person in whose name the Rights Certificate (or, prior to the Separation Time, the associated Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary; (d) Rights beneficially owned by certain Persons will, under the circumstances set forth in Section 3.1(b), become void; and 27 (e) this Agreement may be supplemented or amended from time to time pursuant to Section 2.4(b) or 5.4 hereof. ARTICLE III ADJUSTMENTS TO THE RIGHTS IN THE EVENT OF CERTAIN TRANSACTIONS 3.1 Flip-in. (a) In the event that prior to the Expiration Time a Flip-in Date shall occur, the Company shall take such action as shall be necessary to ensure and provide that, except as provided in this Section 3.1, each Right shall constitute the right to purchase from the Company, upon exercise thereof in accordance with the terms hereof (but subject to Section 5.10), that number of shares of Common Stock having an aggregate Market Price on the Stock Acquisition Date equal to twice the Exercise Price for an amount in cash equal to the Exercise Price (such right to be appropriately adjusted in order to protect the interests of the holders of Rights generally in the event that on or after such Stock Acquisition Date an event of a type analogous to any of the events described in Section 2.4(a) or (b) shall have occurred with respect to the Common Stock). (b) Notwithstanding the foregoing, any Rights that are or were Beneficially Owned on or after the Stock Acquisition Date by an Acquiring Person or an Affiliate or Associate thereof or by any transferee, direct or indirect, of any of the foregoing shall become void and any holder of 28 such Rights (including transferees) shall thereafter have no right to exercise or transfer such Rights under any provision of this Agreement. If any Rights Certificate is presented for assignment or exercise and the Person presenting the same will not complete the certification set forth at the end of the form of assignment or notice of election to exercise and provide such additional evidence of the identity of the Beneficial Owner and its Affiliates and Associates (or former Beneficial Owners and their Affiliates and Associates) as the Company shall reasonably request, then the Company shall be entitled conclusively to deem the Beneficial Owner thereof to be an Acquiring Person or an Affiliate or Associate thereof or a transferee of any of the foregoing and accordingly will deem the Rights evidenced thereby to be void and not transferable or exercisable. (c) The Board of Directors of the Company may, at its option, at any time after a Flip-in Date and prior to the time that an Acquiring Person becomes the Beneficial Owner of more than 50% of the outstanding shares of Common Stock, elect to exchange all (but not less than all) the then outstanding Rights (which shall not include Rights that have become void pursuant to the provisions of Section 3.1(b)) for shares of Common Stock at an exchange ratio of one share of Common Stock per Right, appropriately adjusted in order to protect the interests of holders of Rights generally in the event that after the Separation Time 29 an event of a type analogous to any of the events described in Section 2.4(a) or (b) shall have occurred with respect to the Common Stock (such exchange ratio, as adjusted from time to time, being hereinafter referred to as the "Exchange Ratio"). Immediately upon the action of the Board of Directors of the Company electing to exchange the Rights, without any further action and without any notice, the right to exercise the Rights will terminate and each Right (other than Rights that have become void pursuant to Section 3.1(b)) will thereafter represent only the right to receive a number of shares of Common Stock equal to the Exchange Ratio. Promptly after the action of the Board of Directors electing to exchange the Rights, the Company shall give notice thereof (specifying the steps to be taken to receive shares of Common Stock in exchange for Rights) to the Rights Agent and the holders of the Rights (other than Rights that have become void pursuant to Section 3.1(b)) outstanding immediately prior thereto by mailing such notice in accordance with Section 5.9. Each Person in whose name any certificate for shares is issued upon the exchange of Rights pursuant to this Section 3.1(c) shall for all purposes be deemed to have become the holder of record of the shares represented thereby on, and such certificate shall be dated, the date upon which the Rights Certificate evidencing such Rights was 30 duly surrendered and payment of any applicable taxes and other governmental charges payable by the holder was made; provided, however, that if the date of such surrender and payment is a date upon which the stock transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding Business Day on which the stock transfer books of the Company are open. (d) Whenever the Company shall become obligated under Section 3.1(a) or (c) to issue shares of Common Stock upon exercise of or in exchange for Rights, the Company, at its option, may substitute therefor shares of Preferred Stock, at a ratio of one one-hundredth of a share of Preferred Stock for each share of Common Stock so issuable. (e) In the event that there shall not be sufficient treasury shares or authorized but unissued shares of Common Stock or Preferred Stock of the Company to permit the exercise or exchange in full of the Rights in accordance with Section 3.1(a) or (c), the Company shall either (i) call a meeting of shareholders seeking approval to cause sufficient additional shares to be authorized (provided that if such approval is not obtained the Company will take the action specified in clause (ii) of this sentence) or (ii) take such action as shall be necessary to ensure and provide, to the extent permitted by applicable law and any agreements or instruments in effect on the Stock Acquisition 31 Date to which it is a party, that each Right shall thereafter constitute the right to receive, (x) at the Company's option, either (A) in return for the Exercise Price, debt or equity securities or other assets (or a combination thereof) having a fair value equal to twice the Exercise Price, or (B) without payment of consideration (except as otherwise required by applicable law), debt or equity securities or other assets (or a combination thereof) having a fair value equal to the Exercise Price, or (y) if the Board of Directors of the Company elects to exchange the Rights in accordance with Section 3.1(c), debt or equity securities or other assets (or a combination thereof) having a fair value equal to the product of the Market Price of a share of Common Stock on the Flip-in Date times the Exchange Ratio in effect on the Flip-in Date, where in any case set forth in (x) or (y) above the fair value of such debt or equity securities or other assets shall be as determined in good faith by the Board of Directors of the Company, after consultation with a nationally recognized investment banking firm. 3.2 Flip-over. (a) Prior to the Expiration Time, the Company shall not enter into any agreement with an Acquiring Person (or any of its Affiliates or Associates) with respect to, consummate or permit to occur any Flip-over Transaction or Event unless and until it shall have entered into a supplemental agreement with the Flip-over Entity, for 32 the benefit of the holders of the Rights, providing that, upon consummation or occurrence of the Flip-over Transaction or Event (i) each Right shall thereafter constitute the right to purchase from the Flip-over Entity, upon exercise thereof in accordance with the terms hereof, that number of shares of Flip-over Stock of the Flip-over Entity having an aggregate Market Price on the date of consummation or occurrence of such Flip-over Transaction or Event equal to twice the Exercise Price for an amount in cash equal to the Exercise Price (such right to be appropriately adjusted in order to protect the interests of the holders of Rights generally in the event that after such date of consummation or occurrence an event of a type analogous to any of the events described in Section 2.4(a) or (b) shall have occurred with respect to the Flip-over Stock) and (ii) the Flip-over Entity shall there- after be liable for, and shall assume, by virtue of such Flip-over Transaction or Event and such supplemental agreement, all the obligations and duties of the Company pursuant to this Agreement. The provisions of this Section 3.2 shall apply to successive Flip-over Transactions or Events. (b) Prior to the Expiration Time, unless the Rights will be redeemed pursuant to Section 5.1 hereof in connection therewith, the Company shall not enter into any agreement with respect to, consummate or permit to occur any Flip-over Transaction or Event if at the time thereof there 33 are any rights, warrants or securities outstanding or any other arrangements, agreements or instruments that would eliminate or otherwise diminish in any material respect the benefits intended to be afforded by this Rights Agreement to the holders of Rights upon consummation of such transaction. ARTICLE IV THE RIGHTS AGENT 4.1 General. (a) The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense, incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted to be done by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability. (b) The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, 34 suffered or omitted by it in connection with its administration of this Agreement in reliance upon any certificate for securities purchasable upon exercise of Rights, Rights Certificate, certificate for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper person or persons. 4.2 Merger or Consolidation or Change of Name of Rights Agent. (a) Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent is a party, or any corporation succeeding to the shareholder services business of the Rights Agent or any successor Rights Agent, will be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 4.4 hereof. In case at the time such successor Rights Agent succeeds to the agency created by this Agreement any of the Rights Certificates have been countersigned but not delivered, any such 35 successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates have not been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Rights Certificates will have the full force provided in the Rights Certificates and in this Agreement. (b) In case at any time the name of the Rights Agent is changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. 4.3 Duties of Rights Agent. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound: 36 (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel will be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. (b) Whenever in the performance of its duties under this Agreement the Rights Agent deems it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by a person believed by the Rights Agent to be the Chairman of the Board, the President or any Vice President and by the Treasurer or any Assistant Treasurer or the Secretary or any Assistant Secretary of the Company and delivered to the Rights Agent; and such certificate will be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. (c) The Rights Agent will be liable hereunder only for its own negligence, bad faith or willful misconduct. (d) The Rights Agent will not be liable for or by reason of any of the statements of fact or recitals 37 contained in this Agreement or in the certificates for securities purchasable upon exercise of Rights or the Rights Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and will be deemed to have been made by the Company only. (e) The Rights Agent will not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due authorization, execution and delivery hereof by the Rights Agent) or in respect of the validity or execution of any certificate for securities purchasable upon exercise of Rights or Rights Certificate (except its countersignature thereof); nor will it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor will it be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 3.1(b) hereof) or any adjustment required under the provisions of Section 2.4, 3.1 or 3.2 hereof or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights after receipt of the certificate contemplated by Section 2.4 describing any such adjustment); nor will it by any act hereunder be deemed to make any representation or warranty as to the 38 authorization or reservation of any securities purchasable upon exercise of Rights or any Rights or as to whether any securities purchasable upon exercise of Rights will, when issued, be duly and validly authorized, executed, issued and delivered and fully paid and nonassessable. (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any person believed by the Rights Agent to be the Chairman of the Board, the President or any Vice President or the Secretary or any Assistant Secretary or the Treasurer or any Assistant Treasurer of the Company, and to apply to such persons for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered by it in good faith in accordance with instructions of any such person. (h) The Rights Agent and any shareholder, director, officer or employee of the Rights Agent may buy, sell or deal in Common Stock, Rights or other securities of the 39 Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent will not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof. 4.4 Change of Rights Agent. The Rights Agent may resign and be discharged from its duties under this Agreement upon 90 days' notice (or such lesser notice as is acceptable to the Company) in writing mailed to the Company and to each transfer agent of Common Stock by registered or certified mail, and to the holders of the Rights in accordance with Section 5.9. The Company may remove the Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent and to each transfer agent of the Common Stock by registered or certified mail, and to the holders of the 40 Rights in accordance with Section 5.9. If the Rights Agent should resign or be removed or otherwise become incapable of acting, the Company will appoint a successor to the Rights Agent. If the Company fails to make such appointment within a period of 30 days after such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of any Rights (which holder shall, with such notice, submit such holder's Rights Certificate for inspection by the Company), then the holder of any Rights may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a corporation organized and doing business under the laws of the United States or of the State of New York or Virginia, in good standing, having its principal office in the State of New York or Virginia, which is authorized under such laws to exercise the powers of the Rights Agent contemplated by this Agreement and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50,000,000. After appointment, the successor Rights Agent will be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the 41 successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company will file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock, and mail a notice thereof in writing to the holders of the Rights. Failure to give any notice provided for in this Section 4.4, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. ARTICLE V MISCELLANEOUS 5.1 Redemption. (a) The Board of Directors of the Company may, at its option, at any time prior to the Flip-in Date, elect to redeem all (but not less than all) the then outstanding Rights at the Redemption Price and the Company, at its option, may pay the Redemption Price either in cash or shares of Common Stock or other securities of the Company deemed by the Board of Directors, in the exercise of its sole discretion, to be at least equivalent in value to the Redemption Price. (b) Immediately upon the action of the Board of Directors of the Company electing to redeem the Rights (or, if the resolution of the Board of Directors electing to 42 redeem the Rights states that the redemption will not be effective until the occurrence of a specified future time or event, upon the occurrence of such future time or event), without any further action and without any notice, the right to exercise the Rights will terminate and each Right will thereafter represent only the right to receive the Redemption Price in cash or securities, as determined by the Board of Directors. Promptly after the Rights are redeemed, the Company shall give notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice in accordance with Section 5.9. 5.2 Expiration. The Rights and this Agreement shall expire at the Expiration Time and no Person shall have any rights pursuant to this Agreement or any Right after the Expiration Time, except, if the Rights are exchanged or redeemed, as provided in Section 3.1(c), 3.1(d), 3.1(e), 3.2 or 5.1 hereof. 5.3 Issuance of New Rights Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the number or kind or class of shares of stock purchasable upon exercise of Rights made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of shares 43 of Common Stock by the Company following the Separation Time and prior to the Redemption Time or Expiration Time pursuant to the terms of securities convertible or redeemable into shares of Common Stock or to options, in each case issued or granted prior to, and outstanding at, the Separation Time, the Company shall issue to the holders of such shares of Common Stock, Rights Certificates representing the appropriate number of Rights in connection with the issuance or sale of such shares of Common Stock; provided, however, in each case, (i) no such Rights Certificate shall be issued, if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or to the Person to whom such Rights Certificates would be issued, (ii) no such Rights Certificates shall be issued if, and to the extent that, appropriate adjustment shall have otherwise been made in lieu of the issuance thereof, and (iii) the Company shall have no obligation to distribute Rights Certificates to any Acquiring Person or Affiliate or Associate of an Acquiring Person or any transferee of any of the foregoing. 5.4 Supplements and Amendments. The Company and the Rights Agent may from time to time supplement or amend this Agreement without the approval of any holders of Rights (i) prior to the Flip-in Date, in any respect and (ii) after the close of business on the Flip-in Date, to make any 44 changes that the Company may deem necessary or desirable and which shall not materially adversely affect the interests of the holders of Rights generally or in order to cure any ambiguity or to correct or supplement any provision contained herein which may be inconsistent with any other provisions herein or otherwise defective. The Rights Agent will duly execute and deliver any supplement or amendment hereto requested by the Company which satisfies the terms of the preceding sentence. 5.5 Fractional Shares. If the Company elects not to issue certificates representing fractional shares upon exercise or redemption of Rights, the Company shall, in lieu thereof, in the sole discretion of the Board of Directors, either (a) evidence such fractional shares by depositary receipts issued pursuant to an appropriate agreement between the Company and a depositary selected by it, providing that each holder of a depositary receipt shall have all of the rights, privileges and preferences to which such holder would be entitled as a beneficial owner of such fractional share, or (b) sell such shares on behalf of the holders of Right and pay to the registered holder of such Rights the appropriate fraction of price per share received upon such sale. 5.6 Rights of Action. Subject to the terms of this Agreement (including Section 3.1(b)), rights of action in respect of this Agreement, other than rights of action vested solely in the Rights Agent, are vested in the respective 45 holders of the Rights; and any holder of any Rights, without the consent of the Rights Agent or of the holder of any other Rights, may, on such holder's own behalf and for such holder's own benefit and the benefit of other holders of Rights, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, such holder's right to exercise such holder's Rights in the manner provided in such holder's Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of, the obligations of any Person subject to this Agreement. 5.7 Holder of Rights Not Deemed a Shareholder. No holder, as such, of any Rights shall be entitled to vote, receive dividends or be deemed for any purpose the holder of shares or any other securities which may at any time be issuable on the exercise of such Rights, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or 46 withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in Section 5.8 hereof), or to receive dividends or subscription rights, or otherwise, until such Rights shall have been exercised or exchanged in accordance with the provisions hereof. 5.8 Notice of Proposed Actions. In case the Company shall propose after the Separation Time and prior to the Expiration Time (i) to effect or permit (in cases where the Company's permission is required) occurrence of any Flip-in Date or Flip-over Transaction or Event or (ii) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to each holder of a Right, in accordance with Section 5.9 hereof, a notice of such proposed action, which shall specify the Flip-in Date or the date on which such Flip-over Transaction or Event, liquidation, dissolution, or winding up is to take place, and such notice shall be so given at least 20 Business Days prior to the date of the taking of such proposed action. 5.9 Notices. Notices or demands authorized or required by this Agreement to be given or made by the Rights Agent or by the holder of any Rights to or on the Company shall be sufficiently given or made if delivered or sent by first-class mail, postage prepaid, addressed (until another 47 address is filed in writing with the Rights Agent) as follows: WLR Foods, Inc. P.O. Box 7000 Broadway, VA 22815 Attention: Delbert L. Seitz Any notice or demand authorized or required by this Agreement to be given or made by the Company or by the holder of any Rights to or on the Rights Agent shall be sufficiently given or made if delivered or sent by first- class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows: First Union National Bank of North Carolina Two First Union Center Charlotte, North Carolina 28288-1154 Attention: Ed L. Hartgrove Notices or demands authorized or required by this Agreement to be given or made by the Company or the Rights Agent to or on the holder of any Rights shall be sufficiently given or made if delivered or sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as it appears upon the registry books of the Rights Agent or, prior to the Separation Time, on the registry books of the transfer agent for the Common Stock. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. 5.10 Suspension of Exercisability. To the extent that the Company determines in good faith that some action 48 will or need be taken pursuant to Section 3.1(a), (b), (d) or (e) or to comply with federal or state securities laws, the Company may suspend the exercisability of the Rights for a period of up to ninety (90) days follow- ing the date of the occurrence of the Separation Time or the Flip-in Date in order to take such action or comply with such laws. In the event of any such suspension, the Company shall issue as promptly as practicable a public announcement stating that the exercisability or exchangeability of the Rights has been temporarily suspended. Notice thereof pursuant to Section 5.9 shall not be required. Failure to give a notice pursuant to the provisions of this Agreement shall not affect the validity of any action taken hereunder. 5.11 Costs of Enforcement. The Company agrees that if the Company or any other Person the securities of which are purchasable upon exercise of Rights fails to fulfill any of its obligations pursuant to this Agreement, then the Company or such Person will reimburse the holder of any Rights for the costs and expenses (including legal fees) incurred by such holder in actions to enforce such holder's rights pursuant to any Rights or this Agreement. 5.12 Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. 49 5.13 Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the holders of the Rights any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the holders of the Rights. 5.14 Determination and Actions by the Board of Directors, etc. The Board of Directors of the Company shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement. All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties, and (y) not subject the Board of Directors of the Company to any liability to the holders of the Rights. 50 5.15 Descriptive Headings. Descriptive headings appear herein for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. 5.16 Governing Law. THIS AGREEMENT AND EACH RIGHT ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF VIRGINIA AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE APPLICABLE TO CONTRACTS TO BE MADE AND PERFORMED ENTIRELY WITHIN SUCH STATE. 5.17 Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 5.18 Severability. If any term or provision hereof or the application thereof to any circumstance shall, in any jurisdiction and to any extent, be invalid or unenforceable, such term or provision shall be ineffective as to such jurisdiction to the extent of such invalidity or unenforceability without invalidating or rendering unenforceable the remaining terms and provisions hereof or the application of such term or provision to circumstances other than those as to which it is held invalid or unenforceable. 51 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. WLR FOODS, INC. By: /s/ James L. Keeler Name: Title: President and CEO FIRST UNION NATIONAL BANK OF NORTH CAROLINA By: /s/ Ed L. Hartgrove Name: Ed L. Hartgrove Title: Vice President 1 EXHIBIT A [Form of Rights Certificate] Certificate No. W- _______ Rights THE RIGHTS ARE SUBJECT TO REDEMPTION OR MANDATORY EXCHANGE, AT THE OPTION OF THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. RIGHTS BENEFICIALLY OWNED BY ACQUIRING PERSONS OR AFFILIATES OR ASSOCIATES THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR TRANSFEREES OF ANY OF THE FOREGOING WILL BE VOID. Rights Certificate WLR FOODS, INC. This certifies that ____________________, or registered assigns, is the registered holder of the number of Rights set forth above, each of which entitles the registered holder thereof, subject to the terms, provisions and conditions of the Shareholder Protection Rights Agreement, dated as of February 4, 1994 (as amended from time to time, the "Rights Agreement"), between WLR Foods, Inc., a Virginia corporation (the "Company"), and First Union National Bank, as Rights Agent (the "Rights Agent", which term shall include any successor Rights Agent under the Rights Agreement), to purchase from the Company at any time after the Separation Time (as such term is defined in the Rights Agreement) and prior to the close of business on February 14, 2004, one one-hundredth of a fully paid share of Participating Preferred Stock, no par value (the "Preferred Stock"), of the Company (subject to adjustment as provided in the Rights Agreement) at the Exercise Price 2 referred to below, upon presentation and surrender of this Rights Certi- ficate with the Form of Election to Exercise duly executed at the principal office of the Rights Agent in Charlotte, North Carolina. The Exercise Price shall initially be $68.00 per Right and shall be subject to adjust- ment in certain events as provided in the Rights Agreement. In certain circumstances described in the Rights Agreement, the Rights evidenced hereby may entitle the registered holder thereof to purchase securities of an entity other than the Company or securities or assets of the Company other than Preferred Stock, all as provided in the Rights Agreement. This Rights Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Rights Certificates. Copies of the Rights Agreement are on file at the principal office of the Company and are available without cost upon written request. This Rights Certificate, with or without other Rights Certificates, upon surrender at the office of the 3 Rights Agent designated for such purpose, may be exchanged for another Rights Certificate or Rights Certificates of like tenor evidencing an aggregate number of Rights equal to the aggregate number of Rights evidenced by the Rights Certificate or Rights Certificates surrendered. If this Rights Certificate shall be exercised in part, the registered holder shall be entitled to receive, upon surrender hereof, another Rights Certificate or Rights Certificates for the number of whole Rights not exercised. Subject to the provisions of the Rights Agreement, each Right evidenced by this Certificate may be (a) redeemed by the Company under certain circumstances, at its option, at a redemption price of $0.01 per Right or (b) exchanged by the Company under certain circumstances, at its option, for one share of Common Stock or one one-hundredth of a share of Preferred Stock per Right (or, in certain cases, other securities or assets of the Company), subject in each case to adjustment in certain events as provided in the Rights Agreement. No holder of this Rights Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of any securities which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a shareholder of the Company or any right to 4 vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Rights evidenced by this Rights Certificate shall have been exercised or exchanged as provided in the Rights Agreement. This Rights Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Date: _____________________ ATTEST: WLR FOODS, INC. ___________________________ By______________________ Secretary Name: Title: Countersigned: FIRST UNION NATIONAL BANK By____________________________ Authorized Signature 1 [Form of Reverse Side of Rights Certificate] FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer this Rights Certificate.) FOR VALUE RECEIVED ________________________ hereby sells, assigns and transfers unto ___________________ (Please print name _____________________________________________________ and address of transferee) this Rights Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint _______________ Attorney, to transfer the within Rights Certificate on the books of the within-named Company, with full power of substitution. Dated: _______________, 19__ Signature Guaranteed: _________________________ Signature (Signature must correspond to name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever) Signatures must be guaranteed by a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States. 2 - ------------------------------------------------------------ (To be completed if true) The undersigned hereby represents, for the benefit of all holders of Rights and shares of Common Stock, that the Rights evidenced by this Rights Certificate are not, and, to the knowledge of the undersigned, have never been, Beneficially Owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement). _________________________ Signature - ------------------------------------------------------------ NOTICE In the event the certification set forth above is not completed in connection with a purported assignment, the Company will deem the Beneficial Owner of the Rights evidenced by the enclosed Rights Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) or a transferee of any of the foregoing and accordingly will deem the Rights evidenced by such Rights Certificate to be void and not transferable or exercisable. 1 [To be attached to each Rights Certificate] FORM OF ELECTION TO EXERCISE (To be executed if holder desires to exercise the Rights Certificate.) TO: WLR FOODS, INC. The undersigned hereby irrevocably elects to exercise _______________________ whole Rights represented by the attached Rights Certificate to purchase the shares of Participating Preferred Stock issuable upon the exercise of such Rights and requests that certificates for such shares be issued in the name of: ___________________________________ Address: ___________________________________ Social Security or Other Taxpayer Identification Number: If such number of Rights shall not be all the Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance of such Rights shall be registered in the name of and delivered to: ___________________________________ Address: ___________________________________ Social Security or Other Taxpayer Identification Number: Dated: _______________, 19__ Signature Guaranteed: _________________________ Signature (Signature must correspond to name as written upon the face of the attached Rights Certificate in every particular, without alteration or enlargement or any change whatsoever) 2 Signatures must be guaranteed by a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States. - ------------------------------------------------------------ (To be completed if true) The undersigned hereby represents, for the benefit of all holders of Rights and shares of Common Stock, that the Rights evidenced by the attached Rights Certificate are not, and, to the knowledge of the undersigned, have never been, Beneficially Owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement). _________________________ Signature - ------------------------------------------------------------ NOTICE In the event the certification set forth above is not completed in connection with a purported exercise, the Company will deem the Beneficial Owner of the Rights evidenced by the attached Rights Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) or a transferee of any of the foregoing and accordingly will deem the Rights evidenced by such Rights Certificate to be void and not transferable or exercisable. 1 EXHIBIT B FORM OF CERTIFICATE OF DESIGNATION AND TERMS OF PARTICIPATING PREFERRED STOCK OF WLR FOODS, INC. Pursuant to Section 13.1-639 of the Stock Corporation Act of the State of Virginia We, the undersigned, [Authorized Officer] and [Authorized Officer], the __________________, and ______________, respectively, of WLR Foods, Inc., a Virginia corporation (the "Corporation"), do hereby certify as follows: Pursuant to authority granted by Article TWO of the Articles of Restatement of the Corporation, and in accordance with the provisions of Section 13.1-639 of the Stock Corporation Act of the State of Virginia, the Board of Directors of the Corporation has adopted the following resolutions fixing the designation and certain terms, powers, preferences and other rights of a new series of the Corporation's Preferred Stock, no par value, and certain qualifications, limitations and restrictions thereon: RESOLVED, that there is hereby established a series of Pre- ferred Stock, no par value, of the Corporation, and the designation and certain terms, powers, preferences and other rights of the shares of such series, and certain qualifications, limitations and restrictions thereon, are hereby fixed as follows: (i) The distinctive serial designation of this series shall be "Participating Preferred Stock" (hereinafter called "this Series"). Each share of this Series shall be identical in all respects with the other shares of this Series except as to the dates from and after which dividends thereon shall be cumulative. 2 (ii) The number of shares in this Series shall initially be 110,000, which number may from time to time be increased or decreased (but not below the number then outstanding) by the Board of Directors. Shares of this Series purchased by the Corporation shall be cancelled and shall revert to authorized but unissued shares of Preferred Stock undesignated as to series. Shares of this Series may be issued in fractional shares, which fractional shares shall entitle the holder, in proportion to such holder's fractional share, to all rights of a holder of a whole share of this Series. (iii) The holders of full or fractional shares of this Series shall be entitled to receive, when and as declared by the Board of Directors, but only out of funds legally available therefor, dividends, (A) on each date that dividends or other distributions (other than dividends or distributions payable in Common Stock of the Corporation) are payable on or in respect of Common Stock comprising part of the Reference Package (as defined below), in an amount per whole share of this Series equal to the aggregate amount of dividends or other distributions (other than dividends or distributions payable in Common Stock of the Corporation) that would be payable on such date to a holder of the Reference Package and (B) on the last day of March, June, September and December in each year, in an amount per whole share of this Series equal to the excess (if any) of $17.00 over the aggregate dividends paid per whole share of this Series during the three month period ending on such last day. Each such dividend shall be paid to the holders of record of shares of this Series on the date, not exceeding seventy days preceding such dividend or distribution payment date, fixed for the purpose by the Board of Directors in advance of payment of each particular dividend or distribution. Dividends on each full and each fractional share of this Series shall be cumulative from the date such full or fractional share is originally issued; provided that any such full or fractional share originally issued after a dividend record date and on or prior to the dividend payment date to which such record date relates shall not be entitled to receive the dividend payable on such dividend payment date or any amount in respect of the 3 period from such original issuance to such dividend payment date. The term "Reference Package" shall initially mean 100 shares of Common Stock, no par value ("Common Stock"), of the Corporation. In the event the Corporation shall at any time after the close of business on ________, 19__1 (A) declare or pay a dividend on any Common Stock payable in Common Stock, (B) subdivide any Common Stock or (C) combine any Common Stock into a smaller number of shares, then and in each such case the Reference Package after such event shall be the Common Stock that a holder of the Reference Package immediately prior to such event would hold thereafter as a result thereof. Holders of shares of this Series shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided on this Series. So long as any shares of this Series are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to this Series as to dividends and upon liquidation) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to this Series as to dividends or upon liquidation, nor shall any Common Stock nor any other stock of the Corporation ranking junior to or on a parity with this Series as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to this Series as to dividends and upon liquidation), unless, in each case, the full cumulative dividends (including the dividend to be 1 For a certificate of designation relating to shares to be issued pursuant to Section 2.3 of the Rights Agree- ment, insert the Separation Time. For a certificate of designation relating to shares to be issued pursuant to Section 3.1(d) of the Rights Agreement, insert the Flip-in Date. 4 due upon payment of such dividend, distribution, redemption, purchase or other acquisition) on all outstanding shares of this Series shall have been, or shall contemporaneously be, paid. (iv) In the event of any merger, consolidation, reclassification or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of this Series shall at the same time be similarly exchanged or changed in an amount per whole share equal to the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, that a holder of the Reference Package would be entitled to receive as a result of such transaction. (v) In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, the holders of full and fractional shares of this Series shall be entitled, before any distribution or payment is made on any date to the holders of the Common Stock or any other stock of the Corporation ranking junior to this Series upon liquidation, to be paid in full an amount per whole share of this Series equal to the greater of (A) $__________2 or (B) the aggregate amount distributed or to be distributed prior to such date in connection with such liquidation, disso- lution or winding up to a holder of the Reference Package (such greater amount being hereinafter referred to as the "Liquidation Preference"), together with accrued dividends to such distribution or payment date, whether or not earned or declared. If such payment shall have been made in full to all holders of shares of this Series, the holders of shares of this Series as such shall have no right or claim to any of the remaining assets of the Corporation. In the event the assets of the Corporation available for distribution to the holders of shares of this Series upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, shall be 2 Insert an amount equal to 100 times the Exercise Price in effect as of the Separation Time. 5 insufficient to pay in full all amounts to which such holders are entitled pursuant to the first paragraph of this Section (v), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the shares of this Series upon such liquidation, dissolution or winding up unless proportionate distributive amounts shall be paid on account of the shares of this Series, ratably in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such liquidation, dissolution or winding up. Upon the liquidation, dissolution or winding up of the Corporation, the holders of shares of this Series then outstanding shall be entitled to be paid out of assets of the Corporation available for distribution to its shareholders all amounts to which such holders are entitled pursuant to the first paragraph of this Section (v) before any payment shall be made to the holders of Common Stock or any other stock of the Corporation ranking junior upon liquidation to this Series. For the purposes of this Section (v), the consolidation or merger of, or binding share exchange by, the Corporation with any other corporation shall not be deemed to constitute a liquidation, dissolution or winding up of the Corporation. (vi) The shares of this Series shall not be redeemable. (vii) In addition to any other vote or consent of shareholders required by law or by the Articles of Restatement, as amended, of the Corporation, each whole share of this Series shall, on any matter, vote as a class with any other capital stock comprising part of the Reference Package and voting on such matter and shall have the number of votes thereon that a holder of the Reference Package would have. 6 IN WITNESS WHEREOF, the undersigned have signed and attested this certificate on the ____ day of _________, 1994. _________________________________ Attest: _________________________ EX-99.5 16 WLR FOODS 14D9 EX-99.5 WHICH IS EXHIBIT 15 1 EXHIBIT 15 UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF VIRGINIA HARRISONBURG DIVISION WLR FOODS, INC., Plaintiff, v. CIVIL ACTION NO. 94-0012(H) TYSON FOODS, INC., Defendant. AMENDED COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF Plaintiff WLR Foods, Inc. ("WLR"), by its undersigned attorneys, for its complaint, upon knowledge with respect to itself and its own acts and upon information and belief as to all other matters, alleges: I. NATURE OF ACTION 1. This action seeks a declaration that WLR's Shareholder Protection Rights Agreement (the "Rights Plan"), adopted on February 4, 1994, is valid and was duly adopted in full conformance with applicable law and that any rights to be issued pursuant to the Rights Plan (the "Right(s)") are valid, binding and legally enforceable under state and federal law. 2. This action also seeks a declaration that Article 14, Va. Code Secs. 13.1-725, et seq., and Article 14.1, Va. Code Secs. 13.1- 728.1, et seq., of Virginia's Stock Corporation Act (collectively the "Articles") are 2 constitutional under the Virginia and the United States Constitutions and valid under any other applicable law. The Articles were adopted by the Commonwealth of Virginia as a means of protecting Virginia corporations and their shareholders. II. JURISDICTION 3. This Court has jurisdiction over this matter pursuant to 28 U.S.C. Sec. 1331, 28 U.S.C. Sec. 1332 (a) (1) and 28 U.S.C. Sec. 2201. III. PARTIES 4. WLR is a Virginia corporation with its principal executive offices in Rockingham County, Virginia. Shares of WLR's common stock are publicly traded on the NASDAQ National Market System. 5. Defendant Tyson Foods, Inc. ("Tyson") is a Delaware corporation with its principal executive offices in Springdale, Arkansas. IV. CLAIMS 6. By letter dated January 24, 1994, Tyson proposed to WLR's board of directors a merger of WLR and Tyson (or a subsidiary of Tyson) pursuant to which the shareholders of WLR would receive $30.00 in cash for each of their WLR shares (a copy of the letter is attached hereto as Exhibit A and is incorporated by reference). In that letter, Tyson 3 stated, among other things, that the proposal was contingent upon WLR's board of directors not using what Tyson termed any "Poison Pills" or other "Anti-Takeover" measures to a "obstruct a merger." This language indicates that Tyson believes a basis may exist for challenging the validity of measures such as the Rights Plan. 7. Tyson's January 24, 1994 letter also made its acquisition proposal contingent upon the WLR board of directors taking necessary action to prevent the Virginia Stock Corporation Act from being an "impediment" to the proposed merger. This condition to Tyson's proposed acquisition indicates that Tyson believes a basis may exist for challenging the validity of provisions of Virginia's Stock Corporation Act ("Stock Corporation Act"), including the Articles. 8. By letter dated February 6, 1994, WLR rejected Tyson's January 24, 1994 acquisition proposal (a copy of the letter is attached hereto as Exhibit B and is incorporated by reference). A. Articles 14 and 14.1 Of Virginia's Stock Corporation Act Are Constitutional 9. Article 14 of the Stock Corporation Act ("Article 14") prohibits a corporation from engaging in certain transactions including mergers, with an "interested shareholder" for three years from the date that the person is determined by the corporation's board of directors to be an 4 "interested shareholder." An "interested shareholder" is defined by Article 14 to be, among other things, the beneficial owner of more than ten percent of any class of outstanding voting shares of the corporation. 10. Article 14 provides for certain exceptions from the requirements of the Article, including an exception for transactions approved by a majority of the disinterested directors of the corporation and two-thirds of the voting shares (other than those shares beneficially owned by the interested shareholder). 11. Article 14.1 of the Stock Corporation Act ("Article 14.1") limits the voting rights of the shares of a corporation acquired, in a "control share acquisition." A "control share acquisition" is defined by Article 14.1 to be the direct or indirect acquisition of sufficient shares to give the owner various specified levels of voting power in connection with the election of directors of the corporation. 12. Article 14.1 provides for certain exceptions from its requirements. For instance, the corporation's board of directors may take certain actions, under specified procedures and conditions, that will remove the acquisition from the limitations imposed by Article 14.1. In addition, any acquiring person may request that the corporation call a special meeting of the shareholders for the purpose of considering the voting rights to be granted shares acquired or to be acquired in the control share acquisition. 5 13. Articles 14 and 14.1 were adopted by the Commonwealth of Virginia as a means of protecting Virginia corporations and their shareholders and do not conflict with either the Virginia or the United States Constitutions or any other applicable law. 14. In its January 24, 1994 letter, Tyson states that its proposal is contingent on WLR's board of directors taking action "necessary to prevent the Virginia Corporation Act from being an impediment to the proposed merger" and the board of directors not using the Act to "disadvantage Tyson in the purchase of" WLR's stock. Thus, rather than viewing and respecting the Articles as a measure by the Commonwealth of Virginia to protect Virginia corporations and their shareholders, Tyson apparently believes them to be an "impediment" and "disadvantage" to its acquisition efforts. B. WLR's Shareholder Rights Plan Is Valid 15. At a meeting held on February 14, 1994, WLR's board of directors adopted the Rights Plan. In adopting the plan, the board of directors and each of its members acted in good faith, in conformity with fiduciary and other duties, and conducted a reasonable investigation which included receiving the advice of the company's management and legal and financial advisors. 16. Pursuant to the Rights Plan, among other provisions, the board of directors declared a dividend 6 distribution of one Right for each outstanding share of the Company's common stock (the "Common Stock"). The occurrence of certain events, including commencement of a tender offer for acquisition of at least 15% of WLR's common stock, entitles the holder of each Right to purchase one- hundredth of a share of WLR Participation Preferred Stock at a price set by the board of directors in consultation with the Company's financial advisers (the "Exercise Price"). The Participating Preferred Stock would be designed so that each one-hundredth of a share has economic and voting terms similar to those of one share of Common Stock. 17. If any person acquires 15% or more of the outstanding Common Stock (the "Flip-in trigger"), then: (i) Rights owned by the person acquiring such stock or transferees thereof will automatically be void; and (ii) each other Right will automatically become a right to buy, for the Exercise Price, that number of shares of Common Stock or Participating Preferred Stock having a market value of twice the Exercise Price. The Rights may be redeemed by the boards of directors, at any time until a Flip-in trigger has occurred, at a Redemption Price of $0.01 per Right. 18. WLR believes and alleges that the Rights Plan is valid and lawful and was duly adopted in full conformance with applicable law, and that its adoption was a legitimate exercise of business judgment by WLR's board of directors, and 7 not otherwise contrary to Virginia state law and federal laws. The Right Plan is binding in all respects, valid and enforceable. 19. Based on the language of Tyson's January 24, 1994 letter, WLR believes and alleges that the defendant or persons or entities acting in concert with them or on their behalf will contest (a) the constitutionality or validity otherwise of Articles 14 and 14.1 and (b) the validity of the Rights Plan and the Rights. Thus, an actual controversy exists between the parties to this action which is within the power of this Court to determine pursuant to 28 U.S.C. Secs. 2201-2202. This Court's determination of the issues presented herein will afford relief from uncertainty and insecurity with respect to rights, status, and legal relations between the parties. 20. Without a declaratory judgment, WLR and its shareholders will be deprived of the assurance that (a) Articles 14 and 14.1 are applicable to Tyson's efforts to acquire the corporation and (b) the Rights Plan was validly adopted and the Rights thereunder exercisable. 21. WLR has no adequate remedy at law as to matters which require injunctive relief. WHEREFORE, plaintiff hereby requests that the Court enter a judgment: a. Declaring that Articles 14 and 14.1 of the Virginia Stock Corporation Act, are valid, lawful and binding 8 under both the Virginia and the United States Constitutions and any other applicable laws. b. Declaring that: (i) the Rights Plan and the Rights are valid, lawful and binding; (ii) the Rights Plan was adopted in full compliance with the laws of the Commonwealth of Virginia and any other applicable law; and (iii) the Rights distributed pursuant thereto will be valid and enforceable. c. Temporarily, preliminarily and permanently enjoining defendant, its affiliates, subsidiaries, officers, directors, and all others acting in concert with them or on their behalf, from bringing any action in any other court (a) challenging the constitutionality and validity of Articles 14 and 14.1 of the Virginia Stock Corporation Act; (b) attacking any aspect of the Rights Plan, including the Plan's adoption under Virginia or in regard to any other applicable law; and/or (c) otherwise relating to or involving Tyson's proposal to acquire WLR and the response to that proposal by WLR and/or its directors, officers or agents, under state law and/or federal law. d. Awarding to WLR and against defendant, costs and disbursements of this action, including reasonable attorneys fees, if permitted by law; and 9 e. Granting such further relief to WLR as may be just and proper under the circumstances. /s/ Douglas L. Guynn Douglas L. Guynn VSB No. 19748 Wharton, Aldhizer & Weaver A Professional Limited Liability Company 100 South Mason Street Harrisonburg, Virginia 22801 (703) 434-0316 Attorneys for Plaintiff OF COUNSEL: William R. Norfolk Sullivan & Cromwell 125 Broad Street New York, New York 10004 (212) 558-4000 Dated: February 9, 1994 EX-99.6 17 WLR FOODS 14D9 EX-99.6 WHICH IS EXHIBIT 16 1 EXHIBIT 16 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF VIRGINIA Harrisonburg Division ____________________________________ WLR FOODS, INC. ) ) Plaintiff, ) ) v. ) ) TYSON FOODS, INC., ) ) Defendant, ) ) and ) ) TYSON FOODS, INC., ) ) Civil Action No. 94-0012(H) Counterclaimant, ) ) v. ) ) WLR FOODS, INC., ) ) Counterclaim- ) Defendant, ) ) and ) GEORGE E. BRYAN, ) CHARLES L. CAMPBELL, ) STEPHEN W. CUSTER, ) CALVIN G. GERMROTH, ) WILLIAM H. GROSECLOSE, ) J. CRAIG HOTT, ) JAMES L. KEELER, ) HERMAN D. MASON, ) CHARLES W. WAMPLER, JR., ) WILLIAM D. WAMPLER, ) ) Additional Counter- ) Claim Defendants. ) ____________________________________) ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS OF TYSON FOODS, INC. 2 ANSWER Defendant Tyson Foods, Inc. ("Tyson"), by counsel, answers WLR Foods, Inc.'s ("WLR") Amended Complaint as follows: 1. Admits that the Amended Complaint purports to seek declaratory judgment regarding the "Rights Plan" as that term is defined in the Amended Complaint. The remaining allegations are legal conclusions which do not require a response. To the extent a response is required, Tyson denies them. 2. Admits that the Amended Complaint purports to seek a declaration that Article 14, Va. Code Secs. 13.1-725 et seq. and Article 14.1, Va. Code Secs. 13.1-728.1 et seq. of Virginia's Stock Corporation Act are constitutional under the Virginia and United States Constitutions. The remaining allegations are legal conclusions which do not require a response. To the extent a response is required, Tyson denies them. 3. Denies, except to the extent the allegations constitute legal conclusions which require no response. 4. Admits. 5. Admits. 6. Admits that Tyson believes a basis may exist for challenging the validity of measures such as the Rights Plan. Tyson denies the remaining allegations, except to the 3 extent that the letter dated January 24, 1994 is quoted accurately. 7. Admits that Tyson believes basis may exist for challenging the validity of provisions of Virginia's Stock Corporation Act. Tyson denies the remaining allegations, except to the extent the letter dated January 24, 1994 is quoted accurately. 8. Admits. 9. Denies, except to the extent that the allegations constitute legal conclusions to which no response is required. 10. Denies, except to the extent that the allegations constitute legal conclusions to which no response is required. 11. Denies, except to the extent that the allegations constitute legal conclusions to which no response is required. 12. Denies, except to the extent that the allegations constitute legal conclusions to which no response is required. 13. Denies, except to the extent that the allegations constitute legal conclusions to which no response is required. 14. Denies, except to the extent that the letter dated January 24, 1994 is quoted accurately. 4 15. Admits that Tyson is aware that the Board of Directors of WLR adopted a "Shareholders Rights Plan." Tyson is without sufficient information to admit or deny the remaining allegations and therefore denies them. 16. Admits that Tyson is aware that the WLR Board of Directors adopted a "Shareholders Rights Plan." Tyson refers to the full text of the "Shareholders Rights Plan" for its content. 17. Admits that Tyson is aware that the WLR Board of Directors adopted a "Shareholders Rights Plan." Tyson refers to the full text of the "Shareholder Rights Plan" for its content. 18. Denies, except to the extent that the allegations constitute legal conclusions to which no response is required. 19. Tyson is without knowledge or information sufficient to form a belief as to the truth of the allegations relating to WLR's belief. Tyson denies the remaining allegations except to the extent that the allegations constitute legal conclusions to which no response is required. 20. Denies, except to the extent that the allegations constitute legal conclusions to which no response is required. 5 21. Denies, except to the extent that the allegations constitute legal conclusions to which no response is required. 22. The remaining allegations are a demand for relief to which no response is required. To the extent a response is required; Tyson denies them. 23. Tyson denies every allegation not specifically admitted. AFFIRMATIVE DEFENSES 1. The Amended Complaint fails to state a claim upon which relief may be granted. 2. WLR is guilty of unclean hands. 3. The claims pleaded are barred by the doctrine of estoppel. 4. The claims pleaded are barred by the doctrine of illegality. 5. The claims pleaded are barred by WLR's fraud, which is set forth in the Counterclaims. COUNTERCLAIMS Counterclaim plaintiff Tyson, by counsel, states as its counterclaims: 6 The Parties 1. Tyson is a Delaware corporation with its principal place of business in Arkansas. Tyson has operations throughout the United States, including facilities in the Commonwealth of Virginia. At all relevant times, Tyson owned shares of WLR. Tyson purchased additional shares at times during the relevant period. 2. WLR is a Virginia corporation with its principal place of business in Rockingham County, Virginia. Shares of WLR's common stock are publicly traded on the NASDAQ National Market System. 3. George E. Bryan, Charles L. Campbell, Stephen W. Custer, Calvin G. Germroth, William H. Groseclose, J. Craig Hott, James L. Keeler, Herman D. Mason, Charles W. Wampler, Jr., and William D. Wampler "("Directors") are members of the WLR Board of Directors. Jurisdiction and Venue 4. This Court has subject matter jurisdiction over these counterclaims pursuant to: (a) 28 U.S.C. Sec. 1331 because the matter in controversy arises under the United States Constitution and the laws of the United States; (b) 28 U.S.C. Sec. 1332 because there is complete diversity of citizenship between the counterclaim plaintiff and the counterclaim defendants and the amount in 7 controversy, exclusive of interest and costs, exceeds $50,000; (c) 28 U.S.C. Sec. 1337(a) because the action arises under an act of Congress regulating commerce; (e) 28 U.S.C. Sec. 1367 under the principles of supplemental Jurisdiction. Factual Background 5. On January 24, 1994, Tyson sent a letter to the Board of Directors of WLR proposing a merger of WLR with Tyson (or a subsidiary of Tyson). Tyson's merger offer proposed to pay WLR shareholders $30.00 per share in cash for each of their shares. This offer represented a premium to WLR shareholders of approximately $110 million or 56% over the pre-offer market share price for WLR stock. Tyson requested a response to its January 24th letter by close of business on February 4, 1994. No response from WLR was received by that time. 6. On January 25, 1994, James L. Keeler sent a letter on behalf of the Directors to WLR shareholders in which WLR promised to "keep you posted on important corporate developments." 7. On February 4, 1994, the WLR Board held a meeting in which they rejected Tyson's proposal. At that February 4 meeting, WLR's board took a series of actions designed to erect numerous barriers that would insulate WLR from any 8 acquisition not approved by the WLR board. Through its actions, WLR's board attempted to impose its will on WLR's shareholders, by eliminating any opportunity for those shareholders to exercise their shareholder rights thereby attempting to deprive them of the benefits of an acquisition proposal from Tyson or any other third party not endorsed by the Board of Directors. 8. Specifically, at the February 4, 1994 Board meeting, the Directors: (a) adopted a Shareholder Rights Agreement ("Poison Pill"); (b) adopted certain executive severance arrangements ("Golden Parachutes"); (c) adopted certain severance packages for salaried and hourly employees ("Other Parachutes"); (d) amended the corporate bylaws of WLR relating to the roles that the Chairman and Vice Chairman of WLR play as officers to enhance management's voting power to block Tyson's merger proposal; (e) took actions which denied WLR's disinterested shareholders the opportunities to consider Tyson's proposal; and (f) purported to terminate the employment of a number of WLR officers, while at the same time promising to expend substantial sums for the benefit of those officers in 9 the future, again to enhance management's voting power to block Tyson's merger proposal. These actions are described in WLR's Form 10-Q for the quarterly period ending January 1, 1994, which was filed with the Securities and Exchange Commission on February 15, 1994 ("Form 10-Q"). 9. Pursuant to the Poison Pill, the Board of Directors of WLR declared, among other provisions, that a dividend of one "Right" per outstanding share of WLR stock be issued to WLR stockholders. 10. The Poison Pill provides that it is triggered, or "flips-in," when any person acquires voting control of 15% or more of the outstanding Common Stock of WLR. Once triggered, the Poison Pill provides that the Rights owned by the acquiring person are automatically void, and all other Rights holders automatically may purchase for shares of Common Stock in WLR at half the market price. The Board of Directors of WLR may redeem the Rights at anytime before the flip-in trigger occurs for $0.01 per Right. 11. The Poison Pill adopted by the Board of Directors of WLR makes any acquisition of more than 15% of the shares of WLR prohibitively expensive to any prospective acquirors. In addition to imposing a severe financial penalty on a potential acquiror, the "flip-in" of the Poison Pill would cut that potential acquiror's voting rights almost in half. As a result, the adoption of the Poison Pill has the effect 10 of deterring any takeover offers for WLR except those that are approved by the Board of Directors of WLR. Through their adoption of the Poison Pill, the Board of Directors of WLR have entrenched themselves and the present officers of WLR in their positions, and at the same time have deprived WLR's shareholders of the opportunity to consider lucrative offers for their shares. 12. The Golden Parachutes fall into at least three categories. In the first category is James L. Keeler, President and Chief Executive Officer of WLR. If Keeler decides to leave WLR during a specified period after a "Change of Control" (as that term is defined in the Golden Parachutes) in WLR, Keeler will receive three times his total compensation, including base salary, bonuses, and deferred compensation. In addition, Keeler would receive a cash payment equivalent to the value of his stock options which are not vested at the time of the Change of Control, and his fringe benefits such as health insurance will be extended for three years. The Board provided that Keeler's compensation will be "grossed up" if necessary to ensure this level of compensation is received by Keeler as a net amount and any taxes ordinarily paid by Keeler will be borne by WLR. Under Federal tax law, however, a substantial portion of those payments may not be deducted by WLR for federal income tax purposes. 11 13. In the second category of Golden Parachutes are Delbert L. Seitz, Chief Financial Officer, Secretary, and Treasurer of WLR, and James L. Mason, President of Wampler-Longacre, Inc., a subsidiary of WLR. The terms of Messrs. Seitz' and Mason's Golden Parachutes are identical to those of Mr. Keeler's Golden Parachute, including the "gross up" provision, except that they do not include deferred compensation. 14. The third category of Golden Parachutes provide certain executives with a payment equal to 150% of their annual compensation (base salary plus bonuses) if the individual is terminated after a "Change in Control." The individuals in the third category will also receive a cash payment equivalent to the value of their stock options which are not vested at the time of the Change of Control and their fringe benefits, such as health insurance, will be extended for one and one-half years. Again, where applicable, these benefits will be "grossed up" at WLR's expense. 15. The terms of the Other Parachutes are not disclosed in the 10Q, thereby depriving Tyson and the other shareholders from learning the true cost to WLR of these precipitous acts by the Directors. Also, because of the gross-up provisions of the Golden Parachutes, the shareholders are further deprived of learning information 12 about the true cost to WLR caused by the Directors' self-serving actions. 16. The Golden Parachutes adopted by the Board of Directors of WLR provide for extremely lucrative financial benefits to WLR's present management, a number of whom presently are members of WLR's Board of Directors. At the same time, the Golden Parachutes and Other Parachutes adopted by the Board of Directors make any acquisition of WLR considerably more expensive, and thereby reduce the likelihood of any such acquisition, or at the least reduce the price that WLR's shareholders might receive as a result of any such acquisition. WLR has never disclosed the true financial cost of the Golden Parachutes and Other Parachutes that it has conferred on its officers and employees. These costs, which cannot be calculated based on available information run into an indeterminable number of millions of dollars. 17. In addition, the WLR Board adopted a bylaw that provides that the record date for any special meeting held pursuant to the Virginia Control Share Acquisitions statute will be the day on which an Acquiring Person (as defined by the statute) requests such a meeting. Other provisions of the Virginia Control Share Acquisitions statute regarding the timing of such a meeting, and the solicitations that may precede such a meeting, make it extremely difficult for any third party to prevail against management at such a meeting. 13 The bylaw adopted by the Board compounds any such third party's problems because it maintains voting rights for numerous shareholders who will have sold their shares to purchasers who will not have had advance knowledge of a record date. Accordingly, the purchasing shareholders will be disenfranchised at a special meeting held pursuant to the Control Share Acquisitions statute. On the other hand, the selling shareholders who will maintain their voting rights will have little incentive to vote at all. Such non-voters would be counted against the third party, and in favor of management. The bylaw, in combination with other provisions of the Virginia Control Share Acquisitions statute, make it extremely unlikely that a third party could effectively make its case to WLR's shareholders in connection with a meeting, and thereby eliminates the possibility that WLR's shareholders will have the opportunity to participate in a fair referendum with respect to a third party's participation in WLR'S future. Moreover, in light of the bylaw adopted by WLR, the operation of the Virginia Control Share Acquisitions statute would conflict with the operation of federal law regarding the solicitation of proxies. 18. Also on February 4, 1994, the Directors amended the corporate Bylaws purporting to "clarify" that the roles of the Chairman of the Board and the Vice Chairman of the Board are officers of the Board, not of WLR. Notwithstanding this supposed "clarification", in truth and 14 in fact, both the Chairman and the Vice Chairman of the Board have always acted as officers of WLR, as well as to WLR's Board. Simultaneously, two members of the Board, William D. Wampler and George E. Bryan resigned as Senior Vice Presidents; and Charles W. Wampler, Jr., Herman D. Mason, William D. Wampler, and George E. Bryan, the four of whom who control well in excess of 10% of the shares of WLR, resigned as employees of WLR but remained as directors. 19. The sole motive for the actions described in paragraph 18 was to circumvent the fundamental purpose of the Control Share Acquisitions statute which is to leave solely to the disinterested shareholders the decision whether "interested" shareholders will have a right to vote on a transaction. These cynical acts by the Directors are intended directly to dilute the voting power of the disinterested shareholders, allowing these four directors the opportunity to vote their shares, totalling well in excess of 10% of the outstanding voting shares of WLR, while at the same time barring Tyson from exercising its voting rights, all in direct violation of the plain intent of the statute. The effect of the Board's actions is compounded by the fact that under the Control Share Acquisitions statute, Tyson will be unable to vote its shares, thereby enhancing the voting rights of the remaining shareholders. Thus, unless the Board's actions are rescinded, its own officers who have a plain interest in the outcome of a special 15 meeting called pursuant to the Control Share Acquisitions Act, will have enhanced voting power because of the statute's provision that Tyson will not be able to vote its own shares at such a meeting. 20. On February 6, 1994, defendant Charles W. Wampler, Jr., Chairman of WLR, sent a letter to the Chairman of the Board of Directors of Tyson reporting that the WLR Board unanimously rejected Tyson's offer of merger. 21. By letter dated February 6, 1994, WLR announced to the public that on February 4, 1994 the Directors rejected Tyson's January 24, 1994 merger proposal. 22. Also on February 6, 1994, the Directors sent a letter to WLR's shareholders describing the Poison Pill. 23. None of the February 6, 1994 letters nor any other voluntary communication revealed the actions taken by the Board of Directors of WLR that are described in paragraphs 8 (b)-(e), 12-14 or 17-18. 24. These actions were only made public through the compulsory filing of the Form 10-Q, eleven days after the fact. Count I 25. Tyson realleges paragraphs 1-24. 26. In its Amended Complaint, WLR seeks a declaration that the Virginia Affiliated Transactions Statute is constitutional. 16 27. On its face and as applied, the Virginia Affiliated Transactions Statute essentially gives a Virginia corporation's pre-existing board of directors de facto veto power over mergers and therefore thwarts shareholder democracy and burdens interstate commerce. 28. By denying a meaningful opportunity for success by any possibly interested merger partner other than one receiving the pre-existing board's approval, the Virginia Affiliated Transactions statute on its face and as applied: (a) is preempted by the Williams Act and therefore violates the Supremacy Clause of the United States Constitution; (b) violates the Commerce Clause of the United States Constitution. 29. The unconstitutionality of the Virginia Affiliated Transactions Statute has injured and continues to injure Tyson because it: (a) diminishes the value of Tyson's shares in WLR; and (b) may affect Tyson's ability to merge with WLR. Count II 30. Tyson incorporates paragraphs 1-24. 31. The Virginia Control Share Acquisitions statute defines "interested shares" in pertinent part as the shares of a corporation subject to the statute, the voting of which 17 may be exercised or directed by (a) an acquiror with respect to a control share acquisition; (b) any officer of a corporation subject to the statute; and (c) any employee of a corporation subject to the statute who is also a director of the corporation. Va. Code Sec. 13.1-728.1. 32. Among other things, the Virginia Control Share Acquisitions statute provides that shares acquired in a control share acquisition, as that term is defined by the statute, shall have no voting rights unless voting rights are granted by resolution adopted by a majority of all the votes which could be cast in an election of directors by all outstanding shares, other than "interested shares," which are not entitled to vote on the matter. Va. Code Sec. 13.1-728.3(A)-(B). 33. The actions taken by the WLR Board of Directors on February 4, 1994, including (a) the amendments made to the WLR corporate bylaws relating to the roles that the Chairman and Vice Chairman play as officers of the corporation; (b) the resignations of Additional Counterclaim Defendants William D. Wampler and George E. Bryan as Senior Vice-Presidents; and (c) the termination of compensation from WLR to Additional Counterclaim Defendants Charles W. Wampler, Jr., Herman D. Mason, William D. Wampler, and George E. Bryan, were intended to circumvent the clear purpose of the statute by allowing "interested shares" owned 18 by "management" to vote in a manner prohibited by Va. Code Sec. 13.1-728.3(B). 34. Notwithstanding the actions taken by the WLR Board described in paragraph 18, the shares owned or controlled by Additional Counterclaim Defendants W. Wampler, C. Wampler, Bryan and Mason are "interested shares" under the Virginia Control Share Acquisitions statute. 35. An actual controversy exists concerning whether the shares owned or controlled by Additional Counterclaim Defendants W. Wampler, C. Wampler, Bryan and Mason are "interested shares" prohibited from voting on a resolution to extend voting rights to shares acquired in a control share acquisition as provided by Va. Code Sec. 13.1-728.3(A). 36. Similarly, if the Court determines that the bylaw described above in paragraph 18 is not rescinded, then such statute as applied: (a) is preempted by federal proxy law developed under Section 14 of the Securities Exchange Act of 1934 and thereby violates the Supremacy Clause of the United States Constitution; and, (b) violates the Commerce Clause of the United States Constitution. 37. In the event the Directors' actions described in paragraph 15 are not rescinded, Tyson is entitled to a declaratory judgment, pursuant to 28 U.S.C. Sec. 2201, that all WLR shares owned directly, indirectly or beneficially, by 19 Additional Counterclaim Defendants W. Wampler, C. Wampler, Bryan and Mason, are "interested shares" under the Virginia Control Share Acquisitions statute and accordingly may not be voted in the referendum provided by the statute. 38. Alternatively, if the Court determines that the shares owned directly, indirectly or beneficially, by Additional Counterclaim Defendants W. Wampler, C. Wampler, Bryan and Mason, are not "interested shares" under the Virginia Control Share Acquisitions statute, then such statute as applied: (a) is preempted by the Williams Act and therefore violates the Supremacy Clause of the United States Constitution; (b) violates the Commerce Clause of the United States Constitution. 39. The unconstitutionality of the Virginia Control Share Acquisitions statute as applied has injured and continues to injure Tyson because it: (a) diminishes the value of Tyson's shares in WLR; and (b) may affect Tyson's ability to merge with WLR. Count III 40. Tyson realleges paragraphs 1-24. 41. The operation of the Virginia Affiliated Transactions Statute, the Virginia Control Share 20 Acquisitions statute, and Va. Code Sec. 13.1-646, taken together, on their face and as applied, gives a Virginia corporation's pre-existing board of directors a de facto veto power over mergers, and therefore thwarts shareholder democracy and burden interstate commerce by, among other things: (a) allowing intransigent management to manipulate the record date for determining stock ownership to deprive shareholders of the ability to vote their shares in a fully informed and meaningful way; (b) discouraging shareholders from voting their stock by permitting a discriminatory poison pill to be adopted in the face of a noncoercive proposal, particularly when combined with the manipulation of these statutes by the Board as in this case; (c) frustrating the full purposes and objectives of Congress in enacting the Williams Act by giving intransigent management the ability to impede a noncoercive proposal without consulting shareholders; and (d) impermissibly tilting the balance between management and an acquiror in the context of a noncoercive proposal. 42. By denying a meaningful opportunity for success by any possibly interested merger partner in the face of intransigent management, the operation of the Virginia Affiliated Transaction statute, the Virginia Control Share 21 Acquisitions statute, and Va. Code Sec. 13.1-646, taken together, on their face and as applied, (a) are preempted by the Williams Act and therefore violate the Supremacy Clause of the United States Constitution; (b) violate the Commerce Clause of the United States Constitution. 43. The unconstitutionality of these Virginia statutes have injured and continue to injure Tyson because they: (a) diminish the value of Tyson's shares in WLR; and (b) may affect Tyson's ability to merge with WLR. Count IV 44. Tyson realleges paragraphs 1-24. 45. The Directors have fiduciary duties and a duty of loyalty to WLR's shareholders and others. 46. The actions described in paragraphs 7-18 violate these fiduciary duties; are contrary to the interests of WLR's shareholders; and are intended to entrench WLR's present management in its positions at WLR by making an acquisition by Tyson or any other third party practically impossible, all for the purpose of protecting existing management and depriving shareholders the opportunity to consider a non-coercive proposal. 22 Specifically, the actions taken by the Board of Directors of WLR: (a) allow intransigent management to manipulate the Record Date of stock ownership to deprive shareholders of the ability to vote their stock; (b) discourage shareholders from voting their shares by permitting a discriminatory poison pill to be adopted in the face of a noncoercive proposal; (c) frustrate the full purposes and objectives of Congress in enacting the Williams Act by giving intransigent management the ability to defeat a noncoercive proposal without consulting shareholders; (d) impermissibly tilt the balance between management and a potential acquiror in the context of a noncoercive proposal; (e) burden WLR with increased and undisclosed costs through operation of the Golden and Other Parachutes; (f) manipulate WLR's Bylaws and the status of WLR's officers solely for the purpose of entrenching existing management; (g) fail to disclose Board action to the shareholders in a timely and meaningful way; and (h) establish a series of corporate artifices in an attempt to deprive the shareholders of the opportunity to consider the Tyson proposal in a fully-informed manner. 23 47. These violations have injured and continue to injure Tyson because they: (a) diminish the value of Tyson's shares in WLR; and (b) may affect Tyson's ability to merge with WLR. Irreparable Injury 48. Unless preliminary and permanent injunctive relief is granted, Tyson will be irreparably harmed because it will be denied the opportunity to have its proposal freely and fairly considered by WLR's shareholders, and WLR's shareholders will be irreparably harmed because they will be denied the opportunity to consider and, if they so choose, to accept Tyson's proposal. 49. Unless preliminary and permanent injunctive relief is granted, Tyson will be irreparably harmed in at least the following additional respects: (a) Tyson will be denied a meaningful opportunity to consummate the proposal; (b) WLR's management will hold a decided and unlawful advantage in opposing Tyson's proposal; (c) Tyson will be compelled to terminate its efforts to acquire control of WLR due to the economic and financial uncertainties posed by the Virginia statutes, the Poison Pill, the Golden Parachutes, the Other Parachutes, and the Board's other actions described above; 24 (d) WLR's shareholders will be discouraged from tendering their shares to Tyson because of the economic and financial uncertainty created by the Virginia statutes, the Poison Pill, the Golden Parachutes, the Other Parachutes, and the Board's other actions described above; (e) Tyson will be deprived of the opportunity to acquire control of WLR, a unique business; (f) Tyson will suffer a massive dilution of its equity and voting interest in WLR, pursuant to a discriminatory, unlawful, and ultra vires Poison Pill; and (g) Tyson will be subjected to unnecessary and unreasonable delay in obtaining the approval of any business combination by the incumbent Board of Directors and management, which could prevent it from consummating an acquisition of WLR. 50. Unless preliminary and permanent injunctive relief is granted, WLR's shareholders, including any residing in the Commonwealth of Virginia, will be irreparably harmed by losing their right to sell their shares to Tyson at a premium. 51. The foregoing circumstances constitute deprivation of Tyson's rights under the Williams Act, the United States Constitution, and the laws of the Commonwealth of Virginia, and will result in irreparable injury to Tyson, to WLR shareholders, and to the investing public. 25 Relief Sought 52. Tyson has no adequate remedy at law. 53. Tyson seeks a declaration that: (a) the Virginia Affiliated Transactions statute (Va. Code Sec. 13.1-725 et seq.) on its face and as applied is unconstitutional; (b) the Control Share Acquisitions Statute (Va. Code Sec. 13.1-728.1, et. seq.) as applied is unconstitutional; (c) Section 13.1-646 of the Virginia Stock Corporation Act as applied is unconstitutional; (d) the Directors breached their fiduciary duties and duty of loyalty in taking the actions described in the Counterclaims; (e) the Poison Pill, Golden Parachutes and Other Parachutes are invalid; (f) notwithstanding the actions taken by the WLR Board described in paragraph 18, the shares owned by Additional Counterclaim Defendants W. Wampler, C. Wampler, Bryan and Mason are "interested shares" under the Virginia Control Share Acquisitions Statute. 54. Tyson seeks to temporarily, preliminarily and permanently: (a) enjoin defendants from taking any action invoking the terms of the Virginia Affiliated Transactions and Control Share Acquisitions statutes; 26 (b) enjoin defendants from taking any action in furtherance of the Poison Pill, Golden Parachutes or Other Parachutes; (c) directing the Directors to rescind the actions described in paragraphs 8-18; (d) directing the Directors to redeem the Poison Pill; (e) directing the individuals identified in paragraph 18 to rescind the transactions described in paragraph 18. (f) directing the Directors to rescind the bylaw described above in paragraph 18, or in the alternative enjoin the operation of such bylaw. 55. Tyson seeks such other and further relief as this Court may deem just and proper, including its costs and attorney's fees. Respectfully submitted, TYSON FOODS, INC. BY: /s/ R. Craig Wood Of Counsel 27 James L. Sanderlin (VSB #05878) Thomas E. Spahn (VSB #17411) Thomas F. Farrell, II (VSB #19109) R. Craig Wood (VSB #24264) McGUIRE, WOODS, BATTLE & BOOTHE One James Center 901 East Cary Street Richmond, VA 23219 (804) 775-1000 Russell E. Brooks MILBANK, TWEED, HADLEY & McCLOY 1 Chase Manhattan Plaza New York, NY 10005-1413 (212) 530-5000 James R. Sipe, Esq. (VSB #3742) LITTEN & SIPE Post Office Box 712 410 Neff Avenue Harrisonburg, VA 22801 (703) 434-5353 Attorneys for Defendant and Counterclaimant, Tyson Foods, Inc. CERTIFICATE OF SERVICE A copy of this document was mailed on February 25, 1994, to: William R. Norfolk, Esq. SULLIVAN & CROMWELL 125 Broad Street New York, NY 10004 Douglas L. Guynn, Esq. WHARTON, ALDHIZER & WEAVER 100 S. Main Street Harrisonburg, VA 22801 /s/ R. Craig Wood -----END PRIVACY-ENHANCED MESSAGE-----