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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-K

                                  ANNUAL REPORT

     PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                    FOR THE FISCAL YEAR ENDED MARCH 4, 2000
                         COMMISSION FILE NUMBER--0-7277

                                FRESH FOODS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

          NORTH CAROLINA                               56-0945643
  (State or other jurisdiction of         (I.R.S. Employer Identification No.)
  incorporation or organization)

                   9990 PRINCETON ROAD, CINCINNATI, OHIO 45246
                            TELEPHONE: (800) 543-1604
                    (Address of principal executive offices)

        Securities registered pursuant to Section 12(g) of the Securities
                             Exchange Act of 1934:

                           COMMON STOCK, NO PAR VALUE

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

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

         The number of shares of Fresh Foods, Inc. Common Stock outstanding as
of May 5, 2000 was 5,781,150. The aggregate market value of Fresh Foods, Inc.
Common Stock held by nonaffiliates of Fresh Foods, Inc. as of May 5, 2000 was
$8,757,552.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Part III incorporates certain information by reference from the
Registrant's definitive proxy statement to be filed with respect to its Annual
Meeting of Shareholders to be held on July 27, 2000.

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                                TABLE OF CONTENTS

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ITEM NUMBER                                                                               PAGE
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<S>              <C>                                                                      <C>

                                     PART I

Item  1.         Business..............................................................     1
   Overview      ......................................................................     1
   Business Segments...................................................................     2
   Food Processing Operations..........................................................     2
   Restaurant Operations...............................................................     8
   Ham Curing Operations...............................................................     8
   Trademarks and Licensing............................................................     8
   Competition   ......................................................................     8
   Government Regulation...............................................................     8
   Employees     ......................................................................     9
Item  2.         Properties............................................................     9
Item  3.         Legal Proceedings.....................................................     9
Item  4.         Submission of Matters to a Vote of Security Holders...................     9
Item  4A.        Executive Officers of the Registrant..................................     9

                                     PART II

Item  5.         Market for the Registrant's Common Stock and Related Security
                   Holder Matters......................................................    11
Item  6.         Selected Financial Data...............................................    11
Item  7.         Management's Discussion and Analysis of Financial Condition and
                   Results of Operations...............................................    12
   Results of Operations...............................................................    13
   Liquidity and Capital Resources.....................................................    15
   Inflation     ......................................................................    16
   Seasonality   ......................................................................    16
   New Accounting Pronouncements.......................................................    16
Item  7A.        Quantitative and Qualitative Disclosures About Market Risk............    17
Item  8.         Financial Statements and Supplementary Data...........................    18
Item  9.         Changes in and Disagreements with Accountants on Accounting and
                   Financial Disclosure................................................    18

                                    PART III

Item  10.        Directors and Executive Officers of the Registrant....................    19
Item  11.        Executive Compensation................................................    19
Item  12.        Security Ownership of Certain Beneficial Owners and Management........    19
Item  13.        Certain Relationships and Related Transactions........................    19

                                     PART IV

Item  14.        Exhibits, Financial Statement Schedules, and Reports on Form 8-K......    20
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                                     PART I

ITEM 1. BUSINESS

OVERVIEW

         Fresh Foods, Inc. (the "Company" or "Fresh Foods") is a leading
vertically integrated producer and marketer of fully-cooked branded and private
label protein and bakery products and microwaveable sandwiches for the domestic
foodservice market. The Company sells its high-quality, value-added products
through various distribution channels under the Pierre(TM), Fast Choice(R), Fast
Bites(TM) and Mom 'n' Pop's(R) brand names, which are widely recognized in the
food industry. In its fiscal year ended March 4, 2000, the Company, excluding
its discontinued restaurant segment, had revenues of $185.6 million.

         The Company's predecessor was founded in 1966 to own and operate
restaurants, initially under the Mom 'n' Pop's Ham House concept and later under
the Western Steer family steakhouse and other concepts. The Company acquired
Sagebrush, Inc. in a stock for stock transaction accounted for as a pooling of
interests in January 1998 as a vehicle for market penetration and unit growth of
its restaurant business. After the acquisition, the Company grew its restaurant
business to 67 company owned and operated units and 36 franchised units. The
Company's food processing business was originally developed to support its
restaurants, but grew independently to become its principal business. In
recognition of this fact, in May 1998, the Company, then known as "WSMP, Inc.,"
changed its name to "Fresh Foods, Inc." In June 1998, Fresh Foods consummated
the purchase of substantially all of the business in Cincinnati, Ohio, and a
portion of the business in Caryville, Tennessee (collectively, "Pierre"),
conducted by the Pierre Foods Division of Hudson Foods, Inc. ("Hudson"), a
subsidiary of Tyson Foods, Inc. ("Tyson"). The acquisition was accounted for as
a purchase. Pierre is a value-added food processor selling principally to the
foodservice and packaged foods markets. In September 1998 the Company
implemented a tax-exempt reorganization of its corporate structure in order to
streamline corporate governance, improve corporate efficiencies and synergies,
improve asset allocation and accomplish other corporate objectives. The
reorganization established Fresh Foods, Inc. as a holding company, consolidated
32 subsidiaries into 12 subsidiaries and separated the Company's food processing
and restaurant businesses. In July 1999, the Company sold its ham curing
business, and in October 1999 the Company disposed of its restaurant segment. In
December 1999, the Company implemented another tax-exempt reorganization of its
corporate structure to further streamline its operations into one subsidiary.
Following the sales of its ham curing business and its restaurant segment, the
Company operates solely in the food processing business.

         The Company is a leading manufacturer of fully-cooked branded and
private label protein and bakery products and is, to management's knowledge, the
only integrated producer of microwaveable sandwiches. At its Cincinnati
facility, the Company produces specialty beef, poultry and pork products that
provide superior quality and are typically custom-developed to meet specific
customer requirements. The Company adds further value for its customers by
offering comprehensive food solutions, including proprietary product
development, special ingredients and recipes as well as custom packaging and
marketing programs. The Company's bakery and sandwich assembly plant is located
at the Company's Claremont facility. The Company sells primarily to the
foodservice and packaged foods markets, focusing on premium market niches, where
it offers customers the ability to outsource critical product development and
food processing functions, resulting in reduced labor costs, improved product
quality and consistency, improved portion control, waste reduction and greater
product safety.

         Certain statements made in this document are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements involve risks and uncertainties that may
cause actual results to differ materially from expected results. As detailed in
Exhibit 99.1 to this document, with respect to the Company, these risks and
uncertainties include: substantial leverage; restrictions imposed by the
Company's debt instruments; management control; competition; government
regulation; general risks of the food industry; adverse changes in food costs
and availability of supplies and dependence on key personnel. This list of risks
and uncertainties is not exhaustive. Also, new risk factors emerge over time.
Investors should not place undue reliance on the predictive value of
forward-looking statements.



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         In this document, unless the context otherwise requires, the term
"Company" refers to Fresh Foods, Inc. and its current and former subsidiaries.
The Company's fiscal year ended February 27, 1998 is referred to as "fiscal
1998," its fiscal year ended March 6, 1999 is referred to as "fiscal 1999," and
its fiscal year ended March 4, 2000 is referred to as "fiscal 2000."

BUSINESS SEGMENTS

         During fiscal 2000, the Company operated in three business segments:
food processing operations, ham curing operations and restaurant operations. The
food processing and ham curing segments are presented in the financial
statements as continuing operations. Due to the disposition of the restaurant
segment during fiscal 2000, the results of the restaurant segment are reported
as discontinued operations. The ham curing business, which also was disposed of
during fiscal 2000, did not qualify for discontinued operations presentation.
Information as to revenue, operating profit, identifiable assets, depreciation
and amortization expense and capital expenditures for the Company's food
processing and ham curing business segments is contained herein by reference to
Item 8, "Financial Statements and Supplementary Data," incorporating the
information under the caption "Major Business Segments" in Note 13 to the
Company's consolidated financial statements. Information as to revenue and
operating profit of the restaurant segment is contained herein by reference to
Item 8, "Financial Statements and Supplementary Data," incorporating the
information under the caption "Disposition of the Restaurant Segment" in Note 1
to the Company's consolidated financial statements.

                               REVENUES BY SOURCE

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                                          FISCAL 2000            FISCAL 1999          FISCAL 1998
                                      ------------------     ------------------     -----------------
                                     REVENUES        %      REVENUES        %      REVENUES       %
                                      ------      ------     ------      ------     ------     ------
                                  (IN MILLIONS)          (IN MILLIONS)           (IN MILLIONS)
<S>                                   <C>          <C>       <C>          <C>       <C>         <C>

Food Processing:
   Fully-Cooked Protein Products      $107.0        57.7     $ 89.9        57.3     $   --         --
   Microwaveable Sandwiches ....        68.5        36.9       52.4        33.4       45.2       68.3
   Bakery and Other Products ...         8.0         4.3        7.5         4.8       11.2       16.9
                                      ------      ------     ------      ------     ------     ------
      Total Food Processing ....       183.5        98.9      149.8        95.5       56.4       85.2
Ham Curing .....................         2.1         1.1        7.0         4.5        9.8       14.8
                                      ------      ------     ------      ------     ------     ------
     Total .....................      $185.6       100.0     $156.8       100.0     $ 66.2      100.0
                                      ======      ======     ======      ======     ======     ======
</TABLE>

FOOD PROCESSING OPERATIONS

Overview

         The Company is a leading manufacturer of fully-cooked branded and
private label protein and bakery products and is, to management's knowledge, the
only nationally integrated producer of pre-packaged sandwiches. The Company
provides specialty beef, poultry, and pork products formed and portioned to meet
specific customer requirements. The Company sells primarily to the foodservice
market, offering its customers the ability to outsource critical product
development and food processing functions, resulting in reduced labor costs,
improved product quality and consistency, improved portion control and waste
reduction and greater product safety. Within the foodservice industry, the
Company identifies niche markets that place premiums on the Company's
differentiated products and value-added services. The Company's primary markets
include leading national restaurant chains, primary and secondary schools,
vending, convenience stores and other niche foodservice markets. In addition,
the Company sells fully-cooked protein and bakery products and microwaveable
sandwiches to warehouse clubs and other non-foodservice markets.

         The Company purchased Pierre from Tyson in June 1998 and the acquired
business was subsequently combined with the Company's sandwich assembly
operation. While Pierre has always been one of the largest providers of
fully-cooked differentiated meat products in the United States, since the
acquisition management has been able to increase sales as a result of a renewed
focus on new customer and market development.



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         According to industry sources, the domestic market for frozen,
fully-cooked protein products is growing rapidly. A number of factors are
driving the growth, including: (i) increased outsourcing by foodservice
providers in order to maximize food safety, reduce costs and ensure product
consistency; (ii) increased consumer demand for convenience products such as
fully-cooked products and convenience sandwiches; and (iii) rising public
concern over food safety and increased government regulation in the food
processing industry. The Company is well-positioned to capitalize on these
trends as a leading supplier of a wide array of differentiated, fully-cooked
protein products and convenience sandwiches to a variety of distribution
channels and a fully-compliant, top-quality manufacturer.

         The food processing industry is subject to increasing federal, state
and local government regulation. In particular, the Hazard Analysis and Critical
Control Points ("HACCP") standards of the United States Department of
Agriculture (the "USDA"), requiring the implementation of a seven-step system
for preventing hazards that could cause food-borne illnesses, went into effect
on January 25, 2000 for all food manufacturers with over ten employees and $2.5
million in sales. The HACCP system governing the preparation and production of
food has made it more difficult for foodservice and smaller food processing
companies to prepare their own food products. As a fully-compliant HACCP
manufacturer and a leading producer of value-added protein products, the Company
is well positioned to capitalize on the implementation of the HACCP standards.

Food Products

         The Company produces a wide variety of fully-cooked differentiated
protein products, hand-held convenience sandwiches and value-added bakery
products. These products provide superior quality and are often custom-developed
to meet specific customer requirements. The Company adds value for its customers
by offering comprehensive food solutions, including proprietary product
development, special ingredients and recipes as well as custom packaging
programs. The Company's current product line consists of over 1,000 stock
keeping units ("SKUs"). In fiscal 2000, the Company's revenues from food
processing operations totaled approximately $183.5 million, accounting for 98.9%
of the Company's revenues from continuing operations.

         The Company purchases raw poultry, raw beef, seasonings, raw pork and
soy, which it processes into a broad range of fully-cooked food products at its
Cincinnati facility. The fully-cooked portions are immediately frozen and either
packaged for sale or shipped to the Company's Claremont facility to be combined
with the Company's specialty bread products to form sandwiches. The Company also
purchases bakery ingredients, which are blended, using technologically-advanced
equipment and the Company's proprietary recipes, and baked into yeast rolls and
biscuits at its Claremont facility. The bakery products are then either sold or
combined with meat and other fillings to create sandwiches. The Company's food
products are sold to foodservice customers such as restaurant chains, vending
operators, convenience stores, schools and other niche food service markets or
through various other distribution channels, including warehouse clubs and other
non-foodservice markets.

         The Company's longstanding customer relationships, reputation for
high-quality products, proprietary recipes and national sales and distribution
networks enable it to compete effectively in the markets that it serves. The
Company has developed customized meat and bread recipes that are specifically
designed to maintain flavor and texture under specialized applications, such as
microwave oven conditions, resulting in higher-quality meals and greater
customer satisfaction. The Company's product development team works closely with
customers to develop new products for specific customer applications. By working
closely with its customers during the product development stage, the Company has
become an integral component of their operations, as evidenced by the fact that
the Company has sold to its sixteen largest customers for an average of nearly
ten years. In fiscal 2000, however, no one customer accounted for more than 6.5%
of the Company's revenues.

         Each of the Company's food products is well-known in the marketplace
for quality, consistency and food safety. This reputation has created strong
customer loyalty as these attributes are several of the most important
purchasing criteria within the markets for fully-cooked protein and bakery
products. Additionally, the Company's fully-cooked products reduce costs
associated with labor, waste, preparation, storage and administration and
provide a high level of convenience to end users.




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         The following table summarizes the Company's food product lines:

PRODUCT                                             DESCRIPTION
-------                                             -----------

FULLY-COOKED PROTEIN PRODUCTS:

   Flame-Broiled Chicken Patties    Line of charbroiled, portion controlled,
                                    seasoned chicken products in a variety of
                                    innovative shapes, with and without sauce

   Burger Patties                   Full line of charbroiled, homestyle-shaped
                                    burgers in a variety of sizes and shapes

   Breaded Patties                  A line of fully-cooked beef, pork and
                                    chicken products designed to be baked or
                                    microwaved. Innovative breadings, seasonings
                                    and shapes offer points of differentiation

   Rib-B-Q(R) Patties               Variety of shapes and sizes of charbroiled
                                    rib-shaped products with an exclusive blend
                                    of barbecue seasonings, with and without
                                    barbecue sauce on top

   Seasoned Patties                 Authentic seasoned charbroiled beef and pork
                                    products with and without sauce, including
                                    meatloaf, salisbury steaks and hoagie
                                    patties

   Military Kits                    A line of packaged meals using branded
                                    components, including Pierre(TM)-branded
                                    sliced meat or formed meat sandwiches

PRE-PACKAGED SANDWICHES:

   Pierre(TM) Sandwiches            Premium-quality jumbo sandwiches in a wide
                                    variety and with eye-catching graphics on
                                    packaging

   Fast Choice(R) Sandwiches        Mid-priced, broad line of sandwiches,
                                    microwaveable, ovenable, and deli
                                    sandwiches, with dynamic packaging

   Fast Bites(R)                    Value-priced line of sandwiches aimed at
                                    capturing the $1.00 to $1.25 retail price
                                    point

   Licensed Sandwiches              Restaurant-branded product line offering the
                                    customer restaurant-quality meats and breads
                                    at a premium price

   Warehouse Club Packs             Variety of microwaveable sandwiches in six-
                                    and eight-packs

   Non-Foodservice Markets          Mom 'n' Pop's(R) biscuit sandwiches and
                                    co-packed retail sandwiches


BAKERY AND OTHER PRODUCTS:          Fully-baked, homestyle, microwaveable buns,
                                    biscuits, breadsticks and dumplings

         Fully-Cooked Protein Products. Fully-cooked protein products represent
the Company's largest food product category. Within this category, the Company
manufactures flame-broiled and breaded patties and nuggets utilizing beef,
poultry and pork. The Company's protein products are sold in a variety of
package sizes and customized packaging options and into a wide variety of
distribution channels including restaurants and other niche foodservice, schools
and warehouse clubs.


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<PAGE>   7

         Pre-Packaged Sandwiches. Pre-packaged sandwiches are the Company's
second largest food product category. Within this category, the Company produces
a variety of beef, chicken, fish, and pork sandwiches sold under the Company's
Pierre(TM), Fast Bites(R) and Fast Choice(R) brand names and under
widely-recognized, licensed brand names, including Checkers, Rally's and
Nathan's Famous. The Company's sandwich products are sold to vending and
convenience store operators, airlines, warehouse clubs, retail grocery stores
and schools throughout the United States.

         Bakery and Other Products. Bakery and other products are currently the
Company's smallest food product category. The Company produces a variety of
differentiated bakery products, including flavored biscuits, buns, breadsticks
and other specialty baked products. The Company's bakery products are primarily
sold to restaurant chains and schools.

Quality Control

         The Company views quality control as a critical part of its total
production process. The Company maintains rigid health, food safety and quality
control standards, enabling it to meet the requirements of customers, the USDA
and the Food and Drug Administration (the "FDA"). The Company's quality control
personnel are dedicated to the maintenance of the Company's quality standards
and compliance with HACCP and other government regulations in the Company's food
processing plants and products. These employees perform both periodic and random
inspections of production lines, machinery and product. The Company has
well-defined procedures to ensure that all food is processed uniformly and
within federal guidelines and product specifications. All of the Company's
protein products are cooked for times and at temperatures sufficient to ensure
food safety and meet USDA requirements. Fully cooking the products destroys
bacteria. Once cooked, these products are immediately frozen to lock in flavor
and ensure a consistent quality product. The products remain frozen throughout
the assembly and shipping process, further ensuring product safety. The
Company's facilities are in full compliance with HACCP standards, and its
Cincinnati facility has held the USDA's "Total Quality Control" seal since 1986.

Food Processing Customer Channels

         The Company sells fully-cooked protein and bakery products and
pre-packaged sandwiches primarily to the foodservice market. The Company offers
its customers the ability to outsource critical product development and food
processing functions, resulting in reduced labor costs, improved product quality
and consistency, improved portion control and waste reduction and greater
product safety. Within the foodservice industry, the Company identifies niche
markets that place premiums on the Company's differentiated products and
value-added services. In fiscal 2000, the Company served restaurant chains,
school systems, vending, convenience stores and other niche foodservice markets.
In addition, the Company sells fully-cooked protein and bakery products and
pre-packaged sandwiches to warehouse clubs and other non-foodservice markets.
The Company believes that it benefits from attractive growth trends in each of
its markets driven by the increased demand for product quality, safety, new
products and programs and convenience.

         Restaurant Chains and Other Niche Foodservice. The Company supplies
foodservice products to restaurant chains and other foodservice customers
through a national network of more than 50 food brokers and 625 foodservice
distributors. The Company has strong relationships with major restaurant chains
and leading national foodservice distributors. The largest domestic foodservice
distributor purchases the Company's products for distribution through 67 of its
locations. The Company also provides protein and bakery components for use in
other processors' food programs. The Company sells fully-cooked protein
products, sandwiches and sandwich components to branded food companies,
commissaries and sandwich assemblers that package the products with their
respective labels.

         School Systems. The Company is a leading producer of value-added food
products for school systems. The Company currently supplies a variety of
fully-cooked protein products to most of the largest 100, and estimates that it
sells to more than 50% of all, public primary and secondary school systems in
the United States for use in cafeterias and snack bars. The Company sells a full
line of food products that meet the customized needs of individual school
systems. Sales to school systems are made through a network of over 625
foodservice distributors. When selecting a food product supplier, school systems
typically put the



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<PAGE>   8

contracts out for bid with exacting product specifications. The school systems
base their award decisions on the ability to meet the product specifications, as
well as price, taste, consistency and quality control programs. The Company
actively partners with school systems to develop innovative and appealing menus,
nutritional and marketing programs and custom products.

         The Company is one of the market leaders in the USDA Commodity
Reprocessing Program (the "USDA Program"). Under this federal program, the
Company takes USDA-donated beef and pork and charges a fee for processing the
meat into value-added products such as cooked ground beef, charbroiled beef
patties and fully-cooked breaded beef patties. The USDA Program has complex
administrative and regulatory requirements, which make it difficult for
potential competitors to enter the market. In addition, due to public health
concerns, many school systems will contract only with HACCP-compliant
processors, such as the Company, to supply fully-cooked protein products. Demand
for products under the USDA Program peaks in the fall months. Since these
products are frozen, however, production can be scheduled throughout the year to
maximize plant utilization.

         Vending. The Company sells pre-packaged sandwich products to national
and regional vending machine operators, which typically purchase products
through distributors. The Company sells a full line of vended sandwiches under
its Pierre(TM), Fast Choice(R) and Fast Bites(R) brand names and other
nationally recognized, licensed brands such as Checkers, Rally's and Nathan's
Famous through approximately 300 vending distributors. In addition, the Company
has an exclusive relationship to supply microwaveable sandwiches to one of the
largest vending operators in the United States.

         Convenience Stores. The Company supplies a full array of sandwiches
through approximately 110 distributors and to over 40 convenience store chains
with over 12,000 locations across the United States. The Company sells its
sandwich products under the Pierre(TM), Fast Choice(R), Fast Bites(R) and other
licensed brand names. Convenience stores generally target consumers looking for
value-added, high-quality sandwiches that can be prepared quickly and eaten on
the run. The Company supports the sale of sandwiches with a variety of
merchandising and product promotional tools. The Company provides certain
convenience stores with in-store sandwich kiosks, which include a microwave oven
and condiment center, to increase visibility of the full line of the Company's
sandwich products.

         Long-term Healthcare Facilities. The Company has made substantial
investments in the development of the market to provide fully-cooked protein and
bakery products to long-term healthcare facilities. The Company is developing
initiatives to attack this fast growing market.

         Military. The Company recently entered the military segment of the
foodservice market to provide ready-to-eat meals, pre-packaged sandwiches, and
fully-cooked protein products. The Company has government approval to market 30
SKUs to all branches of the military.

         Warehouse Clubs. The Company packages its fully-cooked food products
into "club packs," which it sells directly to national warehouse clubs. These
clubs typically buy the Company's products in larger volumes of fewer SKUs,
enabling the Company to realize operating efficiencies.

         Other Non-Foodservice Markets. The Company sells private label,
co-packed and branded food products to a variety of non-foodservice customers
through a regional network of brokers. The Company primarily: (i) co-packs
protein and bakery products for large, branded convenience meal programs; (ii)
sells Mom 'n' Pop's(R) branded sandwiches to grocery store chains in the
southeastern United States; and (iii) sells a variety of private label and
branded convenience sandwich products to a large, national grocery chain in the
United States. The Company has established and maintains longstanding
relationships with several major grocery chains in the southeastern United
States.

Food Product Sales and Marketing

         Sales. The Company's team of 28 sales professionals have significant
experience in the Company's markets for fully-cooked protein and bakery products
and microwaveable sandwiches. The sales department is organized predominantly by



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<PAGE>   9

distribution channel, enhancing the sales team's knowledge of its end markets,
increasing responsiveness, facilitating new product and market opportunities and
strengthening customer relationships. The Company's sales force has an average
of ten years of experience in the food processing industry and is compensated
based upon revenues and profitability.

         In addition to its direct sales force, the Company utilizes a
nationwide network of over 90 independent food brokers, all of whom are
compensated solely by payment of sales commissions. The Company believes these
brokerage relationships are a valuable corporate asset, providing significant
new product opportunities with existing customers and the opportunity to develop
new customer relationships. The brokers perform several significant functions
for the Company, including identifying and developing new business opportunities
and providing customer service and support to the Company's distributors and
customers. The Company has had relationships with many of its brokers for at
least ten years.

         Marketing. The Company has assembled a team of six experienced
professionals in its marketing department. The Company's marketing department
drives the Company's research and development of new products and implements and
coordinates the yearly business plans. The product managers are dedicated to
specific distribution channels including foodservice, schools, vending and
convenience stores and warehouse clubs and other non-foodservice markets.

         The Company has developed a reputation in the marketplace for quality,
product innovation, food safety, innovative merchandising material and
promotional programs and convenience. As a result, the Company has established
strong brand loyalty among its end users and substantial credibility among its
foodservice brokers and distributors. The Company's marketing strategy includes
distributor and consumer promotions, trade promotions, advertising and
participation in trade shows and exhibitions. The Company participates in
numerous conferences and is a member of 18 national industry organizations.
Company representatives serve on the boards of a number of industry
organizations, including the American Meat Institute, the American School Food
Service Association, and the National Association of Convenience Stores.

Supplies

         The primary materials used in the food processing operations include
boneless chicken, beef and pork cuts, flour, yeast, seasonings, breading, soy
proteins, and packaging supplies. Meat proteins are generally purchased under
seven day payment terms. Historically, raw material costs have remained stable
and any price increases have generally been passed on to the customer. In
addition, the Company opportunistically capitalizes on raw material price
declines, when they occur, by holding its prices and thus widening its profit
margins. The Company does not hedge in the futures markets.

         The Company purchases all of its raw materials from outside sources and
constantly seeks to maximize its purchasing power through volume purchasing. The
Company does not depend on a single source for any significant item, believes
that its sources of supply for raw materials are adequate for its present needs
and does not anticipate any difficulty in acquiring such materials in the
future.

Product Development

         Ongoing food production research and development activities include
development of new products, improvement of existing products and refinement of
food production processes. The Company has assembled a team of six experienced
food technologists in the product development department. These activities
resulted in the launch of over 100 new SKUs in fiscal 2000. Approximately 22% of
fiscal 2000 food processing sales were related to products developed in the last
two years, the Company's definition of a new product. In fiscal 2000, the
Company spent approximately $354,000 on product development programs.


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RESTAURANT OPERATIONS

         During fiscal 2000, the Company disposed of its restaurant segment.
Prior to the disposition, the Company owned and operated 67 restaurants and
franchised an additional 36 restaurants operating under the Sagebrush, Western
Steer, Prime Sirloin and Bennett's concepts. The Company's restaurants were
located in North Carolina, South Carolina, Tennessee and Virginia.

HAM CURING OPERATIONS

         During fiscal 2000, the Company sold its ham curing business. Prior to
the disposition, the Company produced cured hams and ham products for
foodservice and retail grocery customers. The Company's revenues from ham curing
operations totaled approximately $2.1 million, representing 1.1% of the
Company's revenues from continuing operations.

TRADEMARKS AND LICENSING

Food Processing

         The Company markets food products under a variety of brand names,
including Pierre and Design(TM), Fast Bites(R), Fast Choice(R) and Rib-B-Q(R).
The Company regards these trademarks and service marks as having significant
value in marketing its food products. Pursuant to licenses acquired in fiscal
1998, the Company began producing and marketing microwaveable Checkers, Rally's
and Nathan's Famous sandwiches through its existing distribution channels in the
summer of 1998. The term of each such license is subject to renewal and
satisfaction of sales volume requirements. The Company has national distribution
rights for Rally's and Checkers for vending, as well as distribution rights for
Nathan's Famous products.

COMPETITION

Food Processing

         The food production business is highly competitive and is often
affected by changes in tastes and eating habits of the public, economic
conditions affecting spending habits and other demographic factors. In sales of
meat products, the Company faces strong price competition from a variety of
large meat processing concerns, including Tyson, Zartic, Inc. and Advance Food
Company, and from smaller local and regional operations. In sales of biscuit and
yeast roll products, the Company competes with a number of large bakeries in
various parts of the country. The sandwich industry is extremely fragmented,
with few large direct competitors but low barriers to entry and indirect
competition in the form of numerous other products. The Company's competitors in
the sandwich industry include Market Fare Foods, Bridgford Foods Corp., Jimmy
Dean Foods and E.A. Sween.

GOVERNMENT REGULATION

         The food production industry is subject to extensive federal, state and
local government regulation.

         The Company's food processing facilities and food products are subject
to frequent inspection by the USDA, FDA and other government authorities. In
July 1996, the USDA issued strict new policies against contamination by
food-borne pathogens and established the HACCP system. The Company is in full
compliance with all FDA and USDA regulations, including HACCP standards.

         The Company's operations are governed by laws and regulations relating
to workplace safety and worker health that, among other things, establish noise
standards and regulate the use of hazardous chemicals in the workplace. The
Company also is subject to numerous federal, state and local environmental laws.
Under applicable environmental laws, the Company may be responsible for
remediation of environmental conditions and may be subject to associated
liabilities relating to its facilities and the land on which its facilities are
or had been situated, regardless of whether the Company leases or owns the
facilities or land in question and regardless of whether such environmental
conditions were created by the Company or by a prior owner or tenant.



                                       8
<PAGE>   11

The Company does not believe that compliance with environmental laws will have a
material effect upon the capital expenditures, earnings or competitive position
of the Company and its subsidiaries.

         The Company's operations are subject to licensing and regulation by a
number of state and local governmental authorities, which include health,
safety, sanitation, building and fire agencies. Operating costs are affected by
increases in costs of providing health care benefits, the minimum hourly wage,
unemployment tax rates, sales taxes and other similar matters over which the
Company has no control. The Company is subject to laws governing relationships
with employees, including minimum wage requirements, overtime, working
conditions and citizenship requirements.

EMPLOYEES

         As of March 4, 2000, the Company employed approximately 1,100 persons.
The Company has experienced no work stoppage attributed to labor disputes and
considers its employee relations to be good.

ITEM 2. PROPERTIES

         The Company believes that its facilities are generally in good
condition and that they are suitable for their current uses. The Company
nevertheless engages periodically in construction and other capital improvement
projects designed to expand and improve the efficiency of its facilities.

         Principal Offices. The Company has its main office in Cincinnati, Ohio
and leases 6,000 square feet of office space in Hickory, North Carolina as
additional executive offices.

         Food Processing Plants. The Company produces its fully-cooked meat
products, packaged sandwiches and specialty bread products at facilities it owns
in Cincinnati, Ohio and Claremont, North Carolina. The Cincinnati facility
occupies buildings totaling approximately 200,000 square feet. The Claremont
facility occupies buildings totaling approximately 220,000 square feet. The
Company also owns and uses a 23,000 square foot building in Claremont, North
Carolina for additional office space.

ITEM 3. LEGAL PROCEEDINGS

         Fresh Foods and its subsidiaries are parties in various lawsuits
arising in the ordinary course of business. In the opinion of management, any
ultimate liability with respect to these matters will not have a material
adverse effect on the Company's financial condition or results of operations.

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

         No matter was submitted to a vote of security holders during the fourth
quarter of fiscal 2000.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

         Officers are elected by the Company's Board of Directors and serve
indefinitely at the pleasure of the Board. The following table sets forth
certain information with respect to the executive officers of the Company at
March 4, 2000:

<TABLE>
<CAPTION>
                                                                                                  EXECUTIVE
                                                                                                   OFFICER
NAME                                                     POSITION                         AGE       SINCE
----                                                     --------                         ---     ---------
<S>                                  <C>                                                   <C>      <C>

James C. Richardson, Jr. .......     Chairman of the Board                                 50       1987
David R. Clark..................     Vice Chairman of the Board                            43       1996
Norbert E. Woodhams.............     President, Chief Executive Officer and Director       54       1998
Pamela M. Witters...............     Chief Financial Officer, Treasurer and Secretary      43       1999
</TABLE>


                                       9
<PAGE>   12

         Mr. Richardson became a director in 1987. He currently is the Company's
Chairman of the Board of Directors, a position he assumed in 1999. He has served
the Company as an executive officer since 1987, including Executive Vice
President from 1989 to 1993, President from 1993 to 1996, Chief Executive
Officer from 1993 to 1999, and Vice Chairman of the Board from 1998 to 1999.

         Mr. Clark became a director of the Company in 1996. He currently is the
Company's Vice Chairman of the Board of Directors, a position he assumed in
1999. He has served the Company as President and Chief Operating Officer from
1996 to 1999. From 1994 to 1996, he served as Executive Vice President and Chief
Operating Officer of Bank of Granite, located in Granite Falls, North Carolina.
Prior to joining Bank of Granite, Mr. Clark worked for 13 years with BB&T, a
commercial bank and trust company. Mr. Clark served BB&T in various executive
capacities, including President of BB&T of South Carolina during 1993 and 1994.

         Mr. Woodhams became a director in 1998. He is the Company's President
and Chief Executive Officer, a position he assumed in 1999. He has served the
Company as President of Pierre Foods, LLC, the Company's food processing
subsidiary from the acquisition of Pierre Foods in June 1998 to 1999. Prior to
the acquisition of Pierre by Fresh Foods, he served as President of Hudson
Specialty Foods, a food processing division of Hudson Foods, Inc. ("Hudson"),
from 1994 to 1998. Upon the acquisition by Tyson in January 1998, Mr. Woodhams
became President of Pierre. Prior to joining Hudson, Mr. Woodhams held the
position of Executive Group Vice President for the Pork and Beef Division of
Tyson from 1990 through 1994. He also served as President and Chief Executive
Officer for Henry House/Holly Farms, a value-added processor of pork products,
from 1987 to 1990.

         Ms. Witters currently is the Company's Chief Financial Officer, a
position she assumed in 1999. She served the Company as Vice President of
Finance from 1998 to 1999. From 1994 to 1998, she worked with Deloitte & Touche
LLP in Hickory, North Carolina. Prior to joining Deloitte & Touche, she served
as Controller for Lone Star Cafes, Inc. in Austin, Texas from 1992 to 1994, and
was the operating partner for Accomplishments Through People, Inc., a
multi-state restaurant franchisee from 1989 through 1992.


                                       10
<PAGE>   13

                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS

         The Company's common stock trades on the NASDAQ National Market tier of
the NASDAQ Stock Market under the symbol "FOOD" ("WSMP" prior to May 8, 1998).
As of May 5, 2000, the Company had approximately 1,378 shareholders of record.

         The following table sets forth the quarterly high and low closing bid
price quotations for the Company's common stock on the NASDAQ Stock Market.
These quotations represent interdealer prices, without retail mark-up, mark-down
or commissions, and do not necessarily reflect actual transactions.

                                                    RANGE OF PRICES
                                               ------------------------
                                               HIGH                 LOW
                                               ----                 ---
Fiscal year ended March 6, 1999:
   First Quarter...........................  $      23.750        17.250
   Second Quarter..........................         17.875         8.750
   Third Quarter...........................          9.500         7.000
   Fourth Quarter..........................          8.375         4.250

Fiscal year ended March 4, 2000:
   First Quarter...........................  $       6.938         5.125
   Second Quarter..........................          9.875         6.750
   Third Quarter...........................         10.500         6.688
   Fourth Quarter..........................          6.375         3.000

   The closing price on May 5, 2000 was $3.00 per share.

         The Company did not declare a cash dividend during fiscal 2000, fiscal
1999 or fiscal 1998. The Company's debt instruments restrict its ability to pay
dividends. Regardless of the scope of such restrictions, the Company's policy is
to reinvest any earnings rather than pay dividends.

ITEM 6. SELECTED FINANCIAL DATA

         The following selected historical financial information has been
derived from audited consolidated financial statements of the Company. Such
financial information should be read in conjunction with the consolidated
financial statements of the Company, the notes thereto and the other financial
information contained elsewhere herein. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
consolidated financial statements.


                                       11
<PAGE>   14

<TABLE>
<CAPTION>
                                                                                 Fiscal Years Ended
                                                      ----------------------------------------------------------------------
                                                       March 4,       March 6,        Feb. 27,       Feb. 28,       Feb. 23,
                                                        2000            1999            1998            1997          1996
                                                      ---------       ---------       --------       --------       --------
                                                                   (dollars in thousands, except per share data)
<S>                                                   <C>             <C>             <C>            <C>            <C>

STATEMENT OF OPERATIONS DATA:
   Revenues ....................................      $ 185,598       $ 156,842       $ 66,245       $ 58,615       $ 50,869
   Cost of goods sold ..........................        116,025         101,413         59,153         53,821         47,006
   Selling, general and administrative .........         65,297          41,007          9,716          7,284          6,252
   Loss on sale of Mom 'n' Pop's Country
       Ham, LLC ................................          2,857              --             --             --             --
   Depreciation and amortization ...............          5,662           4,902          1,615          1,401          1,378
                                                      ---------       ---------       --------       --------       --------
   Operating income (loss) .....................         (4,243)          9,520         (4,239)        (3,891)        (3,767)
   Interest expense ............................         14,986          12,332          1,762          1,868          2,163
   Other income, net ...........................            169             409            204             61            217
   Income tax benefit ..........................          4,825             613          1,926          2,262          2,303
                                                      ---------       ---------       --------       --------       --------
   Loss from continuing operations .............        (14,235)         (1,790)        (3,871)        (3,436)        (3,410)
   Income from discontinued operations .........          2,828           4,285          6,121          5,461          5,420
   Gain on disposal of discontinued operations .          6,802              --             --             --             --
   Extraordinary item (1) ......................            (52)            (64)            --            415             --
                                                      ---------       ---------       --------       --------       --------
   Net income (loss) ...........................      $  (4,657)      $   2,431       $  2,250       $  2,440       $  2,010
                                                      =========       =========       ========       ========       ========

NET INCOME (LOSS) PER SHARE - BASIC AND DILUTED:
   Loss from continuing operations .............      $   (2.45)      $   (0.30)      $  (0.68)      $  (0.67)      $  (0.71)
   Income from discontinued operations .........           0.49            0.72           1.08           1.07           1.13
   Gain on disposal of discontinued operations .           1.17              --             --             --             --
   Extraordinary item ..........................          (0.01)          (0.01)            --           0.08             --
                                                      ---------       ---------       --------       --------       --------
   Net income (loss) ...........................      $   (0.80)      $    0.41       $   0.40       $   0.48       $   0.42
                                                      =========       =========       ========       ========       ========

OTHER DATA:
   Capital expenditures ........................      $   5,488       $  15,479       $ 13,252       $  9,702       $  3,970

BALANCE SHEET DATA:
   Working capital (deficit) ...................      $  36,403       $  27,126       $   (497)      $  2,114       $  1,724
   Total assets ................................        164,727         216,989         71,656         59,571         51,994
   Total debt ..................................        115,479         146,940         20,918         18,208         21,109
   Shareholders' equity ........................         31,533          41,152         39,227         31,348         22,328
</TABLE>

(1)      Reflects an extraordinary loss from early extinguishment of debt in the
         amount of $52 in fiscal 2000 and $64 in fiscal 1999, and an
         extraordinary gain from early extinguishment of debt in the amount of
         $415 in fiscal 1997.

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

         Certain statements made in this document are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements involve risks and uncertainties that may
cause actual results to differ materially from expected results. As detailed in
Exhibit 99.1 to this Report, with respect to the Company these risks and
uncertainties include: substantial leverage; restrictions imposed by the
Company's debt instruments; management control; competition; government
regulation; general risks of the food industry; adverse changes in food costs
and availability of supplies, and dependence on key personnel. This list of
risks and uncertainties is not exhaustive. Also, new risk factors emerge over
time. Investors should not place undue reliance on the predictive value of
forward-looking statements.



                                       12
<PAGE>   15

RESULTS OF OPERATIONS

         The Company's operations historically have been classified into three
business segments: food processing operations, principally fully cooked protein
and sandwich production; restaurant operations, comprised of the Sagebrush,
Western Steer, Prime Sirloin and Bennett's concepts; and ham curing operations.
As discussed in Note 1 to the Consolidated Financial Statements, the Company
sold its ham curing business effective July 2, 1999, and sold its restaurant
operations effective October 8, 1999. Accordingly, the results of the restaurant
operations are presented as a discontinued operation in the Company's
Consolidated Statements of Operations, and are excluded from the table below.
The ham curing operations do not qualify for discontinued operations
presentation.

         As a part of the Pierre acquisition, the Company changed its interim
fiscal periods to conform with the standard food processing industry interim
periods. In line with this, each quarter of the fiscal year will contain 13
weeks except for the infrequent fiscal years with 53 weeks. In order to adopt
this interim calendar, the fiscal year ended March 6, 1999 contains 53 weeks.
This additional week of activity did not have a material impact on any reported
line item on the consolidated statements of earnings when compared with fiscal
1998 and fiscal 2000.

         Results for fiscal 2000, fiscal 1999 and fiscal 1998 for each segment
are shown below:

<TABLE>
<CAPTION>
                                                                      FISCAL YEARS ENDED
                                                               --------------------------------
                                                              MARCH 4,     MARCH 6,    FEBRUARY 27,
                                                                2000         1999          1998
                                                               ------       ------       ------
                                                                        (IN MILLIONS)
<S>                                                            <C>          <C>          <C>

Revenues:
   Food processing ......................................      $183.5       $149.8       $ 56.4
   Ham curing ...........................................         2.1          7.0          9.8
                                                               ------       ------       ------
         Total ..........................................       185.6        156.8         66.2
                                                               ------       ------       ------
Cost of goods sold:
   Food processing ......................................       113.9         95.2         50.6
   Ham curing ...........................................         2.1          6.2          8.6
                                                               ------       ------       ------
         Total ..........................................       116.0        101.4         59.2
                                                               ------       ------       ------
Selling, general and administrative .....................        65.3         41.0          9.6
Loss on sale of Mom `n' Pop's Country Ham, LLC ..........         2.9           --           --
Depreciation and amortization ...........................         5.6          4.9          1.6
                                                               ------       ------       ------
Operating income (loss) .................................        (4.2)         9.5         (4.2)
Interest and other expense, net .........................       (14.8)       (11.9)        (1.6)
                                                               ------       ------       ------
Loss from continuing operations before income tax benefit       (19.0)        (2.4)        (5.8)
Income tax benefit ......................................         4.8          0.6          1.9
                                                               ------       ------       ------
Loss from continuing operations .........................       (14.2)        (1.8)        (3.9)
Income from discontinued restaurant segment .............         2.8          4.3          6.1
Gain on disposal of discontinued restaurant segment .....         6.8           --           --
Extraordinary item ......................................        (0.1)        (0.1)          --
                                                               ------       ------       ------
Net income (loss) .......................................      $ (4.7)      $  2.4       $  2.2
                                                               ======       ======       ======
</TABLE>


Fiscal 2000 Compared to Fiscal 1999

         Revenues. Revenues increased by $28.8 million, or 18.3%, due to a $33.7
million (22.5%) increase in the food processing segment, offset by a $5.0
million (70.3%) decrease in the ham curing segment. The increase in food
processing revenues was due to the Pierre acquisition in fiscal 1999 which
contributed four quarters of revenues in fiscal 2000 compared to



                                       13
<PAGE>   16

three quarters of revenue in fiscal 1999. The decrease in ham curing revenues
was due to the Company's strategic decision to exit the ham curing business,
which was effective July 2, 1999.

         Cost of goods sold. Cost of goods sold increased by $14.6 million, or
14.4%, comprised of a $18.7 million (19.6%) increase in the food processing
segment, offset by a $4.1 million (66.0%) decrease in the ham curing segment.
The increase in the food processing segment was due to the Pierre acquisition in
fiscal 1999 which contributed four quarters of operations in fiscal 2000
compared to three quarters of operations in fiscal 1999. As a percentage of food
processing revenues, food processing cost of goods sold decreased from 63.6% to
62.1% due to a shift in demand to product categories with higher margins. The
decrease in ham curing cost of goods sold was due to the Company's strategic
decision to exit the ham curing business, effective July 2, 1999.

         Selling, general and administrative. Selling, general and
administrative expenses increased by $24.3 million, or 59.2% primarily due to
indirect expenses incurred in the disposition of the restaurant segment, and
expenses associated with consulting and non-compete agreements with former
shareholders. As a percentage of operating revenues, selling, general and
administrative expenses increased from 26.1% to 35.2% for the same reasons.

         Depreciation and amortization. Depreciation and amortization increased
by $.8 million, or 15.5%, primarily due to four quarters of Pierre depreciation
and amortization in fiscal 2000 compared to three quarters of Pierre
depreciation and amortization in fiscal 1999, offset by a decline in
depreciation due to the sale of the assets of the ham curing business. As a
percentage of operating revenues, depreciation and amortization was 3.1% for
both fiscal years.

         Interest and other expense, net. Net other expense increased by $2.9
million, or 24.3%. This increase primarily was due to an increase in interest
expense resulting from four quarters of interest expense in fiscal 2000,
compared to three quarters of interest expense resulting from financing of the
Pierre acquisition in June 1998 (see --- "Liquidity and Capital Resources"
below). Other non-operating expenses were not significant in fiscal 2000 or
fiscal 1999.

         Income tax benefit. The effective tax benefit rate for fiscal 2000
continuing operations was 25.3% compared to 25.5% for fiscal 1999.

Fiscal 1999 Compared to Fiscal 1998

         Revenues. Revenues increased by $90.6 million, or 136.8%, due to a
$93.4 million (165.6%) increase in the food processing segment and a $2.8
million (28.3%) decrease in the ham curing segment. The increase in food
processing revenues was due to the acquisition of Pierre on June 9, 1998. The
decrease in ham curing revenues was due to the loss of one large customer during
fiscal 1999.

         Cost of goods sold. Cost of goods sold increased by $42.3 million, or
71.4% due to an increase in the food processing segment, offset slightly by a
decrease in such costs in the ham curing segment. Cost of goods sold in the food
processing segment increased by $44.6 million (88.1%) due to the acquisition of
Pierre in June 1998. As a percentage of food processing revenues, cost of goods
sold in the food processing segment decreased from 89.7% to 63.6%. The decrease
was due to the Company's acquisition of Pierre, which historically had a higher
gross margin percentage than the existing Company food processing operations.
Cost of goods sold in the ham curing segment decreased $2.4 million (27.9%) due
to lower sales volume.

         Selling, general and administrative expenses. Selling, general and
administrative expenses increased by $31.3 million (322.0%) and, as a percentage
of operating revenues, increased from 14.7% to 26.1% due to 1) incremental costs
associated with the fiscal 1999 Pierre acquisition, specifically personnel and
facilities costs of Pierre in Cincinnati; 2) additional costs associated
specifically with the integration of Pierre operations into Fresh Foods' food
processing segment; and 3) an increase due to Pierre's historically higher costs
of marketing and promotional programs.



                                       14
<PAGE>   17

         Depreciation and amortization. Depreciation and amortization increased
by $3.3 million (203.5%) due to the acquisition of Pierre in June 1998.
Additional depreciation of fixed assets and amortization of intangible assets
associated with the Pierre acquisition increased depreciation and amortization
by $1.1 million and $2.0 million, respectively. As a percentage of operating
revenues, depreciation and amortization increased from 2.4% to 3.1% as a result
of the acquisition of Pierre.

         Interest and other expense, net. Net other expense increased by $10.4
million (665.1%) due to an increase in interest expense resulting from
additional borrowings to finance the Pierre acquisition and the Company's
recapitalization in fiscal 1999 (see "--Liquidity and Capital Resources" below).

         Income tax benefit. The effective tax benefit rate for fiscal 1999 was
25.5%, as compared to 33.2% for fiscal 1998. Such rate was lower in fiscal 1999
due to permanent differences.

LIQUIDITY AND CAPITAL RESOURCES

         Net cash used by operating activities was $6.7 million for fiscal 2000,
compared to cash provided by operating activities of $11.0 million in fiscal
1999 and $7.7 million in fiscal 1998. The decrease in net cash provided by
operating activities from fiscal 1999 to fiscal 2000 was primarily due to the
following factors: 1) indirect expenses incurred in the disposition of the
restaurant and ham curing segments 2) payment of estimated income taxes due and
3) a decrease in accounts payable and other accrued liabilities. The increase in
net cash provided by operating activities for fiscal 1999 was primarily due to
increased income (after reflecting non-cash items) from the acquisition of
Pierre in June 1998 and the opening of thirteen new restaurants in fiscal 1999,
offset by an increase in accounts receivable and inventory at Pierre, net of the
increase in accounts payable. The Company had positive working capital at March
4, 2000 and March 6, 1999 of $36.4 million and $27.1 million, respectively, as
compared to a working capital deficit of $.5 million at February 27, 1998.

         Cash flows provided by investing activities were $45.2 million for
fiscal 2000. The primary components were proceeds from the sales of certain of
the Company's assets and the restaurant segment; offset by capital expenditures
for the food processing and restaurant segments. Cash flows used in investing
activities were $132.7 million in fiscal 1999. The primary components were cash
used to purchase Pierre in June 1998 and capital expenditures relating to the
opening of thirteen new restaurants in fiscal 1999, offset slightly by
collections on notes payable to the Company and proceeds from the sale of
assets. Cash acquisitions of fixed assets were $5.5 million for fiscal 2000,
compared to $15.5 million for fiscal 1999 and $12.6 million for fiscal 1998.
During fiscal 1999 and fiscal 1998, the Company acquired fixed assets (primarily
operating equipment) under capital leases of approximately $15,000 and $660,000,
respectively.

         Cash flows used in financing activities were $37.4 million for fiscal
2000. The major components were 1) the early payoff of the Company's industrial
revenue bonds, 2) repayment of borrowings under the revolving credit facility
with proceeds from the disposition of the restaurant segment, 3) a loan to a
principal shareholder, and 4) the repurchase of the Company's common stock. Cash
flows provided by (used in) financing activities were $120.5 million and $(0.8)
million in fiscal 1999 and fiscal 1998, respectively. The major components of
financing activities in fiscal 1999 included the issuance of $115 million
principal amount of 10.75% Senior Notes Due 2006 (the "Notes") and initial
borrowings under a five-year, $75.0 million revolving credit facility. The
proceeds of these financing activities were used to acquire Pierre, extinguish
all existing debt of the Company, with the exception of outstanding industrial
revenue bonds and certain lease obligations and repurchase 110,000 shares of the
Company's common stock.

         As of March 4, 2000, the Company had no outstanding borrowings under
its $75 million revolving credit facility due to the repayment of outstanding
borrowings from the proceeds of the disposition of the restaurant segment. At
March 4, 2000, the Company was not in compliance with the financial covenant
relating to fixed charges under the agreement. Accordingly, the Company had no
availability for borrowings under this credit facility. Effective May 30, 2000,
the Company terminated its $75 million revolving credit facility.



                                       15
<PAGE>   18

         Effective May 24, 2000, subject to certain closing conditions
precedent, the Company secured a new three-year $25 million revolving credit
facility with a new lender. Upon final closing of the $25 million revolving
credit facility, the Company will be able to borrow up to an amount (including
standby letters of credit up to $5.0 million) equal to the lesser of $25.0
million less required minimum availability or a borrowing base (comprised of
eligible accounts receivable and inventory). Funds available under the revolving
credit facility will be available for working capital requirements, permitted
investments and general corporate purposes. Borrowings under the revolving
credit facility will bear interest at floating rates based upon the interest
rate option selected from time to time by the Company. The borrowings will be
secured by a first priority security interest in substantially all of the
accounts receivable and inventory of the Company. In addition, the Company will
be required to meet certain financial covenants regarding net worth, cash flow
and restricted payments, including limited dividend payments.

         Fiscal 2000 operating cash flows were not sufficient to provide
necessary working capital and to service existing debt. These cash requirements
were instead satisfied with proceeds from asset sales. To be certain of making
its $6.2 million semi-annual Note interest payment due June 1, 2000, on May 24,
2000, the Company obtained its new $25 million revolving credit facility, with
availability subject to the satisfaction of certain routine closing conditions.
The Company anticipates that its fiscal 2001 cash requirements for working
capital and debt service will be met through a combination of funds provided by
operations and borrowings under the $25 revolving credit facility.

         The Company has budgeted approximately $3.0 million for capital
expenditures in fiscal 2001. These expenditures are devoted to routine food
processing capital improvement projects and other miscellaneous expenditures and
should be sufficient to maintain current operating capacity. The Company
believes that funds from operations and funds from the $25 million revolving
credit facility, as well as the Company's ability to enter into capital or
operating leases, will be adequate to finance these routine capital
expenditures. If Pierre continues its historical revenue growth trend as
expected, then the Company will be required to raise and invest additional
capital for various plant expansion projects to provide operating capacity to
satisfy increased demand. The Company believes that future cash requirements for
these plant expansion projects would need to be met through other long-term
financing sources, such as an increase in borrowing availability under the $25
million credit facility, the issuance of industrial revenue bonds or equity
investment. The incurrence of additional long-term debt is governed and
restricted by the Company's existing debt instruments. Furthermore, there can be
no assurance that additional long-term financing will be available on
advantageous terms (or any terms) when needed by the Company.

         The Company anticipates continued sales growth in key market areas. As
noted above, however, this growth will require capital expansion projects to
increase existing plant capacity to satisfy increased demand. Sales growth,
improved operating performance and expanded plant capacity - none of which is
assured - will be necessary for the Company to continue to service existing
debt.

INFLATION

         The Company believes that inflation has not had a material impact on
its results of operations for fiscal 1998, fiscal 1999 or fiscal 2000. The
Company does not expect inflation to have a material impact on its results of
operations for fiscal 2001.

SEASONALITY

         Except for sales to school districts, which decline significantly
during the summer and early January, there is no seasonal variation in the
Company's sales of food products. The Company's food production is steady
throughout the year.

NEW ACCOUNTING PRONOUNCEMENTS

         In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" was issued. SFAS No. 133 establishes accounting and
reporting standards for derivative financial instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
embedded derivatives) and for hedging activities. The new standard requires an
entity to recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those



                                       16
<PAGE>   19

instruments at fair value. SFAS No. 133 was amended by SFAS No. 137, "Accounting
for Derivative Instruments and Hedging Activities - Deferral of the Effective
Date of FASB Statement No. 133," which delays the Company's effective date until
the first quarter of the fiscal year ending March 2, 2002. Management is
currently evaluating the effects of SFAS No. 133 on the Company's financial
statements and current disclosures.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company is exposed to market risks stemming from changes in
interest rates, foreign exchange rates and commodity prices. Changes in these
factors could cause fluctuations in the Company's financial condition, results
of operations and cash flows. The Company owned no derivative financial
instruments or nonderivative financial instruments held for trading purposes at
March 4, 2000, March 6, 1999 or February 27, 1998. Certain of the Company's
outstanding nonderivative financial instruments at March 4, 2000 are subject to
interest rate risk, but not subject to foreign currency or commodity price risk.

Interest Rate Risk

         The Company manages the potential loss on long-term debt from changing
interest rates by issuing a combination of fixed and variable-rate debt in
amounts and maturities that management considers appropriate. Of the Company's
long-term debt outstanding at March 4, 2000, all principal amounts were accruing
interest at fixed rates. In the future, should the Company borrow funds under
the variable-rate $25 million revolving credit facility, a rise in prevailing
interest rates could adversely affect the Company's financial condition, results
of operations and cash flows. The following table summarizes the Company's
market risks associated with long-term debt outstanding at March 4, 2000. The
table presents principal cash outflows and related interest rates by maturity
date.

                                                 March 4, 2000
                                      Expected Maturities in Fiscal Years

                                                Long-Term Debt
                                     -------------------------------------
                                                          Weighted Average
                                       Fixed Rate          Interest Rate
                                     -------------        ----------------
                 2001                $     314,433              10.31%
                 2002                       67,631               9.28
                 2003                       49,686               9.28
                 2004                       46,066               9.28
                 2005                        1,539               9.28
                 Thereafter            115,000,000              10.75
                                     -------------
                 Total               $ 115,479,355              10.75
                                     =============

                 Fair Value          $  63,250,000              10.75%


Foreign Exchange Rate Risk

         The Company primarily bills customers in foreign countries in US
dollars. However, a significant decline in the value of currencies used in
certain regions of the world as compared to the US dollar could adversely affect
product sales in those regions because the Company's products may be more
expensive for those customers to pay for in their local currency. At March 4,
2000, all trade receivables were denominated in US dollars.


                                       17
<PAGE>   20

Commodity Price Risk

         Certain raw materials used in food processing products are exposed to
commodity price changes. Increases in the prices of certain commodity products
could result in higher overall production costs. The Company manages this risk
through purchase orders, non-cancelable contracts and by passing on such cost
increases to customers. The Company's primary commodity price exposures relate
to beef, pork, poultry, soy and packaging materials used in food processing
products. At March 4, 2000, the Company evaluated commodity pricing risks and
determined it was not currently beneficial to use derivative financial
instruments to hedge the Company's current positions with respect to such
pricing exposures.

Fair Value of Financial Instruments

         The Company's nonderivative financial instruments consist primarily of
cash and cash equivalents, trade and note receivables, trade payables, and
long-term debt. At March 4, 2000, excluding long-term debt shown above, the book
values of each of the nonderivative financial instruments recorded in the
Company's balance sheet are considered representative of fair value due to
variable interest rates, short-terms to maturity and/or short length of time
outstanding. Fair value of nonderivative financial instruments are estimated
using discounted cash flow analysis, based on current incremental borrowing
rates for similar nonderivative financial instruments.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The information required by this Item is set forth on pages F-1 through
F-27.

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

         None.



                                       18
<PAGE>   21

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information required by this Item for each of the Company's
directors is contained under the caption "Election of Directors" in the
Company's Proxy Statement for its Annual Meeting of Shareholders scheduled for
July 27, 2000 and is incorporated herein by reference.

         The information required by this Item for each of the Company's
executive officers is contained under the caption "Executive Officers of the
Registrant" in Part I, Item 4A, of this Report.

ITEM 11. EXECUTIVE COMPENSATION

         Information on remuneration of the Company's officers and directors is
contained in the Company's Proxy Statement for its Annual Meeting of
Shareholders scheduled for July 27, 2000 under the caption "Executive
Compensation" and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Information on security ownership of certain beneficial owners and
management is contained in the Company's Proxy Statement for its Annual Meeting
of Shareholders scheduled for July 27, 2000 under the caption "Principal
Shareholders and Management Ownership" and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Information required by this Item is contained in the Company's Proxy
Statement for its Annual Meeting of Shareholders scheduled for July 27, 2000
under the caption "Certain Relationships and Related Party Transactions" and is
incorporated herein by reference.



                                       19
<PAGE>   22

                                     PART IV

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

(a)      1.      Financial Statements

                 The Financial Statements listed in the accompanying Index on
         page F-1 are filed as a part of this Report.

         2.       Financial Statement Schedules

                  Financial statement schedules have been omitted because they
         are not applicable or not required or because the required information
         is provided in the consolidated financial statements or notes thereto.


         3.      Exhibits

                 See Index to Exhibits.

(b)      Reports On Form 8-K.

         None.



                                       20
<PAGE>   23

                                   SIGNATURES

         Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, Fresh Foods, Inc. has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                           FRESH FOODS, INC.

                                           By:       /s/  DAVID R. CLARK
                                               ---------------------------------
                                                       David R. Clark
                                                 Vice Chairman of the Board

Dated: May 30, 2000

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

<TABLE>
<CAPTION>
           SIGNATURE                                TITLE                               DATE
           ---------                                -----                               ----
<S>                                        <C>                                      <C>

 /s/  JAMES C. RICHARDSON, JR.             Chairman of the Board                    May 30, 2000
--------------------------------------
      James C. Richardson

      /S/ DAVID R. CLARK                   Vice Chairman of the Board               May 30, 2000
--------------------------------------        (Principal Executive Officer)
        David R. Clark

   /S/  NORBERT E. WOODHAMS                President and Director                   May 30, 2000
--------------------------------------
      Norbert E. Woodhams

    /S/  PAMELA M. WITTERS                 Chief Financial Officer, Treasurer       May 30, 2000
--------------------------------------        and Secretary (Principal
       Pamela M. Witters                      Financial Officer and Principal
                                              Accounting Officer)

    /S/  E. EDWIN BRADFORD                 Director                                 May 30, 2000
--------------------------------------
       E. Edwin Bradford

   /S/  WILLIAM P. FOLEY, II               Director                                 May 30, 2000
--------------------------------------
     William P. Foley, II

     /S/  BOBBY G. HOLMAN                  Director                                 May 30, 2000
--------------------------------------
        Bobby G. Holman

    /S/  RICHARD F. HOWARD                 Director                                 May 30, 2000
--------------------------------------
       Richard F. Howard

     /S/  LEWIS C. LANIER                  Director                                 May 30, 2000
--------------------------------------
        Lewis C. Lanier

     /S/  BRUCE E. MEISNER                 Director                                 May 30, 2000
--------------------------------------
       Bruce E. Meisner
</TABLE>


                                       21
<PAGE>   24


<TABLE>
<S>                                        <C>                                      <C>

 /S/  WILLIAM R. MCDONALD III              Director                                 May 30, 2000
--------------------------------------
    William R. McDonald III

     /S/  ANDREW F. PUZDER                 Director                                 May 30, 2000
--------------------------------------
       Andrew F. Puzder
</TABLE>



                                       22
<PAGE>   25

                                INDEX TO EXHIBITS

Exhibit No.                            Description
-----------                            -----------

2.3      Purchase Agreement dated as of August 6, 1999, among Mom `n' Pop's
         Country Ham, LLC, Pierre Foods, LLC, the Company and Hoggs, LLC
         (schedules and exhibits omitted) (incorporated by reference to Exhibit
         2.3 to the Company's Quarterly Report on Form 10-Q for its fiscal
         quarter ended December 4, 1999)

2.4      Purchase Agreement dated as of September 10, 1999 among Claremont
         Restaurant Group, LLC, Fresh Foods Sales, LLC, the Company and CRG
         Holdings Corp. (incorporated by reference to Exhibit 2.4 to the
         Company's Quarterly Report on Form 10-Q for its fiscal quarter ended
         December 4, 1999)

2.5      Plan of Merger dated as of December 27, 1999 among Pierre Foods, LLC,
         Pierre Leasing, LLC and the Company (incorporated by reference to
         Exhibit 2.5 to the Company's Quarterly Report on From 10-Q for its
         fiscal quarter ended December 4, 1999)

3.1      Restated Articles of Incorporation of the Company (incorporated by
         reference to Exhibit 3.1 to the Company's Registration Statement on
         Form S-4 (No. 333-58711))

3.2      Bylaws of the Company (incorporated by reference to Exhibit 3.4 to the
         Company's Annual Report on Form 10-K for its fiscal year ended February
         27, 1998)

4.1      Note Purchase Agreement, dated June 4, 1998, among the Company, the
         Guarantors and the Initial Purchasers (incorporated by reference to
         Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the
         SEC on June 24, 1998)

4.2      Indenture, dated as of June 9, 1998, among the Company, certain
         Guarantors and State Street Bank and Trust Company, Trustee
         (incorporated by reference to Exhibit 4.2 to the Company's Current
         Report on Form 8-K filed with the SEC on June 24, 1998)

4.3      Registration Rights Agreement, dated June 9, 1998, among the Company,
         certain Guarantors and certain Initial Purchasers (incorporated by
         reference to Exhibit 4.3 to the Company's Current Report on Form 8-K
         filed with the SEC on June 24, 1998 and incorporated herein by
         reference)

4.4      Form of Initial Global Note (included as Exhibit A to Exhibit 4.2 to
         the Company's Current Report on Form 8-K filed with the SEC on June 24,
         1998 and incorporated herein by reference)

4.5      Form of Initial Certificated Note (included as Exhibit B to Exhibit 4.2
         to the Company's Current Report on Form 8-K filed with the SEC on June
         24, 1998 and incorporated herein by reference)

4.6      Form of Exchange Global Note (included as Exhibit C to Exhibit 4.2 to
         the Company's Current Report on Form 8-K filed with the SEC on June 24,
         1998 and incorporated herein by reference)

4.7      Form of Exchange Certificated Noted (included as Exhibit D to Exhibit
         4.2 to the Company's Current Report on Form 8-K filed with the SEC on
         June 24, 1998 and incorporated herein by reference)

4.8      First Supplemental Indenture, dated as of September 5, 1998, among the
         Company, State Street Bank and Trust Company, Trustee, and Pierre
         Leasing, LLC (incorporated by reference to Exhibit 4.8 to Pre-Effective
         Amendment No. 1 to the Company's Registration Statement on Form S-4
         (No. 333-58711))


<PAGE>   26

4.9      Second Supplemental Indenture dated as of February 26, 1999 among the
         Company, State Street Bank and Trust Company and Fresh Foods Restaurant
         Group, LLC (incorporated by reference to Exhibit 4.9 to the Company's
         Quarterly Report on Form 10-Q for its fiscal quarter ended December 4,
         1999)

4.10     Third Supplemental Indenture dated as of October 8, 1999 among the
         Company and State Street Bank and Trust Company (incorporated by
         reference to Exhibit 4.10 to the Company's Quarterly Report on Form
         10-Q for its fiscal quarter ended December 4, 1999)

10.3*    1987 Incentive Stock Option Plan (incorporated by reference to Exhibit
         4 to the Company's Registration Statement on Form S-8 (No. 33-15017))

10.4*    First Amendment to 1987 Incentive Stock Option Plan (incorporated by
         reference to Exhibit 4(b) to Post-Effective Amendment No. 1 to the
         Company's Registration Statement on Form S-8 (No. 33-15017))

10.5*    1987 Special Stock Option Plan (restated as of May 15, 1997)
         (incorporated by reference to Exhibit 99 to the Company's Registration
         Statement on Form S-8 (No. 333-29111))

10.6*    1997 Incentive Stock Option Plan (as amended and restated February 23,
         1998) (incorporated by reference to Post-Effective Amendment No. 1 to
         Exhibit 99(a) to the Company's Registration Statement on Form S-8 (No.
         333-32455))

10.7*    First Amendment to 1997 Incentive Stock Option Plan, dated February 23,
         1998 (incorporated by reference to Exhibit 99(b) to Post-Effective
         Amendment No. 1 to the Company's Registration Statement on Form S-8
         (No. 333-32455))

10.8*    1997 Special Stock Option Plan (as amended and restated February 23,
         1998) (incorporated by reference to Exhibit 99.1 to Post-Effective
         Amendment No. 1 to the Company's Registration Statement on Form S-8
         (No. 333-33439))

10.9*    First Amendment to 1997 Special Stock Option Plan, dated February 23,
         1998 (incorporated by reference to Exhibit 99.2 to Post-Effective
         Amendment No. 1 to the Company's Registration Statement on Form S-8
         (No. 333-33439))

10.10    1994 Employee Stock Purchase Plan (incorporated by reference to Exhibit
         4(c) to the Company's Registration Statement on Form S-8 (No.
         33-79014))

10.11    Amendment to 1994 Employee Stock Purchase Plan, dated as of May 10,
         1995 (incorporated by reference to Exhibit 4(b) to Post-Effective
         Amendment No. 3 to the Company's Registration Statement on Form S-8
         (No. 33-79014)

10.12    Second Amendment to 1994 Employee Stock Purchase Plan, dated as of
         August 30, 1995 (incorporated by reference to Exhibit 4(c) to
         Post-Effective Amendment No. 3 to the Company's Registration Statement
         on Form S-8 (No. 33-79014)

10.13    Third Amendment to 1994 Stock Purchase Plan, dated as of February 12,
         1997 (incorporated by reference to Exhibit 4(d) to Post-Effective
         Amendment No. 4 to the Company's Registration Statement on Form S-8
         (No. 33-79014))

10.17*   Employment Contract, dated as of June 30, 1996, between the Company and
         David R. Clark, together with Amendment to Employment Contract, dated
         as of February 23, 1998 (incorporated by reference to Exhibit 10.18 to
         the Company's Registration Statement on Form S-4 (No. 333-58711))

10.19    Consulting and Non-Competition Agreement, dated as of January 29, 1998,
         between the Company and Charles F. Connor, Jr. (incorporated by
         reference to Exhibit 10.20 to the Company's Registration Statement on
         Form S-4 (No. 333-58711))


<PAGE>   27

10.22    Rights Agreement, dated as of September 2, 1997, between the Company
         and American Stock Transfer & Trust Company, Rights Agent (incorporated
         by reference to Exhibit 99.1 to the Company's Current Report on Form
         8-K filed with the SEC on September 5, 1997)

10.29    Credit Agreement, dated as of June 9, 1998, among the Company, certain
         Guarantors, First Union Commercial Corporation ("First Union"), as
         Agent and a Lender, and NationsBank N.A., American National Bank and
         Trust Company of Chicago and National City Commercial Finance, Inc., as
         Lenders (incorporated by reference to Exhibit 99.1 to the Company's
         Current Report on Form 8-K filed with the SEC on June 24, 1998)

10.30    Security Agreement, dated as of June 9, 1998, among the Company,
         certain Guarantors and First Union, as Agent (incorporated by reference
         to Exhibit 99.2 to the Company's Current Report on Form 8-K filed with
         the SEC on June 24, 1998)

10.31    Pledge Agreement, dated as of June 9, 1998, among the Company, certain
         Guarantors and First Union, as Agent (incorporated by reference to
         Exhibit 99.3 to the Company's Current Report on Form 8-K filed with the
         SEC on June 24, 1998)

10.32    Amendment to Credit Agreement and Consent, dated as of September 5,
         1998, among the Company, certain subsidiaries of the Company, First
         Union, as Agent and a Lender, and certain other Lenders (incorporated
         by reference to Exhibit 10.32 to Pre-Effective Amendment No. 1 to the
         Company's Registration Statement on Form S-4 (No. 333-58711)

10.33    Borrower Joinder Agreement dated as of February 26, 1999 between Fresh
         Foods Restaurant Group, LLC and First Union, as Agent (schedules
         omitted) (incorporated by reference to Exhibit 10.33 to the Company's
         Quarterly Report on Form 10-Q for its fiscal quarter ended December 4,
         1999)

10.34    Amendment No. 2 to Credit Agreement and Waiver dated as of April 14,
         1999 among the Company, certain subsidiaries of the Company, First
         Union, as Agent and a Lender, and certain other Lenders (incorporated
         by reference to Exhibit 10.34 to the Company's Quarterly Report on Form
         10-Q for its fiscal quarter ended December 4, 1999)

10.35    Amendment No. 3 to Credit Agreement dated as of May 14, 1999 among the
         Company, certain subsidiaries of the Company, First Union, as Agent and
         a Lender, and certain other Lenders (incorporated by reference to
         Exhibit 10.35 to the Company's Quarterly Report on Form 10-Q for its
         fiscal quarter ended December 4, 1999)

10.36    Consent dated as of July 29, 1999 among the Company, certain
         subsidiaries of the Company, First Union, as Agent and a Lender, and
         certain other Lenders (incorporated by reference to Exhibit 10.36 to
         the Company's Quarterly Report on Form 10-Q for its fiscal quarter
         ended December 4, 1999)

10.37*   Amended and Restated Change in Control Agreement dated as of July 6,
         1999 between the Company and David R. Clark (supercedes Exhibit 10.24
         to the Company's Annual Report on Form 10-K for its fiscal year ended
         March 6, 1999) (incorporated by reference to Exhibit 10.37 to the
         Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
         December 4, 1999)

10.38*   Amended and Restated Change in Control Agreement dated as of July 6,
         1999 between the Company and James C. Richardson, Jr. (supercedes
         Exhibit 10.21 to the Company's Annual Report on Form 10-K for its
         fiscal year ended March 6, 1999) (incorporated by reference to Exhibit
         10.38 to the Company's Quarterly Report on Form 10-Q for the fiscal
         quarter ended December 4, 1999)

10.39*   Severance, Consulting and Noncompete Agreement dated as of July 12,
         1999 among Claremont Restaurant Group, LLC, the Company and L. Dent
         Miller (supercedes Exhibit 10.18 and 10.26 to the Company's Annual
         Report on Form


<PAGE>   28

         10-K for its fiscal year ended March 6, 1999) (incorporated by
         reference to Exhibit 10.39 to the Company's Quarterly Report on Form
         10-Q for the fiscal quarter ended December 4, 1999)

10.40*   Severance, Consulting and Noncompete Agreement dated as of July 12,
         1999 among Claremont Restaurant Group, LLC, the Company, HERTH
         Management, Inc. and Richard F. Howard (supercedes Exhibit 10.23 to the
         Company's Annual Report on Form 10-K for its fiscal year ended March 6,
         1999) (incorporated by reference to Exhibit 10.40 to the Company's
         Quarterly Report on Form 10-Q for the fiscal quarter ended December 4,
         1999)

10.41*   Incentive Agreement dated as of August 18, 1999 among the Company,
         Pierre Foods, LLC and Norbert E. Woodhams, together with First
         Amendment to Incentive Agreement dated as of January 1, 2000
         (supercedes Exhibit 10.20 and 10.28 of the Company's Annual Report on
         Form 10-K for its fiscal year ended March 6, 1999) (incorporated by
         reference to Exhibit 10.41 to the Company's Quarterly Report on Form
         10-Q for the fiscal quarter ended December 4, 1999)

10.42    Severance, Consulting and Noncompete Agreement dated as of September
         13, 1999 among Claremont Restaurant Group, LLC, the Company, HERTH
         Management, Inc. and James M. Templeton (supercedes Exhibit 10.25 to
         the Company's Annual Report on Form 10-K for its fiscal year ended
         March 6, 1999) (incorporated by reference to Exhibit 10.42 to the
         Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
         December 4, 1999)

10.43    Amendment No. 4 to Credit Agreement dated as of September 23, 1999
         among the Company, certain subsidiaries of the Company, First Union, as
         Agent and Lender, and certain other Lenders (incorporated by reference
         to Exhibit 10.43 to the Company's Quarterly Report on Form 10-Q for the
         fiscal quarter ended December 4, 1999)

10.44    Asset Purchase Agreement dated as of September 30, 1999 among Fairgrove
         Restaurants, LLC, the Company and Fresh Foods Sales, LLC (schedules and
         exhibits omitted) (incorporated by reference to Exhibit 10.44 to the
         Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
         December 4, 1999)

10.45    Amended and Restated Management Services Agreement dated as of December
         17, 1999 between HERTH Management, Inc. and the Company (supercedes
         Exhibit 10.1 and 10.2 of the Company's Annual Report on Form 10-K for
         its fiscal year ended March 6, 1999) (incorporated by reference to
         Exhibit 10.45 to the Company's Quarterly Report on Form 10-Q for the
         fiscal quarter ended December 4, 1999)

10.46    Agreement dated December 21, 1999 between the Company and Gungor
         Solmaz, together with form of Agreement dated January 2000 between the
         Company and Gungor Solmaz (incorporated by reference to Exhibit 10.46
         to the Company's Quarterly Report on Form 10-Q for the fiscal quarter
         ended December 4, 1999)


10.47    Fifth Amendment to Credit Agreement and Consent dated as of December
         30, 1999 by and among the Company, certain subsidiaries of the Company,
         First Union, as Agent and Lender, and certain other Lenders (schedules
         and exhibits omitted) (incorporated by reference to Exhibit 10.47 to
         the Company's Quarterly Report on Form 10-Q for the fiscal quarter
         ended December 4, 1999)

10.48*   Consulting and Noncompete Agreement dated as of January 6, 2000 between
         the Company and L. Dent Miller (incorporated by reference to Exhibit
         10.48 to the Company's Quarterly Report on Form 10-Q for the fiscal
         quarter ended December 4, 1999)

10.49    Consulting and Noncompete Agreement dated as of January 14, 2000
         between the Company and Charles F. Connor, Jr. (incorporated by
         reference to Exhibit 10.49 to the Company's Quarterly Report on Form
         10-Q for the fiscal quarter ended December 4, 1999)


<PAGE>   29

10.50*   Bonus Agreement dated as of June 30, 1999 between the Company and James
         E. Harris (supercedes Exhibit 10.27 to the Company's Annual Report on
         Form 10-K for its fiscal year ended March 6, 1999) (incorporated by
         reference to Exhibit 10.50 to the Company's Quarterly Report on Form
         10-Q for its fiscal quarter ended December 4, 1999)

10.51    Loan and Security Agreement, dated as of May 24, 2000, between the
         Company and Fleet Capital Corporation, as Lender (schedules omitted)

12       Calculation of Ratios of Earnings to Fixed Charges

21       Subsidiaries of Fresh Foods, Inc.

23       Independent Auditors' Consent

27       Financial Data Schedule for the year ended March 4, 2000

27(a)    Restated Financial Data Schedules for the years ended March 6, 1999 and
         February 27, 1998

99.1     Risk Factors


         The Company hereby agrees to provide to the Commission, upon request,
copies of long-term debt instruments omitted from this report pursuant to Item
601(b)(4)(iii)(A) of Regulation S-K under the Securities Act.

         *  Indicates management contract or compensatory plan.


<PAGE>   30

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                          PAGE
                                                                                          ----
<S>                                                                                       <C>

FRESH FOODS, INC.

INDEPENDENT AUDITORS' REPORT.............................................................  F-2

CONSOLIDATED FINANCIAL STATEMENTS:
   Consolidated Balance Sheets as of March 4, 2000 and March 6, 1999.....................  F-3
   Consolidated Statements of Operations for the Years Ended March 4, 2000,
       March 6, 1999 and February 27, 1998...............................................  F-4
   Consolidated Statements of Shareholders' Equity for the Years Ended March 4,
       2000, March 6, 1999 and February 27, 1998.........................................  F-5
   Consolidated Statements of Cash Flows for the Years Ended March 4, 2000,
       March 6, 1999 and February 27, 1998...............................................  F-6
   Notes to Consolidated Financial Statements............................................  F-7
</TABLE>


                                       F-1
<PAGE>   31

                          INDEPENDENT AUDITORS' REPORT



To the Board of Directors and Shareholders of
Fresh Foods, Inc.
Hickory, North Carolina

We have audited the accompanying consolidated balance sheets of Fresh Foods,
Inc. and subsidiaries (the "Company") as of March 4, 2000 and March 6, 1999, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three fiscal years in the period ended March 4, 2000.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at March 4, 2000 and
March 6, 1999, and the results of its operations and its cash flows for each of
the three fiscal years in the period ended March 4, 2000 in conformity with
accounting principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP
Hickory, North Carolina
May 30, 2000

                                       F-2
<PAGE>   32

                                FRESH FOODS, INC.

                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                                MARCH 4,           MARCH 6,
                                                                                                  2000               1999
                                                                                             -------------       ------------
<S>                                                                                          <C>                 <C>
                                         ASSETS
CURRENT ASSETS:
      Cash and cash equivalents                                                              $   2,701,464       $  1,664,398
      Accounts receivable, net (Notes 3, 7 and 16 - includes related party receivables
         of $292,990 and $326,147 at March 4, 2000 and March 6, 1999, respectively)             17,422,811         18,565,152
      Notes receivable - current, net (Notes 3 and 16 - includes related party notes
         receivable of $152,456 and $280,964 at March 4, 2000 and March 6, 1999,
         respectively)                                                                             238,513            416,775
      Inventories (Notes 4 and 7)                                                               25,025,421         30,430,482
      Refundable income taxes (Note 8)                                                           2,828,156                 --
      Deferred income taxes (Note 8)                                                             2,290,361          2,722,095
      Prepaid expenses and other current assets                                                    799,582            988,023
                                                                                             -------------       ------------
           Total current assets                                                                 51,306,308         54,786,925
                                                                                             -------------       ------------
PROPERTY, PLANT AND EQUIPMENT, NET (Notes 5 and 9)                                              35,784,819         74,999,394
                                                                                             -------------       ------------
OTHER ASSETS:
      Properties held for sale                                                                          --          2,086,847
      Trade name (Note 6)                                                                       41,764,636         43,242,636
      Excess of cost over fair value of net assets of businesses acquired, net
           (Note 6)                                                                             28,893,723         32,623,400
      Other intangible assets, net (Note 6)                                                      2,556,936          3,520,053
      Notes receivable (Notes 3 and 16 - includes related party notes receivable
           of $705,493 and $1,018,767 at March 4, 2000 and March 6, 1999, respectively)            705,493          1,072,987
      Deferred loan origination fees                                                             3,714,748          4,524,753
      Other                                                                                             --            132,028
                                                                                             -------------       ------------
           Total other assets                                                                   77,635,536         87,202,704
                                                                                             -------------       ------------
           Total Assets                                                                      $ 164,726,663       $216,989,023
                                                                                             =============       ============

                          LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
      Current installments of long-term debt (Note 7)                                        $     314,433       $    673,752
      Trade accounts payable                                                                     5,493,168         11,255,920
      Income taxes payable                                                                              --            151,366
      Accrued insurance                                                                            154,947          1,155,942
      Accrued interest                                                                           3,213,929          3,533,771
      Accrued payroll and payroll taxes                                                          2,427,691          4,941,033
      Accrued promotions                                                                         1,903,241          1,420,580
      Accrued taxes (other than income and payroll)                                                563,879          1,176,888
      Other accrued liabilities (includes related party accrued liabilities of
          $185,000 at March 6, 1999)                                                               831,681          3,351,366
                                                                                             -------------       ------------
           Total current liabilities                                                            14,902,969         27,660,618
LONG-TERM DEBT, less current installments (Note 7)                                             115,164,922        146,265,928
OTHER LONG-TERM LIABILITIES (Note 16)                                                            1,638,466                 --
DEFERRED INCOME TAXES (Note 8)                                                                   1,487,134          1,910,468
COMMITMENTS AND CONTINGENCIES (Notes 9 and 14)
SHAREHOLDERS' EQUITY (Notes 7, 11 and 16)
      Preferred stock - par value $.10, authorized 2,500,000, no shares issued                          --                 --
      Common stock - no par value, authorized 100,000,000 shares; issued
                and outstanding March 4, 2000 - 5,781,000 shares and
                March 6, 1999 - 5,807,049 shares                                                 5,781,000          5,807,049
      Capital in excess of par value                                                            23,315,881         23,251,845
      Retained earnings                                                                          7,436,291         12,093,115
      Receivable from shareholder (Note 16)                                                     (5,000,000)                --
                                                                                             -------------       ------------
           Total shareholders' equity                                                           31,533,172         41,152,009
                                                                                             -------------       ------------
           Total Liabilities and Shareholders' Equity                                        $ 164,726,663       $216,989,023
                                                                                             =============       ============
</TABLE>

          See accompanying notes to consolidated financial statements.



                                      F-3
<PAGE>   33

                                FRESH FOODS, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                            FISCAL YEARS ENDED
                                                                            --------------------------------------------------
                                                                               MARCH 4,          MARCH 6,         FEBRUARY 27,
                                                                                2000               1999               1998
                                                                            -------------      -------------      ------------
<S>                                                                         <C>                <C>                <C>

REVENUES (Note 13)
      Food processing                                                       $ 183,502,144      $ 149,778,206      $ 56,387,112
      Ham curing                                                                2,096,052          7,063,625         9,858,233
                                                                            -------------      -------------      ------------
                Total revenues                                                185,598,196        156,841,831        66,245,345
                                                                            -------------      -------------      ------------
COSTS AND EXPENSES:
      Cost of goods sold (Note 16 - includes related party transactions
          totaling $12,733, $658,826 and $428,721 in fiscal 2000, 1999,
          and 1998, respectively)                                             116,024,983        101,413,313        59,153,475
      Selling, general and administrative expenses (Notes 11 and 16 -
          includes related party transactions totaling $3,983,434,
          $2,600,529, and $2,109,453 in fiscal 2000, 1999 and 1998,
          respectively)                                                        65,297,277         41,006,810         9,716,431
      Loss on sale of Mom 'n' Pop's Country Ham, LLC (Note 1)                   2,857,160                 --                --
      Depreciation and amortization (Note 13)                                   5,661,893          4,901,356         1,614,823
                                                                            -------------      -------------      ------------
                Total costs and expenses                                      189,841,313        147,321,479        70,484,729
                                                                            -------------      -------------      ------------
OPERATING INCOME (LOSS)                                                        (4,243,117)         9,520,352        (4,239,384)
                                                                            -------------      -------------      ------------
OTHER INCOME (EXPENSE)
      Other income (including interest), net (Note 16 - includes
          related party transactions totaling $137,364, $152,743 and
          $145,936 in fiscal 2000, 1999 and 1998, respectively)                   168,959            409,095           204,045
      Interest expense (Note 16 - includes related party transactions
          totaling $110,263 in fiscal 1998)                                   (14,985,577)       (12,332,248)       (1,762,363)
                                                                            -------------      -------------      ------------
                Net other expense                                             (14,816,618)       (11,923,153)       (1,558,318)
                                                                            -------------      -------------      ------------

LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX BENEFIT                     (19,059,735)        (2,402,801)       (5,797,702)
INCOME TAX BENEFIT (Note 8)                                                     4,825,168            612,885         1,926,693
                                                                            -------------      -------------      ------------
LOSS FROM CONTINUING OPERATIONS                                               (14,234,567)        (1,789,916)       (3,871,009)
DISCONTINUED OPERATIONS (Note 1):
      Income from discontinued restaurant segment (net of income taxes
         of $1,507,029, $2,325,555 and $3,654,701 in fiscal 2000,
         1999 and 1998, respectively)                                           2,828,367          4,285,108         6,121,009
      Gain on disposal of discontinued restaurant segment (net of
         income taxes of $3,968,525)                                            6,801,726                 --                --
                                                                            -------------      -------------      ------------
                             Discontinued operations, net                       9,630,093          4,285,108         6,121,009
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM                                        (4,604,474)         2,495,192         2,250,000
EXTRAORDINARY LOSS FROM EARLY EXTINGUISHMENT OF
      DEBT (net of income tax benefit of $35,633 and $44,158 in fiscal
          2000 and 1999, respectively)                                            (52,350)           (64,335)               --
                                                                            -------------      -------------      ------------
NET INCOME (LOSS)                                                           $  (4,656,824)     $   2,430,857      $  2,250,000
                                                                            =============      =============      ============

NET INCOME (LOSS) PER COMMON SHARE - BASIC AND DILUTED
      Loss from continuing operations                                       $       (2.45)     $       (0.30)     $      (0.68)
      Discontinued operations                                                        1.66               0.72              1.08
      Extraordinary loss from early extinguishment of debt                          (0.01)             (0.01)               --
                                                                            -------------      -------------      ------------
                Net income (loss)                                           $       (0.80)     $        0.41      $       0.40
                                                                            =============      =============      ============


WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED                         5,808,075          5,898,839         5,653,988
</TABLE>


          See accompanying notes to consolidated financial statements.




                                      F-4
<PAGE>   34

                                FRESH FOODS, INC.

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                         ACCUMULATED
                                                            CAPITAL IN                     RECEIVABLE      OTHER         TOTAL
                                             COMMON         EXCESS OF        RETAINED         FROM      COMPREHENSIVE SHAREHOLDERS'
                                              STOCK         PAR VALUE        EARNINGS      SHAREHOLDER     INCOME        EQUITY
                                            -----------    ------------    ------------    -----------    --------    ------------
<S>                                         <C>            <C>             <C>             <C>            <C>         <C>

BALANCE AT FEBRUARY 28, 1997                $ 5,326,948    $ 18,868,284    $  7,143,090    $        --    $ 10,059    $ 31,348,381
Comprehensive income:
    Net income                                       --              --       2,250,000             --          --              --
    Unrealized gain on available for sale
        securities (net of tax of $7,055)            --              --              --             --       9,202              --
Total comprehensive income                                                                                               2,259,202
Net income of Sagebrush, Inc. for period
    from January 4, 1997 to February 28,
    1997 (Note 1)                                    --              --         269,168             --          --         269,168
Common stock options exercised (391,000
    shares) (Note 11)                           391,000         919,700              --             --          --       1,310,700
Purchase of common stock (143,325 shares)      (143,325)     (1,840,425)             --             --          --      (1,983,750)
Issuance of common stock (323,826 shares)       323,826       2,599,040              --             --          --       2,922,866
Tax benefit of stock options exercised
    (Notes 8 and 11)                                 --       3,100,421              --             --          --       3,100,421
                                            -----------    ------------    ------------    -----------    --------    ------------
BALANCE AT FEBRUARY 27, 1998                  5,898,449      23,647,020       9,662,258             --      19,261      39,226,988
Comprehensive income:
    Net income                                       --              --       2,430,857             --          --              --
    Realized gain on sale of
        available for sale securities
        (net of reclassification
        adjustments and tax of $13,094)              --              --              --             --     (19,261)             --
Total comprehensive income                                                                                               2,411,596
Common stock options exercised (15,625
    shares (Note 11)                             15,625          65,625              --             --          --          81,250
Purchase of common stock (110,000
    shares)                                    (110,000)       (490,022)             --             --          --        (600,022)
Issuance of common stock (2,975 shares)           2,975          29,222              --             --          --          32,197
                                            -----------    ------------    ------------    -----------    --------    ------------
BALANCE AT MARCH 6, 1999                      5,807,049      23,251,845      12,093,115             --          --      41,152,009
Net loss and comprehensive loss                      --              --      (4,656,824)            --          --      (4,656,824)
Short swing profit reimbursement                     --          48,542              --             --          --          48,542
Loan to shareholder (Note 16)                        --              --              --     (5,000,000)         --      (5,000,000)
Common stock options exercised
    (39,375 shares (Note 11)                     39,375         165,238              --             --          --         204,613
Accelerated vesting of stock options
    (Note 11)                                        --         345,970              --             --          --         345,970
Purchase of common stock (68,024
    shares)                                     (68,024)       (510,180)             --             --          --        (578,204)
Issuance of common stock (2,600
    shares)                                       2,600          14,466              --             --          --          17,066
                                            -----------    ------------    ------------    -----------    --------    ------------
BALANCE AT MARCH 4, 2000                    $ 5,781,000    $ 23,315,881    $  7,436,291    $(5,000,000)   $     --    $ 31,533,172
                                            ===========    ============    ============    ===========    ========    ============
</TABLE>


          See accompanying notes to consolidated financial statements.



                                      F-5
<PAGE>   35

                                FRESH FOODS, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                             FISCAL YEARS ENDED
                                                                           -------------------------------------------------
                                                                             MARCH 4,          MARCH 6,         FEBRUARY 27,
                                                                               2000              1999               1998
                                                                           ------------      -------------      ------------
<S>                                                                        <C>               <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net income (loss)                                                      $ (4,656,824)     $   2,430,857      $  2,250,000
                                                                           ------------      -------------      ------------
    Adjustments to reconcile net income (loss) to net cash
       provided by (used in) operating activities:
    Extraordinary loss on extinguishment of debt before
      income tax benefit                                                         87,983            108,493                --
    Depreciation and amortization                                             8,199,039          8,463,851         5,230,044
    Amortization of deferred loan origination fees                              899,931            620,301           113,153
    Deferred income taxes                                                         8,400            298,617        (2,081,085)
    Net (gain) loss on disposition of assets (net of writedowns)              2,835,122          1,003,555          (639,966)
    Net gain on disposal of discontinued operations (Note 1)                (10,770,251)                --                --
    Increase in other long-term liabilities                                   1,638,466                 --                --
    Tax benefit of stock options                                                     --                 --         3,100,421
    Other noncash adjustments                                                   705,039           (126,278)          (80,884)
    Changes in operating assets and liabilities (net of effects
      from purchase of restaurant companies and Pierre, and net
      of sales of ham curing and restaurant segments) providing
      (using) cash:
            Receivables                                                        (287,077)        (4,815,226)       (1,628,423)
            Inventories                                                       3,301,173         (2,124,657)         (544,001)
            Refundable income taxes, prepaid expenses and other assets       (2,917,660)           148,285          (673,905)
            Trade accounts payable and other accrued liabilities             (5,763,674)         5,023,953         2,654,178
                                                                           ------------      -------------      ------------
         Total adjustments                                                   (2,063,509)         8,600,894         5,449,532
                                                                           ------------      -------------      ------------
         Net cash provided by (used in) operating activities                 (6,720,333)        11,031,751         7,699,532
                                                                           ------------      -------------      ------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of net assets of Pierre Foods                                           --       (119,289,571)               --
    Net proceeds from sale of restaurant segment (Note 1)                    49,234,814                 --                --
    Net proceeds from sale of Mom 'n' Pop's Country Ham, LLC (Note 1)           147,239                 --                --
    Proceeds from sales of assets to others                                     652,523            363,056         2,185,787
    Proceeds from sales of assets to other related parties                       19,750             13,746         1,350,000
    Decrease in related party notes receivables                                 441,782            777,499           179,452
    Decrease in other notes receivables                                         103,974            804,843           504,439
    Capital expenditures to related parties                                    (316,233)        (2,148,910)       (1,752,565)
    Capital expenditures - other                                             (5,171,445)       (13,315,626)      (10,839,058)
    Other investing activities, net                                              53,875            111,680            14,909
                                                                           ------------      -------------      ------------
         Net cash provided by (used in) investing activities                 45,166,279       (132,683,283)       (8,357,036)
                                                                           ------------      -------------      ------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Net borrowings (repayments) under revolving credit agreement            (29,000,000)        29,000,000                --
    Proceeds from issuance of long-term debt                                         --        115,000,000         5,894,000
    Principal payments on long-term debt                                     (2,415,224)       (12,888,165)       (4,971,615)
    Net repayments under short-term borrowing agreements                             --         (5,105,144)         (935,382)
    Loan origination fees                                                      (177,909)        (4,990,060)         (113,409)
    Loan to shareholder                                                      (5,000,000)                --                --
    Purchase of common stock                                                 (1,020,360)          (600,022)       (1,983,750)
    Proceeds from exercise of stock options                                     204,613             81,250         1,310,700
                                                                           ------------      -------------      ------------
         Net cash provided by (used in) financing activities                (37,408,880)       120,497,859          (799,456)
                                                                           ------------      -------------      ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                          1,037,066         (1,153,673)       (1,456,960)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                  1,664,398          2,818,071         4,275,031
                                                                           ------------      -------------      ------------
CASH AND CASH EQUIVALENTS, END OF YEAR                                     $  2,701,464      $   1,664,398      $  2,818,071
                                                                           ============      =============      ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-6
<PAGE>   36

                                FRESH FOODS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.       BASIS OF PRESENTATION, ACQUISITION AND DISCONTINUED OPERATIONS

     Description of Business. Fresh Foods, Inc. (the "Company" or "Fresh Foods")
is a vertically integrated producer and marketer of fully-cooked branded and
private label protein and bakery products and microwaveable sandwiches for the
domestic foodservice market. The Company sells its products through various
distribution channels under the Pierre, Fast Choice, Fast Bites and Mom 'n'
Pop's brand names. Prior to the sale of the ham curing business effective July
2, 1999, the Company also produced cured hams which were sold primarily through
distributors to retail supermarkets under the "Mom `n' Pop's" brand name. In
addition, prior to the sale of the restaurant segment effective October 7, 1999,
the Company owned and operated 67 restaurants and franchised an additional 36
restaurants operating under the Sagebrush, Western Steer, Prime Sirloin and
Bennett's concepts. Twenty-eight Sagebrush restaurants were acquired when Fresh
Foods completed a merger with Sagebrush, Inc. on January 30, 1998 which was
accounted for as a pooling of interests.

     Acquisition of Pierre Foods Division of Hudson Foods, Inc. On June 9, 1998,
the Company purchased certain of the net operating assets of the Pierre Foods
Division ("Pierre") of Hudson Foods, Inc. ("Hudson"), a wholly owned subsidiary
of Tyson Foods. The acquisition was accounted for using the purchase method of
accounting and the results of Pierre's operations were included in the Company's
fiscal 1999 consolidated statements of operations from the date of acquisition.
The purchase price, which totaled $119.3 million including capitalized
transaction costs was allocated to the net underlying assets based on their
respective fair values. Costs associated with the acquisition totaling $1.5
million were capitalized as part of the transaction. The acquisition price was
allocated as follows (in millions):

         Accounts receivable                                            $  8.5
         Inventory                                                        20.9
         Fixed assets                                                     22.3
         Trade name                                                       44.3
         Assembled work force                                              2.9
         Excess of cost over fair value of assets acquired (goodwill)     30.8
         Accounts payable                                                  5.3
         Accrued liabilities                                               5.1

     Excess purchase price over fair market value of the underlying assets was
allocated to goodwill, trade name and assembled work force and is being
amortized on a straight-line basis over lives ranging from fifteen to thirty
years (Note 2).

     The purchase was financed by the issuance of $115.0 million 10.75% Senior
Notes Due 2006 (the "Senior Notes") and an initial borrowing under a five-year,
$75.0 million, revolving bank credit facility. In addition, borrowings under the
bank facility were used to extinguish all existing indebtedness of the Company,
with the exception of outstanding industrial revenue bonds and certain capital
lease obligations (Notes 5, 7 and 9).

     Following is selected unaudited pro forma combined results of operations
for the fiscal years ended March 6, 1999 and February 27, 1998, assuming that
the two companies had been combined for accounting purposes as of the beginning
of fiscal 1998. All necessary adjustments based on the allocated purchase price
of net assets acquired and eliminations for transactions between Fresh Foods,
Inc. and Pierre Foods have been reflected in the pro forma calculations.
However, the pro forma amounts are not necessarily indicative of the actual
results of operations had the two companies been combined at the beginning of
the years presented.


                                       F-7


<PAGE>   37

<TABLE>
<CAPTION>
                                                    Fiscal Years Ended
                                              --------------------------------
                                              March 6, 1999  February 27, 1998
                                              -------------  -----------------
                                    (Unaudited, In Thousands, Except Per Share Data)
<S>                                             <C>            <C>

Total operating revenues                        $ 185,719      $ 177,102
Operating income                                   11,150          3,632
Loss from continuing operations                 $  (3,795)     $  (7,569)

Loss per share from continuing operations -
       basic and diluted                        $    (.65)     $   (1.34)
</TABLE>


     Disposition of Mom 'n' Pop's Country Ham, LLC. Effective July 2, 1999, the
Company sold Mom 'n' Pop's Country Ham, LLC, its ham curing business, to the
management group of that subsidiary that includes the Chairman of the Board for
$995,000. Under the terms of the sale agreement, the Company received cash of
$9,950 and an 8%, unsecured $985,050 note, due December 31, 1999. In addition,
the Company agreed to provide an 8%, $500,000 unsecured working capital line of
credit through December 31, 1999. As part of the sale transaction, the Company,
on behalf of Mom 'n' Pop's Country Ham, LLC, paid $490,178 for a non-compete and
consulting agreement with a former executive officer of the subsidiary. In
addition, the executive officer received severance benefits totaling $357,583 as
a result of the disposal of this business. As a result of this sale, the Company
recorded a loss on disposition of $2,857,160. At March 4, 2000, all outstanding
principal amounts and accrued interest under the note and working capital line
were paid in full. The ham curing business did not qualify for discontinued
operations presentation.

     Disposition of the Restaurant Segment. On September 10, 1999, the Company
signed an agreement to sell substantially all of its restaurant operations and
thereby committed itself to disposing of its restaurant segment in a transaction
completed on October 8, 1999. Under the terms of the agreement, the buyer,
Carousel Capital Partners, L.P., acquired Claremont Restaurant Group, LLC
("Claremont Restaurant Group"), as well as non-compete and consulting contracts
with certain key restaurant executives in exchange for a cash purchase price of
$49,796,904, subject to adjustments. Cash proceeds were used for payments to key
restaurant executives for severance, consulting, and noncompete agreements
totaling $2,015,361, payments of bonuses to certain restaurant employees
totaling $333,868 and payments of investment banking, legal, and accounting fees
totaling $1,756,167 to arrive at net cash proceeds of $45,691,508. As of October
8, 1999, the net book value of Claremont Restaurant Group was $34,074,024,
resulting in a gain of $11,617,484. In addition, at the time of the sale, the
Company accelerated vesting of stock options for all restaurant employees,
resulting in the recognition of a charge totaling $207,314, which reduced the
net gain to $11,410,170.

         Coinciding with the transaction discussed above, on October 3, 1999 the
Company sold the net assets of its one Bennett's restaurant operation to certain
members of management for a cash purchase price of $1,100,000. Net cash proceeds
received after payment of legal and other fees totaled $1,080,083, resulting in
a net gain of $522,210 from the sale.

         In addition, on September 14, 1999 the Company sold five former
restaurant properties and one tract of vacant land, with a combined book value
of $2,433,482, to an entity in which a former officer and principal shareholder
is a minority investor, for a net cash purchase price of $938,585. This
transaction was completed under an agreement entered into earlier during the
fiscal year and was contingent upon the sale of Claremont Restaurant Group.
Under the terms of the initial agreement, all non-operating restaurant
properties, consisting of seven former restaurant locations and three tracts of
undeveloped land with a total book value of $3,620,842, were offered for sale at
an aggregate price of $2,635,000. The agreement further specified that the cash
proceeds from the sale of any of these properties to third parties prior to the
sale of Claremont Restaurant Group would reduce the purchase price of the
remaining pool of properties on a dollar-for-dollar basis, subject to the sale
of Claremont Restaurant Group. Prior to the sale, four of the properties, with a
book value totaling $1,187,359, were sold to unrelated third parties for cash
totaling $1,557,065. Due to the nature of this transaction, gross gains totaling
$369,706 were netted with the loss recorded from the sale of the remaining real
estate occurring on September 14, 1999. Net cash proceeds from these
transactions, after legal fees and other settlement costs of $32,428, totaled
$2,463,223, resulting in a net loss of $1,157,619.


                                       F-8

<PAGE>   38

         Due to the disposition of all assets and liabilities relating to
Claremont Restaurant Group, the results of the restaurant segment have been
reported separately as discontinued operations in the consolidated statements of
operations. Operating results prior to the measurement date of September 10,
1999 are presented in "Income From Discontinued Restaurant Segment". The
operating loss subsequent to the measurement date through the date of disposal
was $4,510 and is included in "Gain on Disposal of Discontinued Restaurant
Segment", along with the gains and losses discussed above. The results of the
discontinued operations do not reflect any interest expense or management fees
allocated by the Company. In addition, the results of discontinued operations
exclude transaction success bonuses paid to certain corporate officers totaling
$3,102,689, as well as amounts totaling $1,389,503 paid to the Company's former
Chairman under a severance, consulting, and noncompete agreement as part of the
sale (Note 16). Prior year consolidated financial statements have been
reclassified to present Claremont Restaurant Group as a discontinued operation.

     Net revenues and income from discontinued operations are as follows:


<TABLE>
<CAPTION>
                                              Fiscal Years Ended
                                -------------------------------------------------
                                March 4, 2000   March 6, 1999   February 27, 1998
                                 -----------     ------------     ------------
<S>                              <C>             <C>              <C>

Net operating revenues           $59,583,905     $101,440,315     $ 91,261,985
                                 ===========     ============     ============

Operating profit                   4,502,401        7,161,985        9,125,240
Other (income) expense, net          167,005          551,322         (650,470)
Income tax provision               1,507,029        2,325,555        3,654,701
                                 -----------     ------------     ------------

Income from discontinued
     restaurant segment          $ 2,828,367     $  4,285,108     $  6,121,009
                                 ===========     ============     ============


Pretax gain on disposal of
     discontinued restaurant
     segment                     $10,770,251     $         --     $         --
Income tax provision               3,968,525               --               --
                                 -----------     ------------     ------------

Gain on disposal of
     discontinued restaurant
     segment                     $ 6,801,726     $         --     $         --
                                 ===========     ============     ============
</TABLE>


     Corporate Reorganization. On December 31, 1999, the Company completed a
reorganization which merged Pierre Foods, LLC and Pierre Leasing, LLC into Fresh
Foods, Inc. Subsequent to the reorganization, Fresh Foods Properties, LLC is the
only subsidiary of Fresh Foods, Inc.


                                       F-9


<PAGE>   39

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Principles of Consolidation. The accompanying consolidated financial
statements include Fresh Foods, Inc. and subsidiaries. All intercompany
transactions have been eliminated.

     Fiscal Year. The Company reports the results of operations using a 52-53
week basis. As a result of the Pierre acquisition, described in Note 1, the
Company changed its interim fiscal periods to conform with standard food
processing industry interim periods. Each quarter of the fiscal year will
contain 13 weeks except for the infrequent fiscal years with 53 weeks. Prior to
the change in interim periods the Company reported the results of operations
based on quarters of 12, 12, 12 and 16 weeks. In order to adopt this new interim
calendar, the fiscal year ended March 6, 1999 contains 53 weeks. Fiscal 2000 and
fiscal 1998 represent 52 week periods.

     The Company's fiscal year ended March 4, 2000 is referred to herein as
"fiscal 2000," its fiscal year ended March 6, 1999 is referred to herein as
"fiscal 1999," and its fiscal year ended February 27, 1998 is referred to herein
as "fiscal 1998."

     Cash and cash equivalents. The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.

     Inventories. Inventories are stated at the lower of cost (first-in,
first-out) or market.

     Property, Plant and Equipment. Property, plant and equipment are stated at
cost. Expenditures for maintenance and repairs which do not significantly extend
the useful lives of assets are charged to operations whereas additions and
betterments, including interest costs incurred during construction, which was
not material for any year presented, are capitalized.

     Depreciation of property, plant and equipment is provided over the
estimated useful lives of the respective assets on the straight-line basis.
Leasehold improvements are depreciated over the shorter of their estimated
useful lives or the terms of the respective leases. Property under capital
leases is amortized in accordance with the Company's normal depreciation policy.
Depreciation expense along with amortization of intangible assets is recorded as
a separate line item in the consolidated statements of operations. Cost of goods
sold and selling, general and administrative expenses exclude depreciation
expense.

     The Company evaluates the carrying values of long-lived assets for
impairment by assessing recoverability based on forecasted operating cash flows
on an undiscounted basis, and determined no impairment charge was necessary at
March 4, 2000.

     Properties Held for Sale. Properties held for sale at March 6, 1999, which
included real properties and certain undeveloped land of the restaurant segment,
were carried at the lesser of historical cost less accumulated depreciation or
estimated fair value less estimated selling costs.

     Intangible Assets. Intangible assets consist of the excess of cost over the
fair value of net assets of businesses acquired, assembled workforce and trade
name. The Company assesses recoverability of the excess cost over the assigned
value of net assets acquired by determining whether the amortization of the
balance over its remaining life can be recovered through the undiscounted future
operating cash flows of the acquired operations.

The estimated lives of the intangible assets are as follows:

     Excess of cost over fair value of net assets acquired        15 - 30 years
     Trade name                                                        30 years
     Assembled workforce                                               15 years

                                      F-10


<PAGE>   40

     Revenue Recognition. Revenue from sales of food processing products are
recorded at the time the goods are shipped and title passes. Revenue is
recognized as the net amount to be received after deductions for estimated
discounts and product returns.

     Advertising Costs. The Company expenses advertising costs as incurred.
Advertising expense included in continuing operations for fiscal 2000, fiscal
1999 and fiscal 1998 was $994,334, $435,976 and $650,188, respectively.

     Income Taxes. Income taxes are provided for temporary differences between
the tax and financial accounting bases of assets and liabilities using the asset
and liability method. The tax effects of such differences are reflected in the
balance sheet at the enacted tax rate applicable to the years when such
differences are scheduled to reverse. The effect on deferred taxes of a change
in tax rates is recognized in the period that includes the enactment date.

     Reclassifications. Financial statements for fiscal 1999 and 1998 have been
reclassified, where applicable, to conform to the financial statement
presentation used in fiscal 2000.

     Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Significant accounting estimates at March 4, 2000
and March 6, 1999 include sales discounts and promotional allowances, inventory
reserves, insurance reserves, and useful lives assigned to intangible assets.
Actual results could differ from those estimates.

     New Accounting Pronouncement. In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards "SFAS" No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 establishes accounting and reporting standards for derivative financial
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as embedded derivatives) and for hedging
activities. The new standard requires an entity to recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. SFAS No. 133 was amended by SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133," which delays the Company's effective
date until the first quarter of the fiscal year ending March 2, 2002. Management
is currently evaluating the effects of SFAS No. 133 on the Company's financial
statements and current disclosures.

                                      F-11

<PAGE>   41

3.     ACCOUNTS AND NOTES RECEIVABLE

       Accounts and notes receivable consist of the following:

<TABLE>
<CAPTION>
                                                                         March 4,       March 6,
                                                                           2000           1999
                                                                       -----------     -----------
<S>                                                                    <C>             <C>
Accounts receivable:
   Trade accounts receivable (less allowance for doubtful receivables
      of $114,661 and $158,790 at March 4, 2000 and March 6, 1999)     $16,398,631     $17,387,293
   Franchisees (less allowance for doubtful receivables of $35,000
      at March 6, 1999)                                                     50,000         200,060
   Other                                                                   681,190         651,652
                                                                       -----------     -----------
                                                                        17,129,821      18,239,005
   Related parties (Note 16)                                               292,990         326,147
                                                                       -----------     -----------
          Total accounts receivable                                    $17,422,811     $18,565,152
                                                                       ===========     ===========

Notes receivable:
   Related parties; interest rates 8.25% to 9.0%  (Note 16)            $   857,949     $ 1,299,731
   Less current portion                                                    152,456         280,964
                                                                       -----------     -----------
   Noncurrent notes receivable - related parties                           705,493       1,018,767
                                                                       -----------     -----------

   Notes receivable - other; interest rates 8.5% to 9.5% (less
      allowance for doubtful receivables of $47,676 in 1999)                86,057         190,031
   Less current portion                                                     86,057         135,811
                                                                       -----------     -----------
   Noncurrent notes receivable - other                                          --          54,220
                                                                       -----------     -----------
          Total noncurrent notes receivable                            $   705,493     $ 1,072,987
                                                                       ===========     ===========
</TABLE>


       See Note 16 regarding a $5,000,000 note receivable from a significant
       shareholder presented as a reduction of shareholders' equity.


4.     INVENTORIES

       A summary of inventories, by major classification, follows:

                                   March 4,         March 6,
                                    2000             1999
                                 -----------     -----------

Manufacturing supplies           $ 1,149,107     $ 1,299,177
Raw materials                      3,857,801       4,553,087
Work in process                           --       1,008,315
Finished goods                    20,018,513      22,776,027
Restaurant food and supplies              --         793,876
                                 -----------     -----------
       Total                     $25,025,421     $30,430,482
                                 ===========     ===========



                                      F-12
<PAGE>   42

5.    PROPERTY, PLANT AND EQUIPMENT

      The major components of property, plant and equipment are as follows:

<TABLE>
<CAPTION>
                                                    Estimated        March 4,         March 6,
                                                   Useful Life         2000             1999
                                                   -----------     ------------     ------------
<S>                                                <C>             <C>              <C>

Land                                                               $  1,270,025     $  8,717,431
Land improvements                                  10-20 years          382,304        2,030,307
Buildings                                          20-40 years       15,661,100       31,003,329
Leasehold improvements                             5-20 years           660,598       10,819,557
Machinery and equipment                            5-20 years        27,770,877       40,468,872
Machinery and equipment under capital leases       5-15 years           763,517        1,417,541
Furniture and fixtures                             5-15 years         3,451,153        8,591,112
Automotive equipment                               2-5 years            472,307          598,789
Construction in progress                                                279,891        1,544,373
                                                                   ------------     ------------
      Total                                                          50,711,772      105,191,311
Less accumulated depreciation and amortization                       14,926,953       30,191,917
                                                                   ------------     ------------
Property, plant and equipment, net                                 $ 35,784,819     $ 74,999,394
                                                                   ============     ============
</TABLE>

6.    INTANGIBLE ASSETS

     Intangible assets consist of the following:

<TABLE>
<CAPTION>
                                                                          March 4,          March 6,
                                                                            2000              1999
                                                                        ------------      ------------
<S>                                                                     <C>               <C>

Trade name                                                              $ 44,340,000      $ 44,340,000
Less accumulated amortization                                             (2,575,364)       (1,097,364)
                                                                        ------------      ------------
                                                                        $ 41,764,636      $ 43,242,636
                                                                        ============      ============

Excess of cost over fair value of net assets of businesses acquired     $ 30,678,287      $ 34,250,980
Less accumulated amortization                                             (1,784,564)       (1,627,580)
                                                                        ------------      ------------
                                                                        $ 28,893,723      $ 32,623,400
                                                                        ============      ============

Non-compete agreement                                                   $         --      $    888,750
Assembled workforce                                                        2,893,000         2,893,000
                                                                        ------------      ------------
      Total other intangible assets                                        2,893,000         3,781,750
Less accumulated amortization                                               (336,064)         (261,697)
                                                                        ------------      ------------
                                                                        $  2,556,936      $  3,520,053
                                                                        ============      ============
</TABLE>



                                      F-13
<PAGE>   43

7.   FINANCING ARRANGEMENTS

     Long-term debt is comprised of the following:

<TABLE>
<CAPTION>
                                                                     March 4,         March 6,
                                                                       2000             1999
                                                                   ------------     ------------
<S>                                                                <C>              <C>
10.75% Senior Notes, interest payable on June 1 and December 1 of
  each year, maturing on June 1, 2006                              $115,000,000     $115,000,000

Revolving line of credit, maximum borrowings of $75.0 million,
  with interest at floating rates                                            --       29,000,000

Variable rate Industrial Revenue Bonds maturing in 2005,                     --        2,102,500
   paid in full during fiscal 2000

9.25% to 11.5% capitalized lease obligations maturing
  2004 (Note 9)                                                         479,355          837,180
                                                                   ------------     ------------
     Total long-term debt                                           115,479,355      146,939,680
     Less current installments                                          314,433          673,752
                                                                   ------------     ------------
Long-term debt, excluding current installments                     $115,164,922     $146,265,928
                                                                   ============     ============
</TABLE>

         The average rate on the $75 million revolving line of credit was 8.27%
for the fiscal year ended March 4, 2000, and 8.26% for the fiscal year ended
March 6, 1999.

         The Senior Notes are unsecured obligations of the Company,
unconditionally guaranteed on a senior unsecured basis by all existing
subsidiaries of the Company, subject to certain financial and non-financial
covenants. At March 4, 2000, the Company was in compliance with all covenants
under the Senior Notes.

         At March 4, 2000, the Company was not in compliance with the financial
covenant relating to fixed charges under the $75 million revolving credit
facility. Therefore, the Company had no availability for borrowing under this
credit facility. Effective May 30, 2000 the Company terminated the $75 million
credit facility which will result in the recognition of an extraordinary loss in
the first quarter of fiscal 2001 of approximately $450,000, net of income taxes
of approximately $250,000.

         Effective May 24, 2000, subject to certain closing conditions, the
Company obtained a three-year variable rate $25 million revolving credit
facility which provides that the Company will be able to borrow up to an amount
(including standby letters of credit up to $5.0 million) equal to the lesser of
$25.0 million less required minimum availability or a borrowing base (comprised
of eligible accounts receivable and inventory). Funds available under the
revolving credit facility may be used for general working capital needs. In
addition, the Company will be required to meet certain financial covenants
regarding net worth, cash flow and restricted payments, including a prohibition
against dividend payouts.

         Long-term debt maturities, including capital leases (Note 9),
subsequent to March 4, 2000, are as follows:

      Fiscal Year     Amount
      ----------- ------------
      2001        $    314,433
      2002              67,631
      2003              49,686
      2004              46,066
      2005               1,539
      2006         115,000,000
                  ------------
         Total    $115,479,355
                  ============


                                      F-14
<PAGE>   44
8.      INCOME TAXES

        The income tax benefit attributable to continuing operations is
summarized as follows:


<TABLE>
<CAPTION>
                                                                       FISCAL YEARS ENDED
                                                         ----------------------------------------------
                                                           MARCH 4,        MARCH 6,        FEBRUARY 27,
                                                             2000             1999             1998
                                                         -----------      -----------      -----------
<S>                                                      <C>              <C>              <C>

Current:
    Federal                                              $(5,477,218)     $   788,314      $(2,880,125)
    Charge equivalent to tax benefit of stock option
        exercises                                                 --               --        3,100,421
    State                                                    191,094          (87,467)         (25,525)
                                                         -----------      -----------      -----------
      Total current                                       (5,286,124)         700,847          194,771
                                                         -----------      -----------      -----------

Deferred:
    Federal                                                 (404,262)      (1,427,927)      (1,753,116)
    State                                                    865,218          114,195         (368,348)
                                                         -----------      -----------      -----------
      Total deferred                                         460,956       (1,313,732)      (2,121,464)
                                                         -----------      -----------      -----------
      Total benefit                                      $(4,825,168)     $  (612,885)     $(1,926,693)
                                                         ===========      ===========      ===========
</TABLE>


         Actual income tax benefits are different from amounts computed by
applying a statutory federal income tax rate to loss before income tax from
continuing operations. The computed amount is reconciled to total income tax
benefit from continuing operations as follows:


<TABLE>
<CAPTION>
                                                                      FISCAL YEARS ENDED
                                       ----------------------------------------------------------------------------------
                                             MARCH 4, 2000               MARCH 6, 1999              FEBRUARY 27, 1998
                                       -------------------------   ------------------------    --------------------------

                                                     PERCENT OF                 PERCENT OF                    PERCENT OF
                                          AMOUNT     PRETAX LOSS     AMOUNT     PRETAX LOSS       AMOUNT      PRETAX LOSS
                                       -----------   -----------   -----------  -----------    -----------    -----------
<S>                                    <C>              <C>        <C>              <C>        <C>              <C>
Computed benefit at statutory rate     $(6,480,310)     (34.0)%    $  (816,952)     (34.0)%    $(1,971,219)     (34.0)%
Tax effect resulting from:
     State income taxes, net of
        federal tax benefit                790,493       4.1            17,641       0.7            29,876       0.5
     Compensation limitation               833,752       4.4                --        --                --        --
     Meals and entertainment                90,648       0.5           138,962       5.8            27,938       0.5
     Other permanent differences           (59,751)     (0.3)           47,464       2.0           (13,288)     (0.2)
                                       -----------      ----       -----------      ----       -----------      ----
     Income tax benefit                $(4,825,168)     (25.3)%    $  (612,885)     (25.5)%    $(1,926,693)     (33.2)%
                                       ===========      ====       ===========      ====       ===========      ====
</TABLE>



                                      F-15
<PAGE>   45

8.    INCOME TAXES, CONTINUED

        The approximate tax effect of each type of temporary difference and
carryforward that gave rise to the Company's deferred income tax assets and
liabilities for fiscal 2000 and fiscal 1999 is as follows:


<TABLE>
<CAPTION>
                                                        MARCH 4, 2000                                 MARCH 6, 1999
                                         ------------------------------------------     -------------------------------------------
                                            ASSETS      LIABILITIES        TOTAL          ASSETS        LIABILITIES        TOTAL
                                         -----------    -----------     -----------     -----------     -----------     -----------
<S>                                      <C>            <C>             <C>             <C>             <C>             <C>

Current:
    Allowance for doubtful receivables   $    56,037    $        --     $    56,037     $    88,652     $        --     $    88,652
    Inventory                                852,219             --         852,219         908,691              --         908,691
    Accrued promotional expense              684,792             --         684,792         646,673              --         646,673
    Accrued vacation pay                     378,650             --         378,650         434,474              --         434,474
    Reserve for returns                       73,743             --          73,743          41,017              --          41,017
    Reserves - other                          58,195             --          58,195              --              --              --
    Prepaid expenses                              --        (91,239)        (91,239)             --        (182,903)       (182,903)
    VEBA costs                                    --             --              --         150,598              --         150,598
    Accrued bonus                             48,534             --          48,534         212,740              --         212,740
    Accrued worker's compensation            144,992             --         144,992         252,486              --         252,486
    Other                                     84,438             --          84,438         169,667              --         169,667
                                         -----------    -----------     -----------     -----------     -----------     -----------
           Total current                   2,381,600        (91,239)      2,290,361       2,904,998        (182,903)      2,722,095
                                         -----------    -----------     -----------     -----------     -----------     -----------

Noncurrent:
    Property, plant and equipment                 --     (2,476,686)     (2,476,686)             --      (2,339,050)     (2,339,050)
    Basis write-up (reorganization)               --             --              --          73,002              --          73,002
    Consulting agreements                    608,976             --         608,976              --              --              --
    Earnings in unconsolidated
      subsidiaries                                --             --              --          24,255              --          24,255
    Goodwill amortization                         --     (1,620,144)     (1,620,144)             --        (704,512)       (704,512)
    General business credit
      carryforward                           932,546             --         932,546         531,798              --         531,798
    Alternative minimum tax credit
      carryforward                           295,847             --         295,847         282,932              --         282,932
    Federal loss carryforward                728,369        728,369
    State loss carryforward                   28,934             --          28,934         602,580              --         602,580
    Other                                     15,024             --          15,024              --              --              --
    Less valuation allowance                      --             --              --        (381,473)             --        (381,473)
                                         -----------    -----------     -----------     -----------     -----------     -----------
           Total noncurrent                2,609,696     (4,096,830)     (1,487,134)      1,133,094      (3,043,562)     (1,910,468)
                                         -----------    -----------     -----------     -----------     -----------     -----------
           Total current and
             noncurrent                  $ 4,991,296    $(4,188,069)    $   803,227     $ 4,038,092     $(3,226,465)    $   811,627
                                         ===========    ===========     ===========     ===========     ===========     ===========
</TABLE>


         At March 4, 2000, state operating loss carryovers of approximately
$600,000 are available to offset future federal and state taxable income. The
carryover periods range from five to twenty years, which will result in
expirations of varying amounts beginning in fiscal 2005 and continuing through
fiscal 2021.

        No valuation allowance has been provided as of March 4, 2000 because
management believes that it is more likely than not that the deferred tax assets
will be realized.



                                      F-16
<PAGE>   46

9.    LEASED PROPERTIES

         The Company operates certain machinery and equipment under leases
classified as capital leases. The machinery and equipment leases have original
terms ranging from one to eight years. The assets covered under these leases
have carrying values of $394,810, $1,022,457 and $1,260,770 at March 4, 2000,
March 6, 1999 and February 27, 1998, respectively.

         Certain machinery and equipment are under operating leases with terms
that are effective for varying periods until 2006. Certain of these leases have
remaining renewal clauses, exercisable at the option of the lessee. Leases with
related parties are discussed in Note 16.

        At March 4, 2000, minimum rental payments required under operating and
capital leases are summarized as follows:

<TABLE>
<CAPTION>
                                                   Operating Leases
                                      ---------------------------------------------
                                                         Minimum
                                        Minimum          Sublease                         Capital
Fiscal Year                             Payments         Receipts          Total          Leases           Total
-----------                           -----------      -----------      -----------     -----------     -----------
<S>                                   <C>              <C>              <C>             <C>             <C>
2001                                  $   908,101      $   (34,260)     $   873,841     $   348,617     $ 1,222,458
2002                                      680,719          (34,260)         646,459          79,739         726,198
2003                                      503,159          (34,260)         468,899          56,980         525,879
2004                                      498,338          (34,260)         464,078          48,582         512,660
2005                                      468,360          (34,260)         434,100           1,563         435,663
Later years                               182,191          (82,795)          99,396              --          99,396
                                      -----------      -----------      -----------     -----------     -----------
Total minimum lease payments          $ 3,240,868      $  (254,095)     $ 2,986,773         535,481     $ 3,522,254
                                      ===========      ===========      ===========                     ===========
Less amount representing interest                                                           (56,126)
                                                                                        -----------
Present value of minimum lease
   payments under capital leases
   (Note 7)                                                                             $   479,355
                                                                                        ===========
</TABLE>


     Rental expense charged to continuing operations is as follows:

                            Fiscal Year Ended
                -----------------------------------------
                 March 4,       March 6,      February 27,
                   2000           1999           1998
                ----------     ----------     ----------
Real estate     $  251,340     $  147,756     $       --
Equipment          808,164        738,622        293,224
                ----------     ----------     ----------
Total           $1,059,504     $  886,378     $  293,224
                ==========     ==========     ==========


                                      F-17
<PAGE>   47

10.   EMPLOYEE BENEFITS

     On March 1, 1994, the Company established an employee stock purchase plan
through which employees, after meeting minimum eligibility requirements, may
contribute up to 10% of their base earnings toward the purchase of the Company's
common stock. The plan provides that the Company will make matching
contributions of 25% of the employee's contribution. Participation in the plan
is voluntary. All contributions are funded monthly and vest immediately. The
Company's contributions to the plan included in continuing operations totaled
$82,707, $5,937 and $8,614 in fiscal 2000, 1999 and 1998, respectively.

     The Company maintains a 401(k) Retirement Plan for its employees which
provides that the Company will make a matching contribution of up to 50% of an
employee's voluntary contribution, limited to the lesser of 4% of that
employee's annual compensation or $10,500 for fiscal 2000. The Company's
contributions included in continuing operations were $352,773, $243,578 and
$45,067 in fiscal 2000, 1999 and 1998, respectively.

     The Company provides employee health insurance benefits to employees.
During fiscal 2000, 1999 and 1998, benefits were provided through a Voluntary
Employee Benefit Association ("VEBA") which is partially funded by the Company,
and through both fully insured and self insurance group medical plans which are
partially funded by the Company. During fiscal 2000, 1999 and 1998,
contributions included in continuing operations were $1,844,874, $2,126,292 and
$396,970, respectively.

                                      F-18


<PAGE>   48

11.     CAPITAL STOCK

STOCK OPTIONS

         The Company's 1987 Incentive Stock Option Plan, as amended, provides
for the issuance of up to 625,000 shares of the Company's common stock to key
employees, including officers of the Company. The Company may grant Incentive
Stock Options ("ISOs") or nonqualified stock options to eligible employees.
Stock options granted under this plan have terms of ten years, vest evenly over
five years, and are assigned an exercise price of not less than the fair value
on the date of grant.

         The Company's 1987 Special Stock Option Plan, as amended, provides for
the issuance of up to 625,000 shares of the Company's common stock to key
management employees, including officers and directors of the Company and
certain other individuals. All options granted under this Plan are nonqualified
stock options. Stock options granted under this plan have terms of ten years,
vest immediately, and are assigned an exercise price of not less than the fair
value on the date of grant.

         The Company's 1997 Incentive Stock Option Plan, as amended, provides
for the issuance of up to 1,000,000 shares of the Company's common stock to key
employees, including officers of the Company. The Company may grant Incentive
Stock Options ("ISOs") or nonqualified stock options to eligible employees.
Stock options granted under this plan have terms of ten years, vest evenly over
five years, and are assigned an exercise price of not less than the fair value
on the date of grant.

         The Company's 1997 Special Stock Option Plan, as amended, provides for
the issuance of up to 1,500,000 shares of the Company's common stock to key
management employees, including officers and directors of the Company and
certain other individuals. All options granted under this Plan are nonqualified
stock options. Stock options granted under this plan have terms of ten years,
vest immediately, and are assigned an exercise price of not less than the fair
value on the date of grant.

         During fiscal 1999, the Company repriced certain of its outstanding
options to $10.50, the fair market value on the date of repricing. All options
with an exercise price in excess of $10.50 were repriced.

      During fiscal 2000, certain current and former officers and directors of
the Company voluntarily tendered 150,000 stock options of the Incentive Stock
Option Plan and 1,000,000 stock options of the Special Stock Option Plan for
cancellation.

        A summary of the changes in shares under option and the weighted-average
exercise prices for these Plans follows:


<TABLE>
<CAPTION>
                                       1987 AND 1997 INCENTIVE          1987 AND 1997 SPECIAL
                                         STOCK OPTION PLANS              STOCK OPTION PLANS
                                     ---------------------------    ---------------------------
                                                      WEIGHTED                      WEIGHTED
                                                      AVERAGE                       AVERAGE
                                       SHARES     EXERCISE PRICE     SHARES      EXERCISE PRICE
                                     ---------------------------    ---------------------------
<S>                                  <C>              <C>           <C>              <C>
Balance at February 28, 1997           340,335        $12.43          487,500        $ 3.36
     Forfeited or cancelled            (51,662)        14.40               --            --
     Issued                            157,566         15.81          875,000         16.00
     Exercised                         (78,500)         4.63         (312,500)         3.03
                                     ---------                      ---------
Balance at February 27, 1998           367,739         11.92        1,050,000         13.99
     Forfeited or cancelled *         (617,285)        15.47       (1,075,000)        16.00
     Issued *                        1,077,969         11.93        1,275,000         11.36
     Exercised                         (15,625)         5.20               --            --
                                     ---------                      ---------
Balance at March 6, 1999               812,798          9.37        1,250,000          9.50
     Forfeited or cancelled           (457,919)         9.07       (1,000,000)        10.27
     Issued                            166,671          5.76               --            --
     Exercised                         (39,375)         5.20               --            --
                                     ---------                      ---------
Balance at March 4, 2000               482,175          8.75          250,000          6.84
                                     =========                      =========
</TABLE>

*        Includes 584,402 Incentive Stock Options and 1,075,000 Special Stock
         Options repriced on August 27, 1998.



                                      F-19
<PAGE>   49

11.    CAPITAL STOCK, CONTINUED

       A summary of the range of weighted average exercise prices and weighted
average remaining contractual lives for options outstanding under the Plans at
March 4, 2000 is as follows:

<TABLE>
<CAPTION>
                                                      Weighted                      Average
                                                      Average         Shares      Contractual
                                                    Exercise Price  Outstanding      Life
                                                    --------------  -----------   -----------
<S>                                                      <C>          <C>         <C>
1987 and 1997 Special Stock Option Plans ..........      $ 2.90        12,500      10 months
                                                         $ 3.20       112,500      22 months
                                                         $10.50       125,000     100 months

1987 and 1997 Incentive Stock Option Plans ........      $ 5.20         6,875       1 month
                                                         $10.50       312,000      61 months
                                                         $ 5.13        47,500      52 months
                                                         $ 5.75       112,500      37 months
                                                         $ 5.38         1,500     111 months
                                                         $ 6.75         1,800     117 months
</TABLE>

       A summary of the number of shares exercisable and the weighted average
exercise price at March 4, 2000 is as follows:

<TABLE>
<CAPTION>
                                                                              Weighted
                                                                 Shares       Average
                                                              Exercisable  Exercise Price
                                                             ------------- --------------
<S>                                                               <C>             <C>
1987 and 1997 Special Stock Option Plans ................         125,000         $ 3.17
                                                                  125,000         $10.50
                                                             ------------- --------------
                                                                  250,000         $ 6.84
                                                             ============= ==============


1987 and 1997 Incentive Stock Option Plans ..............           6,875         $ 5.20
                                                                  198,775         $10.50
                                                             ------------- --------------
                                                                  205,650         $10.32
                                                             ============= ==============
</TABLE>

         The Company accounts for its stock option plans using the intrinsic
value based method. Accordingly, no compensation expense was recognized for
stock-based compensation relating to options granted in fiscal 2000, 1999 and
1998 since the exercise price of the options approximated the fair market value
on the date of grant. Had compensation for stock options granted been determined
using the fair value based method, the Company's net income (loss) and net
income (loss) per common share amounts for fiscal 2000, 1999 and 1998 would
approximate the following pro forma amounts:

<TABLE>
<CAPTION>
                                                                                FISCAL YEARS ENDED
                                             -------------------------------------------------------------------------------------
                                                      MARCH 4, 2000                MARCH 6, 1999             FEBRUARY 27, 1998
                                             ----------------------------    -------------------------   -------------------------
                                             AS REPORTED      PRO FORMA      AS REPORTED    PRO FORMA    AS REPORTED    PRO FORMA
                                             ------------    ------------    -----------   -----------   -----------   -----------
<S>                                          <C>             <C>             <C>           <C>           <C>           <C>
Loss from continuing operations              $(14,234,567)   $(15,363,122)   $(1,789,916)  $(3,743,044)  $(3,871,009)  $(8,521,445)
Income from discontinued operations             9,630,093       9,051,558      4,285,108     4,016,347     6,121,009     5,663,935
Extraordinary loss                                (52,350)        (52,350)       (64,335)      (64,335)           --            --
                                             ------------    ------------    -----------   -----------   -----------   -----------
Net income (loss)                            $ (4,656,824)   $ (6,363,914)   $ 2,430,857   $   208,968   $ 2,250,000   $(2,857,510)
Net income (loss) per common share --
       basic and diluted:
   Loss from continuing operations           $      (2.45)   $      (2.65)   $     (0.30)  $     (0.63)  $     (0.68)  $     (1.51)
   Income from discontinued operations               1.66            1.56           0.72          0.68          1.08          1.00
   Extraordinary loss                               (0.01)          (0.01)         (0.01)        (0.01)           --            --
                                             ------------    ------------    -----------   -----------   -----------   -----------
   Net income (loss)                         $      (0.80)   $      (1.10)   $      0.41   $      0.04   $      0.40   $     (0.51)
Weighted average fair value of the options                           6.04                         5.18                        9.08
</TABLE>



                                      F-20
<PAGE>   50

11.      CAPITAL STOCK, CONTINUED

       The fair value of options granted under the Company's stock option plans
during fiscal 2000, 1999 and 1998 were estimated on the date of grant using the
Black-Scholes option pricing model.

       The weighted-average assumptions used were as follows:

<TABLE>
<CAPTION>
                                MARCH 4, 2000      MARCH 6, 1999    FEBRUARY 27, 1998
                                -------------      -------------    -----------------
<S>                                 <C>               <C>               <C>
Dividend yield ........               --                --                --
Expected volatility ...             62.6%             66.6%             35.0%
Risk free interest rate              6.0%              5.0%              6.6%
Expected lives ........              3.5               3.5               5.3
</TABLE>

        Contributed capital increased $3,100,421 in fiscal 1998 representing
the income tax benefits the Company realized from stock options exercised during
fiscal 1998. In fiscal 2000, contributed capital increased $345,970, due to
accelerated vesting of stock options resulting from the dispositions of the
restaurant segment and the ham curing business.


SHAREHOLDER RIGHTS PLAN

       In fiscal 1998, the Company adopted a shareholder rights plan pursuant to
which the holder of each share of Company common stock also holds a stock
purchase right ("Right") that may be exercised for Company preferred stock or
Company common stock upon the occurrence of certain "triggering events"
specified in a Rights Agreement dated as of September 2, 1997 between the
Company and American Stock Transfer and Trust Company.

         On August 28, 1997, the Company's Board of Directors declared a
dividend distribution of one Right for each share of the Company's common stock
to the Company's shareholders of record at the close of business on September
10, 1997. Each Right entitles the record holder to purchase from the Company one
one-hundredth of a share of Junior Participating Preferred Stock, Series A, of
the Company at a purchase price of $30. The Rights are attached to the Company's
common stock and are not exercisable except under the limited circumstances set
forth in the Rights Agreement relating to the acquisition of, or the
commencement of a tender offer for, 15% or more of the Company's common stock.
The Rights may be redeemed at a price of $.001 per Right by the Company any time
prior to any person or group acquiring 15% or more of the Company's common stock
and will expire on September 10, 2007. Until the Rights separate from the
Company's common stock, each newly-issued share of such common stock will have a
Right attached. The Rights do not have voting or dividend rights.

PREFERRED STOCK

         The Company is authorized to issue 2,500,000 shares of preferred stock
with a par value of $.10 per share in one or more series. All rights and
preferences of each series are to be established by the Company prior to
issuance. There are no issues of this class of stock outstanding as of March 4,
2000.

COMMON STOCK REPURCHASE

         On December 21, 1999, the Company signed an agreement with a
shareholder which finalized an agreement in principal reached on November 16,
1999. Under the terms of the agreement, the Company agreed to purchase from the
shareholder 68,024 shares of the Company's common stock and receive a release of
any possible claims against the Company for a total price of $1,020,360. The
excess of the purchase price over the market price of the stock at November 16,
1999 totaled $442,156 and was recognized as selling, general and administrative
expense.



                                      F-21
<PAGE>   51

12.     DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS

         The estimated fair values of the financial instruments listed below
have been determined by the Company using available market information and
appropriate valuation techniques. Considerable judgment is required, however, to
interpret market data to develop the estimates of fair value. Accordingly, the
estimates presented herein are not necessarily indicative of the amounts that
the Company could realize in a current market exchange. The use of different
market assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts.

<TABLE>
<CAPTION>
                                                         March 4, 2000
                                                --------------------------------
                                                Carrying Amount      Fair Value
                                                ---------------     ------------
<S>                                               <C>               <C>

Assets:
   Cash and cash equivalents                      $  2,701,464      $  2,701,464
   Accounts receivable                              17,422,811        17,422,811
   Notes receivable                                    944,006           944,006

Liabilities:
   Accounts payable                                  5,493,168         5,493,168
   Long-term debt (excluding capital leases)       115,000,000        63,250,000

Equity:
   Receivable from shareholder                       5,000,000         5,000,000


                                                         March 6, 1999
                                                --------------------------------
                                                Carrying Amount      Fair Value
                                                ---------------     ------------
Assets:
   Cash and cash equivalents                      $  1,664,398      $  1,664,398
   Accounts receivable                              18,565,152        18,565,152
   Notes receivable                                  1,489,792         1,489,792

Liabilities:
   Accounts payable                                 11,255,920        11,255,920
   Long-term debt (excluding capital leases)       146,102,500       142,652,500
</TABLE>


         The carrying amounts of cash and cash equivalents, accounts receivable
and accounts payable are a reasonable estimate of their fair value due to
short-terms to maturity. The fair value of notes receivable is estimated by
discounting the future cash flows using the current rates at which similar loans
would be made to borrowers with similar credit ratings and for the same
remaining maturities.

         The fair value of long-term debt is estimated based on quoted market
prices and interest rates currently available for issuance of debt with similar
terms and remaining maturities.


                                      F-22
<PAGE>   52

13.     MAJOR BUSINESS SEGMENTS

         Food Processing: Pursuant to the acquisition of Pierre, the Company
produces beef, poultry and pork products that typically are custom-developed to
meet specific customer requirements. These products are (i) sold to foodservice
customers such as restaurant chains, schools and healthcare providers, (ii) sold
through various distribution channels, including warehouse clubs and grocery
stores, or (iii) combined with specialty breads to produce microwaveable
sandwiches that are sold through other foodservice channels such as convenience
stores, vending machines, warehouse clubs and grocery stores. Prior to the
acquisition of Pierre, the Company produced a variety of biscuits, yeast rolls
and other flour-based products, sold primarily under the "Mom 'n' Pop's" brand
name to institutional buyers, vending companies, delicatessens and supermarkets.
The inclusion of Pierre's operations in fiscal 1999 (see Note 1) results in
increases in every revenue and expense category compared with prior years
results for the comparable periods.

         Ham Curing: Prior to the sale of Mom 'n' Pop's Country Hams, LLC,
effective July 2, 1999, the Company produced whole cured hams, packaged
cureddham slices, pre-portioned ham for portion control customers, and various
"side meat" products. A portion of ham production was sold directly or through
distributors to retail supermarkets under the "Mom 'n' Pop's" brand name,
primarily in North Carolina, South Carolina, Virginia, Tennessee, Alabama and
Georgia. The remainder of production was sold to institutional food
distributors.

     The following tables set forth revenue and operating profit by segment
included in continuing operations:

<TABLE>
<CAPTION>
                                               FOOD              HAM
                                            PROCESSING          CURING              TOTAL
                                           ------------      ------------       ------------
<S>                                        <C>               <C>                <C>

Fiscal 2000:
     Revenues from external customers      $183,502,144      $  2,096,052       $185,598,196
     Depreciation and amortization            5,419,582            95,488          5,515,070
     Segment profit (loss)                   15,330,661          (268,767)        15,061,894
     Segment assets                         143,236,471                --        143,236,471
     Expenditures for capital assets          4,318,863                --          4,318,863

Fiscal 1999:
     Revenues from external customers      $149,778,206      $  7,063,625       $156,841,831
     Intersegment revenues (1)                       --            25,532             25,532
     Depreciation and amortization            4,450,616           340,966          4,791,582
     Segment profit (loss)                   18,183,964           (87,556)        18,096,408
     Segment assets                         150,857,914         4,012,412        154,870,326
     Expenditures for capital assets          4,085,653           498,290          4,583,943

Fiscal 1998:
     Revenues from external customers      $ 56,387,112      $  9,858,233       $ 66,245,345
     Intersegment revenues (1)                       --           247,716            247,716
     Depreciation and amortization            1,185,006           271,149          1,456,155
     Segment profit                           3,047,131           390,518          3,437,649
     Segment assets                          20,651,963         2,650,509         23,302,472
     Expenditures for capital assets          3,026,217           371,058          3,397,275
</TABLE>

(1)      Intersegment sales are recorded on prevailing prices and relate solely
         to the food processing and ham curing segments.


<TABLE>
<CAPTION>
                                                                FISCAL YEARS ENDED
                                               ------------------------------------------------------
                                               MARCH 4, 2000      MARCH 6, 1999     FEBRUARY 27, 1998
                                               -------------      -------------     -----------------
<S>                                            <C>                <C>                 <C>
Revenues:
  Total revenues from reportable segments      $ 185,598,196      $ 156,867,363       $  66,493,061
  Elimination of intersegment revenues                    --            (25,532)           (247,716)
                                               -------------      -------------       -------------
     Total consolidated revenues               $ 185,598,196      $ 156,841,831       $  66,245,345
                                               =============      =============       =============
</TABLE>



                                      F-23
<PAGE>   53

13.     MAJOR BUSINESS SEGMENTS

<TABLE>
<CAPTION>
                                                                                          FISCAL YEARS ENDED
                                                                       -------------------------------------------------------
                                                                       MARCH 4, 2000       MARCH 6, 1999     FEBRUARY 27, 1998
                                                                       -------------       -------------     -----------------
<S>                                                                    <C>                 <C>                 <C>

Profit or Loss:
     Total profit for reportable segments                              $  15,061,894       $  18,096,408       $   3,437,649
     Corporate expenses                                                  (16,447,851)         (8,576,056)         (7,677,033)
     Loss on sale of Mom 'n Pop's Country Ham, LLC                        (2,857,160)                 --                  --
     Interest and other expense, net                                     (14,816,618)        (11,923,153)         (1,558,318)
                                                                       -------------       -------------       -------------
        Loss from continuing operations before income tax benefit      $ (19,059,735)      $  (2,402,801)      $  (5,797,702)
                                                                       =============       =============       =============

Assets:
     Total assets for reportable segments                              $ 143,236,471       $ 154,870,326       $  23,302,472
     Corporate and discontinued restaurant segment assets                 21,490,192          62,118,697          48,353,327
                                                                       -------------       -------------       -------------
        Consolidated total                                             $ 164,726,663       $ 216,989,023       $  71,655,799
                                                                       =============       =============       =============
</TABLE>


<TABLE>
<CAPTION>
                                           SEGMENT                       CONSOLIDATED
                                            TOTALS        CORPORATE        TOTAL (1)
                                          ----------      ----------      ----------
<S>                                       <C>             <C>             <C>
Other Significant Items:
Fiscal 2000:
     Expenditures for capital assets      $4,318,863      $  690,544      $5,009,407
     Depreciation and amortization         5,515,070         146,823       5,661,893

Fiscal 1999:
     Expenditures for capital assets      $4,583,943      $  777,027      $5,360,970
     Depreciation and amortization         4,791,582         109,774       4,901,356

Fiscal 1998:
     Expenditures for capital assets      $3,397,275      $  172,006      $3,569,281
     Depreciation and amortization         1,456,155         158,668       1,614,823
</TABLE>

     (1) Excludes discontinued restaurant segment expenditures for assets and
depreciation and amortization.


     Sales by major product line are as follows:

<TABLE>
<CAPTION>
                                                            FISCAL YEARS ENDED
                                           ----------------------------------------------------
                                           MARCH 4, 2000      MARCH 6, 1999   FEBRUARY 27, 1998
                                           -------------      -------------   -----------------
<S>                                         <C>               <C>               <C>
Food Processing
   Fully-cooked protein products            $107,001,251      $ 89,886,921      $         --
   Microwaveable sandwiches                   68,500,800        52,392,376        45,189,671
   Bakery and other products                   8,000,093         7,498,909        11,197,441
                                            ------------      ------------      ------------
        Total food processing revenues      $183,502,144      $149,778,206      $ 56,387,112
                                            ============      ============      ============
Ham Curing
     Sliced hams                            $  1,530,118      $  4,944,538      $  6,309,269
     Whole hams                                  565,934         2,119,087         3,548,964
                                            ------------      ------------      ------------
        Total ham curing revenues           $  2,096,052      $  7,063,625      $  9,858,233
                                            ============      ============      ============
</TABLE>

       Significantly all revenues and long-lived assets are derived and reside
in the United States.

         During fiscal 1998, prior to the acquisition of Pierre Foods, a single
customer of the Company's bakery products (Pierre) accounted for 58% of the food
processing segment sales and 24%, of the Company's total operating revenues.
During fiscal 2000 and fiscal 1999, subsequent to the Company's acquisition of
Pierre Foods, no single customer accounted for more than 6.5% of segment sales
or total operating revenues.


                                      F-24
<PAGE>   54

14.   COMMITMENTS AND CONTINGENCIES

     Under the provisions of the Purchase Agreement with Carousel Capital, the
Company is responsible for all income tax and payroll taxes for the period prior
to the sale, relating to Claremont Restaurant Group and related subsidiaries.
The Company believes it has properly recorded any such liabilities to taxing
authorities.

     The Company provides one secured letter of credit in the amount of $500,000
to its insurance carriers for outstanding and potential worker's compensation
and general liability claims, and provides one secured letter of credit in the
amount of $1,500,000 to its insurance carrier for the underwriting of certain
performance bonds.

     The Company is involved in various legal proceedings. Management believes,
based on the advice of legal counsel, that the outcome of such proceedings will
not have a materially adverse effect on the Company's financial position or
future results of operations and cash flows.


15.        SUPPLEMENTAL CASH FLOW INFORMATION

     Cash paid for interest and income taxes is as follows:

                                          Fiscal Years Ended
                          -----------------------------------------------------
                          March 4, 2000      March 6, 1999    February 27, 1998
                          -------------     --------------    -----------------

     Interest               $14,495,414         $8,954,506           $1,621,404
     Income taxes           $ 3,585,875         $  346,372           $2,211,998

       The Company received accounts and notes receivable totaling $1,110,000
from the sale of property, plant and equipment in fiscal 1998.

         The Company acquired machinery and equipment totaling $14,912 and
$660,662 through capital leases or debt during fiscal 1999 and 1998,
respectively.

       On March 1, 1997, the Company acquired fourteen franchise restaurants
through the issuance of common stock and assumption of liabilities. The purchase
price was allocated to inventory and supplies in the amount of $151,313,
property and equipment in the amount of $1,203,413, and excess of cost over fair
value of net assets acquired in the amount of $2,477,481.


16.        TRANSACTIONS WITH RELATED PARTIES

Related party transactions recorded in continuing operations during fiscal 2000,
1999 and 1998 arose in connection with the following relationships:

     The Company obtains public relations, investor relations and graphic design
services from a marketing services company that is owned by a current director.
Payments for these services totaled $221,000, $529,000 and $393,000, during
fiscal 2000, 1999 and 1998, respectively.

     The Company maintained comprehensive insurance coverage through an
insurance agency whose owner was a principal shareholder of the Company.
Payments made to this agency totaled $447,000, $2,267,000 and $2,221,000, in
fiscal 2000, 1999 and 1998, respectively.

       Under a contract with a management services company owned by certain
officers and directors, as amended on December 17, 1999, the Company receives
corporate management services, which include, among other things, strategic
planning, investor relations, management of the Company's banking, accounting
and legal relationships and general oversight. Management fees paid under this
contract are in lieu of salary compensation for certain of the Company's senior
executives. During fiscal 2000, 1999 and 1998, the amount paid annually under
this contract was $1,500,000. In


                                      F-25


<PAGE>   55

addition, during fiscal 2000 and 1999 the Company paid bonuses of $1,695,522 and
$375,000, respectively, to the management services company for one of the senior
executives.

       The Company has mutual leasing agreements with certain related
individuals and with certain companies in which the Company's principal
shareholders have substantial ownership interests. Total payments under such
leasing agreements were $103,200 and $51,600 during fiscal 2000 and 1999,
respectively.

     Two current directors have direct and indirect interests in a company with
which a product licensing agreement has been signed. Under the terms of the
agreement, the Company can produce and market certain products under brand names
owned by the other company in exchange for royalty payments. Production of this
product began in mid-fiscal 1999. Royalties paid totaled $120,000 and $78,000
during fiscal 2000 and 1999, respectively.

     On January 14, 2000, the Company entered into a Consulting and Noncompete
Agreement with Mr. Charles F. Connor, Jr., a significant shareholder and
co-founder of the Company. The agreement, which has a five-year term, provides
payments of $200,000 per year and family medical insurance coverage. The net
present value of payments under the agreement, including the net present value
of the medical insurance coverage over the term, is estimated to be $831,000.
This amount was expensed in selling, general and administrative expense during
the fourth quarter of fiscal 2000, and the balance at March 4, 2000 is reflected
in other long-term liabilities. Subsequent to fiscal 2000, Mr. Connor is no
longer a shareholder or related party.

     On January 6, 2000, the Company entered into a Consulting and Noncompete
Agreement with Mr. L. Dent Miller, a significant shareholder, former President
of Claremont Restaurant Group and member of the Company's Board of Directors.
The agreement, which has a five-year term, provides payments of $200,000 per
year. The net present value of payments under the agreement, is estimated to be
$807,000. This amount was expensed in selling, general and administrative
expense during the fourth quarter of fiscal 2000, and the balance at March 4,
2000 is reflected in other long-term liabilities. Mr. Miller also resigned from
his position as a member of the Board of Directors of the Company, pursuant to
his Consulting and Noncompete Agreement. Subsequent to fiscal 2000, Mr.
Miller is no longer a shareholder or related party.

     On December 16, 1999, the Board of Directors approved a loan to Mr. James
C. Richardson, the Company's current Chairman, of an amount up to $8.5 million
for the purpose of enabling Mr. Richardson to purchase shares of the Company's
common stock owned by certain shareholders. The terms of the loan provide that
outstanding amounts will bear a simple interest rate of 8.5%, with principal and
interest due at maturity, three years from the date of the loan. At March 4,
2000, disbursements under the loan approval totaled $5 million. Due to the
nature of the loan, the outstanding balance is presented as a reduction of
shareholders' equity.

         On June 30, 1999, the Company replaced the existing Change in Control
Agreement with the Company's former Chief Financial Officer (Mr. Harris) with a
Bonus Agreement which specified the amounts of bonus payments to be received
upon disposition of Claremont Restaurant Group. The Company paid $1,059,701
under the terms of this agreement in fiscal 2000 as a result of the sale. The
related expense is included in continuing operations in selling, general and
administrative expense.

     On July 6, 1999, the Company replaced certain existing Change in Control
Agreements with the Company's current Chairman (Mr. Richardson) and current Vice
Chairman (Mr. Clark) with revised Change in Control Agreements. The revised
agreements provide that, if a change in control of the Company occurs, the
following benefits will be provided by the Company: three times the amount of
the annual base salary of the officer; three times the amount of the cash bonus
paid or payable to such person for the most recent fiscal year; and a "gross-up"
payment for all excise and income tax liabilities resulting from payments under
the Change in Control Agreements. A change in control of the Company is
considered to have occurred if: 1) the individuals who constituted the Board of
Directors as of the date of the applicable Change in Control Agreement cease to
constitute a majority of the Board; 2) any "person" (as defined in the
applicable Change in Control Agreement) acquires 15% of the Company's common
stock; 3) any of certain business combinations is consummated, unless the
beneficial owners of the Company's common stock before the combination own more
than 50% of the stock after the combination; or 4) the Company is liquidated or
dissolved. Payments under the Change in Control Agreements are payable upon a
change in control of the Company, whether or not an officer's employment is
terminated. The term of each Change in Control Agreement is ten years unless it
expires earlier upon the termination of an officer's employment.


                                      F-26


<PAGE>   56

     During fiscal 2000, the Company replaced an existing Change in Control
Agreement with the Company's former Chairman (Mr. Howard) with a Severance,
Consulting, and Noncompete Agreement. Payments made to Mr. Howard under this new
agreement totalled $1,389,503 and are included in continuing operations in
selling, general and administrative expense.

     On August 18, 1999, the Company entered into an Incentive Agreement with
the Company's current President (Mr. Woodhams), which replaced a Change in
Control Agreement and Employment Contract. The agreement, as amended on January
1, 2000, specifies terms relating to salary and bonus amounts to be paid to the
executive during the four year-term of the agreement, as well as severance and
disposition bonus amounts to be received upon any sale of the Company.

     On December 17, 1999, the Company signed an Amended and Restated Management
Services Agreement with HERTH Management, Inc ("HERTH"). The amended agreement,
which terminates March 31, 2002, outlines the nature of the services to be
provided by HERTH and continues to provide for annual payments totaling
$1,500,000, payable in four equal quarterly installments.

     During fiscal 2000, the Company sold its ham curing business to the
management group of that subsidiary for $995,000, resulting in a net loss of
$2,857,000.

Related party transactions recorded in discontinued operations during fiscal
2000, 1999 and 1998 arose in connection with the following relationships:

     During fiscal 2000, the Company replaced certain existing Change in Control
Agreements with two key restaurant executives (Mr. Miller and Mr. Templeton)
with Severance, Consulting and Noncompete Agreements. These agreements, which
became effective with the disposition of the restaurant operations, provide the
terms under which the two executives are to provide consulting services to
Claremont Restaurant Group, and stipulate that they are to refrain from engaging
in competitive activities related to restaurant operations and franchising for a
period of five years. On October 7, 1999, payments totaling $2,015,361 were made
to the two restaurant executives as a result of these agreements, and the
consulting and noncompete agreements were transferred to Carousel Capital
Partners, L.P. , the purchaser of Claremont Restaurant Group. The costs of the
agreements are reflected in the gain on disposal of discontinued restaurant
segment (Note 1).

     Certain current and past officers, directors and principal shareholders of
the Company had ownership interests in franchisee companies during fiscal 1999
and 1998. Total franchise, royalty and other fees from related party franchise
companies were $34,000 and $315,000 during fiscal 1999 and 1998, respectively.

     Immediate family members of a current director have ownership interests in
companies from which the Company purchased restaurant equipment, furnishings and
supplies. Purchases from these companies totaled $13,000, $2,555,000 and
$1,753,000 during fiscal 2000, 1999 and 1998, respectively.

     The Company had mutual leasing agreements with certain related individuals
and with certain companies in which the Company's principal shareholders have
substantial ownership interests. Total payments under such leasing agreements
were $867,800, $1,796,400 and $1,804,000 during fiscal 2000, 1999 and 1998,
respectively.

     During fiscal 2000, the Company sold five former restaurant properties and
one tract of vacant land to an entity in which a former officer and principal
shareholder is a minority investor, for a net cash purchase price of $939,000,
resulting in a net loss of $1,495,000. During fiscal 1998, the Company sold an
80% consolidated subsidiary to the same individual for a price of $160,000,
resulting in a gain of $78,000.

       During fiscal 2000, the Company sold the net assets of its one Bennett's
restaurant operation to certain members of management for a cash purchase price
of $1,100,000, resulting in a net gain of $522,000.

       During fiscal 1998, the Company sold its 50% interests in two equity
affiliates to the majority owner for a price of $272,000 and $235,000,
respectively, resulting in gains of $22,000 and $12,000, respectively.


                                      F-27

<PAGE>   57

REPORT OF MANAGEMENT

         The management of Fresh Foods, Inc. is responsible for the preparation
and integrity of the consolidated financial statements of the Company. The
financial statements and notes have been prepared by the Company in accordance
with generally accepted accounting principles and, in the judgment of
management, present fairly and consistently the Company's financial position and
results of operations and cash flows. The financial information contained
elsewhere in this annual report is consistent with that in the financial
statements. The financial statements and other financial information in this
annual report include amounts that are based on management's best estimates and
judgments.

         The Company maintains a system of internal accounting controls to
provide reasonable assurance that assets are safeguarded and that transactions
are executed in accordance with management's authorization and recorded properly
to permit the preparation of financial statements in accordance with generally
accepted accounting principles.

         The Company's financial statements have been audited by Deloitte &
Touche LLP. Management has made available to them all of the Company's financial
records and related data, and believes that all representations made to Deloitte
& Touche LLP during this audit were valid and appropriate. Their report provides
an independent opinion upon the fairness of the financial statements.

         The Board of Directors discharges its responsibility for the Company's
financial statements through its three-member Audit Committee, all of which are
non-management directors. The Audit Committee meets periodically with Deloitte &
Touche LLP, and the reporting staff have direct access to the Audit Committee to
discuss the scope and results of their work, the adequacy of internal accounting
controls and the quality of financial reporting.



      /s/  Norbert E. Woodhams                   /s/  Pamela M. Witters
-------------------------------------      -------------------------------------
Norbert E. Woodhams                        Pamela M. Witters
President and Chief Executive Officer      Chief Financial Officer and Treasurer



<PAGE>   58

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                   QUARTERS ENDED
                                                         ---------------------------------------------------------------------
                                                            6/5/99             9/5/99             12/4/99             3/4/00
                                                         ------------       ------------       ------------       ------------
<S>                                                      <C>                <C>                <C>                <C>
Operating revenues                                       $ 44,454,722       $ 41,620,043       $ 50,012,578       $ 49,510,853
Gross profit                                             $ 17,748,079       $ 17,443,832       $ 17,754,810       $ 16,626,492
Loss from continuing operations                          $   (408,468)      $ (3,033,793)      $ (7,914,628)      $ (2,877,678)
Income from discontinued restaurant segment              $  1,241,783       $  1,287,338       $    299,246       $         --
Gain on disposal of discontinued restaurant segment      $         --       $         --       $  6,801,726       $         --
Extraordinary loss                                       $         --       $    (52,350)      $         --       $         --
Net income (loss)                                        $    833,315       $ (1,798,805)      $   (813,656)      $ (2,877,678)
Loss from continuing operations per common
     share - basic and diluted                           $      (0.07)      $      (0.52)      $      (1.36)      $      (0.50)


                                                                                   QUARTERS ENDED
                                                         ---------------------------------------------------------------------
                                                            5/22/98            9/5/98             12/5/98            3/6/99
                                                         ------------       ------------       ------------       ------------
Operating revenues                                       $ 13,394,846       $ 47,887,216       $ 48,352,396       $ 47,207,373
Gross profit                                             $  1,089,760       $ 16,800,188       $ 18,264,661       $ 19,273,909
Income (loss) from continuing operations                 $   (965,884)      $ (1,223,929)      $    255,535       $    144,362
Income from discontinued restaurant segment              $  1,304,892       $    927,947       $    981,664       $  1,070,605
Extraordinary loss                                       $         --       $    (62,774)      $         --       $     (1,561)
Net income (loss)                                        $    339,008       $   (358,756)      $  1,237,199       $  1,213,406
Income (loss) from continuing operations per
     common share - basic and diluted                    $      (0.17)      $      (0.21)      $       0.04       $       0.02
</TABLE>