Steve Wright

General Manager & CEO

Pro-Fac Cooperative

Changing Business Structures

History

Pro-Fac Cooperative– 1961 - Present

Our beginnings...

1961 - Western N.Y. growers formed partnership with local food processors

Cooperative named “Pro-Fac,” to symbolize producers and facilities Agway played significant role in start-up Company - Curtice-Burns - assured of supply Grower/members assured of markets 700+ growers in New York State joined by buying stock

Innovators from the start...

Members bought stock to join Co-op Operated under detailed agreement between Co-op and processor

partner Separate responsibilities

– Curtice Burns - processed and marketed products (Brand, Private Label, Food Service)

– Pro-Fac – Supplied Raw Product

–Owned Facilities Profits and losses shared equally by series of agreements

Strengths & Benefits - Cooperative Structure

Cooperative form enabled multi-crop, single pool patronage proceeds distributions THUS,

Risk/reward sharing (20+ crops) removed impact of short-term single commodity profit swings and geographic issues

Capper-Volstead protection provided opportunities for marketing alliances and strategic partnerships with other Coops.

Tax Benefits - At patron level vs. corporate rate

Access to Farm Credit System - Favorable rate structure

Growth through expansion...

Company grew through acquisitions - expanding grower opportunities and regions

1973 - corporation became public - listed first on NASDAQ, then AMEX

Grower needs began to compete with public stockholders

Acquisitions of regional companies continued through 70’s & 80’s

Strategic changes...

Restructuring began in 90’s 1993 - Majority owner Agway decided to sell food businesses Lengthy change-of-control battle began Pro-Fac ultimately acquired Curtice-Burns to maintain members’

markets… took public company private (Coop.) With acquisition came significant debt

– Debt $328 million– Interest Expense $42 million

Consolidations...

Divisional consolidations 1997 - Company name changed to “Agrilink Foods” 1998 - acquired DFVC & Birds Eye brand - increased debt load

– Debt $679 million– Interest Expense $83.5 million

Voila! successful national introduction 1999 - Remaining operations combined under one company

The need for change within Pro-Fac and Agrilink

Highly leveraged Inadequate resources to grow the business

– Marketing– New products– Capital expenditures

Approaching deadline for refinancing

American National Bank & Trust Hamilton BankBank of America JP MorganBank of Boston Manufacturers Hanover TrustBank of New England Maryland National BankBank One Mercantile BankBank South Meridian BankBankers Trust Montgomery SecuritiesBarclays Business Credit Nations BankCasco Northern Bank NBD Bank N.A.Central Fidelity Bank NCNBChase Manhattan Bank New Jersey National BankChemical Bank Norstar BankCitibank OFFITBANK HoldingsCitizens and Southern Philadelphia National BankCongress Financial Corp. Republic Security FinancialConnecticut National Bank RIHT National BankContinental Bank Salomon Smith BarneyCorestates Bank Seattle-First National BankCresatar Security PacificDeutsche Bank Shawmut BankFirst Bank System Signet Banking CorporationFirst City BankCorporation Sovran BankFirst Fidelity Bancorporation Star BankFirst National Bank of Chicago Summit BancorpFirst Pennsylvania Bank Texas Commerce BankFirst Union TravelersFirstar Trust Company of GeorgiaFleet Bank U.S. Bancorp

Bank of AmericaBank OneCitigroupDeutsche BankFleetBostonJ.P. MorganSunTrustU.S. BancorpWachovia

Merged Into

Bank Consolidation

Major Cooperatives in Trouble

January 1999 - Agripac declared bankruptcyJuly 2000 - Tri-Valley declared bankruptcyMay 2002 - Farmland Industries declared

bankruptcy (largest coop in U.S.)May 2002 - Mason County Fruit Packers

declared bankruptcy (Michigan fruit cooperative)

September 2002 - Agway declared bankruptcyOctober 2002 - Spring Wheat Bakers closed

(N.D. based coop)

Options Explored

Management and board explored alternatives– IPO– Sale of the company– Strategic investor– Synergistic partner (LLC)– Private equity infusion– Tough it out

Tough it out

Jeopardized – 100% CMV– future dividend payments– value of preferred investment– retention of key management talent

What was the deal?

A recapitalization that did the following– $175 mm capital infusion to reduce debt

– Established Pro-Fac as a separate entity

– Supply Agreement 10 years with liquidated damages Maintained the CMV process Payment to Pro-Fac of $10 mm/year for 5 years (for terminating the

previous supply agreement)

– Transition Services Agreement (24 months)

– Use of the Ag. Services staff

– $1 million annual credit facility (5 years)

What has changed for Pro-Fac?

Pre-Vestar Post-Vestar

Pro-Fac ownership of Birds Eye 100% 40%

Pro-Fac Board Members 12 15

Member-owned delivery rights YES YES

Annual marketing plan YES YES

Payment of full CMV At Risk Less Risk

Annual earnings distribution YES NO

Preferred stock Dividends YES YES

Member equity At Risk Less Risk/Growth

Potential

What was in it for Birds Eye Foods?

The opportunity to create more value for all stakeholders– new products– capital investment– marketing to enhance its brands– potential for acquisitions– attract and retain talent– enhancing the viable employment opportunity

for our associates

Pro-Fac transformation has commenced

Pro-Fac Board began the strategic planning process November, 2002– Use “expert” reactor panel

Agriculture Academia Coop. structure/organization

Strategic Direction

Maintain cooperative structure -

$10 million annual payment from Birds Eye Foods Maintain membership base for supply agreement Assure SEC and NASDAQ requirements are met

(Sarbanes-Oxley Act) Ownership in Birds Eye Holdings, LLC

Strategic Direction

Continue to strongly support current supply agreements Establish and maintain a healthy capital structure Develop new customers Consider structures which would align the Cooperative with commodity or regional opportunities Central management, admin., bargaining/negotiation, customer service Commodity/Regional focus on business development, strategy and capital initiatives Leverage Ag. Services Information System (ASIS) - (Traceability/Food Safety - Leading edge

software)

Strategic Direction

Post a Change of Control

Some members may want to cash out - Can with sufficient proceeds Offer membership to only top producers (evaluations) Capitalization

– May vary with commodity/region– Some re-investment– Possibly base capital plan

Mission Statement

“To be the acknowledged leader in

supplying the food industry with dependable,

superior quality, efficiently and safely

produced fruits, vegetables and other

agricultural products.”

CAHOON CAHOON FARMSFARMS

Pro-Fac Geographic Breadthand Customers

Results to Date - Birds Eye Foods

(Dollars in Millions)

2002 2003

Net Sales $964.4 $878.3

Net Earnings $6.8 $20.8

Cash $14.7 $153.8

Interest Expense $63.0 $40.8

Debt $623.1 $459.9

Down the Road...

Provide return to Vestar Capital Partners and their investors (State pension funds and University endowments)

Provide return to Pro-Fac Cooperative– Supply Agreement in new business structure

– Consider equity redemption

– Recapitalize the Cooperative Investment - Business ventures Growth - New customers, areas and members

Provide return to management investors

“The Birds Eye business will be harvested someday” J.P. Morgan AdvisorJ.P. Morgan Advisor

Pro-Fac Liquidation Valuesand Preference (1/04)

LIQUIDATION VALUESECURITY ($ Mils.)

Qualified Retains $ 9.8

Preferred Stock $ 120.7

Common Stock $ 9.6

Special Membership Interests $ 21.7

Total $ 161.8 million

Hypothetical Pro-Fac Proceeds from its Investment in Birds Eye Foods

Birds Eye EBITDA ($ Mils.) $130.0

Multiple 7.5 x

Enterprise Value $975.0

Net Debt (175.0)

Equity Value $800.0

Vestar Preferred ($137.5 mil. @ 15% PIK) (241.0)

Common Equity Value $559.0

Pro-Fac Portion @ 37.80% * 211.3

Present Value of Termination Agreement Payment -0-

Total Proceeds $211.3 million* Assumes management ownership grows from 3.04% to 10.0%

NOTE: Vestar Common moves from 56.34% to 52.20%

The following example illustrates one method for calculating what Pro-Fac might receive for its investment in Birds Eye Foods. The numbers used do not represent actual results of Birds Eye Foods for any past period or projected results of Birds Eye Foods for any future period. The numbers and method illustrated are not based upon any actual transaction under consideration

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