First Mercantile Trust Company

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					Changing Business Structures

        Steve Wright
   General Manager & CEO
     Pro-Fac Cooperative

   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
         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

   Divisional consolidations
   1997 - Company name changed to “Agrilink
   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
                                   Bank Consolidation
American National Bank & Trust   Hamilton Bank
Bank of America                  JP Morgan
Bank of Boston                   Manufacturers Hanover Trust
Bank of New England              Maryland National Bank
Bank One                         Mercantile Bank
Bank South                       Meridian Bank
Bankers Trust                    Montgomery Securities
Barclays Business Credit         Nations Bank                                Bank of America
Casco Northern Bank              NBD Bank N.A.
Central Fidelity Bank            NCNB
                                                                             Bank One
Chase Manhattan Bank             New Jersey National Bank                    Citigroup
Chemical Bank                    Norstar Bank
Citibank                         OFFITBANK Holdings
                                                                             Deutsche Bank
Citizens and Southern            Philadelphia National Bank    Merged Into   FleetBoston
Congress Financial Corp.         Republic Security Financial
Connecticut National Bank        RIHT National Bank
                                                                             J.P. Morgan
Continental Bank                 Salomon Smith Barney                        SunTrust
Corestates Bank                  Seattle-First National Bank
Cresatar                         Security Pacific
                                                                             U.S. Bancorp
Deutsche Bank                    Shawmut Bank                                Wachovia
First Bank System                Signet Banking Corporation
First City BankCorporation       Sovran Bank
First Fidelity Bancorporation    Star Bank
First National Bank of Chicago   Summit Bancorp
First Pennsylvania Bank          Texas Commerce Bank
First Union                      Travelers
Firstar                          Trust Company of Georgia
Fleet Bank                       U.S. Bancorp
        Major Cooperatives in Trouble

January 1999   - Agripac declared bankruptcy
July 2000      - Tri-Valley declared bankruptcy
May 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 bankruptcy
October 2002   - Spring Wheat Bakers closed
                 (N.D. based coop)
                     Options Explored

   Management and board explored
    –   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/
         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.”
Pro-Fac Geographic Breadth
and Customers                 FARMS
       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...
“The Birds Eye business will be harvested someday”
                                         J.P. Morgan Advisor
   Provide return to Vestar Capital Partners and their
    investors (State pension funds and University
   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
                      Pro-Fac Liquidation Values
                         and Preference (1/04)

                                LIQUIDATION VALUE
SECURITY                               ($ Mils.)
Qualified Retains                      $    9.8
Preferred Stock                        $ 120.7
Common Stock                           $    9.6
Special Membership Interests           $   21.7

              Total                    $ 161.8 million
    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
 Thank you for inviting
me to your meeting and
for your kind attention...

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