SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM S-2
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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PRO-FAC COOPERATIVE, INC.
(Exact Name of Registrant as Specified in Its Charter)
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NEW YORK 16-6036816
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
__________________
90 Linden Oaks
P.O. Box 682
Rochester, New York 14603
(716) 383-1850
(Address, Including Zip Code, and Telephone Number, Including Area Code of
Registrant's Principal Executive Offices)
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Earl L. Powers
Vice President, Finance and Assistant Treasurer
Pro-Fac Cooperative, Inc.
90 Linden Oaks
Rochester, New York 14625
(716) 383-1850
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
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Copy to:
Catherine A. King, Esq.
Harris Beach & Wilcox, LLP
130 East Main Street
Rochester, New York 14604
(716) 232-4440
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [x]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this form check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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<TABLE>
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
Title of Each Class of Securities Amount to be Proposed Maximum Proposed Maximum Amount of
to be Registered Registered Offering Price Aggregate Registration
Per Security Offering Price Fee
- --------------------------------- ----------- ---------------- ---------------- ----------
Class B common stock 1,600,000 $5.00 $ 8,000,000 $2,224
- -------------------- ----------- ---- ----------- ------
Special membership interests $15,000,000 100% $15,000,000 $4,170
- ---------------------------- ----------- ---- ----------- ------
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__________________
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date
until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter
become effective in accordance with Section 8(a) of the Securities Act or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may determine.
</TABLE>
<PAGE>
The information in this Prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
Prospectus
PRO-FAC COOPERATIVE, INC.
1,600,000 Shares of Class B Common stock
$15,000,000 Special Membership Interests
We are a New York agricultural cooperative corporation formed in 1960 to
process and market crops grown by our members. Membership in Pro-Fac is limited
to persons or entities who are actively engaged in the growing of agricultural
products, such as cherries, apples, corn and peas. Growers who wish to become
members of Pro-Fac are required to purchase shares of our common stock.
We are offering a combination of up to 1,600,000 shares of our Class B
common stock, par value $5.00 per share, and up to $15,000,000 of our special
membership interests. The Class B common stock and special membership interests
are being offered exclusively to growers who are currently under contract with
PF Acquisition II, Inc. to supply crops to it for processing, distribution and
sale as processed food products. The grower-offerees were also previously
grower-members of Agripac, Inc., which is an Oregon cooperative currently in
bankruptcy.
PF Acquisition is a subsidiary of Pro-Fac. It conducts business under the
name "AgriFrozen Foods."
A grower who subscribes for securities in this offering will receive shares
of our Class B common stock and a special membership interest. Shares of our
Class B common stock and special membership interests will be issued to growers
in consideration for:
1. their agreement to terminate their rights to cancel their current
crop delivery obligations for the 2000 and 2001 growing seasons,
and
2. their consent to AgriFrozen's assignment of their crop delivery
agreements to us.
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS YOU
SHOULD CONSIDER BEFORE YOU INVEST IN THE CLASS B COMMON STOCK AND THE SPECIAL
MEMBERSHIP INTERESTS BEING SOLD WITH THIS PROSPECTUS.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
This Prospectus is accompanied by a copy of Pro-Fac Cooperative, Inc.'s Annual
Report on Form 10-K/A-1 for the year ended June 26, 1999 and Pro-Fac
Cooperative, Inc.'s Form 10-Q for the fiscal quarter ended September 25, 1999.
This Prospectus is dated November ,1999
<PAGE>
TABLE OF CONTENTS
Page
Prospectus Summary 3
Risk Factors 9
Where You Can Find More Information 17
Forward-Looking Information 18
Use of Proceeds 19
Determination of Offering Price 19
Plan of Distribution 19
AgriFrozen 21
Business of Pro-Fac 30
Description of Pro-Fac Securities 37
Experts 42
ABOUT THIS PROSPECTUS
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus or incorporated by reference in this prospectus. We
are not making offers to sell the Class B common stock or special membership
interests or soliciting offers to purchase the Class B common stock or special
membership interests in any jurisdiction in which such an offer or solicitation
is not authorized or in which the person making such offer or solicitation is
not qualified to do so or to anyone to whom it is unlawful to make such offer or
solicitation. The information in this prospectus is accurate as of the date on
the front cover. You should not assume that the information contained in this
prospectus is accurate as of any other date.
Unless otherwise indicated, references in this prospectus to "Pro-Fac,"
"we," "our," and "us" refer to Pro-Fac Cooperative, Inc., a New York
agricultural cooperative formed in 1960, together with its subsidiaries Agrilink
and AgriFrozen. References in this prospectus to our fiscal year refer to the
12-month period ended the last Saturday of June of that year.
This prospectus includes trademarks, trade names and service marks of
Pro-Fac.
Our principal executive offices are located at 90 Linden Oaks, Rochester,
New York 14625. Our telephone number is 716-383-1850.
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding Pro-Fac and the securities being sold in this offering and
our audited consolidated financial statements incorporated by reference in this
prospectus from our Form 10-KA/1 for the year ended June 26, 1999 and our
unaudited consolidated financial statements from our Form 10-Q for the first
fiscal quarter ended September 25, 1999.
Pro-Fac
As an agricultural cooperative, we process and market crops grown by our
members. Our crops include fruits, such as cherries, apples, blueberries,
peaches and plums, vegetables, such as snap beans, beets, cucumbers, peas, sweet
corn, carrots, cabbage, squash, asparagus, potatoes, turnip roots and leafy
greens, and popcorn. Only growers of crops marketed through us, or associations
of such growers, can become members. Growers become members of Pro-Fac by
purchasing shares of our common stock. You cannot be a member unless you own
shares of our common stock.
Our membership is divided into two separate classes. Members owning shares
of our Class A common stock are our Class A members, and members owning shares
of our Class B common stock are our Class B members. Our Class A members are our
current members who deliver raw product for sale and processing at the
facilities of Agrilink Foods, Inc., which is our wholly owned subsidiary. We
currently have approximately 645 Class A members, consisting of individual
growers or of associations of growers, located principally in the states of New
York, Delaware, Pennsylvania, Illinois, Michigan, Washington, Oregon, Iowa,
Nebraska, Florida and Georgia.
Our Class B members will be established through the issuance of our Class B
common stock in this offering. Our Class B members will be those members who
deliver raw product for sale and processing at AgriFrozen's facilities.
Currently, potential Class B members grow crops for delivery directly to
AgriFrozen. These growers are located in the states of Oregon and Washington.
AgriFrozen has entered into general marketing agreements and crop delivery
agreements with certain of the prior member-growers of Agripac - including you,
an offeree in this prospectus - to supply it with crops for processing at
AgriFrozen's facilities. Under the terms of the general marketing and crop
agreements, you have agreed to supply AgriFrozen with specified quantities and
types of crops for the 1999, 2000 and 2001 growing seasons. The current terms of
the general marketing and crop delivery agreements permit you to terminate your
agreement to supply crops to AgriFrozen after fulfillment of your obligations to
AgriFrozen for the 1999 growing season.
In order for us to obtain a reliable and long term source of supply for
crops, we are prepared to issue to each grower, who is currently under contract
to deliver crops to AgriFrozen, shares of our Class B common stock and special
membership interests. We will issue shares of Class B common stock and a special
membership interest to you, in consideration for your consent to AgriFrozen's
assignment of your general marketing and crop delivery agreements to us and your
agreement to terminate your right to cancel your crop delivery agreements after
the 1999 growing season.
<PAGE>
IMPORTANT CONSIDERATIONS. Terms and characteristics of our Class B common stock
and special membership interests.
We have set forth below some terms and characteristics of our Class B
Common stock and the special membership interests which are discussed in greater
detail throughout this prospectus:
AgriFrozen is a new venture. Its operations commenced in February
1999. Accordingly, it has no significant operating history. Although
the information contained in this prospectus about us and Agrilink is
useful for purposes of evaluating our and Agrilink's experience and
results of operations, AgriFrozen's results of operations will not be
derived from and will be independent of the operations of Pro-Fac or
Agrilink. Any and all income distributable to Class B members will be
derived solely from the operations of AgriFrozen. See "Risk Factors"
and "Description of Pro-Fac and its Subsidiaries."
AgriFrozen's credit facilities expressly recognize and acknowledge our
right to transfer or abandon our ownership interest in AgriFrozen
until June 29, 2002. This date can be extended upon the approval of
AgriFrozen's lenders. Moreover, and notwithstanding the express
recognition of our right under AgriFrozen's financing facilities, our
act of transferring our entire ownership interest in AgriFrozen is an
event of default under those facilities. See "Risk Factors" and
"Description of AgriFrozen's Indebtedness."
The Class B common stock and special membership interests are subject
to repurchase by us at a nominal price. Under the subscription
agreement you will execute to obtain shares of Class B common stock
and special membership interests in this offering, you agree that we
can repurchase all of our Class B common stock and the special
membership interest owned by you for a total consideration of $5.00.
This repurchase right is only exercisable in the event:
(a) we exercise our right to repurchase within 180 days after we
abandon or transfer our ownership interest in AgriFrozen; and
(b) we repurchase all of our Class B common stock and special
membership interests.
Our repurchase right continues until at least June 29, 2002, and our
board of directors has the right, with the approval of AgriFrozen's
lenders, to extend this right beyond that date without notice to you.
See "Risk Factors," "Description of AgriFrozen Indebtedness,"
"Business of Pro-Fac and its Subsidiaries" and "Description of Pro-Fac
Securities."
In the event we exercise our right to abandon or transfer our
ownership interest in AgriFrozen we can, and it is expected that we
will, repurchase all of our Class B common stock and special
membership interests solely and exclusively in consideration for $5.00
per Class B member. See "Risk Factors," "Description of AgriFrozen
Indebtedness," "Business of Pro-Fac and its Subsidiaries" and
"Description of Pro-Fac Securities."
In the event of a liquidation, dissolution or winding up of Pro-Fac,
after payment of our creditors and the holders of our preferred stock
and retains, the holders of our Class A Common stock would be paid the
par value of their shares of common stock, then the face value of the
special membership interests would be paid and then the holders of our
<PAGE>
Class B Common stock would be paid the par value of their shares of
common stock. See "Risk Factors" and "Description of Pro-Fac
Securities."
The Class A Common stock and the Class B Common stock may not receive
the same amount of dividend payments. Moreover, our board of directors
may declare and pay dividends on our Class A Common stock and not on
our Class B Common stock. See "Description of Pro-Fac Securities."
Special membership interests have no voting or dividend rights and
bear no interest. See "Description of Pro-Fac Securities."
The holders of Class B Common stock and the holders of Class A Common
stock will not participate in the same patronage pool. The holders of
Class B Common stock will not share in the patronage income generated
by Agrilink and our Class A members. Similarly, the holders of our
Class A Common stock will not share in the patronage income generated
by AgriFrozen and our Class B members. See "Risk Factors," "Business
of Pro-Fac and its Subsidiaries" and "Description of Pro-Fac
Securities."
Crops supplied by holders of Class B Common stock will be processed at
AgriFrozen's facilities. See "Business of Pro-Fac and its
Subsidiaries."
AgriFrozen.
AgriFrozen is a start-up company. It was incorporated in January 1999 under
the corporation laws of New York State and commenced operations in February
1999. We own 100% of AgriFrozen's common stock. PFA Northwest Growers
Cooperative Inc., a newly formed Oregon cooperative, owns 100% of AgriFrozen's
preferred stock. The preferred stock has no voting rights except to the extent
required by law. AgriFrozen was formed to acquire substantially all of the
assets of Agripac related to its frozen vegetable processing business.
On January 4, 1999, Agripac voluntarily filed for bankruptcy in the United
States Bankruptcy Court for the District of Oregon. On January 22, 1999,
Agripac, as a debtor still in-possession of its assets and operator of its
business requested that the bankruptcy court approve its sale of substantially
all of its assets relating to its frozen vegetable processing business to
AgriFrozen. The bankruptcy court approved the sale on February 18, 1999.
On February 23, 1999, AgriFrozen purchased Agripac's frozen vegetable
processing business. In order to finance the acquisition AgriFrozen obtained
financing from CoBank, ACB under the credit facilities. The CoBank financing
consists of:
a credit facility consisting of a term loan facility of $30.0 million
and a revolving credit facility of $55.0 million for fiscal 2000 and
$50.0 million for each year thereafter, and
a $12.0 million subordinated promissory note.
The net purchase price for the frozen vegetable processing business was
$80.5 million, including expenditures of $7.8 million, consisting of cash
payments of approximately $6.4 million to obtain grower contracts from former
Agripac member-growers, and transaction expenses and miscellaneous costs
totaling $1.4 million. AgriFrozen also expects to pay severance costs of
approximately $1.2 million.
<PAGE>
In order to pay the total acquisition price, AgriFrozen:
borrowed $30.0 million under the term loan facility,
borrowed a total of $36.9 million under the revolving credit facility,
and
issued the $12.0 million subordinated promissory note.
The balance of the total acquisition price, $8.0 million, was paid by AgriFrozen
from the sale of shares of its preferred stock to PFA Northwest Growers
Cooperative, Inc. Of the $36.9 million borrowed under the revolving credit
facility, $6.4 million was held in escrow until the final purchase price was
agreed to. The $6.4 million was returned to AgriFrozen in July 1999 and was
applied against the amount outstanding under its revolving credit facility.
AgriFrozen granted a security interest in substantially all of its assets
as security for the CoBank credit facility and the subordinated promissory note.
Neither we nor Agrilink guaranteed the debts of AgriFrozen or otherwise pledged
any of our respective properties as security for the CoBank financing. In fact,
all of AgriFrozen's indebtedness is expressly without recourse to us and
Agrilink.
We have entered into a marketing and facilitation agreement with
AgriFrozen. Under this agreement, we have agreed to sell the crops of our Class
B members to AgriFrozen at their commercial market value ("CMV") for processing
and distribution by AgriFrozen. AgriFrozen has agreed to pay us the CMV of those
crops, less any losses incurred on products processed using our Class B members'
crops. We will distribute to our Class B members payments received from
AgriFrozen for our Class B members' crops. The commercial market value of a crop
or its CMV is the weighted average of the prices paid by other commercial
processors for similar crops used for similar or related purposes sold under
pre-season contracts or in the open market in the same or similar market areas.
AgriFrozen has also entered into an administrative services agreement with
Agrilink, pursuant to which Agrilink provides AgriFrozen with certain management
consulting and administrative services.
Agrilink.
We are the parent of Agrilink Foods, Inc., a New York corporation formed in
1961. Agrilink is a producer and marketer of processed food products. It has
four primary product lines including vegetables, fruits, snacks and canned
meals. The vegetable product line consists of canned and frozen vegetables,
chili beans, pickles and various other products. Branded products within the
vegetable category include Birds Eye, Birds Eye Voila!, Freshlike, Veg-All,
McKenzies, Brooks Chili Beans, Farman's, and Nalley. The fruit product line
consists of canned and frozen fruits including fruit fillings and toppings.
Branded products within the fruit category include Comstock and Wilderness. The
snack product line consists of potato chips, popcorn and other corn-based snack
items. Branded products within the snack category include Tim's Cascade Chips,
Snyder of Berlin, Husman, La Restaurante, Erin's, Beehive, Pops-Rite, and Super
Pop. The canned meal product line includes canned meat products such as chilies,
stews, soups, and various other ready-to-eat prepared meals. Branded products
within the canned meal category include Nalley. All other product lines
primarily represent salad dressings. Branded products within this category
include Bernstein's and Nalley. Agrilink also sells its products to
supermarkets, warehouse clubs and mass merchandisers under private labels and to
food service institutions such as restaurants, caterers, bakeries and schools.
Agrilink operates 28 processing facilities located throughout the United States
and one facility in Mexico. These processing facilities provide Agrilink with
access to diverse sources of raw agricultural
<PAGE>
products. Agrilink distributes its finished products to over 13,000 customer
distribution points through a nationwide network of distribution centers and
food brokers.
In 1994, we entered into a marketing and facilitation agreement with
Agrilink. Under that agreement, we supply Agrilink with crops and provide
additional financing to Agrilink, Agrilink provides us with marketing and
management services and we share in Agrilink's profits or losses.
The Acquisition of Dean Foods Vegetable Company
On September 24, 1998, Agrilink acquired the frozen and canned vegetable
business of Dean Foods Company, by acquiring from Dean Foods all the outstanding
capital stock of Dean Foods Vegetable Company and Birds Eye de Mexico SA de CV.
DFVC was a vegetable processor selling its products under brand names, such as
Birds Eye, Freshlike and Veg-All, and private labels. In connection with the
acquisition of DFVC, Agrilink sold its aseptic business to Dean Foods. The
aseptic business produced primarily dairy products, such as puddings and cheese
sauces. In addition to transferring its aseptic business, Agrilink paid Dean
Foods $360.0 million in cash and issued to Dean Foods a $30.0 million unsecured
subordinated promissory note due November 22, 2008, as consideration for the
acquisition of DFVC. In connection with the acquisition of DFVC, Agrilink
reserved the right to require Dean Foods, in consideration for the payment of an
additional $13.2 million, to treat the acquisition of DFVC as an asset sale for
tax purposes under Section 338(h)(10) of the Internal Revenue Code. Agrilink
exercised that right on April 15, 1999 and paid Dean Foods $13.2 million.
Immediately following the acquisition of DFVC, Dean Foods Vegetable Company
was merged into Agrilink. We believe that the acquisition of DFVC strengthens
Agrilink's competitive position by enhancing its brand recognition and market
position, providing opportunities for cost savings and operating efficiencies,
and increasing Agrilink's product and geographic diversification.
The Refinancing
Concurrently with the acquisition of DFVC, Agrilink refinanced its
then-existing indebtedness, which included $160.0 million of its senior
subordinated notes having an interest rate of 12 1/4% per year and maturing in
the year 2005, which we refer to as Agrilink's old notes, and its then-existing
bank debt. As part of its refinancing, Agrilink purchased substantially all its
old notes for an aggregate amount of approximately $184.0 million, including
accrued interest of $2.9 million, terminated its old credit facility and repaid
$176.5 million of indebtedness that had been outstanding under that facility.
In order to finance the acquisition of DFVC, the subsequent merger of DFVC
into Agrilink, the refinancing of Agrilink's then-existing indebtedness, and pay
related fees and expenses, Agrilink:
entered into and borrowed from a new credit facility, consisting of a
$455.0 million term loan facility and a $200.0 million revolving
credit facility;
entered into and borrowed from a $200.0 million bridge loan facility;
and
issued the $30.0 million subordinated promissory note to Dean Foods.
Agrilink repaid the $200.0 million bridge loan facility on November 18,
1998 with the proceeds of an offering of $200.0 million of new senior
subordinated notes having an interest rate of 11 7/8% per year and maturing in
the year 2008. These "initial" notes were later exchanged for notes that were
substantially identical to the initial notes, except that the new notes are
freely transferable. We refer to the notes issued in exchange for all of the
initial notes as the "new notes."
We have guaranteed Agrilink's obligations under the new credit facility,
the subordinated promissory note to Dean Foods Company and its new notes.
<PAGE>
Recent Developments
Agrilink recently announced the sale of its Midwest private label canned
vegetable business to Seneca Foods Corporation. The sale was effective as of
November 8, 1999. The assets acquired by Seneca included Agrilink's Arlington,
Minnesota facility.
Agrilink also recently announced that it had signed a letter of intent with
Del Monte Foods, San Francisco, pursuant to which Del Monte would acquire
Agrilink's Cambria, Wisconsin facility. This transaction does not include
Agrilink's branded canned vegetables, Veg-All and Freshlike.
<PAGE>
RISK FACTORS
Before you invest in our Class B common stock and special membership
interests, you should be aware that there are various risks, including those
described below. You should carefully consider these risks together with all of
the other information included in this prospectus, incorporated by reference in
this prospectus, and filed as exhibits to our registration statement before you
decide to purchase shares of our Class B common stock or special membership
interests.
AgriFrozen is a new venture with no meaningful operating history.
AgriFrozen was incorporated in January 1999. It began its operations on
February 23, 1999. In order to transition from a start-up entity to an operating
company, AgriFrozen must generate revenues from product sales with sufficient
gross profit margins to cover AgriFrozen's operating expenses and debt costs.
AgriFrozen's success will also depend upon the ability of its management to
implement AgriFrozen's business strategies, including maintaining relatively low
administration costs and achieving planned manufacturing savings. The payment of
CMV and patronage proceeds to our Class B members will be dependent upon
AgriFrozen's ability to operate profitably. No assurance can be given that
AgriFrozen will be able to transition from a start-up company to a profitable
operating entity. See "Business of Pro-Fac."
Patronage income distributed to our Class B members will be derived
exclusively from AgriFrozen's operations.
Our members participate in two separate and distinct pools: (a) the Class A
member pool, which is limited to Class A members and (b) the Class B member
pool, which is limited to Class B members. A Class A member is a producer and
supplier of raw products to us for processing at facilities of Agrilink. A Class
B member is a producer and supplier of raw products to us for processing at
facilities of AgriFrozen. A member's share of patronage proceeds will be
determined within the particular membership pool the member is assigned. All
income from patronage sources and related expenses will be allocated to either
the Class A member pool or the Class B member pool. Members in the Class B
member pool will not have any right to participate in patronage income generated
by growers in the Class A member pool. Similarly, members in the Class A member
pool will not have any right to participate in patronage income generated by
growers in the Class B member pool. See "Business of Pro-Fac."
Until at least June 29, 2002 we can repurchase all shares of Class B common
stock and special membership interests for a nominal price.
As is described and expressly reserved to us in the subscription agreement
you will sign to subscribe for shares of Class B common stock and special
membership interests, we can repurchase all of your shares of Class B common
stock and your special membership Interest for a total purchase price of $5.00.
We have this repurchase right until at least June 29, 2002. This right may be
extended beyond June 29, 2002 without notice to you. See "Business of Pro-Fac."
A member's share of proceeds may be less than CMV and may be less than
proceeds paid to members of the Class A members' patronage pool.
Payment for crops is based upon the CMV of the crops supplied to us by our
members. There is no relationship, however, between the CMV of crops and
AgriFrozen's cost of producing such crops, since CMV is determined by supply and
demand in the marketplace. Under our marketing and facilitation agreement with
AgriFrozen, if AgriFrozen experiences a loss on products processed from crops
supplied by our Class B members, this loss will be deducted from the CMV
AgriFrozen would otherwise pay to us for distribution to our Class B members.
AgriFrozen's ability to pay us the CMV of crops supplied by our Class B members
<PAGE>
will depend upon the overall profitability of AgriFrozen. There can be no
assurance that AgriFrozen will be able to pay the CMV of our Class B members'
crops.
Moreover, there can be no assurance that proceeds paid by us to our Class B
members for their crops will be equal to or greater than proceeds paid to our
Class A members, since the total proceeds payable to us for our Class A members'
crops is dependent upon the overall profitability of Agrilink. See "Business of
Pro-Fac."
We own 100% of the voting stock of AgriFrozen.
We own 100% of AgriFrozen's common stock. All voting power is vested
exclusively in the holders of AgriFrozen's common stock. The only voting rights
the holders of AgriFrozen's preferred stock have are those required by law,
which essentially means that if AgriFrozen wants to change its certificate of
incorporation in a way that would materially and adversely affect the holders of
its preferred stock, then AgriFrozen would have to obtain the approval of at
least 2/3 of the outstanding shares of its preferred stock. This means that we
have the effective ability to elect all of AgriFrozen's directors and determine
the outcome of practically all matters submitted to a vote of AgriFrozen's
stockholders. See "AgriFrozen."
Dividends payable to AgriFrozen's preferred stockholder will reduce
AgriFrozen's earnings and, thereby reduce the amount of patronage proceeds, if
any, distributable to our Class B members.
Beginning in fiscal 2010 the holder of AgriFrozen's preferred stock will be
entitled to receive cumulative, cash dividends, if and when declared by
AgriFrozen's board of directors, in an amount equal to $35 per share. Any
payment of dividends will reduce the amount of patronage proceeds, if any,
distributable to our Class B members.
Our Class B common stock is subordinated in liquidation.
Under our restated certificate of incorporation and bylaws, in the event of
our liquidation, dissolution or winding-up, the holders of Class B common stock
will not be entitled to be paid unless and until all the holders of our retains,
preferred stock, Class A common stock and special membership interests have been
paid in full. See "Description of Pro-Fac Securities."
Our Class B common stock has potentially different dividend rights than our
Class A common stock.
Our restated certificate of incorporation provides that our board of
directors may declare and pay dividends on our Class A common stock and not
declare or pay dividends on our Class B common stock. Moreover, our board of
directors is permitted to pay the holders of Class A common stock and Class B
common stock different dividends amounts.
Holders of our common stock receive only one vote regardless of the number
of shares owned.
Each of our members has one vote, regardless of the number of shares of
common stock held. If two or more members are joined in a single farming
enterprise, the participating members receive only a single vote. Therefore,
even a member with substantial holdings of common stock will have relatively
little control over the election of directors or other matters on which our
members may vote. See "Description of Pro-Fac Securities."
<PAGE>
Possible discontinuance of crops; no redemption of Class B common stock
until termination of our repurchase right.
We continuously review the ability of our members to produce high-quality
crops. Based on our evaluations, we may determine to stop marketing, in whole or
in part, a particular crop and terminate or reduce the crops deliverable under
the crop delivery agreements of our members producing that crop for sale through
us. The Class B members affected would be required to sell all of their shares
of Class B common stock supporting that portion of the crop to us for cash at
its par value, which is $5.00 per share, plus any declared but unpaid dividends.
However, we have no intention of redeeming shares of Class B common stock so
long as our right to repurchase your equity interests in Pro-Fac is outstanding.
If we exercise our repurchase right, we will only be required to pay a total of
$5.00 to each Class B member to exercise our right. In such an event you will
not receive the $5.00 per share par value for your shares. Assuming we do not
exercise our right to repurchase, a Class B member could be inactive for an
extended period of time without a readily available market for his shares.
We may also adjust the quantity of a crop to be marketed for our members.
This adjustment may be temporary or permanent. Permanent increases in the
quantity of a crop to be marketed would involve the purchase of additional
shares of common stock, and permanent decreases would involve the sale of shares
of common stock, by members of the particular pool affected or the associated
growers of such pool.
Although it is not currently uncommon for Class A members to be temporarily
inactive, it would be uncommon if we were to require a permanently inactive
member or a member whose quantity of crop deliveries has been permanently
reduced to maintain his common stock ownership for an extended period of time.
This may be the case with our Class B members if, at the time of the permanent
reduction, our repurchase right has not terminated. See "Business of Pro-Fac."
AgriFrozen's substantial leverage and financing restrictions could
adversely affect AgriFrozen's operations and place it in a competitive
disadvantage.
AgriFrozen is highly leveraged. In order to finance the acquisition of
Agripac's frozen vegetable processing business, AgriFrozen incurred $78.9
million of bank debt. Moreover, the CoBank credit facility contains covenants
imposing a number of operating and financial restrictions on AgriFrozen's
business. AgriFrozen's indebtedness and the operational and financial
restrictions imposed on its operations under the CoBank credit facility may have
important consequences, including the following:
1. AgriFrozen's ability to obtain additional financing for working
capital needs, including seasonal working capital, capital
expenditures, general corporate purposes or other purposes, may be
impaired. For example, the CoBank credit facilities:
(a) limit AgriFrozen's ability to:
make capital expenditures, which might include improvements
to its facilities or acquisitions of machinery,
incur additional indebtedness,
incur or maintain liens,
enter into transactions with affiliates or unrelated third
parties,
incur administrative expenses, and
<PAGE>
merge, consolidate or sell substantially all of its assets;
and
(b) require AgriFrozen to maintain specified levels with regard to:
its EBITDA, which is defined in the CoBank credit facility
as AgriFrozen's pre-tax income or loss, excluding one time
gains or losses and extraordinary items, plus interest
expense, depreciation and amortization, and
its leverage ratio, which is the extent of AgriFrozen's debt
obligations in relation to its cash flow to service those
obligations.
2. AgriFrozen is more highly leveraged than several of its competitors.
As a result, it must devote a greater percentage of its cash flow to
the payment of debt, rather than reinvestment into its business, when
compared to its competitors. This may place AgriFrozen at a
competitive disadvantage.
For these reasons, AgriFrozen's substantial degree of indebtedness may
limit its flexibility in planning for or reacting to changing market conditions,
reduce its ability to withstand competitive pressures and make it more
vulnerable to a downturn in general economic conditions or in its business. See
"AgriFrozen."
AgriFrozen's ability to service its indebtedness could affect its ability
to pay CMV.
AgriFrozen's interest liability under the CoBank revolving credit facility
and term loan facility is capped at $5.5 million per fiscal year.
Notwithstanding this fact, Agrilink must service its debt obligations.
AgriFrozen's ability to make interest payments under the CoBank credit facility
will depend on AgriFrozen's future operating performance. Interest expense is
included in determining AgriFrozen's earnings or losses on products processed
from crops supplied by our Class B members. Losses on Pro-Fac products will be
deducted from CMV otherwise payable to us for distribution to our Class B
members. There can be no assurance that AgriFrozen's business will generate cash
flow at levels sufficient to meet its debt service requirements and still have
cash flow to pay CMV.
In addition, in the event AgriFrozen is unable to generate sufficient cash
flow from operations to service its debt obligations and to meet other cash
requirements, it may be required to sell assets, reduce capital expenditures, or
obtain additional financing. There can be no assurance that any such asset sales
would be possible or that any additional financing would be available, if at
all, on terms acceptable to AgriFrozen. Factors which could affect AgriFrozen's
access to the capital markets, or the cost of such capital, include:
Pro-Fac's and Agrilink's refusal and/or inability to guarantee or
secure any indebtedness of AgriFrozen;
changes in interest rates;
general economic conditions; and
its results of operations, leverage, financial condition and business
prospects. See "AgriFrozen."
Delayed payments for crops.
Our members receive delayed payment of a portion of the purchase price for
their crops. This delay may exceed the industry average in some instances. For
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instance, we have historically paid the final 25% of CMV by July 15 of the year
immediately following the year of delivery. See "Business of Pro-Fac."
Our members must include as taxable income proceeds for which they have not
received any cash payment.
A member of Pro-Fac must include in his taxable income for federal income
tax purposes his share of the net proceeds of Pro-Fac realized from patronage
business, which is member related business, paid to him in cash and allocated to
his account as qualified retains. As a result, a member is required to declare
as income the value of the qualified retains allocated to him even though he has
not received an actual cash payment or distribution equal to that amount.
Non-qualified retains are included in a member's taxable income only when they
are redeemed. See "Business of Pro-Fac."
The transferability of Class B common stock is severely restricted.
The Class B common stock may only be transferred to us and, with our
consent, to other Class B members. Until the expiration of our right to
repurchase all our Class B common stock and special membership interests, we
have no intention of redeeming our Class B common stock in the event a Class B
member desires to stop growing crops or desires to decrease the quantity of
crops grown. Therefore, while Class A members who desire to stop growing crops
or who desire to decrease the quantity of crops to be delivered to us will have
us as a source to purchase their Class A common stock, until termination of our
repurchase right, Class B members will only have other Class B members as
potential purchasers of their shares.
The transferability of special membership interests is severely restricted.
The special membership interests are non-transferable without our prior
approval. They do not bear interest and have no dividend rights. You may not be
able to sell your special membership interest in the event you are ever in need
of an immediate source of cash. Moreover, you may not be able to pledge your
special membership interest as collateral for loans.
The non-qualified retains are not transferable and you have limited
liquidity.
Non-qualified retains are non-transferable. They do not bear interest and
have no dividend rights. As with the special membership interests, you may not
be able to readily sell your non-qualified retains for cash, or pledge your
non-qualified retains as collateral for loans.
We have the ability to change our treatment of retains.
Every year our board of directors determines whether to redeem our retains,
and, if so, the amount of retains that should be redeemed. Historically, we have
redeemed our qualified retains for shares of our Class A cumulative preferred
stock, and our non-qualified retains for our Class A cumulative preferred stock
and cash.
Historically, our board of directors has redeemed retains, qualified and
non-qualified, five years after issuance. This policy is subject to change in
the discretion of our board of directors. Our board could, for example, increase
the number of years the retains must be held before they are redeemed or our
board could decide to redeem the retains for cash only, for shares of our Class
A cumulative preferred stock or shares of some other authorized class of our
capital stock, some other form of consideration, or for some combination of cash
and securities.
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Shortages or oversupplies of raw product due to seasonality and other
factors could result in reduced profitability.
We and our members are subject to all the risks generally associated with
the production and marketing of agricultural commodities. The production of
agricultural products is predominantly seasonal. The frozen vegetable processing
business can be positively or negatively affected by national weather conditions
because of the weather's effect on crop yields. Favorable weather conditions can
produce high crop yields and an oversupply situation in a given year. Oversupply
typically will result in depressed selling prices and reduced profitability on
products produced from that year's crops. Excessive rain or drought conditions
can produce low crop yields and a shortage situation. Shortages typically result
in higher selling prices and increased profitability for products; however,
shortages could result in supplies being insufficient to meet our requirements.
Although the overall national supply situation controls pricing, the supply can
differ regionally because of variations in weather.
Risks of the food industry, including changes in consumer preferences and
distribution channels could adversely affect our business.
Food processors are subject to risks of:
adverse changes in general economic conditions;
evolving consumer preferences and nutritional and health related
concerns;
changes in food distribution channels and increasing buying power of
large supermarket chains, warehouse clubs, mass merchandisers,
supercenters and other retail outlets that tend to resist price
increases and have stringent inventory and management requirements;
federal, state and local food processing controls;
consumer product liability claims; and
risks of product tampering.
Product liability claims or product recalls could adversely affect our business.
The packaging, marketing and distribution of food products entails an
inherent risk of product liability and product recall and resultant adverse
publicity. We may be subject to significant liability if the consumption of any
of our products causes injury, illness or death. We could be required to recall
certain of our products in the event of contamination or damage to its products.
There can be no assurances that product liability claims will not be asserted
against us in the future, or that any claims that are made will not create
adverse publicity that will have a material adverse effect on our ability to
successfully market our products and on our business, financial condition and
results of operations.
Competition in food processing industry.
The products of AgriFrozen, including those processed from crops supplied
by us, compete with those of national and major regional food processors under
highly competitive conditions. Many national manufacturers have substantially
greater resources than AgriFrozen. As a result, these national manufacturers may
be able to afford to update their processing facilities with new and more
efficient equipment more often then AgriFrozen and may be able to spend more
money on advertising and marketing their products than AgriFrozen.
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It is anticipated that AgriFrozen will purchase all of its requirements for
nonagricultural products, such as containers, on the open market. Although it is
not expected that AgriFrozen will experience any difficulty in obtaining
adequate supplies of these nonagricultural items, occasional periods of short
supply of certain materials could occur which could have a material adverse
effect on the AgriFrozen's business, financial condition and results of
operations.
Environmental risks; compliance with environmental laws.
AgriFrozen. AgriFrozen's purchase of Agripac's frozen vegetable processing
business in a bankruptcy proceeding may not have extinguished certain
liabilities of the business, including environmental liabilities. As part of
AgriFrozen's acquisition of Agripac's frozen vegetable processing business,
CoBank agreed to provide AgriFrozen with a total of $4.0 million to fund
environmental remediation expenses. Phase I environmental audits were performed
on the facilities acquired from Agripac, including leased properties. A number
of environmental conditions requiring remedial action have been identified, but
we believe that the total cost to remediate those conditions will not exceed the
$4.0 million to be paid by CoBank. There can be no assurance, however, that
additional environmental liabilities do not exist, or that the $4.0 million of
environmental remediation credit will be sufficient to cover all the remedial
costs that may be associated with any environmental clean-up activities required
at such facilities. Environmental liabilities could cause AgriFrozen to incur
significant expenses for remediation or clean-up regardless of fault. Such
liabilities could have a material adverse effect on AgriFrozen's business,
financial condition and results of operations.
In addition, we are subject to various federal, state and local laws and
regulations relating to the protection of the environment. These environmental
laws and regulations govern the disposal of solid and liquid waste material,
which results from the preparation and processing of foods, and emissions into
the atmosphere, including odors inherent in the heating of foods during
preparation. These environmental laws and regulations have had an important
effect on the food processing industry as a whole, requiring substantially all
firms in the industry to incur material expenditures for modification of
existing processing, as well as for the construction, operation and closure of
waste treatment and related facilities. We cannot predict what environmental
legislation or regulations will be enacted in the future, how existing or future
laws or regulations will be administered or interpreted or whether new
environmental conditions may be found to exist. Enactment of more stringent laws
or regulations, more strict interpretation of existing laws and regulations or
identification of new conditions may require additional expenditures by us,
which expenditures could have a material adverse effect on our business,
financial condition and results of operations.
Pro-Fac. As a stockholder of AgriFrozen, third-parties may seek to hold us
responsible for the environmental liabilities of AgriFrozen's facilities.
Although we do not believe that there would be any basis for such a claim, we
may be required to expend resources defending such a claim.
Year 2000 technology problems could cause business interruptions.
Many currently installed computer systems and software products worldwide
are coded to accept only two-digit entries to identify a year in the date code
field. Consequently, on January 1, 2000, many of these systems could fail or
malfunction because they are not able to distinguish between the year 1900 and
the year 2000. Accordingly, many companies, including Pro-Fac and our customers
and suppliers, may need to upgrade their systems to comply with applicable year
2000 requirements.
Because we, our customers and suppliers depend, to a very substantial
degree, upon the proper functioning of computer systems, a failure of these
systems to correctly recognize dates beyond January 1, 2000 could disrupt
operations. Any disruptions could have a material adverse effect on our
business, financial condition or results of operations.
<PAGE>
We are the guarantor of Agrilink's indebtedness.
We do not have any independent operations or any significant assets other
than the capital stock of Agrilink and AgriFrozen. We are dependent upon the
receipt of payments under our marketing and facilitation agreements with
Agrilink and AgriFrozen, and upon the receipt of dividends or other
distributions from Agrilink and AgriFrozen to fund our obligations, including
our obligations under our guarantees with respect to Agrilink's indebtedness
under its new credit facility, the Dean Foods subordinated promissory note and
Agrilink's new notes.
Restrictions imposed by terms of Agrilink's indebtedness could adversely
affect our operating flexibility and default could impair our operations.
Agrilink is highly leveraged and has significant debt service requirements.
At June 26, 1999, Agrilink had $677 million of indebtedness outstanding, not
including borrowings under its $200 million revolving credit facility. At June
26, 1999, Agrilink had $18.9 million of indebtedness outstanding under its
revolving credit facility, representing seasonal working capital borrowings, and
it had issued $16.2 million of letters of credit under its revolving credit
facility.
Agrilink's credit facility contains covenants imposing a number of
significant operating and financing restrictions on our business, as well as
Agrilink's business. These covenants, among other things, limit our ability to:
incur additional indebtedness;
incur or maintain liens;
pay dividends or other distributions;
redeem our capital stock;
make other restricted payments;
enter into transactions with affiliates;
sell or dispose of assets; and
merge, consolidate or sell all or substantially all of our assets.
In addition, we are required under Agrilink's credit facility to maintain
specified levels with regard to EBITDA, interest coverage, fixed charges
coverage, leverage and net worth. These provisions could negatively affect our
ability to react to changes in market conditions or to take advantage of
business opportunities we believe to be desirable.
Our or Agrilink's failure to comply with these provisions in Agrilink's
credit facility would result in a default thereunder.
In addition, a substantial portion of Agrilink's cash flow from operations
must be dedicated to the payment of principal and interest on its indebtedness,
reducing funds available to Agrilink for operations, capital expenditures, or
other purposes. For example:
Agrilink must make interest payments on its new notes in the amount of
approximately $23.8 million each year;
<PAGE>
Agrilink is required to make interest payments under the new credit
facility of approximately $40.4 million each year under the term loan
facility and approximately $81,000 per $1 million borrowed under the
revolving credit facility, assuming its interest rates do not change;
Agrilink is required to make annual principal payments under the new
credit facility in amounts of: $8.3 million in fiscal 2000, $10.8
million in each of fiscal 2001, 2002 and 2003, $11.1 million in fiscal
2004, $195.3 million in fiscal 2005 and $199.5 million in fiscal 2006.
Agrilink would not presently be able to make the payments due in
fiscal 2005 or 2006 out of its current cash flow and may be unable to
pay these principal amounts when they become due unless Agrilink is
able to refinance indebtedness; and
Certain of Agrilink's loans under the new credit facility have
variable or floating rate interest. Of the $446.6 million principal
amount of loans outstanding at June 26, 1999 under Agrilink's term
loan facility, Agrilink has effectively fixed the applicable interest
rates for $250 million of such loans for three years through interest
rate hedges. Accordingly, Agrilink remains vulnerable to increases in
interest rates, and correspondingly, increases in its interest costs,
for the unfixed portion of the interest due for this floating rate
debt.
A default under Agrilink's credit facility would allow the lenders to
terminate their loan commitments under Agrilink's revolving credit facility. In
addition, Agrilink's creditors under its credit facility could require
acceleration of the payment of principal and interest on those loans upon the
occurrence of a default, causing all amounts owed under Agrilink's credit
facility to be immediately due and payable. If Agrilink is unable to repay its
indebtedness under its credit facility, the lenders could enforce our guaranty
and require us to pay Agrilink's indebtedness. Because we have no independent
operations, it is unlikely that we would be able to pay such debt. In addition,
because of Agrilink's indebtedness, on a consolidated basis, we are more highly
leveraged than several of our competitors. As a result, our ability to react to
changing market conditions may be limited, our ability to withstand competitive
pressures may be inhibited and we may be more vulnerable to a downturn in
general economic conditions or in our business.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-2 under the
Securities Act registering, the Class B Common stock and special membership
interests. This prospectus, which is part of the registration statement, does
not contain all of the information included in the registration statement. Also,
any statement made in this prospectus concerning the contents of any contract,
agreement or other document is not necessarily complete. If we have filed any
contract, agreement or other document as an exhibit to the registration
statement, you should read the exhibit for a more complete understanding of the
document or matter involved.
We and Agrilink are required to file periodic reports and other information
with the SEC under the Securities Exchange Act. Accordingly, we and Agrilink
file reports and other information with the Commission.
You may read and copy the registration statement, including the attached
exhibits, and any reports, statements or other information that we may file, at
the SEC's public reference room at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549-1004, and at the SEC`s Midwest Regional Office located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511; and its Northeast Regional Office located at 7 World Trade Center,
Suite 1300, New York, New York 10048. You can request copies of these documents,
upon payment of the duplicating fee, by writing to the SEC at its principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549-1004. Please call the
<PAGE>
SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. Our and Agrilink's SEC filings are also available to the public
on the SEC's Internet site (http://www.sec.gov).
The SEC allows us to "incorporate by reference" information we have filed
with it, which means that we can disclose important information to you by
referring you to those previously filed documents. These incorporated documents
contain important business and financial information about us that is not
included in or delivered with this prospectus, and later information filed with
the SEC will update and supersede this information. The information incorporated
by reference is considered to be part of this prospectus. We incorporate by
reference the documents listed below.
Our Annual Report on Form 10-K/A-1 for the year ended June 26, 1999;
and
Our Quarterly Report on Form 10-Q for the fiscal quarter ended
September 25, 1999.
A copy of our Annual Report on Form 10-K/A-1 for the fiscal year ended June
26, 1999 and a copy of our Quarterly Report on Form 10-Q for the first fiscal
quarter ended September 25, 1999 are being delivered with this prospectus. The
above filings are also available at the SEC's offices and Internet site
described above. The filing is also available to you, without charge, directly
from us. You may request a copy of the filing by writing or telephoning us at
the following address: Pro-Fac Cooperative, Inc., 90 Linden Oaks, P.O. Box 682,
Rochester, New York 14603, Attention: Vice-President-Communications; telephone:
(716) 383-1850.
FORWARD-LOOKING INFORMATION
This prospectus, together with the annual report on Form 10-K/A-1 and the
quarterly report on Form 10-Q incorporated into this prospectus, contain
forward-looking statements, which are not statements of historical facts. We
have based these forward-looking statements on our current expectations and
projections about future events, based on the information currently available to
us. The forward-looking statements include, among other things, our expectations
and estimates about AgriFrozen's business operations, strategies and future
financial performance.
The forward-looking statements are subject to risks, uncertainties and
assumptions about us, AgriFrozen and Agrilink and about the future, and could
prove to be wrong. Important factors that could cause actual results to differ
materially from our expectations are discussed in this prospectus, including the
forward-looking statements included in this prospectus and under "Risk Factors."
Among the factors that could impact our ability to achieve our goals and, in
particular, AgriFrozen's ability to achieve its goals are:
AgriFrozen's ability to successfully transition from a start-up
company to an operating company;
AgriFrozen's ability to service its indebtedness;
the impact of strong competition in the food industry; and
the impact of weather on the volume and quality of raw products.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus may not occur.
<PAGE>
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of our Class B
common stock or special membership interests.
DETERMINATION OF OFFERING PRICE
As is described below, the number of shares of Class B common stock issued
to a particular grower will be based on the quantity and type of crop the grower
has committed to deliver to AgriFrozen, as outlined in the grower's crop
delivery agreements with AgriFrozen for the 2000 and 2001 growing seasons. The
value of a grower's special membership interest will be determined based on a
percentage of the particular grower's historic equity interest in Agripac. Our
board of directors has determined, in consideration of our right to repurchase
all of our Class B common stock and special membership interests for a total
consideration of $5.00 per Class B member, that the value to us of the
commitments of the prior member-growers of Agripac to deliver crops for the 2000
and 2001 growing seasons, insuring us a continuous supply of raw product for
those growing seasons, and to agree to the assignment of their general marketing
agreements and crop delivery agreements by AgriFrozen, is $16.0 million.
PLAN OF DISTRIBUTION
The Offering.
We are offering shares of our Class B common stock and special membership
interests exclusively to growers who are currently under contract with
AgriFrozen to deliver certain quantities and types of crops for the 1999, 2000
and 2001 growing seasons. These growers were previously member-growers of
Agripac.
Subscribers of our Class B common stock will become Class B members of
Pro-Fac. As consideration for our issuance of shares of our Class B common stock
to a particular grower, the grower will be required to consent to the assignment
by AgriFrozen of his crop delivery agreements to us and agree to the termination
of his right to cancel his crop delivery obligations for the 2000 and 2001
growing seasons. The number of shares of Class B common stock issuable to a
grower will be based upon the quantity and type of crop the grower currently is
committed to supply to AgriFrozen.
In addition to shares of Class B common stock, a subscriber-grower will be
issued a special membership interest. The value of the special membership
interests issued to the subscriber-grower will be determined based on
approximately 58% of the grower's historic equity interest in Agripac, less the
total number of shares of Class B common stock being issued to the grower
multiplied by the par value of the shares, $5.00.
The number of shares of Class B common stock to be issued to a grower is
determined in a four step process. First, we determine the average CMV over the
past four years for the particular crop to be delivered by the grower. Second,
that average CMV is multiplied by 25% and the product is rounded to the nearest
whole number divisible by $5.00, the par value of our common stock. This is the
investment rate. Third, the investment rate is multiplied by the number of acres
of the crop the grower has committed to deliver. Finally, that product is
divided by $5.00, the par value of our common stock, to determine the number of
shares of common stock issuable to the grower. If we assume a grower has
committed to deliver 100 acres of sweet corn to AgriFrozen and had a $100,000
historic equity interest in Agripac, the grower will be issued 3,900 shares of
Class B common stock.
<PAGE>
The four step process described above is applied to our example as
follows:
Step 1: Four year average CMV for sweet corn = $775
Step 2: $775 x 25% = investment rate = $195
Step 3: Investment rate ($195) x Acres (100) = $19,500
Step 4: $19,500/$5 par value per share = 3,900 shares
In addition, the grower in our example will receive a special membership
interest with a value of $38,500. This value is determined by multiplying 58%
times the grower's historic equity interest in Agripac. The result is $58,000.
From this number, subtract the par value, $5.00 per share, of the 3,900 shares
of Class B common stock the grower will receive, 58,000 - 19,500, which results
in the $38,500 value of the special membership interest. The shares of Class B
common stock and the special membership interest issuable to each
subscriber-grower under the foregoing formula, will be issued subject to our
right to repurchase all of the shares of our Class B common stock and the
special membership interest issued to the subscriber-grower solely and
exclusively for a total consideration of $5.00 payable to the subscriber-grower.
Together with this prospectus, each subscriber-grower in this offering is
receiving an individualized subscription agreement that sets out:
the subscriber's historic equity interest in Agripac,
the number of shares of Class B common stock that would be issued to
him based on his acreage and crop commitment, and
the value of his special membership interest.
The Distribution.
The offering will be implemented through our Agricultural Services
Department. Members of the Agricultural Services Department will provide
assistance in this offering, which may consist of: (i) assisting in the mailing
of this prospectus; (ii) responding to phone inquiries from potential
grower-offerees with regard to matters of an administrative nature; (iii)
maintaining records of all subscriptions; and (iv) attending informational
meetings for potential grower-offerees and communicating with them by telephone
concerning the information contained in this prospectus.
None of the members of our Agricultural Services Department are registered
with the SEC as a broker-dealer. No member of our Agricultural Services
Department will receive any compensation or other remuneration, either directly
or indirectly, for his or her assistance in this offering. Any time spent by the
members of our Agricultural Services Department to assist in this offering will
be incidental to his or her regular duties at Pro-Fac.
Subscription Procedure.
Subscriptions for the Class B common stock and special membership interests
can be made by completing and signing the subscription agreement provided with
this prospectus and mailing it to Pro-Fac Cooperative, Inc., 90 Linden Oaks,
P.O. Box 682, Rochester, New York 14603, Attention: Kevin M. Murphy, V.P. Member
Relations - Agricultural Services Department.
The execution and delivery of the subscription agreement will obligate the
subscriber to irrevocably and unconditionally acquire the number of shares of
Class B common stock and special membership interests subscribed for in the
subscription agreement if we accept the subscription. We reserve the right to
accept or reject any subscription in whole or in part in our sole and complete
discretion.
<PAGE>
By executing the subscription agreement, each grower-subscriber expressly
grants to us the right to repurchase his shares of Class B common stock and his
special membership interest for a total consideration of $5.00.
Prospective growers-subscribers are referred to the subscription agreement
provided with this prospectus for the full text of the representations and
warranties and other agreements and obligations he will make to or with Pro-Fac.
AGRIFROZEN
AgriFrozen was incorporated under the laws of the State of New York in
January 1999. AgriFrozen's capital stock consists of 20,000 shares of common
stock, $1.00 par value per share, and 20,000 shares of preferred stock, par
value $1.00 per share. As of the date of this prospectus, 1,000 shares of common
stock were issued and outstanding and owned by us, and 16,000 shares of
preferred stock were issued and outstanding and owned by PFA Northwest Growers
Cooperative, Inc. AgriFrozen's common stock is voting and its preferred stock in
non-voting, except to the extent required by law. The preferred stock does rank
senior to the common stock with respect to dividends commencing after the fiscal
year ending June 2004 and with respect to liquidation rights. One hundred
percent of the capital stock of PFA Northwest Growers is owned by former
member-growers of Agripac.
AgriFrozen is a producer and marketer of primarily frozen vegetables.
AgriFrozen's products include frozen green peas, sugar-snap peas, cob corn and
whole kernel corn, green beans, carrots and lima beans. Although AgriFrozen does
have branded products, including Chef Du Jour, Perfect Sense, Sweet Jubilee,
Jack and the Beanstalk and Oregon's Finest, most of its frozen vegetable
products are packaged and sold under private labels. Under trademark licensing
agreements with Ore-Ida Foods, Inc., AgriFrozen will sell some of its frozen cob
corn products under the Ore-Ida and Mini-Gold trademarks, certain of its frozen
breaded vegetable products, including okra, mushrooms, zucchini and corn
nuggets, will be sold under the Tendekrisp and Ore-Ida trademarks and some of
its frozen stew vegetable products will be marketed and distributed under the
Ore-Ida trademark. In addition, under its co-packing agreement with Agrilink,
AgriFrozen will process and package a variety of frozen vegetables under
Agrilink's Birds Eye trademark. Sales of finished product sold to Agrilink for
distribution under the Birds Eye brand constituted approximately $30.0 million
of AgriFrozen's total sales for the 1999 fiscal year.
AgriFrozen owns four facilities and leases two. A description of these
facilities is listed below.
Approximate Owned/
Location Use Square Footage Leased
Salem, Oregon Headquarters 8,981 Owned
Frozen vegetable
processing 110,000 Owned
Woodburn, Oregon Frozen vegetable
processing 388,000 Owned
Distribution and
packaging 385,000 Leased
Grandview, Washington Frozen vegetable
processing 62,069 Leased
Walla Walla, Washington Frozen vegetable
processing 102,000 Owned
<PAGE>
The location of these facilities provides growers in Oregon and Washington
with a regional market for their crops and provides AgriFrozen with a regional
source of raw agricultural products. Finished products are distributed primarily
in the western United States through a regional network of distribution centers
and food brokers. Some of AgriFrozen's finished products will be marketed and
distributed by Agrilink under the service agreement between AgriFrozen and
Agrilink. AgriFrozen's customers include supermarket chains in the western
United States, including Kroger and Safeway, as well as food service providers
such as Sysco and Alliant Food Service.
It is expected that AgriFrozen and Agrilink will enter into arm's-length
co-packing agreements or similar agreements whereby AgriFrozen might pack and
distribute finished products to customers of Agrilink in the western United
States and Agrilink might pack and distribute finished products to customers of
AgriFrozen in the eastern United States. These type of arrangements are expected
to enable both AgriFrozen and Agrilink to reduce their respective freight costs
associated with the shipment of finished product.
Under the marketing and facilitation agreement between AgriFrozen and
Pro-Fac, the board of directors of AgriFrozen is required to consist of:
at least three and as many as five directors who are individuals who
currently serve as directors of Pro-Fac and who are chosen by
Pro-Fac's board of directors,
one director who is nominated by the president of Agrilink from among
Agrilink's management employees and
any number of disinterested directors who are to be elected from
individuals recommended by the president of Agrilink.
Individuals who are employees or shareholders of Pro-Fac, Agrilink or
AgriFrozen cannot be disinterested directors of AgriFrozen. Disinterested
directors of Agrilink are, however, eligible to serve as disinterested directors
of AgriFrozen. The marketing and facilitation agreement also reserves to us the
right to elect additional directors to AgriFrozen's board of directors from our
Class B members. These individuals would serve as either directors or ex officio
directors of AgriFrozen.
The following table provides certain information with respect to the
executive officers, directors and certain other key employees of AgriFrozen. All
of the executive officers and directors of AgriFrozen are either officers and
directors of Pro-Fac or Agrilink, or both.
Name Position(s) held at AgriFrozen
Directors and Executive Officers
Dennis M. Mullen President and Director
Earl L. Powers Vice President and Treasurer
William D. Rice Vice President and Secretary
Stephen R. Wright Vice President and Assistant Secretary
Bruce R. Fox Director
Paul E. Roe Director
Steven D. Koinzan Director
Tom R. Croner Director
Walter F. Payne Director
<PAGE>
Other Key Employees
Charles G. Smutny General Manager
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Dennis M. Mullen is the president and chief executive officer and a
director of Agrilink. He has served as president and chief executive officer
since January 1997 and has served as a director since May 1996. From May 1996 to
January 1997, Mr. Mullen was the chief operating officer of Agrilink and
executive vice president of Agrilink from January 1996 until January 1997. From
March 1993 to May 1996 Mr. Mullen was president and chief executive officer of
Agrilink's Curtice Burns Foods division. He was senior vice president and
business unit manager food service of Curtice Burns Foods division from 1991 to
1993, and senior vice president-custom pack sales for Agrilink's Nalley Find
Foods division from 1990 to 1991. Prior to his employment with Agrilink, Mr.
Mullen was president and chief executive officer of Globe Products Company.
Earl L. Powers is the executive vice president and chief financial officer
of Agrilink. He has served in these positions since February 1997. Mr. Powers
was vice president and corporate controller of Agrilink from March 1993 to
February 1997, and vice president finance and management information systems of
Agrilink's Curtice Burns Food division from 1991 to March 1993. Prior to joining
Agrilink, Mr. Powers was controller of various divisions of the Pillsbury
Company and held various executive management positions at the Pillsbury
Company.
William D. Rice is the secretary and senior vice president of strategic
development of Agrilink. He has served as secretary since 1989 and has served as
senior vice president of strategic development since February 1997. Mr. Rice
served as chief financial officer of Agrilink from 1969 to February 1997. He was
treasurer of Agrilink from 1975 to 1996, and vice president - finance of
Agrilink from 1969 to 1991.
Stephen R. Wright is the general manager and assistant treasurer of Pro-Fac
and an executive vice president agriculture of Agrilink. He has served as
general manager of Pro-Fac since March 1995. Prior to becoming general manager,
he served as assistant general manager from November 1994. Mr. Wright has served
as the assistant treasurer of Pro-Fac since March 1995. He has served as
executive vice president agriculture of Agrilink since November 1996. He was
senior vice president - procurement of Agrilink from November 1994 and vice
president - procurement of Agrilink from 1990 to November 1994, having served as
director of commodities and administration services of Agrilink from 1988 to
1990.
Bruce R. Fox is the president and a director of Pro-Fac and a director of
Agrilink. Mr. Fox has served as a director of Pro-Fac since 1974 and has served
as a director of Agrilink since November 1994. He was treasurer of Pro-Fac from
1984 until March 1995 at which time he was elected president. Mr. Fox has been a
member of Pro-Fac since 1974. He is a fruit and vegetable grower (N.J. Fox &
Sons, Inc., Shelby, Michigan).
Paul E. Roe is a director of Pro-Fac. He has served as a director since
1986. He has been a member of Pro-Fac since 1961. Mr. Roe is a vegetable, grain
and dry bean farmer (Roe Acres, Inc., Bellona, New York).
Steven D. Koinzan is the treasurer and a director of Pro-Fac and a director
of Agrilink. Mr. Koinzan has served as treasurer of Pro-Fac since March 1995 and
as a director of Pro-Fac since 1983. He has served as a director of Agrilink
since November 1994. Mr. Koinzan served as secretary of Pro-Fac from March 1993
until March 1995. He has been a member of Pro-Fac since 1979. Mr. Koinzan is a
popcorn, field corn and soybean farmer (Koinzan Farms, Norden, Nebraska).
<PAGE>
Tom R. Croner is the secretary and a director of Pro-Fac. He has served as
secretary since March 1995 and has served as a director since 1985. Mr. Croner
has been a member of Pro-Fac since 1973. He is a dairy and potato farmer (T-Rich
Inc., Berlin, Pennsylvania).
Walter F. Payne is a disinterested director of Agrilink. He has served as a
director since January 1996. Mr. Payne is the president and chief executive
officer of Blue Diamond Growers and has served in these capacities since 1992.
He held various positions at Blue Diamond Growers between 1973 and 1992. Mr.
Payne currently serves on the board of directors of the Almond Board of
California and the International Nut Council, a board alternate for the National
Council of Farmer Cooperatives, and as a member of the Board of Trustees for the
Graduate Institute of Cooperative Leadership.
Key Employees
Charles G. Smutny served as the president of Agripac from July 1998 until
February 1999. Prior to becoming president of Agripac he served as executive
vice president of sales and marketing from December 1995 until his election as
president. From 1985 until 1995, Mr. Smutny served as vice president of
operations and international sales of S&W Fine Foods, Inc.
- ---------------------------
Director Compensation. Members of the board of directors of AgriFrozen are
reimbursed for their expenses incurred in connection with any board meeting
attended. AgriFrozen does not currently anticipate paying its directors any
directors' fees for serving as directors of AgriFrozen.
Executive Compensation. AgriFrozen does not currently anticipate paying its
executive officers any compensation for serving as executive officers of
AgriFrozen.
Marketing and Facilitation Agreement. The marketing and facilitation
agreement between AgriFrozen and Pro-Fac provides that AgriFrozen will purchase
raw product from us, process the raw product and market the finished processed
products. AgriFrozen is permitted to determine under which label or labels the
finished products will be marketed and the price at which it will sell the
products.
The amount and type of raw product we are obligated to deliver to
AgriFrozen and AgriFrozen is obligated to purchase from us is determined by both
our board of directors and AgriFrozen's board of directors on an annual basis.
The two boards will make this annual determination upon the recommendation of a
joint committee, comprised of the chief executive officer of Agrilink and an
equal number of Pro-Fac directors and disinterested directors. Disinterested
directors serving on the joint committee may not be employees, shareholders or
affiliates of either Agrilink, AgriFrozen or Pro-Fac, but may be a disinterested
director of Agrilink.
AgriFrozen will pay us the CMV of the crops sold by us to it. However, in
the event AgriFrozen experiences any losses on products processed from crops
supplied by our Class B members, AgriFrozen will deduct the losses from the
total CMV otherwise payable to us. In any year in which AgriFrozen has earnings
on any Pro-Fac products, AgriFrozen will distribute its earnings from those
Pro-Fac products to our Class B members. The marketing and facilitation
agreement permits AgriFrozen to pay 20% of its earning on Pro-Fac products in
cash and retain 80% of its earnings as working capital.
We are under no obligation to distribute to our Class B members the entire
amount of any earnings paid to us in excess of CMV.
Service Agreement. AgriFrozen has entered into a service agreement with
Agrilink. Under the terms of the service agreement Agrilink provides AgriFrozen
with administrative services and certain management consulting services.
<PAGE>
AgriFrozen's outsourcing of these services to Agrilink is expected to result in
efficiencies and savings in selling, general and administrative expenses. The
types of administrative services covered in the service agreement include:
financial and accounting services,
assistance in purchasing and entering orders,
assistance related to human resource and employee benefit plan
matters,
assistance in research and development,
agricultural services, which may include planting, harvesting and
hauling crops,
computer and information systems services,
customer relations, and
engineering services.
The management consulting services are limited to providing advice to
AgriFrozen from time to time as requested by AgriFrozen.
AgriFrozen will pay Agrilink $1.0 million each year for its services. In
addition, in any year AgriFrozen's EBITDA exceeds $12.0 million, AgriFrozen will
pay Agrilink a supplemental payment equal to 40% of the excess. The service
agreement defines EBITDA as the sum of pre-tax income or loss plus interest,
amortization and depreciation expenses, plus all other non-cash items that
reduces AgriFrozen's income, plus amounts payable to Agrilink under the service
agreement, even though actual payment has not been made, minus all non-cash
items that increased AgriFrozen's net income.
The service agreement terminates in June 2002 unless extended by Agrilink
and AgriFrozen.
In addition to realizing savings on selling, general and administrative
expenses as a result of the service agreement with Agrilink, AgriFrozen expects
to realize savings in manufacturing overhead expenses by processing frozen
vegetable product in four facilities, as opposed to six processing facilities
used by Agripac. Savings from this planned consolidation are not expected to
have any immediate impact on AgriFrozen's operations. The terms of the CoBank
credit facility are also expected to contribute favorably to AgriFrozen's
operating results. The credit agreement caps AgriFrozen's annual total interest
liability at $5.5 million.
Acquisition of the Frozen Vegetable Processing Business of Agripac.
On February 23, 1999, AgriFrozen acquired substantially all of the assets
of Agripac related to its frozen vegetable processing business, including:
accounts receivable;
an administration building and three frozen vegetable processing
facilities, including associated equipment;
Agripac's frozen vegetable inventory; and
<PAGE>
leases relating to an additional frozen vegetable processing facility
and a distribution and packaging facility, as well as equipment and
operating leases associated with the facilities.
With the exception of continuing performance obligations under contracts
specifically assigned to AgriFrozen, AgriFrozen did not assume any liabilities
of Agripac.
The net purchase price for the assets was $80.5 million, including
expenditures of $7.8 million, consisting of cash payments of approximately $6.4
million to prior member-growers of Agripac to induce them to enter into crop
delivery agreements with AgriFrozen, and transaction expenses and miscellaneous
costs totaling $1.4 million. AgriFrozen also expects to pay an additional $1.2
million in severance costs associated with the acquisition and the
implementation of AgriFrozen's business plan. All but $8.0 million of the total
acquisition price was financed by CoBank. The balance was paid by AgriFrozen.
Agripac Inc.
Agripac is an Oregon cooperative headquartered in Salem, Oregon. Prior to
its bankruptcy in January 1999, it produced a wide variety of canned and frozen
vegetable and fruit products, with a concentration in green beans, sweet corn,
peas, table beets and carrots. Its raw product was supplied by approximately 200
member-growers. For its fiscal year ended March 31, 1998, Agripac's frozen
vegetable processing business sales were $130.0 million, constituting
approximately 72% of its total net sales of approximately $180.0 million.
In 1997, Agripac became one of the largest co-packers of Birds Eye labeled
frozen vegetable products through a co-packing agreement with Dean Foods
Vegetable Company. Pursuant to that agreement, Agripac became the exclusive
supplier of Birds Eye label products in the Northwestern United States. DFVC's
rights and obligations under the co-packing agreement were subsequently assumed
by Agrilink as a result of Agrilink's acquisition of DFVC and the subsequent
merger of DFVC into Agrilink in September 1998. Agripac was also a party to an
agreement with Ore-Ida Foods, Inc., pursuant to which Agripac marketed frozen
cob corn and stew vegetable blends under the Ore-Ida brand name and through
Ore-Ida's distribution channels. These agreements, in modified form, were
acquired as part of AgriFrozen's purchase of the Agripac frozen vegetable
processing business. See "Business of Pro-Fac and Its Subsidiaries -
AgriFrozen."
Based on information available to us regarding Agripac's financial
condition, Agripac had declining net income, operating margins and profit
margins, resulting in losses for its 1995, 1996, 1997 and 1998 fiscal years.
Agripac's low margins did not allow it to service its indebtedness. As a result
Agripac was paying its members less then market value for their crops. In late
1998, Agripac was faced with an unwillingness by its lenders to provide
additional operating loans.
On January 4, 1999, Agripac filed a voluntary petition for bankruptcy under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the
District of Oregon. On January 22, 1999, Agripac, as debtor-in-possession, filed
a motion with the bankruptcy court for authority to sell substantially all of
the assets comprising its frozen food packaging business, free and clear of any
liens or encumbrances under ss. 363(b) of the Bankruptcy Code, to AgriFrozen
under the terms described in the asset purchase agreement. The bankruptcy court
approved the sale of Agripac's frozen food processing assets to AgriFrozen by an
order entered on February 18, 1999.
<PAGE>
Description of Agrifrozen's Indebtedness
The Credit Facilities.
In connection with the acquisition of Agripac's frozen vegetable processing
business, AgriFrozen entered into a credit agreement with CoBank. That credit
facility consists of a $30.0 million term loan and a revolving credit facility
of $55.0 million for fiscal 2000 and $50.0 million for each year thereafter.
AgriFrozen also entered into a subordinated note agreement with CoBank.
That credit facility consists of a $12.0 million secured subordinated promissory
note.
In order to consummate the acquisition, AgriFrozen borrowed a total of
$36.9 million under the revolving credit facility, all $30.0 million under the
term loan facility and issued its $12.0 million promissory note.
AgriFrozen's obligations under the revolving credit facility, the term loan
facility and the promissory note, are not guaranteed by Pro-Fac or Agrilink and
are expressly nonrecourse as to Pro-Fac and Agrilink.
Both the credit agreement and the subordinated note agreement expressly
recognize our ability to abandon or transfer our ownership interest in
AgriFrozen under any of the following circumstances:
1. on June 15, 2002, upon 11 months prior notice; or
2. at any time before June 29, 2002 if:
(a) AgriFrozen becomes insolvent or is otherwise unable to meet
its obligations as they become due, as determined by us in
our sole, but reasonable, discretion; or
(b) any pre-acquisition liabilities of Agripac are asserted
against AgriFrozen or any of its affiliates, including us,
and either,
no lender under the AgriFrozen credit facilities is
willing to make any advance to AgriFrozen to finance
costs and expenses associated with the liability; or
we determine that, in light of the liability and
associated costs, our continued ownership of AgriFrozen
common stock would not be in our best interests.
In the event we determine to abandon or transfer our ownership interest in
AgriFrozen it is our intention to exercise our right to repurchase all of our
shares of Class B common stock and special membership interests.
Our decision to abandon or transfer our ownership interest in AgriFrozen is
an event of default under AgriFrozen's financing agreements, which would allow
the lenders to accelerate payment of AgriFrozen's indebtedness.
Revolving credit facility and term loan facility.
Both the term loan facility and the revolving credit facility mature on
June 29, 2002.
<PAGE>
The term loan facility and the revolving credit facility bear interest, at
AgriFrozen's option, at CoBank's cost of funds plus 4.19% or at CoBank's
designated variable rate. CoBank's designated "variable rate" is defined as the
variable per annum rate of interest so designated from time to time by CoBank as
its national variable rate. CoBank's variable rate is merely a reference rate
and does not necessarily represent the lowest or best rate for credit being
extended by CoBank. In no event, however, can the total interest liability to
AgriFrozen exceed $5.5 million in any fiscal year.
The revolving credit facility is reduced over time as follows:
Until June 24, 2000 the maximum funds available is $55.0 million, and
From June 25, 2000 until maturity the maximum funds available is $50.0
million.
CoBank has no obligation to fund advances under the revolving credit
facility in excess of the borrowing base, which is equal to:
1. 85% of AgriFrozen's accounts receivable, excluding:
the portion of any account that is more than 60 days past due and
the entire account if more than 25% of it is more than 60 days
past due,
the portion of any account that is the subject of any dispute,
regardless of the aging of the account, and
any off-setting or contra accounts, plus
2. 65% of the value of AgriFrozen's inventory of agricultural products.
AgriFrozen will pay a revolving credit unused commitment fee equal to 0.50%
per annum times the amount by which the total revolving credit commitment
exceeds the greater of :
(a) $50.0 million, or
(b) the average daily total of advances under the revolving credit
facility.
The term loan facility and revolving credit facility are subject to
mandatory prepayment from 100% of the net cash proceeds from asset dispositions,
subject to certain exceptions, including the reinvestment of the proceeds in
like property.
In addition, the revolving credit facility must be reduced by an amount
equal to 75% of the increase in AgriFrozen's retained earnings at the beginning
of each fiscal year over its retained earnings at the end of that fiscal year.
AgriFrozen's obligations under the revolving credit facility and term loan
facility are secured by a first priority lien on substantially all existing or
after-acquired assets, tangible or intangible, of AgriFrozen.
The credit agreement also contains customary covenants and restrictions on
AgriFrozen's ability to engage in certain activities, including:
1. limitations on the incurrence of indebtedness and liens;
<PAGE>
2. limitations on consolidations, mergers, sales of assets,
acquisitions and transactions with affiliates and other third
parties;
3. limitations on the payment of dividends and other distributions;
4. restrictions on payments to us and Agrilink;
5. limitations on capital expenditures in any fiscal year, as
follows:
for the fiscal year ending June 24, 2000, up to $2.8
million,
for the fiscal year ending June 30, 2001, up to $3.6
million, and
for the fiscal year ending June 29, 2002, up to $3.7
million.
6. limitations on administrative expenses in any fiscal year, as
follows:
for the fiscal year ending June 24, 2000, up to $2.0
million,
for the fiscal year ending June 30, 2001, up to $2.1
million, and
for the fiscal year ending June 29, 2002, up to $2.1
million.
Under the terms of the credit agreement, CoBank has agreed to pay the first
$4.0 million of any pre-approved remediation costs for environmental liabilities
which arose prior to the acquisition associated with any of the assets acquired
from Agripac.
The credit agreement and the subordinated note agreement contain financial
covenants requiring AgriFrozen to maintain a maximum leverage ratio and a
minimum level of EBITDA.
Subordinated promissory note.
AgriFrozen issued to CoBank its subordinated promissory note for $12.0
million aggregate principal amount due February 22, 2014. Beginning March 31,
2009, equal, quarterly payments of principal in an amount equal to 2.5% of the
principal balance outstanding on March 31, 2009, are due on the last day of each
calendar quarter. Interest on the subordinated promissory note is payable
quarterly in arrears beginning February 22, 2004 through February 22, 2009 at a
rate per annum of 5% and at a rate of 7% thereafter. Because the stated rates on
the note are below market value, AgriFrozen has imputed the appropriate discount
using an effective interest rate of 13%. Interest accruing for the period from
February 22, 2004 until February 22, 2009 is payable in kind through the
issuance by AgriFrozen of additional subordinated promissory notes identical to
the subordinated promissory note in the principal amount of the interest due.
Interest accruing after February 22, 2009 is payable in cash. The subordinated
promissory note may be prepaid at AgriFrozen's option without premium or penalty
at any time, and is mandatorily prepayable upon the sale of AgriFrozen, after
payment of all senior indebtedness.
The subordinated promissory note is expressly subordinate to AgriFrozen's
revolving credit facility and term loan. The subordinated promissory note is
secured by the assets of AgriFrozen. Principal and interest on the subordinated
promissory note may be declared due and payable earlier than its expressed
maturity, but no payment may be made before the payment in full of all "senior
indebtedness", which, as defined in the subordinated promissory note, includes
the revolving credit facility and term loan facility.
<PAGE>
BUSINESS OF PRO-FAC
We are an agricultural cooperative formed under New York State law to
process and market crops grown by our members. Only growers of crops marketed
through Pro-Fac, or associations of such growers, can become members of Pro-Fac.
Membership.
Membership in Pro-Fac is evidenced by the ownership of our common stock.
Our common stock is divided into two classes -- Class A common stock and Class B
common stock. Holders of Class A common stock are "Class A members". Holders of
our Class B common stock are "Class B members". Crops supplied to us by our
Class A members are sold to Agrilink for processing at its facilities, and crops
supplied by our Class B members will be sold to AgriFrozen for processing at its
facilities. See "Description of Pro-Fac Securities - Common Stock."
Growers desiring to become members of Pro-Fac are required to file an
application for membership. In the application a grower agrees to, among other
things, purchase the required number and class of shares of our common stock, as
determined by our board of directors based upon the quantity and type of crops
to be marketed through Pro-Fac by the member-applicant.
We currently have approximately 645 Class A members located principally in
New York, Delaware, Pennsylvania, Illinois, Michigan, Washington, Oregon, Iowa,
Nebraska, Florida, and Georgia. After completion of this offering we anticipate
that we will have approximately 190 Class B members located in Oregon and
Washington. Crops grown by our members and purchased by us include:
fruits, such as cherries, apples, blueberries, peaches and plums,
vegetables, such as snap beans, beets, cucumbers, dry beans, spinach,
lima beans, peas, sweet corn, carrots, cabbage, squash, asparagus,
potatoes, turnip roots and leafy greens, and
popcorn.
Regional Representation.
The business of Pro-Fac is conducted pursuant to policies established by
our board of directors. The territorial area in which Pro-Fac operates has been
divided into geographical regions based on natural divisions of product and
location. In addition, some regions have been further divided into districts.
The members within each region or district are represented on Pro-Fac's board of
directors by at least one director. In an effort to insure a reasonably balanced
representation of members from various geographical regions on our board of
directors, our board of directors designates the number of directors to be
elected from each region or district based on the value of raw product delivered
by the members from the particular geographical region. Presently, Pro-Fac's
operations are conducted in five regions. Those regions, as well as the number
of directors elected from each of those regions, are identified in the table
below.
Present Number
Region Area of Directors
I (Dist. 1) Western Upstate New York 2
(Dist. 2) Eastern Upstate New York 2
(Dist. 3) Pennsylvania and Delaware 1
II (Dist. 1) Michigan 3
(Dist. 2) Illinois 1
III Iowa and Nebraska 1
IV Washington and Oregon 1
V Georgia and Florida 1
<PAGE>
The members in each region elect the director or directors for that
region. In the case of a region that is divided into districts, the members in
each district elect the directors for that district. There are currently 12
directors on our board of directors even though our bylaws permit us to have up
to 18 directors. Although our bylaws authorize our board of directors to appoint
up to one-fifth of the total number of directors, our members have historically
elected all our directors.
Commodity Committees.
Commodity committees have been established for each of the major crops
marketed through us. Each committee member is a member of Pro-Fac who grows the
crop or crops with which his committee represents. The committees are charged
with the responsibility of counseling and advising our board of directors, our
officers and management of matters generally associated with the specific crop
or crops the committee members represent.
Under our current policy, if a particular crop is produced in different
geographical areas, commodity committees are established either for the separate
geographical areas or for a combination of the geographic areas. Members of each
commodity committee are elected by the members of Pro-Fac in the region or
regions for which the particular commodity committee serves.
Our commodity committees have been active in advising our board of
directors on numerous matters affecting Pro-Fac crops, particularly with regard
to the determination of CMV and the content of the annual crop delivery
agreements, which specify, among other things, the terms under which crops will
be grown, harvested and delivered.
Marketing of Members' Crops.
General Marketing Agreement. Each member of Pro-Fac enters into a general
marketing agreement with Pro-Fac. In the general marketing agreement the member
appoints Pro-Fac as his exclusive agent for processing and marketing the portion
of his crop committed under the general marketing agreement, and under the crop
delivery agreements executed between Pro-Fac and the members each year for the
then up-coming growing season. In the general marketing agreement Pro-Fac agrees
to make available, through its marketing and facilitation agreements with
Agrilink and AgriFrozen, facilities for receiving and processing the crops
delivered by its members to Agrilink or AgriFrozen, as the case may be.
Passage of Title to Crops. Upon a member's delivery of crops to us, we take
title to the crops and have the right to transfer, process or encumber the crops
as we see fit, subject to the provisions of the general marketing agreement. A
member delivering crops to Pro-Fac has no control over those crops following
delivery. Prior to delivery to Pro-Fac, each member bears all risk of loss or
damage to his crops.
Quantity of Crops Marketed. The quantity of a crop to be delivered by a
member in any year is the quantity established in the annual crop delivery
agreements which are supplements to the general marketing agreements. Members
are required to purchase additional shares of common stock if they undertake to:
1. increase their delivery to Pro-Fac of a particular crop or
<PAGE>
2. grow a new type of crop to be marketed through Pro-Fac.
A member's common stock ownership is dependent upon the quantity and type
of raw product to be delivered by the member.
If we determine that additional quantities of a crop are required,
additional shares of common stock will be offered to growers of the crop.
Qualified current members of Pro-Fac in the area where the crop is needed will
be given the first opportunity to purchase the stock. If a reduction in the
quantity of a crop is required, the common stock holdings of all Pro-Fac members
delivering that crop will be proportionately reduced. The opportunity to grow
additional crops and the requirement to reduce crop production will be given and
made by the board of directors.
If a change in total crop requirement is determined to be only temporary,
adjustments of common stock holdings will not be required. If additional
quantities are temporarily required, we will offer our members currently growing
the crop the opportunity to deliver the additional quantities, on a pro rata
basis, without regard to membership class. If a temporary reduction in a crop is
required, we may temporarily pro-rate downward the quantity of the crop
delivered by all members supplying it, without regard to membership class.
If the deliveries of a crop are temporarily pro-rated downward, the members
affected may, with the approval of our board of directors, be offered the
opportunity to sell their excess common stock to Pro-Fac. A Class B member,
however, would not have the opportunity to sell his shares of Class B common
stock until termination of Pro-Fac's right to repurchase all outstanding shares
of Class B common stock and special membership interests.
A member choosing to sell a portion of his shares of common stock would
permanently reduce, by a corresponding amount, the amount of crop he is entitled
to deliver to Pro-Fac.
The quantity of a particular crop to be delivered to Pro-Fac may be based
on:
the actual number of acres the member agrees to plant and harvest for
delivery to Pro-Fac, or
a specified tonnage.
For example, growers of sweet corn and snap beans typically agree to plant
and harvest a specified number of acres of those crops, while growers of squash,
carrots and asparagus typically agree to supply a specified tonnage of those
crops.
Agent Growers. If a member is temporarily unable to fulfill his crop
production obligations to Pro-Fac, either in whole or in part, he may, on a
temporary basis, contract with another grower or growers, who may, but need not
be, a member, to fulfill all or a part of the member's obligations to deliver
crops to Pro-Fac. In the event a member contracts with another member to fulfill
his crop production obligations, the member must be of the same class. In other
words, Class A members may only contract with other Class A members and Class B
members may only contract with other Class B members. All payments, including
the allocation of retains, made by Pro-Fac for crops delivered by an agent
grower will be made directly to the agent grower. A member may not utilize an
agent grower to fulfill his production obligations to Pro-Fac more frequently
than once in any two consecutive years without subjecting himself to a mandatory
transfer of his excess common stock.
<PAGE>
Payment for Members' Crops.
Commercial Market Value. Our marketing and facilitation agreements with
Agrilink and AgriFrozen provide, generally, that we will be paid the CMV of the
crops purchased from us.
Acting upon the recommendation of a joint committee, our board of
directors, together with the board of directors of AgriFrozen, will determine
the CMV of our Class B members' crops; and our board of directors, together with
the board of directors of Agrilink, will determine the CMV of our Class A
members' crops. The joint committee is comprised of the chief executive officer
of Agrilink and an equal number of Pro-Fac directors and disinterested
directors.
In making its determination, the joint committee will consider data
supplied by Agrilink and AgriFrozen concerning pre-season contracts and open
market purchases for various crops. The joint committee will also give
considerable weight to the advice of the commodity committees representing the
various crops marketed through Pro-Fac.
Pools. We operate within two separate and distinct pools: (a) the Class A
member pool, which is limited to Class A members and (b) the Class B member
pool, which is limited to Class B members.
Patronage Proceeds.
Our patronage proceeds are equal to our gross receipts, which are derived
from sources that under law qualify as patronage income, including income from
the sale of raw products and all income from other patronage sources, less our
operating expenses attributable to the production of our patronage income. Our
operating expenses include overhead, interest, dividends on capital stock,
maintenance, depreciation, obsolescence, bad debts, taxes and other proper
costs, all as determined by our board of directors. Gains and losses are
distributed based on the nature of the business disposed of, but in any event
such gains and losses are to be distributed to the members of the particular
pool affected.
Members' Share of Patronage Proceeds.
A member's share of patronage proceeds is determined within the particular
pool to which the member is assigned. Within each pool, each member's and each
agent grower's pro rata share of the patronage proceeds is determined annually
based upon each member's share of the year's total CMV within the pool.
In any year in which patronage proceeds of a particular pool exceed the CMV
of the pool, the members within that pool will be paid or allocated their pro
rata portion of the excess patronage proceeds. Similarly, if in any year the
patronage proceeds of a particular pool are less than CMV of the pool then the
CMV paid to each member and agent grower as the purchase price for his crop
shall be reduced by his share of the loss of the pool for the year.
Payment of Patronage Proceeds. Our bylaws require us to pay or allocate to
each member or agent grower his pro rata share of patronage proceeds within 8
1/2 months after the end of our fiscal year.
Retention of Patronage Proceeds. A portion of the patronage proceeds
payable to our members may be retained by us for use as working capital or for
other general corporate purposes. Retained patronage proceeds are characterized
as either qualified retains or non-qualified retains. The portion of the
patronage proceeds of a particular pool that are retained will be allocated
among the members and agent growers within the pool.
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Under the Internal Revenue Code, we are permitted to deduct, for federal
income tax purposes, the entire amount of retained patronage proceeds allocated
(but not yet distributed) to our members, provided,
we give our members a "qualified written notice of allocation," which
discloses to the member the stated dollar amount allocated to him as
retained patronage income;
each member consents to include in his gross income for the taxable
year the stated dollar amount of the allocation, as well as the amount
of percentage income actually distributed to him; and
at least 20% of each member's retained patronage income is paid in
cash.
If all of these requirements are met, the retained patronage income
constitutes a qualified retain. Retained patronage income not meeting the above
requirements is a non-qualified retain.
Our bylaws require us to pay or account annually to our members for their
crops, on a cooperative basis, in cash and through the allocation of retains -
qualified or non-qualified - as our board of directors determines. In four out
of the past five years we have paid our Class A members the full CMV of all of
their products marketed through us. Patronage proceeds in excess of CMV, after
payment of dividends on our capital stock, have been paid partially in cash to
our Class A members and partially in the form of retains. In fiscal 1996, Class
A members' cash payments for CMV were reduced by 10%.
The percentages of CMV paid in cash or allocated to our Class A members as
retains over the last five fiscal years are as follows:
Fiscal Year Ended June
1995 1996 1997 1998 1999
------ ----- ------ ------ ------
Paid in cash 102.6% 90.0% 101.7% 102.6% 100.0%
Allocated as qualified retains 10.6 0.0 5.2 7.9 0.0%
Allocated as non-qualified retains 0.5 0.0 0.0 0.0 0.0%
----- ---- ----- ----- -----
Total 113.7% 90.0% 106.9% 110.5% 100.0%
===== ==== ===== ===== =====
Timing of Payments for Crops. Both AgriFrozen and Agrilink are required,
under their respective marketing and facilitation agreements with us, to pay us
the purchase price for crops purchased from us on a date or dates that coincide
with the time of payment for crops by us to our members. The actual CMV of a
crop cannot ordinarily be determined until well after the harvest, so initial
payments are generally based upon the final CMV established for the crop in the
prior year, unless the board of directors determines that average industry
prices have changed significantly since that time.
Recognizing the costs involved in harvesting and delivering a crop, we have
adopted a policy of offering harvest time cash advances to our members. The
terms and conditions governing these advances are specified in the annual crop
delivery agreements. The harvest time payment is usually due approximately one
week after delivery of a crop, and the total amount of the advance may not
exceed 50% of the crops estimated CMV. The harvest time advance is repaid by
<PAGE>
deducting the amount of the advance from the first CMV payment otherwise due the
member for the crop.
Once payments for particular crops are received from Agrilink or
AgriFrozen, we will pay the funds received over to the members of the Class A
Pool or the Class B Pool, as the case may be, who delivered those crops. Subject
to minor variations, we have historically paid our members the purchase price
for their crops in accordance with the following schedule:
50% of estimated CMV is paid not later than 30 days after completion
of delivery of a particular crop;
another 25% of estimated or actual CMV is paid not later than 120 days
after the average date of final delivery for each crop; and
the balance of CMV is paid not later than the immediately following
July 15.
Any payments in addition to CMV are made as soon as possible, but in any
event within 8-1/2 months following the end of our fiscal year.
For example, if a member delivers crops to us with a CMV of $10,000 on
September 1, 1999 and a total of $1,050 in patronage proceeds in excess of CMV
is earned for the year and allocated to him, he will be paid or allocated a
total of $11,050 for his crops. Of this amount, he will be paid $10,000 (CMV) in
cash, in three installments based on the following schedule of payments from
Agrilink or AgriFrozen, as the case may be:
$5,000 by October 1, 1999, less any harvest time advance;
$2,500 by February 1, 2000, assuming this member's date of final
delivery coincides with the average date of final delivery for the
same crop, and
$2,500 by July 15, 2000.
In addition, as soon as the necessary computations can be made and final
payment is received from Agrilink or AgriFrozen, as the case may be, but before
March 15, 2001, the $1,050 of excess patronage proceeds will be paid or
allocated to the member in the form of cash or retains. A minimum of 20% of the
excess over CMV, in the above example $210, must be distributed in cash and the
balance may be distributed in the form of retains. See "Description of Pro-Fac
Securities."
Tax Matters. As a cooperative, we are taxed under Subchapter T of the
Internal Revenue Code. Subchapter T imposes regular corporate income tax rates
on cooperatives, but at the same time allows cooperatives to deduct from taxable
income, for federal income tax purposes, certain deductions which are not
available to other business corporations. In particular, under Subchapter T a
cooperative may deduct from its taxable income all amounts which are paid to its
members and other patrons as patronage dividends (either in cash or through the
allocation of amounts retained by the cooperative and represented by qualified
written notices of allocation) with respect to patronage occurring during the
taxable year. Non-patronage-sourced income of a cooperative is subject to
federal income tax at the cooperative level.
In general, the payments from earnings of a cooperative to its members in
the form of cash and qualified retains constitute patronage dividends within the
meaning of Subchapter T. Members and other patrons of a cooperative must agree
to include in their taxable income in the year received all amounts of patronage
dividends paid in cash or allocated to their accounts as qualified retains.
Patronage income allocated by a cooperative to its members in the form of
non-qualified retains is taxable at the cooperative level when such retains are
issued. In the year in which non-qualified retains are redeemed by a
<PAGE>
cooperative, the cooperative receives a tax deduction in the amount of the
retains which are redeemed. Members and other patrons of the cooperative must
agree to include in their taxable income in the year of redemption any
non-qualified retains redeemed by the cooperative.
Under our marketing and facilitation agreement with Agrilink, payments are
made by Agrilink for the crops of our members. Such payments, in part, are based
upon the earnings of Agrilink derived from products processed from the crops
supplied by our Class A members. These payments are classified and reported by
us, for federal income tax purposes, as patronage-sourced income. Because there
are few guidelines in this area of law, such classification and reporting has in
the past led to audit disputes with the Internal Revenue Service. The IRS
clarified its position in a technical advice memorandum to us on September 23,
1991. Although changes have occurred in our relationship with Agrilink since the
issuance of the technical advice memorandum, the contractual relationship
requiring the payments based upon the earnings of Agrilink, remains
substantively the same as when the technical advice memorandum was issued.
Accordingly, we have continued to treat payments based upon the earnings of
Agrilink as patronage-sourced income. In January 1995, Agrilink's and our board
of directors approved appropriate amendments to Agrilink's bylaws to allow
Agrilink to qualify as a cooperative under Subchapter T of the Code. On August
24, 1995, we received a favorable ruling from the IRS approving the change in
tax treatment effective for fiscal 1996. This ruling also confirmed that the
change in Agrilink's tax status would have no effect on our ongoing treatment as
a cooperative under Subchapter T of the Code. Based on the foregoing, Harris
Beach & Wilcox, LLP is of the opinion that payments to members of Pro-Fac based
upon earnings of Agrilink continue to constitute patronage-sourced income
pursuant to Subchapter T of the Code. In the event, however, the IRS changes the
classification and/or the reporting of the patronage-sourced income by us,
additional income taxes and interest could be assessed as a result of the
reclassification of income reported as patronage-sourced income to
non-patronage-sourced income.
Our marketing and facilitation agreement with AgriFrozen is substantially
the same as the one we have with Agrilink. In reliance upon the technical advice
memorandum discussed above, we believe that, so long as AgriFrozen's
relationship with us is substantially similar to Agrilink's relationship with
us, that payments to our Class B members based upon earnings of AgriFrozen
derived from products processed from the crops supplied by our Class B members
will constitute patronage-sourced income pursuant to Subchapter T of the Code.
From time to time various proposals have been made and bills introduced in
Congress which would have the effect of modifying or eliminating the present
provisions of the Code pursuant to which cooperatives are taxed and could
subject cooperatives to greater federal income tax liability. It is not possible
to predict whether any such proposal may be adopted, or if adopted what effect
it might have on our federal income tax liability and the federal income
liability of our members.
In addition, from time to time the IRS issues revenue rulings, revenue
procedures, and other official statements, which may be either prospective or
retrospective in application, by which it seeks to interpret and administer the
provisions of the Code applicable to cooperatives. It is also impossible to
predict the effect any administrative interpretations which may be adopted in
the future would have on our federal tax liability or that of our members.
Tax Treatment of Amounts Paid or Allocated to Members. Under the federal
income tax laws, our members must currently include in their taxable income
calculation the purchase price for their crops, including all cash payments and
allocations of qualified retains. Non-qualified retains are not subject to
current taxation to our members and are taxable to members only if and when
redeemed by us.
<PAGE>
DESCRIPTION OF PRO-FAC SECURITIES
This description summarizes some of the provisions of our restated
certificate of incorporation, a copy of which has been included as an exhibit to
the registration statement. If you want more complete information, you should
read the provisions of our restated certificate of incorporation that are
important to you.
Our authorized capital stock consists of 5,000,000 shares of Class A common
stock, 2,000,000 shares of Class B common stock and 55,000,000 shares of
preferred stock. We are also authorized to issue up to $15,000,000 of special
membership interests.
As of September 25, 1999, we had outstanding 2,040,568 shares of Class A
common stock, 39,635 shares of non-cumulative preferred stock with a par value
of $25 per share, 3,694,495 shares of Class A cumulative preferred stock with a
par value of $1.00 per share and 26,061 shares of Class B, series 1 10%
cumulative preferred stock with a par value of $1.00 per share.
Common stock.
Rights to dividends and on liquidation. Class A common stock may be treated
preferentially with respect to the declaration and payment of dividends over the
Class B common stock. Upon liquidation, Class A common stock has priority over
Class B common stock. Any outstanding retains and preferred stock rank senior to
the common stock in respect of liquidation rights and dividend rights.
Under present law, dividends on our common stock may not exceed 12% of its
par value per year. Members who purchase shares of common stock in installments
are entitled to receive dividends only on those shares of common stock actually
issued to them.
Voting. All voting power is vested exclusively in the holders of common
stock. However, each member is entitled to one vote regardless of the number of
shares held. When two or more holders of common stock are joined in an
agricultural venture, our board of directors will determine whether the venture
is a single enterprise, entitling the participating holders to a single vote, or
multiple enterprises, entitling the holders to more than one vote.
Preemptive rights. Holders of our common stock do not have any right to
purchase additional shares of common stock or any of our capital stock if we
sell shares to others.
Conversion rights. Our common stock is not convertible into any other
security of Pro-Fac.
Required disposition and redemption of common stock.
In the event a member is no longer a producer of agricultural products
marketed through us then the member is required to dispose of his
shares of common stock.
Upon the death of an individual member, the estate of the deceased
member will continue as a member for the purposes of winding up the
affairs of the deceased member until all of the obligations of the
deceased member to us have been performed, including those under any
then current crop delivery agreement. After fulfillment of the
deceased member's obligations to us, the deceased member's estate is
required to dispose of the member's common stock.
In the event we discontinue a crop, then all members whose ownership
of common stock is based upon their marketing of the discontinued crop
through us will be required to sell their common stock to us for cash
<PAGE>
at the par value, plus any declared but unpaid dividends. With respect
to Class B members, we do not intend to repurchase any shares of Class
B common stock at any time prior to the termination of our express
right under the subscription agreement to repurchase all shares of
Class B common stock.
In the event a member desires or is required by us to permanently
reduce the quantity of a crop which he sells to us, then the member
will be required to dispose of the number of shares of his common
stock as is necessary to bring his ownership of shares of common stock
into proper relationship to the quantity and type of crops which he
markets through us. With respect to Class B members, the manner in
which these members will be entitled to dispose of their shares of
Class B common stock prior to the termination of our right to
repurchase all shares of Class B common stock will be limited to
transfers to other Class B members.
A member who voluntarily wishes to sell his common stock or who is required
to sell his shares of common stock must make a reasonable effort to find another
grower within the disposing member's pool, that is, a Class A member must use
reasonable efforts to find another grower in the Class A member pool and a Class
B member must use reasonable efforts to find another grower in the Class B
member pool, who is willing to purchase the member's common stock and assume all
of his obligations to us and who meets all requirements for membership in
Pro-Fac. We will give a disposing member a reasonable period of time within
which to find another grower.
We may assist the disposing member in finding another grower by advising
him of the price another qualified grower in the appropriate class, that is a
Class A member or Class B member, acceptable to us, is willing to pay for the
stock. Historically, these prices have varied widely by commodity and the region
in which the crop associated with the common stock is to be grown. Sales are
often at a price exceeding the $5.00 par value at which the common stock was
originally issued. Historically, there has usually been sufficient demand for
common stock offered for sale by members.
In the event the disposing member is unable to find a qualified grower
within a reasonable period of time, the member must sell his common stock to us
for cash at par value plus any declared and unpaid dividends. With respect to
Class B members, the expiration of a "reasonable time" will in no event be
earlier than the termination of our right to repurchase all our Class B common
stock.
With respect to our Class B members, we have the right from the date that
we issue the shares of Class B common stock until and including June 29, 2002,
or some later date if extended by our board of directors, to repurchase all of
our outstanding shares of Class B common stock and all of our special membership
interests in consideration of $5.00 payable to each of our Class B members.
Liability to further assessment. Shares of our common stock are not subject
to further call or assessment. Under the New York Cooperative Corporations Law,
however, each member of a cooperative corporation, as well as each director, may
be personally liable for certain amounts due to employees for services rendered
to the cooperative.
Transfer agent. We function as our own transfer agent for our common stock.
Transferability. Our common stock is issued only to growers of agricultural
products marketed through us, or to associations of growers, and may be
transferred only to another grower who meets our membership standards. A member
holding shares of Class A common stock may only transfer his shares to another
member owning shares of Class A common stock or to a grower eligible for
<PAGE>
membership in Pro-Fac and eligible to own shares of Class A common stock.
Similarly, a member holding shares of Class B common stock may only transfer
shares to another member owning shares of Class B common stock or to a grower
eligible for membership in Pro-Fac and eligible to own shares of Class B common
stock.
Non-Cumulative Preferred Stock, Class A Cumulative Preferred Stock and Class B,
Series 1 Cumulative Preferred Stock.
General. Our non-cumulative preferred stock, Class A cumulative
preferred stock and Class B, series 1 cumulative preferred stock are not
convertible into any other securities. We are not obligated to redeem or retire
these securities.
Our Class A cumulative preferred stock is listed on The Nasdaq National
Market under the symbol "PFACP." There is currently no active trading market for
either our non-cumulative preferred stock or our Class B, series 1 preferred
stock. We do maintain an ongoing exchange program to allow holders of
non-cumulative preferred stock to exchange their shares for Class A cumulative
preferred stock on a share-for-share basis. A "blackout" period exists between
the dividend qualifying date for the non-cumulative preferred stock and October
16 each year when such exchanges cannot be made. This prevents a holder from
collecting the annual dividend on the non-cumulative preferred stock and
immediately becoming eligible to collect the quarterly dividend on the Class A
cumulative preferred stock.
Our Class B, series 1 preferred stock is issuable to employees of Agrilink
pursuant to an employee stock purchase plan. Under the plan employees of
Agrilink can purchase shares of Class B, series 1 cumulative preferred stock at
a price of $10.00 per share.
Ranking. The non-cumulative preferred stock, Class A cumulative preferred
stock and Class B, series 1 cumulative preferred stock rank senior to the common
stock and are on parity with each other with respect to dividends and upon
liquidation.
Generally, this means that we cannot pay dividends on our common stock
unless we have paid the full amount of the dividends on the non-cumulative
preferred stock, Class A cumulative preferred stock and Class B, series 1
cumulative preferred stock that are due and owing at the time. Also, if we are
dissolved or liquidated, holders of the non-cumulative preferred stock, Class A
cumulative preferred stock and Class B, series 1 cumulative preferred stock are
required to be paid the full amount of their liquidation preferences before any
assets can be distributed to holders of common stock. The liquidation preference
of the non-cumulative preferred stock is $25 per share plus declared and unpaid
dividends. The liquidation preference of the Class A cumulative preferred stock
is $25 per share plus all accrued and unpaid dividends. The liquidation
preference of the Class B, series 1 cumulative preferred stock is $10 per share
plus all accrued and unpaid dividends.
So long as shares of non-cumulative preferred stock remain outstanding, we
cannot create any class of stock that would rank senior to the non-cumulative
preferred stock with respect to liquidation and dividend rights without the
consent of at least 2/3rds of the outstanding shares of non-cumulative preferred
stock.
Dividends. Holders of non-cumulative preferred stock are entitled to
receive, when and as declared by our board of directors, non-cumulative cash
dividends at the rate per annum of not less than 6% per share of the par value
of such shares.
Holders of Class A cumulative preferred stock are entitled to receive, when
and as declared by our board of directors, cumulative cash dividends at a
quarterly rate equal to $.43 per share, or an annual rate of approximately 6.88%
of the liquidation preference of $25 per share. We pay dividends on the Class A
cumulative preferred stock quarterly in arrears on April 30, July 31, October
31, and January 31 of each year.
<PAGE>
Holders of Class B, series 1 cumulative preferred stock are entitled to
receive, when and as declared by our board of directors, cumulative cash
dividends at the rate per annum of $1.00 per share.
Redemption. We can redeem our non-cumulative preferred stock at any time
upon 90 days written notice. If we decide to redeem, we can redeem all of the
outstanding shares at once, or we can redeem some of the shares at different
times. The redemption price is $25 per share, plus an amount equal to all
declared and unpaid dividends.
We can redeem the Class A cumulative preferred stock at any time upon
written notice not less than 30 days and not more than 60 days prior to the date
fixed for redemption. If we decide to redeem less than all of the outstanding
shares at once, the shares to be redeemed can be selected pro-rata or by lot,
except that we have the right to first redeem all of the shares of Class A
cumulative preferred stock held by any holder who owns 100 or less shares. The
redemption price is $25 per share, plus an amount equal to accrued and unpaid
dividends.
The Class B, series 1 cumulative preferred stock can be redeemed by us at
any time upon not less than 30 days and not more than 60 days written notice
before the date fixed for redemption. The redemption price is $10 per share,
plus an amount equal to accrued and unpaid dividends.
Voting rights. The only voting rights the holders of shares of
non-cumulative preferred stock, Class A preferred stock and Class B, series 1
cumulative preferred stock have are those required by law.
Generally, this means that if we want to change our restated certificate of
incorporation in a way that would materially and adversely affect these holders
of the shares, then we must get the approval of holders of at least 2/3rds of
the outstanding shares of non-cumulative preferred stock, Class A cumulative
preferred stock and Class B, series 1 cumulative preferred stock.
Restriction on stock acquisitions. We are prohibited from repurchasing or
otherwise redeeming our stock, other than to repurchase our common stock from
departing members, unless full dividends have been paid or are contemporaneously
declared on the non-cumulative preferred stock, Class A cumulative preferred
stock and Class B, series 1 cumulative preferred stock.
Transfer agent: The transfer agent, dividend agent and redemption agent for
the Class A cumulative preferred stock is Harris Trust Company. We act as our
own transfer agent for our non-cumulative preferred stock and Class B, series 1
cumulative preferred stock.
Special membership interests.
Special membership interests bear no interest. They are non-transferable
without the prior approval of our board of directors. Special membership
interests have no rights, including no voting or dividend rights, and no
preferences, except that special membership interests rank senior to the Class B
common stock in respect of liquidation rights.
Retains.
Annual allocation. Retains, if any, must be allocated to the accounts of
our members within 8 1/2 months of the close of our fiscal year. Our fiscal year
ends on the last Saturday of June. It has been, and continues to be, our policy
to allocate retains to our members on or about September 15 of each year. Each
member is typically advised of the allocation of qualified retains and
non-qualified retains to his account by means of an investment summary which is
mailed to him each year on or about September 15. There were no allocations of
<PAGE>
retains for fiscal 1996 or fiscal 1999. Qualified retains. Qualified retains
bear no interest, but five years after issuance they generally mature into
shares of our Class A cumulative preferred stock at the discretion of our board
of directors. One share of Class A cumulative preferred stock for each $25 of
qualified retains is ordinarily issued to holders of qualified retains on or
about December 31 following the completion of the fifth year after allocation of
the qualified retains. If our board determines, qualified retains issued prior
to fiscal 1996 may be redeemed for shares of our Class A cumulative preferred
stock, unless the holder specifically requests non-cumulative preferred stock.
Redemption of non-qualified retains. It is the present intention of our
board of directors that non-qualified retains will be redeemed, through partial
payment in cash and the issuance of Class A cumulative preferred stock,
approximately five years after their issuance.
Adjustment of amount of non-qualified retains. It is possible that the
allocation of proceeds made immediately following the close of a fiscal year may
not be final and may require modification because of some event that could occur
after the close of the fiscal year. Should such an event require a reduction in
the proceeds paid or allocated to our members in a prior year, our board of
directors may, in its discretion, reduce the amount of the non-qualified retains
allocated to the accounts of those members for the year in question.
Transferability of retains; absence of market. Non-qualified retains are
not transferable, except to the heirs or personal representative of a member in
the event of the member's death. Qualified retains are freely transferable.
Although there are several broker-dealers making a market in our qualified
retains, there can be no assurance that any such market will be established.
Historically, sales of qualified retains have been at prices substantially less
than their face amount. If a market for our qualified retains is established,
the increased leverage of Pro-Fac as a result of the acquisitions in fiscal
1999, and the limits on our ability to repurchase our preferred stock pursuant
to Agrilink's new credit facility and the indenture covering its new notes, are
likely to decrease the prices at which our qualified retains are traded.
Rights to dividends and on liquidation. All retains are junior and
subordinate to our indebtedness. In the event of our liquidation, holders of our
retains would rank senior to our preferred stock, our common stock and or
special membership interests. No dividends are payable on our retains.
Restrictions on dividends and other distributions to members and investors
As guarantors of Agrilink's indebtedness we are limited as to the aggregate
dollar amounts we can pay or distribute in the form of dividends or other
distributions for the purchase or redemption of shares of our common stock and
preferred stock each fiscal year. Further, because Agrilink and its lenders are
the principal sources of cash used by us to pay dividends, the restrictions on
payments from Agrilink to us under its new credit facility may also limit our
ability to pay dividends on our common and preferred stock.
Certificates for securities
Except with respect to our Class A cumulative preferred stock, we
ordinarily do not issue certificates representing shares of either our common or
preferred stock or our members' interests in retains, except upon specific
request. In lieu of certificates, we distribute to our members and our
non-member security holders periodic computerized statements referred to as
"investment summaries." The investment summaries detail the investment of each
member or security holder in our securities by type of security, number of
shares, or dollar amount, and date of issue. In the case of qualified retains,
<PAGE>
the summaries also indicate the date upon which they are anticipated to be
replaced by corresponding par value dollar amounts of preferred stock.
Additionally, the investment summaries detail each member's crop commitments to
us.
EXPERTS
The consolidated financial statements of Pro-Fac incorporated by reference
into this prospectus from Pro-Fac's Annual Report on Form 10-K/A-1 for the year
ended June 26, 1999, have been incorporated in reliance upon the report of
PricewaterhouseCoopers, LLP, independent accountants, given on the authority of
that firm as experts in auditing and accounting.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth expenses in connection with the issuance and
distribution of the Class B common stock and special membership interests being
registered. All amounts except the registration fee payable to the Securities
and Exchange Commission are estimates.
SEC Registration Fee $ 6,394.00
Legal Fees and Expenses $10,000.00
Accountants Fees and Expenses $ 3,500.00
Printing and Engraving Fees $ 3,000.00
Blue Sky Fees and Expenses $ 5,000.00
Transfer Agent and Registration Fee and Expenses $ None
Miscellaneous $ 1,000.00
Total $28,894.00
Item 15. Indemnification of Directors and Officers.
Pro-Fac Cooperative
Pro-Fac is a New York cooperative corporation. Sections 721 through 726 of
the New York Business Corporation Law permit the registrant to indemnify its
officers and directors against liabilities. Under Section 722 of the New York
Business Corporation Law, the registrant may indemnify any person made, or
threatened to be made, a party to any action or proceeding, whether civil or
criminal, by reason of the fact that he, his testator or intestate is or was a
director, officer or employee of the registrant or serves or served any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise in any capacity at the request of the registrant against judgments,
fines, amounts paid in settlement and reasonable expenses, including attorneys'
fees actually and necessarily incurred as a result of such action or proceeding
or any appeal thereon, if such director or officer acted in good faith for a
purpose which he reasonably believed to be in, or, under certain circumstances,
not opposed to, the best interests of the registrant.
Section 726 of the New York Business Corporation Law allows the registrant
to purchase and maintain insurance to indemnify (i) the registrant for any
obligation which it incurs as a result of the indemnification of directors and
officers, (ii) directors and officers in instances in which they may be
indemnified by the registrant, and (iii) directors and officers in instances in
which they may not otherwise be indemnified by the registrant provided the
contract of insurance covering such directors and officers provides, in a manner
acceptable to the superintendent of insurance of the State of New York, for a
retention amount and for co-insurance. Notwithstanding the foregoing, no such
insurance may provide for any payment, other than cost of defense, to or on
behalf of any director or officer (i) if a judgment or other final adjudication
adverse to the insured director or officer establishes that his acts of active
and deliberate dishonesty were material to the cause of action so adjudicated,
or that he personally gained in fact a financial profit or other advantage to
which he was not legally entitled or (ii) in relation to any risk the insurance
of which is prohibited under the insurance law of the State of New York.
The foregoing statements are subject to the detailed provisions of Sections
721 through 726 of the New York Business Corporation Law, Pro-Fac's By-laws and
its Restated Certificate of Incorporation, as applicable.
<PAGE>
Liability Insurance
Pro-Fac maintains a directors and officers liability insurance and
corporation reimbursement policy, in such amount as it deems reasonable, against
certain liabilities that may be asserted against, or incurred by, the directors
and officers of each registrant in their capacities as directors or officers of
such registrant, including liabilities under Federal and state securities laws.
<TABLE>
Item 16. Exhibits.
<CAPTION>
(a) Exhibits:
<S> <C> <C>
3.1(8) -- Restated Certificate of Incorporation for Pro-Fac Cooperative, Inc.
3.2(8) -- Pro-Fac Cooperative, Inc. Bylaws.
4.1 -- Subscription Agreement for Shares of Class B Common Stock and Special Membership Interests.
4.2(7) -- Indenture, dated as of November 18, 1998, between Agrilink Foods, Inc., the Guarantors named therein and IBJ
Schroder Bank & Trust Company, Inc., as Trustee.
4.3(7) -- Form of 11 7/8 percent Senior Subordinated Notes due 2008 (included as Exhibit B to Exhibit 4.2).
4.4(2) -- Indenture, dated as of November 3, 1994 (the "Indenture"), among PFAC, Pro-Fac and IBJ Schroder Bank & Trust
Cooperative ("IBJ"), as Trustee, as amended by first Supplemental Indenture, dated as of November 3,
1994, each with respect to Agrilink's 12.25 percent Senior Subordinated Notes due 2005.
5.1 -- Opinion of Harris Beach & Wilcox LLP
8.1 -- Opinion of Harris Beach & Wilcox LLP - Tax Matters
10.1(2) -- Marketing and Facilitation Agreement, dated as of November 3, 1994, between Pro-Fac and Agrilink.
10.2(2) -- Management Incentive Plan, as amended.
10.3(2) -- Supplemental Executive Retirement Plan, as amended.
10.4(2) -- Master Salaried Retirement Plan, as amended.
10.5(2) -- Non-Qualified Profit Sharing Plan, as amended
10.6(2) -- Excess Benefit Retirement Plan.
10.7(9) -- Salary Continuation Agreement - Dennis M. Mullen.
10.8(1) -- Second Amendment to Non-Qualified Profit Sharing Plan.
10.9(3) -- Equity Value Plan Adopted on June 24, 1996.
10.10(4) -- OnSite Services Agreement with Systems & Computer Technology.
10.11(4) -- Raw Product Supply Agreement with Seneca Foods Corporation.
10.12(4) -- Reciprocal Co-Pack Agreement with Seneca Foods Corporation.
10.13(5) -- Second Supplemental Indenture dated November 10, 1997.
10.14(9) -- Third Supplemental Indenture dated September 24, 1998.
10.15(6) -- Credit Agreement among Agrilink Foods, Inc., Pro-Fac Cooperative, Inc., and Harris Trust and Savings Bank,
and Bank of Montreal, Chicago Branch, and the Lenders from time to time party thereto, dated September 23, 1998.
10.16(6) -- Subordinated Promissory Note among Agrilink Foods, Inc. and Dean Foods Company, dated as of September 23, 1998.
10.17(8) -- Service Agreement among Agrilink Foods, Inc., and PF Acquisition II, Inc., dated as of February 22, 1999.
10.18(8) -- Amendment to Marketing and Facilitation Agreement between Agrilink Foods, Inc. and Pro-Fac dated September 23, 1998.
10.19(8) -- Marketing and Facilitation Agreement, dated as of February 22, 1999, between Pro-Fac and PF Acquisition II, Inc.
10.20(8) -- Credit Agreement among PF Acquisition II, Inc. and CoBank as administrative agent for the lenders thereunder, dated
February 22, 1999.
10.21(8) -- Subordinated Promissory Note among PF Acquisition II, Inc. and CoBank, dated February 22, 1999.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
10.22(8) -- Asset Purchase Agreement between PF Acquisition II, Inc., Pro-Fac Cooperative, Inc. and Agripac, Inc., Debtor and
Debtor-In-Possession dated February 12, 1999.
23.1 -- Consent of PricewaterhouseCoopers LLP regarding Pro-Fac Cooperative, Inc.
23.2 -- Consent of Counsel (included in Exhibit 5.1).
24.1 -- Powers of Attorney of Pro-Fac Cooperative, Inc., (included in the signature pages hereto).
<FN>
(1) Incorporated by reference from Registration Statement No. 33-60273.
(2) Incorporated by reference from Registration Statement No. 33-56517, as amended.
(3) Incorporated by reference from Registrant's 1996 Annual Report on Form 10-K.
(4) Incorporated by reference from Registrant's 1997 Annual Report on Form 10-K.
(5) Incorporated by reference from Registrant's Fiscal 1998 Annual Report on Form 10-K.
(6) Incorporated by reference from Registrant's Fiscal 1999 First Quarter Report on Form 10-Q.
(7) Incorporated by reference from Registration Statement No. 333-70143, as amended.
(8) Incorporated by reference from Registrant's Fiscal 1999 Third Quarter Report on Form 10-Q.
(9) Incorporated by reference from Registrant's 1999 Annual Report on Form 10-K.
</FN>
</TABLE>
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the registration statement. Notwithstanding
the foregoing, any increase or decrease in the volume
of securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high end
of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement; provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the registration statement is on Form S-3,
Form S-8 or Form F-3, and the information required to
be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with
or furnished to the Commission by the Registrant
pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference
in the registration statement.
2. That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and that
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
<PAGE>
3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering;
4. If a foreign private issuer, to file a post-effective amendment to the
registration statement to include any financial statements required by Rule 3-19
of this chapter at the start of any delayed offering or throughout a continuous
offering. Financial statements and information otherwise required by Section
10(a)(3) of the Act need not be furnished, provided, that the registrant
includes in the prospectus, by means of a post-effective amendment, financial
statements required pursuant to this paragraph a(4) and other information
necessary to ensure that all other information in the prospectus is at least as
current as the date of those financial statements. Notwithstanding the
foregoing, with respect to registration statements in Form F-3, a post effective
amendment need not be filed to include financial statements and information
required by Section 10(a)(3) of the Act or Rule 3-19 of this chapter if such
financial statements and information are contained in periodic reports filed
with or furnished to the Commission by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporate by
reference in the form F-3.
(b) Insofar as indemnifications for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefor, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is inserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will governed by the final adjudication of
such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Rochester, State of New
York, on November 16, 1999.
PRO-FAC COOPERATIVE, INC.
By:
/s/ Earl L. Powers
Name: Earl L. Powers
Title: Vice President, Finance and
Assistant Treasurer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Stephen R. Wright and Earl L. Powers and
each of them, with full power to act alone, as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement and any subsequent registration statement filed
by the Registrant pursuant to Rule 462(b) of the Securities Act, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the SEC, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
date indicated.
Signature Title Date
President and Director November 16, 1999
/s/ Bruce R. Fox
(Bruce R. Fox)
Treasurer and Director November 16, 1999
/s/ Steven D. Koinzan
(Steven D. Koinzan)
Vice President, Finance and November 16, 1999
/s/ Earl L. Powers Assistant Treasurer
(Earl L. Powers)
Assistant Treasurer and
/s/ Stephen R. Wright General Manager November 16, 1999
(Stephen R. Wright) (Principal Executive Officer)
/s/ Dale W. Burmeister Director November 16, 1999
(Dale W. Burmeister)
/s/ Robert V. Call, Jr. Director November 16, 1999
(Robert V. Call, Jr.)
<PAGE>
Signature Title Date
/s/ Glen Lee Chase Director November 16, 1999
(Glen Lee Chase)
/s/ Tom R. Croner Secretary and Director November 16, 1999
(Tom R. Croner)
/s/ Kenneth M. Dahlstedt Director November 16, 1999
(Kenneth M. Dahlstedt)
/s/ Robert A. DeBadts Director November 16, 1999
(Robert A. DeBadts)
/s/ Kenneth A. Mattingly Director November 16, 1999
(Kenneth A. Mattingly)
/s/ Allan W. Overhiser Director November 16, 1999
(Allan W. Overhiser)
/s/ Paul E. Roe Director November 16, 1999
(Paul E. Roe)
/s/ Darell Sarff Director November 16, 1999
(Darell Sarff)
<PAGE>
<TABLE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
(a) Exhibits:
<CAPTION>
<S> <C> <C>
3.1(8) -- Restated Certificate of Incorporation for Pro-Fac Cooperative, Inc.
3.2(8) -- Pro-Fac Cooperative, Inc. Bylaws.
4.1 -- Subscription Agreement for Shares of Class B Common Stock and Special Membership Interests.
4.2(7) -- Indenture, dated as of November 18, 1998, between Agrilink Foods, Inc., the Guarantors named therein and IBJ
Schroder Bank & Trust Company, Inc., as Trustee.
4.3(7) -- Form of 11 7/8 percent Senior Subordinated Notes due 2008 (included as Exhibit B to Exhibit 4.2).
4.4(2) -- Indenture, dated as of November 3, 1994 (the "Indenture"), among PFAC, Pro-Fac and IBJ Schroder Bank & Trust
Cooperative ("IBJ"), as Trustee, as amended by first Supplemental Indenture, dated as of November 3,
1994, each with respect to Agrilink 12.25 percent Senior Subordinated Notes due 2005.
5.1 -- Opinion of Harris Beach & Wilcox LLP
8.1 -- Opinion of Harris Beach & Wilcox LLP - Tax Matters
10.1(2) -- Marketing and Facilitation Agreement, dated as of November 3, 1994, between Pro-Fac and Agrilink.
10.2(2) -- Management Incentive Plan, as amended.
10.3(2) -- Supplemental Executive Retirement Plan, as amended.
10.4(2) -- Master Salaried Retirement Plan, as amended.
10.5(2) -- Non-Qualified Profit Sharing Plan, as amended.
10.6(2) -- Excess Benefit Retirement Plan.
10.7(9) -- Salary Continuation Agreement - Dennis M. Mullen.
10.8(1) -- Second Amendment to Non-Qualified Profit Sharing Plan.
10.9(3) -- Equity Value Plan Adopted on June 24, 1996.
10.10(4) -- OnSite Services Agreement with Systems & Computer Technology.
10.11(4) -- Raw Product Supply Agreement with Seneca Foods Corporation.
10.12(4) -- Reciprocal Co-Pack Agreement with Seneca Foods Corporation.
10.13(5) -- Second Supplemental Indenture dated November 10, 1997.
10.14(9) -- Third Supplemental Indenture dated September 24, 1998.
10.15(6) -- Credit Agreement among Agrilink Foods, Inc., Pro-Fac Cooperative, Inc., and Harris Trust and Savings Bank,
and Bank of Montreal, Chicago Branch, and the Lenders from time to time party thereto, dated September 23, 1998.
10.16(6) -- Subordinated Promissory Note among Agrilink Foods, Inc. and Dean Foods Company, dated as of September 23, 1998.
10.17(8) -- Service Agreement among Agrilink Foods, Inc., and PF Acquisition II, Inc., dated as of February 22, 1999.
10.18(8) -- Amendment to Marketing and Facilitation Agreement between Agrilink Foods, Inc. and Pro-Fac dated September 23, 1998.
10.19(8) -- Marketing and Facilitation Agreement, dated as of February 22, 1999, between Pro-Fac and PF Acquisition II, Inc.
10.20(8) -- Credit Agreement among PF Acquisition II, Inc. and CoBank as administrative agent for the lenders thereunder, dated
February 22, 1999.
10.21(8) -- Subordinated Promissory Note among PF Acquisition II, Inc. and CoBank, dated February 22, 1999.
10.22(8) -- Asset Purchase Agreement between PF Acquisition II, Inc., Pro-Fac Cooperative, Inc. and Agripac, Inc., Debtor and
Debtor-In-Possession dated February 12, 1999.
<PAGE>
23.1 -- Consent of PricewaterhouseCoopers LLP regarding Pro-Fac Cooperative, Inc.
23.2 -- Consent of Counsel (included in Exhibit 5.1).
24.1 -- Powers of Attorney of Pro-Fac Cooperative, Inc., (included in the signature pages hereto).
<FN>
(1) Incorporated by reference from Registration Statement No. 33-60273.
(2) Incorporated by reference from Registration Statement No. 33-56517, as amended.
(3) Incorporated by reference from Registrant's 1996 Annual Report on Form 10-K.
(4) Incorporated by reference from Registrant's 1997 Annual Report on Form 10-K.
(5) Incorporated by reference from Registrant's Fiscal 1998 Annual Report on Form 10-K.
(6) Incorporated by reference from Registrant's Fiscal 1999 First Quarter Report on Form 10-Q.
(7) Incorporated by reference from Registration Statement No. 333-70143, as amended.
(8) Incorporated by reference from Registrant's Fiscal 1999 Third Quarter Report on Form 10-Q.
(9) Incorporated by reference from Registrant's 1999 Annual Report on Form 10-K.
</FN>
</TABLE>
SUBSCRIPTION AGREEMENT FOR SHARES OF
CLASS B COMMON STOCK AND SPECIAL MEMBERSHIP INTERESTS
(Social Security of Employer Identification No.)
(Name)
(Address)
PRO-FAC COOPERATIVE, INC.
90 LINDEN OAKS, ROCHESTER, NEW YORK 14625
I hereby express my desire for membership in Pro-Fac Cooperative, Inc.
("Pro-Fac") as a Class B Member upon the following terms and conditions:
Subscription.
I hereby subscribe for shares of Class B Common Stock and a Special Membership
Interest of Pro-Fac.
The number of shares of Class B Common Stock issuable to me and the value of the
Special Membership Interest to be issued to me pursuant to this Subscription
Agreement has been determined by Pro-Fac in accordance with the formula
described in Pro-Fac's Prospectus dated November ____, 1999 is set forth on the
"Calculation and Acceptance Page" of this Subscription Agreement.
1. On __________ ____, 1999 I entered into a General Marketing Agreement
with PF Acquisition II, Inc., together with an annual crop delivery
agreement(s). The term of the General Marketing Agreement is for a
period of three years. Under the terms of the General Marketing
Agreement, beginning September 1, 1999, I am permitted to terminate the
agreement upon 90 days prior written notice.
2. Under my 1999 crop delivery agreement(s) I have agreed to produce the
crop(s) for delivery to Pro-Fac in the amount(s) specified below:
CROP(S) BASE ACRES TONNAGE
3. As consideration for Pro-Fac's issuance of shares of Class B Common
Stock and a Special Membership Interest to me, I hereby agree:
a. To the cancellation of my right to terminate the General
Marketing Agreement as provided in Section 10 of that
agreement, and that this Subscription Agreement, when executed
by both me and Pro-Fac, shall constitute an instrument
modifying Section 10 of the General Marketing Agreement and
that Section 10 of that agreement shall read in its entirety
as follows: "10. The term of this agreement shall be for three
consecutive production years."; and
b. To the assignment of the General Marketing Agreement, my 1999
crop delivery agreement(s) and all subsequent crop delivery
agreements entered into by me, as contemplated under the
General Marketing Agreement, to Pro-Fac, and that from and
after the date this Subscription Agreement is executed by both
me and Pro-Fac, Pro-Fac shall be the successor of PF
Acquisition II, Inc. as the party to those agreements and,
except as provided in Subsection a. above and the substitution
of Pro-Fac, such agreements and their respective terms shall
remain in full force and effect.
<PAGE>
4
Agreements and Representations.
1. Subject to the limitations set forth below in subsections a. and b., I
hereby grant to Pro-Fac the right to repurchase all of my shares of
Class B Common Stock and the Special Membership Interest issued to me
pursuant to this Subscription Agreement, or otherwise owned by me, for
an aggregate consideration of $5.00. Pro-Fac's right to exercise this
repurchase right shall be conditioned only upon the following:
a. In the event Pro-Fac shall exercise its right to repurchase
hereunder, Pro-Fac shall repurchase all shares of Class B
Common Stock and all Special Membership Interests outstanding;
and
b. Pro-Fac's right to repurchase hereunder may be exercised only
within 180 days after Pro-Fac abandons or transfers its
ownership interest in PF Acquisition II, Inc.
I hereby acknowledge and agree that:
o I have not given any cash consideration for the shares of
Class B Common Stock or Special Membership Interest issued to
me pursuant to this Subscription Agreement; and
o the aggregate repurchase consideration of $5.00 payable to me
does not in any way reflect the current market value or par
value of the shares of Class B Common Stock or Special
Membership Interest; and
o in the event Pro-Fac determines to reduce or terminate the
marketing of one or more of the crops I have agreed to produce
and deliver under my General Marketing Agreement and crop
delivery agreement(s) then, unless and until Pro-Fac's right
to repurchase hereunder shall have terminated, I will be
required to hold my shares of Class B Common Stock supporting
that crop or those crops, and notwithstanding any agreement or
instrument to the contrary, including Pro-Fac's Bylaws, I will
not be entitled to receive the par value of $5.00 per share of
Class B Common Stock or the face value of my Special
Membership Interest unless and until Pro-Fac's repurchase
rights hereunder shall have been terminated; and
o Pro-Fac's repurchase rights hereunder shall continue until at
least June 29, 2002, and Pro-Fac's board of directors may
extend such time without notice to me.
2. I was a member-grower of Agripac, Inc. on February 22, 1999.
3. I acknowledge that this Subscription Agreement and my qualifications
for membership as a Class B Member must be reviewed by the board of
directors of Pro-Fac and accepted by them as a condition of my
membership; that the terms of this Subscription Agreement, the General
Marketing Agreement and the crop delivery agreement(s) are not binding
upon Pro-Fac until accepted by Pro-Fac.
4. I hereby agree, as a condition of membership, that I will take into
account in determining my gross income for federal income tax purposes
the stated dollar amount of all patronage dividends paid to me by
Pro-Fac by means of written notices of allocation within the meaning of
the pertinent provisions of the Internal Revenue Code of 1986, as
amended.
5. I understand that written or oral information or representations other
than those appearing in the Pro-Fac Registration Statement on Form S-2,
the Prospectus dated November ___, 1999, which is a part of the
Registration Statement, and the documents incorporated by reference
into the Prospectus have not been authorized by Pro-Fac.
<PAGE>
Miscellaneous
1. This subscription is and shall be irrevocable and the subscription rights
represented hereby are non-transferable.
2. Neither this Subscription Agreement nor any provision hereof shall be
waived, modified, changed, discharged, terminated, revoked, or canceled
except by an instrument in writing signed by the party against whom any
change, discharge or termination is sought.
3. This Subscription Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
4. This Subscription Agreement shall be enforced, governed and construed
in all respects in accordance with the laws of the State of New York,
as such laws are applied by New York courts to agreements entered into
and to be performed in New York State and shall be binding upon me, my
heirs, estate, legal representatives, successors and assigns and shall
inure to the benefit of Pro-Fac and its successors and assigns.
5. I hereby acknowledge receipt of Pro-Fac's Prospectus dated November
___, 1999, its Form 10-K for its Fiscal Year Ended June 26, 1999, its
Form 10-Q for its Fiscal Quarter Ended September 25, 1999, its Restated
Certificate of Incorporation and its Bylaws. I have reviewed the
foregoing documents prior to executing this application for membership.
Subscriber's Name and Signature Print
(Subscriber's Name)
Signed
(Date) (Subscriber's Signature)
Print
(Witness's Name)
Signed
(Date) (Witness)
<PAGE>
Calculation and Acceptance Page
For
------------------------
(Subscriber)
<TABLE>
1. Shares of Class B Common Stock at $5.00 per share (par value) approved for issuance to above subscriber:
INVESTMENT RATE
BASE ACRES/ AVERAGE COMMERCIAL (ROUNDED UP TO SHARES OF CLASS B
CROP(S) TONNAGE MARKET VALUE NEAREST $5.00) COMMON STOCK
<S> <C> <C> <C> <C> <C> <C>
(FOUR YEARS)
x 25% = /$5.00 =
---------- -------------- -------------------- ------------ --------------
x 25% = /$5.00 =
---------- -------------- -------------------- ------------ --------------
x 25% = /$5.00 =
---------- -------------- -------------------- ------------ --------------
x 25% = /$5.00 =
---------- -------------- -------------------- ------------ --------------
x 25% = /$5.00 =
---------- -------------- -------------------- ------------ --------------
x 25% = /$5.00 =
---------- -------------- -------------------- ------------ --------------
</TABLE>
2. Value of Special Membership Interest issuable to above subscriber:
Subscriber's historic equity ownership in Agripac, Inc. = $___________.
58% of Subscriber's historic equity ownership in Agripac, Inc. = ________,
less total investment rate $____ ($5.00 X shares of Class B Common Stock)
= Special Membership Interest equal to $_________.
3. Aggregate par value of Class B Common Stock and face value of Special
Membership Interest equals $______________.
--------------------------------------
Subscription accepted by Pro-Fac Cooperative, Inc. this ___day of _______, 1999.
SIGNATURE DATE
PRO-FAC COOPERATIVE, INC.
By:
Name:
Title:
HARRIS
BEACH &
WILCOX
A LIMITED LIABILITY PARTNERSHIP
ATTORNEYS AT LAW
THE GRANITE BUILDING
130 EAST MAIN STREET
ROCHESTER, N.Y.
14604-1687
(716) 232-4440
November 16, 1999
Pro-Fac Cooperative, Inc.
90 Linden Oaks
Rochester, New York 14603
Re: Pro-Fac Cooperative, Inc. - Registration Statement on Form S-2
Ladies and Gentlemen:
We have acted as your counsel in connection with a Registration Statement
on Form S-2 ("Registration Statement") to be filed by you with the Securities
and Exchange Commission ("Commission") pursuant to the Securities Act of 1933 as
amended. The Registration Statement may be amended, from time to time, by one or
more amendments at the request of the Commission, or on your own initiative,
either before or after its effective date. The Registration Statement as so
amended, or to be amended, covers Pro-Fac's Class B common stock and special
membership interests.
We have examined originals or copies, identified to our satisfaction, of
such documents and records of Pro-Fac, and such other documents and records as
we have deemed necessary, as a basis for the opinions hereinafter expressed.
Based on the foregoing, and having regard for such legal considerations as
we have deemed relevant, we are of the opinion that, subject to an order or
other appropriate action by the Commission declaring the Registration Statement
effective, the Class B common stock and the special membership interests when
issued in accordance with the terms and conditions set forth in the Prospectus
forming part of the Registration Statement, will be legally issued, fully paid
and non-assessable, except that under the New York Cooperative Corporations Law
each member and each director of Pro-Fac may be personally liable, jointly and
severally, for certain amounts owed to employees for services rendered to
Pro-Fac, as described in the Prospectus under the caption "Description of
Pro-Fac Securities - Common Stock."
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
HARRIS BEACH & WILCOX, LLP
By: /s/ Catherine A. King
__________________________________________
Catherine A. King, Partner of the Firm
AFFILIATES WASHINGTON, DC NEW YORK
COPENHAGEN LIVORNO PARIS MILFORD, CT ALBANY ITHACA ROCHESTER
KRISTIANSUND LONDON OSLO HACKENSACK, NJ BUFFALO NEW YORK CITY SYRACUSE
HARRIS
BEACH &
WILCOX
A LIMITED LIABILITY PARTNERSHIP
ATTORNEYS AT LAW
THE GRANITE BUILDING
130 EAST MAIN STREET
ROCHESTER, N.Y.
14604-1687
(716) 232-4440
November 16, 1999
Pro-Fac Cooperative, Inc.
90 Linden Oaks
Rochester, New York 14625
Re: Registration Statement on Form S-2
Ladies and Gentlemen:
This opinion is delivered to you in our capacity as counsel to Pro-Fac
Cooperative, Inc. (the "Company" or "Pro-Fac") in connection with the Company's
Registration Statement on Form S-2 (the "Registration Statement") to be filed
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended, including the prospectus forming a part thereof (the "Prospectus") and
any subsequent pre-effective amendments, post-effective amendments, prospectus
supplements or exhibits thereto, relating to the public offering of shares of
Class B common stock and special membership interests. This opinion relates to
the federal income tax consequences that are likely to be material to a holder
of Pro-Fac's common stock.
We have reviewed the Registration Statement and the documents incorporated
by reference therein (the "Incorporated Documents") that describe the Company
and its investments and activities. We have relied upon the representations of
an officer of the Company regarding the manner in which the Company and its
affiliates have been and will be owned and operated. We have neither
independently investigated nor verified such representations, and this opinion
is expressly conditioned upon the accuracy of such representations. We assume
that the Company has been and will be operated in accordance with applicable
laws and the terms and conditions of applicable documents and that the
descriptions of the Company and its actual and proposed activities, operations
and governance set forth in the Incorporated Documents continue to be true,
correct and complete.
In rendering the following opinion, we have examined the Company's Restated
Certificate of Incorporation and the By-Laws of the Company and such other
records, certificates and documents, each as amended, as we have deemed
necessary or appropriate for purposes of rendering the opinion set forth herein.
In rendering the opinion set forth herein, we have assumed (i) the
genuineness of all signatures on documents we have examined, (ii) the
authenticity of all documents submitted to us as originals, (iii) the conformity
to the original documents of all documents submitted to us as copies, (iv) the
conformity of final documents to all documents submitted to us as drafts, (v)
the authority and capacity of the individual or individuals who executed any
such documents on behalf of any person, (vi) the accuracy and completeness of
all records made available to us and (vii) the factual accuracy of all
representations, warranties and other statements made by all parties. We also
have assumed, without investigation, that all documents, certificates,
representations, warranties and covenants on which we have relied in rendering
the opinion set forth below and that were given or dated earlier than the date
of this letter continue to remain accurate, insofar as relevant to the opinion
set forth herein, from such earlier date through and including the date of this
letter and that all representations made to the "best knowledge" of any
AFFILIATES WASHINGTON, DC NEW YORK
COPENHAGEN LIVORNO PARIS MILFORD, CT ALBANY ITHACA ROCHESTER
KRISTIANSUND LONDON OSLO HACKENSACK, NJ BUFFALO NEW YORK CITY SYRACUSE
<PAGE>
HARRIS
BEACH &
WILCOX
November 16, 1999
Page 2
person(s), or subject to similar qualification, are true and complete as if made
without such qualification. Notwithstanding the foregoing, nothing has come to
our attention that would cause us to question the accuracy or completeness of
the foregoing assumptions.
The opinion set forth below is based upon the Internal Revenue Code of
1986, as amended (the "Code"), the income tax regulations and procedures and
administration regulations promulgated thereunder and existing published
administrative and judicial interpretations thereof, all as they exist at the
date of this letter. All of the foregoing statutes, regulations and
interpretations are subject to change, in some circumstances with retroactive
effect; any changes to the foregoing authorities might result in modifications
of our opinion contained herein.
Based upon and subject to the foregoing, we are of the opinion that the
statements in the Prospectus set forth under the caption "Tax Matters"
concerning our opinions as to the federal income tax consequences that are
likely to be material to a holder of the Company's common stock, accurately
reflect our opinions on the issues discussed and, to the extent such discussion
refers to the opinion of this firm, we adopt and incorporate all such opinions,
subject to the assumptions and limitations set forth herein.
This opinion is rendered with respect to the federal law of the United
States and does not address the laws of any other jurisdiction. We express no
opinion other than that expressly set forth herein. Our opinion is not binding
on the Internal Revenue Service (the "IRS"), and the IRS may disagree with the
opinion contained herein. Except as specifically discussed above, the opinion
expressed herein is based upon federal law as it currently exists. Consequently,
future changes in the law may cause the federal income tax treatment of the
transactions described herein to be materially and adversely different from that
described above.
We consent to being named as counsel to the Company in the Prospectus, to
the references in the Prospectus to our firm and to the inclusion of a copy of
this opinion letter as an exhibit to the Registration Statement.
Very truly yours,
HARRIS BEACH & WILCOX, LLP
/s/Robert C. Scutt
Robert C. Scutt, Partner of the Firm
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-2 of our report dated
August 23, 1999 appearing on page 27 of the Annual Report on Form 10-K/A-1 of
Pro-Fac Cooperative, Inc. for the year ended June 26, 1999. We also consent to
the application of such report to the Financial Statement Schedule for the three
years ended June 26, 1999 listed under Item 14(a) of Pro-Fac Cooperative, Inc.'s
Annual Report on Form 10-K/A-1 for the year ended June 26, 1999 when such
schedule is read in conjunction with the financial statements referred to in our
report. The audits referred to in such report also included this Financial
Statement Schedule. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
/s/ PricewaterhouseCoopers LLP
_______________________________
PricewaterhouseCoopers LLP
Rochester, New York
November 18, 1999
