UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q



(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
--
ACT OF 1934
For the quarterly period ended September 30, 2002
                               ------------------

                                       OR

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
----
ACT OF 1934
For the transition period from                          to
                               ------------------------    ---------------------

Commission file number 2-22791
                       -------


                                   AGWAY INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


DELAWARE                                                              15-0277720
--------------------------------------------------------------------------------
(State or other jurisdiction of                                 (I.R.S. Employer
incorporation or organization)                               Identification No.)


333 Butternut Drive, DeWitt, New York                                      13214
--------------------------------------------------------------------------------
(Address of principal executive offices)                              (Zip Code)


                                  315-449-6431
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)





Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.
Yes   X    No
    -----     -----

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.





             Class                               Outstanding at November 8, 2002
------------------------------------------------ -------------------------------
Membership Common Stock, $25 par value per share             96,447 shares


                                       1
<PAGE>


                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

                                      INDEX

<TABLE>
<CAPTION>

                                                                                                             PAGE NO.
                                                                                                             --------
PART I.    FINANCIAL INFORMATION
-------    ---------------------
<S>        <C>                                                                                                   <C>

           Item 1.  Financial Statements (Unaudited)

           Condensed Consolidated Balance Sheets as  of  September 30, 2002  and June 30, 2002.................   3

           Condensed Consolidated Statements of Operations and Retained Earnings for the three months ended
           September 30, 2002 and September 30, 2001...........................................................   4

           Consolidated Statements of Comprehensive Income for the three months ended September 30, 2002
           and September 30, 2001..............................................................................   5

           Condensed Consolidated Cash Flow Statements for the three months ended September 30, 2002
           and September 30, 2001..............................................................................   6

           Notes to Condensed Consolidated Financial Statements................................................   7

           Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations......  21

           Item 3.  Quantitative and Qualitative Disclosures About Market Risk.................................  32

           Item 4.  Controls & Procedures......................................................................  33

PART II.   OTHER INFORMATION
--------   -----------------

           Item 3.  Defaults Upon Senior Indebtedness..........................................................  34

           Item 6.  Exhibits and Reports on Form 8-K...........................................................  34

           SIGNATURES..........................................................................................  40

           Certifications Under New Exchange Act Rules 13a-14 and 15d-14 of the Exchange Act of 1934...........  41

</TABLE>

                                       2













<PAGE>


                          PART I. FINANCIAL INFORMATION
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

                  Item 1. CONDENSED CONSOLIDATED BALANCE SHEETS
                             (Thousands of Dollars)

<TABLE>
<CAPTION>

                                                                         September 30,                June 30,
                                                                              2002                      2002
                                                                       ------------------------  ------------------
ASSETS                                                                     (Unaudited)
<S>                                                                    <C>                       <C>
Current Assets:

     Cash............................................................  $           6,095         $                0
     Trade accounts receivable (including notes receivable of
         $2,019 and $1,988, respectively), less allowance for
         doubtful accounts of $5,364 and $4,723, respectively........             74,277                     76,733
     Advances and other receivables..................................              7,565                      4,757
     Inventories:
         Raw materials...............................................                441                        954
         Finished goods..............................................             29,248                     26,322
         Goods in transit and supplies...............................              1,369                      1,902
                                                                       ------------------------  ------------------
              Total inventories......................................             31,058                     29,178
     Deferred tax assets.............................................             11,981                     17,840
     Prepaid expenses and other assets...............................             11,245                      9,136
                                                                       ------------------------  ------------------
         Total current assets........................................            142,221                    137,644
Security investments, net............................................             10,685                     11,125
Properties and equipment, net........................................            120,627                    123,685
Net pension asset....................................................            225,935                    223,649
Other assets  .......................................................             24,194                     23,650
Total assets of discontinued operations..............................            936,380                  1,054,607
                                                                       ------------------------  ------------------
         Total assets................................................  $       1,460,042         $        1,574,360
                                                                        =======================  ==================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
     Notes payable...................................................  $          30,233                     34,180
     Current installments of long-term debt..........................              1,804                      1,842
     Current installments of subordinated debt.......................             36,219                     36,917
     Accounts payable................................................             31,837                     49,015
     Trade receivables with credit balances..........................             43,321                     28,079
     Other current liabilities.......................................             37,516                     51,976
                                                                       ------------------------  ------------------
         Total current liabilities...................................            180,930                    202,009
Long-term debt.......................................................             16,989                     17,143
Subordinated debt....................................................            387,291                    388,449
Deferred tax liabilities.............................................             27,547                     31,987
Other liabilities....................................................             63,465                     60,260
Total liabilities of discontinued operations.........................            739,600                    810,410
                                                                       ------------------------  ------------------
         Total liabilities...........................................          1,415,822                  1,510,258
Commitments and contingencies........................................
Shareholders' equity:
     Preferred stock, net............................................             31,997                     32,057
     Common stock, net...............................................              2,411                      2,413
     Accumulated other comprehensive income (loss)...................              4,148                      1,195
     Retained earnings...............................................              5,664                     28,437
                                                                       ------------------------  ------------------
         Total shareholders' equity..................................             44,220                     64,102
                                                                       ------------------------  ------------------
              Total liabilities and shareholders' equity.............  $       1,460,042         $        1,574,360
                                                                        =======================  ==================

</TABLE>

     See accompanying notes to condensed consolidated financial statements.
                                       3
<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

  Item 1. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
                                   (Unaudited)
                             (Thousands of Dollars)

<TABLE>
<CAPTION>
                                                                                    Three Months Ended
                                                                       --------------------------------------------
                                                                         September 30,             September 30,
                                                                              2002                      2001
                                                                       ------------------------  ------------------

<S>                                                                    <C>                       <C>
Net sales and revenues...............................................  $         188,940         $          201,631

Cost and expenses from:
     Products and plant operations...................................            185,406                    196,311
     Selling, general and administrative activities..................             19,035                     15,292
                                                                       ------------------------  ------------------
         Total operating costs and expenses..........................            204,441                    211,603

Operating loss.......................................................            (15,501)                    (9,972)
Interest expense, net................................................             (4,864)                    (5,001)

Other income, net....................................................              2,918                      1,587
                                                                       ------------------------  ------------------
Loss from continuing operations before income taxes..................            (17,447)                   (13,386)
Income tax expense (benefit).........................................                 63                     (6,557)
                                                                       ------------------------  -------------------

Loss from continuing operations......................................            (17,510)                    (6,829)

Discontinued operations:
     Loss from operations, net of tax expense (benefit) of $125
         and $(1,401), respectively..................................             (4,345)                    (3,413)
     Loss on disposal, net of tax expense (benefit) of $0............               (918)                         0
                                                                       ------------------------  ------------------
     Loss from discontinued operations...............................             (5,263)                    (3,413)

Net loss ............................................................            (22,773)                   (10,242)
                                                                       ------------------------  ------------------
Retained earnings, beginning of period...............................             28,437                    129,343
                                                                       ------------------------  ------------------
Dividends     .......................................................                  0                          0
                                                                       ------------------------  ------------------
Retained earnings, end of period.....................................  $           5,664         $          119,101
                                                                        =======================  ==================

</TABLE>


















     See accompanying notes to condensed consolidated financial statements.
                                       4

<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

        Item 1. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                   (Unaudited)
                             (Thousands of Dollars)

<TABLE>
<CAPTION>

                                                                                    Three Months Ended
                                                                       --------------------------------------------
                                                                         September 30,             September 30,
                                                                              2002                      2001
                                                                       ------------------------  ------------------

<S>                                                                    <C>                       <C>
Net earnings (loss)..................................................  $         (22,773)        $          (10,242)

Other comprehensive income (loss), net of tax:

     Unrealized gains (losses) on available-for-sale securities held
         in discontinued operations..................................                  0                        822

     Reclassification adjustment for (gains) losses included in net
         earnings....................................................               (570)                        (5)

     Deferred gains (losses) on cash flow hedges, net of tax:
         Holding gains (losses) arising during period................              3,985                         82
         Reclassification adjustment for (gains) losses included in
              net earnings...........................................               (462)                       (26)
                                                                       ------------------------  -------------------

Other comprehensive income (loss)....................................              2,953                        873
                                                                       ------------------------  -------------------

Comprehensive income (loss)..........................................  $         (19,820)        $           (9,369)
                                                                       ========================  ===================

</TABLE>


























     See accompanying notes to condensed consolidated financial statements.

                                       5

<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

               Item 1. CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
                                   (Unaudited)
                             (Thousands of Dollars)
<TABLE>
<CAPTION>


                                                                                    Three Months Ended
                                                                       --------------------------------------------
                                                                         September 30,             September 30,
                                                                              2002                      2001
                                                                       ------------------------  ------------------

<S>                                                                    <C>                       <C>
Net cash flows provided by (used in) continuing operations...........  $         (28,830)        $            1,055
Net cash flows provided by (used in) discontinued operations.........             42,155                     16,142
                                                                       ------------------------  ------------------
Net cash flows provided by (used in) operating activities............             13,325                     17,197

Cash flows provided by (used in) investing activities:
     Purchases of property, plant and equipment......................             (2,228)                    (1,526)
     Proceeds from disposal of property, plant and equipment.........              2,361                      1,331
     Net purchase (sale) of other security investments...............                  0                       (170)
                                                                       ------------------------  -------------------

Net cash flows provided by (used in) investing activities:...........                133                       (365)

Cash flows provided by (used in) financial activities:
     Net change in short-term notes payable..........................             (3,947)                   (35,672)
     Proceeds from long-term debt....................................                235                         15
     Repayment of long-term debt.....................................                (42)                       (83)
     Proceeds from sale of subordinated debt.........................                  0                     35,919
     Maturity and redemption of subordinated debt....................             (1,856)                   (17,353)
     Net change in capital leases....................................               (384)                     2,924
     Redemption of stock, net........................................                (62)                    (1,061)
     Cash dividends paid.............................................             (1,307)                    (1,521)
                                                                       ------------------------  -------------------

Net cash flows provided by (used in) financing activities............             (7,363)                   (16,832)
                                                                       ------------------------  -------------------

Net increase (decrease) in cash and equivalents......................              6,095                          0
Cash and equivalents at beginning of period..........................                  0                          0
                                                                       ------------------------  ------------------

Cash and equivalents at end of period................................  $           6,095         $                0
                                                                        =======================  ==================

</TABLE>















     See accompanying notes to condensed consolidated financial statements.

                                       6

<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

          Item 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                             (Thousands of Dollars)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     ------------------------------------------

     Basis of Presentation
     The accompanying  unaudited condensed  consolidated financial statements of
     Agway Inc. (the  "Company") have been prepared in accordance with generally
     accepted accounting  principles for interim financial  information and with
     the   instructions   to  Form  10-Q  and  Article  10  of  Regulation  S-X.
     Accordingly,  they do not  include  all of the  information  and  footnotes
     required by generally accepted accounting principles for complete financial
     statements.  In the opinion of management,  all adjustments  (consisting of
     normal recurring  accruals)  considered  necessary for a fair  presentation
     have been  included.  Operating  results for the  three-month  period ended
     September 30, 2002, are not necessarily  indicative of the results that may
     be expected for the year ending June 30, 2003,  due to the seasonal  nature
     of certain major segments of our business.

     On October  1,  2002,  Agway Inc.  and  certain of its  subsidiaries  filed
     voluntary  petitions to reorganize under Chapter 11 of the U.S.  Bankruptcy
     Code in order  to  allow it to  continue  running  its  businesses  without
     interruption  while it gains the time needed to  reorganize  its  financial
     obligations and strengthen its balance sheet. See Note 2.

     On March 6, 2002, the Company  announced  details of a  comprehensive  plan
     designed to refocus capital resources on four selected  businesses:  Animal
     Feed  and  Nutrition  (the  principal   operation  within  the  Agriculture
     segment),  Energy Products  (Energy  segment),  Produce,  and  Agricultural
     Technologies  (operations within the Country Products Group segment).  This
     plan also disclosed our  intentions to divest of four business  operations:
     Telmark (Leasing segment),  Agway Insurance (the principal operation within
     the  Insurance  segment),  and  Agronomy  and  Seedway  (components  of the
     Agriculture segment). After this plan was announced, as part of its ongoing
     strategic assessment of remaining Agway businesses, including its sunflower
     business (an operation included within the Country Products Group segment),
     Agway  engaged  an  investment  advisor  to  assist in the  exploration  of
     strategic  alternatives  involving  the sunflower  business.  In June 2002,
     after  reviewing a number of written  indications  of  interest,  the Agway
     Board of Directors  affirmed  management's  intentions to actively pursue a
     sale of  this  business.  As  required  by  generally  accepted  accounting
     principles,  the  financial  statements  separately  reflect  the  business
     operations planned for divestiture,  or actually divested,  as discontinued
     operations  for  all  periods  reported.  For  further  information  on the
     discontinued operations, refer to Note 4 of these financial statements.

     To date,  progress has been made regarding all divestiture plans. On August
     28, 2002,  Agway  announced the  completion of the sale of its wholly owned
     insurance subsidiary, Agway Insurance Company, to United Farm Family Mutual
     Insurance  Company.  On September 16, 2002, Agway completed the sale of its
     sunflower business (an operation  historically  included within the Country
     Products Group segment) to Cenex Harvest States Cooperatives.  On September
     27, 2002,  Agway and GROWMARK  announced  that they had signed a definitive
     agreement  regarding  the sale of the Agronomy and Seedway  businesses  and
     related assets to GROWMARK,  and a motion to approve this  transaction  was
     granted by the Bankruptcy Court on November 13, 2002. Finally, with respect
     to the sale of Telmark,  Goldman,  Sachs & Co. is  continuing to assist the
     Company in exploring potential strategic alternatives for this business.



                                       7
<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

    Item 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
                             (Thousands of Dollars)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
     ------------------------------------------------------

     Basis of Consolidation
     The consolidated  financial  statements  include the accounts of all wholly
     owned subsidiaries.  All significant intercompany transactions and balances
     have  been  eliminated  in  consolidation  except  for  certain  items  for
     intercompany  transactions  between continuing and discontinued  operations
     principally  related  to  leases  between  Telmark   (discontinued  Leasing
     segment) and the continuing operations or other discontinued operations.

     Income Taxes

     Agway is subject to income taxes on all income not  distributed  to patrons
     as patronage  refunds and provides for income taxes in accordance  with the
     provisions  of SFAS No.  109,  "Accounting  for  Income  Taxes."  Under the
     liability  method  specified  by SFAS No.  109,  deferred  tax  assets  and
     liabilities are based on the difference between the financial statement and
     tax basis of assets and  liabilities  as measured by the tax rates that are
     anticipated to be in effect when these  differences  reverse.  The deferred
     tax provision  represents the net change in the assets and  liabilities for
     deferred tax. A valuation  allowance is established when it is necessary to
     reduce deferred tax assets to amounts for which  realization is more likely
     than  not.  The  provision  for  income  taxes has been  allocated  between
     continuing and discontinued operations for all periods presented.

     For the three months ended September 30, 2002, an assessment of the changes
     in tax  timing  items  and  losses  in  both  continuing  and  discontinued
     operations generated additional deferred tax assets. Due to the uncertainty
     of sufficient  future taxable income being  generated to reasonably  assure
     realization of these deferred tax assets, an additional valuation allowance
     of  $6,300  and  $1,900  was  recorded  in  continuing   and   discontinued
     operations, respectively, for the three months ended September 30, 2002.

     Reclassifications
     Certain  reclassifications  have been made to conform prior year  financial
     statements with the current year presentation.

     Comprehensive Income
     Comprehensive  income  consists of net earnings  (loss),  the net change in
     unrealized gains and losses on  available-for-sale  securities (relating to
     Agway Insurance and included in discontinued  operations),  net of tax, and
     the net change in  deferred  gains and losses on cash flow  hedges,  net of
     tax. The deferred  gains and losses on cash flow hedges in the statement of
     comprehensive income are net of tax expense (benefit) of $2,963 and $37 for
     the  three  months  ended  September  30,  2002  and  September  30,  2001,
     respectively.

     New Financial Accounting Standards
     The Financial  Accounting  Standards  Board (FASB) has recently  issued the
     following:

     SFAS No. 142,  "Goodwill and Other  Intangible  Assets," was issued in June
     --------------------------------------------------------
     2001. Under SFAS No. 142, amortization of goodwill,  including goodwill and
     intangible   assets  with  indefinite   lives  recorded  in  past  business
     combinations, will discontinue upon adoption of this standard. In addition,
     goodwill recorded as a result of business combinations completed after July
     1, 2001, will not be amortized. Instead, all goodwill and intangible assets
     with  indefinite  lives will be tested  for  impairment  annually,  or more
     frequently  if  circumstances  indicate  potential  impairment,  through  a
     comparison  of fair  value to its  carrying  amount.  The net book value of
     goodwill and other intangible assets of continuing operations was $7,900 at
     September 30, 2002.  Amortization  of  intangible  assets with finite lives
     totaled $100 and $420,  respectively,  for the three months ended September
     30, 2002 and 2001. We adopted this standard on July 1, 2002,  and we expect
     to complete  the initial  impairment  analysis by  December  31,  2002,  as
     allowed under the new standard.

                                       8

<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

    Item 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
                             (Thousands of Dollars)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
     ------------------------------------------------------

     New Financial Accounting Standards (continued)

     SFAS No 143,  "Accounting for Asset Retirement  Obligations," was issued in
     -------------------------------------------------------------
     June 2001 and is  effective  for the Company on July 1, 2002.  SFAS No. 143
     establishes financial accounting and reporting obligations  associated with
     the retirement of tangible  long-lived  assets and the  associated  assets'
     retirement costs. It applies to all legal  obligations  associated with the
     retirement  of  long-lived   assets  that  result  from  the   acquisition,
     construction,  development,  and/or the normal  operation  of a  long-lived
     asset. The  implementation  of the statement did not have a material impact
     on the results of operations and financial position of the Company.

     SFAS No. 144,  "Accounting  for the  Impairment  or Disposal of  Long-Lived
     ---------------------------------------------------------------------------
     Assets,"  provides new guidance on the recognition of impairment  losses on
     --------
     long-lived  assets  to be held  and  used  or to be  disposed  of and  also
     broadens the definition of what  constitutes a  discontinued  operation and
     how  the  results  of  discontinued  operations  are  to  be  measured  and
     presented.  SFAS No.  144  supersedes  SFAS No.  121,  "Accounting  for the
     Impairment of Long-Lived  Assets and for  Long-Lived  Assets to be Disposed
     Of," and a portion of Accounting  Principle Board (APB) No. 30,  "Reporting
     the Results of Operations-Reporting the Effects of Disposal of a Segment of
     a  Business,"  while  retaining  many  of the  requirements  of  these  two
     statements.  Under  SFAS No.  144,  discontinued  operations  are no longer
     measured on a net realizable  value basis,  and future operating losses are
     no longer  recognized  before  they  occur.  This  statement  broadens  the
     presentation of discontinued  operations in the income statement to include
     a component of an entity (rather than a segment of a business). A component
     of an  entity  comprises  operations  and cash  flows  that can be  clearly
     distinguished, operationally and for financial reporting purposes, from the
     rest of the entity.

     The  Company  early  adopted  this new  standard  on January  1, 2002,  and
     recognized no impact in its financial statements regarding the new guidance
     on the recognition of impairment losses on long-lived assets to be held and
     used.  As  further  described  in Note 4, the  Company  has  announced  the
     discontinuation of a number of its business  operations and has adopted the
     guidance  of SFAS No.  144  regarding  the  measurement,  recognition,  and
     disclosure of these discontinued operations.

     SFAS No.  146,  "Accounting  for Costs  Associated  with  Exit or  Disposal
     ---------------------------------------------------------------------------
     Activities,"  was issued  June 2002 and is  effective  for exit or disposal
     ------------
     activities  initiated  after  December  31,  2002.  SFAS No. 146  addresses
     financial  accounting  and  reporting  for  costs  associated  with exit or
     disposal  activities and nullified  Emerging Issues Task Force (EITF) Issue
     No. 94-3, "Liability  Recognition for Certain Employee Termination Benefits
     and Other Costs to Exit an Activity  Including  Certain Costs Incurred in a
     Restructuring."  The Company will  implement this statement for all exit or
     disposal activities  initiated after December 31, 2002. However, we believe
     that  our  current  reporting  of these  types  of costs is not  materially
     different than the requirements of this new standard.

                                       9

<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

    Item 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
                             (Thousands of Dollars)


2.   CHAPTER 11 FILINGS
     ------------------

     Background
     On  October  1, 2002 (the  "Petition  Date"),  Agway  Inc.  and five of its
     subsidiaries  (collectively,  the "Debtors")  filed voluntary  petitions to
     reorganize  under  Chapter 11 of the  United  States  Bankruptcy  Code (the
     "Chapter 11  Proceedings")  in the United States  Bankruptcy  Court for the
     Northern District of New York in Utica, New York (the "Bankruptcy  Court").
     The Chapter 11 Proceedings have been  consolidated for procedural  purposes
     only and are being administered jointly under case numbers 02-65872 through
     02-65877 pursuant to an order of the Bankruptcy Court entered on October 1,
     2002.  The  subsidiaries  that were included in the Chapter 11  Proceedings
     were Feed Commodities  International LLC, Country Best-DeBerry LLC, Country
     Best Adams,  LLC,  Brubaker  Agronomic  Consulting  Service  LLC, and Agway
     General Agency, Inc.

     Four wholly owned Agway Inc.  subsidiaries  ARE NOT included in the Chapter
     11  Proceedings:  Agway Energy Products LLC, Agway Energy  Services,  Inc.,
     Agway  Energy  Services-PA,  Inc.  and Telmark  LLC. In  addition,  Telmark
     debenture   holders  ARE   NOT  subject  to  the  Chapter  11  Proceedings.
     Cooperative Milling Cooperative Inc., a company 50% owned by Agway Inc. was
     also not included in the Chapter 11 Proceedings.  Finally, the Agway dealer
     stores ARE  NOT  included in the Chapter 11  Proceedings,  because they are
     independently owned and are not affiliated with Agway Inc. in any way.

     Agway  Energy  Products is a separate  subsidiary  which  historically  has
     generated, and is expected to continue to generate, sufficient cash to meet
     its needs.  Agway Energy Products requires  short-term  borrowings from the
     Company's   lines  of  credit  to  meet   seasonal   and  working   capital
     requirements.  Such  short-term  financing  will be made available to Agway
     Energy Products as a non-debtor  borrower on an ongoing basis by our senior
     lenders  as part of a  $125,000  Debtor-in-Possession  financing  agreement
     ("DIP Facility").  The details of the DIP Facility are discussed in Note 3.
     However,  Agway Energy  Products  will continue to operate as it has in the
     past and IS NOT included in the Agway Inc. Chapter 11 Proceedings.

     Telmark LLC is a separately financed subsidiary with an appropriate capital
     structure for its industry. Telmark LLC has historically and is expected to
     continue to generate  ample earnings and cash flow to meet its debt service
     requirements.  Telmark LLC will  continue to be financed and to be operated
     separately  from Agway Inc.  as it has in the past and  IS NOT  included in
     the Agway Inc. Chapter 11 Proceedings.

     Events  Leading to the Chapter 11 Filings  Based on the expected  cash flow
     from our business operations,  the cash generated from asset sales to date,
     and the  uncertainty  of both the  amount  and  timing of cash  from  other
     planned sales of business operations,  it was not certain or likely that we
     would have generated  sufficient cash to pay our November 1, 2002, maturity
     of subordinated debt of $33,100.  Further, without an amendment to the then
     existing credit agreement, payment of that subordinated debt maturity would
     have been  precluded  since it would  have  constituted  a  default  of the
     minimum Agway securities balance requirement in the credit agreement.

                                       10

<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

    Item 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
                             (Thousands of Dollars)


2.   CHAPTER 11 FILINGS (continued)
     ------------------------------

     Events Leading to the Chapter 11 Filings (continued)
     In addition, earnings through September 30, 2002, were not expected to, and
     did not,  meet the  financial  covenant  requirements  of the then existing
     credit agreement.  Projected cash flow from our business  operations,  with
     appropriate  senior debt  financing,  was expected to be sufficient to meet
     future  operating needs but, without  additional  sales of assets,  was not
     expected to be adequate to pay the future  interest  requirements  on Agway
     Inc.  unsecured debt or dividends on Agway Inc.  preferred  stock.  In July
     2002, our surety provider issued  cancellation  notices relative to $23,900
     of surety bonds supporting our insurance programs. While this had no direct
     impact on our insurance coverage,  it gave our insurance carriers the right
     to demand payment of the collateral  amount  provided by the bonds from the
     issuer of the  bonds.  Because  of the  cancellation  notices  issued,  our
     insurers  had a right to make  demand on our  surety  provider  for  $4,625
     starting late September and for $6,000  starting late October.  We disputed
     the right of the surety  provider to cancel the  remaining  $13,275 at that
     time but recognized their right to cancel coverage in the spring of 2003 at
     the scheduled  renewal dates.  If our insurers would have demanded  payment
     relative  to these  cancellation  notices  and if our surety  provider  had
     chosen to pay cash to our insurers  rather than reissue  bonds,  our surety
     would  have had a right to  demand  cash  payment  from us.  As  previously
     announced,  we ceased our  historic  practice of  voluntarily  repurchasing
     Agway  preferred  stock and  certain  subordinated  debt;  as a result,  we
     concluded that we would no longer have been able to successfully issue such
     debt because it would not have been possible to restore investor confidence
     in Company-issued  securities without a comprehensive  restructuring at the
     Agway Inc.  level.  In view of the  foregoing,  we  determined  that such a
     restructuring   could   best  be   accomplished   through  a   Chapter   11
     reorganization.  To that end, as noted above,  the Company entered into the
     Chapter 11 Proceedings on October 1, 2002.

     Chapter 11 Process
     Each of the  Debtors  continues  to  operate  its  business  and manage its
     property as a Debtor-in-Possession pursuant to sections 1107(a) and 1108 of
     the Bankruptcy Code. As  Debtors-in-Possession,  the Debtors are authorized
     to operate their  business but may not engage in  transactions  outside the
     ordinary course of business  without the approval of the Bankruptcy  Court.
     The  Bankruptcy  Court entered  orders on October 1, 2002 granting  various
     initial requests of Agway, including payment of employee wages and salaries
     on schedule,  continuation  of Feed and Agronomy  customer  pre-pay product
     programs, and interim access to cash funding. Also, on October 1, 2002, the
     Bankruptcy Court entered an order authorizing the Company to pay vendors in
     the ordinary course for all goods and services received on or after October
     1,  2002.  We agreed to terms of a DIP  Facility  with our  present  senior
     lender group to provide a $125,000 facility over the next 18 months,  which
     we believe  will provide  adequate  cash  resources  for Agway Inc. to meet
     future operating requirements while we restructure the business. On October
     4, 2002, the Bankruptcy Court approved the DIP Facility on an interim basis
     and on October 22, 2002,  approved the Company's motion for final access to
     the full amount of the $125,000 DIP Facility. Upon obtaining final approval
     from the  Bankruptcy  Court,  the DIP Facility  replaced  Agway's  existing
     senior debt and the credit  agreement.  See Note 3 for terms and conditions
     including covenants under the DIP Facility.


                                       11

<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

    Item 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
                             (Thousands of Dollars)


2.   CHAPTER 11 FILINGS (continued)
     ------------------------------

     Chapter 11 Process (continued)

     On  October 9,  2002,  the United  States  Trustee  appointed  an  official
     committee of unsecured  creditors ("the Committee").  The Committee and its
     legal  representatives  may take  positions on matters that come before the
     Bankruptcy  Court and, at the  appropriate  time, will negotiate with Agway
     the terms of a plan of  reorganization.  On October 11, 2002, the Committee
     filed a motion seeking reconsideration of all the first day motions entered
     by the Bankruptcy Court on October 1, 2002. The reconsideration  motion has
     not yet been  finalized and it is possible that one of the first day orders
     will be modified. Agway and the Committee and their respective advisors are
     holding discussions in an effort to resolve the reconsideration  motion and
     other  related  matters.   The  outcome  of  these  discussions  cannot  be
     determined at this time.

     At this stage,  we cannot  predict the impact of the Chapter 11 Proceedings
     on our financial condition and results of operations. However, until a plan
     of reorganization is developed and approved by the Bankruptcy Court and our
     creditors, we will be prohibited from paying all pre-petition indebtedness,
     including  principal,  interest,  and  maturities on our  outstanding  debt
     securities and various other obligations or claims against the Company such
     as pending litigation and environmental  claims.  Accordingly,  the $33,100
     maturity  of  subordinated  debt due on  November  1,  2002  was not  paid.
     Following  approval  of  a  plan  of   reorganization,   treatment  of  our
     pre-petition obligations will depend upon the terms of the plan.


     Accounting Treatment of Chapter 11 Filings
     The accompanying  pre-petition  consolidated financial statements as of and
     for the period  ended  September  30,  2002 have been  prepared  on a going
     concern  basis.  As a result of the  Debtors  entering  into a  Chapter  11
     Proceedings on October 1, 2002,  Agway's unaudited  condensed  consolidated
     financial  statements  for the  quarter  ended  December  31,  2002 will be
     prepared in  accordance  with AICPA  Statement  of Position  ("SOP")  90-7,
     "Financial  Reporting by Entities in  Reorganization  under the  Bankruptcy
     Code," and will continue to apply generally accepted accounting  principles
     as a going concern which assumes the  realization of assets and the payment
     of liabilities in the ordinary course of business.

     SOP  90-7  requires  that  pre-petition  liabilities  that are  subject  to
     compromise  be  segregated  in  Agway's  unaudited  Condensed  Consolidated
     Balance Sheet as  "Liabilities  Subject to  Compromise"  and that revenues,
     expenses,  realized gains and losses,  and provisions for losses  resulting
     from the  reorganization  and  restructuring  of the  Debtors  be  reported
     separately  as  reorganization  items,  except  for  those  required  to be
     reported  as   discontinued   operations,   in  the   unaudited   Condensed
     Consolidated  Statements  of  Operations.  Finally,  a  condensed  combined
     financial statement that includes all Debtors in the Bankruptcy filing will
     also be presented.

     During the three-month  period ended September 30, 2002, we recorded $2,200
     in  reorganization  expenses which is recorded in the selling,  general and
     administrative  activities  line item of our statement of operations and is
     included  in  the  "Other"  segment.  Reorganization  expenses  principally
     related to  professional  services  fees  associated  with the  contingency
     planning which ultimately resulted in the Chapter 11 Proceedings.


                                       12

<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

    Item 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
                             (Thousands of Dollars)


3.   BORROWINGS
     ----------

     Notes Payable
     Agway has  available  under its Senior  Debt  program  (described  below) a
     $125,000  short-term line of credit, up to $35,000 of which can be used for
     letters  of credit.  At  September  30,  2002,  letters  of credit  issued,
     primarily to back Agway insurance programs,  totaled approximately $28,100.
     The carrying amounts of Agway's  short-term  borrowings  approximate  their
     fair value and were as follows:

                                                September 30,           June 30,
                                                     2002                 2002
                                              ----------------------------------
     Line of credit.........................  $      30,233         $     34,180
                                              ==================================
     Weighted average interest rate.........         7.01%                5.89%
                                              ==================================

     Agway Senior Debt
     As more fully  described  below,  as a result of the  Company's  Chapter 11
     Proceedings,  the Agway  Senior  Debt  Agreement  ("Senior  Debt") has been
     replaced by the DIP Facility.  During the first quarter ended September 30,
     2002,  the Company had  available  under its Senior  Debt,  an  asset-based
     revolving  line of credit  for up to  $150,000  pursuant  to the terms of a
     credit  agreement  dated  March  28,  2001  between  Agway  Inc.,   certain
     subsidiaries,  and a syndicated  group of lenders (the "Credit  Agreement).
     However,  as of September  30, 2002,  Agway was in default under the Credit
     Agreement, and it was necessary to obtain a waiver regarding those covenant
     violations.  Those covenant  violations were permanently waived on November
     14, 2002, and as a result,  Agway no longer has any  obligations  under the
     Credit  Agreement.  The Senior Debt was  collateralized by a variety of our
     assets,  including the outstanding  limited  liability  company  membership
     interest of Telmark.  Interest  rates were  determined as either prime rate
     plus 2.5% or the London Interbank  Offered Rate (LIBOR) plus 4%. During the
     quarter,  we sold the Agway Insurance Company and the Sunflower division of
     our CPG segment for gross proceeds of approximately  $42,100, which had the
     impact of reducing the  commitment  level from  $150,000 to  $125,000.  The
     Credit  Agreement had a number of financial  covenants which had restricted
     capital  spending  and required us to maintain  minimum  levels of earnings
     before interest, taxes, depreciation, and amortization (EBITDA), as defined
     in the Credit  Agreement and minimum  ratios of EBITDA to fixed charges and
     interest of Senior Debt.

     This  Credit  Agreement  had  been  amended  three  times  in  response  to
     violations of financial  covenants.  In connection  with those  amendments,
     those  violations  were waived.  As of September  30, 2002, we had violated
     various  covenants  under  the  Credit  Agreement.  As noted  above,  these
     covenants were  permanently  waived  effective  November 14, 2002, with the
     first amendment to the DIP Facility. The first amendment's most significant
     change to the DIP Facility was the waiver of compliance  with the financial
     covenants set forth in the former Credit  Agreement and also  conformed the
     DIP Facility to the Bankruptcy Court Order.

     On October  22,  2002,  the  Bankruptcy  Court  granted  Agway and  certain
     subsidiaries,  including the non-debtor borrowers,  final approval to enter
     into an 18-month DIP Facility of $125,000 with its existing lenders to fund
     working  capital   requirements  of  the  Debtors  during  the  Chapter  11
     Proceedings, and to fund the working capital requirements of the non-debtor
     borrowers.

     The  DIP  Facility  line  is  collateralized  by a  variety  of our assets,
     including the pledge of the limited liability company  membership  interest
     in Telmark.  As in the former  Senior Debt  Agreement,  interest  rates are
     determined,  at the option of Agway,  as either prime rate plus 2.5% or the
     London  Interbank  Offered rate  (LIBOR)  plus 4%. The amount  available to
     Agway  under  this  asset-based  line  of  credit  is  the  lesser  of  the
     "collateral  borrowing  base" or the  $125,000  upper  limit of the line of
     credit.


                                       13
<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

    Item 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
                             (Thousands of Dollars)


3.   BORROWINGS (continued)
     ----------------------

     Agway Senior Debt (continued)
     In the event of the sale of certain assets, as defined in the DIP Facility,
     the upper  limit of the line of  credit  will  decrease  from  $125,000  to
     $100,000.  The  collateral  borrowing  base  consists of certain of Agway's
     eligible  accounts   receivable  and  inventory  (as  defined  in  the  DIP
     Facility). In addition, the collateral borrowing base includes other assets
     pledged as  collateral  up to the lesser of  $25,000 or  $125,000  less the
     eligible  accounts  receivable and  inventory.  In the event that a sale of
     certain  assets,  as defined in the DIP  Facility,  is not  completed on or
     before December 31, 2002, the $25,000 additional  collateral borrowing base
     related to those  assets is reduced  by $10,000  and is further  reduced by
     $5,000 in each succeeding  month to zero by March 31, 2003 in the event the
     assets are not sold by then. At that time,  the  collateral  borrowing base
     will consist solely of eligible accounts receivable and inventory.

     The DIP  Facility has a number of financial  covenants  which  restrict our
     capital  spending  and  require us to maintain  minimum  levels of earnings
     before  interest,  taxes,  depreciation,  amortization,  and  restructuring
     charges, as well as a maximum level of restructuring charges.

     Agway Subordinated Debt
     Agway  previously  registered  with the Securities and Exchange  Commission
     (SEC) to offer debentures and money market  certificates to the public.  As
     previously  disclosed,  since March 6, 2002,  the Company has suspended its
     active capital raising efforts through the sale of Company  securities;  it
     does not expect to sell any additional securities in the near future, if at
     all.  The  debentures  and money  market  certificates  are  unsecured  and
     subordinated to all senior debt of Agway.  Furthermore,  as a result of the
     Chapter  11  Proceedings,  payment  of  interest  and  maturities  on these
     securities   are   prohibited.   Accordingly,   the  $33,100   maturity  of
     subordinated debt due on November 1, 2002 was not paid.


4.   DISCONTINUED OPERATIONS
     -----------------------

     On March 6, 2002, the Company  announced  details of a  comprehensive  plan
     designed to strengthen our capital structure and reduce our debt. This plan
     focuses our capital resources on four selected businesses:  Animal Feed and
     Nutrition (the principal operation within the Agriculture segment),  Energy
     Products  (Energy   segment),   Produce,   and  Agricultural   Technologies
     (operations  within the Country  Products  Group  segment).  This plan also
     disclosed our intentions to divest four business  operations:  Telmark (the
     former Leasing segment),  Agway Insurance Company (the principal  operation
     within the former Insurance  segment),  and Agronomy and Seedway  (formerly
     components of the Agriculture segment).

     After  this  restructuring  plan  was  announced,  as part  of its  ongoing
     strategic assessment of remaining Agway businesses, in June 2002, the Agway
     Board of Directors  affirmed  management's  intentions to actively pursue a
     sale of Agway's sunflower  business (an operation  formerly included within
     the Country Products Group segment).

     With the announcement of our March 6, 2002 restructuring  plan, our ongoing
     strategic assessment,  and our adoption of SFAS No. 144, we are required to
     separately  report the combined  results of  businesses  that we are taking
     steps to sell as discontinued  operations and to immediately  recognize any
     estimated losses directly related to the sales of those businesses.  Actual
     gains, if any, realized on sale of discontinued operations are not reported
     until realized.  The results of operations of all  discontinued  businesses
     are reported in discontinued operations in the periods in which they occur.
     Discontinued  business  operations  results  are  reported  in  the  income
     statement,  net of tax, in earnings  (loss) from operations of discontinued
     operations. The recognition of any estimated losses directly related to the
     sales of these  businesses  are  reported in the income  statement,  net of
     taxes,  in gain (loss) on disposal of  discontinued  operations.  The total
     assets of  discontinued  operations and total  liabilities of  discontinued
     operations are separately reported in the consolidated balance sheet.


                                       14
<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

    Item 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
                             (Thousands of Dollars)


4.   DISCONTINUED OPERATIONS (continued)
     -----------------------------------

     For  the  businesses   noted  above  that  are  reflected  in  discontinued
     operations,  a summary  of net sales and  revenues  and  pre-tax  operating
     results for the three months ended  September  30, 2002 and  September  30,
     2001,  respectively,  and total assets of discontinued operations and total
     liabilities of  discontinued  operations at September 30, 2002 and June 30,
     2002 are detailed below.  These amounts also include assets and liabilities
     remaining from the retail  services  business,  which was  discontinued  in
     fiscal 2000.  Furthermore,  a portion of the Company's interest expense has
     been allocated to discontinued  operations  based on the  outstanding  debt
     attributable  to holding these  discontinued  operations.  Finally,  income
     taxes have been allocated  between  continuing and discontinued  operations
     for all periods presented.

<TABLE>
<CAPTION>
                                                                                    Three Months Ended
                                                                       --------------------------------------------
                                                                          September 30,             September 30,
                                                                               2002                       2001
                                                                       ------------------------  ------------------

<S>                                                                    <C>                        <C>
     Total sales and revenues........................................  $         67,571           $        75,500
     Pre-tax loss before interest and taxes..........................            (1,696)                   (1,656)
     Interest expense allocated to discontinued operations ..........             2,524                     3,160
     Loss from operations, before tax................................            (4,220)                   (4,814)
</TABLE>

<TABLE>
<CAPTION>
                                                                                  Discontinued Operations
                                                                       --------------------------------------------
                                                                          September 30,               June 30,
                                                                              2002                      2002
                                                                       --------------------------  ----------------
     Discontinued Assets:
        <S>                                                            <C>                         <C>
         Cash........................................................  $           5,833           $          5,932
         Restricted cash.............................................              5,697                      6,014
         Accounts receivable and notes receivable, net...............             56,760                    102,425
         Total lease receivables, net................................            714,631                    716,499
         Inventories.................................................             29,428                     42,909
         Prepaid and other current assets............................             52,539                     55,473
         Marketable securities available for sale....................                  0                     39,826
         Other security investments..................................             41,464                     41,483
         Property, plant and equipment...............................             26,209                     35,342
         Other assets................................................              3,819                      8,704
                                                                       --------------------------  ----------------
              Total assets of discontinued operations................  $         936,380           $      1,054,607
                                                                       ==========================  ================
</TABLE>
<TABLE>
<CAPTION>

     Discontinued Liabilities:
        <S>                                                            <C>                         <C>
         Notes payable...............................................  $         124,200           $        204,263
         Current portion of long-term debt...........................            111,628                    126,485
         Accounts payable............................................             19,013                     22,909
         Other current liabilities...................................            112,797                    165,505
         Long-term debt..............................................            345,976                    258,569
         Other long-term liabilities.................................             25,986                     32,679
                                                                       --------------------------  ----------------
              Total liabilities of discontinued operations             $         739,600           $        810,410
                                                                       ==========================  ================
</TABLE>


                                       15
<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

    Item 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
                             (Thousands of Dollars)


4.   DISCONTINUED OPERATIONS (continued)
     -----------------------------------

     The loss on  disposal  of  discontinued  operations,  net of tax,  has been
     adjusted to the current estimated loss at September 30, 2002 as follows:
<TABLE>
<CAPTION>

                                                  June 30,                 1st Quarter              September 30,
                                                    2002                   Adjustments                   2002
                                            ------------------------   ------------------------   ------------------
<S>                                         <C>                        <C>                        <C>
     Impairment on long-lived assets and
       other reserves.....................  $          (71,633)        $             932          $         (70,701)
     Direct costs of sale.................             (18,181)                   (1,850)                   (20,031)
     Benefit plans curtailment............             (13,422)                        0                    (13,422)
                                            ------------------------   ------------------------   ------------------
     Pre-tax loss.........................            (103,236)                     (918)                  (104,154)
     Income tax benefit...................              17,800                         0                     17,800
                                            ------------------------   ------------------------   ------------------
     Net loss on disposal of discontinued
       operations.........................  $          (85,436)        $            (918)         $         (86,354)
                                            ========================   ========================   ==================
</TABLE>

     The  adjustments  during the three months ended September 30, 2002 were the
     result of the ongoing  negotiations with potential buyers of the businesses
     to be  divested,  finalization  of the impacts  relating to the sale of the
     Insurance Company and Sunflower business, and changes in estimate of direct
     transaction  costs,  principally  pay-to-stay  program costs that are being
     recognized over their expected terms.

     The above net loss on disposal of discontinued  operations could be further
     adjusted  (either  increased or  decreased)  in future  periods for changes
     experienced  from  the  current  estimate  for  net  loss  on  disposal  of
     discontinued operations.

5.   AGRICULTURE REALIGNMENT
     -----------------------

     In the second  quarter of fiscal year 2001,  the Agway  Board of  Directors
     approved a plan (the Agriculture  Plan) to realign the Agriculture  segment
     of Agway's  business with the continuing  concentration  of farming and our
     farmer-members  in the northeastern  United States.  The realignment into a
     Feed and Nutrition Division and an Agronomy Division has been completed. In
     addition, a total of 62 locations have been converted to dealers,  sold, or
     closed and 397 employees at these locations have been paid  severance.  The
     62  locations  were  comprised  of 4 feed  mills,  12 feed  storage and mix
     locations,  39 Agronomy  facilities and 7 farm stores. As of June 30, 2002,
     the Agriculture Plan was substantially completed with only residual impacts
     of  immaterial  amounts  occurring in fiscal  2003.  The  financial  impact
     associated with the  Agriculture  Plan has been reported in both continuing
     and discontinued operations. For the three months ended September 30, 2001,
     the  Agriculture  Plan  generated  a gain on the  realignment  activity  of
     $1,500,  which is primarily the net gain realized on the sale of assets and
     is  reported  $300 on  continuing  operations  and  $1,200 in  discontinued
     operations.


                                       16
<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

    Item 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
                             (Thousands of Dollars)


6.   ACCOUNTING FOR DERIVATIVES AND HEDGING ACTIVITIES
     -------------------------------------------------

     The Company's  Energy segment enters into a combination of  exchange-traded
     futures  and options  contracts  and,  in certain  circumstances,  over the
     counter  options  (collectively  "derivatives")  to manage  the price  risk
     associated with future purchases of the commodities used in its operations,
     principally  heating  oil  and  propane.   Energy  has  fair  value  hedges
     associated  with its fixed price  purchase  contracts and cash flows hedges
     for  its  variable   priced   purchase   contracts.   The  derivatives  are
     specifically  matched  in volume and  maturity  with the  various  purchase
     commitments of the business and generally  expire within a year. Under SFAS
     No. 133,  the value of option  contracts  that  Energy  enters into has two
     components:  time and intrinsic  value. The intrinsic value is the value by
     which the option is "in the money" (i.e.,  has a positive  value to Agway).
     The remaining amount of option value is attributable to time value.  Energy
     does not include the time value of option  contracts in its  assessment  of
     hedge  effectiveness  and  therefore  records  changes  in the  time  value
     component  of its options  currently in  earnings.  At September  30, 2002,
     Energy had a derivative  asset of $7,400.  An after-tax  total of $4,400 of
     deferred net unrealized gains on derivatives instruments was accumulated in
     other comprehensive income and is expected to be reclassified into earnings
     during  the next  twelve  months.  A charge  to cost of goods  sold for the
     change  in  option  time  value  not  used  in  the   assessment  of  hedge
     effectiveness  was $2,200 and $1,200 for the three months  ended  September
     30, 2002 and 2001, respectively.

     In the Agriculture  segment,  the purchase of corn, soy complex,  and oats,
     which can be sold directly as ingredients or included in feed products sold
     by Agriculture,  creates price risk for this business.  Agriculture intends
     to match its purchase and sales contracts  whenever possible to hedge price
     risk; however,  exchange-traded  commodity instruments are used principally
     to manage the price risk associated with unmatched  commodity  purchases or
     sales.  Agriculture matches all derivative  contracts with their underlying
     purchase or sale contracts;  however, due to the differences in the changes
     in the commodity cash price at an Agriculture  location  versus the Chicago
     Board of Trade, a highly effective hedging relationship (as defined by SFAS
     No.  133)  has  not  been  achieved.  Therefore,  the  derivatives  used in
     Agriculture  are  marked to market  currently  in  earnings.  The impact of
     marking these  derivatives  to market for the three months ended  September
     30, 2002, was immaterial.

7.   COMMITMENTS AND CONTINGENCIES
     -----------------------------

     Environmental
     We are  subject to various  laws and  governmental  regulations  concerning
     environmental  matters.  We  expect  to be  required  to  expend  funds  to
     participate in the  remediation of certain sites,  including sites where we
     have been  designated  by the  Environmental  Protection  Agency (EPA) as a
     potentially  responsible party (PRP) under the Comprehensive  Environmental
     Response,  Compensation,  and  Liability  Act  (CERCLA)  and at sites  with
     underground   fuel  storage  tanks.  We  will  also  incur  other  expenses
     associated with environmental compliance.

     We are designated as a PRP under CERCLA or as a third party by the original
     PRPs in several  Superfund  sites.  The liability under CERCLA is joint and
     several, meaning that we could be required to pay in excess of our pro rata
     share  of  remediation  costs.  As a  result  of the  use and  handling  of
     hazardous substances in our normal operations,  an unexpected environmental
     event or significant changes in environmental compliance requirements could
     have a material  adverse  impact on our financial  condition and results of
     operations.



                                       17
<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

    Item 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
                             (Thousands of Dollars)


7.   COMMITMENTS AND CONTINGENCIES (continued)
     -----------------------------------------

     Environmental (continued)
     We   continually   monitor  our   operations   with  respect  to  potential
     environmental   issues,   including  changes  in  legal   requirements  and
     remediation   technologies.   Our  recorded   liability  in  our  financial
     statements  reflects  those  specific  issues  where we  think  remediation
     activities  are likely and where we can estimate  the cost of  remediation.
     Estimating the extent of our  responsibility  for a particular site and the
     method and ultimate cost of remediation of that site require that we make a
     number of assumptions.  As a result, the ultimate outcome of remediation of
     a site may differ from our  estimates.  However,  we believe  that our past
     experience   provides  us  with  a  reasonable  basis  for  estimating  our
     liability. When we receive additional information,  we adjust our estimates
     as necessary.  While we do not anticipate  that any such adjustment will be
     material to our financial  statements,  the result of ongoing and/or future
     environmental  studies or other  factors could alter this  expectation  and
     require that we record additional liabilities. We currently can't determine
     whether we will incur  additional  liabilities  in the future or, if we do,
     the extent or amount of such additional liabilities.

     Other
     Agway  is  also  subject  to  various  investigations,  claims,  and  legal
     proceedings  covering a wide range of  matters  that arise in the  ordinary
     course of its  business  activities.  Each of these  matters  is subject to
     various uncertainties, and it is possible that some of these matters may be
     resolved  unfavorably to Agway. Agway has established  accruals for matters
     for which payment is probable and amounts reasonably estimable.  Management
     believes any liability  that may  ultimately  result from the resolution of
     these matters in excess of amounts  provided  under the above stated policy
     will not have a  material  adverse  effect on the  results  of  operations,
     financial position, or liquidity of Agway.

     Other Assets
     The sale of the  wholesale  procurement  and supply  system was paid for in
     part by a note  receivable  in the original  amount of $13,300 that was due
     and payable  January 2003. In connection  with a refinancing of the obligor
     in December  2001,  we agreed to extend the $12,500  remaining  outstanding
     balance to February 15, 2003, with a possible  extension to August 12, 2003
     under certain  conditions.  In connection with this agreement,  we became a
     secured party in an intercreditor  agreement with the obligor's bank group.
     The September 30, 2002 outstanding  balance of $11,500 is included in other
     assets on the balance  sheet.  The obligor  failed to make a payment due on
     the note as of September  30, 2002 and is in process of  renegotiating  its
     entire financial obligations with its secured bank group and Agway Inc. The
     collectibility of that note receivable is subject to the ongoing successful
     operation of the obligor or our ability,  if  necessary,  to realize  value
     from the security under the intercreditor agreement.


                                       18
<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

    Item 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
                             (Thousands of Dollars)


7.   COMMITMENTS AND CONTINGENCIES (continued)
     -----------------------------------------

     Insurance Coverage
     The Company uses various insurance companies to insure its primary casualty
     insurance  risks as well as to  obtain  various  umbrella/excess  liability
     coverages.  On October  3, 2001,  the  Commonwealth  Court of  Pennsylvania
     approved the petition of the  Pennsylvania  Insurance  Commissioner  for an
     Order of  Liquidation  for  Reliance  Insurance  Company  (RIC).  Agway has
     obtained  insurance  coverage from RIC in various segments of its insurance
     programs  since  1991.  Presently,  Agway has four  claims  which  could be
     affected by this liquidation.  Total covered amounts by RIC on these claims
     as of  September  30, 2002 are  estimated at $3,200.  In  addition,  future
     claims  could be  affected by this  liquidation.  The  liquidation  statute
     establishes certain priorities for payment of claims.  Direct policyholders
     are one of the top  priorities for payment.  To the extent,  if any, RIC is
     unable  to meet  its  claim  obligations  to its  policyholders  and  other
     creditors,  certain state insurance  guarantee funds may provide additional
     sources of claim  payments.  The Company  cannot at this time determine the
     ultimate outcome of this liquidation,  its impact on outstanding and future
     claims  against RIC policies held by Agway,  or the impact on the Company's
     financial results.  However, it is anticipated that due to this proceeding,
     the Company,  at a minimum,  can expect delays in receiving cash settlement
     for claims outstanding under RIC policies and that we will not receive full
     value for such  claims.  Therefore,  the Company has  established  a $1,500
     allowance for loss on amounts reimbursable from RIC.

     In July 2002, our surety provider issued  cancellation  notices relative to
     $23,900 of surety bonds  supporting  our  insurance  programs.  This has no
     impact on our insurance  coverage,  but it does give our insurance carriers
     the right to demand payment of the collateral  amount provided by the bonds
     from the issuer of the bonds. If our surety provider chooses to pay cash to
     our insurers  rather than reissue  bonds,  our surety would have a right to
     make a claim  against us for such  amounts in the  Chapter 11  Proceedings.
     Because of the  cancellation  notices issued,  our insurers have a right to
     make demand on our surety  provider for $4,625  starting late September and
     for  $6,000  starting  late  October.  We  dispute  the right of the surety
     provider to cancel the remaining  $13,275 at this time but recognize  their
     right to cancel  coverage  in the spring of 2003 at the  scheduled  renewal
     dates.


                                       19
<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

    Item 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
                             (Thousands of Dollars)


8.   FINANCIAL INFORMATION CONCERNING SEGMENT REPORTING
     --------------------------------------------------

     Agway is an agricultural  cooperative  directly  engaged in  manufacturing,
     processing,  marketing and direct  distribution of various animal feeds and
     services  for its  farmer-members  and other  customers,  primarily  in the
     northeastern United States and Ohio. In addition,  Agway is involved in the
     manufacturing,  processing  and  repacking  of a  variety  of  agricultural
     products  marketed  directly  to  consumers,  retailers,  wholesalers,  and
     processors;  the exploration and development of new technologies to benefit
     agricultural  and  food  businesses;  the sale and  delivery  of fuel  oil,
     kerosene, propane, gasoline and diesel fuel; the marketing and servicing of
     heating,  ventilation,  and  air-conditioning  equipment  and  marketing of
     natural gas and electricity,  where deregulation makes that possible. Agway
     reports its continuing  operations  principally in three business segments.
     Total  sales and  revenues  of each  industry  segment  include the sale of
     products and services to unaffiliated  customers,  as reported in the Agway
     consolidated  statements of operations,  as well as sales to other segments
     of Agway which are competitively priced.

     The Other  category  within the summary of business  segments  includes net
     corporate expenses, the Agway General Agency, pension income,  intersegment
     eliminations,  and  interest.  Total assets in the Other  category  consist
     principally  of  discontinued  assets,  as  detailed  in Note 4, and  other
     corporate assets, including the pension asset.

     As  discussed  in Note 4, as a result  of the  discontinuation  of  certain
     businesses  during the quarter  ended  September  30, 2002,  the  following
     changes  to  segments,   as  previously  reported,   have  been  made:  The
     Agriculture segment no longer includes the results of Agronomy and Seedway;
     the Leasing segment has been removed;  the principal  operation  within the
     Insurance  segment  (Agway  Insurance)  was removed.  Finally,  the General
     Agency is now combined in the Other segment.

<TABLE>
<CAPTION>
                                                           Three Months Ended September 30, 2002
                                          -----------------------------------------------------------------------------------
                                                                Country
                                                               Products
                                            Agriculture          Group          Energy            Other        Consolidated
                                          -------------   ---------------    -------------   --------------   ---------------
       <S>                                <C>             <C>                <C>             <C>              <C>
       Net sales and revenues to
         unaffiliated customers.........  $     56,148    $      34,105      $    98,597     $          90    $     188,940
       Intersegment sales and revenues..             0              887                1              (888)               0
                                          -------------   ---------------    -------------   --------------   ---------------
         Total sales and revenues.......  $     56,148    $      34,992      $    98,598     $        (798)   $     188,940
                                          =============   ===============    =============   ==============   ===============

       Earnings (loss) from continuing
         operations before income taxes.  $       (665)   $       1,566      $   (12,083)    $      (6,268)   $     (17,447)
                                          =============   ===============    =============   ==============   ===============


       Total assets.....................  $     79,272    $      29,630      $   150,457     $   1,200,683    $   1,460,042
                                          =============   ===============    =============   ==============   ===============
</TABLE>

<TABLE>
<CAPTION>
                                                           Three Months Ended September 30, 2001
                                          ------------------------------------------------------------------------------------
                                                               Country
                                                              Products
                                           Agriculture         Group            Energy            Other        Consolidated
                                          -------------    ---------------    -------------   --------------   ---------------
<S>                                       <C>              <C>                <C>             <C>              <C>
       Net sales and revenues to
         unaffiliated customers.........  $     59,346     $      33,384      $   108,764     $         137    $     201,631
       Intersegment sales and revenues..             1             1,063               78            (1,142)               0
                                          -------------    ---------------    -------------   --------------   ---------------
         Total sales and revenues.......  $     59,347     $      34,447      $   108,842     $      (1,005)   $     201,631
                                          =============    ===============    =============   ==============   ===============

       Earnings (loss) from continuing
         operations before income taxes.  $       (851)    $        (451)     $   (10,052)    $      (2,032)   $     (13,386)
                                          =============    ===============    =============   ==============   ===============


       Total assets.....................  $     89,412     $       43,982     $   166,501     $   1,313,379    $   1,613,274
                                          =============    ===============    =============   ==============   ===============
</TABLE>
                                       20
<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

       Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (Unaudited)
                             (Thousands of Dollars)


CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

Agway is including the following  cautionary statement in this Form 10-Q to make
applicable  and take  advantage of the "safe  harbor"  provisions of the Private
Securities Litigation Reform Act of 1995 for any forward-looking  statement made
by, or on behalf of, Agway. Where any such forward-looking  statement includes a
statement of the assumptions or basis underlying such forward-looking statement,
Agway  cautions  that,  while  it  believes  such  assumptions  or  basis  to be
reasonable  and makes them in good faith,  assumed  facts or basis almost always
vary from actual results, and the differences between assumed facts or basis and
actual  results  can be  material,  depending  upon the  circumstances.  Certain
factors  that  could  cause  actual  results  to differ  materially  from  those
projected  have been  discussed in this report and include the factors set forth
below.  Other  factors  that could  cause  actual  results to differ  materially
include uncertainties of economic, competitive, and market conditions and future
business  decisions,  all of  which  are  difficult  or  impossible  to  predict
accurately   and  many  of  which  are  beyond  our  control.   Where,   in  any
forward-looking statement, Agway, or its management, expresses an expectation or
belief as to future  results,  such  expectation  or belief is expressed in good
faith and  believed to have a  reasonable  basis,  but there can be no assurance
that the  statement  of  expectation  or belief  will  result or be  achieved or
accomplished.  The words "intend,"  "believe,"  "expect," and  "anticipate"  and
phrases  "it is  probable"  and "it is  possible"  or  similar  words or phrases
identify forward-looking statements.

RESULTS OF OPERATIONS
---------------------
Agway's  continuing  operations net sales and revenues and operating results are
significantly  impacted  by  seasonal  fluctuations  due  to the  nature  of its
operations and the geographic  location of its service area,  which is primarily
the northeastern United States.  Energy generally realizes  significantly higher
net sales and  revenues  in the winter  months due to the higher  demand for its
products from cold winter conditions.  The Agriculture feed business and Country
Products  Group net sales and revenues and operating  results are not materially
impacted by seasonal fluctuations.

On March 6, 2002, the Company announced details of a comprehensive plan designed
to refocus  capital  resources  on four  selected  businesses:  Animal  Feed and
Nutrition (the  principal  operation  within the  Agriculture  segment),  Energy
Products (Energy segment),  Produce, and Agricultural  Technologies  (operations
within  the  Country  Products  Group  segment).  This plan also  disclosed  our
intentions to divest of four business  operations:  Telmark  (Leasing  segment),
Agway  Insurance (the principal  operation  within the Insurance  segment),  and
Agronomy and Seedway  (components of the Agriculture  segment).  After this plan
was announced,  as part of its ongoing  strategic  assessment of remaining Agway
businesses,  including its sunflower  business (an operation included within the
Country Products Group segment),  Agway engaged an investment  advisor to assist
in the exploration of strategic  alternatives  involving the sunflower business.
In June 2002, after reviewing a number of written  indications of interest,  the
Agway Board of Directors affirmed  management's  intentions to actively pursue a
sale of this business. As required by generally accepted accounting  principles,
the financial statements  separately reflect the business operations planned for
divestiture,  or actually divested,  as discontinued  operations for all periods
reported. For further information on the discontinued operations,  refer to Note
4 of the condensed financial statements.


                                       21
<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

       Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (Unaudited)
                             (Thousands of Dollars)


RESULTS OF OPERATIONS (continued)
---------------------------------

To date,  progress has been made regarding all divestiture  plans. On August 28,
2002,  Agway  announced the completion of the sale of its wholly owned insurance
subsidiary,  Agway  Insurance  Company,  to United Farm Family Mutual  Insurance
Company.  On  September  16, 2002,  Agway  completed  the sale of its  sunflower
business (an operation  historically  included within the Country Products Group
segment) to Cenex Harvest States Cooperatives.  On September 27, 2002, Agway and
GROWMARK  announced  that they had signed a definitive  agreement  regarding the
sale of the Agronomy and Seedway businesses and related assets to GROWMARK,  and
a motion to approve  this  transaction  was granted by the  Bankruptcy  Court on
November 13, 2002. Finally, with respect to the sale of Telmark,  Goldman, Sachs
& Co. is  continuing  to assist the  Company in  exploring  potential  strategic
alternatives for this business.

Amounts in the  following  narrative  have been  rounded to the nearest  hundred
thousand.

Consolidated Results
--------------------
Consolidated  net sales and  revenues of  $188,900  for the three  months  ended
September 30, 2002,  decreased  $12,700 (6%),  compared to $201,600 for the same
period in the prior year.  The decreases  were the result of decreased  sales in
Energy and Agriculture,  with the most significant decrease occurring in Energy,
as more fully discussed below.

The  consolidated  net loss of $22,800 for the three months ended  September 30,
2002 is an increase of $12,600 (124%) compared to the $10,200 loss for the three
months ended September 30, 2001. This increased loss includes a $4,100 increased
pre-tax loss from continuing operations, a $6,600 decrease in tax benefit, and a
$1,900 increase in loss on discontinued  operations.  Consolidated  pre-tax loss
from  continuing  operations of $17,500 for the three months ended September 30,
2002 reflects an increase of $4,100 (31%) from a pre-tax loss of $13,400 for the
same period in the prior year. Improvements in the Country Products Group and in
Agriculture  were offset by a decline in Energy.  Net corporate  costs of $6,300
for the three-month  period increased $4,300 (215%),  compared to $2,000 for the
same  period  in  the  prior  year.  These  net  corporate  cost  increases  are
principally  related to a  reduction  in the  pension  income and an increase in
professional services compared to the same period in the prior year. The pension
plan amendments made last fiscal year, as previously disclosed in the Agway Form
10-K as of June 30, 2002, have reduced  pension income from  historical  levels.
The professional  services  expense  increase related  substantially to services
rendered in connection with contingency  planning which  ultimately  resulted in
the Chapter 11 Proceedings.  The $6,600 decrease in tax benefit is primarily due
to valuation  allowances of $6,300  provided in the three months ended September
30,  2002,  as more fully  discussed in Note 1. The $1,900  increased  loss from
discontinued operations is more fully discussed below.

Agriculture
-----------
Total  Agriculture  sales and  revenues  of $56,100 for the three  months  ended
September 30, 2002 decreased by $3,200 (5%) compared to total  Agriculture sales
and revenues of $59,300 for the same period in the prior year. The feed business
sales and revenues  decreased  $2,400 (4%) for the three months ended  September
30,  2002.  The  decline  was  substantially  the result of  reduced  volumes in
manufactured  dairy and  poultry  feeds.  These  reductions  are a result of the
overall general  decrease in the farm economy compared to the same period in the
prior year.  The average  selling  price of feeds has remained  relatively  flat
compared  to the same  periods in the prior  year.  This is due in large part to
commodity prices being consistent with prior-year periods.  Additionally,  sales
decreased  $1,300  (100%) for the three  months  ended  September  30, 2002 as a
result of closed  Agriculture farm stores that were part of the planned business
realignment  which began in mid-fiscal  2001.  The declines in sales noted above
were partially offset by increased tested specific pathogen free ("TSPF") heifer
rearing  service  revenues  of $500  (37%)  for  the  three  month-period  ended
September 30, 2002 compared to the same period in the prior year from the result
of increased utilization of the facilities this year compared to the same period
in the prior year.

                                       22
<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

       Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (Unaudited)
                             (Thousands of Dollars)

Agriculture (continued)
-----------------------
Agriculture  pre-tax loss of $700 for the three-month period ended September 30,
2002  decreased $200 (5%) from a pre-tax loss of $900 for the three months ended
September 30, 2001. The improvement in pre-tax loss for the quarter is primarily
due to a royalty  payment of $900  received by Agway for the use of Agway's name
in connection with the sale of agricultural  products to prospective buyers. The
above improvements were partially offset by a decrease in pre-tax results within
the feed  business of $600 which is  primarily  the result of an increase in bad
debt expense of $400 due to the  bankruptcy of a dairy  customer.  Additionally,
the  improvements  were further  reduced by an increase in pre-tax losses in the
TSPF heifer rearing services of $200 (27%) compared to the prior year.

Country Products Group
----------------------
Country  Products  Group (CPG) total sales and revenues of $35,000 for the three
months ended  September 30, 2002 increased $600 (2%) compared to total sales and
revenues of $34,400 for the three months ended September 30, 2001.  Sales in CPG
ongoing  operations  increased  $3,000 (10%) for the quarter ended September 30,
2002, compared to the same period in the prior year. An increase in sales in the
continuing operations of the Produce Group of $2,900 (10%) for the quarter ended
September 30, 2002,  resulted from increased  sales prices of potatoes which was
caused by a shortage  in supply  during the  quarter,  along with an increase in
sales of the empire sweet onion product based on increased  market demand during
the current  quarter  compared  to the same period in the prior year.  The above
increase was partially  offset by a decrease in sales compared to the prior year
which  resulted from the closing or selling of a number of business  operations.
The exit of these  businesses  reduced sales and revenues in these businesses by
$2,400 (80%) for the three months ended  September 30, 2002 compared to the same
period in the prior year.

CPG pre-tax  earnings of $1,600 for the three  months ended  September  30, 2002
increased $2,000 compared to the pre-tax loss of $400 for the same period in the
prior year in 2001.  The ongoing  Produce  Group  operations  generated  pre-tax
income of $1,000 for the three months ended  September  30, 2002.  Produce Group
gross margins of $1,600  increased  $1,000 for the three months ended  September
30, 2002 compared to the same period in the prior year.  The  increased  margins
are a result of  improved  market  conditions  compared  to the same period last
year.  Additionally,  Apex Bag was sold in the month of August 2002 generating a
gain on the sale of $1,000  which  created a $900  variance in pre-tax  earnings
compared to the same  period in the prior year.  The  remaining  combination  of
closed business locations and operations to be divested generated pre-tax income
for the three months ended September 30, 2002 of $100 compared to a pre-tax loss
of $100 in the prior year.


Energy
------
Energy total sales and revenues of $98,600 for the three months ended  September
30, 2002 decreased  $10,200 (9%) compared to total sales and revenue of $108,800
in the same period in the prior year. Overall sales dollar decreases from liquid
product  volume was $12,500 (13%) for the three months ended  September 30, 2002
compared  to the same  period in the  prior  year.  The  volume  decreases  were
primarily  the result of lower  wholesale  volumes in power fuels  (gasoline and
diesel).  The generally  weaker economic  conditions  compared to the prior year
have lowered the demand for power fuels. Additionally, as a result of a decrease
in  commodity  prices for the three  months  compared to the prior year,  Energy
experienced  sales dollar decreases  relating to price in its liquid products of
$1,300 for the three months ended September 30, 2002 compared to the same period
in the prior year. Finally, continued growth of revenues in heating, ventilation
and  air-conditioning  installation and service  increased sales by $3,600 (26%)
for the three months ended  September  30, 2002,  compared to the same period in
the prior year.

                                       23

<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

       Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (Unaudited)
                             (Thousands of Dollars)


Energy (continued)
------------------
Energy  pre-tax loss of $12,100 for the three months  ended  September  30, 2002
increased $2,000 (20%) compared to a pre-tax loss of $10,100 for the same period
in the prior year.  Overall gross margin  dollars  decreased  $300 (1%) over the
prior year and were  substantially  driven by the decrease in sales noted above.
Additionally,  a  decrease  in  pre-tax  earnings  for the  three  months  ended
September 30, 2002,  resulted  from an increase in operating  expenses of $1,200
(3%) compared to the same period in the prior year. These increases in operating
expenses  resulted  from  higher  payroll  and  insurance  costs.  Adding to the
increased  pre-tax loss is an increase of $1,000 (117%) in a loss on the hedging
positions  that Energy  enters into to offset the future cost of product.  These
items were partially  offset from a reduction in interest  expense of $500 (29%)
compared  to the same  period in the prior year as a result of  reduced  working
capital.

Discontinued Operations
-----------------------
The  following   discussion   represents  the  operational  results  of  Agway's
discontinued  operations for the three months ended September 30, 2002 and 2001,
respectively.
<TABLE>
<CAPTION>

September 30, 2002           Leasing       Insurance      Sunflower    Agronomy(1)      Other (2)           Total
------------------        -------------  ------------  ------------   ------------    -------------   ---------------
<S>                       <C>            <C>           <C>            <C>             <C>             <C>
Total sales & revenue.    $     22,296   $      4,806  $     10,352   $    30,117     $          0    $       67,571
Pre-tax earnings (loss)
from operations.......    $      6,130   $        108  $       (844)  $    (6,809)    $     (2,805)   $       (4,220)

September 30, 2001
------------------
Total sales & revenue.    $     22,518   $      7,075  $     10,259   $    35,655     $         (7)   $       75,500
Pre-tax earnings (loss)
from operations.......    $      5,299   $        328  $         82   $    (7,363)    $     (3,160)   $       (4,814)
</TABLE>

(1)  Includes the Agronomy, Seedway, and Brubaker Consulting businesses formerly
     part of the Agriculture business segment.

(2)  The  Other  column  includes  the  elimination  of  intercompany  sales and
     revenues  between  discontinued  operations  components  and other  pre-tax
     earnings  (loss)  impacts  of  the  discontinued  operations,   principally
     interest allocated to the net investment in discontinued operations.

Leasing (Telmark)
-----------------
Leasing total revenues of $22,300 for the three months ended  September 30, 2002
decreased $200 (1%) compared to total revenues of $22,500 for the same period in
the prior year.  The  decrease in revenues is primarily  due to a lower  average
income rate on the outstanding portfolio caused by lower interest rates.

Pre-tax  earnings from  continuing  operations of $6,100 for 2002 increased $800
(16%) for the three  months  ended  September  30,  2002,  compared  to  pre-tax
earnings  of $5,300  for the same  period in the prior  year.  The  increase  in
pre-tax  earnings  is  primarily  due to  overall  lower  interest  rates on the
outstanding  debt  compared  to the prior year.  Additionally  a decrease in the
provision for credit  losses  contributed  to the increase in pre-tax  earnings.
Telmark's  allowance  for  credit  losses is based on a  periodic  review of the
collection  history of past leases,  current  credit  practices,  an analysis of
delinquent accounts, and current economic conditions.



                                       24

<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

       Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (Unaudited)
                             (Thousands of Dollars)


Insurance
---------
Agway  Insurance  Company  net  revenues  of $4,800 for the three  months  ended
September 30, 2002,  decreased  $2,300 (32%)  compared to net revenues of $7,100
for the same period in the prior year. The Agway  Insurance  Company was sold on
August 28, 2002 to United Farm Mutual Insurance  Company.  The decrease in sales
is due to only two months of  activity  prior to the date of sale in the current
year compared to three months activity in the same period in the prior year.

Pre-tax  earnings of the Agway  Insurance  Company of $100 for the three  months
ended  September 30, 2002 decreased  $200 (66%) compared to pre-tax  earnings of
$300 for the same period in the prior year.

Sunflower (Operation of the Country Products Group)
---------------------------------------------------
The Sunflower operation was previously a component of the Country Products Group
segment.  Total sales and revenue of $10,400  increased  $100 (1%) for the three
months ended  September  30, 2002  compared to $10,300 in the same period in the
prior year.  The  sunflower  operation  was sold on September  16, 2002 to Cenex
Harvest States Cooperative.

Sunflower's  pre-tax  loss of $800  increased  $900 for the three  months  ended
September 30, 2002,  compared to pre-tax earnings of $100 for the same period in
the prior year. This pre-tax loss is a result of increased costs associated with
bakery  product  lines  compared to the prior year;  in addition,  expenses were
higher for the quarter  primarily due to increased legal expenses related to the
sale.

Discontinued Agriculture Components
-----------------------------------
Agronomy,  Seedway and Brubaker Consulting services were all previously reported
as part of the Agriculture segment. Total sales and revenue of $30,100 decreased
$5,600  (15%) for the three months ended  September  30, 2002  compared to total
sales and revenues of $35,700 in the same period in the prior year. The decrease
in sales  resulted  from a  decrease  in sales in  Agronomy  of $2,600  (9%),  a
decrease  in sales in  Seedway  of  $2,600  (34%),  and a  decrease  in sales in
Brubaker  of $400  (100%)  compared  to the  sales  in  Agronomy,  Seedway,  and
Brubaker, respectively, during in the same period in the prior year. Overall the
decreases in sales are attributable to dryer than normal conditions that existed
in the summer  which  caused a reduction  in the number of acres  planted by our
customers.  When normal summer  conditions  exist,  many customers that purchase
both the Agronomy and Seedway products are able to plant a second crop; however,
due to the  drought  conditions  in the  summer of 2002,  this  second  planting
generally did not occur. Additionally sales were down over the prior year due to
the closing of the Brubaker Agronomic  Consulting Service business during fiscal
2002.

Agriculture's  discontinued  components  pre-tax  loss of  $6,800  for the three
months ended  September 30, 2002  decreased $600 (8%) compared to a pre-tax loss
of $7,400 for the same period in the prior year.  The decrease in pre-tax losses
is related to a reduction in expenses  related to packaging and  distribution of
Agronomy  related  products.  These  reductions  were  partially  offset  in  by
inventory  write-downs  of seasonal  seed products that were not sold due to the
adverse weather conditions noted above.


                                       25
<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

       Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (Unaudited)
                             (Thousands of Dollars)


LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

As discussed in more detail below, due to the Company's  projected level of cash
from  operations  and the  status  of its  previously  announced  plan to divest
certain of its businesses,  the Company determined that it would have difficulty
in satisfying its  anticipated  short-term  and long-term  liquidity  needs.  As
described  in more  detail  below,  the  Company  has  agreed  to terms of a DIP
Facility  with its  current  lender  group and filed for an order of  protection
under Chapter 11 of the United States  Bankruptcy Code on October 1, 2002. It is
currently  expected  that  the DIP  Facility  will  be  sufficient  to meet  the
liquidity needs of the Company during the Chapter 11 Proceedings.

Events Leading to the Chapter 11 Filings
Based on the expected cash flow from our business operations, the cash generated
from asset sales to date,  and the  uncertainty of both the amount and timing of
cash from other  planned  sales of  business  operations,  it was not certain or
likely that we would have generated sufficient cash to pay our November 1, 2002,
maturity of subordinated debt of $33,100.  Further,  without an amendment to the
then existing credit agreement, payment of that subordinated debt maturity would
have been  precluded  since it would have  constituted  a default of the minimum
Agway securities balance requirement in the credit agreement.

In addition,  earnings through September 30, 2002, were not expected to, and did
not,  meet the  financial  covenant  requirements  of the then  existing  credit
agreement.  Projected cash flow from our business  operations,  with appropriate
senior debt  financing,  was expected to be sufficient to meet future  operating
needs but, without  additional sales of assets,  was not expected to be adequate
to pay  the  future  interest  requirements  on  Agway  Inc.  unsecured  debt or
dividends  on Agway Inc.  preferred  stock.  In July 2002,  our surety  provider
issued  cancellation  notices relative to $23,900 of surety bonds supporting our
insurance  programs.  While this had no direct impact on our insurance coverage,
it gave our  insurance  carriers the right to demand  payment of the  collateral
amount  provided  by the bonds  from the  issuer of the  bonds.  Because  of the
cancellation  notices  issued,  our  insurers  had a right to make demand on our
surety  provider for $4,625 starting late September and for $6,000 starting late
October.  We disputed the right of the surety  provider to cancel the  remaining
$13,275 at that time but recognize  their right to cancel coverage in the spring
of 2003 at the  scheduled  renewal  dates.  If our insurers  would have demanded
payment  relative to these  cancellation  notices and if our surety provider had
chosen to pay cash to our insurers  rather than reissue bonds,  our surety would
have had a right to demand cash payment  from us. As  previously  announced,  we
ceased our historic practice of voluntarily  repurchasing  Agway preferred stock
and certain subordinated debt; as a result, we concluded that we would no longer
have been able to  successfully  issue such debt  because it would not have been
possible to restore investor  confidence in Company-issued  securities without a
comprehensive  restructuring  at the Agway Inc. level. In view of the foregoing,
we determined  that such a restructuring  could best be  accomplished  through a
Chapter 11 reorganization. To that end, as noted above, the Company entered into
the Chapter 11 Proceedings on October 1, 2002.

                                       26
<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

       Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (Unaudited)
                             (Thousands of Dollars)


LIQUIDITY AND CAPITAL RESOURCES (continued)
-------------------------------------------

Cash Flows for Three Months Ended September 30, 2002 and 2001
During the three months ended  September 30, 2002 and 2001,  cash generated from
sale of discontinued operations and from sale of assets was Agway's major source
of funds to finance  increased  working  capital  needs,  capital  improvements,
redemption of debt, redemption of stock, and shareholder dividends.
<TABLE>
<CAPTION>

                                               September 30,              September 30,               Increase
                                                   2002                       2001                   (Decrease)
                                            ---------------------   -----------------------   ----------------------
Net cash flows provided by (used in):
<S>                                         <C>                        <C>                       <C>
     Continuing operating activities......  $          (28,830)        $           1,055         $          (29,885)
     Discontinued operating activities....              42,155                    16,142                     26,013


     Investing activities of continuing
       operations.........................                 133                      (365)                       498

     Financing activities of continuing
       operations.........................              (7,363)                  (16,832)                     9,469
                                            -------------------        ------------------        ------------------
Net increase (decrease) in cash
     and equivalents......................  $            6,095         $               0         $            6,095
                                            ===================        ==================        ===================
</TABLE>

Cash Flows from Continuing Operating Activities
Cash flows from  continuing  operations for the three months ended September 30,
2002 used cash of $28,800,  compared to  generation  cash of $1,100 for the same
period in the prior year. The  fluctuations in continuing  operations cash flows
are  substantially  the  result of  fluctuations  in the cash  required  to fund
working  capital.  Due to the  commodities  used in our Energy  and  Agriculture
businesses,  inventory,  receivables and payables are significantly  impacted by
changes in the commodity prices.

Cash Flows from Investing Activities of Continuing Operations
Capital  expenditures  required  cash of $2,200 and $1,500 for the three  months
ended  September 30, 2002 and 2001,  respectively.  Cash flows used in investing
was funded by cash generated from investing activities, principally the proceeds
from the disposal of property and equipment, which amounted to $2,300 and $1,300
for the three months ended September 30, 2002 and 2001, respectively.

Cash Flows from Financing Activities of Continuing Operations
For the three months ended September 30, 2002, the financing  obligations of the
Company,  including short-term notes payable and subordinated  debentures,  were
reduced  principally  through  net  cash  proceeds  received  from  discontinued
operations  activities,  principally sale of assets.  The following  details the
Company's current financing activities:



                                       27
<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES
       Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (Unaudited)
                             (Thousands of Dollars)


LIQUIDITY AND CAPITAL RESOURCES (continued)
-------------------------------------------
Cash Flows from Financing Activities of Continuing Operations (continued)

Agway Senior Debt
As  more  fully  described  below,  as a  result  of the  Company's  Chapter  11
Proceedings,  the Agway Senior Debt Agreement  ("Senior Debt") has been replaced
by the DIP  Facility.  During the first quarter  ended  September 30, 2002,  the
Company had available  under its Senior Debt, an  asset-based  revolving line of
credit for up to  $150,000  pursuant  to the terms of a credit  agreement  dated
March 28, 2001 between Agway Inc., certain subsidiaries,  and a syndicated group
of lenders (the "Credit  Agreement").  However,  as of September 30, 2002, Agway
was in default  under the Credit  Agreement,  and it was  necessary  to obtain a
waiver  regarding  those covenant  violations.  Those covenant  violations  were
permanently  waived on November 14, 2002,  and as a result,  Agway no longer has
any obligations under the Credit Agreement.  The Senior Debt was  collateralized
by a variety of our assets,  including the outstanding limited liability company
membership  interest of Telmark.  Interest rates were determined as either prime
rate plus 2.5% or the London Interbank  Offered Rate (LIBOR) plus 4%. During the
quarter,  we sold the Agway Insurance Company and the Sunflower  division of our
CPG segment for gross proceeds of approximately $42,100, which had the impact of
reducing the commitment  level from $150,000 to $125,000.  The Credit  Agreement
had a number of financial  covenants which had restricted  capital  spending and
required  us to maintain  minimum  levels of earnings  before  interest,  taxes,
depreciation,  and amortization (EBITDA), as defined in the Credit Agreement and
minimum ratios of EBITDA to fixed charges and interest of Senior Debt.

The Credit  Agreement  was amended  three times in  response  to  violations  of
financial  covenants.  In connection with those amendments,  the violations were
waived.  As of September 30, 2002, we had violated  various  covenants under the
Credit  Agreement.  As noted above,  these  covenants  were  permanently  waived
effective  November 13, 2002, with the first amendment to the DIP Facility.  The
first amendment's most significant  change to the DIP Facility was the waiver of
compliance with the financial covenants set forth in the former Credit Agreement
and also conformed the DIP Facility to the Bankruptcy Court Order.

On  October  22,  2002,   the   Bankruptcy   Court  granted  Agway  and  certain
subsidiaries,  including the non-debtor borrowers,  final approval to enter into
an 18-month DIP Facility of $125,000  with its existing  lenders to fund working
capital  requirements of the Debtors during the Chapter 11  Proceedings,  and to
fund the working capital requirements of the non-debtor borrowers.

The DIP Facility line is  collateralized  by a variety of our assets,  including
the pledge of the limited liability company membership  interest in Telmark.  As
in the former Senior Debt Agreement, interest rates are determined at the option
of Agway,  as either prime rate plus 2.5% or the London  Interbank  Offered rate
(LIBOR) plus 4%. The amount  available to Agway under this  asset-based  line of
credit is the lesser of the  "collateral  borrowing  base" or the $125,000 upper
limit of the line of credit.

In the event of the sale of certain assets, as defined in the DIP Facility,  the
upper limit of the line of credit will decrease  from $125,000 to $100,000.  The
collateral  borrowing  base  consists  of certain of Agway's  eligible  accounts
receivable  and inventory  (as defined in the DIP  Facility).  In addition,  the
collateral  borrowing base includes other assets pledged as collateral up to the
lesser  of  $25,000  or  $125,000  less the  eligible  accounts  receivable  and
inventory.  In the event  that a sale of certain  assets,  as defined in the DIP
Facility,  is  not  completed  on or  before  December  31,  2002,  the  $25,000
additional  collateral  borrowing  base  related  to those  assets is reduced by
$10,000  and is further  reduced by $5,000 in each  succeeding  month to zero by
March 31, 2003 in the event the assets are not sold by then.  At that time,  the
collateral  borrowing base will consist solely of eligible  accounts  receivable
and inventory.

The DIP Facility has a number of financial  covenants which restrict our capital
spending and require us to maintain  minimum levels of earnings before interest,
taxes,  depreciation,  amortization,  and  restructuring  charges,  as well as a
maximum level of restructuring charges.

                                       28
<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

       Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (Unaudited)
                             (Thousands of Dollars)


LIQUIDITY AND CAPITAL RESOURCES (continued)
-------------------------------------------
Cash Flows from Financing Activities of Continuing Operations (continued)

Agway Subordinated Debt

Agway previously registered with the Securities and Exchange Commission (SEC) to
offer  debentures  and money market  certificates  to the public.  As previously
disclosed,  on March 6, 2002, the Company  suspended its active capital  raising
efforts through the sale of Company  securities;  it does not expect to sell any
additional  securities in the near future,  if at all. The  debentures and money
market  certificates are unsecured and subordinated to all senior debt of Agway.
Furthermore, as a result of the Chapter 11 Proceedings,  payment of interest and
maturities on these securities are prohibited. Accordingly, the $33,100 maturity
of subordinated debt due on November 1, 2002 was not paid.

Surety Liquidity Risk
As indicated  above,  our surety  provider  issued  cancellation  notices to our
insurers. If our insurers made claim against those bonds and the surety provider
chooses to pay cash to our insurers rather than reissue bonds,  our surety would
have a right to make a claim  against  us for such  amounts  in the  Chapter  11
Proceedings.

Sources of Long-Term Financing
Sources of long-term financing include the following as of September 30, 2002:

Source of debt
--------------
Other long-term debt - due 2002 to 2018, interest at a weighted average
   rate of 9.3% with a range of 6.54% to 10%......................... $    1,965
Capital lease - due 2002 to 2022, interest with a range of 10.83%
   to 12.2%..........................................................     16,828
Subordinated money market certificates - due 10/02 to 10/17, interest
   at a weighted average rate of 8.23% with a range of 5.50% - 9.75%..   419,805
Subordinated debentures - due 2003, interest at a weighted average rate
   of 7.92% with a range of 7.50% to 8.00%...........................      3,705
                                                                       ---------
     Total debt...................................................... $  442,303
                                                                      ==========

CRITICAL ACCOUNTING POLICIES
----------------------------
Critical  accounting  policies  are  those  accounting  policies  that  are very
important to the  portrayal of the  Company's  financial  condition  and results
which require  management's  most  difficult,  subjective or complex  judgments,
often as a result of the need to make estimates about the effect of matters that
are inherently uncertain.  The Company believes the following to be critical and
could result in materially  different  amounts being  reported  under  different
conditions or using different assumptions.

Disposal of Long-Lived Assets/Discontinued Operations
With  the  announcement  of our  March  6,  2002  plan,  our  ongoing  strategic
assessment,  and our  adoption of SFAS No. 144,  we are  required to  separately
report the combined  results of  businesses  that we are taking steps to sell as
discontinued  operations  and to  immediately  recognize  any  estimated  losses
directly  related  to the  sales  of those  businesses.  Actual  gains,  if any,
realized on sale of discontinued operations are not reported until realized. The
results  of  operations  of  all   discontinued   businesses   are  reported  in
discontinued  operations  in the  periods  in  which  they  occur.  Discontinued
business operations results are reported in the income statement, net of tax, in
earnings (loss) from operations of discontinued  operations.  The recognition of
any  estimated  losses  directly  related to the sales of these  businesses  are
reported in the income  statement,  net of taxes,  in gain (loss) on disposal of
discontinued operations.  The estimation of any loss on disposal,  including the
direct costs to sell, is dependent on numerous factors that continuously  change
as we  proceed in our  negotiations  to sell these  operations.  This  creates a
situation   where  our   estimate  can  change   frequently   and  could  differ
significantly period to period.




                                       29
<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

       Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (Unaudited)
                             (Thousands of Dollars)


CRITICAL ACCOUNTING POLICIES (continued)
----------------------------------------

Commodity Instruments
SFAS No. 133,  "Accounting for Derivative  Instruments and Hedging  Activities,"
requires  that all  derivative  instruments  be recorded on the balance sheet at
their fair value.  Changes in the fair value of  derivatives  are recorded  each
period in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge  transaction and, if it is, the type
of hedge transaction.  For fair-value hedge transactions in which the Company is
hedging  changes  in fair  value of an  asset,  liability,  or firm  commitment,
changes in the fair value of the derivative  instrument will generally be offset
in the  income  statement  by  changes  in the hedged  item's  fair  value.  For
cash-flow hedge transactions, in which the Company is hedging the variability of
cash flows  related  to a  variable-priced  asset,  liability,  or a  forecasted
transaction,  changes in the fair  value of the  derivative  instrument  will be
reported in other  comprehensive  income. The gains and losses on the derivative
instrument that are reported in other comprehensive  income will be reclassified
as earnings in the periods in which earnings are impacted by the  variability of
the cash flows of the hedged item. The ineffective portion of all hedges will be
recognized in current-period earnings.

The  Company's  Energy  segment  enters into a  combination  of  exchange-traded
futures and options  contracts and, in certain  circumstances,  over-the-counter
options  (collectively  "derivatives")  to manage the price risk associated with
future purchases of the commodities used in its operations,  principally heating
oil and propane.  Energy has fair value hedges  associated  with its fixed price
purchase  contracts  and cash  flow  hedges  for its  variable  priced  purchase
contracts.  The derivatives are specifically matched in volume and maturity with
the various  purchase  commitments of the business and generally expire within a
year.  Under SFAS No. 133, the value of option contracts that Energy enters into
has two components:  time and intrinsic  value. The intrinsic value is the value
by which the option is in the money.  The  remaining  amount of option  value is
attributable  to time  value.  Energy  does not include the time value of option
contracts in its assessment of hedge effectiveness and therefore records changes
in the time value component of its options currently in earnings.

In the Agriculture  segment,  the purchase of corn, soy complex, and oats, which
can be sold  directly  as  ingredients  or  included  in feed  products  sold by
Agriculture,  creates price risk for this business. Agriculture intends to match
its purchase and sales contracts whenever possible to hedge price risk; however,
exchange-traded  commodity  instruments are used principally to manage the price
risk associated with unmatched commodity purchases or sales. Agriculture matches
all  derivative  contracts  with their  underlying  purchase  or sale  contract;
however, due to the differences in the changes in the commodity cash price at an
Agriculture  location  versus the  Chicago  Board of Trade,  a highly  effective
hedging  relationship  (as  defined  by SFAS No.  133)  has not  been  achieved.
Therefore, the derivatives used in Agriculture are marked to market currently in
earnings.

Liability for Self-Insurance
The Company is primarily self-insured for workers compensation, general and auto
liability and certain group health and welfare costs. Self-insurance liabilities
are  actuarially  calculated  based on claims  filed and an  estimate  of claims
incurred but not yet reported. Projection of losses concerning these liabilities
is  subject  to a high  degree  of  variability  due to  factors  such as  claim
settlement patterns, litigation trends, legal interpretations,  future levels of
health care costs and the selection of discount rates.

Employee Benefit Plans
The   actuarial   determination   of  Agway's   obligations   and   expense  for
Company-sponsored  pension  and  postretirement  benefits  is  dependent  on the
Company's  selection  of  assumptions  including  the  discount  rate,  expected
long-term  rate of return on plan  assets,  rates of  compensation  increase and
health  care  cost  trend  rate.  Significant  differences  between  our  actual
experience or significant  changes in our assumptions may materially  affect our
pension income and net periodic postretirement obligation expense.

                                       30
<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

       Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (Unaudited)
                             (Thousands of Dollars)


CRITICAL ACCOUNTING POLICIES (continued)
----------------------------------------

Revenue Recognition
We record revenue from product sales when the goods are shipped,  title and risk
of loss passes to the  customer,  and when  collection  is  reasonably  assured.
Revenue from service contracts is accounted for when the services are provided.

Income Taxes
Agway is subject to income  taxes on all  income not  distributed  to patrons as
patronage  refunds  and  provides  for  income  taxes  in  accordance  with  the
provisions of SFAS No. 109,  "Accounting  for Income Taxes." Under the liability
method specified by SFAS No. 109,  deferred tax assets and liabilities are based
on the  difference  between the financial  statement and tax basis of assets and
liabilities  as measured by the tax rates that are  anticipated  to be in effect
when these differences  reverse.  The deferred tax provision  represents the net
change in the assets and  liabilities  for deferred  tax. The Company  records a
valuation  allowance  when it is  necessary  to reduce  deferred  tax  assets to
amounts for which  realization is more likely than not. The provision for income
taxes has been allocated between continuing and discontinued  operations for all
years presented.

Environmental Remediation Costs
Agway accrues for losses associated with environmental  remediation  obligations
when such losses are probable and reasonably  estimable.  Accruals for estimated
losses from environmental  remediation  obligations  generally are recognized no
later than  completion  of the remedial  feasibility  study.  Such  accruals are
adjusted as further  information  develops  or  circumstances  change.  Costs of
future expenditures for environmental remediation obligations are not discounted
to their present value. Recoveries of environmental remediation costs from other
parties (primarily other PRPs and state  environmental  funds) are considered in
determining the Company's accrual for these losses.




                                       31

<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

       Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                                   (Unaudited)
                             (Thousands of Dollars)


COMMODITY PRICE EXPOSURE
------------------------
In the normal course of our  continuing  operations,  we have exposure to market
risk from price  fluctuations  associated  with  commodities  such as corn,  soy
complex, oats, gasoline, distillate and propane. These price fluctuations impact
commodity  inventories,  product gross margins, and anticipated  transactions in
our  Agriculture  and  Energy  businesses.  We manage  the risk of market  price
fluctuations  of  some  of  these  commodities  by  using  commodity  derivative
instruments.  Commodity derivative instruments include  exchange-traded  futures
and option contracts and, in limited circumstances,  over-the-counter  contracts
with third  parties.  We have  policies  that specify what we can use  commodity
derivative  instruments for and set limits on the maturity of contracts we enter
into and the level of exposure to market price  fluctuations  that we are trying
to protect  ourselves  against (or  hedge).  However,  because  the  commodities
markets  are very  volatile,  our gains or losses on these  contracts  might not
fully offset the corresponding change in the prices of the underlying commodity,
which could lower our earnings.

A sensitivity  analysis has been prepared to estimate Agway's exposure to market
risk of its  commodity  instrument  positions as of September 30, 2002 and 2001.
The fair value of such position is a summation of the fair values calculated for
each commodity  instrument by valuing each position at quoted futures prices or,
in the case of options,  a delta-adjusted  calculated  price. The market risk of
the  commodity  position  is  estimated  as the  potential  loss in  fair  value
resulting  from a  hypothetical  10%  adverse  change  in  market  prices of the
underlying  commodities.  This estimated loss in fair value does not reflect the
offsetting  impact of market price  changes to the  underlying  commodities  for
which the commodity instruments are managing the price risk. As of September 30,
2002 and 2001,  assuming a 10%  hypothetical  adverse  change in the  underlying
commodity  price,  the potential  decrease in fair value of our Energy  business
commodity instruments was $5,300 and $2,300, respectively. The potential loss in
fair value of commodity  instruments  for  Agriculture  was  immaterial for both
periods.


                                       32
<PAGE>


                    PART I. FINANCIAL INFORMATION (continued)
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

                         Item 4. CONTROLS AND PROCEDURES


CONTROLS AND PROCEDURES
-----------------------
Within the 90-day period prior to the filing date of this quarterly report,  the
chief  executive  officer and chief  financial  officer of Agway Inc.  evaluated
Agway's disclosure controls and procedures related to the recording, processing,
summarization and reporting of information in Agway's reports that it files with
the Securities and Exchange  Commission  (SEC).  These  disclosure  controls and
procedures have been designed to ensure that (a) material  information  relating
to Agway,  including  its  consolidated  subsidiaries,  is made known to Agway's
management,  including  their  officers,  by other  employees  of Agway  and its
subsidiaries,  and (b) this  information  is  recorded,  processed,  summarized,
evaluated and reported, as applicable,  within the time periods specified in the
SEC's rules and forms. Based upon this evaluation, these officers concluded that
the design of the disclosure controls and procedures is sufficient to accomplish
their purpose.

There have been no  significant  changes in Agway's  internal  controls or other
factors that could significantly affect these controls subsequent to the date of
their  evaluation,   including any corrective actions with regard to significant
deficiencies and material weaknesses.



                                       33
<PAGE>


                           PART II. OTHER INFORMATION
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES

Item 3. Defaults Upon Senior Indebtedness
------------------------------------------

As of September 30, 2002, Agway had violated various  covenants under its Credit
Agreement.  These covenants were permanently waived effective November 14, 2002,
with the first amendment to the DIP facility.

On October 1, 2002, Agway Inc. and certain of its  subsidiaries  filed voluntary
petitions to reorganize under Chapter 11 of the U. S. Bankruptcy Code. Under the
Chapter 11  Proceedings,  we will be  prohibited  from  paying all  pre-petition
indebtedness,  including principal,  interest, and maturities on our outstanding
debt  securities  and various other  obligations  or claims against the Company.
Accordingly,  the $33,100 maturity of subordinated  debt due on November 1, 2002
was not paid.

Item 6.  Exhibits and Reports on Form 8-K
------------------------------------------

(A)  EXHIBITS REQUIRED BY SECURITIES AND EXCHANGE COMMISSION REGULATION S-K

 (i) The following  required  exhibits are hereby  incorporated by reference  to
     previously filed Registration Statements on Forms S-1, S-2, S-3,  or S-7 or
     on Form 10-K, 10-Q, or 8-K filed on the dates as specified:

  PLAN  OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION, OR SUCCESSION

   2(a)   - Certificate  of  Ownership  and  Merger   merging  Agway   Financial
            Corporation  with and into Agway Inc., filed by reference to Exhibit
            2(a) of Form 8-K, dated July 2, 2001.

  ARTICLES OF INCORPORATION AND BY-LAWS

   3(a)   - Certificate  creating  series of preferred stock of Agway Inc. dated
            July 5, 1977,  filed by reference to Exhibit 3(a)(5) of Registration
            Statement on Form S-1, File No. 2-59896, dated September 16, 1977.

   3(b)   - Certificate  creating  series of Honorary  Member Preferred Stock of
            Agway Inc.  dated June 15, 1981,  filed by reference to Exhibit 1(c)
            of the Registration  Statement on Form S-1, File No. 2-73928,  dated
            September 3, 1981.

   3(c)   - Agway Inc.  By-Laws,  as amended May 2, 2002,  filed by reference to
            Exhibit 3(d) of Form 10-Q as of March 31, 2002, dated May 15, 2002.

   3(d)   - Restated  Certificate of Incorporation  dated October 3, 1989, filed
            by reference to Exhibit 3(d) of Form10-K as of June 30, 2002, dated.

  INSTRUMENTS  DEFINING THE RIGHTS OF SECURITY HOLDERS,  INCLUDING   INDENTURES.
   (SEE ALSO 3(A), (B) AND (C) ABOVE.)

   4(a)   - The  Indenture  dated as of September 1, 1978 between Agway Inc. and
            First  Trust and Deposit  Company of  Syracuse,  New York,  Trustee,
            including forms of Subordinated  Debentures (Minimum 8.0% per annum)
            due July 1, 2003,  and  Subordinated  Debentures  (Minimum  7.5% per
            annum)  due July 1,  2003,  filed by  reference  to Exhibit 4 of the
            Registration Statement (Form S-1), File No. 2-62549, dated September
            8, 1978.

   4(b)   - The Indenture dated as of September 1, 1985,  between Agway Inc. and
            Key  Bank of  Central  New  York of  Syracuse,  New  York,  Trustee,
            including  forms of  Subordinated  Member Money Market  Certificates
            (Minimum 8% per annum) due October 31, 2005, and Subordinated  Money
            Market  Certificates  (Minimum 7.5% per annum) due October 31, 2005,
            filed by reference to Exhibit 4 of the Registration  Statement (Form
            S-2), File No. 2-99905, dated August 27, 1985.

                                       34
<PAGE>

                           PART II. OTHER INFORMATION
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES


Item 6.  Exhibits and Reports on Form 8-K (continued)
-----------------------------------------------------


(A) EXHIBITS REQUIRED BY SECURITIES AND EXCHANGE COMMISSION REGULATION S-K
(CONTINUED)

   INSTRUMENTS  DEFINING THE RIGHTS OF SECURITY  HOLDERS,  INCLUDING  INDENTURES
   (CONTINUED)

   4(c)   - The  Indenture  dated as of September  1, 1986,  between AFC and Key
            Bank of Central New York of Syracuse,  New York, Trustee,  including
            forms of Subordinated Member Money Market  Certificates  (Minimum 6%
            per annum) due October  31,  2006,  and  Subordinated  Money  Market
            Certificates (Minimum 5.5% per annum) due October 31, 2006, filed by
            reference  to Exhibit 4 of the  Registration  Statement  (Form S-3),
            File No. 33-8676, dated September 11, 1986.

   4(d)   - The  Supplemental  Indenture dated as of October 1, 1986, among AFC,
            Agway Inc. and Key Bank of Central New York of  Syracuse,  New York,
            Trustee,  including forms of subordinated  debt securities  filed by
            reference  to Exhibit 4 of the  Registration  Statement  (Form S-3),
            File No. 33-8676, dated September 11, 1986.


   4(e)   - The Indenture  dated as of August 24, 1987,  between AFC and Key Key
            Bank of Central New York of Syracuse,  New York, Trustee,  including
            forms of Subordinated Member Money Market Certificates (Minimum 6.5%
            per annum) due October  31,  2008,  and  Subordinated  Money  Market
            Certificates  (Minimum 6% per annum) due October 31, 2008,  filed by
            reference  to Exhibit 4 of the  Registration  Statement  (Form S-3),
            File No. 33-16734, dated August 31, 1987.

   4(f)   - The Indenture dated as of August 23, 1988,  between AFC and Key Bank
            of Central New York of Syracuse, New York, Trustee,  including forms
            of  Subordinated  Member Money Market  Certificates  (Minimum 9% per
            annum)  due  October  31,  2008,  and   Subordinated   Money  Market
            Certificates (Minimum 8.5% per annum) due October 31, 2008, filed by
            reference  to Exhibit 4 of the  Registration  Statement  (Form S-3),
            File No. 33-24093, dated August 31, 1988.

   4(g)   - The Supplemental  Indenture dated as of October 14, 1988, among AFC,
            Agway Inc. and Key Bank of Central New York,  National  Association,
            Trustee,  amending the  Indentures  dated as of August 23, 1988, and
            August 24, 1988, filed on October 18, 1988.

   4(h)   - The Indenture dated as of August 23, 1989, among AFC, Agway Inc. and
            Key  Bank of  Central  New  York of  Syracuse,  New  York,  Trustee,
            including  forms  of  Subordinated  Money  Market  Certificates  and
            Subordinated Member Money Market Certificates, filed by reference to
            Exhibit  4 of  the  Registration  Statement  (Form  S-3),  File  No.
            33-30808, dated August 30, 1989.

   4(i)   - The  Supplemental  Indenture dated as of August 24, 1992, among AFC,
            Agway Inc. and Key Bank of New York, Trustee, amending the Indenture
            dated as of August 23, 1989,  filed by reference to Exhibit 4 of the
            Registration   Statement  (Form  S-3),  File  No.  33-52418,   dated
            September 25, 1992.

   4(j)   - Agreement of Resignation,  Appointment and Acceptance among KeyCorp,
            Key Bank of New  York,  AFC and  Mellon  Bank,  F.S.B.,  dated as of
            September 3, 1996,  five  agreements,  filed by reference to Exhibit
            4(o) of the Registration  Statement (Form S-3), File No.  333-34781,
            dated September 2, 1997.

   4(k)   - Letter  dated  November  14,  1997 from  Chase  Manhattan  Bank,  as
            Successor  Trustee,  to Mellon Bank,  F.S.B.,  filed by reference to
            Exhibit 4(a) of the Annual Report on Form 10-K,  dated September 21,
            2000.
                                       35

<PAGE>

                           PART II. OTHER INFORMATION
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES


Item 6.  Exhibits and Reports on Form 8-K (continued)
-----------------------------------------------------

(A) EXHIBITS REQUIRED BY SECURITIES AND EXCHANGE COMMISSION REGULATION S-K
(CONTINUED)

   INSTRUMENTS  DEFINING THE RIGHTS OF SECURITY  HOLDERS,  INCLUDING  INDENTURES
   (CONTINUED)

   4(l)   - The  Supplemental  Indenture  dated as of July 1, 2001 between Agway
            Financial  Corporation,  Agway Inc., and The Chase  Manhattan  Bank,
            amending the  Indentures  dated as of September 1, 1986,  August 24,
            1987, August 23, 1988 (amended by a supplemental  indenture dated as
            of  October  14,  1988)  and  August  23,  1989  (as  amended  by  a
            supplemental  indenture  dated  as of  August  24,  1992),  filed by
            reference to Exhibit 4(a) of Form 8-K, dated July 2, 2001.

   MATERIAL CONTRACTS

   10(a)  - Senior Secured, Super-Priority Debtor-in-Possession Credit Agreement
            with lenders  dated  October 4, 2002,  filed by reference to Exhibit
            99.4 of Form 8-K, dated October 15, 2002.

   10(b)  - Security  Agreement  with lenders  dated  October 4, 2002,  filed by
            reference to Exhibit 99.5 of Form 8-K, dated October 15, 2002.

   10(c)  - Pledge  Agreement  with  lenders  dated  October 4,  2002,  filed by
            reference to Exhibit 99.6 of Form 8-K, dated October 15, 2002.

   10(d)  - Intellectual  Property Security Agreement with lenders dated October
            4,  2002,  filed by  reference  to Exhibit  99.7 of Form 8-K,  dated
            October 15, 2002.

   10(e)  - Credit  Agreement  with  lenders  dated  March  28,  2001,  filed by
            reference to Exhibit 10(a) of Form 10-Q as of March 24, 2001,  dated
            May 8, 2001.

   10(f)  - Security  Agreement  with  lenders  dated March 28,  2001,  filed by
            reference to Exhibit 10(b) of Form 10-Q as of March 24, 2001,  dated
            May 8, 2001.

   10(g)  - Pledge  Agreement  with  lenders  dated  March  28,  2001,  filed by
            reference to Exhibit 10(c) of Form 10-Q as of March 24, 2001,  dated
            May 8, 2001.

   10(h)  - Intellectual  Property  Security  Agreement with lenders dated March
            28, 2001,  filed by  reference  to Exhibit  10(d) of Form 10-Q as of
            March 24, 2001, dated May 8, 2001.

   10(i)  - First Amendment and Waiver to Credit Agreement,  dated September 14,
            2001,  filed by reference  to Exhibit  10(e) of Form 10-K as of June
            30, 2001, dated September 14, 2001.

   10(j)  - First  Amendment to Security  Agreement,  dated  September 14, 2001,
            filed by  reference  to  Exhibit  10(f) of Form  10-K as of June 30,
            2001, dated September 14, 2001.

   10(k)  - Pledge  Amendment with lenders,  dated September 14, 2001,  filed by
            reference to Exhibit  10(g) of Form 10-K as of June 30, 2001,  dated
            September 14, 2001.

   10(l)  - Vehicle Security and Escrow Agreement with lenders,  dated September
            14, 2001,  filed by  reference  to Exhibit  10(h) of Form 10-K as of
            June 30, 2001, dated September 14, 2001.

   10(m)  - Second Amendment and Waiver to Credit  Agreement,  dated January 31,
            2002,  filed  by  reference  to  Exhibit  10(k)  of Form  10-Q as of
            December 31, 2001, dated February 4, 2002.

                                       36

<PAGE>


                           PART II. OTHER INFORMATION
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES


Item 6.  Exhibits and Reports on Form 8-K (continued)
-----------------------------------------------------

(A) EXHIBITS  REQUIRED BY  SECURITIES  AND EXCHANGE  COMMISSION  REGULATION  S-K
(CONTINUED)

   MATERIAL CONTRACTS (CONTINUED)

   10(n)  - Third Amendment and Waiver to Credit Agreement, dated April 3, 2002,
            filed by  reference  to  Exhibit  10(l) of Form 10-Q as of March 31,
            2002, dated May 15, 2002.

   10(o)  - Waiver to Credit  Agreement,  dated May 13, 2002, filed by reference
            to Exhibit  10(m) of form 10-Q as of March 31,  2002,  dated May 15,
            2002.

   10(p) -  Consent and Fourth  Amendment  to Credit  Agreement,  dated July 30,
            2002,  filed by reference  to Exhibit  10(l) of Form 10-K as of June
            30, 2002, dated September 30, 2002.

   10(q) -  Consent and Fifth Amendment to Credit Agreement, dated September 13,
            2002,  filed by reference  to Exhibit  10(m) of Form 10-K as of June
            30, 2002, dated September 30, 2002.

   10(r) -  Directors - Deferred Compensation  Agreement,  filed by reference to
            Exhibit 10(n) of Form 10-K as of June 30, 2002,  dated September 30,
            2002.

   10(s) -  Board Officers - Deferred Compensation Agreement, filed by reference
            to Exhibit 10(o) of Form 10-K as of June 30, 2002,  dated  September
            30, 2002.

   10(t) -  Incentive plans for period  beginning July 1, 2001 for Mr. Donald P.
            Cardarelli,  filed by reference to Exhibit  10(p) of Form 10-K as of
            June 30, 2002, dated September 30, 2002.

   10(u) -  Incentive plans for period  beginning July 1, 2002 for Mr. Donald P.
            Cardarelli,  filed by reference to Exhibit  10(q) of Form 10-K as of
            June 30, 2002, dated September 30, 2002.

   10(v) -  Incentive plans for period beginning July 1, 2001 for Mr. Michael R.
            Hopsicker,  filed by reference  to Exhibit  10(r) of Form 10-K as of
            June 30, 2002, dated September 30, 2002.

   10(w) -  Incentive plans for period beginning July 1, 2002 for Mr. Michael R.
            Hopsicker,  filed by reference  to Exhibit  10(s) of Form 10-K as of
            June 30, 2002, dated September 30, 2002.

   10(x) -  Letter dated October 26, 2001 between Mr.  Michael R.  Hopsicker and
            Mr.  Donald P.  Cardarelli,  filed by reference to Exhibit  10(t) of
            Form 10-K as of June 30, 2002, dated September 30, 2002.

   10(y) -  Letter dated April 20, 2001  between Mr. Roy Lubetkin and Mr. Donald
            P.  Cardarelli,  filed by reference to Exhibit 10(u) of Form 10-K as
            of June 30, 2002, dated September 30, 2002.

   10(z) -  Indemnification agreement dated April 30, 2001 between Agway and Mr.
            Roy Lubetkin, filed by reference to Exhibit 10(v) of Form 10-K as of
            June 30, 2002, dated September 30, 2002.

   10(aa) - Incentive  plans for  period  beginning  July 1,  2001  for Mr.  Roy
            Lubetkin,  filed by  reference  to Exhibit  10(w) of Form 10-K as of
            June 30, 2002, dated September 30, 2002.

   10(ab) - Incentive  plans for  period  beginning  July 1,  2002 for  Mr.  Roy
            Lubetkin,  filed by  reference  to Exhibit  10(x) of Form 10-K as of
            June 30, 2002, dated September 30, 2002.

   10(ac) - Incentive  plans for  period  beginning  July 1,  2001 for  Mr.  Dan
            Edinger, filed by reference to Exhibit 10(y) of Form 10-K as of June
            30, 2002, dated September 30, 2002.



                                       37
<PAGE>


                           PART II. OTHER INFORMATION
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES


Item 6.  Exhibits and Reports on Form 8-K (continued)
-----------------------------------------------------

(A) EXHIBITS REQUIRED BY SECURITIES AND EXCHANGE COMMISSION REGULATION S-K
(CONTINUED)

   MATERIAL CONTRACTS (CONTINUED)

   10(ad) - Incentive  plans  for  period  beginning  July 1,  2002 for Mr.  Dan
            Edinger, filed by reference to Exhibit 10(z) of Form 10-K as of June
            30, 2002, dated September 30, 2002.

   10(ae) - Letter dated September 26, 2002 to Mr. D. J. Edinger from Mr. Donald
            P.  Cardarelli  concerning  stay pay,  filed by reference to Exhibit
            10(aa) of Form 10-K as of June 30, 2002, dated September 30, 2002.

   10(af) - Incentive  plans  for period  beginning  July 1, 2001 for Mr.  Jerry
            Seeber, filed by reference to Exhibit 10(ab) of Form 10-K as of June
            30, 2002, dated September 30, 2002.

   10(ag) - Letter dated January 14, 2002 to Mr. G. R. Seeber from Mr. Donald P.
            Cardarelli concerning stay pay, filed by reference to Exhibit 10(ac)
            of Form 10-K as of June 30, 2002, dated September 30, 2002.

   10(ah) - Stock Purchase  Agreement  Between Agway Inc. and United Farm Family
            Mutual Insurance Company, dated June 14, 2002, filed by reference to
            Exhibit 10(ad) of Form 10-K as of June 30, 2002, dated September 30,
            2002.

   10(ai) - Asset  Purchase  Agreement  By and  Between  Agway,  Inc.  and Cenex
            Harvest States  Cooperatives,  dated as of September 10, 2002, filed
            by  reference  to Exhibit  10(ae) of Form 10-K as of June 30,  2002,
            dated September 30, 2002.

 (ii)The following exhibits are filed as a separate section of this report:

   10(aj) - First     amendment     to    Senior     Secured,     Super-Priority
            Debtor-in-Possession  Credit  Agreement  with lenders dated November
            14, 2002, filed herewith.

   99     - Sarbanes-Oxley Act of 2002  Certifications
            -- 99.1 Certification of Chief Executive Officer
            -- 99.2  Certification  of Chief Financial Officer

(B) REPORTS ON FORM 8-K

   AGWAY FILED REPORTS ON FORM 8-K DURING THE THREE MONTHS ENDED  SEPTEMBER  30,
   2002, AS FOLLOWS:

   July 31, 2002
   -------------
   To announce that Agway Inc. and GROWMARK, Inc. signed a Letter of Intent that
   provides  GROWMARK  with  exclusive  rights  to  negotiate  for the  possible
   acquisition of Agway's Agronomy and Seedway businesses and related assets.

   September 4, 2002
   -----------------

   To announce that on August 28, 2002, Agway completed the sale of  its  wholly
   owned  insurance  subsidiary, Agway Insurance Company, to Indiana Farm Bureau
   Insurance Companies.

   September 13, 2002
   ------------------

   To announce  that CHS  Cooperatives  and Agway Inc. had signed  a  definitive
   agreement under which the Harvest States Division of CHS will acquire Agway's
   Grandin, N.D.-based Sunflower business.


                                       38
<PAGE>


                           PART II. OTHER INFORMATION
                    AGWAY INC. AND CONSOLIDATED SUBSIDIARIES


Item 6.  Exhibits and Reports on Form 8-K (continued)
-----------------------------------------------------

(B)REPORTS ON FORM 8-K (CONTINUED)

   AGWAY FILED REPORTS ON FORM 8-K  SUBSEQUENT TO SEPTEMBER 30, 2002,  BUT PRIOR
   TO FILING OF THIS FORM 10-Q FOR THE QUARTER  ENDED  SEPTEMBER  30,  2002,  AS
   FOLLOWS:

   October 15, 2002
   ----------------
   To  announce  that Agway Inc.  and certain of its wholly  owned  subsidiaries
   filed voluntary petitions to reorganize under Chapter 11 of the United States
   Bankruptcy Code on October 1, 2002. The disclosure  listed some details as to
   the case numbers assigned,  judge presiding over cases, and discussion of the
   granting of various initial requests of Agway.  Additionally,  announced that
   the Company had agreed to terms of a $125 million  debtor-in-possession (DIP)
   financing facility and that interim approval to obtain $80 million of the DIP
   financing had been received by the Bankruptcy Court on October 4, 2002.

   October 24, 2002
   ----------------
   To  announce  the  approval  by the  Bankruptcy  Court on October 22,2002 for
   access to the full amount of the $125 million   debtor-in-possession   credit
   facility.  Additionally,  announced  the   details  of an auction  within the
   Chapter 11 proceedings of the Company's  Agronomy and Seedway  businesses and
   related assets.

                                       39
<PAGE>


SIGNATURES

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




                                                AGWAY INC.
                                    --------------------------------------------
                                               (Registrant)




Date   November  14, 2002                /s/ PETER J. O'NEILL
      ----------------------        --------------------------------------------
                                              Peter J. O'Neill
                                           Senior Vice President,
                                              Finance & Control
                                      (Principal Financial Officer and
                                         Chief Accounting Officer)




                                       40

<PAGE>


               CERTIFICATIONS UNDER NEW EXCHANGE ACT RULES 13a-14
               --------------------------------------------------

                     AND 15d-14 OF THE EXCHANGE ACT OF 1934
                     --------------------------------------

I, Donald P. Cardarelli, certify that:

1.   I have  reviewed  this  quarterly  report on Form 10-Q for the period ended
     September 30, 2002 of Agway Inc.;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   Designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     b)   Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   Presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent functions):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly  report  whether  there  were  significant  changes  in  internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.



Date:    November 14, 2002
         -------------------------

         /s/  Donald P. Cardarelli
         -------------------------
         Donald P. Cardarelli
         President and Chief Executive Officer



                                       41
<PAGE>


               CERTIFICATIONS UNDER NEW EXCHANGE ACT RULES 13a-14
               --------------------------------------------------

                     AND 15d-14 OF THE EXCHANGE ACT OF 1934
                     --------------------------------------

I, Peter J. O'Neill, certify that:

1.   I have  reviewed  this  quarterly  report on Form 10-Q for the period ended
     September 30, 2002 of Agway Inc.;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   Designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     b)   Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   Presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent functions):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly  report  whether  there  were  significant  changes  in  internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.



Date:    November 14, 2002
         ----------------------------
         /s/  Peter J. O'Neill
         ----------------------------
         Peter J. O'Neill
         Senior Vice President, Finance and Control

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