<PAGE>

                                                              EXHIBIT 10.10.1(a)

                           ASSET PURCHASE AGREEMENT

     ASSET PURCHASE AGREEMENT, dated as of June 20, 2000, by and between Agway,
Inc., a Delaware corporation ("Agway") and Southern States Cooperative, Inc., a
Virginia agricultural cooperative corporation ("Southern States").

     WHEREAS, Agway wishes to sell and assign to Southern States, and Southern
States wishes to purchase and assume from Agway, for the consideration and on
the terms and conditions set forth herein, certain business operations of the
consumer wholesale business of Agway, and various assets that are used in
connection therewith (collectively, the "Consumer Wholesale Dealer Distribution
Business," as defined herein), and certain liabilities of the Consumer Wholesale
Dealer Distribution Business.

     NOW, THEREFORE, in consideration of the mutual agreements and the
representations and warranties, conditions and promises contained herein, and
intending to be legally bound hereby Agway and Southern States hereby agree as
follows (capitalized terms having the meaning given in Article XIX or elsewhere
herein):


                                   ARTICLE I

Sale and Purchase of the Purchased Assets and Assumption of the Dealer
                    Agreements and the Assumed Liabilities

     At the Closing, and subject to the terms and conditions of this Agreement:
(a) Agway shall sell, transfer, convey, assign and deliver to Southern States,
and Southern States shall purchase and acquire from Agway, the Purchased Assets
free and clear of all Liens, and (b) Agway shall assign to Southern States, and
Southern States shall assume from Agway, the Dealer Agreements and the Assumed
Liabilities.  No other agreements or liabilities of Agway arising out of the
Consumer Wholesale Dealer Distribution Business, the ownership or operation of
any of the Purchased Assets, the consummation of the transactions under this
Agreement or otherwise, except as expressly provided in this Agreement, shall be
assumed by Southern States.

     For purposes of this Agreement, the Consumer Wholesale Dealer Distribution
Business of Agway shall mean all dealer marketing, development, operations and
distribution associated with the consumer wholesale business of Agway.


                                  ARTICLE II

                             The Purchased Assets

          2.1.  The Purchased Assets.  The "Purchased Assets" shall mean all
                --------------------
right, title, interest and claims of Agway in and to the following assets:
<PAGE>

               (a)  the Inventory;

               (b)  the Owned Personal Property as identified more particularly
on Schedule 6.8.1;

               (c)  the Accounts Receivable;

               (d)  the Prepaid Expenses;

               (e)  the Dealer Agreements;

               (f)  the Real Property Leases as listed on Schedule 6.5.1
(including all of Agway's right, title, and interest, if any, in and to the
Improvements located on the Leased Real Property);

               (g)  the Personal Property Leases listed on Schedule 6.8.3;

               (h)  the Assignable Permits;

               (i)  subject to any legal restrictions and required consents,
copies of all of the books, records, computer files, and other files, data or
other existing and available information of Agway relating specifically to or
used in connection with the Consumer Wholesale Dealer Distribution Business and
the Purchased Assets, including but not limited to (i) dealer purchase
histories, (ii) dealer credit files and payment histories, (iii) vendor supply
histories, including prices, terms of payment, storage or title retention
agreements and other information of a similar nature, (iv) those records or
other files evidencing all goods sold and services rendered on credit pursuant
to the Dealer Agreements and which have given rise to the Accounts Receivable;
and (v) those records or other files relating to shipments made and services
performed, discounts allowed, payments received, returns and other credits, and
all late charges, interest and costs which may have been or may be added to the
Accounts Receivable, for all periods beginning on July 1, 1998, and ending on or
before the Closing Date which Agway can reasonably make available to Southern
States without adversely impacting its own business operations (including its
tax obligations), and which are requested by Southern States in writing on or
after the Closing ("Records").

          Southern States acknowledges that Agway is not transferring, and shall
retain all rights with respect to, any vendor rebates or recoveries related to
products or business disclosed on, or substantially similar to the programs
disclosed on, Schedule 2.1.


                                  ARTICLE III

                            The Assumed Liabilities

          3.1.  The Assumed Liabilities.  The "Assumed Liabilities" shall mean
                -----------------------
the following obligations and liabilities of Agway relating solely to the
Consumer Wholesale Dealer Distribution Business:

                                       2
<PAGE>

               (a)  all of Agway's liabilities and obligations under and
pursuant to the Real Property Leases and Personal Property Leases existing on or
arising after the Closing Date; provided, that, Southern States will not assume
any obligation or liability resulting from or arising out of any default or
nonperformance by Agway prior to the Closing Date under or with respect thereto;

               (b)  all of Agway's liabilities and obligations under and
pursuant to the Dealer Agreements, provided, that, Southern States shall not
assume any obligation or liability resulting from or arising out of any default
or nonperformance by Agway prior to the Closing Date under or with respect
thereto;

               (c)  any liability or obligation that arises from any Post-
Closing Environmental Condition;

               (d)  all of Agway's liabilities and obligations incurred in the
ordinary course of business related to commitments to purchase inventory for the
Consumer Wholesale Dealer Distribution Business for shipment in the ordinary
course of business in amounts that ordinarily would last not more than 120 days
after the Closing and such other inventory purchase commitments as may be listed
in Schedule 3.1(d); and

               (e)  any obligations or liabilities related to on-going
agreements, contracts, or commitments related to the Consumer Wholesale Dealer
Distribution Business, incurred in the ordinary course of business, as listed in
Schedule 3.1(e).

         3.2.  The Excluded Liabilities.  Except for the Assumed Liabilities,
               ------------------------
and any obligations pursuant to this Agreement, Southern States shall not assume
any obligation, payment or liability of Agway of any kind, whether fixed,
contingent, known or unknown and whether existing as of the Closing or arising
thereafter.  Without limiting the generality of the foregoing, and regardless of
whether any of the foregoing may be disclosed to Southern States pursuant to
Article VI hereof, or otherwise, or whether Southern States may have knowledge
of the same, Southern States shall not be deemed to assume any liability,
payment or obligation of Agway arising out of or relating to: (a) any workers'
compensation claims related to the operation of the Consumer Wholesale Dealer
Distribution Business prior to the Closing, or any other claims or liabilities
relating to the employment by Agway of persons prior to the Closing; (b) any
actual or alleged tortious conduct of Agway or any of its employees or agents;
(c) any claim for products liability related to products manufactured or
distributed by Agway in the operation of the Consumer Wholesale Dealer
Distribution Business prior to the Closing; (d) any claim for breach of warranty
or contract versus Agway related to the operation of the Consumer Wholesale
Dealer Distribution Business prior to the Closing; (e) any claim predicated on
strict liability or any similar legal theory related to the operation of the
Consumer Wholesale Dealer Distribution Business prior to the Closing; (f) the
violation of any law, ordinance or regulation in effect prior to the Closing
related to the operation of the Consumer Wholesale Dealer Distribution Business
prior to the Closing but not related to any Pre-Closing Environmental Condition;
(g) any business or business activities of Agway which are not part of the
Consumer Wholesale Dealer Distribution Business; (h) any tax liabilities, except
as otherwise expressly

                                       3
<PAGE>

provided herein; (i) any liabilities under any Agway employee benefit plans or
programs, or for accrued vacation or sick pay; (j) any intercompany or
intracompany liabilities or corporate charges; (k) any liability in any pending
or threatened litigation, governmental proceeding, or workers compensation
claim; (l) any liability or obligation to any dealer or other customer of Agway
for any credit balances or prepayment account held by Agway at the time of
closing; (m) any other indebtedness not listed as an Assumed Liability; (n) any
liabilities or obligations of Agway under any collective bargaining agreements;
(o) any liability or obligation that arises from any Pre-Closing Environmental
Condition; or (p) any other liabilities of Agway not within the scope of the
definition "Assumed Liabilities" (collectively, the "Excluded Liabilities").


                                   ARTICLE IV

                             Closing Purchase Price

          The purchase price to be paid by Southern States to Agway shall be the
sum of the amounts determined under Sections 4.1, 4.2 and 4.3.  The purchase
price shall be payable as provided for in Section 4.4 below.

          4.1.  Accounts Receivable.  The purchase price for the Accounts
                -------------------
Receivable shall be the aggregate stated unpaid amount thereof as shown on
Agway's books and records as of its last statement cut-off date, which shall be
as of a date not more than seven (7) days prior to the Closing Date.  This
balance will be "rolled forward" to the Closing Date as necessary and subject to
Section 8.8 below.

          4.2.  Inventory.  The purchase price for the Inventory will be Agway's
                ---------
cost or fair market value, whichever is lower, except as provided for in the
last sentence of this Section 4.2.  On or before the Closing, Agway and Southern
States shall jointly conduct a physical count and inspection of the Inventory in
accordance with the Inventory Procedures included as Annex A to this Agreement.
The purchase price for obsolete, discontinued, damaged, shopworn and inventory
held in stock longer than 180 days will be negotiated pursuant to the Inventory
Procedures.

          4.3.  Owned Personal Property.  The purchase price for the Owned
                -----------------------
Personal Property will be based on the fair market value or book value of such
assets, as agreed upon by Agway and Southern States.

          4.4   Method of Payment.  Southern States shall deliver to Agway at
                -----------------
the Closing, in cash or other immediately available funds, an amount equal to
the sum of the amounts required under Sections 4.1, 4.2 and 4.3 above.

                                       4
<PAGE>

                                   ARTICLE V

                                  The Closing

          5.1.  Time and Place.  The consummation of the transactions
                --------------
contemplated in this Agreement (the "Closing") shall take place at such location
as Southern States and Agway may mutually agree, at 9:00 a.m., Eastern Standard
Time, on July 10, 2000, or such other date as Agway and Southern States may
agree (the "Closing Date").  All actions at the Closing shall be deemed to be
taken simultaneously, and all documents executed at the Closing shall be
effective as of 12:01 a.m. on the Closing Date.

          5.2.  Actions by Agway at the Closing.  At the Closing, Agway shall
                -------------------------------
deliver to Southern States the following:

                (a)  a bill of sale to the Owned Personal Property and the
Inventory as shall be effective to vest in Southern States good and sufficient
title to the Owned Personal Property and Inventory free and clear of Liens,
which shall be in substantially the form of Exhibit A attached hereto;

                (b)  an assignment and transfer of Accounts Receivable conveying
all of Agway's right, title, and interest in and to the Accounts Receivable
(excluding any security interest, guarantees or other collateral relating to
Accounts Receivable) which shall be in substantially the form of Exhibit B
attached hereto;

                (c)  a license agreement (the "License Agreement") providing for
the use by Southern States of the trade name "AGWAY" and the trademarks set
forth in Annex A of the License Agreement (Exhibit C of this Agreement);

                (d)  an Assignment and Assumption Agreement to:  (i) the Dealer
Agreements; (ii) the Real Property Leases; (iii) the Personal Property Leases;
and (iv) the other Assumed Liabilities in substantially the form of Exhibit D
attached hereto, or such other form of assignment reasonably requested by
Southern States or Agway, which shall, among other things, convey good and
marketable title to the leasehold interests in the Leased Real Property, free
and clear of Liens together with such instruments of assignment and transfer of
all of Agway's right, title, and interest in, the Assignable Permits, the
Prepaid Expenses, and the Records of Agway relating to the Consumer Wholesale
Dealer Distribution Business, as may be reasonably requested by Southern States;

                (e)  an executed Transition Services Agreement;

                (f)  the certificate of Agway described in Section 11.2;

                (g)  a certificate of good standing of Agway from the Secretary
of State of Delaware, dated within thirty (30) days of the Closing Date;

                (h)  copies, certified by the Secretary of Agway, of the
resolutions of the board of directors of Agway approving the transactions
contemplated herein;

                                       5
<PAGE>

                (i)  the Closing Consents; and

                (j)  such other documents and instruments as may be reasonably
requested by Southern States, including, without limitation, the documents,
instruments, and other items required to be delivered by Agway to Southern
States pursuant to Article XI hereof.

          5.3.  Actions by Southern States at the Closing. At the Closing,
                -----------------------------------------
Southern States shall deliver to Agway the following:

                (a)  the purchase price payable in accordance with the
provisions of Article 4;

                (b)  an Assignment and Assumption Agreement to (i) the Dealer
Agreements, (ii) the Real Property Leases, (iii) the Personal Property Leases,
and (iv) the other Assumed Liabilities, in substantially the form of Exhibit D
attached hereto, or such other form of assignment reasonably requested by
Southern States or Agway;

                (c)  an executed Transition Services Agreement;

                (d)  a certificate of good standing of Southern States from the
Virginia State Corporation Commission, dated within thirty (30) days of the
Closing Date;

                (e)  the certificate of Southern States described in Section
10.2;

                (f)  copies, certified by the Secretary of Southern States, of
the resolutions of the board of directors of Southern States approving the
transactions contemplated herein; and

                (g)  such other documents and instruments as may be reasonably
requested by Agway, including, without limitation, the documents, instruments,
and other items required to be delivered by Southern States to Agway pursuant to
Article X hereof.


                                  ARTICLE VI

                    Representations and Warranties of Agway

     Agway represents and warrants to Southern States as follows, and
acknowledges and confirms that Southern States is relying upon such
representations and warranties in connection with the execution, delivery and
performance of this Agreement:

          6.1.  Corporate Organization and Authority.  Agway is a Delaware
                ------------------------------------
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware.  Agway is duly qualified to conduct business as a
foreign corporation in the jurisdictions listed on Schedule 6.1, which are all
of the jurisdictions in which Agway is required to be so qualified in order to
conduct the Consumer Wholesale Dealer Distribution Business and in which the
failure of Agway to so qualify would have a material adverse effect on the
financial condition or

                                       6
<PAGE>

operations of the Consumer Wholesale Dealer Distribution Business. Agway has the
requisite corporate power and authority to own or lease the Purchased Assets, to
carry on the Consumer Wholesale Dealer Distribution Business as it is now being
conducted, to execute and deliver this Agreement, and to consummate the
transactions contemplated herein. The execution and delivery of this Agreement
by Agway, and the consummation by Agway of the transactions contemplated herein,
has been duly and validly approved and authorized by the board of directors of
Agway.

          6.2.  Validity of Agreement; No Violation; Consents.
                ---------------------------------------------

                6.2.1.  This Agreement has been duly authorized, executed and
delivered by Agway and is a valid and binding obligation of Agway, enforceable
against Agway in accordance with its terms, except as may be limited by
bankruptcy, reorganization, insolvency and similar laws of general application
relating to or affecting the enforcement of rights of creditors or the relief of
debtors.  Except as otherwise set forth herein or as set forth on Schedule
6.2.1, the execution, delivery, and performance of this Agreement by Agway and
the consummation of the transactions contemplated herein, will not:  (a) violate
or conflict with any provision of the Certificate of Incorporation or Bylaws of
Agway; (b) violate or conflict in any material respect with any provision of any
law, rule, regulation, order, permit, certificate, writ, judgment, injunction,
decree, determination, award, or other decision of any court, governmental
agency or instrumentality binding upon Agway or to which the Purchased Assets
are subject; (c) violate, conflict with, or result in the breach of or a default
under, or result in the acceleration of any liability, or the cancellation or
termination of any of the Dealer Agreements or the Real Property Leases which
have not been waived; or (d) result in the creation, or imposition of, any Lien
upon, or with respect to, any of the Purchased Assets.

                6.2.2.  Agway may execute, deliver and perform this Agreement
without the necessity of Agway obtaining any consent, approval, authorization or
wavier or giving any notice or otherwise, except for the expiration of any
waiting period required under the HSR Act or such consents, approvals,
authorizations, waivers and notices (a) disclosed on Schedule 6.2.2 hereto (the
"Required Consents"); or (b) which have been obtained and are unconditional and
are in full force and effect.

          6.3.  Absence of Certain Changes.
                --------------------------

                (a)   Except as set forth on Schedule 6.3, since June 26, 1999,
Agway has conducted the Consumer Wholesale Dealer Distribution Business only in
the usual and ordinary course of business consistent with Agway prior practices
and there has not been:

                      (i)   any material adverse change in the financial
condition, operations, assets, or liabilities of the Consumer Wholesale Dealer
Distribution Business;

                      (ii)  any damage, destruction, or loss, whether or not
covered by insurance, which has materially and adversely affected or will
materially and adversely affect the Purchased Assets or the Consumer Wholesale
Dealer Distribution Business;

                                       7
<PAGE>

                     (iii)  any other fact, event or condition of any character
that will materially and adversely affect the Purchased Assets or the Consumer
Wholesale Dealer Distribution Business, or could reasonably be expected
materially to disrupt, interrupt, prevent or impair the conduct of the Consumer
Wholesale Dealer Distribution Business.

                (b)  Except as set forth on Schedule 6.3, since June 26, 1999,
Agway has not, with respect to the Consumer Wholesale Dealer Distribution
Business or with respect to the Purchased Assets:

                     (i)    entered into any transaction or contract, or amended
or terminated any transaction or contract, except normal transactions or
contracts consistent in nature and scope with prior practices and entered into
in the ordinary course of business in arms length transactions;

                     (ii)   with respect to the Consumer Wholesale Dealer
Distribution Business, canceled or waived any claim or right of substantial
value, or sold, transferred, distributed or otherwise disposed of any of the
Purchased Assets, except in the ordinary course of business;

                     (iii)  agreed to do any of the foregoing.

                (c)  With respect to Agway, there has not occurred any fact,
event or condition of any character that may materially and adversely affect the
obligation of Agway to repurchase unpaid Accounts Receivable under Section 14.6
below.

          6.4.  Taxes.  Agway has prepared and timely filed with the appropriate
                -----
governmental agencies all tax reports, filings and returns required to be filed
by it related to the Consumer Wholesale Dealer Distribution Business, and Agway
has paid, or made provision for the payment of, all such taxes which have become
due pursuant to said returns or pursuant to any assessment received by Agway.
Except as disclosed in Schedule 6.4, all federal, state, city, and foreign
income, profits, franchise, sales, use, occupation, property, excise, and other
taxes due in connection with the Consumer Wholesale Dealer Distribution Business
have been fully paid or shall be fully paid by Agway as of the date hereof or
hereafter when due.  Agway has not received notice of any tax deficiency
outstanding, proposed or assessed against it with respect to the Consumer
Wholesale Dealer Distribution Business, nor has it executed any waiver of any
statute of limitations on the assessment or collection of any tax.  There are no
tax liens upon, pending against or, to the Best Knowledge of Agway threatened
against, any Purchased Asset.

          6.5.  Real Property.
                -------------

                6.5.1.  Schedule 6.5.1 sets forth a complete list of all leases
or subleases (the "Real Property Leases"), of real property leased by Agway
primarily used in the Consumer Wholesale Dealer Distribution Business and being
assumed by Southern States in connection with its purchase of the Consumer
Wholesale Dealer Distribution Business (the "Leased Real Property"). Except as
disclosed on Schedule 6.5.1, the Real Property Leases are in full force and
effect, are valid and enforceable in accordance with their terms and constitute
the legal, valid and

                                       8
<PAGE>

binding obligations of Agway and, to the Best Knowledge of Agway, of the other
parties thereto (except, in each case, as may be limited by bankruptcy,
reorganization, insolvency and similar laws of general application relating to
or affecting the enforcement of rights of creditors or the relief of debtors),
and, to the Best Knowledge of Agway, no condition exists or event, act or
omission has occurred which, with or without notice, lapse of time or both,
would constitute a default or a basis of force majeure or other claim of
excusable delay or nonperformance thereunder. Agway has made available to
Southern States a copy of each of the Real Property Leases, and each such copy
is correct and complete and includes any and all modifications thereof. The
interest of Agway in and under any of the Real Property Leases is unencumbered
and subject to no present Lien, except for any Lien listed in Schedule 6.5.1.

                6.5.2.  To the Best Knowledge of Agway, except as described on
Schedule 6.5.2 hereto, (a) no improvement or structure on any Leased Real
Property encroaches on any adjacent property or conflicts with the rights of any
owner thereof, and (b) no improvement or structure on any real property owned or
leased by any other person encroaches on any Leased Real Property.

                6.5.3.  Except as set forth on Schedule 6.5.3, to the Best
Knowledge of Agway, all easements, rights of way, licenses, and other non-
ownership interests, if any, granted to or by Agway in any of the Leased Real
Property (the "Realty Use Rights") are valid and effective in accordance with
their terms. Agway has furnished Southern States with copies of all material
written Realty Use Rights which it has, all of which are identified on Schedule
6.5.3.

                6.5.4.  To the Best Knowledge of Agway, the Improvements located
on the Leased Real Property are in substantial compliance with all applicable
material building, fire, and other regulatory laws, ordinances, and regulations.
Agway has not received any written notice of any violation thereof.

                6.5.5.  To the Best Knowledge of Agway, all requisite
certificates of occupancy and other material permits or approvals legally
required with respect to the Improvements located on the Leased Real Property
and the occupancy and use thereof, have been obtained and are currently in full
force and effect.

          6.6.  Dealer Agreements and Other Contracts.
                -------------------------------------

                6.6.1.  Schedule 6.6.1 sets forth a list of all dealer
agreements or contracts (the "Dealer Agreements"), and such other written
agreements (other than the Real Property Leases and the Personal Property
Leases), purchase orders, and commitments, if any, and whether or not in the
ordinary course of business, to which Agway is a party or is bound, which
primarily relate to the Consumer Wholesale Dealer Distribution Business and
which Southern States agrees to assume in connection with the purchase of the
Consumer Wholesale Dealer Distribution Business. Agway has furnished to Southern
States a copy of each of the Dealer Agreements, and other agreements, if any,
listed on Schedule 6.6.1, and each such copy is correct and complete and
includes all modifications thereof.

                                       9
<PAGE>

               6.6.2.  All of the Dealer Agreements are in full force and effect
and constitute the legal, valid and binding obligations of Agway and, to the
Best Knowledge of Agway, of the other parties thereto (except, in each case, as
may be limited by bankruptcy, reorganization, insolvency and similar laws of
general application relating to or affecting the enforcement of rights of
creditors or the relief of debtors), and to the Best Knowledge of Agway, no
condition exists or event, act or omission has occurred which, with or without
notice, or lapse of time or both, would constitute a default or a basis of force
majeure or other claim of excusable delay or nonperformance thereunder. No
consent of any party to the Dealer Agreements is required to assign the Dealer
Agreements, and Agway's rights and obligations thereunder, to Southern States.
No other party to any Dealer Agreement has notified Agway of the assertion of
its right to renegotiate the terms or conditions of any Dealer Agreement, and,
to the Best Knowledge of Agway, no such basis exists.

         6.7.  Permits.  Schedule 6.7 sets forth a list of all material
               -------
governmental licenses, permits, consents, approvals, or certificates issued to
Agway and which are primarily related to the Consumer Wholesale Dealer
Distribution Business (the "Permits").  Agway has furnished to Southern States a
copy of each of the Permits, and each such copy is correct and complete and
includes any and all modifications thereof.  To the Best Knowledge of Agway: (a)
the Permits are in full force and effect; (b) Agway is not in material violation
of any of the Permits; (c) no proceedings for the suspension or cancellation of
any of the Permits is pending or threatened; (d) no condition exists which (with
or without notice, the passage of time or both) would constitute a material
violation of any of the Permits; and (e) the Permits constitute all material
governmental licenses, permits, consents, approvals or certificates required to
be obtained or held by Agway in connection with operation of the Consumer
Wholesale Dealer Distribution Business as presently conducted, the failure to
obtain which would have a material adverse effect on the financial condition or
operations of the Consumer Wholesale Dealer Distribution Business; provided,
however, that no representation is made in this sentence with respect to
"Environmental Permits", as to which all representations and warranties are set
forth in Section 6.14 hereof.  Those Permits (including the Environmental
Permits) which are assignable by Agway to Southern States are marked with an
asterisk on Schedule 6.7, and are referred to herein as the "Assignable
Permits".

         6.8.  Title to and Condition of Personal Property.
               -------------------------------------------

               6.8.1.  Schedule 6.8.1 sets forth a list of machinery, equipment,
furniture, fixtures, and other items of tangible personal property (other than
Inventory) or intangible personal property, including but not limited to the
"electronic catalogue" software developed by Agway for the Consumer Wholesale
Dealer Distribution Business and the copyright thereto, that are owned by Agway
and that are primarily used in connection with the Consumer Wholesale Dealer
Distribution Business and that are being purchased by Southern States in
connection with the purchase of the Consumer Wholesale Dealer Distribution
Business (the "Owned Personal Property").  To the Best Knowledge of Agway, the
list is accurate in all material respects.

               6.8.2.  Except for the Liens on Schedule 6.8.2., all of which
will be removed prior to the Closing except as otherwise contemplated herein,
Agway has good and sufficient title to the Owned Personal Property, free and
clear of any Liens.

                                       10
<PAGE>

               6.8.3.  Schedule 6.8.3 sets forth a list of all machinery,
equipment, furniture, fixtures, vehicles and other items of tangible personal
property, if any, that are leased by Agway and that are primarily used in the
Consumer Wholesale Dealer Distribution Business (the "Leased Personal
Property"), the leases for which (the "Personal Property Leases") are being
assumed by Southern States in connection with the purchase of the Consumer
Wholesale Dealer Distribution Business. Agway has valid leasehold interests in
all the Leased Personal Property. The Personal Property Leases are valid and in
full force and effect.

               6.8.4.  All of the Owned Personal Property and Leased Personal
Property used by Agway in the Consumer Wholesale Dealer Distribution Business
and the operations thereof is owned or leased by Agway and not owned or leased
by any member, shareholder or affiliate thereof. To the Best Knowledge of Agway,
the Owned Personal Property and the Leased Personal Property is, collectively,
in reasonable operating condition, and has been appropriately maintained in the
ordinary course of business, conforms to all material requirements of law and is
substantially fit for use in accordance with and sufficient for Agway's present
operations, subject to ordinary wear and tear.

         6.9.  Accounts Receivable.  The Accounts Receivable are valid and
               -------------------
enforceable obligations arising out of the sale of goods and/or services by
Agway in connection with the operations of the Consumer Wholesale Dealer
Distribution Business prior to the Closing and, to the Best Knowledge of Agway
arose out of arms-length transactions free of defenses and without right of set
off or deduction on the part of account debtors.  To the Best Knowledge of
Agway, no basis presently exists for the assertion of any defense, counterclaim
or set-off.  Except as disclosed on Schedule 6.9, all of the Accounts Receivable
are within 60 days of the time of the sale of goods or rendering of services
which gave rise to such Accounts Receivable, none is evidenced by an instrument
or chattel paper, and no judgment has been obtained on any Account Receivable.

         6.10. Trademarks and Trade Name.  Annex A of the License Agreement
               -------------------------
(Exhibit C) sets forth a list of all trademarks or trademark registrations, (the
"Trademarks") trade names or service marks, used or owned by Agway relating to
or covering use of the name "Agway" which will be licensed under the License
Agreement, in connection with the Consumer Wholesale Dealer Distribution
Business.  Except as set forth on Annex A of the License Agreement, the
Trademarks are currently in compliance with all legal and present requirements
(including payment of filing, examination, maintenance fees, and affidavits of
use and incontestability), are valid and enforceable and are not subject to any
maintenance fees or taxes on actions or filings falling due within ninety (90)
days after the Closing Date.

         6.11. Inventory.  Except as set forth in Schedule 6.11, Agway has
               ---------
good and sufficient title to the Inventory, free and clear of any Liens, which
Liens shall be released at or prior to the Closing.  Except as set forth in
Schedule 6.11, all Inventory consists of, and will at the Closing Date consist
of, a quantity and quality usable and saleable in the ordinary course of
business, except for obsolete items and items of below-standard quality, which
shall be appropriately addressed in accordance with the Inventory Procedures.

         6.12. Labor Relations.
               ---------------

                                       11
<PAGE>

               6.12.1.  Agway is not a party to any collective bargaining
agreements related to the Consumer Wholesale Dealer Distribution Business.

               6.12.2.  To the Best Knowledge of Agway: (a) Agway is in
compliance in all material respects with all Federal, state, and other
applicable laws regarding employment practices, terms and conditions of
employment, and wages and hours with respect to the Consumer Wholesale Dealer
Distribution Business; (b) since December 31, 1999, Agway has not engaged in any
unfair labor practice with respect to the Consumer Wholesale Dealer Distribution
Business; (c) there is no unfair labor practice complaint against Agway pending
before the National Labor Relations Board or any similar state or local labor
agency with respect to the Consumer Wholesale Dealer Distribution Business; (d)
there is no labor strike, dispute, slowdown, representation question or stoppage
pending or threatened against or involving the Consumer Wholesale Dealer
Distribution Business; (e) there exists no grievance which may have a material
adverse effect upon the Consumer Wholesale Dealer Distribution Business; (f) no
arbitration proceeding arising out of or under any collective bargaining
agreement is pending or threatened with respect to the Consumer Wholesale Dealer
Distribution Business; and (g) since December 31, 1999, Agway has not
experienced any strike, interruption, or material work slowdown by its labor
force due to employment problems of any nature with respect to the Consumer
Wholesale Dealer Distribution Business.

          6.13.  Litigation.  Except as set forth on Schedule 6.13, (a) Agway is
                 ----------
governmental action or any proceeding in which relief is sought or ordered
affecting the operation of the Consumer Wholesale Dealer Distribution Business
or the Purchased Assets or which would prevent, delay, question or challenge the
transactions contemplated by this Agreement; (b) there are no actions, claims,
suits, proceedings (whether in equity or in law) or investigations pending or,
to the Best Knowledge of Agway, threatened, involving or against the Consumer
Wholesale Dealer Distribution Business or the Purchased Assets before any court
or governmental or regulatory body which individually or in the aggregate would
have a material adverse effect on the condition, financial or otherwise, of the
Consumer Wholesale Dealer Distribution Business or which question or challenge
the validity of this Agreement or any action taken or to be taken pursuant to
this Agreement; and (c) to the Best Knowledge of Agway, no facts exist which
would serve as a basis under current laws or regulations, for the institution of
any actions, laws, audit investigation, claim, or procedure which might affect
materially and adversely the business or financial condition of the Consumer
Wholesale Dealer Distribution Business.

          6.14.  Environmental.  Except as set forth on Schedule 6.14, to the
                 -------------
Best Knowledge of Agway with respect to the Leased Real Property and the
Consumer Wholesale Dealer Distribution Business:

                 (a)  all underground petroleum or chemical storage tanks
located under the Leased Real Property are in compliance with all Environmental
Laws;

                 (b)  Agway is not the subject of any governmental investigation
or proceeding pertaining to the presence, generation, discharge, emission,
release or threatened release, spill, use, storage, processing, receiving,
containment, treatment, shipment,

                                       12
<PAGE>

transportation, handling or disposition of any Hazardous Material, nor has Agway
provided (or been required to provide) nor received notice of any violation of
any Environmental Law or release or threat of release of Hazardous Materials or
received any claim or notice under any Environmental Laws with respect to the
Leased Real Property or the other Purchased Assets;

                 (c)  included within the list of Permits on Schedule 6.7 are
all Permits and other governmental authorizations currently held by Agway
relating to the Consumer Wholesale Dealer Distribution Business pursuant to or
relating to any Environmental Law, including EPA product registrations (the
"Environmental Permits"), and Agway is conducting the Consumer Wholesale Dealer
Distribution Business in compliance with the Environmental Permits, which
constitute all of the environmental permits, approvals, certificates, or other
authorizations required to be obtained from any public, governmental, regulatory
or judicial authority to conduct the Consumer Wholesale Dealer Distribution
Business in substantially the same manner and extent it is presently conducted
by Agway; and

                 (d)  there is no action, activity, circumstance, condition,
event, or incident, including without limitation, the release, emission,
discharge, presence, or disposal of any Hazardous Material, that could
reasonably be expected to form the basis of any environmental claim or result in
any liability, remedial action or penalties against Agway with respect to the
Consumer Wholesale Dealer Distribution Business, the Leased Real Property or the
other Purchased Assets.

          6.15.  Insurance.  Agway maintains policies of insurance which insure
                 ---------
the Purchased Assets and the Consumer Wholesale Dealer Distribution Business in
commercially reasonable amounts for occurrences normally insured against.  There
are no claims by Agway pending or, to the Best Knowledge of Agway, threatened
with respect to the Purchased Assets or the Consumer Wholesale Dealer
Distribution Business under said policies or disputes with underwriters, and, to
the Best Knowledge of Agway, all premiums due and payable have been paid and all
such policies are in full force and effect in accordance with their respective
terms.



                                  ARTICLE VII

               Representations and Warranties of Southern States

     Southern States represents and warrants to Agway as follows, and
acknowledges and confirms that Agway is relying upon such representations and
warranties in connection with the execution, delivery and performance of this
Agreement:

          7.1.   Corporate Organization and Authority.  Southern States is an
                 ------------------------------------
agricultural cooperative  corporation duly organized, validly existing, and in
good standing under the laws of the Commonwealth of Virginia, and is (or will be
at the Closing Date) duly qualified to conduct business as a foreign corporation
in the states of Maine, New Hampshire, Vermont, Massachusetts, Rhode Island,
Connecticut, New York, New Jersey, Pennsylvania, Ohio, Delaware and Maryland.
Southern States has the requisite corporate power and authority to

                                       13
<PAGE>

execute and deliver this Agreement and to consummate the transactions
contemplated herein and therein. The execution and delivery of this Agreement by
Southern States and the consummation by Southern States of the transactions
contemplated herein and therein have been duly and validly approved and
authorized by the board of directors of Southern States.

          7.2.   Validity of Agreement; No Violation. This Agreement has been
                 -----------------------------------
duly executed and delivered by Southern States.  This Agreement is a valid and
binding obligation of Southern States, enforceable in accordance with its terms,
except as may be limited by bankruptcy, reorganization, insolvency and similar
laws of general application relating to or affecting the enforcement of rights
of creditors or the relief of debtors.  The execution, delivery, and performance
of this Agreement by Southern States and the consummation of the transactions
contemplated hereby will not:  (a) violate or conflict with any provision of the
Articles of Incorporation or Bylaws of Southern States or (b) violate or
conflict in any material respect with any provision of any law, rule,
regulation, order, permit, certificate, writ, judgment, injunction, decree,
determination, award, or other decision of any court, governmental agency or
instrumentality binding upon Southern States or to which Southern States is
subject.

          7.3.   Brokers or Finders.  Southern States has not incurred any
                 ------------------
obligation or liability, contingent or otherwise, for brokers or finders fees or
commissions or other similar payments in connection with this Agreement.


                                  ARTICLE VIII

                               Covenants of Agway

          8.1.   Access.  Prior to the Closing, Agway shall provide Southern
                 ------
States with reasonable access during normal business hours to the Purchased
Assets and to Agway's employees, officers, agents and consultants, books and
records (including property or sales tax returns, dealer state sales tax
exemption certificates), and such other information relating to the Consumer
Wholesale Dealer Distribution Business, subject to any legal restrictions or
limitations and its existing policies with respect to providing information
about its employees to other potential employers or other proprietary or
confidential information, as Southern States may reasonably request. Agway shall
provide Southern States with, or allow Southern States to make, copies, at
Southern States' expense, of any requested materials that are relevant to the
Consumer Wholesale Dealer Distribution Business and do not contain any
confidential or proprietary information about Agway or otherwise violate any
internal procedures of Agway. Southern States shall advise Agway, and obtain
Agway's consent (which shall not be unreasonably withheld), before contacting
any third-party in connection with its due diligence of the Consumer Wholesale
Dealer Distribution Business. Southern States shall use its reasonable efforts
to minimize any disruption to Agway's business in connection with the conduct of
the due diligence process contemplated herein, and Agway shall receive
reasonable advance notice of and shall have the right to participate in, any
discussions Southern States might have with any federal or state regulatory
authorities about Agway or the Consumer Wholesale Dealer Distribution Business.
Prior to the Closing, Southern States will not, without the consent of Agway,
conduct a "Phase II" environmental assessment or any other environmental
investigation of Agway's

                                       14
<PAGE>

Leased Real Property, other than visual inspections of the properties. Southern
States shall use its best efforts to complete its due diligence, subject to any
additional disclosures by Agway, no later than June 30, 2000.

          8.2.   Conduct of Business.
                 -------------------

                 8.2.1.  Affirmative Covenants.  Prior to the Closing, except as
                         ---------------------
may be agreed to in writing by Agway and Southern States, Agway shall conduct
the Consumer Wholesale Dealer Distribution Business, in all material respects,
according to its ordinary and usual course of business and consistent with
Agway's prior practice. Without limiting the generality of the foregoing, Agway
shall: (a) maintain in effect and fully perform all of its obligations under the
Dealer Agreements and the Real Property Leases in accordance with the terms
thereof; (b) give prompt written notice to Southern States of any notice given
or received by Agway of any default or breach or alleged default or breach under
any of the Dealer Agreements, the Real Property Leases or the Personal Property
Leases and of any claim or threat to commence any action, suit, proceeding, or
investigation against Agway with respect to the Consumer Wholesale Dealer
Distribution Business; (c) maintain the Owned Personal Property, the Leased
Personal Property and Improvements on the Leased Real Property in the same
condition and repair as on the date of this Agreement, ordinary wear and tear
excepted; (d) comply, in all material respects, with all laws applicable to it
in the conduct of the Consumer Wholesale Dealer Distribution Business; (e) use
its best efforts to preserve the business of the Consumer Wholesale Dealer
Distribution Business in accordance with Agway's Retail Plan contained in
Schedule 6.3(a); (f) maintain in full force and effect all insurance policies
currently in effect with respect to the Purchased Assets, or policies that
provide coverage that is comparable to such insurance policies; and (g) promptly
advise Southern States of any breach of any representation or warranty,
covenant, condition or obligation of Agway hereunder.

                 8.2.2.  Negative Covenants.  Prior to the Closing, except as
                         ------------------
may be agreed in writing by Agway and Southern States or as may be disclosed in
the Schedules to this Agreement, Agway shall not: (i) enter into or agree to
enter into any lease, contract, commitment, transaction or understanding of any
kind with respect to the Consumer Wholesale Dealer Distribution Business,
outside of the ordinary course of business, or to amend or agree to amend any of
the Dealer Agreements, the Personal Property Leases or the Real Property Leases
except in the ordinary course of business; (ii) purchase or otherwise commit to
purchase inventory for the Consumer Wholesale Dealer Distribution Business in
amounts that would ordinarily last more than 180 days beyond the Closing Date;
(iii) alter in any material respect its current credit policies as they relate
to the Accounts Receivable; or (iv) voluntarily take any action which would
render any representation and warranty of Agway contained in Article VI hereof
inaccurate at any time between the date hereof and the Closing Date, including
as of the Closing Date.

          8.3.   Consents of Third Parties.  Agway shall use its commercially
                 -------------------------
reasonable efforts to obtain the Closing Consents prior to the Closing Date, and
to obtain the remaining Required Consents as soon as practicable following the
Closing Date, including in each case as applicable and without limitation:  (i)
as required, the consent of the landlords or lessors of the Leased Real Property
and the lessors of the Leased Personal Property to the assignment to, and
assumption by, Southern States of the Real Property Leases and the Personal
Property Leases; (ii) as required, the consent of third parties to the
assignment to, and

                                       15
<PAGE>

assumption by, Southern States of the Dealer Agreements; and (iii) as required,
the consent of any governmental, public or regulatory authority to the
assignment to Southern States of the Assignable Permits.

          8.4.   Cooperation.  Agway shall cooperate with Southern States to
                 -----------
effect the consummation of the transactions contemplated herein on the Closing
Date.

          8.5.   Supplement to Schedules.  After the date hereof, Agway shall,
                 -----------------------
from time to time prior to or at the Closing, by notice to Southern States,
supplement or amend any Schedule, including without limitation, one or more
supplements or amendments thereto, to correct any matter which would constitute
a breach of any representation or warranty set forth herein.  Such supplemental
or amended Schedule shall not be deemed to cure any willful and intentional
breach of such representation or warranty for the purposes of Article XVI
hereof.  If, however, the Closing occurs, such supplemental or amended Schedule
shall be effective to cure and correct for all purposes any breach of any
representation or warranty that would have existed by reason of Agway not having
made such supplement or amendment.

          8.6.   Satisfaction of Conditions. Agway shall use its best efforts
                 --------------------------
(not to include the expenditure of any substantial sums) to cause the conditions
to the obligations of Southern States contained in Article XI to be satisfied to
the extent that the satisfaction of such conditions is in the control of Agway;
however, the foregoing shall not constitute a limitation upon the covenants and
obligations of Agway otherwise expressly set forth in this Agreement.

          8.7.   No Other Negotiations.  In consideration of the time and
                 ---------------------
expense that will be incurred by Southern States in connection with the
transaction contemplated by this Agreement, Agway agrees that following the
execution of this Agreement or until termination of this Agreement pursuant to
Article XVI hereof, it shall not, nor shall it permit any of its subsidiaries
to, nor shall it authorize or permit any officer, director or employee of, or
any investment banker, attorney, accountant or other advisor or representative
of, Agway or any of its subsidiaries to, directly or indirectly, (i) solicit,
initiate or encourage the submission of any Acquisition Proposal (as hereinafter
defined) or (ii) participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or agree to or endorse,
or take any other action to facilitate any Acquisition Proposal or any inquiries
or the making of any proposal that constitutes, or may reasonably be expected to
lead to, any Acquisition Proposal; provided, however, that nothing in this
Section 8.7 shall require the members of the Board of Directors of Agway to
violate their fiduciary duties. Agway shall as promptly as practicable advise
Southern States orally and in writing of the receipt by it (or any of the other
entities of persons referred to above) after the date hereof of any Acquisition
Proposal, or any inquiry which could lead to any Acquisition Proposal, the
material terms and conditions of such Acquisition Proposal or inquiry, and the
identity of the person making any such Acquisition Proposal or inquiry. Agway
will keep Southern States fully informed of the status and details of any such
Acquisition Proposal or inquiry. The term "Acquisition Proposal" as used herein
means any offer or proposal involving the purchase of all or any portion of all
the assets of the Agway Consumer Wholesale Dealer Distribution Business as
defined and specified in Article I of this Agreement.

                                       16
<PAGE>

          8.8.   Payments on Accounts Receivable.  If, after the Closing, Agway
                 -------------------------------
receives any check, draft or other payment on or on account of any of the
Accounts Receivable, it shall promptly endorse such check, draft or other
payment to Southern States without recourse and mail it to Southern States,
along with any supporting documentation, at such address as Southern States
shall furnish for this purpose.  Such payments shall be applied to the Accounts
Receivable as provided for in Section 14.6 below.

          8.9.   Preparation of Financial Statements for Consumer Wholesale
                 ----------------------------------------------------------
Dealer Distribution Business.  Agway will cause to be prepared separate "carve-
----------------------------
out" financial statements of the Consumer Wholesale Dealer Distribution Business
(the "CWDDB Financial Statements).  The CWDDB Financial Statements will be
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission (the "SEC") and will be for such periods that are required
by the SEC for inclusion in SEC filings of Southern States.  To the extent SEC
rules and regulations require some or all of the CWDDB Financial Statements to
be audited, Agway will cause such financial statements to be audited.  Such
statements will be accompanied by supporting schedules indicating assumptions,
allocations, and reclassifications made in conjunction with the preparation of
the CWDDB Financial Statements.  Agway shall provide by June 15, 2000, projected
financial statements of the CWDDB (the "Projected CWDDB Financial Statement")
for the period ending on and as of June 24, 2000 (Agway's fiscal year-end),
which statement Southern States may use in arranging any financing required by
Southern States in connection with the consummation of the transactions
contemplated by the Agreement.  The Projected CWDDB Financial Statement will be
prepared on a basis consistent with the rules and regulations of the SEC unless
modified by Agway with the consent of Southern States.


                                  ARTICLE IX

                         Covenants of Southern States

          9.1.   Cooperation.  Southern States shall cooperate with Agway to
                 -----------
effect the consummation of the transactions contemplated herein on the Closing
Date and will use its reasonable efforts to obtain the necessary financing to
meet the Closing Date.  Southern States shall also use its reasonable efforts to
cause Agway to be relieved at Closing, or as soon thereafter as may be
practicable, from any and all liabilities with respect to the Assumed
Liabilities.

          9.2.   Negative Covenant.  Southern States shall not take any action
                 -----------------
which would render any representation and warranty of Southern States contained
in Article VII hereof inaccurate at any time between the date hereof and the
Closing Date, including as of the Closing Date, and shall promptly advise Agway
of any breach of any representation or warranty, covenant, condition or
obligation of Southern States hereunder.

          9.3.   Satisfaction of Conditions. Southern States shall use its best
                 --------------------------
efforts (not to include the expenditure of any substantial sums) to cause the
conditions to the obligations of Agway contained in Article X to be satisfied to
the extent that the satisfaction of such conditions

                                       17
<PAGE>

is in the control of Southern States; however, the foregoing shall not
constitute a limitation upon the covenants and obligations of Southern States
otherwise expressly set forth in this Agreement.



                                   ARTICLE X

               Conditions Precedent to the Obligations of Agway

     The obligations of Agway hereunder are subject to the fulfillment of each
of the following conditions prior to or at the Closing any one of which may be
waived in whole or in part by the Agway:

          10.1.  Performance of Obligations.  Southern States shall have
                 --------------------------
performed, or complied with, in all respects, all of its agreements and
covenants expressly required to be performed or complied with on or before the
Closing Date hereunder.

          10.2.  Representations and Warranties.  The representations and
                 ------------------------------
warranties of Southern States made herein shall be deemed to have been made
again at and as of the Closing Date and shall then be true in all material
respects, and Southern States shall deliver to Agway a certificate of an officer
of Southern States dated as of the Closing Date, certifying to that effect.

          10.3.  Closing Consents.  Agway and Southern States shall have
                 ----------------
received the Closing Consents, and any HSR Act waiting period with respect to
the transaction contemplated hereby shall have expired or been terminated.

          10.4.  Miscellaneous.  Agway shall have received such other
                 -------------
instruments and documents as Agway and its counsel may reasonably request,
including but not limited to the instruments and documents to be delivered by
Southern States to Agway pursuant to Section 5.3 hereof.

          10.5.  Absence of Litigation.  No temporary restraining order,
                 ---------------------
preliminary injunction or permanent injunction or other order preventing the
consummation of the transactions and other actions contemplated under this
Agreement shall have been issued by any Federal or state court and remain in
effect. Southern States agrees to use commercially reasonable efforts to have
any such injunction or order lifted.

          10.6.  No Change In Law.  No law, order or regulation shall have been
                 ----------------
enacted which prohibits the Closing or the satisfaction of any of the conditions
to the obligations of Agway contained in this Article X.

                                       18
<PAGE>

                                  ARTICLE XI

          Conditions Precedent to the Obligations of Southern States

     The obligations of Southern States hereunder are subject to the fulfillment
of each of the following conditions prior to or at the Closing, any one of which
may be waived in whole or in part by Southern States:

          11.1.  Performance of Obligations.  Agway shall have performed, or
                 --------------------------
complied with, in all respects all of its agreements and covenants expressly
required to be performed or complied with on or before the Closing Date
hereunder.

          11.2.  Representations and Warranties.  The representations and
                 ------------------------------
warranties of Agway made herein shall be deemed to have been made again at and
as of the Closing Date and shall then be true in all material respects, and
Agway shall deliver to Southern States a Certificate of an officer of Agway,
dated as of the Closing Date, certifying to that effect.

          11.3.  Closing Consents.  Agway and Southern States shall have
                 ----------------
received the Closing Consents and any HSR Act waiting period with respect to the
transaction contemplated hereby shall have expired or been terminated.

          11.4.  No Material Adverse Change.  There shall not have been any
                 --------------------------
material adverse change in (i) the assets, liabilities, the business or
condition, financial or otherwise, or the results of operations of the Consumer
Wholesale Dealer Distribution Business, or (ii) in the financial condition,
taken on a consolidated basis, of Agway and its subsidiaries.

          11.5.  Financing.  Southern States shall have obtained the financing
                 ---------
necessary to consummate the transactions contemplated in this Agreement, on
terms and conditions reasonably satisfactory to Southern States.

          11.6.  Transition Services.  On or before the Closing, Agway and
                 -------------------
Southern States shall have entered into a Transition Services Agreement in
substantially the same form as Exhibit E hereto, pursuant to which Agway shall
provide to Southern States the services specified therein and on the terms and
conditions set forth therein.

          11.7.  Environmental.  On or before the Closing, Southern States shall
                 -------------
have completed to its satisfaction "Phase I" environmental examinations of the
Leased Real Property.  Southern States shall use best efforts to complete "Phase
I" examinations no later than June 30, 2000.

          11.8.  Logistical Arrangements.  On or before the Closing, Southern
                 -----------------------
States shall have entered into arrangements to its satisfaction regarding
outbound freight transportation from the distribution centers located on the
Leased Real Property.

          11.9.  Due Diligence.  Southern States shall have completed to its
                 -------------
satisfaction its due diligence with respect to the Consumer Wholesale Dealer
Distribution Business and the Purchased Assets, including specifically the Real
Property Leases, the Accounts Receivable and

                                       19
<PAGE>

the Dealer Agreements, as well as its credit evaluation of the dealers who are
parties to the Dealer Agreements. Southern States shall use its best efforts to
complete its due diligence, subject to any additional information or disclosures
which may be provided by Agway, no later than June 30, 2000.

          11.10.  Projected CWDDB Financial Statement.  On or before the
                  -----------------------------------
Closing, Southern States and, to the extent necessary, its external auditors,
shall have had an opportunity to review the Projected CWDDB Financial Statement
and shall have concluded in their reasonable judgment, and after discussion and
review with Agway management, that the methodology employed and the allocations
and reclassifications made in the preparation of the Projected CWDDB Financial
Statement are reasonable.

          11.11.  Miscellaneous.  Southern States shall have received such other
                  -------------
instruments and documents as Southern States and its counsel may reasonably
request, including but not limited to the instruments and documents to be
delivered by Agway to Southern States pursuant to Section 5.2 hereof.

          11.12.  Absence of Litigation.  No temporary restraining order,
                  ---------------------
preliminary injunction or permanent injunction or other order preventing the
consummation of the transactions and other actions contemplated under this
Agreement shall have been issued by any Federal or state court and remain in
effect. Agway agrees to use commercially reasonable efforts to have any such
injunction or order lifted.

          11.13.  No Change in Law.  No law, order or regulation shall have been
                  ----------------
enacted which prohibits the Closing or the satisfaction of any of the conditions
to the obligations of Southern States contained in this Article XI.



                                  ARTICLE XII

                                Confidentiality

          12.1.   Confidentiality.  Each party shall continue to abide by the
                  ---------------
terms of the confidentiality agreement between Agway and Southern States, dated
May 1, 2000, (the "Confidentiality Agreement") subject to Southern States' and
Agway's right to make such disclosures as either may deem appropriate to their
lenders or other parties who are involved in arranging financing for either
Southern States or Agway.  No public announcement of the execution of or
relating to this Agreement shall be made by either party without the prior
consent of the other, provided, however, that either party shall be entitled to
make such disclosures as may in the opinion of its counsel be required to comply
with applicable laws or the requirements of the Securities and Exchange
Commission or the National Association of Securities Dealers.

          12.2.   Equitable Remedies.  The parties acknowledge and agree that in
                  ------------------
the event of a default or breach by either party of the provisions of this
Article XII, the other party shall sustain irreparable injury and damages, the
amount and extent of which cannot be measured in

                                       20
<PAGE>

money and for which there does not and shall not exist any adequate remedy at
law. Accordingly, each of the parties hereby agrees that in the event of a
default or breach by either party of the provisions of this Article XII, the
other party shall be entitled to injunctive relief and to specific performance
and that in any legal action or proceeding for injunctive relief and specific
performance the party against whom such action or proceeding is instituted shall
be deemed to have hereby been waived, and shall not assert in such action or
proceeding, the defense or claim that the party instituting such action or
proceeding has an adequate remedy at law or that an adequate remedy at law
exists. The foregoing shall not, however, be deemed to limit or restrict the
remedies at law or in equity of either party for any default or breach of the
provisions of this Article XII.


                                 ARTICLE XIII

                        Destruction of Tangible Assets

          13.1.  Condition of Tangible Assets.  At the Closing, Agway shall use
                 ----------------------------
its commercially reasonable efforts to deliver physical possession of the Owned
Personal Property, the Leased Personal Property and the Improvements
(collectively, the "Tangible Assets") to Southern States in substantially the
same physical condition as they exist as of the date hereof, except for normal
wear and tear and changes occurring in the usual and ordinary course of business
or incident to the customary use of the same.  Agway will amend its schedules to
reflect any material damage to or destruction of Purchased Assets that is
inconsistent with the foregoing sentence.

          13.2.  Risk of Loss.  All risk of loss as a result of any destruction,
                 ------------
damage, or depletion of or to the Tangible Assets prior to the Closing, whether
by reason of fire, theft, accident or other cause, shall be borne by Agway, and
except as provided in Section 13.3 below, all insurance proceeds payable as a
result thereof shall be paid and belong solely to Agway.

          13.3.  Destruction.  If, prior to the Closing, the Tangible Assets
                 -----------
other than Inventory, are destroyed or damaged to an extent that (a) their value
or physical condition differs in any material respect from the value or physical
condition as it exists as of the date hereof, or (b) the destruction or damage
has a material adverse effect on the operation of the Consumer Wholesale Dealer
Distribution Business (either (a) or (b) referred to herein as a "Material
Loss"), Southern States may in its sole discretion, by written notice to Agway,
terminate this Agreement.  If, prior to the Closing, the Tangible Assets, other
than Inventory, are destroyed or damaged, to an extent that does not result in a
Material Loss, or in the event that Southern States in its sole discretion
elects to proceed to Closing notwithstanding the occurrence of a Material Loss,
Agway and Southern States shall consummate the transactions contemplated in this
Agreement, and at the Closing Agway shall deliver physical possession of the
Tangible Assets to Southern States in such physical condition as the same may
then exist, but in that event Agway will pay to Southern States any net
insurance proceeds received for the property damage to the Purchased Assets, but
not any proceeds for business interruption or other kinds of insurance that may
be payable with respect to any period prior to the Closing Date with respect to
such damage or destruction.  For purposes of this Section, the value or physical
condition of the Owned Personal Property shall be

                                       21
<PAGE>

deemed to differ in a material respect from its value or physical condition as
of the date hereof if the greater of (a) the book value, as shown on the Agway's
books and records, of the Owned Personal Property destroyed or damaged, or (b)
the aggregate costs of all necessary repairs to, and replacements of, the Owned
Personal Property, is greater than ten percent (10%) of the aggregate book value
of the Tangible Assets prior to such damage or destruction as shown on the
Agway's books and records.

          13.4.  Liability Upon Termination.  If this Agreement is terminated by
                 --------------------------
Southern States pursuant to this Article XIII, neither Agway nor Southern States
shall be liable or obligated to the other except and to the extent as may be
expressly provided in this Agreement.


                                  ARTICLE XIV

                        Post-Closing and Other Matters

          14.1.  Covenants Relating to the Consumer Wholesale Dealer
                 ---------------------------------------------------
Distribution Business
---------------------

                 14.1.1.  Agway agrees to license to Southern States, subject to
the terms set forth in the License Agreement attached as Exhibit C, the use of
the AGWAY name and other trademarks for use on brand products, excluding feed
(other than bird feed and pet food), commercial agricultural fertilizer,
commercial agricultural seed and commercial agricultural pesticides, for
distribution to consumer dealers.

                 14.1.2.  Southern States agrees that, during the term of the
License Agreement, it will offer for sale to its dealers in the Trade Area (and
provide commercial support for, as specified in Section 14.1.9 below)
Seedway/Agway vegetable seed and Agway lawn and garden consumer fertilizer in
packages of 40 pounds or less as specified in Schedule 14.1.2, assuming these
products are competitively priced to market when comparing quality, quantity and
marketing. If at any time Southern States believes the Agway products are not
competitively priced to market when comparing quality, quantity and marketing,
Southern States shall promptly provide written notice of its position in
reasonable detail and Agway shall have five (5) business days from receipt of
such notice to address and meet the market price.

                 14.1.3.  Southern States agrees that, during the term of the
License Agreement, it will offer for sale to its dealers in its entire territory
(and provide commercial support for, as specified in Section 14.1.9) Agway
Feathered Friend bird feed, along with other competitive brands, using the same
wholesale margin structure for all such products. If at any time Southern States
believes the Agway product is not competitively priced to market when comparing
quality, quantity and marketing, Southern States shall promptly provide written
notice of its position in reasonable detail, including such documentation
concerning its wholesale margin structure as shall be necessary in the
circumstances, and Agway shall have two (2) business days from receipt of such
notice and supporting information to address and meet the market price.

                                       22
<PAGE>

                 14.1.4.  Southern States agrees that, during the term of the
License Agreement, it will provide Agway labeled or other exclusive branded
products in the Trade Area, and to the extent it elects to sell or otherwise
distribute Agway labeled branded products under the Dealer Agreements, it will
provide reasonable commercial support for the Agway brand.

                 14.1.5.  Southern States agrees that Agway will have the
exclusive right and authority, and Southern States acknowledges that Agway
intends, to continue to manufacture, promote, distribute, and sell bagged feed
products, including equine feed, through the Southern States dealer channel in
the Trade Area. Also, subject to the terms of the marketing agreement between
Southern States and Agway dated February 24, 1998, and any renewals, extensions
or replacements thereof, Southern States agrees that Agway will have the
exclusive right and authority, and Southern States acknowledges that Agway
intends, to continue to manufacture, promote, distribute, and sell Legends
bagged feed products through the Southern States channel in the Trade Area.

                 14.1.6.  Subject to the terms of the License Agreement,
Southern States agrees to pay to Agway $100,000 on June 30, 2001 and thereafter,
beginning on August 1, 2002, annualized payments equal to 0.840% of the dollar
volume of gross sales to dealers (including new dealers added to the system) in
the Trade Area for each of the fiscal years ended June 30, 2002 through 2010,
not to exceed $840,300 in any fiscal year.

                 14.1.7.  Southern States agrees that it will consider the
purchase from Agway of Agway's interest in Pro Pet LLC. In the event Southern
States does not purchase Agway's interest in Pro Pet LLC, Agway agrees that it
will sell Pro Pet products to Southern States at Agway's cost (F.O.B. St.
Mary's, Ohio) in such quantities as Southern States may reasonably require for
resale in the Trade Area.

                 14.1.8.  Southern States and Agway will coordinate efforts to
make a joint presentation to promote the Consumer Wholesale Dealer Distribution
Business and its purchase by Southern States at the Spotlight Show on June 27
and 28, 2000, at Foxwoods, Connecticut.

                 14.1.9.  Southern States agrees to enter into joint efforts
with Seedway and the Agway Sunflower division of Agway ("Agway Sunflower") to
promote the sales of products listed in Schedule 14.8. Southern States agrees to
make reasonable, good faith efforts to make Seedway the "preferred supplier" of
the Southern States dealer network in the Trade Area. Southern States agrees to
make reasonable, good faith efforts to make Agway Sunflower the "preferred
supplier" of the entire Feathered Friend Birdfood line (including Black Oil
Sunflower and all other birdfood) across its entire dealer network, both inside
and outside the Trade Area. Such efforts by Southern States would include but
not be limited to the following:

                 (a)      Organize and conduct semi-annual product review and
sales strategy sessions with each supplier and appropriate Southern States
procurement and sales personnel.

                 (b)      Feature Seedway and Feathered Friend products in
corporate sales circulars according to seasonality.

                                       23
<PAGE>

                 (c)      Implement direct order and distribution center dealer
sales programs.

                 (d)      Provide adequate dealer point-of-purchase and local
advertising materials.

                 (e)      Make booth space available at semi-annual Shows, i.e.,
Seedway at Shows in the Trade Area; Feathered Friend at all Shows.

                 (f)      Provide adequate training to Southern States corporate
and dealer personnel to promote the sales of products listed in Schedule 14.8.

                 (g)      Include Seedway and Feathered Friend programs in
monthly promotional mailings to dealers according to seasonality and territory
outlined above.

                 (h)      Allow full access to supplier representatives to work
directly with dealers to promote their product sales.

                 (i)      Southern States will impose no markup or marketing
penalties, as compared to competitive lines, that would unfairly restrict the
competitive nature of the products listed in Schedule 14.8.

Any and all of the above may be modified or cancelled upon mutual consent of
and Agway.

          14.2.  Employees and Employee Benefits.
                 -------------------------------

                 14.2.1.  Southern States shall have the right to talk with and
to take applications from and to consider employees of the Consumer Wholesale
Dealer Distribution Business for employment by Southern States in connection
with its acquisition and assumption of the Consumer Wholesale Dealer
Distribution Business. Nothing in this Agreement shall be construed as giving
any person any right to employment or to any terms or conditions of employment
including but not limited to any type or levels of compensation or benefits,
with Southern States.

                 14.2.2.  (a) Agway shall be and remain liable and responsible
for any and all liabilities or payments arising, prior to the Closing, with
respect to the employment by Agway of the Business Employees or the termination
of that employment.

                          (b) Agway will pay any required severance payments in
accordance with its severance payment policy to present Agway personnel. A "stay
on bonus" will be developed by Agway and Southern States. The cost of the bonus
will be divided equally between Agway and Southern States.

                                       24
<PAGE>

                 14.2.3.  Southern States shall not assume, and Agway shall
retain all obligations to fund or otherwise shall provide all benefits in
respect of or payable under, Agway's employee benefit plans and programs. No
assets or liabilities of any of Agway's employee benefit plans and programs
shall be transferred to any plan maintained or established by Southern States.

          14.3.  Allocation of Purchase Price.  Agway and Southern States shall
                 ----------------------------
allocate the Purchase Price, when determined, among the Purchased Assets and the
Assumed Liabilities in accordance with an allocation schedule.  As soon as may
be practicable after the Closing and prior to filing any tax return which
includes information related to the transactions contemplated in this Agreement,
Agway and Southern States, employing the allocation of the Purchase Price made
pursuant to this Section 14.3, shall prepare mutually acceptable IRS Forms 8594
which they shall use to report the transactions contemplated in this Agreement
to the Internal Revenue Service and to all other taxing authorities.  Neither
Agway nor Southern States shall take a position in any tax proceeding, tax audit
or otherwise inconsistent with such allocation; provided, however, that nothing
contained herein shall require Agway or Southern States to contest any proposed
deficiency or adjustment by any taxing authority or agency which challenges such
allocation of the Purchase Price, or exhaust administrative remedies before any
taxing authority or agency in connection therewith, and Agway and Southern
States shall not be required to litigate before any court (including without
limitation the United States Tax Court), any proposed deficiency or adjustment
by any taxing authority or agency which challenges such allocation of the
Purchase Price.  Agway and Southern States shall give prompt notice to the other
of the commencement of any tax audit or the assertion of any proposed deficiency
or adjustment by any taxing authority or agency which challenges such allocation
of the Purchase Price.

          14.4.  Transition Services Agreement.  As a condition to the Closing,
                 -----------------------------
Agway and Southern States shall have entered into a transition services
agreement substantially in the form of Exhibit E hereto (the "Transition
Services Agreement"), pursuant to which Agway agrees to use reasonable
commercial efforts to provide Southern States for a period of up to 180 days
following the Closing, with certain purchasing, distribution, accounting,
customer service, computer and related information support services relating to
the operations of the Consumer Wholesale Dealer Distribution Business.  The
Transition Services Agreement shall provide that Southern States will pay to
Agway a monthly fee equivalent to Agway's costs of providing such services.

          14.5.  Use of the Agway Name by Southern States after Closing.  Agway
                 ------------------------------------------------------
acknowledges and agrees that Southern States shall have the right after the
Closing to use the name "AGWAY" as provided for in the License Agreement.

          14.6.  Repurchase of Unpaid Accounts Receivable and Application of
                 -----------------------------------------------------------
Proceeds.  Agway agrees that on the date that is 120 days from the Closing Date
--------
(or the next business day if applicable) (the "Settlement Date"), it will
repurchase the aggregate stated amount thereof as shown on Southern States'
books and records any balance owed on the Accounts Receivable at the Closing and
for which final payment has not been received within 120 days from Closing,
provided that Agway shall only be obligated to repurchase unpaid Accounts
Receivable which it transferred to Southern States.  The purchase price for such
repurchases shall be the face amount

                                       25
<PAGE>

of such unpaid Accounts Receivable plus interest at the rate of 7.5% per annum
from the Closing Date. Any payments received from customers by Southern States
on the Accounts Receivables will be credited first to the oldest outstanding
Account Receivable of the account debtor unless a customer otherwise specifies
the invoice or invoices to which payment shall be applied because an item is in
dispute. On the Settlement Date, Agway agrees to assign and transfer to Southern
States all such security interests or other collateral held by it securing
obligations of the account debtors on the Accounts Receivable purchased by
Southern States and not resold to Agway.

          14.7.  Additional Documents.  From and after the Closing Date, each of
                 --------------------
the parties shall, at the request of the other, prepare, execute, and deliver to
the other such additional documents and instruments and take such action as the
other may deem reasonably necessary to further evidence or effect any of the
transactions contemplated herein.

          14.8.  Non-Competition.
                 ---------------

          (a) In consideration of Southern States' purchase of the Consumer
Wholesale Dealer Distribution Business pursuant to this Agreement, Agway agrees
that for a period of ten (10) years following the Closing Date, and except as
otherwise provided for in this Section 14.8, it will not, directly or
indirectly, for itself or on behalf of any individual, partnership, corporation
or any other legal entity, as principal, agent, or otherwise, engage in,
control, manage or otherwise participate in the ownership, control or management
of a business, or enter into any contract or other arrangement with a third-
party which involves the distribution or sale of branded products currently
being sold exclusively through the Consumer Wholesale Dealer Distribution
Business ("Transferred Products") in direct competition, whether by traditional
"bricks and mortar" or by electronic or internet means, within any part of the
Trade Area.  Southern States acknowledges that none of Agway's other businesses
are presently in competition with any portion of the Consumer Wholesale Dealer
Distribution Business and that Agway may acquire up to 5% of the outstanding
securities of any competitor of the Consumer Wholesale Dealer Distribution
Business whose securities are publicly traded.  For purposes of this Section
14.8, "Trade Area" shall mean the states of Maine, New Hampshire, Vermont,
Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Pennsylvania,
Ohio (excluding from the operation of this Section 14.8, however, but only in
the State of Ohio, the distribution and sale of Feathered Friend bird feed
products), Delaware and Maryland.  Agway recognizes that irreparable injury may
result to Southern States if Agway breaches this Section 14.8, and Agway agrees
that if it engages in any act in violation of the provisions hereof, Southern
States shall be entitled, in addition to any actual damages proved, to
injunctive relief prohibiting Agway from engaging in any such act.
Notwithstanding the foregoing, nothing in this Agreement shall be deemed to
prohibit Agway and/or its present or future affiliate(s) from entering into a
merger, joint venture or other business combination with another entity
provided:  (1) the objective of the transaction is not to serve the Consumer
Wholesale Dealer Distribution Business market in the Trade Area; and (2) serving
the Consumer Wholesale Dealer Distribution Business market in the Trade Area is
not a principal element of the other entity's current or future business or, if
that service is such an element, Agway, its affiliate(s) and its personnel will
have no involvement with that element of the combined or resulting business
during the term of the non-competition covenant under this Section 14.8 and no
such combined or resulting business shall use or license the use of the name
"AGWAY" or the Marks (as defined in the

                                       26
<PAGE>

License Agreement) in competition with the Consumer Wholesale Dealer
Distribution Business operated by Southern States for so long as this non-
competition covenant or the License Agreement shall be in effect.

          (b)  The non-competition covenant in Section 14.8(a) insofar as it
shall relate to each category of Transferred Products shown on Schedule 14.8, is
subject to and conditional upon the continued satisfaction of each of the
following conditions with respect to each such category as applicable and
default under the provisions below with respect to one such category shall have
no effect upon any other category insofar as this Section 14.8 shall be
concerned:

               (i)    the three month gross shipped volume for each category of
the Feathered Friend categories of Transferred Products listed on Schedule 14.8
shall equal or exceed 50% of the average three month gross shipped volume for
each of the corresponding categories of product calculated for the same three
month period over the two years preceding the Closing Date. (For example, the
three month gross shipped volume for each category of Feathered Friend product
for the months of March, April and May of 2001 will be compared against the
average of Agway's gross shipped volume for that category during the months of
March, April, and May for each of 1998 and 1999.)

               (ii)   the three month gross sales volume for vegetable seed
purchased from Seedway shall equal or exceed 80% of the average three month
gross sales volume over the two years preceding the Closing Date. (For example,
the three month gross sales volume for vegetable seed purchased from Seedway for
the months of March, April and May of 2001 will be compared against the average
of Agway's gross sales volume for that category during the months of March,
April, and May for each of 1998 and 1999.)

               (iii)  Southern States shall continue to comply with its
obligations in subsections 14.1.2, 14.1.3, 14.1.4, and 14.1.9, subject in all
cases to the delivery of products to Southern States in sufficient quantities
and qualities to permit Southern States to carry out such obligations; and
subject, further, to the condition that if at any time Agway shall believe that
Southern States is not in compliance with any of subsections 14.1.2, 14.1.3,
14.1.4 or 14.1.9, it shall give Southern States prompt written notice of its
position in reasonable detail and Southern States shall have thirty (30) days
from receipt of such notice to address Agway's stated concern. To the extent
that Southern States shall fail to correct any breach alleged by Agway within
the time period provided, the non competition covenant of Section 14.8(a) shall
be null and void with respect to, but only with respect to, the product line or
lines as to which such breach shall relate.

          (c)  The non-competition covenant in Section 14.8 (a) in its entirety
shall be subject to and conditional upon the continued satisfaction of each of
the following conditions:

               (i)    the License Agreement shall continue to be in effect, and
Southern States shall not have failed to cure any breach of any material
provision of the License Agreement after notice of and within the time period
provided for therein for the cure of such a breach.

                                       27
<PAGE>

                (ii)   Southern States shall have met its obligations under
Section 14.1.6 in all respects.

In the event any of the foregoing conditions are not met, the non-competition
covenant in Section 14.8(a) shall be null and void as provided for herein.

          (d)   Further, Southern States agrees that:

                (i)    Agway's right to compete (through traditional or
electronic or internet means) in the Trade Area with respect to commercial
animal feed (other than bird feed and pet food), commercial agricultural
fertilizer (including turf fertilizer), commercial agricultural seed (including
turf seed) and commercial agricultural pesticides (regardless of brand name)
shall not be restricted or limited in any way;

                (ii)   Seedway shall have the right to compete in sales to the
Southern States dealer network (through traditional or electronic or internet
means) in the Trade Area with respect to special mix turf seeds and commercial
turf seed in generic branded AGWAY bags, these product lines being understood
and agreed to include products not broadly marketed through or in pre-packaged
branded or "concept" form.

                (iii)  Wetsel, Inc., a subsidiary of Southern States, will not
manufacture, label or distribute any product bearing the "AGWAY" name or
trademark.

          (e)   In the event Southern States elects to exercise its option as
provided for in the License Agreement to extend the License Agreement for a
five-year period following the expiration of the initial ten (10) year term,
then the non-competition covenant in Section 14.8(a) above shall continue for an
additional five (5) year period as well subject to Southern States' continued
compliance with subsections 14.8(b) and (c) above.  Southern States and Agway
agree that it is the intention of both such parties that the non-competition
covenant in Section 14.8 above shall be continued during any further extension
of the License Agreement as provided for in that Agreement; nevertheless, the
parties recognize that substantially changed circumstances may require that the
covenant be re-addressed at the time of any such further extension in light of
any such substantially changed circumstances existing at the time.  Accordingly,
the parties acknowledge that the covenant in Section 14.8 is not binding under
the terms of this Agreement beyond the initial ten (10) year term of the License
Agreement and the first five (5) year extension thereof, if exercised by
Southern States, and any further extension of the covenant in Section 14.8 above
beyond the initial ten (10) year term and the first five (5) year extension, if
exercised by Southern States, shall be effective only if agreed upon in writing
by the parties or their respective successors or assigns.

          14.9. Cooperation Regarding Tax Filings.  Agway and Southern States
                ---------------------------------
shall reasonably cooperate, and shall use reasonable efforts to cause their
respective affiliates, officers, employees, agents, auditors and other
Representatives reasonably to cooperate, in preparing and filing all tax
returns, including, but not limited to, maintaining and making available to each
other all records necessary in connection with taxes and in resolving all
disputes and audits with respect to all taxable periods relating to taxes.

                                       28
<PAGE>

                                  ARTICLE XV

                                Indemnification

          15.1.  Survival.  Each of the covenants, agreements, and
                 --------
representations and warranties of Agway and Southern States herein shall survive
the Closing until 5:00 p.m. Eastern Standard Time one year following the Closing
Date, at which time, such covenants, agreements, representations and warranties
shall expire and terminate, provided, however, that (i) the representations and
warranties of Agway respecting taxes set forth in Section 6.4 shall survive the
Closing for the applicable statute of limitations; (ii) the representations and
warranties of Agway respecting environmental matters set forth in Section 6.14
shall survive the Closing without limitation as to time; (iii) the
representations and warranties of Agway to the extent they apply solely to title
to the Purchased Assets set forth in Sections 6.8.2 and 6.11, and the obligation
of Agway to indemnify Southern States for any loss arising out of any Excluded
Liabilities pursuant to Section 15.2(iii), shall survive the Closing without
limitation as to time; (iv) the obligations of Agway to indemnify Southern
States for any loss arising out of any Pre-Closing Environmental Condition
pursuant to Section 15.2(iv), shall survive the Closing without limitation as to
time; (v) the representations and warranties of Agway set forth in the second
sentence of Section 6.11 shall expire and terminate at Closing; and (vi) the
covenants and agreements of Agway or Southern States to be performed after
Closing Date shall survive the Closing without limitation as to time except that
the covenants contained in Section 14.1 shall survive the Closing and expire and
terminate upon termination of the License Agreement (the "Survival Period").

          15.2.  Indemnification by Agway.  Subject to the provisions of
                 ------------------------
Sections 15.3 and 15.6, Agway shall indemnify, defend and hold harmless Southern
States and the directors, officers, employees and shareholders of Southern
States (the "Southern States Indemnified Persons") against and in respect of all
losses, costs, and expenses suffered or incurred or required to be paid by
Southern States Indemnified Persons as a result of:  (i) the breach by Agway of
any representation and warranty made by Agway to Southern States Indemnified
Persons in Article VI of this Agreement and the Schedules including therewith
hereto that is executed and delivered pursuant hereto or in connection with the
closing of the transactions hereunder; (ii) the non-fulfillment by Agway of any
agreement or covenant of Agway contained herein; (iii) the Excluded Liabilities
but not including any liability or obligation arising from any Pre-Closing
Environmental Condition; (iv) any liability or obligation arising from any Pre-
Closing Environmental Condition; (v) the waiver by Agway and Southern States of
compliance with the Bulk Transfers Laws; and (vi) all actions, suits,
proceedings, demands, assessments, judgments, costs, including reasonable
attorney's fees, and expenses incident to any of the foregoing.

          15.3.  Limitations on Indemnification by Agway.  Notwithstanding the
                 ---------------------------------------
provisions of Section 15.2, Agway shall have no liability to indemnify Southern
States Indemnified Persons hereunder until the aggregate amount of Southern
States Indemnified Persons' indemnifiable losses exceeds $50,000 (the "Agway
Minimum Amount").  If the aggregate amount of Southern States Indemnified
Persons' indemnifiable losses exceeds the

                                       29
<PAGE>

Agway Minimum Amount, Agway shall Indemnify Southern States Indemnified Persons
for the amount that such indemnifiable losses exceed the Agway Minimum Amount
and are less than or equal to $1,000,000. The foregoing cap limitation shall not
apply to Agway's indemnification obligations with respect to the following: (i)
the Excluded Liabilities; (ii) the representations and warranties of Agway to
the extent they apply solely to title to the Purchased Assets set forth in
Sections 6.8.2 and 6.11; (iii) any liability or obligation arising from any Pre-
Closing Environmental Condition or the representations and warranties of Agway
respecting environmental matters contained in Section 6.14; (iv) the
representations and warranties of Agway respecting taxes set forth in Section
6.4; (v) the covenants or agreements of Agway to be performed after Closing
Date; or (vi) the failure to comply with the Bulk Transfer Laws.

          15.4.  Indemnification by Southern States.  Subject to the provisions
                 ----------------------------------
of Sections 15.5 and 15.6, Southern States shall indemnify and hold harmless
Agway and the directors, officers, employees and shareholders of Agway (the
"Agway Indemnified Persons") against and in respect of all losses, costs, and
expenses suffered or incurred or required to be paid by Agway Indemnified
Persons as a result of:  (i) the breach by Southern States of any representation
and warranty made by Southern States to Agway in Article VII hereof; (ii) the
nonfulfillment by Southern States of any agreement or covenant of Southern
States contained herein; (iii) the failure of Southern States to discharge, when
due, the Assumed Liabilities; (iv) the operations by Southern States from and
after the Closing of the Consumer Wholesale Dealer Distribution Business,
including but not limited to any liability or obligation arising from any Post-
Closing Environmental Condition; and (v) all actions, suits, proceedings,
demands, assessments, judgments, costs, including reasonable attorney's fees,
and expenses incident to the foregoing.

          15.5.  Limitations on Indemnification by Southern States.
                 -------------------------------------------------
Notwithstanding the provisions of Section 15.4, Southern States shall have no
liability to indemnify Agway Indemnified Persons hereunder until the aggregate
amount of Agway Indemnified Persons' indemnifiable issues exceeds $50,000 (the
"SSC Minimum Amount").  If the aggregate amount of Agway Indemnified Persons'
indemnifiable losses exceeds the SSC Minimum Amount, Southern States shall
indemnify Agway Indemnified Persons for the amount that such indemnifiable
losses exceed the SSC Minimum Amount and are less than or equal to $1,000,000.
The foregoing cap limitation shall not apply to Southern States' indemnification
obligations with respect to (a) the Assumed Liabilities; (b) the covenants or
agreements of Southern States to be performed after Closing Date; and (c) the
operations by Southern States from and after the Closing of any Consumer
Wholesale Dealer Distribution Business, including but not limited to any
liability or obligation arising from any Post-Closing Environmental Condition.

          15.6.  Procedures for Indemnification.
                 ------------------------------

                 15.6.1.   If Southern States Indemnified Persons seek
indemnification from Agway for indemnifiable losses, Southern States Indemnified
Persons shall give notice to Agway of such loss, specifying in reasonable detail
the nature and basis for the claim and the amount thereof (the "Notice of
Loss"). If, within sixty days after the date on which Agway receives the Notice
of Loss, Agway has not delivered to Southern States a notice objecting to all or
any portion of the claimed loss and setting forth the amount of such claimed
loss objected to and the

                                       30
<PAGE>

reasons for such objection, Southern States Indemnified Persons shall be
entitled to indemnification for such loss unless Agway's failure to object was
inadvertent, and Agway shall promptly pay such loss. If the failure of Agway was
inadvertent, the process should be begun again but the Survival Period with
respect to the Claim shall be extended if the First Notice of Loss was within
the Survival Period. If, within sixty days after the date on which Agway
receives a Notice of Loss, Agway delivers to Southern States an objection to all
or any portion of the claimed loss, setting forth the amount of such loss
objected to and the reasons for such objection, Southern States Indemnified
Persons shall be entitled to reimbursement for the portion of such loss not
objected to by Agway and Agway shall promptly pay such amount. Southern States
Indemnified Persons shall be entitled to indemnification for the portion of such
claimed loss to which Agway objected to upon the earlier of: (a) the Agway's and
Southern States' written agreement with respect to the indemnification of such
loss or (b) a final judgment or award of an arbitrator as provided in Section
18.12.

                 15.6.2. If Agway Indemnified Persons seek indemnification from
Southern States for indemnifiable losses, Agway Indemnified Persons shall give a
Notice of Loss to Southern States, specifying in reasonable detail the nature
and basis for the claim and the amount thereof.  If, within sixty days after the
date on which Southern States receives the Notice of Loss, Southern States has
not delivered to Agway a notice objecting to all or any portion of the claimed
loss and setting forth the amount of such claimed loss objected to and the
reasons for such objection, Agway Indemnified Persons shall be entitled to
indemnification for such loss unless Southern States' failure to object was
inadvertent, and Southern States shall promptly pay such loss.  If the failure
of Southern States was inadvertent, the process should be begun again but the
Survival Period with respect to the Claim shall be extended if the first Notice
of Loss was within the Survival Period.  If, within sixty days after the date on
which Southern States receives a Notice of Loss, Southern States delivers to
Agway an objection to all or any portion of the claimed loss, setting forth the
amount of such loss objected to and the reasons for such objection, Agway
Indemnified Persons shall be entitled to reimbursement for the portion of such
loss not objected to by Southern States and Southern States shall promptly pay
such amount.  Agway Indemnified Persons shall be entitled to indemnification for
the portion of such claimed loss to which Southern States objected to upon the
earlier of:  (a) the Agway's and Southern States' written agreement with respect
to the indemnification of such loss or (b) a final judgment or award of an
arbitrator pursuant to Section 18.12.

                 15.6.3. The obligations and liabilities of an Indemnifying
Person with respect to losses resulting from the assertion of liability by third
parties (each, a "Third Party Claim") shall be subject to the following terms
and conditions:

                 (a)     The Indemnified Persons shall promptly give written
notice to the Indemnifying Persons of any Third Party Claim which might give
rise to any loss by the Indemnified Persons, stating the nature and basis of
such Third Party Claim, and the amount thereof to the extent known; provided,
however, that no delay on the part of the Indemnified Persons in notifying any
Indemnifying Persons shall relieve the Indemnifying Persons from any liability
or obligation hereunder unless (and then solely to the extent) the Indemnifying
Person thereby is prejudiced by the delay. Such notice shall be accompanied by
copies of all relevant documentation with respect to such Third Party Claim,
including, without limitation, any

                                       31
<PAGE>

summons, complaint or other pleading which may have been served, any written
demand or any other document or instrument.

                 (b)     If the Indemnifying Persons shall acknowledge in a
writing delivered to the Indemnified Persons that such Third Party Claim is
properly subject to their indemnification obligations hereunder, then the
Indemnifying Persons shall have the right to assume the defense of any Third
Party Claim at their own expense and by their own counsel, which counsel shall
be reasonably satisfactory to the Indemnified Persons; provided, however, that
                                                       --------  -------
the Indemnifying Persons shall not have the right to assume the defense of any
Third Party Claim, notwithstanding the giving of such written acknowledgment, if
(i) the Indemnified Persons shall have been advised by counsel that there are
one or more legal or equitable defenses available to them which are different
from or in addition to those available to the Indemnifying Persons, and, in the
reasonable opinion of the Indemnified Persons, counsel for the Indemnifying
Persons could not adequately represent the interests of the Indemnified Persons
because such interests could be in conflict with those of the Indemnifying
Persons, (ii) such action or proceeding involves, or could have a material
effect on, any material matter beyond the scope of the indemnification
obligation of the Indemnifying Persons or (iii) the Indemnifying Persons shall
not have assumed the defense of the Third Party Claim in a timely fashion.

                 (c)     If the Indemnifying Persons shall assume the defense of
a Third Party Claim (under circumstances in which the proviso to Section
15.6.3(b) is not applicable), the Indemnifying Persons shall not be responsible
for any legal or other defense costs subsequently incurred by the Indemnified
Persons in connection with the defense thereof. If the Indemnifying Persons do
not exercise their right to assume the defense of a Third Party Claim by giving
the written acknowledgment referred to in Section 15.6.3(b), or are otherwise
restricted from so assuming by the proviso to Section 15.6.3(b), the
Indemnifying Persons shall nevertheless be entitled to participate in such
defense with their own counsel and at their own expense. If the defense of a
Third Party Claim is assumed by the Indemnified Persons pursuant to clause (i)
or (ii) of the proviso of Section 15.6.3(b), the Indemnified Persons shall not
be entitled to settle such Third Party Claim without the prior written consent
of the Indemnifying Persons, which consent shall not be unreasonably withheld or
delayed.

                 (d)     If the Indemnifying Persons exercise their right to
assume the defense of a Third Party Claim pursuant to clauses (i) or (ii) of
Section 15.6.3(b), (i) the Indemnified Persons shall be entitled to participate
in such defense with their own counsel at their own expense and (ii) the
Indemnifying Persons shall not make any settlement of any claims without the
written consent of the Indemnified Persons, which consent shall not be
unreasonably withheld or delayed.

                 15.6.4. Notwithstanding any other provisions of this Agreement,
neither Agway nor Southern States shall have any claim for indemnification
hereunder unless such claim is asserted, as provided herein, against the other
within the Survival Period (in which event the party's right to indemnification
for such matters shall continue until liability is finally determined), it being
acknowledged that the Survival Period of certain indemnities is without
limitation as to time as provided in Sections 15.1, 15.2 and 15.4.

                                       32
<PAGE>

          15.7.  Computation of Losses.  In determining the amount of any
                 ---------------------
indemnifiable loss hereunder, the aggregate amount of any insurance proceeds
received by or benefiting the indemnified party and any tax benefit realized by
the indemnified party in connection with the facts giving rise to the right to
indemnification shall be deducted from the amount to be paid by the indemnifying
party. If, with respect to any indemnifiable loss paid by an indemnifying party,
the indemnified party subsequently receives insurance proceeds, or realizes a
tax benefit, the indemnified party shall, as soon as may be practicable, pay to
the indemnifying party an amount equal to such insurance proceeds, tax
deduction, or tax benefit.

          15.8.  Exclusive Remedy.  Notwithstanding anything to the contrary
                 ----------------
contained herein, except in the case of fraud or willful misconduct, the
indemnity provisions of this Article XV shall be the sole and exclusive remedy
against Southern States or Agway for any breach of the representations,
warranties, agreements and covenants contained in this Agreement.


                                  ARTICLE XVI

                                  Termination

          16.1.  Procedure for Termination.  This Agreement may be terminated at
                 -------------------------
any time on or before the Closing Date as follows:

                 (a)  by the mutual agreement of Agway and Southern States;

                 (b)  by Agway (provided that Agway is not in breach of its
obligations under this Agreement): (i) if Agway reasonably determines that the
transactions contemplated hereby cannot be consummated because of any
nonfulfillment of any condition set forth in Article X hereof which, as
determined by Agway, cannot be cured or rectified on or before the Closing or
such other prior date required by this Agreement for the fulfillment of such
condition; (ii) if Southern States breaches any representation or warranty made
by Southern States in this Agreement and such breach has a material adverse
effect on Agway; or (iii) if Southern States fails to comply with any of
Southern States' covenants or agreements contained in this Agreement; and

                 (c)  by Southern States (provided that Southern States is not
in breach of its obligations under this Agreement): (i) if Southern States
reasonably determines that the transactions contemplated hereby cannot be
consummated because of any nonfulfillment of any condition set forth in Article
XI hereof which, as determined by Southern States, cannot be cured or rectified
on or before the Closing or such other prior date required by this Agreement for
the fulfillment of such condition; (ii) if Agway breaches any representation or
warranty made by Agway in this Agreement and such breach has a material adverse
effect on the Purchased Assets or the Consumer Wholesale Dealer Distribution
Business; (iii) if Agway fails to comply with any of its covenants or agreements
contained in this Agreement; or (iv) pursuant to Article XIII hereof.

                                       33
<PAGE>

                 (d)  by either Agway or Southern States if the Closing shall
not have occurred on or before August 15, 2000; provided, however, that the
right to terminate this Agreement pursuant to this Section 16.1(d) shall not be
available to any parties whose failure to fulfill any obligation of this
Agreement has been the cause of, or resulted in, the failure of the Closing to
have occurred on or before the aforesaid date.

          16.2.  Effect of Termination.  If this Agreement is terminated as
                 ---------------------
provided in Section 16.1, the obligations of the parties hereunder shall
terminate; provided however, that if this Agreement is terminated by a party as
a result of the other party's willful failure to comply with its agreements or
covenants hereunder, then the party that terminated this Agreement shall have
the right to pursue all legal and equitable remedies available to it.


                                  ARTICLE XVII

                     Bulk Transfer Laws, Expenses and Taxes

          17.1.  Bulk Transfer Laws.  Agway and Southern States hereby waive
                 ------------------
compliance with the provisions of any applicable bulk transfer laws, or any
other similar laws ("Bulk Transfer Laws"), and Agway hereby agrees to defend,
indemnify, and hold harmless Southern States from and against any costs,
expenses, liability or claims by any person arising out of or due to the failure
to comply with such Bulk Transfer Laws, including, without limitation, any
claims by any person against all or any part of the Purchased Assets, but
excluding any Assumed Liabilities.

          17.2.  Costs and Expenses.  Except as otherwise specifically provided
                 ------------------
herein, all costs and expenses incurred by or on behalf of Agway and Southern
States, including, without limitation, all fees and expenses of agents,
representatives, counsel, and accountants employed in connection with the
authorization, preparation, execution, and performance of this Agreement or
other matters relating thereto shall be borne solely by the party that incurred
the same and the other party shall have no liability with respect thereof.

          17.3.  Transfer Taxes.  All sales, use, and transfer taxes and
                 --------------
recording, filing, title, and registration fees or other charges imposed upon or
incurred in connection with or as a result of the transfer of the Purchased
Assets to Southern States and the consummation of the transactions contemplated
herein shall be borne and paid by Southern States.

          17.4.  Real Estate and Other Taxes.  Real estate taxes imposed upon or
                 ---------------------------
assessed against the Leased Real Property shall be prorated as of the Closing
Date as mutually agreed by Agway and Southern States.

          17.5.  Utilities and Other Charges.  (a) Charges for electricity,
                 ---------------------------
water, gas, and other utilities and for telephone services related to the
Purchased Assets as of or for the calendar month in which the Closing occurs
shall be prorated as of the Closing Date; (b) payments under the Real Property
Leases and the Personal Property Leases as of or for the calendar month in which
the Closing occurs shall be prorated as of the Closing Date; and (c) other
similar prepaid

                                       34
<PAGE>

expenses and other charges of Agway related to the Consumer Wholesale Dealer
Distribution Business shall be prorated as of the Closing Date as mutually
agreed by Agway and Southern States.


                                 ARTICLE XVIII

                                 Miscellaneous

          18.1.  Entire Agreement.  This Agreement, together with the Schedules
                 ----------------
and the Exhibits hereto, constitutes the entire agreement between the parties
with respect to the matters set forth herein and supersedes all prior
agreements, arrangements, and understandings between the parties with respect to
the same.

          18.2.  Modification.  No provision of this Agreement, including the
                 ------------
provisions of this Section, may be modified, deleted, or amended in any manner
except by an agreement in writing executed by Agway and Southern States.

          18.3.  Notices.  All notices, requests, consents, and other
                 -------
communications to, upon, or between the parties shall be in writing and shall be
deemed to have been given, delivered, or made when personally delivered, sent by
telecopy, or when sent or mailed by certified mail, postage prepaid and return
receipt requested to the parties at the address set forth below or to such other
address as any party may specify by notice to the other party:

                 If to Southern States:

                         Southern States Cooperative, Inc.
                         6606 West Broad Street
                         Richmond, VA  23230-1717
                         Attn:  N. Hopper Ancarrow, Jr.
                                Vice President and General Counsel
                         Phone: 804-281-1205
                         Fax:   804-281-1383

                 If to Agway:

                         Agway, Inc.
                         P.O. Box 4933
                         Syracuse, NY  13221
                         Attn:  Christopher W. Fox
                                Associate General Counsel
                         Phone: 315-449-6431
                         Fax:   315-449-6253

          18.4.  Severability.  The invalidity or unenforceability of any
                 ------------
provision of this Agreement shall not affect the validity or enforceability of
any other provision.

                                       35
<PAGE>

          18.5.  No Assignment.  Neither this Agreement nor any interest herein
                 -------------
may be assigned by either party without the consent of the other party; and
provided further, that, upon written notice to Agway, Southern States may assign
its rights and obligations under this Agreement to an entity organized by
Southern States for the purpose of acquiring the Purchased Assets, provided that
Southern States retains all obligations hereunder pursuant to an agreement that
is reasonably satisfactory to Agway and such assignment is conditioned upon the
prior approval and execution of such agreement.

          18.6.  Waiver.  No waiver of any provision hereof shall be effective
                 ------
against the party waiving such provision unless such waiver is in a writing
executed by such party. The failure, at any time, of any party hereto to require
the performance of any provision hereof shall not affect the right of such party
to enforce the same. The waiver by any party hereto of any condition or of the
breach of any representation, warranty, covenant, or agreement shall not be
deemed to be a further or continuing waiver of such condition or such breach or
of any other condition or the breach of any other representation, warranty,
covenant, or agreement.

          18.7.  Benefit.  This Agreement shall be binding on and inure to the
                 -------
respective benefit of Southern States and Agway and their respective successors
and permitted assigns.

          18.8.  Construction.  This Agreement shall be construed and enforced
                 ------------
in accordance with the laws of the State of Delaware, other than its rules with
respect to choice of laws.

          18.9.  Counterparts.  This Agreement may be executed in more than one
                 ------------
counterpart, each of which shall be deemed an original and all of which shall
constitute a single instrument and agreement.

          18.10. Headings.  The underlined headings provided herein are for
                 --------
convenience only and shall not affect the interpretation of this Agreement.

          18.11. Third Party Beneficiaries.  None of the provisions of this
                 -------------------------
Agreement or any document contemplated hereby is intended to grant any right or
benefit to any person or entity which is not a party to this Agreement.

          18.12. Arbitration.  Except as otherwise set forth herein, any
                 -----------
dispute hereunder or under any of the agreements included as exhibits or
executed pursuant to the terms of this Agreement between Agway and Southern
States, or any of their successors or assigns, shall be settled by binding
arbitration conducted on a confidential basis, under the US Arbitration Act, if
applicable, and the then-current Commercial Arbitration Rules of the American
Arbitration Association strictly in accordance with the terms of this Agreement
and the substantive law of the State of Delaware.  The arbitration shall be
conducted at the Association's office located in the Washington, D.C. area by
three independent arbitrators, at least one of whom shall be knowledgeable in
the agricultural industry, one of whom shall be an attorney and one of whom
shall be a member of a nationally recognized accounting firm familiar with
business engaged in agriculture.  Judgment upon the arbitrators' award is
binding and final upon all parties and may be

                                       36
<PAGE>

entered and enforced in any court of competent jurisdiction. Neither party shall
institute a proceeding hereunder unless at least 60 days prior thereto such
party shall have given written notice to the other party of its intent to do so.


                                  ARTICLE XIX

                                  Definitions

     In addition to the other terms defined herein, the following shall apply
throughout this Agreement:

          19.1.  Accounts Receivable.  The term "Accounts Receivable" shall mean
                 -------------------
all dealer accounts receivable of the Agway Consumer Wholesale Dealer
Distribution Business arising from the sale of goods or services in the ordinary
course of business (excluding (i) any accounts receivable as to which the
account debtor is a non-U.S. resident; (ii) any accounts as to which the
original term for payment has been extended; (iii) any accounts which are
evidenced by promissory notes or other chattel paper; (iv) accounts of any
account debtor which, in whole or in part, have remained unpaid more than 60
days after the delivery of the goods sold or the services rendered; (v) other
distressed accounts for which collection procedures have been initiated; or (vi)
any intercompany or intracompany accounts receivable) existing as of the Closing
Date as set forth on the books and records of Agway as of the Closing Date,
which books and records shall detail the account name, address, the amount due,
and the aging of all such accounts receivable.  Agway reserves the right, in its
discretion, to exclude other accounts receivable which may have collection
issues connected with them.

          19.2.  Agway Indemnified Person.  The term "Agway Indemnified Person"
                 ------------------------
shall have the meaning set forth in Section 15.4.

          19.3.  Agway Minimum Amount.  The term "Agway Minimum Amount" shall
                 --------------------
have the meaning set forth in Section 15.3.

          19.4.  Assignable Permits.  The term "Assignable Permits" shall have
                 ------------------
the meaning set forth in Section 6.7.

          19.5.  Assumed Liabilities.  The term "Assumed Liabilities" shall have
                 -------------------
the meaning set forth in Section 3.1.

          19.6.  Best Knowledge of Agway.  The term "Best Knowledge of Agway",
                 -----------------------
including "Agway's knowledge" and all similar terms or expressions in this
Agreement, shall mean the actual knowledge of the officers and employees of
Agway listed in Schedule 19.6, and the knowledge of any other officers or
employees of Agway shall not be the Best Knowledge of Agway.

          19.7.  Bulk Transfer Laws.  The term "Bulk Transfer Laws" shall have
                 ------------------
the meaning set forth in Section 17.1.

                                       37
<PAGE>

          19.8.  Closing.  The term "Closing" shall have the meaning set forth
                 -------
in Section 5.1.

          19.9.  Closing Consents.  "Closing Consents" shall mean those third
                 ----------------
party consents included within the Required Consents that, by agreement of Agway
and Southern States, are so indicated on Schedule 6.2.2.

          19.10. Closing Date.  The term "Closing Date" shall have the meaning
                 ------------
set forth in Section 5.1.

          19.11. Consumer Wholesale Dealer Distribution Business.  The term
                 -----------------------------------------------
"Consumer Wholesale Dealer Distribution Business" shall have the meaning set
forth in Article I.

          19.12. Dealer Agreements.  The term "Dealer Agreements" shall have
                 -----------------
the meaning set forth in Section 6.6.1.

          19.13. Environmental Laws.  The term "Environmental Laws" shall mean
                 ------------------
any and all federal, state or local statutes, laws, regulation, ordinances,
court decisions, orders or rules relating to the environment; occupational
safety and health; the effect of Hazardous Materials on the environment or human
health; emissions, discharges or releases of Hazardous Materials into the
environment, including without limitation into ambient air, surface water,
groundwater or land; or otherwise relating to the handling of Hazardous
Materials or the clean-up or other remediation of Hazardous Materials.

          19.14. Environmental Permits.  The term "Environmental Permits" shall
                 ---------------------
have the meaning set forth in Section 6.14.

          19.15. Excluded Liabilities.  The term "Excluded Liabilities" shall
                 --------------------
have the meaning set forth in Section 3.2.

          19.16. Hazardous Materials.  The term "Hazardous Materials shall mean
                 -------------------
any and all "hazardous substances," "hazardous wastes," "pollutants,"
"contaminants" or "toxic substances," as defined by the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601
et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et
seq., the Clean Water Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42
U.S.C. Section 7401 et seq., or the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq., and regulations promulgated thereunder, or any analogous
federal, state or local laws and regulations; including but not limited to
petroleum and petroleum products, polychlorinated biphenyls ("PCBs"),
radioactive materials and asbestos.

          19.17. HSR Act.  The terms "HSR Act" shall mean the Hart-Scott-Rodino
                 -------
Antitrust Improvements Act of 1996, as amended, or any successor law, and
regulations and rules issues pursuant to that Act or any successor law.

          19.18. Improvements.  The term "Improvements" shall mean all of the
                 ------------
buildings, structures, improvements, fixtures, and appurtenances, including
construction in progress, located on the "Leased Real Property," as defined
herein, as the case may be.

                                       38
<PAGE>

          19.19.  Inventory.  The term "Inventory" shall mean all inventory of
                  ---------
merchandise for sale, operating supplies, and warehoused items including items
held under consignment, if any, including any associated vendor warranties
applicable to such merchandise held for sale and operating supplies held with
respect to or otherwise related to the Consumer Wholesale Dealer Distribution
Business, counted and valued pursuant to Section 4.2 of this Agreement;
provided, however, that the term "Inventory" shall not include any merchandise
held for sale by any person under consignment from Agway, except as may be
specifically agreed to by Southern States.

          19.20.  Leased Personal Property.  The term "Leased Personal Property"
                  ------------------------
shall have the meaning set forth in Section 6.8.3.

          19.21.  Leased Real Property.  The term "Leased Real Property" shall
                  --------------------
have the meaning set forth in Section 6.5.1.

          19.22.  License Agreement.  The term "License Agreement" shall have
                  -----------------
the meaning set forth in Section 5.2(c).

          19.23.  Liens.  The term "Liens" shall mean all liens, encumbrances,
                  -----
leases, casements, covenants, licenses, defects of title, claims, security
interests, mortgages, pledges, charges, restrictions, equities, agreements and
rights of others of every nature and description whatsoever; provided, however,
that the term "Liens" shall not include any "Permitted Liens" as defined below.

          19.24.  Owned Personal Property.  The term "Owned Personal Property"
                  -----------------------
shall have the meaning set forth in Section 6.8.1.

          19.25.  Permits.  The term "Permits" shall have the meaning set forth
                  -------
in Section 6.7.

          19.26.  Permitted Lien.  The term "Permitted Liens" shall mean (a) all
                  --------------
liens, encumbrances, leases, easements, covenants, licenses, defects of title,
claims, security interests, mortgages, pledges, charges, restrictions, equities,
agreements and rights of others of every nature and description whatsoever which
arise in the ordinary course of business and do not materially adversely affect
the full use and enjoyment of the assets subject thereto for the purposes for
which they are currently used, or materially detract from their value; and (b)
liens for taxes not yet due and payable.

          19.27.  Personal Property Leases.  The term "Personal Property Leases"
                  ------------------------
shall have the meaning set forth in Section 6.8.3.

          19.28.  Post-Closing Environmental Conditions.  The term "Post-Closing
                  -------------------------------------
Environmental Conditions" shall mean any and all conditions of any Leased Real
Property acquired by Southern States, including soil, surface water and
groundwater contamination, resulting from the disposal or release of Hazardous
Materials by Southern States after the Closing Date; or that is attributable to
the operation of the Consumer Wholesale Dealer Distribution Business by Southern
States after the Closing Date; provided, however, that any migration of
contamination first released prior to the Closing Date shall constitute a Pre-
Closing Environmental Condition to the extent applicable to such migration and
shall constitute a Post-Closing

                                       39
<PAGE>

Environmental Condition to the extent caused after the Closing Date by
operations of the Consumer Wholesale Dealer Distribution Business.

          19.29.  Pre-Closing Environmental Conditions.  The term "Pre-Closing
                  ------------------------------------
Environmental Conditions" shall mean any and all conditions of any Leased Real
Property or any other property formerly owned or leased by Agway as a part of
the Consumer Wholesale Dealer Distribution Business, including soil, surface
water and groundwater contamination, resulting from the disposal or release of
Hazardous Materials, which condition was in existence on, or arose from, such
property on or before the Closing Date; or that is attributable to the operation
of the Consumer Wholesale Dealer Distribution Business or the Purchased Assets
on or before the Closing Date.

          19.30.  Prepaid Expenses.  The term "Prepaid Expenses" shall mean
                  ----------------
those prepaid expenses relating to the Consumer Wholesale Dealer Distribution
Business which will inure to the benefit of Southern States.

          19.31.  Projected CWDDB Financial Statement.  The term "Projected
                  -----------------------------------
CWDDB Financial Statement shall have the meaning set forth in Section 8.9.

          19.32.  Purchased Assets.  The term "Purchased Assets" shall have the
                  ----------------
meaning set forth in Section 2.1.

          19.33.  Real Property Leases.  The term "Real Property Leases" shall
                  --------------------
have the meaning set forth in Section 6.6.1.

          19.34.  Records.  The term "Records" shall have the meaning set forth
                  -------
in Section 2.1(i).

          19.35.  Required Consents. The term "Required Consents" shall have the
                  -----------------
meaning set forth in Section 6.2.2.

          19.36.  Southern States Indemnified Persons.  The term "Southern
                  -----------------------------------
States Indemnified Persons" shall have the meaning set forth in Section 15.2.

          19.37.  SSC Minimum Amount.  The term "SSC Minimum Amount" shall have
                  ------------------
the meaning set forth in Section 15.5.

          19.38.  Survival Period.  The term "Survival Period" shall have the
                  ---------------
meaning set forth in Section 15.1.

          19.39.  Tangible Assets.  The term "Tangible Assets" shall have the
                  ---------------
meaning set forth in Section 13.1.

          19.40.  Trade Area.  The term "Trade Area" shall have the meaning set
                  ----------
forth in Section 14.8.

                                       40
<PAGE>

          19.41.  Trademarks.  The term "Trademarks" shall have the meaning set
                  ----------
forth in Section 6.10.

          19.42.  Transition Services Agreement.  The term "Transition Services
                  -----------------------------
Agreement" shall have the meaning set forth in Section 14.4.

     IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.


                              SOUTHERN STATES COOPERATIVE,
                              INCORPORATED


                              By:  /s/ Wayne A. Boutwell
                                 -----------------------
                              Its: President and Chief Executive Officer



                              AGWAY, INC.


                              By:   /s/ Robert A. Fischer
                                  -----------------------
                                        Vice President


                                       41