Document:

<PAGE>

                                                                    EXHIBIT 10.8

================================================================================

                         AGREEMENT AND PLAN OF MERGER

                               between and among

                   SOUTHERN STATES COOPERATIVE, INCORPORATED

                                      and

                          MICHIGAN LIVESTOCK EXCHANGE

                                      and

                        STATESMAN FINANCIAL CORPORATION

                                      and

                     MICHIGAN LIVESTOCK CREDIT CORPORATION

                         Dated as of December 31, 1997

================================================================================
<PAGE>

                                   Agreement

                               Table of Contents

                          (Not Part of the Agreement)

<TABLE>
<CAPTION>
                                                                           Page
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<S>                                                                        <C>
                                   ARTICLE I

The Mergers...............................................................   1
1.1.  Merger of MLE into Southern States..................................   1
1.2.  Merger of MLCC into Statesman.......................................   1
1.3.  Consummation of the MLE Merger and the MLCC Merger..................   1
1.4.  Approval by MLE Members and MLCC Stockholders.......................   2

                                  ARTICLE II
Closing...................................................................   2
2.1.  Time and Place......................................................   2

                                  ARTICLE III

Representations and Warranties of the MLE and MLCC........................   2
3.1.  Organization........................................................   2
3.2.  Subsidiaries........................................................   3
3.3.  Member Equities and Capitalization..................................   3
3.4.  Authority Relative to this Agreement................................   4
3.5.  Consents and Approvals; No Violation................................   4
3.6.  Financial Statements and Reports....................................   4
3.7.  Absence of Undisclosed Liabilities..................................   5
3.8.  Absence of Material Adverse Change..................................   5
3.9.  Finders and Investment Bankers......................................   5
3.10. Severance, Termination, Change in Control and Similar Agreements....   5
3.11. Real Property.......................................................   6
3.12. Title to and Condition of Personal Property.........................   7
3.13. Litigation..........................................................   7
3.14. Compliance with other Instruments and Laws..........................   7
3.15. Taxes...............................................................   8
3.16. Employees...........................................................   9
3.17. Employee Benefit Plans and Programs.................................   9
3.18. Accounts and Notes Receivable.......................................  13
3.19. Insurance...........................................................  13
3.20. Intellectual Property...............................................  13
3.21. Contracts...........................................................  14
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                                       i

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<TABLE>
<S>                                                                         <C>
3.22. Environmental Matters...............................................  15
3.23. Disclosure..........................................................  16

                                  ARTICLE IV

Separate Representations and Warranties of MLCC...........................  17
4.1.  Financial Statements and Reports....................................  17
4.2.  Absence of Undisclosed Liabilities..................................  17

                                   ARTICLE V

Representations and Warranties of Southern States.........................  17
5.1.  Organization........................................................  17
5.2.  Authority Relative to this Agreement................................  18
5.3.  Consents and Approvals; No Violation................................  18
5.4   Financial Statements and Reports....................................  18
5.5.  Litigation..........................................................  18
5.6   Absence of Undisclosed Liabilities..................................  19
5.7   Absence of Material Adverse Change..................................  19
5.8   Finders and Investment Bankers......................................  19
5.9   Compliance with Other Instruments and Laws..........................  19
5.10  Disclosure..........................................................  20

                                  ARTICLE VI

Representations and Warranties of Statesman...............................  20
6.1.  Organization........................................................  20
6.2.  Authority Relative to this Agreement................................  20
6.3.  Consents and Approvals; No Violation................................  21
6.4   Financial Statements and Reports....................................  21
6.5.  Litigation..........................................................  21
6.6.  Absence of Undisclosed Liabilities..................................  22
6.7   Absence of Material Adverse Change..................................  22
6.8   Compliance with Other Instruments and Laws..........................  22
6.9   Disclosure..........................................................  23

                                  ARTICLE VII

Conduct of Business Pending the Merger....................................  23
7.1.  Conduct of Business of the MLE Companies............................  23
</TABLE>

                                      ii
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<TABLE>
<S>                                                                        <C>
                                 ARTICLE VIII

Additional Agreements...................................................    25
8.1.   Southern States By-laws..........................................    25
8.2.   MLE Results of Operations........................................    26
8.3    Exchange of MLE Equities.........................................    26
8.4.   MLCC Lending Programs............................................    26
8.5.   Additional Agreements............................................    26
8.6.   No Solicitation of Acquisition Proposals.........................    27
8.7.   Access to Information; Confidentiality...........................    27
8.8.   Public Announcements.............................................    27

                                  ARTICLE IX

Closing Conditions......................................................    28
9.1.   Conditions Precedent to the Obligations of All Parties...........    28
9.2.   Conditions Precedent to the Obligations of MLE...................    28
9.3.   Conditions Precedent to Obligations of MLCC......................    29
9.4.   Conditions Precedent to Obligations of Southern States...........    29
9.5    Conditions Precedent to Obligations of Statesman.................    30

                                   ARTICLE X

Termination and Abandonment.............................................    31
10.1.  Termination......................................................    31
10.2.  Procedure and Effect of Termination..............................    32
10.3.  Effect on MLCC Merger of Termination by MLE or Southern States...    32

                                  ARTICLE XI

Miscellaneous...........................................................    32
11.1.  Amendment and Modification.......................................    32
11.2.  Waiver of Compliance; Consents...................................    32
11.3.  Investigations; Survival of Warranties...........................    33
11.4.  Notices..........................................................    33
11.5.  Assignment; Parties in Interest..................................    34
11.6.  Further Assurances...............................................    34
11.7.  Governing Law....................................................    34
11.8.  Counterparts.....................................................    34
11.9.  Entire Agreement.................................................    34
11.10. Severability.....................................................    34
</TABLE>

                                      iii
<PAGE>

                                   EXHIBITS

Exhibit A   Plan of Merger of Michigan Livestock Exchange with and into Southern
            States Cooperative, Incorporated

Exhibit B   Plan of Merger of Michigan Livestock Credit Corporation with and
            into Statesman Financial Corporation

Exhibit C   Proposed Amendments to Bylaws of Southern States Cooperative,
            Incorporated

                                      iv
<PAGE>

                     AGREEMENT AND PLAN OF REORGANIZATION

     Agreement and Plan of Merger dated as of December 31 1997 (the
"Agreement"), between and among Southern States Cooperative, Incorporated, a
Virginia agricultural cooperative corporation ("Southern States"), and Michigan
Livestock Exchange, a Michigan non-stock cooperative membership corporation
("MLE"), Statesman Financial Corporation, a Virginia corporation ("Statesman"),
and Michigan Livestock Credit Corporation, a Michigan corporation ("MLCC").

                                   ARTICLE I

                                  The Mergers

          1.1. Merger of MLE into Southern States. At the Effective Time (as
               ----------------------------------
defined in Section 1.3 hereof), in accordance with this Agreement and the
Virginia Stock Corporation Act ("VSCA") and applicable Michigan law, MLE shall
be merged into Southern States (the "MLE Merger") under and in accordance with
the terms of the Plan of Merger attached hereto as Exhibit A (the "MLE Plan of
                                                                   -----------
Merger"), the separate existence of MLE shall cease, and Southern States shall
------
continue as the surviving corporation of the MLE Merger with the effect as
provided for under the VSCA and applicable Michigan law. The Articles of
Incorporation and By-laws of the surviving corporation in the MLE Merger shall
be the Articles of Incorporation and By-laws of Southern States as in effect
immediately prior to the Effective Time, except as the By-laws of Southern
States shall be amended as of the Effective Time as provided for in Section 8.1
of this Agreement, until thereafter amended as provided for therein and under
the VSCA.

          1.2. Merger of MLCC into Statesman. At the Effective Time (as defined
               -----------------------------
in Section 1.3 hereof), in accordance with this Agreement and the Virginia Stock
Corporation Act ("VSCA") and applicable Michigan law, MLCC shall be merged into
Statesman or with or into a wholly owned subsidiary of Statesman (the "MLCC
Merger") under and in accordance with the terms of the Plan of Merger attached
hereto as Exhibit B (the "MLCC Plan of Merger"), the separate existence of MLCC
                          -------------------
shall cease, and Statesman shall continue as the surviving corporation of the
MLCC Merger with the effect as provided for under the VSCA and applicable
Michigan law. The Articles of Incorporation and By-laws of the surviving
corporation in the MLCC Merger shall be the Articles of Incorporation and By-
laws of Statesman as in effect immediately prior to the Effective Time until
thereafter amended as provided for therein and under the VSCA.

          1.3. Consummation of the MLE Merger and the MLCC Merger. The parties
               --------------------------------------------------
hereto will cause each of the MLE Merger and the MLCC Merger to be consummated
by delivering to the State Corporation Commission of the Commonwealth of
Virginia (the "Virginia Commission") articles of merger (the "Articles of
Merger") in such form as required by, and executed and acknowledged in
accordance with, the relevant provisions of the VSCA. Each of the MLE Merger and
the MLCC Merger shall become effective as of the time that the Virginia
Commission finds that the Articles of Merger comply with the requirements of law
and that all required fees have been paid, and it shall issue a certificate of
merger with respect to the MLE Merger and the MLCC Merger for record in
accordance with the relevant provisions of the VSCA (or at such later time
specified as the effective time in the Articles of Merger). The term
<PAGE>

"Effective Time" shall mean the date and time at which the MLE Merger and MLCC
Merger become effective.

          1.4. Approval by MLE Members and MLCC Stockholders. The MLE Merger
               ---------------------------------------------
shall be approved by the members of MLE and the MLCC Merger shall be approved by
the shareholders of MLCC, in each case in accordance with applicable Michigan
law. In order to consummate the MLE Merger, MLE shall, in accordance with
applicable law, duly call, give notice of, convene and hold a meeting of its
members as soon as practical, for the purposes of voting on and approving the
adoption of this Agreement and the MLE Plan of Merger. Subject to Section 8.6,
MLE shall include in the materials distributed to its members in connection with
the meeting called to vote upon this Agreement, the recommendation of the Board
of Directors of MLE that the members of MLE vote in favor of the approval of the
MLE Merger and the adoption of this Agreement and the MLE Plan of Merger.

                                  ARTICLE II

                                    Closing

          2.1. Time and Place. The closing of the transactions provided for in
               --------------
this Agreement (the "Closing") shall take place at the main office of Southern
                     -------
States in Richmond, Virginia, at 10:00 a.m., local time, as soon as practicable
following satisfaction of the closing conditions set forth in Article IX,
provided, however, that the parties hereto agree to use all reasonable efforts
to consummate the Closing on or before April 1, 1998, or as soon as practicable
thereafter. The date on which the Closing actually occurs is herein referred to
as the "Closing Date."

                                  ARTICLE III

                Representations and Warranties of MLE and MLCC

          MLE represents and warrants to Southern States with respect to itself
and, where applicable with respect to each of the Subsidiaries (as hereinafter
defined), and MLCC represents and warrants to each of Southern States and
Statesman with respect to itself, as follows:

          3.1. Organization. MLE is a non-stock, membership corporation duly
               ------------
organized, validly existing and in good standing under the laws of the State of
Michigan. MLCC is a stock corporation duly organized, validly existing and in
good standing under the laws of the State of Michigan. Each of MLE and MLCC has
all requisite power and authority, and all governmental licenses, authorizations
and approvals, to own, lease and operate its properties and to carry on its
business as now being conducted. Each of MLE and MLCC is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification necessary. Each of MLE and MLCC has heretofore
delivered or made available to Southern States accurate and complete copies of
its Articles of Incorporation and By-laws, as amended and in effect on the date
hereof.

                                       2
<PAGE>

          3.2.  Subsidiaries. Except as specifically set forth in Schedule 3.2,
                ------------
neither MLE nor MLCC has any subsidiaries and neither of them owns any capital
stock of or equity interests in any corporation, partnership, joint venture or
other entity or enterprise. MLE owns directly or indirectly each of the
outstanding shares of capital stock or other ownership interest of each of MLE's
subsidiaries shown on Schedule 3.2. (Each subsidiary of MLE listed on Schedule
3.2 is hereinafter referred to as a "Subsidiary" and MLE together with all of
                                     ----------
the Subsidiaries, are hereinafter referred to as the "MLE Companies".) Each of
                                                      -------------
the outstanding shares of capital stock or other ownership interest of each of
the Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and, except as set forth on Schedule 3.2, is owned, directly or
indirectly, by MLE free and clear of all liens, pledges, security interests,
claims or other encumbrances. The following information for each Subsidiary set
forth in Schedule 3.2 is true and correct: (i) its name and jurisdiction of
incorporation or organization and all jurisdictions where it is or is required
to be qualified to do business; (ii) its authorized capital stock or other
ownership interest; and (iii) the number of issued and outstanding shares of
capital stock or other ownership interest, the names of the holders thereof, and
the number of shares or amount of interest held by each such holder. Each of the
Subsidiaries is duly organized, validly existing and in good standing under the
laws of its state of organization and has all requisite power and authority, and
all government licenses, authorization and approvals, to own, lease and operate
its properties and to carry on its business as now being conducted. Each
Subsidiary is duly qualified or licensed and in good standing to do business in
each jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary.

          3.3.  Member Equities and Capitalization.
                ----------------------------------

                (a)  The aggregate amount of members' and patrons' equities of
MLE is accurately reflected on the MLE Financial Statements (as defined herein)
and the individual member's and patron's equities of MLE are accurately
reflected on MLE's books and records. MLE has furnished to Southern States an
accurate and complete list of member and patron allocated equities broken down
by year of allocation.

                (b)  All issued and outstanding capital stock or other ownership
interests in MLE or any of its subsidiaries are duly authorized, validly issued,
fully paid, non-assessable and free of preemptive rights.

                (c)  Except as set forth in Schedule 3.3(c), there are not now,
and at the Closing there will not be, any options, warrants, calls,
subscriptions, or other rights or other agreements or commitments of any nature
whatsoever (either firm or conditional) obligating MLE or any Subsidiary to
issue, transfer, deliver or sell, or cause to be issued, transferred, delivered
or sold, any additional shares of capital stock or other equity interest of MLE
or any Subsidiary, or any options, warrants, calls or other rights with respect
to any securities of, or equity interest in, MLE or any Subsidiary or any
securities or obligations convertible into or exchangeable for any such capital
stock or other interest, or obligating MLE or any Subsidiary to grant, extend or
enter into any such agreement or commitment, and no authorization therefor has
been given or made.

          3.4.  Authority Relative to this Agreement. Each of MLE and MLCC has
                ------------------------------------
all requisite power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby on behalf of itself and all of
the Subsidiaries. The execution and delivery of this Agreement by each of MLE
and MLCC and the consummation by each of

                                       3
<PAGE>

MLE and MLCC of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of each of MLE and MLCC, and immediately
prior to the Closing, no other corporate or cooperative action or proceedings on
the part of any of the MLE Companies or any of their respective shareholders or
members will be necessary to authorize this Agreement or the consummation of the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of MLE and MLCC and constitutes a valid and
legally binding agreement, enforceable against each of MLE and MLCC in
accordance with its terms.

          3.5.  Consents and Approvals; No Violation. Except as specifically set
                ------------------------------------
forth in Schedule 3.5, (i) there is no legal impediment to the consummation of
the transactions contemplated by this Agreement; (ii) no filing with, notice to,
or permit, authorization, consent or approval of, any public body or authority
or other third party is necessary for the consummation of the transactions
contemplated by this Agreement; and (iii) neither the execution and delivery of
this Agreement, consummation of the transactions contemplated hereby, nor
compliance with any of the provisions hereof will (A) conflict with or result in
any violation of any provision of the Articles of Incorporation or By-Laws of
MLE or any Subsidiary, (B) violate any statute, rule, regulation, order, writ,
injunction or decree of any public body or authority by which MLE, any
Subsidiary or any of their respective properties is bound, (C) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration or any right to receive prepayment penalties) or the loss of any
benefit to which MLE or any Subsidiary is entitled, under any contract,
agreement, note, bond, mortgage, indenture, license, lease, franchise, permit or
other instrument or obligation to which MLE or any Subsidiary is a party, or by
which any of them or any of their properties are bound, or (D) result in the
creation of any lien, encumbrance or charge of any kind on any asset of MLE or
any Subsidiary.

          3.6.  Financial Statements and Reports. MLE has furnished to Southern
                --------------------------------
States the following financial statements (collectively, the "MLE Financial
                                                              -------------
Statements"): (i) audited consolidated, and unaudited consolidating, balance
----------
sheets, statements of income, statements of changes in members' and
stockholders' equity and statements of cash flows as of and for the three most
recently ended fiscal years (the fiscal year ended December 31, 1996 being
referred to herein as the "MLE Last Fiscal Year End") of MLE and the
                           ------------------------
Subsidiaries; (ii) unaudited consolidated and consolidating balance sheets and
statements of income, changes in members' and stockholders' equity and cash flow
of MLE and the Subsidiaries as of and for the nine (9) month period ended
September 30, 1997; and (iii) unaudited consolidated and consolidating balance
sheets of MLE as of November 30, 1997 (the "MLE Balance Sheet"). The MLE
                                            -----------------
Financial Statements are correct and complete in all material respects with
respect to each item therein, and present fairly the consolidated financial
position, results of operations and changes in members' and stockholders' equity
of MLE and the Subsidiaries as of and for the periods indicated, and are
consistent in all material respects with the books and records of MLE and each
of the Subsidiaries (which books and records are correct and complete in all
material respects). The audited MLE financial statements have been prepared in
accordance with generally accepted accounting principles applied consistently
throughout the periods covered thereby.

          3.7.  Absence of Undisclosed Liabilities. Except as specifically set
                ----------------------------------
forth in Schedule 3.7, there are no liabilities, obligations or contingencies of
any nature whatsoever (whether absolute, accrued, contingent or otherwise),
except for liabilities, obligations or contingencies which are accrued or
reserved against on the MLE Balance Sheet or are immaterial

                                       4
<PAGE>

liabilities  which were incurred  after the date of the MLE Balance Sheet in the
ordinary course of business consistent with past practice.

          3.8.  Absence of Material Adverse Change. Except as specifically set
                ----------------------------------
forth in Schedule 3.8, since the date of the MLE Balance Sheet, the business of
MLE and each of the Subsidiaries has been operated in the usual and ordinary
course and substantially in the same manner as previously conducted, and there
has not been: (i) except for the effect of reserves established with the consent
of Southern States or Statesman in contemplation of the Mergers, any material
adverse change in the business, financial condition, results of operations or
prospects of MLE or any Subsidiary, and, to the best knowledge of MLE, no fact
or condition exists or is contemplated or threatened which might reasonably be
expected to result in any such material adverse change; (ii) any material
impairment of the ability of MLE or any Subsidiary to perform their respective
obligations under this Agreement; (iii) any material threat or impediment to the
consummation of the MLE Merger or the MLCC Merger and the other transactions
contemplated by this Agreement; (iv) any loss or, to the best knowledge of MLE,
threatened or contemplated loss of business of one or more customers of MLE or
any Subsidiary, which loss will have a material adverse effect upon the
business, results of operations or prospects of MLE or any Subsidiary; (v) any
material loss, damage, condemnation or destruction of or to any of the
properties of MLE or any Subsidiary (whether covered by insurance or not); (vi)
any borrowings by MLE or any Subsidiary arising other than in the ordinary
course of business consistent with past practices; (vii) any mortgage, pledge,
lien or encumbrance made on any of the Real Property (as defined in Section 3.11
hereof), Personal Property (as defined in Section 3.12 hereof) or other
properties or assets of MLE or any Subsidiary other than in the ordinary course
of business consistent with past practices; or (viii) any sale, transfer or
other disposition of any of the Real Property, Personal Property or other assets
or properties of MLE or any Subsidiary, other than (A) in the ordinary course of
business consistent with past practices or (B) as contemplated by this
Agreement.

          3.9.  Finders and Investment Bankers. Except as specifically set forth
                ------------------------------
in Schedule 3.9, all negotiations relating to this Agreement and the
transactions contemplated hereby have been carried on without the intervention
of any person acting on behalf of MLE or any Subsidiary in such manner as to
give rise to any claim against MLE or any Subsidiary for any broker's or
finder's fee or similar compensation.

          3.10.  Severance, Termination, Change in Control and Similar
                 -----------------------------------------------------
Agreements. Except as specifically set forth in Schedule 3.10, neither MLE nor
----------
any Subsidiary is a party to or bound by any agreement or arrangement for the
benefit of any current or former employee or director providing for any
severance, termination or retention payments or benefits or for any payments or
benefits payable in connection with or as a result of, directly or indirectly,
any change in control of MLE or any Subsidiary, and neither MLE nor any
Subsidiary will be a party to or bound by any such agreement or arrangement at
the Closing. No amount that could be received (whether in cash or property) as a
result of the consummation of the transactions contemplated by this Agreement by
any officer, director or employee of MLE or any Subsidiary under any employment,
severance or termination agreement or other compensation arrangement or plan
currently in effect will be characterized as an "excess parachute payment" (as
such term is defined in Section 280G(b)(1) of the Internal Revenue Code of 1986,
as amended (the "Code")).

          3.11. Real Property.
                -------------

                                       5
<PAGE>

                (a)   Schedule 3.11 contains a complete and correct list of all
real property and all interests in real property owned by MLE and each of the
Subsidiaries (collectively, the "Owned Real Property"). Schedule 3.11 also sets
                                 -------------------
forth the owner of each parcel of Owned Real Property and describes all
improvements thereon. Each of MLE and each Subsidiary, as the case may be, has
good, valid and marketable fee simple title to its Owned Real Property free and
clear of all Liens, other than (i) Liens existing on the date hereof and
specifically identified on Schedule 3.11, and (ii) statutory Liens for taxes not
yet due and payable (the items referred to in the foregoing clauses (i) and (ii)
are, collectively, "Permitted Liens").
                    ---------------

                (b)   Schedule 3.11 contains a complete and correct list of all
leases, subleases, licenses and occupancy agreements (collectively, "Leases")
                                                                     ------
pursuant to which MLE or any of its Subsidiaries is the lessee, sublessee,
licensee or occupant of any real property leased or subleased by MLE or any
Subsidiary (collectively, the "Leased Real Property"). Schedule 3.11 also
                               --------------------
contains a complete and correct list of all leases, subleases, licenses and
occupancy agreements pursuant to which MLE or any Subsidiary is the lessor,
sublessor or licensor of any part of the Leased Real Property or the Owned Real
Property (collectively, the "Other Leases"). Schedule 3.11 also sets forth the
                             ------------
landlord and tenant for each Lease and each Other Lease. MLE has delivered or
made available to Southern States complete and correct copies of the Leases and
the Other Leases. MLE and each Subsidiary have duly complied with the material
provisions of each of the Leases or Other Leases to which MLE or any Subsidiary
is a party and is not in default under any of the Leases or Other Leases. To the
best knowledge of MLE, no condition or state of facts exists which, with notice
or the passage of time or both, would constitute a default under any of the
Lease or Other Leases. Each of the Leases or Other Leases is in full force and
effect and is enforceable by MLE or such Subsidiary against all other parties
thereto.

                (c)   Except as specifically set forth in Schedule 3.11, the
Owned Real Property and the Leased Real Property (collectively, the "Real
Property") constitute all the fee simple and leasehold interests in real
property of MLE or any Subsidiary.

                (d)   Except as specifically set forth in Schedule 3.11, there
are no proceedings in eminent domain or other similar proceedings pending or
threatened affecting any portion of the Real Property. There exists no writ,
injunction, decree, order or judgment outstanding, nor any litigation pending or
threatened, relating to the ownership, lease, use, occupancy or operation by any
person of any Real Property.

                (e)   Except as specifically set forth in Schedule 3.11, the use
and operation of the Real Property in the conduct of the business of MLE or any
Subsidiary does not violate in any material respect any instrument of record or
other agreement affecting the Real Property. There is no material violation of
any covenant, condition, restriction, easement or order of any governmental
authority having jurisdiction over the Real Property or any other person
entitled to enforce the same affecting the Real Property or the use or occupancy
thereof. MLE and each of the Subsidiaries enjoy peaceful and undisturbed
possession under the Leases for the Leased Real Property.

                (f)   Except as specifically set forth in Schedule 3.11, the
Real Property is in compliance in all material respects with all applicable
building, environmental, zoning, subdivision and other land use and similar
applicable laws, codes, ordinances, rules, regulations and orders of
governmental authorities (collectively, the "Real Property Laws"), and neither
                                             ------------------
MLE nor any Subsidiary has received any notice of violation or claimed violation
of any Real

                                       6
<PAGE>

Property Law. There is no pending or, to the best knowledge of MLE, anticipated
change in any Real Property Law that will have or result in a material adverse
effect upon the ownership, alteration, use, occupancy or operation of the Real
Property or any portion thereof. No current use by MLE or any Subsidiary of the
Real Property is dependent on a nonconforming use or other governmental approval
the absence of which would materially limit the use of such properties or assets
in the business of MLE or any Subsidiary.

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

                      (a)  Except as specifically set forth in Schedule 3.12,
MLE and each of the Subsidiaries have good title to all material tangible assets
constituting personal property purported to be owned by it, including, without
limitation, all such personal property reflected on the MLE Balance Sheet or
acquired after the date thereof, all fixed assets, chattels, machinery,
equipment, leasehold improvements, computer hardware, fixtures, furniture,
furnishings, handling equipment, implements, parts, tools and accessories of all
kinds, and has valid leasehold interests in all personal property leased by it,
in each case free and clear of all Liens (personal property owned or leased by
MLE, collectively, the "Personal Property").
                        -----------------

                      (b)   Except as specifically set forth in Schedule 3.12,
the Personal Property is in good operating condition, in good repair, has been
well maintained, conforms with all applicable ordinances and regulations,
environmental laws,, regulations and ordinances and is substantially fit for use
in accordance with MLE and each Subsidiary's past practices.

                3.13. Litigation. Except as specifically set forth in Schedule
                      ----------
3.13, there is no action, suit, proceeding or investigation pending, or, to the
best knowledge of MLE, threatened against MLE or any Subsidiary which relates to
the transactions contemplated by this Agreement or which would, if adversely
determined, result in any liability to MLE or any Subsidiary, nor has MLE or any
Subsidiary received threat of any such action, proceeding, investigation or
inquiry. No such action, proceeding or, to the best knowledge of MLE,
investigation or inquiry has been pending at any time since the MLE Last Fiscal
Year End. There are no citations, fines or penalties heretofore asserted against
MLE or any Subsidiary under any federal, state or local law regulation, or
ordinance which remain unpaid, nor has MLE or any Subsidiary received any notice
or any other communication since MLE's Last Fiscal Year End from any federal,
state or local agency or other governmental authority with respect to any
material violations or alleged violations of any federal, state or local law or
regulation.

                3.14. Compliance with Other Instruments and Laws. Except as
                      ------------------------------------------
specifically set forth in Schedule 3.14, neither MLE nor any Subsidiary is in
violation of or default under any term of, nor is there any set of facts which
would, upon receipt of notice or passage of time constitute a violation of or
default under (i) its Articles of Incorporation or By-laws; (ii) any note, bond,
mortgage, indenture, instrument or agreement relating to indebtedness for
borrowed money; (iii) any judgment, decree or order of any court or governmental
body; or (iv) any other material contract, agreement, license, lease, franchise,
permit or other instrument or obligation to which it is a party or by which it
or any of its properties or assets is bound. MLE and each of the Subsidiaries
are in compliance in all material respects with all statutes, laws, ordinances,
rules, regulations, permits, concessions, grants, franchises, licenses and other
governmental authorizations and approvals applicable to the operation of their
respective businesses. All permits, concessions, grants, franchises, licenses
and other governmental authorizations and approvals material to the conduct of
the businesses of MLE or any Subsidiary have been duly

                                       7
<PAGE>

obtained and are in full force and effect, and there are no proceedings pending
or, to the best knowledge of MLE, threatened which may result in the revocation,
cancellation, suspension or materially adverse modification thereof. None of
such permits, concessions, grants, franchises, licenses or other governmental
authorizations and approvals will be affected in a manner that would have an
adverse effect on the financial condition, operations or business of MLE or any
of the Subsidiaries by the consummation of the transactions contemplated by this
Agreement.

                3.15. Taxes.
                      -----

                      (a)  MLE and each of the Subsidiaries have duly and timely
filed all federal, state, and local tax returns required to be filed by or with
respect to MLE or any Subsidiary or any of their respective assets or business,
and all such returns are true and correct in all material respects. True and
complete copies of all such tax returns for the preceding five years have been
furnished or made available to Southern States. MLE and each of the Subsidiaries
have duly and timely paid, collected and withheld all taxes, levies, duties,
imposts, assessments, fees and other governmental charges (including any
interest and penalties thereon and additions thereto) ("Taxes") that are or may
                                                        -----
be required to be paid, collected or withheld by or with respect to MLE or any
Subsidiary or any of their respective assets or business, except for Taxes not
yet due and for which adequate reserves are being maintained and reflected on
the MLE Balance Sheet in accordance with generally accepted accounting
principles. Except as specifically set forth on Schedule 3.15, no taxing
authority is now asserting or, to the best knowledge of MLE, threatening to
assert against MLE or any Subsidiary any deficiency or claim for Taxes. Except
as specifically set forth on Schedule 3.15, neither MLE nor any Subsidiary (i)
has been granted any waiver of any statute of limitations with respect to, or
any extension of a period for the assessment of, any Tax or (ii) is currently
under, or has received notice of commencement of, any audit by any taxing
authority, or is a party to any judicial proceeding with respect to Taxes.

                      (b)  Except as specifically set forth in Schedule 3.15,
there is no contract or agreement (including Tax sharing, allocation and
indemnification agreements) under which MLE or any Subsidiary has, or may at any
time in the future have, an obligation to contribute to the payment of any
portion of any Tax (or pay any amount computed by reference to any portion of
any Tax).

                      (c)  Except as specifically set forth in Schedule 3.15, no
written ruling has been received from, and no closing or other similar agreement
has been executed with, any taxing authority that is presently binding upon MLE
or any Subsidiary or any of their respective assets or business.

                      (d)  Schedule 3.15 sets forth (i) all states and
localities in which MLE or any Subsidiary is required to file Tax returns or pay
Taxes and (ii) all elections with respect to Taxes presently binding upon MLE or
any Subsidiary.

                      (e)  None of the assets of MLE or any of its Subsidiaries
(i) is properly required to be treated as being owned by any other person under
the "safe harbor lease" provisions of former Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended, or (ii) has been financed with or directly or
indirectly secures any bond or debt the interest on which is tax exempt under
Section 103(a) of the Code.

                                       8
<PAGE>

               3.16. Employees.  Except as specifically set forth on Schedule
                     ---------
3.16, MLE and each Subsidiary has complied in all material respects with all
legal requirements relating to the employment of labor, including, without
limitation, provisions relating to wages, hours, equal opportunity, collective
bargaining and the payment of social security and other Taxes. Except as set
forth in Schedule 3.16, neither MLE nor any Subsidiary is a party to or bound by
any collective bargaining agreement, nor has any of them experienced any
strikes, grievances, claims of unfair labor practice or other collective
bargaining disputes. Neither MLE nor any Subsidiary has any knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of MLE or any Subsidiary. Schedule 3.16
contains (i) a list of all grievances, if any, filed pursuant to any collective
bargaining agreement which is presently pending and which involves any employee
at any facility of MLE or the Subsidiaries, as well as a description and the
status of each, (ii) a list of all pending unfair labor practice charges, if
any, as well as a description of and a statement as to the status of each, filed
prior to the date hereof with any governmental agency by or on behalf of any
employee at any facility of MLE or any Subsidiary, and (iii) a list of all
pending employee-related litigation, if any, including administrative
proceedings, as well as a description of and a statement as to the status of
each case, filed by or on behalf of any employee at any facility of MLE or the
Subsidiaries.

               3.17. Employee Benefit Plans and Programs.
                     -----------------------------------

                     (a)  Schedule 3.17 lists (i) each "employee benefit
                          -------------
plan" within the meaning of Section 3(3) of ERISA (including, without
limitation, pension, profit sharing, stock bonus, medical reimbursement, life
insurance, disability and severance pay plans) that is maintained or otherwise
contributed to by, or under which there is any continuing obligation on the part
of, MLE or any Subsidiary for the benefit of any current or former employee or
director, spouse or former spouse, dependent or beneficiary thereof of MLE or
any Subsidiary or any of its current or former ERISA Affiliates (collectively,
"Employees") and (ii) all other employee benefit plans, agreements, programs,
policies or other arrangements (including, without limitation, vacation, sick,
personal or other leave and dependent care), not subject to ERISA, that are
maintained or otherwise contributed to by, or under which there is any
continuing actual or contingent obligation on the part of, MLE or any Subsidiary
for the benefit of any Employee (collectively, "Plans"). For purposes hereof, an
                                                -----
"ERISA Affiliate" means each entity that is or, depending on the context, was a
 ---------------
member of a controlled group or affiliated service group of which MLE or any
Subsidiary or, depending on the context, was such a member or that is or,
depending on the context, was under common control with MLE or any Subsidiary
(within the meaning of Sections 414(b), 414(c), 414(m) or 414(o) of the Code).

                     (b)  Schedule 3.17 hereto also contains a true and
                          -------------
complete list of the terms and conditions of employment, including compensation,
change in control agreements, severance and benefit continuation agreements and
other benefits other than Plans, of present and former employees of MLE or any
Subsidiary and the spouses, former spouses, dependents or beneficiaries of any
such persons.

                     (c)  With respect to each of the Plans which is not
a "multiemployer plan" (as such term is defined in Section 3(37) of ERISA), MLE
and each Subsidiary has made available to Southern States:

                                       9
<PAGE>

                    (i)    a current, accurate and complete copy (or, to
the extent no such copy exists, an accurate description) of the Plan document
therefor (including all existing amendments thereto that shall become effective
at a later date) and, to the extent applicable;

                    (ii)   any related trust agreement, annuity contract,
insurance contract (including, without limitation, any stop loss coverage), or
other funding instrument;

                    (iii)  any summary plan description and all summaries of
material modifications thereto;

                    (iv)   any related investment manager agreement,
administrative services agreement or other agreement with any service provider;

                    (v)    the last five years' annual reports on IRS Form 5500
series;

                    (vi)   for any Plan which is a defined benefit pension plan,
the last five years' actuarial valuation reports;

                    (vii)  the last five years' tax returns on Form 990 for any
trust funds;

                    (viii) the last five years' tax or other returns on which
excise taxes relating thereto has been reported;

                    (ix)   for any Plan which is a health, life insurance,
disability or accident plan, the claims experience for the last three years; and

                    (x)    the latest employee handbook and all modifications
thereto.

               (d)  Except as set forth in Schedule 3.17, with respect to
                                           -------------
each of the Plans which is not a "multiemployer plan" (as such term is defined
in Section 3(37) of ERISA):

                    (i)    each such Plan has been established and administered
in compliance with its terms and with the applicable provisions, if any, of
ERISA and the Code and of any applicable state or other law, and neither MLE nor
any ERISA Affiliate has received any written notice alleging to the contrary
with respect to any such plan;

                    (ii)   each such Plan is enforceable in accordance with the
written terms thereof and no representation or assurance has been made to any
Employee of MLE or any ERISA Affiliate that differs from the written terms of
any such Plan;

                    (iii)  MLE has the right to amend or terminate each such
Plan at any time and for any reason;

                    (iv)   there is no action, claim or demand of any kind
(other than routine claims for benefits), whether through litigation,
administrative or other proceedings or otherwise, that has been brought or, to
the best knowledge of MLE, is proposed or threatened, against any such Plan or
the assets thereof, against the fiduciary of any such plan, or against MLE or
any Subsidiary;

                                      10
<PAGE>

                    (v)    each Plan that is intended to be qualified
within the meaning of Section 401(a) of the Code has received a favorable
determination letter as to its qualification, and to the best knowledge of MLE,
there are no facts or circumstances that would jeopardize any Plan's
qualification under Section 401(a) of the Code;

                    (vi)   each Plan that is intended to be a cafeteria plan
within the meaning of Section 125 of the Code has been established and operated
in accordance with the applicable requirements thereof, and, to the best
knowledge of MLE, there are no facts or circumstances that would jeopardize any
Plan's treatment as a cafeteria plan under Section 125 of the Code;

                    (vii)  to the best knowledge of MLE no "reportable event"
(as such term is used in Section 4043 of ERISA), "prohibited transaction" (as
such term is used in Section 4975 of the Code or ERISA), or "accumulated funding
deficiency" (as such term is used in Section 412 or 4971 of the Code) has
occurred, or would occur by reason of the consummation of the transactions
contemplated in this Agreement, with respect to any Plan;

                    (viii) MLE and each Subsidiary and each of their respective
ERISA Affiliates has complied with the health care continuation requirements of
Section 601, et seq. of ERISA and COBRA with respect to Employees;
             -- ---

                    (ix)   Neither MLE nor any Subsidiary has any
obligation under any Plan to provide health, life insurance or other welfare
benefits to former employees, spouses, former spouses, or their dependents
except as specifically required by law;

                    (x)    the Real Property, Personal Property and other
properties and assets of MLE and the Subsidiaries are not subject to any liens
or other encumbrances (whether absolute or contingent), or any condition which
could result in any such lien or encumbrance, under the Code or ERISA with
respect to the Plans;

                    (xi)   there are no liabilities which would have a
material adverse effect with respect to the Plans which are not disclosed in the
MLE Balance Sheet;

                    (xii)  none of the agreements listed on Schedule 3.17
                                                            ------------
hereto will be breached by the execution, delivery and performance of this
Agreement by either MLE or MLCC;

                    (xiii)  none of the agreements listed on Schedule
                                                             --------
3.17 hereto requires Southern States or Statesman to retain any Employee of MLE
----
or any Subsidiary as an Employee for any period of time or to assume any
employment, compensation, fringe benefit, welfare pension, profit sharing or
deferred compensation plan or other employee benefit plan in respect of any
Employee of MLE, any Subsidiary or any ERISA Affiliate; and

                    (xiv)  each Plan which is a defined benefit pension
plan, which is subject to Title IV of ERISA is fully funded on a plan
termination basis.

               (e)  With respect  to each of the Plans  which is
a  "multiemployer  plan" (as such term is defined  in  Section  3(37) of ERISA),
except as set forth in Schedule 3.17:
                       -------------

                                      11
<PAGE>

                    (i)  MLE has identified each such plan on Schedule 3.17 as
                                                              -------------
such a multiemployer plan and has disclosed the ongoing regular contribution
obligation thereunder to Southern States;

                    (ii)   neither MLE nor any Subsidiary has incurred
any withdrawal liability with respect to any such multiemployer plan that
remains unsatisfied, or would incur any withdrawal liability with respect to any
such multiemployer plan if it or any of its ERISA Affiliates withdrew at the
Closing; and no withdrawal liability will be triggered by reason of the
consummation of the transactions contemplated in this Agreement;

                    (iii)  MLE has made available to Southern States a
current, accurate and complete copy (or, to the extent no such copy exists, an
accurate description) of the plan document therefor (including all existing
amendments thereto that shall become effective at a later date), and any summary
plan description and all summaries of material modifications thereto;

                    (iv)   there is no action, claim or demand of any kind
(other than routine claims for benefits), whether through litigation,
administrative or other proceedings or otherwise, that has been brought or, to
the best knowledge of MLE, is proposed or threatened, against or by any such
multiemployer plan or the assets thereof, MLE or any Subsidiary or any fiduciary
of any such multiemployer plan;

                    (v)    the Real Property, Personal Property and other
properties and assets of MLE and the Subsidiaries are not subject to any liens
or other encumbrances (whether absolute or contingent), or any condition which
could result in any such lien or encumbrance, under the Code or ERISA with
respect to any such multiemployer plan; and

                    (vi)   there are no liabilities with respect to any
such multiemployer plan which are not disclosed in the MLE Balance Sheet.

               (f)  Information provided by MLE to Southern States
regarding the costs of benefits and administration of the Plans for the
Employees of MLE and the Subsidiaries is accurate and complete.

        3.18.  Accounts and Notes Receivable. Except as specifically set
               -----------------------------
forth in Schedule 3.18, the accounts receivable and notes receivable of MLE or
any Subsidiary reflected on the MLE Balance Sheet, and such additional accounts
receivable or notes receivable as are reflected on the books of MLE or any
Subsidiary on the date hereof, including, without limitation, all customer
accounts receivable and notes receivable, are genuine and represent the valid
and binding obligations of the obligor thereon, enforceable in accordance with
their terms and are good and collectible at the recorded amounts thereof, are
free and clear of any Liens and have arisen only from bona fide transactions in
the ordinary course of business.

        3.19.  Insurance.  Each of MLE and each Subsidiary has fire and
               ---------
casualty insurance policies with extended coverages, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed. Schedule 3.19 lists all policies of
insurance covering MLE or any Subsidiary and their respective properties as
maintained by MLE or such Subsidiary on the date hereof. Such policies are in
full force and effect and all premiums due thereon have been paid. MLE and the
Subsidiaries have

                                      12
<PAGE>

complied in all material respects with the terms and provisions of such
policies. No notice of termination or premium increase has been received under
any of such policies.

          3.20.  Intellectual Property.
                 ---------------------

                 (a)  For purposes of this Section 3.20, the term "Intellectual
Property" means the United States and foreign trademarks, trade names, trade
dress, copyrights, and similar rights, including registrations and applications
to register or renew the registration of any of the foregoing, the United States
and foreign letters patent and patent applications, and inventions, processes,
designs, formulae, trade secrets, know-how, computer software, data, customer
lists, and all similar intellectual property rights, tangible embodiments of any
of the foregoing (in any medium including electronic media), and licenses of any
of the foregoing.

                 (b)  Schedule 3.20 sets forth a complete andcorrect list of all
Intellectual Property that is owned by MLE or any Subsidiary (the "Owned
Intellectual Property"), which term includes all owned computer software. Except
as specifically set forth in Schedule 3.20, the Owned Intellectual Property
constitutes all Intellectual Property used or held for use in connection with,
necessary for the conduct of, or otherwise material to the business of MLE or
any Subsidiary. Schedule 3.20 sets forth a complete and correct list of all
written or oral licenses and arrangements (i) pursuant to which the use by any
person of Intellectual Property is permitted by MLE or any Subsidiary and (ii)
pursuant to which the use by MLE of Intellectual Property is permitted by any
person (collectively, together with any of the foregoing relating to computer
software, the "Intellectual Property Licenses"). Immediately after the Closing,
               ------------------------------
Southern States or Statesman, as the case may be, will have the right to use all
Intellectual Property described in Schedule 3.20 and will own all Owned
Intellectual Property, free and clear of Liens. True and complete copies of all
Intellectual Property Licenses have been furnished to Southern States and
Statesman. MLE and the Subsidiaries have duly complied with the provisions of
each Intellectual Property License and none of them is in default under any such
Intellectual Property License. To the best knowledge of MLE, no condition or
state of facts exists which, with notice or the passage of time or both, would
constitute a default under any such Intellectual Property License. All
Intellectual Property Licenses are in full force and effect and are enforceable
by MLE or any Subsidiary, as the case may be, against all other parties thereto.
Except as specifically set forth in Schedule 3.20, (i) the conduct of the
business of MLE and the Subsidiaries does not infringe the rights of any third
party in respect of any Intellectual Property, (ii) to the best knowledge of
MLE, none of the Owned Intellectual Property is being infringed by third
parties, and (iii) there is no claim or demand of any person pertaining to, or
any proceeding which is pending or, to the best knowledge of MLE, threatened
that challenges the rights of MLE or any Subsidiary in respect of any Owned
Intellectual Property or Intellectual Property License, or that claims that any
default exists under any Intellectual Property License.

          3.21.  Contracts.
                 ---------

                 (a)  Except as may be listed on another Schedule to this
Agreement, Schedule 3.21 sets forth a list of all material written agreements,
contracts and commitments, together with all amendments thereto, and accurate
descriptions of all oral agreements of the following types to which MLE or any
Subsidiary is a party as of the date hereof:

                                      13
<PAGE>

                    (i)     Borrowing and Lending Arrangements. Mortgages,
                            ----------------------------------
indentures, security agreements and other agreements and instruments relating to
the borrowing of money or advances of credit;

                    (ii)    Partnership. Partnership or joint venture
                            -----------
agreements;

                    (iii)   Employment. Employmentagreements and consulting
                            ----------
agreements;

                    (iv)    Bonus and Benefit Plans. Bonus, profit sharing,
                            -----------------------
compensation, stock option, pension, retirement, severance, deferred
compensation or other plans, agreements, arrangements, trusts or funds for the
benefit of employees, including all arrangements subject to ERISA;

                    (v)     Sales Agency. Material sales agency, manufacturer's
                            ------------
representative or distributorship agreements, supply agreements, marketing
agreements, advertising agreements, agreements with outside credit card
companies, licenses and other agreements relating to Intellectual Property,
including all Intellectual Property Licenses;

                    (vi)    Capital Expenditures. Agreements or commitments for
                            --------------------
capital expenditures to be made in excess of $50,000 for any single project;

                    (vii)   Investment Agreements. Agreements to provide funds
                            ---------------------
or to make any investment (in the form of a loan, capital contribution or
otherwise) in any entity or business;

                    (viii)  Agreements with Affiliates. Agreements or
                            --------------------------
commitments with any officer or director of MLE or any Subsidiary or with any
entity or business venture in which such officer or director has a direct or
indirect interest or any person who owns more than 5% of the issued and
outstanding equity of MLE or any Subsidiary;

                    (ix)    Loan Agreements. Loans, credit, factoring,
                            ---------------
subordination or similar agreements;

                    (x)     Powers of Attorney. Outstanding powers of attorney
                            ------------------
empowering any person, company or other organization to act on behalf of MLE or
any Subsidiary;

                    (xi)    Guaranty. Outstanding guaranty or similar type of
                            --------
agreement, whether or not entered into in the ordinary course of business;

                    (xii)   Professional Advisors. All agreements, contracts,
                            ---------------------
commitments and understandings with professional advisors for services to be
rendered on behalf of MLE or a Subsidiary;

                    (xiii)  Customer Agreements. Agreements or other
                            -------------------
arrangements with customers of any of the MLE Companies with an aggregate value
in excess of $50,000;

                    (iv)    Other Agreements. All other agreements, contracts
                            ----------------
and commitments (excluding purchase orders, sales orders and contracts for the
purchase of goods

                                      14
<PAGE>

and services created in the ordinary course of business), including, without
limitation, real estate leases, written or oral, to which MLE or any Subsidiary
is a party or by which any of its properties is bound as of the date hereof, any
one (or series) of which in any way involve payments or receipts of more than
$50,000 following the date hereof, and all Intellectual Property Licenses; and,

                (b)  True and compete copies of all of the agreements, contracts
and commitments referred to in this Section 3.21 (the "Material Contracts") have
                                                       ------------------
been furnished or made available to Southern States. MLE and each of the
Subsidiaries have duly complied with the provisions of each Material Contract to
which MLE or any such Subsidiary is a party and neither MLE nor any Subsidiary
is in default under any such Material Contract. All Material Contracts to which
MLE or any Subsidiary is a party are in full force and effect and are
enforceable by MLE or such Subsidiary against all other parties thereto.

          3.22. Environmental Matters.
                ---------------------

                (a)  As used in this Agreement:

                     (i)   "Applicable Environmental Law" means federal, state
                            ----------------------------
and local laws, principles of common law, regulations, and ordinances that exist
on the date hereof, relating to pollution or protection of the environment which
are applicable to MLE or any Subsidiary or their respective businesses,
including laws relating to the emission, discharge, release or threatened
release of any Hazardous Substance (as hereinafter defined) into the
environment, or otherwise relating to the presence, manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of any
Hazardous Substance.

                     (ii)  "Hazardous Substance" means any pollutant,
                            -------------------
contaminant, toxic or hazardous or extremely hazardous substance, material,
waste, constituent or chemical (including, petroleum or any product, by-product,
or fraction thereof, asbestos and asbestos-containing materials, polychlorinated
biphenyls ("PCBs"), pesticides, defoliants, explosives, flammables, corrosives
            ----
and urea formaldehyde) that is regulated by or requires notification,
investigation or remediation under any Applicable Environmental Law.

                (b)  Except as specifically set forth in Schedule 3.22 hereto:

                     (i)   Each of MLE and the Subsidiaries has obtained all
material permits, licenses and other authorizations and filed all notices which
are required to be obtained or filed by MLE or such Subsidiary under any
Applicable Environmental Law;

                     (ii)  Each of MLE and the Subsidiaries is in compliance in
all material respects with all terms and conditions of such required permits,
licenses and authorizations;

                     (iii) Each of MLE and the Subsidiaries is in compliance in
all material respects with all requirements contained in any Applicable
Environmental Law;

                     (iv)  There are no past or present activities related to
the presence, manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling, or the emission, discharge, release or
threatened release into the environment, of a material amount of any Hazardous
Substance by MLE or any Subsidiary;

                                      15
<PAGE>

                    (v)   The properties and plants of MLE or any Subsidiary do
not contain any asbestos, PCBs, aboveground or underground storage tanks in any
form, any surface impoundment, lagoon, landfill or other containment facility
for the storage, treatment or disposal of any Hazardous Substance, or any
wetlands area; and

                    (vi)  Neither MLE nor any Subsidiary has knowledge or
received notice of any violation of any Applicable Environmental Law, nor has it
been advised by any governmental agency of any actual or potential claim,
liability or demand pursuant to any Applicable Environmental Law, including but
not limited to, a claim, notice or demand under the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. ss.ss.9601 et seq.
("CERCLA") or other similar state law, brought by any governmental agency,
private party or other entity with respect to the operation of the business of
MLE or any Subsidiary.

          3.23.  Disclosure. This Agreement, including all Schedules and
                 ----------
other exhibits or related documents, does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements and information contained herein, in light of the circumstances in
which they are made, not misleading. There is no material fact which has not
been disclosed to Southern States or Statesman in writing, which is or could be
anticipated to be material to Southern States' or Statesman's decision to
consummate the transactions contemplated by the Agreement on the terms and
conditions set forth herein.

                                  ARTICLE IV

                Separate Representations and Warranties of MLCC

          In addition to, and severally with, the representations and warranties
made by MLCC in the preceding Article III, MLCC represents and warrants to each
of Southern States and Statesman as follows:

          4.1.   Financial Statements and Reports. MLCC has furnished to
                 --------------------------------
Statesman the following financial statements (collectively, the "MLCC Financial
                                                                 --------------
Statements"): (i) audited balance sheet, statement of income, statement of
----------
changes in stockholders' equity and statement of cash flows as of and for the
fiscal year ended December 31, 1996 (the "MLCC Last Fiscal Year End") of MLCC;
                                          -------------------------
the (ii) unaudited balance sheets and statements of income, changes in
stockholders' equity and cash flow of MLCC as of and for the two fiscal years
ended December 31, 1994 and December 31, 1995 and for the nine (9) month period
ended September 30, 1997; and (iii) unaudited balance sheet of MLCC as of
November 30, 1997 (the "MLCC Balance Sheet"). The MLCC Financial Statements are
                        ------------------
correct and complete in all material respects with respect to each item therein,
and present fairly the consolidated financial position, results of operations
and changes in stockholders' equity of MLCC as of and for the periods indicated,
and are consistent in all material respects with the books and records of MLCC
(which books and records are correct and complete in all material respects). The
audited MLCC financial statements have been prepared in accordance with
generally accepted accounting principles applied consistently throughout the
periods covered thereby.

          4.2.   Absence of Undisclosed Liabilities. Except as specifically set
                 ----------------------------------
forth in Schedule 4.2, there are no liabilities, obligations or contingencies of
any nature whatsoever (whether absolute, accrued, contingent or otherwise),
except for liabilities, obligations or contingencies which are accrued or
reserved against on the MLCC Balance Sheet or are

                                      16
<PAGE>

liabilities which were incurred after the date of the MLCC Balance Sheet in the
ordinary course of business consistent with past practice.

                                   ARTICLE V

               Representations and Warranties of Southern States

          Southern States represents and warrants to MLE as follows:

          5.1.   Organization. Southern States is an agricultural cooperative
                 ------------
corporation duly incorporated, validly existing and in good standing under the
laws of the Commonwealth of Virginia. Southern States has all requisite power
and authority, and all governmental licenses, authorizations and approvals, to
own, lease and operate its properties and to carry on its business as now being
conducted. Southern States is duly qualified or licensed and in good standing to
do business in each jurisdiction in which the property owned, leased or operated
by it or the nature of the business conducted by it makes such qualification
necessary. Southern States has heretofore delivered or made available to MLE
accurate and complete copies of its Articles of Incorporation and By-laws, as
amended and in effect on the date hereof.

          5.2.   Authority Relative to this Agreement. Southern States has all
                 ------------------------------------
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Southern States and the consummation by Southern
States of the transactions contemplated hereby have been duly and validly
authorized and approved by the Board of Directors of Southern States, and,
immediately prior to the Closing, no other corporate action or proceedings on
the part of Southern States or its shareholders will be necessary to authorize
this Agreement or the consummation of the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Southern States
and constitutes a valid and binding agreement of Southern States, enforceable
against Southern States in accordance with its terms.

          5.3.   Consents and Approvals; No Violation. Except as specifically
                 ------------------------------------
set forth in Schedule 5.3, (i) there is no legal impediment to the consummation
of the transactions contemplated by this Agreement; (ii) no filing with, and no
permit, authorization, consent or approval of, any public body or authority is
necessary for the consummation by Southern States of the transactions
contemplated by this Agreement; and (iii) neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby nor
compliance by Southern States with any of the provisions hereof will: (A)
conflict with or result in any violation of any provision of the Articles of
Incorporation or By-laws of Southern States, (B) violate any statute, rule,
regulation, order, writ, injunction or decree of any public body or authority by
which Southern States is bound, or (C) except as specifically set forth in
Schedule 5.3, (1) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any contract,
agreement, note, bond, mortgage, indenture, license, lease, franchise, permit or
other instrument or obligation to which Southern States is a party, or by which
it or any of its properties is bound, or (2) result in the creation of any lien,
encumbrance or charge of any kind on any asset of Southern States.

                                      17
<PAGE>

          5.4.   Financial Statements and Reports. Southern States has furnished
                 --------------------------------
to MLE the following financial statements (collectively, the "Southern States
                                                              ---------------
Financial Statements"): (i) audited consolidated balance sheet, statement of
--------------------
income, statement of changes in stockholders' equity and statement of cash flows
as of and for the fiscal year ended June 30, 1997 ("Southern States Last Fiscal
                                                    ---------------------------
Year End") of Southern States; and (ii) unaudited consolidated balance sheet
--------
("Southern States Balance Sheet") and statements of income, changes in
  -----------------------------
stockholders' equity and cash flow of Southern States as of and for the five (5)
month period ended November 30, 1997. The Southern States Financial Statements
are correct and complete in all material respects with respect to each item
therein, have been prepared in accordance with generally accepted accounting
principles applied consistently throughout the periods covered thereby, and
present fairly the consolidated financial position, results of operations and
changes in stockholders' equity of Southern States as of and for the periods
indicated, and are consistent in all material respects with the books and
records of Southern States (which books and records are correct and complete in
all material respects).

          5.5.   Litigation. Except as specifically set forth in Schedule 5.5,
                 ----------
there is no action, proceeding or investigation pending, or to the best
knowledge of Southern States threatened, against Southern States which relates
to the transactions contemplated by this Agreement or which would, if adversely
determined, result in any liability to Southern States, nor has Southern States
received threat of any such action, proceeding investigation or inquiry. No such
action, proceeding or, to the best knowledge of Southern States, investigation
or inquiry has been pending, at any time since the date of Southern States Last
Fiscal Year End. There are no citations, fines, or penalties heretofore asserted
against Southern States under any federal, state or local law, regulation or
ordinance which remain unpaid, nor has Southern States received notices or any
other communications since Southern States Last Fiscal Year End from any
federal, state or local agency or other governmental authority with respect to
any material violations or alleged violations of any federal, state or local law
or regulation.

          5.6.   Absence of Undisclosed Liabilities. Except as specifically set
                 ----------------------------------
forth in Schedule 5.6, there are no liabilities, obligations or contingencies of
any nature whatsoever (whether absolute, accrued, contingent or otherwise),
except for liabilities, obligations or contingencies which are accrued or
reserved against on the Southern States Balance Sheet or are immaterial
liabilities which were incurred after the date of the Southern States Balance
Sheet in the ordinary course of business consistent with past practice.

          5.7.   Absence of Material Adverse Change. Except as specifically set
                 ----------------------------------
forth in Schedule 5.7, since the date of the Southern States Balance Sheet, the
business of Southern States has been operated in the usual and ordinary course
and substantially in the same manner as previously conducted, and there has not
been: (i) any material adverse change in the business, financial condition,
results of operations or prospects of Southern States, and, to the best
knowledge of Southern States, no fact or condition exists or is contemplated or
threatened which might reasonably be expected to result in any such material
adverse change; (ii) any material impairment of the ability of Southern States
to perform its obligations under this Agreement; (iii) any material threat or
impediment to the consummation of the MLE Merger or the MLCC Merger and the
other transactions contemplated by this Agreement; (iv) any loss or, to the best
knowledge of Southern States, threatened or contemplated loss of business of one
or more customers of Southern States, which loss will have a material adverse
effect upon the business, results of operations or prospects of Southern States;
(v) any material loss, damage, condemnation or destruction of or to any of the
properties of Southern States (whether covered

                                      18
<PAGE>

by insurance or not); (vi) any borrowings by Southern States arising other than
in the ordinary course of business consistent with past practices; (vii) any
mortgage, pledge, lien or encumbrance made on any of the properties or assets of
Southern States arising other than in the ordinary course of business consistent
with past practices; or (viii) any sale, transfer or other disposition of any of
the assets or properties of Southern States, other than (A) in the ordinary
course of business consistent with past practices or (B) as contemplated by this
Agreement.

          5.8.   Finders and Investment Bankers. Except as specifically set
                 ------------------------------
forth in Schedule 5.8, all negotiations relating to this Agreement and the
transactions contemplated hereby have been carried on without the intervention
of any person acting on behalf of Southern States in such manner as to give rise
to any claim against Southern States for any broker's or finder's fee or similar
compensation.

          5.9.   Compliance with Other Instruments and Laws. Except as
                 ------------------------------------------
specifically set forth in Schedule 5.9, Southern States is not in violation of
or default under any term of nor is there any set of facts which would, upon
receipt of notice or passage of time constitute a violation of or default under
(i) its Articles of Incorporation or By-laws; (ii) any note, bond, mortgage,
indenture, instrument or agreement relating to indebtedness for borrowed money;
(iii) any judgment, decree or order of any court or governmental body; or (iv)
any other material contract, agreement, license, lease, franchise, permit or
other instrument or obligation to which it is a party or by which it or any of
its properties or assets is bound. Southern States is in compliance in all
material respects with all statutes, laws, ordinances, rules, regulations,
permits, concessions, grants, franchises, licenses and other governmental
authorizations and approvals applicable to the operation of their respective
businesses. All permits, concessions, grants, franchises, licenses and other
governmental authorizations and approvals material to the conduct of the
business of Southern States have been duly obtained and are in full force and
effect, and there are no proceedings pending or, to the best knowledge of
Southern States, threatened which may result in the revocation, cancellation,
suspension or materially adverse modification thereof. None of such permits,
concessions, grants, franchises, licenses or other governmental authorizations
and approvals will be affected in a manner that would have an adverse effect on
the financial condition, operations or business of Southern States by the
consummation of the transactions contemplated by this Agreement.

          5.10.  Disclosure. This Agreement, including all Schedules and other
                 ----------
exhibits or related documents, does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements and information contained herein, in light of the circumstances in
which they are made, not misleading. There is no material fact which has not
been disclosed to MLE in writing, which is or could be anticipated to be
material to MLE's decision to consummate the transactions contemplated by the
Agreement on the terms and conditions set forth herein.

                                      19
<PAGE>

                                  ARTICLE VI

                  Representations and Warranties of Statesman

          Statesman represents and warrants to MLCC as follows:

          6.1.   Organization. Statesman is a corporation duly incorporated,
                 ------------
validly existing and in good standing under the laws of the Commonwealth of
Virginia. Statesman has all requisite power and authority, and all governmental
licenses, authorizations and approvals, to own, lease and operate its properties
and to carry on its business as now being conducted. Statesman is duly qualified
or licensed and in good standing to do business in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary. Statesman has heretofore
delivered or made available to MLCC accurate and complete copies of its Articles
of Incorporation and By-laws, as amended and in effect on the date hereof.

          6.2.   Authority Relative to this Agreement. Statesman has all
                 ------------------------------------
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Statesman and the consummation by Statesman of the
transactions contemplated hereby have been duly and validly authorized and
approved by its Board of Directors and, to the extent required by law, its
shareholders, and, immediately prior to the Closing, no other corporate action
or proceedings on the part of Statesman or its shareholders will be necessary to
authorize this Agreement or the consummation of the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
Statesman and constitutes a valid and binding agreement of Statesman,
enforceable against Statesman in accordance with its terms.

          6.3.   Consents and Approvals; No Violation. Except as specifically
                 ------------------------------------
set forth in Schedule 6.3, (i) no filing with, and no permit, authorization,
consent or approval of, any public body or authority is necessary for the
consummation by Statesman of the transactions contemplated by this Agreement;
and (ii) neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby nor compliance by Statesman
with any of the provisions hereof will (A) conflict with or result in any
violation of any provision of the Articles of Incorporation or By-laws of
Statesman, (B) violate any statute, rule, regulation, order, writ, injunction or
decree of any public body or authority by which Statesman is bound, or (C)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any contract, agreement, note, bond,
mortgage, indenture, license, lease, franchise, permit or other instrument or
obligation to which Statesman is a party, or by which it or any of its
properties is bound.

          6.4.   Financial Statements and Reports. Statesman has furnished to
                 --------------------------------
MLCC the following financial statements (collectively, the "Statesman Financial
                                                            -------------------
Statements"): (i) audited balance sheet, statement of income, statement of
----------
changes in stockholders' equity and statements of cash flows as of and for the
fiscal year ended June 30, 1997 ("Statesman Last Fiscal Year End") of Statesman;
                                  ------------------------------
and (ii) unaudited balance sheet ("Statesman Balance Sheet") and statement of
                                   -----------------------
income, changes in stockholders' equity and cash flow of Statesman as of and for
the five (5) month period ended November 30, 1997. The Statesman Financial
Statements are correct and complete in all material respects with respect to
each item therein, have been prepared in

                                      20
<PAGE>

accordance with generally accepted accounting principles applied consistently
throughout the periods covered thereby, and present fairly the consolidated
financial position, results of operations and changes in stockholders' equity of
Statesman as of and for the periods indicated, and are consistent in all
material respects with the books and records of Statesman (which books and
records are correct and complete in all material respects).

          6.5.   Litigation. Except as specifically set forth in Schedule 6.5,
                 ----------
there is no action, proceeding or investigation pending, or, to the best
knowledge of Statesman, threatened against Statesman which relates to the
transactions contemplated by this Agreement or which would, if adversely
determined, result in any liability to Statesman, nor has Statesman received
threat of any such action, proceeding, investigation or inquiry. No such action,
proceeding or, to the best knowledge of Statesman, investigation or inquiry has
been pending at any time since the Statesman Last Fiscal Year End. There are no
citations, fines, or penalties heretofore asserted against Statesman under any
federal, state or local law, regulation or ordinance which remain unpaid, nor
has Statesman received notices or any other communications since the Statesman
Last Fiscal Year End from any federal, state or local agency or other
governmental authority with respect to any material violations or alleged
violations of any federal, state or local law or regulation.

          6.6.   Absence of Undisclosed Liabilities. Except as specifically set
                 ----------------------------------
forth in Schedule 6.6, there are no liabilities, obligations or contingencies of
any nature whatsoever (whether absolute, accrued, contingent or otherwise),
except for liabilities, obligations or contingencies which are accrued or
reserved against on the Statesman Balance Sheet or are immaterial liabilities
which were incurred after the date of the Statesman Balance Sheet in the
ordinary course of business consistent with past practice.

          6.7.   Absence of Material Adverse Change. Except as specifically set
                 ----------------------------------
forth in Schedule 6.7, since the date of the Statesman Balance Sheet, the
business of Statesman has been operated in the usual and ordinary course and
substantially in the same manner as previously conducted, and there has not
been: (i) any material adverse change in the business, financial condition,
results of operations or prospects of Statesman, and, to the best knowledge of
Statesman, no fact or condition exists or is contemplated or threatened which
might reasonably be expected to result in any such material adverse change; (ii)
any material impairment of the ability of Statesman to perform its obligations
under this Agreement; (iii) any material threat or impediment to the
consummation of the MLE Merger or the MLCC Merger and the other transactions
contemplated by this Agreement; (iv) any loss or, to the best knowledge of
Statesman, threatened or contemplated loss of business of one or more customers
of Statesman, which loss will have a material adverse effect upon the business,
results of operations or prospects of Statesman; (v) any material loss, damage,
condemnation or destruction of or to any of the properties of Statesman (whether
covered by insurance or not); (vi) any borrowings by Statesman arising other
than in the ordinary course of business consistent with past practices; (vii)
any mortgage, pledge, lien or encumbrance made on any of the properties or
assets of Statesman arising other than in the ordinary course of business
consistent with past practices; or (viii) any sale, transfer or other
disposition of any of the assets or properties of Statesman, other than (A) in
the ordinary course of business consistent with past practices or (B) as
contemplated by this Agreement.

                                      21
<PAGE>

          6.8.   Compliance with Other Instruments and Laws. Except as
                 ------------------------------------------
specifically set forth in Schedule 6.8, Statesman is not in violation of or
default under any term of nor is there any set of facts which would, upon
receipt of notice or passage of time constitute a violation of or default under
(i) its Articles of Incorporation or By-laws; (ii) any note, bond, mortgage,
indenture, instrument or agreement relating to indebtedness for borrowed money;
(iii) any judgment, decree or order of any court or governmental body; or (iv)
any other material contract, agreement, license, lease, franchise, permit or
other instrument or obligation to which it is a party or by which it or any of
its properties or assets is bound. Statesman is in compliance in all material
respects with all statutes, laws, ordinances, rules, regulations, permits,
concessions, grants, franchises, licenses and other governmental authorizations
and approvals applicable to the operation of their respective businesses. All
permits, concessions, grants, franchises, licenses and other governmental
authorizations and approvals material to the conduct of the business of
Statesman have been duly obtained and are in full force and effect, and there
are no proceedings pending or, to the best knowledge of Statesman, threatened
which may result in the revocation, cancellation, suspension or materially
adverse modification thereof. None of such permits, concessions, grants,
franchises, licenses or other governmental authorizations and approvals will be
affected in a manner that would have an adverse effect on the financial
condition, operations or business of Statesman by the consummation of the
transactions contemplated by this Agreement.

          6.9.   Disclosure. This Agreement, including all Schedules and other
                 ----------
exhibits or related documents, does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements and information contained herein, in light of the circumstances in
which they are made, not misleading. There is no material fact which has not
been disclosed to MLCC in writing, which is or could be anticipated to be
material to MLCC's decision to consummate the transactions contemplated by the
Agreement on the terms and conditions set forth herein.

                                      22
<PAGE>

                                  ARTICLE VII

                    Conduct of Business Pending the Merger

          7.1.   Conduct of Business of the MLE Companies. Each of the MLE
                 ----------------------------------------
Companies hereby covenants to Southern States, and MLCC covenants to Statesman,
that, except as specifically provided in this Agreement or except with the prior
written consent of Southern States, or, in the case of MLCC, Statesman, during
the period from the date of this Agreement to the Closing, each of the MLE
Companies will conduct its operations only in the ordinary and usual course
consistent with past practice, and will use its customary and reasonable efforts
to preserve intact its business organization, to keep available the services of
its officers, employees and consultants, to maintain satisfactory relationships
with suppliers, customers and all others having business relationships with it
and to maintain accounting records consistent with past practice. MLE and each
of the Subsidiaries will promptly advise Southern States, or, in the case of
MLCC, Statesman, in writing of any change in the financial condition, operations
or business of any of the MLE Companies which MLE or MLCC, as the case may be,
recognizes is or is likely to be materially adverse to any of the MLE Companies.
Without limiting the generality of the foregoing, and except as otherwise
expressly provided in this Agreement, prior to the Closing, without the prior
written consent of Southern States, or, in the case of MLCC, Statesman, neither
MLE nor any Subsidiary will do or enter into any written or oral agreement to do
any of the following:

                 (a)  amend the Articles of Incorporation or By-Laws of MLE or
any Subsidiary;

                 (b)  rescind, modify, amend or otherwise change or affect any
of the resolutions of the Boards of Directors of MLE or any Subsidiary approving
the execution of this Agreement and recommending it to the members of MLE for
approval;

                 (c)  (i) except as mutually agreed by MLE and Southern States,
based upon the results of operations of MLE for the fiscal year ended December
31, 1997, either: (A) pay any patronage refund or (B) authorize any additional
allocated patrons equity; or (ii) authorize for issuance, issue, sell, deliver
or agree or commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any equity or shares of capital stock of any class of MLE or of any
Subsidiary, or any securities convertible into or exchangeable for such equity
or shares of capital stock;

                 (d)  split, combine or reclassify any member's equity or shares
of capital stock of MLE or of any Subsidiary of any class, declare, set aside or
pay any dividend or other distribution (whether in cash, stock or property or
any combination thereof) in respect of any class of equity or capital stock of
MLE or of any Subsidiary, or redeem or otherwise acquire any such equity or
shares of capital stock;

                 (e)  except in the ordinary course of business under existing
lines of credit, consistent with past practice and not in excess of current
requirements or as may be required to extend MLE's and/or MLCC's existing credit
facilities with St. Paul Bank until April 30, 1998 upon terms and conditions
substantially similar to the terms of MLE's current credit

                                      23
<PAGE>

facilities with St. Paul Bank, (i) create, incur, assume, maintain or permit to
exist any long-term debt, including obligations in respect of capital leases
(other than obligations under capital leases existing on the date hereof) or
create, incur, assume, maintain or permit to exist any short-term borrowing in
an aggregate amount for MLE or any such Subsidiary exceeding $500,000, (ii)
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person;
(iii) make any loans, advances or capital contributions to, or investments in,
any other person; or (iv) waive, release, grant or transfer any material rights
or modify or change any existing license, lease, contract or other document
material to MLE or any Subsidiary;

                 (f)  (i) increase or commit to increase in any manner the
compensation, bonus, bonus opportunity, fringe benefits or other benefits of any
employee, or enter into or commit to enter into, any employment or consulting
agreement with or for the benefit of any person employed or otherwise engaged by
MLE or any Subsidiary as of the date of this Agreement, except as any of such
may occur in the ordinary course of business and in accordance with its
customary past practices (and in any such event MLE will consult with Southern
States before taking such action); (ii) increase or commit to increase in any
manner the benefits, rights or entitlements under any Plan of any Employee;
(iii) pay or commit to pay any pension or other retirement benefit or allowance
not required by an existing Plan; (iv) amend or commit to amend any Plan; (v)
institute or enter into or commit to institute or enter into any bonus, profit-
sharing, incentive, stock option or other equity benefit, deferred compensation,
severance, retention, change in control, pension, retirement, health, welfare,
group insurance or other employee or retiree benefit plan, agreement, trust,
fund or arrangement; or (vi) hire or employ any additional employee (either on a
salaried or hourly basis) other than on a part time basis and consistent with
past practice and seasonal needs without first advising Southern States of such
intended new hire;

                 (g)  except in the ordinary course of business, consistent with
past practice, sell, transfer, lease, license, mortgage or otherwise dispose of,
or encumber, or agree to sell, transfer, lease, license, assign, mortgage or
otherwise dispose of or encumber, any properties, real, personal or mixed,
including automobiles, whether owned or leased;

                 (h)  enter into any other agreements, commitments or contracts
which, individually or in the aggregate, are material to MLE or any Subsidiary,
except agreements, commitments or contracts for the purchase, sale or lease of
goods or services in the ordinary course of business consistent with past
practice and not in excess of current requirements, or otherwise make any
material change in the conduct of the business or operations of MLE or any such
Subsidiary;

                 (i)  enter into any agreement, commitment or contract with
respect to the purchase of any capital assets involving an amount in excess of
$50,000 for any single project;

                 (j)  enter into any other agreements, leases, commitments or
contracts which individually involve the expenditure of more than $25,000
(except for purchase orders, sales orders and contracts for the purchase of
goods and services in the ordinary course of business);

                                      24
<PAGE>

                 (k)  except as specifically permitted in this Agreement,
willfully take any action or omit to take any action that would result in the
representations and warranties of MLE and the Subsidiaries contained in this
Agreement not being true and correct on the date made or, except with respect to
those representations and warranties made as of a specified date, on the Closing
Date or in any of the conditions to the consummation of the transactions
contemplated hereby not being satisfied on the Closing Date;

                 (l)  make any new elections, or make any changes to current
elections, with respect to Taxes;

                 (m)  create any subsidiary of MLE or any Subsidiary whether by
acquisition, merger or otherwise; provided, that if Southern States consents to
                                  --------
the creation of any such subsidiary, then any representations or warranties of
MLE and the Subsidiaries relating to their respective subsidiaries or the
business to be acquired by any such subsidiary made by MLE or any Subsidiary
shall be deemed to be made with respect to such acquired subsidiary or acquired
business, with the same force and effect as the representations and warranties
made by MLE and the Subsidiaries in Article III hereof; or

                 (n)  change any method of accounting or any accounting
principle or practice used by MLE or any Subsidiary.

                                 ARTICLE VIII

                             Additional Agreements

          8.1.   Southern States By-laws. As of the Effective Time of the MLE
                 -----------------------
Merger, Southern States shall have amended its By-laws in the manner set forth
in Exhibit C to this Agreement and its Board of Directors shall have adopted the
appropriate resolutions to provide for the following: (i) the establishment and
maintenance of MLE's operations and activities relating to livestock marketing
prior to the Effective Time as a separate allocation unit of Southern States for
purposes of operations and patronage of the MLE business ("MLE Allocation
Unit"); (ii) the creation of an election district providing for one seat on
Southern States' Board of Directors based on commission volume and other inputs
and services; and (iii) the establishment of a livestock marketing board for the
purpose of consulting with Southern States with respect to the business and
operations of the MLE Allocation Unit. The livestock marketing board initially
will be composed of the twelve persons serving as members of the board of
directors of MLE at the Effective Time plus up to five additional persons to be
designated by the Board of Directors of Southern States. The livestock marketing
board shall be reduced to not more than twelve members by the date which is five
years after the Effective Time of the MLE Merger.

          8.2.   MLE Results of Operations. MLE covenants that, exclusive of the
                 -------------------------
effect of any reserves established with the consent of Southern States in
contemplation of the Mergers, the results of operations of the MLE Companies,
determined in accordance with accounting principals consistently applied in
accordance with past practices, for the period between September 30, 1997 and
the final day of the month immediately preceding the Closing shall not be a
deficit amount.

          8.3.   Exchange of MLE Equities. Southern States agrees that, at the
                 ------------------------
Effective Time, it will assume on a dollar for dollar basis the allocated
patrons' equities of MLE existing

                                      25
<PAGE>

on the books of MLE at such time, provided, however, that the first dollar of
each such members' allocated equity shall be exchanged for and represented by
one share of Southern States' membership common stock, $1.00 par value per
share. Southern States further agrees that those allocated member and patron
equities assumed by Southern States will be revolved with Southern States'
patronage refund allocations, treating MLE's 1983 class year of assumed equities
as if they were patronage refund allocations of Southern States for the year
1977, with corresponding treatment for subsequent years of MLE equities assumed
(e.g., 1984 member equities of MLE will be revolved at the same time as Southern
States revolves its 1978 patronage refund allocations), provided, however, that
no more than one class year of MLE equities will be revolved by Southern States
in any one fiscal year. Patronage equities of the MLE Allocation Unit arising
after the Effective Time of the MLE Merger will be subject to revolvement under
the same policies applicable to all other Southern States patronage refund
allocations as determined by the Board of Directors of Southern States from time
to time. Southern States agrees that operating savings of Southern States
attributable to the business of Statesman will be allocated among the members
and patrons of Southern States in such a manner as will cause the patrons of the
MLE Allocation Unit to share equitably in such operating savings.

          8.4.   MLCC Lending Programs. After the Effective Time, Statesman will
                 ---------------------
undertake to continue to provide the animal and facility credit programs
currently provided by MLCC, subject to the exercise of its good faith business
judgment concerning the nature and extent of such programs and the terms and
conditions of credit to individual obligors.

          8.5.   Additional Agreements. Each of the parties hereto agrees to use
                 ---------------------
all reasonable efforts to take or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement and to cooperate with each other in connection with the foregoing,
including using its best efforts to obtain all necessary consents, approvals and
authorizations as are required to be obtained under any Federal, state or local
law or regulation, to defend all lawsuits or other legal proceedings challenging
this Agreement or the consummation of the transactions contemplated hereby, to
cause to be lifted or rescinded any injunction or restraining order or other
order adversely affecting the ability of the parties to consummate the
transactions contemplated hereby, and to effect all necessary registrations and
Filings.

          8.6.   No Solicitation of Acquisition Proposals. Until such time, if
                 ----------------------------------------
any, as this Agreement is terminated pursuant to Section 10.1, MLE will not, and
will cause each of the Subsidiaries and their respective directors, officers,
employees, representatives, partners and agents (collectively, the
"Representatives") to not, 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 contained in this
paragraph shall prohibit the Board of Directors of MLE from furnishing
information to, or entering into discussions or negotiations with, any person or
entity that makes an unsolicited bona fide Acquisition Proposal if, and only to
the extent that (A) the Board of Directors of MLE, after consultation with and
based upon the advice of independent legal counsel, determines in good faith
that such action is necessary for the Board of Directors of MLE to comply with
its fiduciary duties to its members and patrons under applicable law and (B)
prior to taking such action, MLE

                                      26
<PAGE>

(x) provides reasonable notice to Southern States to the effect that it is
taking such action and (y) receives from such other person or entity an executed
confidentiality agreement in reasonably customary form. MLE shall as promptly as
practicable advise Southern States orally and in writing of the receipt by it
(or any of the other entities or 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. MLE 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 involving the capital stock, membership
rights and/or allocated patrons' equities of MLE or any of its subsidiaries, any
proposal for a merger, consolidation or other business combination involving MLE
or any of its subsidiaries, any proposal or offer to acquire in any manner a
substantial portion of the business or assets of MLE or any of its subsidiaries,
or any proposal or offer with respect to any other transaction similar to any of
the foregoing with respect to MLE or any of its subsidiaries, other than the
business combination contemplated by this Agreement.

          8.7.   Access to Information; Confidentiality. MLE and Southern States
                 --------------------------------------
shall each afford to the other and to the other's financial advisors, legal
counsel, accountants, consultants, financing sources, and other authorized
representatives access during normal business hours throughout the period prior
to the Effective Time to all of its books, records, properties, plants and
personnel and, during such period, each shall furnish as promptly as practicable
to the other all information as such other party reasonably may request,
provided that neither party shall disclose to the other any competitively
sensitive information and no investigation pursuant to this Section 8.7 shall
affect any representations or warranties made herein or the conditions to the
obligations of the respective parties to consummate the MLE Merger and the MLCC
Merger. Each party shall continue to abide by the terms of the confidentiality
agreement between MLE and Southern States, dated November 5, 1997 (the
"Confidentiality Agreement").

          8.8.   Public Announcements. Southern States, Statesman and the MLE
                 --------------------
Companies will consult with each other before issuing any press release or
otherwise making any public statements with respect to this Agreement and shall
not issue any such press release or make any such public statement prior to such
consultation without the mutual consent of Southern States and MLE, except as in
the opinion of counsel for the MLE Companies or Southern States is required by
law.

                                  ARTICLE IX

                              Closing Conditions

          9.1.   Conditions Precedent to the Obligations of All Parties. The
                 ------------------------------------------------------
respective obligations of each party to effect the Closing of each of the MLE
Merger and the MLCC Merger shall be subject to the fulfillment at or prior to
the Closing of each of the following conditions: (i) none of the parties hereto
shall be subject to a preliminary or permanent injunction or other order, decree
or ruling issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission nor any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority shall be in effect which would (A) make the acquisition or holding by
Southern States of the assets and/or equities of the MLE Companies illegal or
make the acquisition or holding by Statesman of the assets and/or capital

                                      27
<PAGE>

stock of MLCC illegal or (B) otherwise prevent the consummation of the Closing
as contemplated by this Agreement; and (ii) receipt of all governmental,
environmental, regulatory and other third-party consents and approvals required
to effect the transactions contemplated herein.

          9.2.   Conditions Precedent to the Obligation of MLE. The obligation
                 ---------------------------------------------
of MLE to effect the Closing is also subject to the fulfillment, at or prior to
the Closing Date, of the following additional conditions:

                 (a)  Southern States shall have performed in all material
respects each obligation to be performed by it hereunder on or prior to the
Closing, and the transactions contemplated herein shall have been approved by
the Board of Directors and, to the extent required by law, the members of
Southern States.

                 (b)  The representations and warranties of Southern States set
forth in this Agreement shall be true and correct at and as of the Closing as if
made at and as of such time, except to the extent that any such representation
or warranty is made as of a specified date (in which case such representation or
warranty shall have been true and correct as of such date).

                 (c)  MLE shall have received a certificate, dated the Closing
Date, of the Chief Executive Officer, Chief Operating Officer, or any Senior
Vice President of Southern States to the effect that the conditions specified in
paragraphs (a) and (b) of this Section 9.2 have been fulfilled.

                 (d)  MLE shall have received the opinion of Mays & Valentine,
L.L.P., counsel to Southern States, addressed to them and dated the Closing
Date, as to such items and in such form and substance as are reasonably
requested by MLE.

                 (e)  The By-laws of Southern States shall have been amended as
contemplated in Section 8.1 above.

          9.3.   Conditions Precedent to Obligations of MLCC. The obligation of
                 -------------------------------------------
MLCC to effect the Closing shall be subject to the fulfillment, at or prior to
the Closing Date, of the following additional conditions:

                 (a)  Statesman shall have performed in all material respects
each obligation to be performed by it hereunder on or prior to the Closing, and
the transactions contemplated herein shall have been approved by the Board of
Directors and, to the extent required by law, shareholders of Statesman.

                 (b)  The representations and warranties of Statesman set forth
in this Agreement shall be true and correct at and as of the Closing as if made
at and as of such time, except to the extent that any such representation or
warranty is made as of a specified date (in which case such representation or
warranty shall have been true and correct as of such date).

                 (c)  MLCC shall have received a certificate, dated the Closing
Date, of the President or any Vice President of Statesman to the effect that the
conditions specified in paragraphs (a) and (b) of this Section 9.3 have been
fulfilled.

                                      28
<PAGE>

                 (d)  MLCC shall have received the opinion of Mays & Valentine,
L.L.P., counsel to Statesman, addressed to them and dated the Closing Date, as
to such items and in such form and substance as are reasonably requested by
MLCC.

          9.4.   Conditions Precedent to Obligations of Southern States. The
                 ------------------------------------------------------
obligation of Southern States to effect the Closing shall be subject to the
fulfillment, at or prior to the Closing Date, of the following additional
conditions:

                 (a)  Each of the MLE Companies shall have performed in all
material respects each of its obligations under this Agreement required to be
performed by it on or prior to the Closing pursuant to the terms hereof.

                 (b)  The representations and warranties of each of MLE and MLCC
contained in this Agreement shall be true and correct when made and at and as of
the Closing Date as if made at and as of such time, except to the extent that
any such representation or warranty is made as of a specified date (in which
case such representation or warranty shall have been true and correct as of such
date).

                 (c)  Except for the effect of reserves established with the
consent of Southern States in contemplation of the Mergers, there shall not have
occurred after the date hereof any material adverse change in the financial
condition, business or results of operations of any of the MLE Companies.

                 (d)  Southern States shall be satisfied that the consolidated
balance sheet of MLE as of the final day of the month immediately preceding the
Closing reflects all such reserves or other provisions for loss or contingencies
as shall be necessary or appropriate to its continuing business and operations
as contemplated by this Agreement.

                                      29
<PAGE>

                 (e)  Southern States shall have received a certificate, dated
the Closing Date, of the President of MLE to the effect that the conditions
specified in paragraphs (a), (b), (c), (f) and (j), of this Section 9.4
applicable to each of MLE and the Subsidiaries have been fulfilled.

                 (f)  There shall not be any action or proceeding commenced by
or before any court or governmental agency or authority in the United States, or
threatened by any governmental agency or authority in the United States, that
challenges the consummation of the Closing or seeks to impose material
limitations on the ability of Southern States to exercise full rights of
ownership of any of the material assets or business of any of the MLE Companies
or seeks material damages from any of the MLE Companies in connection with such
ownership.

                 (g)  All necessary third-party consents relating to the
transactions contemplated by this Agreement shall have been obtained and shall
be in full force and effect.

                 (h)  Southern States shall have received the opinion of
McDermott, Will & Emery, counsel to the MLE Companies, addressed to it and dated
the Closing Date, as to such items and in such form and substance as are
reasonably requested by Southern States.

                 (i)  Southern States shall be satisfied with the results of its
environmental due diligence of all of the Real Property.

                 (j)  Southern States shall have received satisfactory assurance
from all lessors under the Leases regarding the status of such Leases and the
effect on the status of such Leases of this Agreement and the consummation of
the transactions contemplated hereby.

                 (k)  Southern States shall have received satisfactory assurance
that the Marketing and Management Agreement, dated November 2, 1994, between
MLE, Indiana Livestock Exchange and Thorn Apple Valley, Inc., a Michigan
corporation and any other designated agreement shall continue in full force and
effect without interruption or alteration, in any fashion on account of the
consummation of the transactions contemplated herein.

                 (l)  Southern States shall have received the written consent of
CoBANK, ACB relating to the transactions contemplated by this Agreement and such
consent shall be in full force and effect.

          9.5.   Conditions Precedent to Obligations of Statesman. The
                 ------------------------------------------------
obligations of Statesman to effect the Closing of the MLCC Merger shall be
subject to the fulfillment, at or prior to the Closing Date, of the following
additional conditions:

                 (a)  MLCC shall have performed in all material respects its
obligations under this Agreement required to be performed by it on or prior to
the Closing pursuant to the terms hereof.

                 (b)  The representations and warranties of MLCC contained in
this Agreement shall be true and correct when made and at and as of the Closing
Date as if made at and as of such time, except to the extent that any such
representation or warranty is made as of a specified date (in which case such
representation or warranty shall have been true and correct as of such date).

                                      30
<PAGE>

                 (c)  There shall not have occurred after the date hereof any
material adverse change in the financial condition, business or results of
operations of MLCC.

                 (d)  Statesman shall have received a certificate, dated the
Closing Date, of the President of MLCC, to the effect that the conditions
specified in paragraphs (a), (b), (c) and (f) of this Section 9.5 applicable to
MLCC have been fulfilled.

                 (e)  There shall not be any action or proceeding commenced by
or before any court or governmental agency or authority in the United States, or
threatened by any governmental agency or authority in the United States, that
challenges the consummation of the Closing or seeks to impose material
limitations on the ability of Statesman to exercise full rights of ownership of
any of the material assets or business of MLCC or seeks material damages from
MLCC in connection with such ownership.

                 (f)  All necessary third-party consents relating to the
transactions contemplated by this Agreement shall have been obtained and shall
be in full force and effect.

                 (g)  Statesman shall have received the opinion of McDermott,
Will & Emery, counsel to MLCC, addressed to it and dated the Closing Date, as to
such items and in such form and substance as are reasonably requested by
Statesman.

                 (h)  Statesman shall have received satisfactory assurance from
all of MLCC's lenders regarding the status of their respective loans to MLCC and
the effect on the status of such loans of this Agreement and the consummation of
the transactions contemplated hereby.

                 (i)  Statesman shall have received the written consent of
CoBANK, ACB, Crestar Bank, NationsBank, N.A. First Union National Bank, SunTrust
Bank, Atlanta, Wachovia Bank of North Carolina, N.A. relating to the
transactions contemplated by this Agreement and such consents shall be in full
force and effect.

                                   ARTICLE X

                          Termination and Abandonment

          10.1.  Termination. With respect to all of the transactions
                 -----------
contemplated hereby, this Agreement may be terminated at any time prior to the
Closing:

                 (a)  by mutual consent of MLE and Southern States;

                                      31
<PAGE>

                 (b)  by either MLE or Southern States if the Closing shall not
have occurred on or before April 30, 1998; provided, however, that the right to
                                           --------  -------
terminate this Agreement pursuant to this Section 10.1(b) shall not be available
to any party 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;

                 (c)  by Southern States, if an MLE Company shall have breached
any of its covenants herein or shall have made a misrepresentation or if
Southern States is not satisfied with the results of its environmental due
diligence as stated in Section 9.4(h).

                 (d)  by MLE, if Southern States shall have made a
 misrepresentation herein;

                 (e)  by either Southern States or MLE, if any court of
competent jurisdiction or other governmental agency of competent jurisdiction
shall have issued an order, decree or ruling or taken any other action binding
on the parties hereto restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated herein, and such order, decree,
ruling or other action shall have become final and non-appealable; provided,
                                                                   --------
however, that neither Southern States nor the MLE Companies may terminate this
-------
Agreement as a result of any such order, decree, ruling or other action issued
at the request of a party seeking to purchase any of the MLE Companies'
equities, shares or assets unless such order, decree, ruling or other action is
issued without the consent of and over the opposition of the party seeking to
terminate this Agreement pursuant to this Section 10.1(e).

          10.2.  Procedure and Effect of Termination. In the event of
                 -----------------------------------
termination of this Agreement pursuant to Section 10.1 by either Southern States
or MLE, written notice thereof shall forthwith be given to the other and this
Agreement shall terminate, without further action by either of them. If this
Agreement is terminated as provided herein, no party hereto shall have any
liability or further obligation to any other party to this Agreement except that
the provisions of the final sentence of Section 8.7, Article XI and this Section
10.2 shall survive such termination.

          10.3.  Effect on MLCC Merger of Termination by MLE or Southern States.
                 --------------------------------------------------------------
In the event of termination of this Agreement pursuant to this Article X, all
obligations of either Statesman or MLCC under this Agreement also shall be
terminated simultaneously.

                                  ARTICLE XI

                                 Miscellaneous

          11.1.  Amendment and Modification. Subject to applicable law, this
                 --------------------------
Agreement may be amended, modified or supplemented by mutual agreement of
Southern States and MLE or, as applicable, with respect to the MLCC Merger by
Statesman and MLCC at any time before Closing; provided, however, that this
                                               -----------------
Agreement may not be amended except by an instrument in writing signed by each
of the parties hereto.

          11.2.  Waiver of Compliance; Consents. Any failure of Southern States
                 ------------------------------
or Statesman, on the one hand, or any of the MLE Companies, on the other hand,
to comply with any obligation, covenant, agreement or condition herein may be
waived by MLE, or with respect to Statesman, MLCC on the one hand, or Southern
States, or with respect to MLCC, Statesman

                                      32
<PAGE>

on the other, respectively, only by a written instrument signed by the party or
parties granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
11.2.

          11.3.  Investigations; Survival of Warranties. The respective
                 --------------------------------------
representations, warranties and covenants of Southern States, Statesman and the
MLE Companies contained herein or in any certificates, schedules or other
documents delivered prior to or at the Closing shall not be deemed waived or
otherwise affected by any investigation made by any party hereto. Each and every
representation, warranty and covenant of Southern States, Statesman or any of
the MLE Companies and each of their respective officers, directors, shareholders
and partners shall expire with, and be terminated and extinguished by, the
Closing; provided, however, this Section 11.3 shall have no effect upon any
         -----------------
other obligation of the parties hereto to be performed before or after the
Closing or on the obligations of the parties described in Sections 8.1, 8.3, and
8.4 and in the final sentence of Section 8.7 and in this Article XI, all of
which will survive the Closing.

          11.4.  Notices. All notices and other communications hereunder shall
                 -------
be in writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice; provided that notices of a change of address shall be effective
only upon receipt thereof):

                 (a)  if to Southern States or Statesman, to:

                      Wayne A. Boutwell, Chief Executive Officer
                      Southern States Cooperative, Inc.
                      6606 West Broad Street
                      Richmond, Virginia 23230-1717
                      Phone: (804) 281-1000
                      Fax: (804) 281-1383

                      with a copy to:

                      N. Hopper Ancarrow, Jr., Esquire
                      Vice President and General Counsel
                      Southern States Cooperative, Inc.
                      Richmond, Virginia 23230-1717
                      Phone: (804) 281-1205
                      Fax: (804) 281-1383

                 (b)  if to the MLE Companies, to:

                      Thomas H. Reed, CEO
                      Michigan Livestock Exchange
                      806 Coolidge Road
                      East Lansing, Michigan 48823
                      Phone: (517) 337-2856
                      Fax: (517) 337-6070

                                      33
<PAGE>

                      with a copy to:

                      Michael R. Fayhee, Esquire
                      McDermott, Will & Emery
                      227 West Monroe Street
                      Chicago, Illinois 60603
                      Phone: (312) 984-7522
                      Fax: (312) 984-2097

          11.5.  Assignment; Parties in Interest. This Agreement and all of the
                 -------------------------------
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of the
other parties, provided that Southern States and Statesman may assign either of
               --------
their respective rights and obligations to one or more affiliates, but no such
assignment shall relieve Southern States or Statesman of their respective
obligations hereunder. This Agreement is not intended to confer upon any other
person except the parties hereto any rights or remedies.

          11.6.  Further Assurances. From time to time, at Southern States' or
                 ------------------
Statesman's request and without further consideration, the MLE Companies will
execute and deliver to Southern States or Statesman, as the case may be, such
documents and take such action as Southern States or Statesman may reasonably
request in order to consummate the transactions contemplated hereby and to vest
in Southern States and with respect to MLCC, Statesman good and valid title to
the respective assets of the MLE Companies.

          11.7.  Governing Law. This Agreement shall be governed by the laws of
                 -------------
the Commonwealth of Virginia without regard to the laws that might otherwise
govern under applicable principles of conflicts of law as to all matters,
including, but not limited to, matters of validity, construction, effect,
performance and remedies.

          11.8.  Counterparts. This Agreement may be executed in two or more
                 ------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

          11.9.  Entire Agreement. This Agreement, including the documents and
                 ----------------
instruments referred to herein, embodies the entire agreement and understanding
of the parties hereto in respect of the MLE Merger and MLCC Merger and all other
matters contained herein. There are no restrictions, promises, representations,
warranties, covenants or undertakings, other than those expressly set forth or
referred to herein. This Agreement, together with the documents and instruments
referred to herein, supersedes all prior agreements and understandings between
the parties with respect to the MLE Merger and MLCC Merger and such other
matters.

          11.10. Severability. If any provision of this Agreement shall be held
                 ------------
illegal, invalid or unenforceable, the parties hereto agree that such provision
shall be enforced to the maximum extent permissible so as to effect the intent
of the parties, and the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby. If necessary to effect the intent of the parties hereto, the parties
will negotiate in good faith to amend this Agreement to replace the
unenforceable language with enforceable language which as closely as possible
reflects such intent.

                                      34
<PAGE>

          IN WITNESS WHEREOF, Southern States, Statesman, MLE and MLCC have
caused this Agreement to be signed by their respective duly authorized officers
on the date first above written.

                              SOUTHERN STATES COOPERATIVE,
                              INCORPORATED

                              By: ______________________________________________
                                    Name:  Wayne A. Boutwell
                                    Title: President and Chief Executive Officer

                              STATESMAN FINANCIAL CORPORATION

                              By: ______________________________________________
                                    Name:  Jonathan A. Hawkins
                                    Title: President

                              MICHIGAN LIVESTOCK EXCHANGE

                              By: ______________________________________________
                                    Name:  Thomas H. Reed
                                    Title: President and Chief Executive Officer

                              MICHIGAN LIVESTOCK CREDIT CORPORATION

                              By: ______________________________________________
                                    Name:  Thomas H. Reed
                                    Title: President

                                      35
<PAGE>

                                                                       EXHIBIT A

                                Plan of Merger
                                      of
                          Michigan Livestock Exchange
                                 with and into
                       Southern States Cooperative, Inc.

1.   The names of the merging corporations are Michigan Livestock Exchange
     ("MLE"), a Michigan non-stock membership corporation and Southern States
     Cooperative, Inc. ("SSC"), a Virginia agricultural cooperative corporation.
     MLE shall be merged with and into SSC and SSC shall be the surviving
     corporation in the merger (the "Merger").

2.   Upon the effective date of the Merger, the membership interests in MLE
     shall be extinguished, and each membership interest shall be and become one
     share of membership common stock of SSC, $1 par value per share.

3.   Upon the effective date of the Merger, allocated patronage equities of MLE
     existing on such date shall be and become allocated patronage equities of
     SSC on a dollar for dollar basis, except that the first dollar of each
     allocated patron's equity of MLE thereafter shall be represented by the one
     share of SSC membership common stock, $1 par value per share, exchanged for
     each membership interest in MLE as provided for in Section 2 above.

4.   The Articles of Incorporation and By-laws of SSC as in effect prior to the
     Merger shall continue (until amended or repealed as provided by applicable
     law) to be the Articles of Incorporation and By-laws of SSC provided,
     however, that the By-laws of SSC shall be amended as of the effective date
     of the Merger in the form provided for in the Agreement of Merger of which
     this Plan of Merger is a part.

5.   The directors of SSC after the Merger shall consist of the same individuals
     serving as members of the board of directors prior to the Merger, with the
     addition of William Pridgeon, who shall be the duly elected director of the
     MLE Allocation Unit of SSC until his successor shall have been duly elected
     in accordance with the By-laws of SSC.

                                      36
<PAGE>

                                                                       EXHIBIT B

                                Plan of Merger
                                      of
                     Michigan Livestock Credit Corporation
                                 with and into
                              SFC II Corporation

1.   The names of the merging corporations are Michigan Livestock Credit
     Corporation ("MLCC"), a Michigan corporation, and SFC II Corporation ("SFC
     II"), a Virginia corporation. MLCC shall be merged with and into SFC II and
     SFC II shall be the surviving corporation in the merger (the "Merger").

2.   Upon the effective date of the Merger, by virtue of the Merger and without
     any action on the part of any of the parties hereto or any holder of any of
     the following securities: (i) the 100,000 shares of MLCC Common Stock, par
     value $1.00 per share, held by Michigan Livestock Exchange, a Michigan non-
     stock corporation which is the sole holder of MLCC Common Stock, shall be
     converted into shares of SFC II Class X Preferred Stock, $1,000 par value
     per share, with the aggregate number of shares of Class X Preferred Stock
     to be issued to be equal to the number of shares (or, if that number is not
     an even number, than to the next lowest whole number) determined by
     dividing (a) the net equity of MLCC as shown on its balance sheet as of the
     close of the month end immediately prior to the effective date of the MLCC
     Merger, by (b) one thousand dollars ($1,000.00). For purposes of this
     section 2 of this Plan of Merger, the "net equity" of MLCC shall mean its
     total equity after the establishment of such loan loss reserves or other
     reserves for contingencies as shall be satisfactory to Statesman Financial
     Corporation less the aggregate liquidation preference of any shares of MLCC
     preferred stock then outstanding. No fractional shares of SFC II Class X
     Preferred Stock shall be issued pursuant to this Plan of Merger; (ii) each
     outstanding share of MLCC Class A Preferred Stock, par value $1.00 per
     share, shall be converted into one (1) share of SFC II Class A Preferred
     Stock, par value $1.00 per share; (iii) each outstanding share of MLCC
     Class B Preferred Stock, par value $1.00 per share, shall be converted into
     one (1) share of SFC II Class B Preferred Stock, par value $1.00 per share;
     and (iv) each outstanding share of MLCC Class C Preferred Stock, par value
     $20.00 per share, shall be converted into one (1) share of SFC II Class C
     Preferred Stock, par value $20.00 per share.

3.   The Articles of Incorporation and By-laws of SFC II as in effect prior to
     the Merger shall continue (until amended or repealed as provided by
     applicable law) to be the Articles of Incorporation and By-laws of SFC II
     provided, however, that the Articles of Incorporation of SFC II shall be
     amended as of the effective date of the Merger to change the name of SFC II
     to "Michigan Livestock Credit Corporation".

                                      37
<PAGE>

                                                                       EXHIBIT C

                       Proposed Amendments to By-laws of
                       Southern States Cooperative, Inc.

          Article VI of the By-laws of Southern States Cooperative, Inc. shall
be amended to renumber the current provisions of Article VI as Article VI(A),
and to add a new Article VI(B) as follows:

                                      (B)

                              Livestock Marketing

          Section 1B. Livestock Divisional Board Election. The Livestock
Divisional Board shall consist of as many eligible members in each region for
terms of three (3) years each as may, from time to time, be established by the
Board of Directors. If more than one (1) member represents a region, the terms
shall be staggered. The Livestock Divisional Board shall also have one (1) at-
large member as provided in Section 2B of this Article. The initial Livestock
Divisional Board shall be appointed by the Board of Directors and shall
thereafter be self perpetuating with all vacancies, whether from the expiration
of term of office or otherwise, to be filled by a majority vote of the remaining
Livestock Divisional Board from eligible members from the region in which the
vacancy occurs. Each member of the Livestock Divisional Board shall serve until
the appointment and acceptance of his duly qualified successor. The Board of
Directors shall divide the territory served by the Livestock Marketing Division
into at least four (4) geographic regions so that as far as practical, each area
of such territory shall be represented on the Livestock Divisional Board.
Changes in the number and boundaries of these regions may be made from time to
time as circumstances require.

          The Livestock Divisional Board shall elect a Chairman, Vice Chairman
and Secretary for terms of one (1) year.

          Section 2B. The At-Large Livestock Divisional Board Member. In
addition to the appointed members of the Livestock Divisional Board, one (1) at-
large Member shall be appointed by the Board of Directors for a term of three
(3) years, or until his successor is appointed. The at-large member shall have
the same powers and rights as other members of the Livestock Divisional Board.
Any vacancy occurring in the office of at-large Livestock Advisory Board member
shall be filled in the same manner as the original appointment was made.

          Section 3B. Duties of the Livestock Divisional Board. The Livestock
Divisional Board shall serve in an advisory capacity to the Board of Directors
with respect to the operation of the Livestock Marketing Division, and shall
make recommendations to the Board of Directors on matters referred to the
Livestock Divisional Board, and may make recommendations to the Board of
Directors on policies affecting Livestock Marketing Division operations.

          Amend Article VIII, Section 4: Add "its livestock marketing
facilities" after elevators in the sixth line.

             FINANCING SERVICES AND CONTRIBUTED CAPITAL AGREEMENT

                                      38<PAGE>

                                                                 EXHIBIT 10.9(a)

                                 GROUND LEASE

                                    between

                   SOUTHERN STATES COOPERATIVE, INCORPORATED

                                   as Lessor

                                      and

                      GOLD BOND STAMP COMPANY OF GEORGIA

                                   as Lessee

                          Dated: as of July 15, 1977

                         Location: Richmond, Virginia.
<PAGE>

                               TABLE OF CONTENTS
                               -----------------

<TABLE>
<CAPTION>
                                                                                                 Page
                                                                                                 Number
                                                                                                 ------
<S>                                                                                              <C>
1.       DEMISE OF PREMISES....................................................................    1

2.       CERTAIN DEFINITIONS...................................................................    2

3.       TITLE AND CONDITION...................................................................    4

4.       USE OF PROPERTY; QUIET ENJOYMENT......................................................    5

5.       TERM..................................................................................    5

6.       RENT..................................................................................    5

7.       NET LEASE; NON-TERMINABILITY..........................................................    6

8.       TAXES AND ASSESSMENTS; COMPLIANCE WITH LAW............................................    7

9.       LIENS.................................................................................    8

10.      INDEMNIFICATION.......................................................................    9

11.      MAINTENANCE AND REPAIR................................................................   10

12.      ALTERATIONS, RELEASE OF LAND AND REDUCTION
         OF BASIC RENT.........................................................................   10

13.      CONDEMNATION..........................................................................   12

14.      CASUALTY..............................................................................   16

15.      ASSIGNMENT, SUBLETTING AND MORTGAGING.................................................   17

16.      PERMITTED CONTESTS....................................................................   17

17.      CONDITIONAL LIMITATIONS; DEFAULT PROVISION............................................   20

18.      ADDITIONAL RIGHTS OF LESSOR...........................................................   26

19.      NOTICES...............................................................................   26
</TABLE>
<PAGE>

<TABLE>
<S>                                                                                               <C>
20.      ESTOPPEL CERTIFICATES.................................................................   27

21.      NO MERGER.............................................................................   29

22.      SURRENDER.............................................................................   30

23.      SEPARABILITY..........................................................................   30

24.      RIGHTS OF MORTGAGEE...................................................................   31

25.      APPRAISERS............................................................................   34

26.      THE SUBLEASE..........................................................................   35

27.      ATTORNMENT OF SUBLESSEE; NO PERSONAL LIABILITY
         OF LESSEE.............................................................................   38

28.      OPTION TO PURCHASE....................................................................   39

29.      TERMINATION OF OPTIONS................................................................   41

30.      TERMINATION OF AGREEMENT FOR LEASE AND
         DEVELOPMENT...........................................................................   42

31.      TERMINATION DATE AGREEMENT............................................................   42

32.      BINDING EFFECT........................................................................   42

33.      HEADINGS..............................................................................   43

34.      GOVERNING LAW.........................................................................   43

35.      SCHEDULES.............................................................................   43

                                         Schedule A-1 Description of Land......................   44

                                                  A-2  Permitted Encumbrances..................   46

                                                  A-3  Lessee's Equipment......................   47
</TABLE>
<PAGE>

<TABLE>
<S>                                                                                               <C>
                                                  B    Description of Improvements.............   48

                                                  C    Lease Term and Rent.....................   49

         SIGNATURE PAGE........................................................................   50

         ACKNOWLEDGEMENTS......................................................................   51
</TABLE>
<PAGE>

          THIS LEASE, dated as of July 15, 1977, between SOUTHERN STATES
COOPERATIVE, INCORPORATED, a Virginia Corporation (herein, together with its
successors and assigns, called "Lessor") having an address at Seventh and Main
Streets, P. O. Box 1656, Richmond, Virginia 23213, and GOLD BOND STAMP COMPANY
OF GEORGIA, a New Jersey corporation, (herein, together with its successors and
assigns, called "Lessee") having an address at 12755 State Highway 55,
Minneapolis, Minnesota.

1.   Demise of Premises.
     ------------------

     (a)  In consideration of rents and covenants herein stipulated to be paid
and performed and upon the terms and conditions hereinafter specified, Lessor
hereby demises and lets to Lessee, for the term hereinafter described, the
premises consisting of

          (i)  the parcel of land described in Schedule A-I hereto, and

          (ii) all easements, rights and appurtenances relating to such parcel,
     but not including Improvements as hereinafter defined such premises being
     herein called the "Leased Premises".

     (b)  Lessee shall improve the Leased Premises through the construction of
the Improvements (hereinafter defined) as described in Schedule B hereto. Such
Improvements shall be completed in a good and workmanlike manner, and shall be
completed expeditiously in compliance with all laws, ordinances, orders, rules,
regulations and requirements applicable thereto. All work done in connection
with such Improvements shall comply with the requirements of any insurance
policy required to be maintained by Lessee hereunder. Lessee shall promptly pay
all costs and expenses of such Improvements, shall discharge all liens (other
than the Mortgage hereinafter defined) filed against the Leased Premised arising
out of the same and shall procure and
<PAGE>

pay for all permits and licenses required in connection with such Improvements.
Lessee shall deliver to Lessor immediately after substantial completion of such
construction a Certificate duly executed on behalf of Lessee to the effect that

          (i)  such construction has been completed in a manner satisfactory to
     it; and

          (ii) all building permits and certificates of occupancy, if any are
     required, have been obtained and that all applicable zoning and use laws,
     ordinances, regulations and agreements permit the use of the Property, as
     hereinafter defined, for the purposes contemplated.

2.   CERTAIN DEFINITIONS.
     -------------------

     (a)  The term "Improvements" means, an office building consisting of the
buildings, structures and other improvements on the Leased Premises at the date
hereof, if any, and hereafter erected thereon, together with all equipment
fixtures and items of personal property attached to or used in the operation or
maintenance of the improvements now or hereafter on the Leased Premises and
owned by Lessee, specifically including, but not limited to, those items
enumerated on Schedule A-3 hereto, which building equipment is used in the
operation and maintenance of the Leased Premises or of any building, structure
or other improvement thereon and which may or may not be affixed to the Leased
Premises, including without limitation, fixtures, machinery, elevators, air-
conditioning systems and equipment and all additions, alterations, restorations
and repairs to and replacements of any of the foregoing (but not including trade
fixtures, machinery and equipment and/or computers which are the property of a
sublessee or third parties).

                                      -2-
<PAGE>

     (b)  The term "Lessee" means, the lessee in possession under this Lease and
shall include any successor assignees of Lessee's interest in this Lease.

     (c)  The term "Lessee's Estate" means, all the right, title and interest of
Lessee in the Property.

     (d)  The term "Lessor's Estate" means, all the right, title and interest of
Lessor in the Leased Premises.

     (e)  The term "Mortgage" means, the Deed of Trust from Lessee, as grantor
to the Trustees named therein, for the benefit of The Lincoln National Life
Insurance Company and upon discharge thereof any deed of trust, mortgage or
other security instrument which creates a first lien on Lessee's Estate.

     (f)  The term "Mortgagee" means, the mortgagee or a beneficiary, under any
Mortgage.

     (g)  The term "Property" means, the Leased Premises and Improvements,
collectively.

     (h)  The term "Sublease" means, any lease of the Improvements and sublease
of the Leased Premises.

     (i)  The term "Sublessee" means, any lessee under a Sublease.

     (j)  The term "Notes" means, any notes which are secured by a Mortgage.

3.   TITLE AND CONDITION
     -------------------

          The Leased Premises are demised and let subject to

                                      -3-
<PAGE>

     (i)   the rights of any parties in possession thereof and the existing
           state of the title thereof as of the commencement of the term of this
           Lease,

     (ii)  any state of facts which an accurate survey or physical inspection
           thereof might show, and

     (iii) all zoning regulations, restrictions, rules and ordinances, building
           restrictions and other laws and regulations now in effect or
           hereafter adopted by any governmental authority having jurisdiction
           over the Property.

4.   USE OF PROPERTY; QUIET ENJOYMENT.
     --------------------------------

     (a)  Lessee may occupy and use the Property for an office building and for
any other lawful purpose.

     (b)  If and so long as Lessee shall observe and perform all covenants,
agreements and obligations required to be observed and performed by it
hereunder, Lessor warrants peaceful and quiet occupation and enjoyment of the
Leased Premises by Lessee; however, Lessor and its agents may enter upon and
inspect the Leased Premises at reasonable times.

5.   TERM.
     ----

     Subject to other terms, covenants, agreements and conditions contained
herein, Lessee shall have and hold the Leased Premises for a term which shall
commence and expire on the dates set forth in Schedule C hereto.

6.   RENT.
     ----

                                      -4-
<PAGE>

     (a)  Lessee covenants to pay to Lessor, as rent for the Leased Premises
during the term of this Lease, the respective amounts set forth in Schedule C
hereto (herein called the "Basic Rent") on the dates set forth in Schedule C
(herein called the "Basic Rent Payment Dates") in lawful money of the United
States of America at Lessor's address set forth above or at such other place or
to such other person as Lessor from time to time may designate in writing.

     (b)  Lessee covenants to pay and discharge, when the same shall become due,
as additional rent, all other amounts, liabilities and obligations which Lessee
assumes or agrees to pay or discharge pursuant to this Lease, together with
every fine, penalty, interest and cost which may be added for non-payment or
late payment thereof and, in the event of any failure by Lessee to pay or
discharge any of the foregoing, Lessor shall have all rights, powers and
remedies provided herein, by law or otherwise in the case of non-payment of the
Basic Rent (provided, however, that amounts payable as liquidated damages
pursuant to Paragraph 17(f) shall not constitute additional rent).

7.   NET LEASE; NON TERMINABILITY.
     ----------------------------

    This Lease is a net lease, and, except as otherwise expressly provided
herein, any present or future law to the contrary notwithstanding, Lessee shall
not be entitled to any abatement, reduction, set-off, counterclaim, release or
reduction with respect to any Basic Rent, additional rent or other sum payable
hereunder, nor shall the obligations of Lessee hereunder be affected, by reason
of: any damage to or destruction of the Premises; any taking of the Premises or
any part thereof by condemnation or otherwise; any prohibition, limitation,
restriction or prevention of Lessee's use, occupancy or enjoyment of the
Premises, or any interference with such use, occupancy or enjoyment by any
person; any

                                     -5-
<PAGE>

eviction by paramount title or otherwise, any default by Lessor hereunder or
under any other agreement, the impossibility or illegality of performance by
Lessor, Lessee or both; any action of any governmental authority; or any other
cause whether similar or dissimilar to the foregoing. The parties intend that
the obligations of Lessee hereunder shall be separate and independent covenants
and agreements and shall continue unaffected unless such obligations shall have
been modified or terminated pursuant to an express provision of this Lease.

8.   TAXES AND ASSESSMENTS; COMPLIANCE WITH LAW.
     ------------------------------------------

     (a)  Lessee shall pay: (i) all taxes, assessments, levies, fees, water and
sewer rents and charges, and all other governmental charges, general and
special, ordinary and extraordinary, foreseen and unforeseen, which are, at any
time prior to or during the term hereof, imposed or levied upon or assessed
against (A) the Property, (B) any Basic Rent, additional rent or other sum
payable hereunder or (C) this Lease or the leasehold estate hereby created or
which arise in respect of the operation, possession or use of the Property; (ii)
all gross receipts or similar taxes imposed or levied upon, assessed against or
measured by any Basic Rent, additional rent or other sum payable hereunder;
(iii) all sales, use and similar taxes at any time levied, assessed or payable
on account of the acquisition, leasing or use of the Property; and (iv) all
charges for utilities serving the Property. Lessee shall not be required to pay
any franchise, estate, inheritance, transfer, income or similar tax of Lessor
(other than any tax referred to in clause (ii) above. Lessee will furnish to
Lessor, promptly after demand therefor, proof of payment of all items referred
to above which are payable by Lessee. If any such assessment may legally be paid
in installments, Lessee may pay such assessment in installments; in such event,

                                      -6-
<PAGE>

Lessee shall be liable only for installments which become due and payable during
the term hereof.

     (b)  Lessee shall comply with and cause the Property to comply with (i) all
statutes, laws, rules, orders, regulations or ordinances applicable to the
Property or the use thereof and (ii) all contracts (including insurance
policies), agreements and restrictions applicable to the Property as the
ownership, occupancy or use thereof, including but not limited to all such
statutes, laws, rules, orders, regulations or ordinances, requirements,
contracts, agreements and restrictions which require structural, unforeseen or
extraordinary changes to the Improvements.

9.   LIENS.
     -----

     Lessee will not directly or indirectly create or permit to be created or to
remain, and will promptly discharge, at its expense, any mortgage, lien,
encumbrance or charge on, pledge of, or conditional sale or other title
retention agreement with respect to the Property or any part thereof or Lessee's
interest therein or the Basic Rent or additional rent payable under this Lease,
other than the Mortgage, Permitted Encumbrances as defined in Schedule A-2
attached hereto, and any mortgage, lien, encumbrance or other charge on, pledge
of, or conditional sale or any other title retention agreement created by or
resulting from any act of or failure to act by Lessor. The existence of any
mechanic's, laborer's, materialman's, supplier's or vendor's lien, or any right
in respect thereof, shall not constitute a violation of this Paragraph 9, if
payment is not yet due upon the contract or for the goods or services in respect
of which any such lien has arisen. Nothing contained in this Lease shall be
construed as constituting the consent or request of Lessor, expressed or
implied, to or for the performance of any labor or services or the furnishing

                                      -7-
<PAGE>

of any goods or materials by any contractor, sub-contractor, laborer,
materialman or vendor.

10.  INDEMNIFICATION.
     ---------------

     Lessee shall defend all actions against Lessor with respect to, and shall
pay, protect, indemnify and save harmless Lessor from and against, any and all
liabilities, losses, damages, costs, expenses (including reasonable attorneys'
fees and expenses), causes of action, suits, claims, demands or judgments of any
nature arising from (i) injury to or death of any person, or damage to or loss
of property, on the Property or on adjoining sidewalks, streets or ways, or
connected with the use, condition or occupancy of any thereof, (ii) violation of
this Lease, (iii) any act or omission of Lessee or its agents, contractors,
licensees, sublessees or invitees, and (iv) any contest referred to in Paragraph
16.

11.  MAINTENANCE AND REPAIR.
     ----------------------

     Lessee will maintain at its expense the Property in good repair and
condition, except for ordinary wear and tear, and will make with reasonable
promptness all structural and non-structural, foreseen and unforeseen and
ordinary and extraordinary changes and repairs which may be required to keep the
Property in good repair and condition. Lessor shall not be required to maintain,
repair or rebuild the Improvements or to maintain the Property, and Lessee
waives the right to make repairs at the expense of Lessor pursuant to any law at
any time in effect.

12.  ALTERATIONS, RELEASE OF LAND AND REDUCTION OF BASIC RENT.
     --------------------------------------------------------

                                      -8-
<PAGE>

     (a)  Lessee may, without expense to Lessor, make additions to and
alterations of the Improvements at any time located or constructed on the Leased
Premises, and Lessee may make substitutions and replacements for the same,
provided that

          (i)   the market value of the Leased Premises shall not be lessened by
      reason of any such addition, alteration, substitution or replacement,

          (ii)  the foregoing actions shall be performed in a good and
      workmanlike manner, and

          (iii) such additions, substitutions and replacements shall be
      expeditiously completed in compliance with all laws, ordinances, orders,
      rules, regulations and requirements applicable thereto.

Lessee shall promptly pay all costs and expenses of each such addition,
alteration, substitution or replacement and subject to Paragraph 9 shall
discharge all liens filed against the Property arising out of the same. Lessee
shall procure and pay for all permits and licenses required in connection with
any such addition, alteration, substitution or replacement.

     (b)  Lessee may, at its expense,

          (i)  construct upon the Leased Premises any additional buildings,
      structures or other improvements and

          (ii) install, assemble or place upon the Leased Premises any items of
      machinery or equipment used or useful in Lessee's business, in each case
      upon compliance with all the terms and conditions set forth in Paragraph
      12(a).

                                      -9-
<PAGE>

     (c)  In the event any Sublessee is entitled pursuant to the Sublease to a
release therefrom of any portion of the Leased Premises necessary for the
construction and operation of proposed additional improvements, Lessor and
Lessee will release such portion of the Leased Premises from the terms of this
Lease and the Basic Rent shall thereafter be reduced in the proportion that the
area of the released portion bears to the area of the Leased Premises covered by
this Lease immediately prior to such release.

13.  CONDEMNATION.
     ------------

     (a)  If a portion of the Leased Premises shall be taken in or by
condemnation or other eminent domain proceedings pursuant to any law, general or
special, Lessee shall have the option, at its expense, to repair any damage to
the Leased Premises caused by such taking in conformity with the requirements of
Paragraph 11(a) promptly after such taking so that, after the completion of such
repair, the Leased Premises shall be, as nearly as practicable, in its condition
immediately prior to such taking.

     (b)  Except as herein otherwise specifically provided, if a portion of the
Leased Premises shall be taken as aforesaid, this Lease shall continue but the
Basic Rent thereafter payable by Lessee shall be reduced from the date of each
such partial taking by an amount equal to the product of the Basic Rent payable
at the time of each such taking multiplied by a fraction, the numerator of which
is the area of the Leased Premises taken and the denominator of which is the
area of the Leased Premises immediately prior to such taking.

     (c)  If the entire Leased Premises shall be taken in or by condemnation or
other eminent domain proceedings under any law, general or special (other than a
taking for

                                     -10-
<PAGE>

temporary use), this Lease shall terminate on the date of the termination of the
Sublease occasioned by such taking, except with respect to obligations and
liabilities of Lessee under this Lease, actual or contingent, which have arisen
on or prior to such date of termination, upon payment by Lessee of

          (i)  all Basic Rent due with respect to the period during which this
     Lease is in effect, and

          (ii) all other sums due and payable by it under this Lease to and
     including such date, and Lessee shall not be required to repair the
     Property pursuant to Paragraph 12(a).

          If at the time of a taking (other than a taking for temporary use)
     under such proceedings of any substantial portion of the Property which is
     sufficient, in the good faith judgment of Lessee, to render the remaining
     portion thereof uneconomic for Lessee's continued use or occupancy, Lessee,
     at its election, may give written notice to Lessor of the termination of
     this Lease on any date for the payment of Basic Rent after the date of such
     taking (but not less than thirty (30) days after such taking) provided that
     the Sublease shall have terminated on or by such date, and this Lease shall
     terminate as of the date specified in such notice.

     (d)  All awards and payments made on account of any taking of the Property
in condemnation or other eminent domain proceedings shall be paid as follows:

          (i)  if on account of the Leased Premises, to Lessor, and, if on
     account of the Improvements, to Lessee; or

                                     -11-
<PAGE>

          (ii) if the award cannot be so allocated by the condemning authority
     or the court before which such action is pending, to Lessor and Lessee in
     proportion to the fair market value of the Leased Premises and the
     Improvements, respectively, determined as of the date prior to such taking
     as if this Lease had not been and would not be terminated by reason of such
     taking. If Lessor and Lessee are unable to agree upon such respective
     values, such values shall be determined by appraisal within a reasonable
     time in accordance with Paragraph 25 and the fees for such appraisal shall
     be deducted from the awards and payments made with respect to the Property
     prior to the disbursement of such awards and payments in accordance with
     this clause, provided, however, that all payments to be made under this
     Paragraph 13(d) shall be subject to the provisions of the Sublease and the
     Mortgage, as long as the same are in effect. For the purposes of this
     Lease, all amounts payable pursuant to any agreement with any condemning
     authority which has been made in settlement of or under threat of such
     taking shall be deemed to constitute an award made in such proceeding.

     (e)  In the event of a taking in or by such proceedings of all or any
portion of the Leased Premises for temporary use, this Lease shall continue in
full effect without reduction or abatement of Basic Rent and additional rent,
and Lessee, subject to the provisions of the Sublease and the Mortgage, as long
as the same are in effect, shall be entitled, after paying the reasonable
expenses of Lessor, Lessee and the Mortgagee incurred in collecting the same, to
make claim for, recover and retain any awards or proceeds made on account
thereof, whether in the form of rents or otherwise, unless such period of
temporary use or occupancy shall extend beyond the term of this Lease, in

                                     -12-
<PAGE>

which case such awards or proceeds, after deducting the cost of repairs made to
the Improvements by Lessee by reason thereof, shall be apportioned between
Lessor and Lessee as of such date of expiration of the term of this Lease.

     (f)  In the event of the termination of the Sublease as the result of the
rejection of the Sublessee's offer to purchase the Property resulting from
condemnation of a portion of the Property, Lessor shall have the right to
terminate this Lease by purchasing Lessee's Estate at its fair market value,
determined as of the date immediately following such damage or destruction.

14.  CASUALTY.
     --------

     (a)  If the improvements shall be substantially damaged or destroyed in any
single casualty during the term hereof so that the Property shall in the
judgment of Lessee, be uneconomic for restoration for Lessee's continued use and
occupancy, then Lessee may give notice to Lessor, within thirty (30) days after
such occurrence, of its intention to terminate this Lease on any business day
specified in such notice which occurs not less than thirty (30) days after the
date of giving of such notice, provided that any Sublease in effect shall have
terminated on or by such date, and this Lease shall terminate on the date
specified in such notice. The entire compensation or proceeds payable in
connection with any damage or destruction of the Improvements shall be payable
to Lessee, provided, however, that all payments to be made under this Paragraph
14 shall be subject to the provisions of the Sublease and the Mortgage, as long
as the same are in effect.

     (b)  In the event of the termination of the Sublease as the result of the
rejection of the Sublessee's offer to purchase the Property resulting from
substantial damage or

                                     -13-
<PAGE>

destruction to the Property, Lessor shall have the right to terminate this Lease
by purchasing Lessee's Estate at its fair market value, determined as of the
date immediately following such damage or destruction.

15.  ASSIGNMENT, SUBLETTING AND MORTGAGING.
     -------------------------------------

     Lessee may assign, transfer, sell, mortgage or pledge the whole or any part
of its interest in this Lease, its interest in the leasehold estate hereby
created and the term hereby demised and let, as security or otherwise, and may
sublet the whole or any part of the Property. Lessee may also mortgage or pledge
its interest in and to any sublease, including without limitation, the Sublease,
and the rentals payable thereunder. Lessee shall, at or prior to the time of any
such assignment, transfer, sale, mortgage, pledge or sublease, give Lessor
notice thereof. Lessor agrees to execute and deliver, at the request of Lessee,
an agreement modifying this Lease and containing such modifications hereof as
may be required by the Mortgagee, provided that such modifications do not

          (i)   increase Lessor's liability hereunder,

          (ii)  reduce or diminish Lessee's obligations hereunder, or

          (iii) release Lessee from any of its obligations hereunder.

16.  PERMITTED CONTESTS.
     ------------------

     Lessee shall not be required to

     (a)  pay any tax, assessment, levy, fee, water or sewer rent or charge
referred to in Paragraph 8(a),

     (b)  comply with any statute, law, rule, order, regulation or ordinance
referred-to in Paragraph 8(b), or

                                     -14-
<PAGE>

     (c)  discharge or remove any lien, encumbrance or charge referred to in
Paragraph 9 or 12(a), so long as Lessee shall contest, in good faith and without
expense to Lessor, the existence, amount or validity thereof, the amount of the
damage caused thereby or the extent of its liability therefor by appropriate
proceedings which shall operate during the pendency thereof to prevent

          (i)   the collection of, or other realization upon the tax,
     assessment, levy, fee, water or sewer rent or charge or lien, encumbrance
     or charge so contested,

          (ii)  the sale, forfeiture or loss of the Property or any part thereof
     or the Basic Rent or any additional rent or any portion thereof to satisfy
     the same or to pay any damages caused by any such encroachment, hindrance,
     obstruction, violation or impairment,

          (iii) any interference with the use or occupancy of the Property or
     any part thereof,

          (iv)  any interference with the payment of the Basic Rent or any
     additional rent or any portion thereof, and

          (v)   in the case of any statute, law, rule, order, regulation or
     ordinance, imposition of any criminal liability upon the Lessor.

     Anything to the contrary notwithstanding in this Paragraph, Lessee shall
also not be required to take any action described in clauses (a) through (c)
above, so long as Lessee or Sublessee shall contest the existence, amount or
validly thereof, the amount of the damage caused thereby or the extent of
Lessee's liability therefor. While any such

                                     -15-
<PAGE>

proceedings are pending, Lessor shall not have the right to pay, remove or cause
to be discharged the tax, assessment, levy, fee, water or sewer rent or charge
or lien, encumbrance or charge thereby contested. Lessee further agrees that
each such contest shall be promptly prosecuted to a final conclusion. Lessee
will pay or cause to be paid and save Lessor harmless from and against any and
all losses, judgments, decrees and costs (including all reasonable attorneys'
fees and expenses) in connection with any such contest and will, promptly after
the final settlement or determination of such contest, fully pay and discharge
the amounts which shall be levied, assessed, charged or imposed or be determined
to be payable therein or in connection therewith, together with all penalties,
fines, interests, costs and expenses thereof or in connection therewith and
perform all acts, the performance of which shall be ordered or decreed as a
result thereof.

17.  CONDITIONAL LIMITATIONS, DEFAULT PROVISION.
     ------------------------------------------

     (a)  Any of the following occurrences or acts shall constitute an event of
default under this Lease: if Lessee, at any time during the continuance of this
Lease (and with regard to subparagraphs l and 2, regardless of the pendency of
any bankruptcy, reorganization, receivership, insolvency or other proceedings,
at law, in equity or before any administrative tribunal, which have or might
have the effect of preventing Lessee from complying with the terms of this
Lease), shall

          (i)   fail to make any payment of Basic Rent, additional rent or other
     sum herein required to be paid by Lessee for ten (10) days after written
     notice thereof, or

                                     -16-
<PAGE>

          (ii)  fail to observe or perform any other provision hereof for thirty
     (30) days after Lessor shall have deliver to Lessee notice of such failure
     (provided that in the case of any default referred to in this clause (2)
     which cannot with diligence be cured within such thirty (30) day period, if
     Lessee shall prosecute promptly to cure the same and thereafter shall
     prosecute the curing of such default with diligence, then upon receipt by
     Lessor of a certificate duly authorized on behalf of Lessee stating the
     reason that such default cannot be cured within thirty (30) days and
     stating that Lessee is proceeding with diligence to cure such default, the
     time within which such failure may be cured shall be extended for such
     period as may be necessary to complete the curing of the same with
     diligence), or

          (iii) shall file a petition in bankruptcy or for reorganization or for
     an arrangement pursuant to any federal or state bankruptcy law or any
     similar federal or state law, or shall be adjudicated a bankrupt or become
     insolvent or shall make an assignment for the benefit of creditors or shall
     admit in writing its inability to pay its debts generally as they become
     due, or if a petition or answer proposing the adjudication or Lessee as a
     bankrupt or its reorganization pursuant to any federal or state bankruptcy
     law or any similar federal or state law shall be filed in any court and
     Lessee shall consent to or acquiesce in the filing thereof or such petition
     or answer shall not be discharged or denied within 90 days after the filing
     thereof or if a receiver, trustee or liquidator of Lessee or of all or
     substantially all of the assets of Lessee or of Lessee's Estate shall be
     appointed in any proceeding brought by Lessee, or if any such receiver,
     trustee or liquidator shall be appointed in any proceeding brought against
     Lessee and shall not be discharged within 90

                                     -17-
<PAGE>

     days after such appointment, or if Lessee shall consent to or acquiesce in
     such appointment.

     Notwithstanding the foregoing, the happening of an act or occurrence
described in this Paragraph 17(a) shall not constitute an event of default under
this Lease if the happening of such act or occurrence has occurred under the
Sublease and constitutes an event of default thereunder on the part of the
Sublessee.

     (b)  If an event of default shall have happened and be continuing Lessor
shall have the right at its election then or at any time thereafter while such
event of default shall continue, to give Lessee written notice of Lessor's
intention to terminate the term of this Lease on a date specified in such
notice. Upon the giving of such notice, the term of this Lease and the estate
hereby granted shall expire and terminate on such date as fully and completely
and with the same effect as if such date were the date herein fixed for the
expiration of the term of this Lease, and all rights of Lessee hereunder shall
expire and terminate, but Lessee shall remain liable as hereinafter provided.
Unless such notice shall have been given, this Lease shall not terminate,
notwithstanding any default under this Lease and the abandonment of the Property
by Lessee. If an event of default shall have happened and be continuing and
Lessee shall have abandoned the Property, Lessor may, at its option, enforce all
of its rights and remedies under this Lease, including the right to receive
Basic Rent, additional rent and all other sums payable hereunder as they become
due. Moreover, Lessor shall be entitled to recover from Lessee all costs of
maintenance and preservation of the Leased Premises, and all costs (including
attorney's and receiver's fees, incurred in connection with the appointment of
and performance by a receiver to protect the Leased Premises and Lessor's
interest under this Lease.

                                     -18-
<PAGE>

     (c)  If an event of default shall have happened and be continuing, Lessor
shall have the immediate right, whether or not the term of this Lease shall have
been terminated pursuant to Paragraph 17(b), to re-enter and repossess the
Property or any part thereof by force, summary proceedings ejectment or
otherwise and the right to remove all persons and property therefrom. Lessor
shall be under no liability for or by reason of any entry, repossession or
removal. No such re-entry or taking of possession of the Property by Lessor
shall be construed as an election on Lessor's part to terminate the term of this
Lease unless a written notice of such intention be given to Lessee pursuant to
Paragraph 17(b), or unless the termination of this Lease be decreed by a court
of competent jurisdiction.

     (d)  At any time or from time to time after the repossession of the
Property or any part thereof pursuant to Paragraph 17(c), whether or not the
term of this Lease shall have been terminated pursuant to Paragraph 17(b),
Lessor may (but shall be under no obligation to) relet the Property or any part
thereof for the account of Lessee, in the name of Lessee or Lessor or otherwise
without notice to Lessee, for such term or terms (which may be greater or less
than the period which would otherwise have constituted the balance of the term
of this Lease) and on such conditions (which may include concessions or free
rent) and for such uses as Lessor, in its absolute discretion, may determine,
and Lessor may collect and receive any rents payable by reason of such
reletting. Lessor shall not be responsible or liable for any failure to relet
the Property or any part thereof or for any failure to collect any rent due upon
such reletting.

     (e)  No expiration or termination of the term of this Lease pursuant to
Paragraph 17(b), by operation of law or otherwise, and no repossession of the
Property or

                                     -19-
<PAGE>

any part thereof pursuant to Paragraph 17(c) or otherwise, and no reletting of
the Property or any part thereof pursuant to Paragraph 17(d), shall relieve
Lessee of its liabilities and obligations hereunder, all of which shall survive
such expiration, termination, repossession or reletting.

     (f)  In the event of any expiration or termination of this Lease or
repossession of the Property or any part thereof by reason of the occurrence of
an event of default, Lessee will pay to Lessor the Basic Rent, additional rent
and other sums required to be paid by Lessee to and including the date of such
expiration termination or repossession; and, thereafter, Lessee shall, until the
end of what would have been the term of this Lease in the absence of such
expiration, termination or repossession, and whether or not the Property or any
part thereof shall have been relet, be liable to Lessor for, and shall pay to
Lessor, as liquidated and agreed current damages

               (A)  the Basic Rent, additional rent and other sums which would
          be payable under this Lease by Lessee in the absence of such
          expiration, termination or repossession, less

               (B)  the net proceeds, if any, of any reletting effected for the
          account of Lessee pursuant to Paragraph 17(d), after deducting from
          such proceeds all Lessor's expenses in connection with such reletting
          (including without limitation, all repossession costs, brokerage
          commissions, legal expenses, attorney's fees, alteration costs and
          expenses of preparation for such reletting).

          Lessee will pay such current damages on the days on which the Basic
Rent would have been payable under this Lease in the absence of such expiration,
termination

                                     -20-
<PAGE>

     recover or repossession, and Lessor shall be entitled to recover the same
     from Lessee on each such day.

         (g) The words "enter", "re-enter" or "re-entry", as used in this
     Paragraph l7, are not restricted to their technical meaning.

     18. ADDITIONAL RIGHTS OF LESSOR.
         ---------------------------

         No right or remedy herein conferred upon or reserved to Lessor is
     intended to be exclusive of any other right or remedy, and each and every
     remedy shall be cumulative and in addition to any other right or remedy
     given hereunder or now or hereafter existing at law or in equity or by
     statute, provided that Lessor shall not be reimbursed for any loss or
     damage more than once.

     19. NOTICES.
         -------

         All notices, demands, requests, consents, approvals and other
     instruments required or permitted to be given pursuant to the terms of this
     Lease shall be in writing and shall be deemed to have been properly given
     if

         (a) with respect to Lessor, sent by certified mail, postage prepaid,
     addressed to Lessor at its address first above set forth, and

         (b) with respect to Lessee, sent by certified mail, postage prepaid,
     addressed to Lessee at its address first above set forth.

         Lessor and Lessee shall each have the right from time to time to
     specify as its address for purposes of this Lease any other address in the
     United States of America upon giving fifteen (l5) days written notice
     thereof, similarly given, to the other party. A counterpart or confirmed
     copy of each notice required or permitted to be given hereunder

                                     -21-
<PAGE>

     shall also be given to the Mortgagee, if the Mortgage is then in effect,
     and to the Sublessee, if a Sublease is then in effect, sent by registered
     or certified mail, postage prepaid, in each case at the last address of the
     Mortgagee or the Sublessee, as the case may be, known to the party giving
     such notice.

     20. ESTOPPEL CERTIFICATES.
         ---------------------

         (a) Lessee will execute, acknowledge and deliver to Lessor, promptly
     upon request but not more often than once each six (6) months, a
     certificate certifying

             (i)    that this Lease is unmodified and in full effect (or, if
         there have been modifications, that this Lease is in full effect, as
         modified, and stating the modifications),

             (ii)   the dates, if any, to which the Basic Rent, additional rent
         and other sums payable hereunder have been paid and the amount of the
         Basic Rent currently payable, and

             (iii)  that no notice has been received by Lessee of any default
         which has not been cured, or, if any default for which notice has been
         received has not been cured, specifying the nature and period of
         existence thereof and what action Lessee is taking or proposes to take
         with respect thereto.

     Any such certificate may be relied upon by any prospective purchaser of the
     Leased Premises or any part thereof.

         (b) Lessor will execute, acknowledge and deliver to Lessee, promptly
     upon request, a certificate certifying

                                     -22-
<PAGE>

               (i)   that this Lease is unmodified and in full effect (or, if
         there have been modifications, that this Lease is in full effect, as
         modified, and stating the modifications),

               (ii)  the dates, if any, to which the Basic Rent, additional rent
         and other sums payable hereunder have been paid and the amount of the
         Basic Rent currently payable, and

               (iii) that no notice has been given by Lessor of any default
         which has not been cured, or if any default for which notice has been
         given has not been cured, specifying the nature and period of existence
         thereof and what action Lessor is taking or proposes to take with
         respect thereto.

     Any such certificate may be relied upon by any prospective assignee of
     Lessee's interest in this Lease or the Mortgagee or any assignee of the
     Mortgagee.

         (c)   Lessee will cause the Sublease to contain a provision requiring
     the Sublessee to execute, acknowledge and deliver to Lessor, promptly upon
     request, but not more often than once each six (6) months, a certificate
     certifying

               (i)   that the Sublease is unmodified and in full effect (or if
         there have been modifications, that the Sublease is in full effect as
         modified, and stating the modifications),

               (ii)  the dates, if any, to which the Basic Rent, additional rent
         and other sums payable under the Sublease have been paid and the amount
         of the Basic Rent currently payable thereunder, and

                                     -23-
<PAGE>

               (iii) that no notice has been received by the Sublessee of
         default under the Sublease which has not been cured or, if any default
         for which notice has been received has not been cured, specifying the
         nature and period of existence thereof and what action the Sublessee is
         taking or proposes to take with respect thereto.

     21. NO MERGER.
         ---------

         There shall be no merger of this Lease or of the leasehold estate
     hereby created with the fee estate in the Leased Premises or any part
     thereof by reason of the fact that the same person may acquire or hold,
     directly or indirectly, this Lease or the leasehold estate hereby created
     or any interest in this Lease or in such leasehold estate and the fee
     estate in the Leased Premises or any interest in such fee estate.

     22. SURRENDER.
         ---------

         Upon the expiration or earlier termination of this Lease, Lessee shall
     peaceably leave and surrender the Leased Premises to Lessor in the same
     condition in which the Leased Premises were originally received from Lessor
     at the commencement of the term of this Lease, except as improved,
     repaired, rebuilt, restored, altered or added to as provided in, permitted
     by or required by any provisions of this Lease and except for ordinary wear
     and tear and except as provided in Paragraphs l3 and l4. Lessee shall have
     the right to remove from the Leased Premises on or prior to such expiration
     or earlier termination all property situated thereon which is not owned by
     Lessor, including the Improvements, or, at its election, to allow such
     property to remain on the Leased Premises, but Lessee shall be required to
     repair, at its expense, any damage to the Leased Premises resulting from
     any such removal. Such property not so removed shall become

                                     -24-
<PAGE>

     the property of Lessor, and Lessor may thereafter, at its expense, cause
     such property to be removed from the Leased Premises and disposed of.

     23. SEPARABILITY.
         ------------

         Each and every covenant and agreement contained in this Lease is, and
     shall be construed to be, a separate and independent covenant and
     agreement, and the breach of any such covenant or agreement by Lessor shall
     not discharge or relieve Lessee from its obligations to perform the same.
     If any term or provision of this Lease or the application thereof to any
     person or circumstance shall to any extent be invalid and unenforceable,
     the remainder of this Lease, or the application of such term or provision
     to persons or circumstances other than those as to which it is invalid or
     unenforceable, shall not be affected thereby, and each term and provision
     of this Lease shall be valid and shall be enforced to the extent permitted
     by law.

     24. RIGHTS OF MORTGAGEE.
         -------------------

         (a)  If Lessee shall be in default in the observance or performance of
     any covenant in this Lease beyond any applicable period of grace referred
     to herein, Lessor shall send written notice of such default to the
     Mortgagee at its address set forth in the Mortgage or as the Mortgagee may
     designate by notice to Lessor. The Mortgagee shall have 30 days after
     delivery of such written notice from Lessor within which to cure or remove
     such default, and if such default cannot with diligence be cured within
     such 30 day period, a reasonable time thereafter, provided, that the
     Mortgagee proceeds promptly to cure the same and thereafter prosecutes the
     curing of such default with diligence. Notwithstanding any other provision
     of this Lease, Lessor shall not have any right pursuant to this Lease or
     otherwise to terminate this Lease due to such default unless

                                     -25-
<PAGE>

     Lessor shall have first given written notice thereof to the Mortgagee and
     unless the Mortgagee shall have failed to cure or remove, or cause to be
     cured or removed, such default within the time required by this
     subparagraph (a).

          (b)  Lessor will accept performance by the Mortgagee or the Sublessee
     or either of them of any covenant, agreement or obligation of Lessee
     contained in this Lease with the same effect as though performed by lessee.

          (c)  Lessor shall have no rights in and to the rentals payable to
     Lessee under any Sublease of all or any part of the Property, which rentals
     may be assigned by Lessee to the Mortgagee.

          (d)  If this Lease shall be terminated for any reason, (other than
     pursuant to Paragraphs l3 and l4) or in the event of the rejection or
     disaffirmance of this Lease pursuant to bankruptcy law or other law
     affecting creditor's rights, Lessor will enter into a new lease of the
     Leased Premises with the Mortgagee, or any party designated by the
     Mortgagee, not less than ten (l0) nor more than thirty (30) days after the
     request of the Mortgagee referred to below, for the remainder of the term
     of this Lease, effective as of the date of such termination, rejection or
     disaffirmance, upon all the terms and provisions contained in this Lease,
     provided, that the Mortgagee makes a written request to Lessor for such new
     lease within ninety (90) days after the effective date of such termination,
     rejection or disaffirmance, as the case may be, and such written request is
     accompanied by a copy of the new lease, prepared at Lessee's expense, duly
     executed and acknowledged by the Mortgagee, or the party designated by the
     Mortgagee to be the lessee thereunder, and the Mortgagee cures all defaults
     under this Lease which can be cured by the payment of money and pays to
     Lessor all Basic Rent and additional rent

                                     -26-
<PAGE>

     which would at the time of such execution and delivery be due and payable
     by Lessee under this Lease but for such rejection, disaffirmance or
     termination, less net amounts received by Lessor under Paragraph 17(d), if
     any. If the Mortgagee, or the party so designated by the Mortgagee, shall
     have entered into a new lease with Lessor pursuant to this subparagraph
     (d), then any default under this Lease which cannot be cured by the payment
     of money shall be deemed cured. Any new lease made pursuant to this
     subparagraph (d) shall have the same priority of lien as this Lease and
     shall be accompanied by a conveyance of Lessor's title, if any, to the
     Improvements (free of any mortgage or other lien, charge or encumbrance
     created or suffered to be created by Lessor) for a term of years equal in
     duration to the term of the new lease. The provisions of this subparagraph
     (d) shall survive the termination, rejection or disaffirmance of this Lease
     and shall continue in full effect thereafter to the same extent as if this
     subparagraph (d) were a separate and independent contract made by Lessor,
     Lessee and the Mortgagee and, from the effective date of such termination,
     rejection or disaffirmance of this Lease to the date of execution and
     delivery of such new lease, the Mortgagee may use and enjoy the leasehold
     estate created by this Lease without hindrance by Lessor.

          (e)  Lessor will not accept a voluntary surrender of this Lease. This
     Lease shall not be modified without the prior written consent of the
     Mortgagee.

          (f)  The provisions of this Paragraph 24 are for the benefit of the
     Mortgagee and may be relied upon and shall be enforceable by the Mortgagee.
     Neither the Mortgagee nor any other holder or owner of the indebtedness
     secured by the Mortgage or otherwise shall be liable upon the covenants,
     agreements or obligations of Lessee

                                     -27-
<PAGE>

     contained in this Lease, unless and until the Mortgagee or such holder or
     owner becomes the lessee hereunder.

     25.  APPRAISERS.
          ----------

          Whenever in this Lease it is provided that any question shall be
     determined by appraisers, such questions shall be submitted to a board of
     appraisers, three (3) in number, each of whom shall be a qualified member
     of the American Institute of Real Estate Appraisers, or any successor of
     such Institute, or if such organization or successor shall no longer be in
     existence, a recognized national association or institute of appraisers.
     One such appraiser shall be named by each of the parties hereto and the
     third shall be selected by the two so named, and the decision of any two
     (2) of such appraisers shall be final and conclusive on the parties hereto.
     If the two appraisers designated by the parties fail to select a third
     appraiser within fifteen (l5) days after the appointment by such parties,
     either party shall have the right to apply to the American Institute of
     Real Estate Appraisers or such successor for the designation of a third
     appraiser. Lessor agrees that it will recognize any designation by Lessee
     of the Mortgagee as the party to exercise the rights of Lessee with respect
     to the selection of appraisers in connection with any dispute arising
     hereunder which it is provided herein is to be determined by appraisal
     pursuant to this Paragraph. The cost of any such appraisal shall be borne
     equally by Lessor and Lessee.

                                     -28-
<PAGE>

     26.  THE SUBLEASE.
          ------------

          So long as the Sublease shall be in effect:

            (i)    Lessor and Lessee shall not agree between themselves to any
          termination (except as expressly provided in Paragraph 13 or l4
          hereof), surrender or modification of this Lease without the prior
          written consent of the Sublessee;

            (ii)   Lessor will give to the Sublessee a copy of any notice or
          other communication given by Lessor to Lessee, at the time of giving
          such notice or communication to Lessee, and Lessor will not exercise
          any right, power or remedy with respect to any default hereunder and
          no notice to Lessee of any default and no termination of this Lease in
          connection therewith shall be effective, unless Lessor shall have
          given to the Sublessee written notice or a copy of its notice to
          Lessee of such default or any such termination, as the case may be;

            (iii)  Lessor will not exercise any right power or remedy with
          respect to any event of default hereunder until the expiration of any
          grace period provided with respect thereto, plus

                   (A) in the case of a default constituting an event of
            default under clause (l) of Paragraph 17(a), fifteen (l5) days after
            the date Lessor has given to the Sublessee written notice of such
            default or a copy of its notice to Lessee of such default (as
            required by clause (ii) above), or

                   (B) in the case of a default constituting an event of default
            under clause (2) of Paragraph 17(a), thirty (30) days after the last
            to occur of

                                     -29-
<PAGE>

                              (1)  any grace period provided with respect
                        thereto, or

                              (2)  the date Lessor gives to the Sublessee
                        written notice of such default or a copy of its notice
                        to Lessee of such default (as required by clause (ii)
                        above).

                   Lessor will not exercise any right, power or remedy with
                   respect to any default referred to in subclause (B) of this
                   clause (iii), if

                        (x)   the Sublessee, within such thirty (30) day period
                              referred to in subclause (B), shall give to Lessor
                              written notice that it intends to undertake the
                              correction of such default or to cause the same to
                              be corrected, and

                        (y)   the Sublessee shall thereafter prosecute
                              diligently the correction of such default, and

                   (iv) the performance by the Sublessee of any of the terms and
          provisions of this Lease on Lessee's part to be performed shall be
          deemed to be performance thereof by Lessee.

     27.  ATTORNMENT OF SUBLESSEE; NO PERSONAL LIABILITY OF LESSEE.
          --------------------------------------------------------

          (a)     Lessee shall cause the Sublease to contain language to the
     following effect:

     If:

                   (i) the Ground Lease shall terminate for any reason other
          than as specifically provided for in Paragraphs l3 and l4 thereof, or

                                     -30-
<PAGE>

                   (ii) the Ground Lease shall have been rejected or disaffirmed
          by Lessee thereunder or any trustee or receiver thereof pursuant to
          bankruptcy or insolvency law or other law affecting creditor's rights
          and if the Mortgagee (or its designee) shall not have entered into a
          new lease or acquired the interest of the Lessee thereunder pursuant
          to Paragraph 24 thereof,

     the Sublessee under the Sublease shall attorn to Ground Lessor. Upon the
     Ground Lessor's acceptance thereof, Ground Lessor and such Lessee shall
     continue the Sublease in full force and effect as a direct lease from the
     Ground Lessor to such Lessee on the same terms and conditions of the
     Sublease, including without limitation, the obligation to pay Basic Rent,
     additional rent and all other sums (including without limitation, sums
     payable pursuant to Paragraph 19(a) of the Sublease) payable under the
     Sublease (as those terms are defined in the Sublease) for the period after
     the termination, rejection or disaffirmance of the Ground Lease, and all of
     the terms and conditions of the Sublease shall be binding upon the Ground
     Lessor and such Lessee to the same extent as if Ground Lessor and such
     Lessee had been the original lessor and lessee, respectively, under the
     Sublease.

          (b) the Lessor agrees that if the Sublessee shall attorn to Lessor in
     accordance with the Sublease, Lessor shall accept such attornment and
     thereafter continue the Sublease in full force and effect as a direct lease
     from Lessor to the Sublessee on the same terms and conditions of the
     Sublease, including, without limitation, the obligation to pay Basic Rent,
     additional rent and any other sums payable under the Sublease (as those
     terms are defined in the Sublease) for the period after the termination,
     rejection or disaffirmance of this Lease and that all of the terms and
     conditions of the Sublease shall

                                     -31-
<PAGE>

     be binding upon Lessor and the Sublessee to the same extent as if Lessor
     and Sublessee had been the original lessor and lessee, respectively, under
     the Sublease.

          (c) Lessee agrees that the provisions of Paragraphs 27(a) and 27(b)
     shall be for the benefit of the Sublessee and that the Sublessee may rely
     thereon in entering into the Sublease.

     28.  OPTION TO PURCHASE.
          ------------------

          Provided the Sublessee shall not have purchased the Premises (as
     defined in the Sublease) pursuant to paragraph 11 or 13 of the Sublease or
     Paragraph l3(f) or 14(b) hereof, Lessee shall have the right to purchase
     the Leased Premises upon the expiration of the Sublease, as the same may be
     extended pursuant to paragraph 3 thereof, and thereafter once every five
     years during the term of this Lease, on the last day of such five year
     period, subject to the following terms and conditions:

              (i)    At least 130 days prior written notice must have been given
          to Lessor.

              (ii)   The purchase price shall be the fair market value of the
          Leased Premises, such value determined pursuant to Paragraph 25
          hereof.

              (iii)  Lessor shall convey title subject only to (w) Permitted
          Encumbrances, (x) all charges, liens, security interests and
          encumbrances attaching to the title on or after the commencement of
          the term hereof which shall have not been created by Lessor or which
          shall be consented to by Lessee, and (y) all applicable laws,
          regulations, ordinances, and Permitted Encumbrances, but free

                                     -32-
<PAGE>

          of the lien of the Mortgage and charges, liens, security interests and
          encumbrances resulting from acts of Lessor taken without the consent
          of Lessee.

                (iv) Upon the date fixed for any purchase of Lessor's interest
          in the Leased Premises or any portion thereof hereunder, Lessee shall
          pay to Lessor the purchase price therefor specified herein together
          with all Basic Rent, additional rent and other sums then due and
          payable hereunder to and including such date of purchase, and Lessor
          shall deliver to Lessee a conveyance of the Leased Premises and any
          other instruments necessary to convey the title thereto. Lessee shall
          pay all charges incident to such conveyance and assignment, including
          counsel fees, escrow fees, recording fees, title insurance premiums
          and all applicable taxes (other than any income or franchise taxes of
          Lessor) which may be imposed by reason of such conveyance and
          assignment and the delivery of said conveyance and other instruments.
          Upon the completion of any such purchase of the Leased Premises but
          not prior thereto, this Lease shall terminate, except with respect to
          obligations and liabilities of Lessee hereunder, actual or contingent,
          which have arisen on or prior to such date of purchase.

     29.  TERMINATION OF OPTIONS.
          ----------------------

          Anything herein to the contrary notwithstanding, each option to
     purchase contained in this Lease shall terminate on the earlier of the
     following dates: (i) the specific date of termination referred to in each
     option; or (ii) that date which is 2l years after the death of the last
     survivor of the descendants of Franklin D. Roosevelt, former president of
     the United States of America, who was alive on the date of this Lease.

                                     -33-
<PAGE>

     30.  TERMINATION OF AGREEMENT FOR LEASE AND DEVELOPMENT TERM.
          -------------------------------------------------------

          If the Agreement for Lease and Development dated as of April 18, 1977
     herewith between Lessor and Lessee (the "Agreement for Lease and
     Development") is terminated pursuant to Paragraph 6.7 thereof, then this
     Lease shall automatically cease and terminate as of the date of termination
     of the Agreement for Lease and Development, and shall be of no further
     force and effect between Lessor and Lessee.

     31.  TERMINATION DATE AGREEMENT.
          --------------------------

          Upon the occurrence of the Permanent Loan Funding Date, as defined in
     the Agreement for Lease and Development, Lessor and Lessee shall enter into
     a written agreement setting forth the Termination Date, as defined in
     Schedule C hereof.

     32.  BINDING EFFECT.
          --------------

          All of the covenants, conditions and obligations contained in this
     Lease shall be binding upon and inure to the benefit of the respective
     successors and assigns of Lessor and Lessee to the same extent as if each
     such successor and assign were in each case named as a party to this Lease;
     and the term "Lessor", as used in this Lease, shall include any successor
     owner or owners, at any time, of the Leased Premises or any part thereof.
     This Lease may not be changed, modified or discharged except by a writing
     signed by Lessor and Lessee [and consented to by the Mortgagee, if such
     consent is required pursuant to Paragraph 24(f) hereof].

                                     -34-
<PAGE>

     33.  HEADINGS.
          --------

          The headings to the various paragraphs and schedules of this Lease
     have been inserted for reference only and shall not to any extent have the
     effect of modifying, amending or changing the expressed terms and
     provisions of this Lease.

     34.  GOVERNING LAW.
          -------------

          This Lease shall be governed by and interpreted under the laws of the
     State of Virginia.

     35.  SCHEDULES.
          ---------

          The following are Schedules A-1, A-2, A-3, B and C referred to in this
Lease.

                                     -35-
<PAGE>

                                 SCHEDULE A-1
                                 ------------

     ALL that certain lot, piece or parcel of land, with appurtenances thereunto
     pertaining, lying and being in Brookland District, Henrico County,
     Virginia, containing 11.80 acres, more or less, outlined in red, on "Map of
     11.80 Acres Of Land In Brookfield, In Brookland District, Henrico County,
     Virginia" dated September 22, 1976, revised January 12, 1977, February 8,
     1977, and February 14, 1977, made by LaPrade Brothers, Civil Engineers and
     Surveyors, Richmond, Virginia, a copy of which said plat was recorded on
     February 15, 1977 in the Clerk's Office of the Circuit Court for the County
     of Henrico, Virginia in Deed Book 1714, page 684.

     TOGETHER with a non-exclusive easement of ingress and egress for vehicular
     and pedestrian traffic over the private road as it meanders east from Broad
     Street through the "Brookfield Development" to the west line of the above
     described property, said non- exclusive easement for ingress and egress for
     vehicular and pedestrian traffic is outlined in red on "Map of Private Road
     In Brookfield From Broad Street Road to Southern States Cooperative,
     Incorporated, Property in Brookland District, Henrico County, Virginia"
     dated February 11, 1977, made by LaPrade Brothers, Civil Engineers and
     Surveyors, Richmond, Virginia, a copy of which plat was recorded on
     February 15, 1977 in the aforesaid Clerk's Office in Deed Book 1714, page
     684.

     TOGETHER with a non-exclusive easement to drain surface water along a path
     shaded in blue on the plat entitled "Easement For Surface Drainage Across
     Richmond Equivest, Inc. Property, From North Line Southern States
     Cooperative, Inc. Property To South Line Of 1-64," dated February 18, 1977,
     made by LaPrade Brothers, Civil Engineers and Surveyors, Richmond,
     Virginia, a copy of which plat was recorded on March 28, 1977 in the
     aforesaid Clerk's Office in Deed Book 1716, page 1137.

                                     -36-
<PAGE>

                                 SCHEDULE A-2
                                 ------------

          (a)  Easements, rights of way, restrictions and other minor defects
and irregularities in the title and ownership of the Leased Premises, which do
not materially impair the use thereof for the purposes for which it is held by
Lessor or leased by Lessee or materially affect its value;

          (b)  Rights reserved to or vested in any municipality or public
authority by the terms of any right, power, franchise, grant, license, permit,
and rights of any municipality or public authority to condemn or appropriate the
Leased Premises;

          (c)  Any liens thereon for taxes, assessments, fees, water, sewer or
other rents, rates and charges, excises, levees, license fees, permits,
inspection fees and other governmental authorities, which are not delinquent to
the extent that penalties for nonpayment may be assessed, or, if delinquent, the
amount or validity of which, is being contested as permitted by paragraph 16 of
the Lease;

          (d)  Liens which arise by operation of law in the ordinary course of
business securing claims, which are not delinquent, of materialmen, mechanics,
workmen, repairmen, suppliers, carriers, warehousemen, landlords, vendors or
employees.

                                     -37-
<PAGE>

                                 SCHEDULE A-3
                                 ------------

     l.  Miscellaneous plumbing
     2.  Kitchen equipment
     3.  Exhaust fans
     4.  Vinyl wallcovering
     5.  Sound insulation
     6.  Miscellaneous built-in shelving, counters and storage
     7.  Graphics and signage
     8.  Drapes
     9.  Full-height doors
     10. Special lighting
     11. Carpet
     12. Millwork

                                     -38-
<PAGE>

                                  SCHEDULE B
                                  ----------

          An eight-story office building containing approximately 210,000 square
     feet, together with paved, striped and lighted parking for approximately
     750 cars, to be constructed in accordance with the plans and specifications
     prepared by Cooper, Carry & Associates, Inc., Architects, pursuant to an
     Agreement between Lessee and Cooper, Carry & Associates, Inc.

                                     -39-
<PAGE>

                                  SCHEDULE C
                                  ----------

     TERM
     ----
          The term of this Lease shall commence on August l, 1977, and end at
     midnight on the earlier of (i) the last day of the month in which the
     seventieth (70th) anniversary of the Permanent Loan Funding Date (as
     defined in the Agreement for Lease and Development) occurs or (ii) January
     l, 2050 (the "Termination Date").

     RENT
     ----
         The Basic Rent from the commencement of the term until the Permanent
     Loan Funding Date shall be at the rate of $1.00 per annum payable in
     arrears on the day immediately preceding the Permanent Loan Funding Date.

         The Basic Rent from the Permanent Loan Funding Date through the
     Termination Date shall be at the rate of $127,500 per annum, payable
     monthly in arrears on the last day of the month in installments of $10,625,
     provided that if the Permanent Loan Funding Date shall occur on a date
     other than the first day of a calendar month, the first monthly installment
     shall be prorated to the end of such calendar month.

                                     -40-
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
     signed and sealed as of the day and year first above written.

                                            SOUTHERN STATES COOPERATIVE,
                                            INCORPORATED

     [CORPORATE SEAL]

                                            By: /s/ John J. Feland
                                               -------------------------
                                                Vice President

      ATTEST:

      By: /s/  E.M. Holdaway
         ------------------
         Secretary

                                            GOLD BOND STAMP COMPANY
                                            OF GEORGIA

      [CORPORATE SEAL]

                                            By: /s/ H. W. Greenough
                                               ---------------------------
                                                President

      ATTEST:

      By: /s/ C. C. Krause
        ----------------------
         Assistant Secretary

                                     -41-
<PAGE>

     STATE OF VIRGINIA       :
                             :    ss.:

     CITY OF RICHMOND        :

          I, Lois E. Sisk, a Notary Public in and for the State and City
     aforesaid, do certify that John J. Feland, and E. M. Holdaway a Vice
     President and Secretary respectively, of SOUTHERN STATES COOPERATIVE,
     INCORPORATED, a Virginia corporation, whose names are signed to the writing
     above, bearing date as of the 15th day of July, 1977, have acknowledged the
     same before me in my City aforesaid.

          Given under my hand this 29th day of July 10, 1977.

                                                 /s/ Lois E. Sisk
                                                 ----------------------------
                                                 Notary Public
                                                 Commission Expires 10-14-80

[NOTARIAL SEAL]

                                     -42-
<PAGE>

     STATE OF Minnesota   :
                          :   ss..
     COUNTY OF HENNEPIN   :

          I, Terri Nims, a Notary Public in and for the State and County
     aforesaid, do certify that H. W. Greenough and C. C. Krause a President and
     Assistant Secretary, respectively, of GOLD BOND STAMP COMPANY OF GEORGIA, a
     New Jersey corporation, whose names are signed to the writing above,
     bearing date as of the 15 day of July, 1977, have acknowledged the same
     before me in my County aforesaid.

          Given under my hand this 26 day of July, 1977.

                                                     /s/ Terri Nims
                                                     --------------------
                                                     Notary Public

[NOTARIAL SEAL]

                                     -43-

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