Exhibit 10.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
ARCHER ACQUISITIONS, LLC
AND
ARCHWAY COOKIES LLC
Dated as of November 13, 2008

 

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ASSET PURCHASE AGREEMENT
     THIS ASSET PURCHASE AGREEMENT dated as of November 13, 2008 (this
“Agreement”) is entered into by and between Archer Acquisitions, LLC, a North
Carolina limited liability company, or its designee subject to the provisions of
Section 13.3 (“Purchaser”), and Archway Cookies, LLC, a Delaware limited
liability company (“Seller”), and for the purposes of Section 6.4, Lance, Inc.,
a North Carolina corporation and the indirect parent of Purchaser. Purchaser and
Seller are sometimes individually referred to in this Agreement as a “Party” and
collectively as the “Parties.”
RECITALS:
     WHEREAS, Seller was engaged in the business of manufacturing and
distributing branded cookies and snack foods (the “Business”).
     WHEREAS, Seller desires to sell, transfer, convey, assign and deliver the
Purchased Assets (as defined below) and to assign the Assumed Liabilities (as
defined below), as their interests may appear, and Purchaser desires to
purchase, take delivery of and assume such Purchased Assets and Assumed
Liabilities, upon the terms and subject to the conditions set forth herein;
     WHEREAS, Seller commenced a Chapter 11 Bankruptcy Case (the “Bankruptcy
Case”) in the United States Bankruptcy Court for the District of Delaware (the
“Bankruptcy Court”); and
     WHEREAS, the transactions contemplated by this Agreement (the
“Transactions”) will be consummated pursuant to a Bidding Procedures Order and a
Sale Approval Order (each as defined below) to be entered in the Bankruptcy Case
under Sections 105, 363, 365 and other applicable provisions of the Bankruptcy
Code (as defined below), and the Transactions and this Agreement are subject to
the approval of the Bankruptcy Court.
     NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements, covenants, representations, warranties and promises set forth
herein, and in order to prescribe the terms and conditions of such purchase and
sale, intending to be legally bound, the Parties agree as follows:
     1. Definitions.
          1.1. Definitions. The following terms, as used herein, have the
following meanings:
               (a) “Affiliate” means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under common control
with, such other Person.
               (b) “Agent of Bank Group” means Wachovia Capital Finance
Corporation (New England), together with its successors and assigns.

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               (c) “Archway Name” means any name owned by or licensed to Seller
including the words “Archway” or “A&M” and those other registered or
unregistered trade names, trademarks or service marks expressly set forth on
Schedule 2.1(e) of the Disclosure Schedules, together with the goodwill
associated therewith.
               (d) “Ashland Employees” means the Seller’s full-time employees
who had been working at the Plant for at least 90 days as of October 3, 2008 and
are listed on Schedule 1.1(d) of the Disclosure Schedules.
               (e) “Bank Group” means Agent of the Bank Group and the other
lenders from time to time parties to the Loan and Security Agreement dated
January 28, 2005, as amended, by and among Agent of the Bank Group, the other
members of the Bank Group, Seller and certain Affiliates of Seller.
               (f) “Bankruptcy Code” means Title 11 of the United States Code
(11 U.S.C. § 101 et seq.), as amended.
               (g) “Bid Deadline” means November 25, 2008.
               (h) “Bidding Procedures Order” means an Order of the Bankruptcy
Court, in form and substance reasonably satisfactory to Purchaser, Seller and
their respective counsel, which contains bid procedures, protections and
findings, that, among other things, (i) determines that this Agreement
constitutes a Qualified Bid for the Purchased Assets, against which other
parties interested in acquiring the Purchased Assets must bid; (ii) establishes
a date by which any competing Qualified Bids must be submitted; (iii) approves
the Bidding Procedures and payment of the Breakup Fee in accordance with the
terms thereof and this Agreement; (iv) approves the Initial Overbid and the
subsequent Incremental Bid Amount; (v) establishes the date of the Auction; (vi)
sets a deadline for the filing of objections to the Sale Motion, including
without limitation, the proposed Cure Amounts; and (vii) schedules the Sale
Hearing to occur no later than December 2, 2008.
               (i) “Business Day” means a day other than Saturday, Sunday or
other day on which commercial banks in New York, New York are authorized or
required by law to close.
               (j) “Claim” means a “claim” as defined in Section 101(5) of the
Bankruptcy Code.
               (k) “Competing Proposal” means a competitive bid or proposal from
a Third Party (i) to acquire, directly or indirectly, the Purchased Assets
whether in a separate transaction or series of transactions or as part of a plan
of reorganization of Seller, (ii) for any merger, consolidation, liquidation,
dissolution or similar transaction involving Seller, or (iii) to acquire,
directly or indirectly, a majority of the outstanding equity of Seller.
               (l) “Closing Date” means the date of the Closing.
               (m) “Code” means the Internal Revenue Code of 1986, as amended.

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               (n) “Contract” means any agreement or contract related to the
Business, whether written or oral, including, but not limited to, Customer
Contracts, Chapter 11 Licenses, licenses or agreements related to Intellectual
Property Rights, leases, arrangements, undertakings and purchase and sales
orders.
               (o) “Cure Amounts” means all unpaid amounts or unsatisfied
obligations that must be paid or satisfied to effectuate, pursuant to all
applicable provisions of the Bankruptcy Code, the assumption by and assignment
to Purchaser of Assumed Contracts.
               (p) “Customer Contract” means an arrangement, commitment,
agreement or contract, whether oral or written, pursuant to which a Seller
provides goods and/or services to a customer in connection with the Business.
               (q) “Employee Benefit Plans” means all employee benefit plans as
defined in section 3(3) of ERISA, all compensation, pay, severance pay, salary
continuation, bonus, incentive, stock option, retirement, pension, profit
sharing or deferred compensation plans, Contracts, programs, funds or
arrangements of any kind and all other employee benefit plans, programs, funds
or arrangements (whether written or oral, qualified or nonqualified, funded or
unfunded, foreign or domestic, currently effective or terminated, and whether or
not subject to ERISA) and any trust, escrow or similar agreement related
thereto, whether or not funded.
               (r) “ERISA” means the Employee Retirement Income Security Act of
1974, as amended.
               (s) “Final Order” means an order of the Bankruptcy Court, which
is not the subject of any applicable stay.
               (t) “Finished Good Inventory” means all finished goods owned by
Seller on the Closing Date.
               (u) “Governmental Authority” means a federal, state, county,
local, foreign or other governmental or regulatory agency, authority (including
self-regulatory authority), instrumentality, commission, board or body having
jurisdiction over a Person.
               (v) “Intellectual Property Right” means the Archway Name, any
mask work, invention, patent, trade secret, copyright, know-how (including any
registrations or applications for registration of any of the foregoing),
formulas or recipes, manufacturing methods, techniques and processes for
products produced in the Business, license agreement or any other similar type
of proprietary intellectual property right, together with all of the goodwill
associated therewith.
               (w) “IRS” means the Internal Revenue Service of the United
States.
               (x) “Law” means any code, law (including without limitation
common law), ordinance, regulation, reporting or licensing requirement, rule or
statute applicable to a Person, its assets, liabilities or business.

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               (y) “Lien” means, with respect to any property or asset, any
mortgage, lien, pledge, charge, security interest or other encumbrance in
respect of such property or asset.
               (z) “Material Adverse Effect” or “Material Adverse Change” means
a material adverse effect on or change in the Purchased Assets, taken as a
whole, excluding any such effect or change to the extent resulting from or
arising in connection with (i) the proposed Transactions or the public
announcement thereof, (ii) changes in economic, regulatory or political
conditions generally, (iii) changes resulting from the commencement or
continuation of the Bankruptcy Case, and (iv) actions taken by Seller pursuant
to (or as contemplated by) orders entered by the Bankruptcy Court in the
Bankruptcy Case (vi) changes in the financial or stock markets in the United
States of America, (vii) changes in national or international political,
economic or social conditions as a result of war, military or terrorist attack
upon the US, or any of its territories or possessions or diplomatic offices,
(viii) changes in laws, rules, regulations or orders issued by any governmental
entity, or (ix) any existing event, occurrence or circumstance with respect to
which Purchaser has knowledge as of the date hereof.
               (aa) “Mother’s Assets” means the “Purchased Assets” as such term
is defined in that certain Asset Purchase Agreement of even date herewith by and
between Madre Capital, Inc. and Mother’s Cake and Cookie Co.
               (bb) “Order” means any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency, or regulatory authority.
               (cc) “Petition Date” means the date on which the Seller commenced
the Bankruptcy Case by filing with the Bankruptcy Court a voluntary petition for
relief under Chapter 11 of the Bankruptcy Code.
               (dd) “Person” means an individual, corporation, partnership,
limited liability company, association, trust or other entity or organization,
including a governmental unit or political subdivision thereof.
               (ee) “Plant” means that certain manufacturing facility owned by
Seller situated on the Real Property located in Ashland Ohio.
               (ff) “Pre-Closing Inventory” means any all finished goods, raw
materials, work in process, and inventoriable supplies owned by Seller prior to
the Closing Date.
               (gg) “Pre-Closing Tax Period” means (i) any Tax period ending on
or before the Closing Date and (ii) with respect to a Straddle Tax Period, the
portion of such period up to and including the Closing Date.
               (hh) “Property Taxes” means all real property Taxes, personal
property Taxes and similar ad valorem obligations levied with respect to the
Purchased Assets for any Tax period.

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               (ii) “Qualified Bid” means a Competing Proposal that is
determined to be a Qualified Bid under the Bidding Procedures Order. This
Agreement shall be deemed to be a Qualified Bid for the Purchased Assets.
               (jj) “Qualified Bidder” means a Person (a) who has delivered to a
Seller a Qualified Bid that Seller, in good faith, believes is reasonably likely
to lead to an acceptable offer for the Purchased Assets, and (b) whom Seller in
good faith determines is reasonably likely (based on the availability of
financing and proof of financial wherewithal, experience and other relevant
considerations) to be able to consummate a transaction based on the Qualified
Bid, if selected as the successful bidder for the Purchased Assets. Purchaser
shall be deemed to be a Qualified Bidder.
               (kk) “Sale Approval Order” means an Order of the Bankruptcy
Court, in form and substance reasonably acceptable to Purchaser, Seller and
their respective counsel, that, among other things contains usual and customary
findings of fact and conclusions of law by the Bankruptcy Court and, (i) grants
the Sale Motion; (ii) approves and authorizes Seller to enter into this
Agreement (or any amended version of such agreement agreed upon by the Parties
in writing) and consummate the Transactions; (iii) determines that this
Agreement was proposed by Purchaser in good faith and represents the highest and
best offer for the Purchased Assets and should be approved; (iv) determines that
Purchaser is a good faith purchaser under Section 363(m) of the Bankruptcy Code
and that the provisions of Section 363(n) of the Bankruptcy Code have not been
violated; (v) determines that the Purchased Assets may be sold free and clear of
all Liens and interests in full compliance with Section 363(f) of the Bankruptcy
Code; (vi) authorizes and directs Seller to sell the Purchased Assets to
Purchaser pursuant to this Agreement (or any amended version of such agreement
agreed upon by the Parties in writing) and all applicable provisions of the
Bankruptcy Code, free and clear of all Liens (including any and all “interests”
in the Purchased Assets within the meaning of Section 363(f) of the Bankruptcy
Code), other than the Assumed Liabilities and the Permitted Liens;
(vii) authorizes and directs Seller to execute, deliver, perform under,
consummate and implement this Agreement (or any amended version of such
agreement agreed upon by the Parties in writing), together with all additional
instruments and documents that may be reasonably necessary or desirable to
implement the foregoing; (viii) approves and establishes procedures for the
assumption and assignment of Assumed Contracts in accordance with section 7.6 of
this Agreement; (ix) provides that Purchaser is not the successor to the Seller
or its bankruptcy estate by reason of any theory of law or equity and that
Purchaser has not assumed any liability or obligation of the Seller or its
bankruptcy estate except as otherwise expressly provided in this Agreement;
(x) provides that Purchaser has no obligation to pay any liabilities or
obligations of Seller of any kind, except as expressly provided in this
Agreement; (xi) to the extent enforceable under applicable law, enjoins the
holder of any lien or interest in Seller or any of the Purchased Assets from
interfering with Purchaser’s title or use and enjoyment of the Purchased Assets
based upon or related to such lien or interest on and after the Closing Date;
(xii) provides for the Bankruptcy Court to obtain jurisdiction to enforce or
implement the terms and provisions of this Agreement and the Sale Approval
Order; and (xiii) provides that, notwithstanding Bankruptcy Rule 6004(h) and
6006(d), the Sale Approval Order shall be effective and enforceable immediately
upon its entry, shall be self-executing and shall authorize Seller and
Purchaser, in the absence of any stay pending appeal, to consummate the
Transactions.

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               (ll) “Sale Motion” means the motion or motions, filed and served
by Seller, pursuant to all applicable provisions of the Bankruptcy Code and the
Bankruptcy Rules, in the Bankruptcy Case seeking, among other things, to obtain
entry of the Sale Approval Order, approve the Transactions, and authorize the
assumption and assignment of the Assumed Contracts to Purchaser in accordance
with this Agreement.
               (mm) “SEC” means the Securities and Exchange Commission.
               (nn) “Seller Benefit Plan” means all Employee Benefit Plans
currently or previously sponsored or maintained by Seller or any of Seller’s
Affiliates (collectively, the “Seller Controlled Group”) or their respective
predecessors or with respect to which the Seller Controlled Group or their
respective predecessors has made or is required to make payments, transfers or
contributions in respect of any present or former employees, directors,
officers, shareholders, consultants or independent contractors of Seller or any
of the Seller’s Affiliates or their respective predecessors, and all insurance
policies, fiduciary liability policies, benefit administration contracts,
actuarial contracts, trusts, escrows, surety bonds, letters of credit and other
contracts primarily relating to any such Employee Benefit Plan.
               (oo) “Seller’s Knowledge” means the actual knowledge of Jeff
Granger, Sam Williams, and Jennifer Marquette, Vice President Employment
Relations.
               (pp) “Straddle Tax Period” means a Tax period that commences
before the Closing Date and ends after the Closing Date.
               (qq) “Tax” means (i) any federal, state, local, foreign or other
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, ad valorem, sales,
use, transfer, registration, value added, general service, alternative or add-on
minimum, estimated or other tax of any kind whatsoever, however denominated, or
computed, and including any interest, penalty, or addition thereto, whether
disputed or not; (ii) liability for the payment of any amounts of the type
described in clause (i) arising as a result of being (or ceasing to be) a member
of any consolidated, combined, unitary or affiliated group; and (iii) liability
for the payment of any amounts of the type described in clause (i) or (ii) as a
transferee or successor, by Contract or from or any express or implied
obligation to indemnify or otherwise assume or succeed to the liability of any
other Person.
               (rr) “Tax Return” means any return, declaration, report, claim
for refund, or information return or other document or statement relating to
Taxes, including any form, schedule or attachment thereto and any amendment or
supplement thereof.
               (ss) “Third Party” or “Third Parties” means any Person that is
not Purchaser or a Seller, or an Affiliate of Purchaser or Seller.
               (tt) “Transaction Documents” means this Agreement and all other
documents or agreements contemplated by this Agreement to be executed and
delivered in connection with this Agreement.

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               (uu) “WARN Act” means the Worker Adjustment and Retraining
Notification Act of 1988 or similar state law.
          1.2. Cross References. Each of the following terms is defined in the
Section set forth opposite such term:

      Term   Section
Agreement
  Preamble
Apportioned Obligations
  8.3
Assignment and Assumption Agreement
  2.9(a)
Assumed Contracts
  7.6
Assumed Liabilities
  2.3
Assumption Notice
  7.6
Auction
  7.4(b)(ii)
Bankruptcy Case
  Recitals
Bankruptcy Court
  Recitals
Bidding Procedures
  7.4(b)
Bidding Procedures Order
  7.4(a)
Books and Records
  2.2(c)
Breakup Fee
  7.4(b)(iii)
Business
  Recitals
Chapter 11 Licenses
  2.1(d)
Closing
  2.8
Closing Date
  2.8
Deposit
  2.6(b)
Disclosure Schedules
  13.10
End Date
  12.1(b)
Excluded Assets
  2.2
Excluded Liabilities
  2.4
HSR
  7.2
Incremental Bid Amount
  7.4(b)(ii)
Initial Overbid
  7.4(b)(i)
Inventory
  2.1(c)
Party
  Preamble
Permitted Liens
  3.8(b)
Personal Property
  2.1(f)
Post-Closing Straddle Period
  8.3
Pre-Closing Straddle Period
  8.3
Prevailing Bid
  7.4(b)(ii)
Purchase Price
  2.6(a)
Purchased Assets
  2.1
Purchaser
  Preamble
Real Property
  2.1(j)
Required Seller Financial Statements
  5.2(c)
Sale Hearing
  7.4(b)(ii)
Seller
  Preamble
Transactions
  Recitals

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      Term   Section
Transfer Taxes
  8.2

     2. Purchase and Sale.
          2.1. Purchase and Sale. Subject to the terms and conditions set forth
in this Agreement, at the Closing, Seller agrees to sell, transfer and deliver
to Purchaser, and Purchaser agrees to purchase, acquire and accept from Seller,
on an “as is, where is” basis and without any representation or warranty on the
part of any Seller except as expressly set forth herein, all right, title and
interest of such Seller as of the Closing Date in and to the following assets,
properties and rights (the “Purchased Assets”), free and clear of all Liens and
Claims (other than Permitted Liens and the Assumed Liabilities) to the maximum
extent permitted by Section 363 of the Bankruptcy Code:
               (a) all Assumed Contracts as defined and determined in accordance
with Section 7.6;
               (b) the Kronos Electronic Timekeeping System and all accompanying
software and documentation, to the extent transferable under applicable Law
without Third Party consent;
               (c) all packaging materials, raw materials and inventoriable
supplies owned by Seller and located at the Plant on the Closing Date;
               (d) all licenses, permits or other governmental authorizations of
Seller, but only to the extent transferable under applicable law without
approval of any governmental agency except the Bankruptcy Court (“Chapter 11
Licenses”);
               (e) all Intellectual Property Rights of Seller, including without
limitation Registered Trademarks listed on Schedule 2.1(e), provided that in the
case of intellectual property owned by Third Parties and licensed to Seller,
such property shall be a Purchased Asset to the extent transferable without
Third Party consent under applicable law including 11 U.S.C § 365;
               (f) all machinery, equipment (including but not limited to
manufacturing and office equipment), furniture, furnishings, fixtures, leasehold
improvements and other items of tangible personal property, including but not
limited to the items listed on Schedule 2.1(f) of the Disclosure Schedules,
located at the Plant on the Closing Date (“Personal Property”);
               (g) all cars, trucks, forklifts, other industrial vehicles and
other motor vehicles, including the items listed on Schedule 2.1(g) of the
Disclosure Schedules;
               (h) all rights of Seller under all warranties, representations,
indemnities, waivers or guaranties made by third parties to or for the benefit
of any Seller with respect to the Purchased Assets;

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               (i) all proceeds payable under any insurance policy in
consideration of any damage occurring to the Purchased Assets after the
execution of this Agreement and prior to the Closing as a result of any fire,
storm, accident or other casualty;
               (j) all real property identified on Schedule 2.1(j) of the
Disclosure Schedules (“Real Property”); provided, however, that Purchaser shall
have the right to designate that parcel of real property identified as Parcel
No. 2 on Schedule 2.1(j) of the Disclosure Schedules as an Excluded Asset. Any
such designation of Parcel No. 2 on Schedule 2.1(j) of the Disclosure Schedules
as an Excluded Asset shall be made no later than five (5) days prior to the
Closing Date and shall not result in any reduction of the Purchase Price.
               (k) the goodwill of the Business, including, but not limited to,
goodwill associated with the Archway Name and assumed names included in the
Intellectual Property Rights;
               (l) all deposits of any kind or nature held by any Third Party
other than the Agent of the Bank Group or any member of the Bank Group in
respect of the Seller’s interest in the Real Property; and
               (m) all prepaid expenses related to the Purchased Assets or the
Assumed Liabilities.
          2.2. Excluded Assets. Notwithstanding any other provision of this
Agreement to the contrary, the Purchased Assets shall not include any assets,
properties or rights not specifically identified in Section 2.1 including the
following (the “Excluded Assets”):
               (a) all of Seller’s cash and cash equivalents on hand (including
all undeposited checks) and in banks or other financial institutions;
               (b) all accounts receivable of Seller arising from the sale of
goods or provision of services related to the Business, including, without
limitation, trade and miscellaneous accounts receivable, recorded as an asset of
the Business or charged to the Business on the books of Seller, or arising out
of the Business;
               (c) all books, records and other documents (whether on paper,
computer diskette, tape or other storage media) of Seller relating to the
Business or the Purchased Assets including minute books, organizational
documents, property records, purchase and sale records, credit data, marketing,
advertising and promotional materials, personnel and payroll records (to the
extent permitted by applicable law), accounting and financial records, fixed
asset lists, vendor lists, customer lists, customer records and information,
supplier lists, parts lists, correspondence, files and similar items
(collectively, the “Books and Records”);
               (d) all of Seller’s computer software and software systems
(including but not limited to licenses, computer programs, source and object
codes, as well as all documentation and listings related thereto used in the
Business), other than as described in Section 2.1(b);

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               (e) any and all unexpired leases or executory contracts not
identified in this Agreement as an Assumed Contract;
               (f) except as specified in Section 2.1(i), all insurance policies
owned by Seller or relating to the Business, including without limitation all
director’s and officer’s liability policies, all life insurance policies on any
current or former officer, director, or employee of Seller, all claims and other
rights arising under such policies (whether prior to or after the Closing Date),
and all credits, premium refunds, cash surrender values, proceeds, causes of
action or rights thereunder;
               (g) any and all claims or causes of action of any kind or nature
(whether prior to or after the Closing), including without limitation all
avoidance actions in the Bankruptcy Case;
               (h) all rights of Seller arising under this Agreement or in
connection with the Transactions;
               (i) any Purchased Asset sold or otherwise disposed of in
compliance with Section 5.1(a) prior to the Closing Date;
               (j) any Tax refund, Tax rebate or Tax reimbursement in respect of
a Pre-Closing Tax Period that is due to Seller or their Affiliates;
               (k) any insurance or other refunds or monies due Seller of any
kind or nature, except for deposits or prepaid expenses described in
Sections 2.1(l) or (m);
               (l) all deposits of any kind or nature whatsoever that are either
unrelated to the Purchased Assets or Assumed Liabilities;
               (m) all of the real estate leases identified by Purchaser under
Section 7.6 (including, without limitation, any assignment of a real estate
lease or sublease);
               (n) all Mother’s Assets; and
               (o) all Finished Goods Inventory, provided however that Seller’s
right to sell or dispose of Finished Goods Inventory shall terminate two
(2) weeks after the Closing Date (“Final Inventory Date”), and whatever Finished
Goods Inventory which has not been sold, or otherwise transferred or conveyed by
such Final Inventory Date, shall at Purchaser’s option by written notice to
Seller, become the property of Purchaser.
          2.3. Assumed Liabilities. Upon the terms and subject to the conditions
of this Agreement, Purchaser agrees, effective at the time of the Closing, to
assume, pay, perform and discharge promptly, when payment or performance is due
or required, the following liabilities and obligations of Seller or the Business
(the “Assumed Liabilities”):
               (a) all Cure Amounts;

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               (b) all liabilities and obligations arising after the Closing
with respect to the Assumed Contracts; and
               (c) all costs, expenses and liabilities prorated to Purchaser as
specifically identified and set forth in this Agreement (including Section 8.3).
          2.4. Excluded Liabilities. Notwithstanding any other provision of this
Agreement to the contrary, Purchaser is assuming only the Assumed Liabilities
and is not assuming any other liability or obligation of Seller of whatever
nature, whether known or unknown, absolute, contingent, presently in existence
or arising hereafter and whether or not related to the Purchased Assets or the
Business, including, without limitation, any liability or obligation of Seller
to, or in any way connected with, any present or former employees, whether
full-time, part-time, temporary, seasonal, in laid-off or inactive status,
contingent/contract, leased, or otherwise, of Seller (and their respective
spouses, dependents, and heirs or assigns), including, without limitation,
(i) all liabilities and obligations under any Seller Benefit Plan; (ii) all
liabilities and obligations in connection with and with respect to the WARN Act
or any other applicable state or federal law relating to plant closings or mass
layoffs; (iii) all liabilities and obligations of Seller relating to present or
former employees who are receiving as of the Closing Date, or who are or could
become eligible to receive, any benefits of any kind arising out of or related
in any way to the employment of persons by the Seller, including, without
limitation, short- or long-term disability benefits or benefits under applicable
unemployment compensation laws; (iv) all liabilities and obligations to present
or former employees arising out of or related in any way to their respective
employment with the Seller and the termination thereof; (v) all liabilities and
obligations to present or former employees arising out of or related in any way
to claims under any federal or state statute, regulation, common law, or public
policy, including, but not limited to, The Civil Rights Act of 1866; The Civil
Rights Act of 1871; The Civil Rights Act of 1991; Sarbanes-Oxley Act of 2002;
Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in
Employment Act; the Older Workers Benefits Protection Act; the Americans with
Disabilities Act; ERISA; COBRA; the National Labor Relations Act of 1935; the
Equal Pay Act of 1964; the Family and Medical Leave Act; and the Fair Labor
Standards Act; (vi) any liabilities and obligations of Seller to any unions or
any other similar law; and (vii) all liabilities for Taxes (whether federal,
state, local or foreign), including Taxes incurred in respect of or measured by
(1) the sales of goods or services by Seller, (2) the wages or other
compensation paid by Seller to its employees, (3) the value of Seller’s property
(personal as well as real property), (4) the income of Seller earned on or
realized prior to the Closing Date, and (5) any gain and income from the sale of
the Purchased Assets. All such other liabilities and obligations shall be
retained by and remain obligations and liabilities of Seller (all such
liabilities and obligations not being assumed being herein referred to as the
“Excluded Liabilities”).
          2.5. Intentionally Omitted.
          2.6. Purchase Price; Deposit; Cure Amounts; Allocation of Purchase
Price.
               (a) In addition to the assumption of the Assumed Liabilities, in
consideration for the sale, transfer and delivery of the Purchased Assets,
Purchaser shall pay to

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Seller in cash an amount equal to $31,075,000 cash (the “Purchase Price”), less
the Deposit and less the Breakup Fee of $950,000.
               (b) A good faith deposit of one million five hundred thousand
dollars ($1,500,000) (the “Deposit”) shall be paid to the Agent for the Bank
Group within one (1) Business Day after entry of the Bidding Procedures Order.
The balance of the Purchase Price shall be paid to Seller at the Closing in
immediately available funds wired to a bank account (or accounts) as shall be
designated in writing no later than one (1) day prior to the Closing Date by
Seller to Purchaser. The Deposit may be retained by Seller (i) at the Closing as
a credit against the Purchase Price, or (ii) without limiting any other rights
or remedies of Seller, if this Agreement is terminated pursuant to
Section 12.1(e). Except as described in the previous sentence and provided that
Purchaser is not in default of this Agreement, the Deposit shall be returned to
Purchaser within five (5) Business Days after any termination of this Agreement
pursuant to Sections 12.1 (a), (b), (c), (d), (f) or (g). Until Seller is
entitled to apply the Deposit to the Purchase Price or is obligated to return
the Deposit to the Purchaser under this Section 2.6(b), Agent for the Bank Group
shall hold the Deposit in accordance with the terms of the Bidding Procedures
Order. Interest earned on the Deposit shall accompany the Deposit and be paid to
the party who is entitled to receive the Deposit pursuant to this
Section 2.6(b).
               (c) All Cure Amounts, if any, shall be paid by Purchaser pursuant
to the procedures for the assumption and assignment of Assumed Contracts set
forth in Section 7.6 of this Agreement.
               (d) Purchaser and Seller agree that the Purchase Price,
applicable Assumed Liabilities and other relevant items for Tax purposes shall
be allocated in accordance with Section 1060 of the Code and the Treasury
Regulations promulgated thereunder and Schedule 2.6(d) of the Disclosure
Schedules (such schedule to be (i) submitted by Purchaser to Seller and
(ii) approved by Seller, all to be completed prior to Closing). Purchaser and
Seller each agree to provide the other promptly with any other information
required to complete Schedule 2.6(d) of the Disclosure Schedules. Such
allocation shall be binding on Purchaser and Seller for all purposes, including
the reporting of Seller’s gain or loss and determination of Purchaser’s basis
for income Tax purposes, and each of the Parties hereto agrees that it will file
a statement (on IRS Form 8594 or other applicable form) setting forth such
allocation with its federal and applicable state income Tax Returns and will
also file such further information or take such further actions as may be
necessary to comply with Section 1060 of the Code and the Treasury Regulations
promulgated thereunder and similar applicable state Tax Laws.
          2.7. INTENTIONALLY OMITTED
          2.8. Closing. The closing (the “Closing”) of the purchase and sale of
the Purchased Assets and the assumption of the Assumed Liabilities shall take
place in New York, New York at the offices of Duane Morris, LLP, on December 2,
2008, or such later date as soon as reasonably practicable after satisfaction of
the conditions set forth in Section 10 (other than those requiring a delivery,
or the taking of other action, at the Closing), but in all events within three
(3) Business days after the satisfaction of such conditions, or at such other
time or place as Purchaser and Seller may agree (the “Closing Date”).

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          2.9. Deliveries by Seller. At the Closing, Seller will deliver or
cause to be delivered to Purchaser (unless delivered previously) the following:
               (a) a Bill of Sale, Assignment and Assumption Agreement in form
and substance reasonably agreed to by the Parties (the “Assignment and
Assumption Agreement”), duly executed by Seller, pursuant to which Seller shall
transfer and convey the Purchased Assets to Purchaser;
               (b) incumbency certificates dated the Closing Date certifying the
incumbency of that Person authorized by the Bankruptcy Court to act on behalf of
Seller and who has executed this Agreement or any of the other Transaction
Documents. These certificates shall contain specimens of the signatures of each
of such authorized Persons;
               (c) a certificate of the Secretary of State for the State of
Delaware stating that the Seller is in good standing under the Laws of the State
of Delaware; and
               (d) all other certificates, documents, instruments and writings
required to convey the Purchased Assets to Purchaser pursuant to the Sale Order.
          2.10. Deliveries by Purchaser. At the Closing, Purchaser will deliver
or cause to be delivered to Seller in accordance with the terms of this
Agreement (unless previously delivered) the following:
               (a) the Purchase Price (less the Deposit);
               (b) the Assignment and Assumption Agreement, duly executed by
Purchaser;
               (c) an incumbency certificate dated the Closing Date certifying
the incumbency of all officers of Purchaser who have executed this Agreement or
any of the other Transaction Documents. These certificates shall contain
specimens of the signatures of each of such officers and shall be executed by an
officer of Purchaser other than an officer whose incumbency or authority is
certified;
               (d) certificate of the Secretary of State of the State of North
Carolina stating that the Purchaser is a limited liability company in good
standing under the Laws of such state; and
               (e) all other documents, instruments and writings reasonably
requested by Seller to be delivered by Purchaser at or prior to the Closing in
connection with the consummation of the Transactions pursuant to this Agreement.
     3. Representations and Warranties of Seller. Subject to the terms,
conditions and limitations set forth in this Agreement, including without
limitation Section 13.10, Seller hereby represents and warrants to Purchaser as
of the date hereof that to the Seller’s Knowledge:
          3.1. Organization. The Seller is a limited liability company validly
existing under the laws of the State of Delaware, and has full limited liability
company power and

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authority to own, lease and operate the Purchased Assets. Complete and correct
copies of the Certificate of Formation and all amendments thereto (certified by
the Secretary of State of Delaware), and the Limited Liability Company Agreement
of Seller and all amendments thereto (certified by the Secretary of Seller) have
been provided to Purchaser. Seller has no subsidiaries.
          3.2. Authorization. The execution, delivery and performance of this
Agreement and the other Transaction Documents to which Seller is a party and the
consummation of the Transactions are within Seller’s limited liability company
powers and have been duly authorized by all necessary action on the part of
Seller, or as otherwise authorized by the Bankruptcy Court. This Agreement has
been duly executed and delivered by Seller. Subject to entry by the Bankruptcy
Court of the Sale Approval Order in the Bankruptcy Case, this Agreement
constitutes a valid and binding agreement of Seller that is enforceable in
accordance with its terms, except as enforcement thereof may be limited by the
effect of bankruptcy, insolvency, reorganization, moratorium and other Laws
affecting creditors’ rights generally.
          3.3. Governmental Authorization. Except as disclosed in Schedule 3.3
of the Disclosure Schedules, the execution, delivery and performance by Seller
of this Agreement and the consummation of the transactions contemplated hereby
by Seller require no action by or in respect of, or filing with, any
governmental body, agency or official other than consents, approvals or
authorizations of, or declarations or filings with, the Bankruptcy Court,
provided that nothing herein contained shall constitute a representation or
warranty that Seller has all licenses or permits in connection with the
Purchased Assets, or will be able to transfer any such governmental licenses or
permits if such transfer requires the consent or approval of any governmental
authority other than the Bankruptcy Court.
          3.4. Noncontravention. Subject to entry by the Bankruptcy Court of the
Sale Approval Order in the Bankruptcy Case, the execution, delivery and
performance by Seller of this Agreement and the other Transaction Documents to
which it is a party and the consummation of the Transactions do not and will not
(i) violate Seller’s Certificate of Formation or Limited Liability Company
Agreement, (ii) assuming compliance with the matters referred to in Section 3.3,
violate any applicable Law or Order, or (iii) result in the creation or
imposition of any Lien on any Purchased Asset, except for Permitted Liens.
          3.5. Required Consents. Except for consents, approvals or
authorizations of, or declarations or filings with, the Bankruptcy Court, except
for Third Party consents, if any, necessary to transfer or assign to Purchaser
any Intellectual Property or any lease or contract, including Assumed Contracts
and except as otherwise set forth on Schedule 3.5 of the Disclosure Schedules,
there is no material agreement or other instrument binding upon Seller requiring
a consent or other action by any Person as a result of the execution, delivery
and performance of this Agreement or other Transaction Document to which Seller
is a party.
          3.6. Litigation. Except as disclosed in Schedule 3.6 of the Disclosure
Schedules, and except as disclosed in the Bankruptcy Case, as of the date
hereof, there is no action, suit, investigation or proceeding pending against,
threatened against or affecting, the Purchased Assets or the Business before any
court or arbitrator or any Governmental Authority which would have a Materially
Adverse Effect on the Purchased Assets after the Closing Date.

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          3.7. Compliance with Laws and Orders. Except as disclosed in
Schedule 3.7, Seller is not in violation of any Law or Order applicable to the
Purchased Assets or the conduct of the Business which would have a Materially
Adverse Effect on the Purchased Assets after the Closing Date.
          3.8. Sufficiency of and Title to the Purchased Assets.
               (a) On the date hereof and at all times prior to the closing of
the Transactions, Seller has good and marketable title in and to, or a valid
leasehold interest in, each of the Purchased Assets. Upon consummation of the
Transactions, Purchaser will have acquired good and marketable title in and to,
or a valid leasehold interest in each of the Purchased Assets, free and clear of
all Liens and Claims to the maximum extent permitted by the Bankruptcy Code,
other than Assumed Liabilities and Permitted Liens.
               (b) Upon entry of the Sale Approval Order and consummation of the
Transactions, including without limitation, the payment of the Purchase Price by
Purchaser in accordance with the terms hereof, no Purchased Asset will be
subject to any Lien, except Liens for Taxes, assessments and similar charges, if
any, that are not yet due and that are to be paid when due by Purchaser pursuant
to the terms of this Agreement (the “Permitted Liens”).
          3.9. Intentionally Omitted.
          3.10. Certain Fees. Except for the fees and expenses of Rothschild
Inc., which shall be paid in their entirety by Seller, Seller has not incurred
any liability for any investment banking fees, financial advisory fees,
brokerage fees, finders’ fees or other similar fees in connection with this
Agreement or the Transactions.
          3.11. Personal Property. Schedule 3.11 of the Disclosure Schedules
contains a true and complete list of each lease of material Personal Property by
Seller, and Seller shall provide the Cure Amounts required, if any, in respect
of each such lease that Purchaser hereafter designates, pursuant to Section 7.6,
that it wishes to assume. True and correct copies of each lease listed on
Schedule 3.11 of the Disclosure Schedules and any amendments, extensions, and
renewals thereof. have been made available to Purchaser
          3.12. Intentionally Omitted.
          3.13. Contracts. Schedule 3.13 of the Disclosure Schedules contains a
true and complete list of each material Contract or material commitment pursuant
to which Seller has any rights or benefits or undertakes any obligations or
liabilities, not otherwise listed on Schedule 3.11 of the Disclosure Schedules,
and Seller shall provide the Cure Amounts owing in respect of each such Contract
or commitment that Purchaser hereafter designates, pursuant to Section 7.6, that
it wishes to assume. True and complete copies of each Contract listed on
Schedule 3.13 of the Disclosure Schedules (or, if oral, a written description
thereof) have been made available to Purchaser.

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          3.14. Intellectual Property.
               (a) Seller owns or possesses sufficient legal rights to the
Intellectual Property Rights without any conflict with or infringement of the
rights of others. Schedule 2.1(e) of the Disclosure Schedules contains a
complete list of patents, trademarks and registered copyrights of Seller
throughout the world and pending applications therefor and registrations,
renewals, extensions and the like thereof. All agreements relating to material
Intellectual Property Rights are listed on Schedule 3.13 of the Disclosure
Schedules. Except as set forth on Schedule 3.14 of the Disclosure Schedules, no
Person is infringing, misappropriating or violating any of the Intellectual
Property Rights.
     4. Representations and Warranties of Purchaser. Purchaser represents and
warrants to Seller as follows:
          4.1. Organization. Purchaser is a limited liability company validly
existing under the laws of its state of North Carolina, and has full power and
authority to own, lease and operate the Purchased Assets, and to carry on in all
material respects the Business.
          4.2. Authorization. The execution, delivery and performance by
Purchaser of this Agreement and the other Transaction Documents to which it is a
party and the consummation of the Transactions are within Purchaser’s limited
liability company powers and have been duly authorized by all necessary limited
liability company action on the part of Purchaser. Subject to entry by the
Bankruptcy Court of the Sale Approval Order in the Bankruptcy Case, this
Agreement has been duly executed and delivered by Purchaser. This Agreement
constitutes a valid and binding agreement of Purchaser that is enforceable in
accordance with its terms, except as enforcement thereof may be limited by the
effect of bankruptcy, insolvency, reorganization, moratorium and other Laws
affecting creditors’ rights generally.
          4.3. Governmental Authorization. The execution, delivery and
performance by Purchaser of this Agreement and the consummation of the
Transactions by Purchaser require no action by or in respect of, or filing with,
any governmental body, agency or official other than (i) consents, approvals or
authorizations of, or declarations or filings with, the Bankruptcy Court and
(ii) any such action or filing as to which the failure to make or obtain would
not have a material adverse effect on the Purchaser or its ability to close the
Transactions.
          4.4. Noncontravention. Neither the execution and delivery of this
Agreement and the other Transaction Documents to which it is a party and the
consummation of the Transactions will (a) violate Purchaser’s articles of
organization or operating agreement; (b) violate, conflict with or constitute a
default under or give rise to any right of termination, cancellation or
acceleration of any right or obligation or to a loss or any benefit relating to
any note, mortgage, other evidence of indebtedness, guarantee, license,
agreement, lease or other contract, instrument or obligation to which Purchaser
is a party or by which Purchaser or any of its assets may be bound; or
(c) violate any applicable Law or Order applicable to Purchaser, excluding from
the foregoing clauses (b) and (c) such requirements, violations, conflicts,
defaults or rights (i) which would not adversely affect the ability of Purchaser
to consummate the

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Transactions, or (ii) which become applicable as a result of any acts or
omissions by, or the status of or any facts pertaining to, Seller.
          4.5. Adequate Assurance. Purchaser is capable of satisfying the
conditions contained in Sections 365(b)(1)(C) and 365(f)(2)(B) of the Bankruptcy
Code with respect to the Assumed Contracts and Intellectual Property Rights.
          4.6. Litigation. There is no action, suit, investigation or proceeding
pending against or, to the knowledge of Purchaser, threatened against or
affecting Purchaser before any court or arbitrator or any governmental body,
agency or official which in any manner challenges or seeks to prevent, enjoin,
alter or materially delay the Transactions.
          4.7. Certain Fees. Except for MacQuarie Capital Advisors, whose fees
shall be paid in their entirety by Purchaser, Purchaser has not employed any
broker, finder, investment banker or other intermediary or incurred any
liability for any investment banking fees, financial advisory fees, brokerage
fees, finders’ fees or other similar fees in connection with this Agreement or
the Transactions.
     5. Covenants of Seller. Seller agrees that:
          5.1. Conduct of the Business. From the date hereof until the earlier
of the Closing Date or the date of termination of this Agreement, except (i) as
may be required by the Bankruptcy Court, (ii) for the consequences resulting
from the commencement and continuation of the Bankruptcy Case, or (iii) as may
be required or contemplated by this Agreement, Seller will not:
               (a) sell or otherwise dispose of any asset that would constitute
a Purchased Asset if owned by Seller on the Closing Date without the prior
written consent of Purchaser; provided, however, that, for the avoidance of
doubt, Seller may sell or otherwise dispose of Pre-Closing Inventory in any
manner it chooses;
               (b) take any action that would reasonably be expected to cause
the failure of any condition contained in Section 10.2; or
               (c) remove, cause to be removed or permit to be removed any asset
of Seller that would constitute a Purchased Asset if it was located at the Plant
on the Closing Date, except for Pre-Closing Inventory sold prior to the Closing
Date.
          5.2. Access to Information.
               (a) From the date hereof until the earlier of the Closing Date or
the date of termination of this Agreement, Seller shall reasonably afford, and
shall cause its officers, employees, attorneys and other agents to reasonably
afford, to Purchaser and its counsel, accountants and other representatives,
access (at reasonable times during normal business hours) to all properties,
books, accounts, records and documents of, or relating to, the Business, and to
Jeff Granger and Sam Williams, in each case subject to the terms of the
confidentiality agreements, entered into by Seller, on the one hand, and
Purchaser and its Affiliates, on the other hand. Seller hereby consents to
Purchaser contacting any former employee of Seller for the

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purpose of planning for the acquisition of the Purchased Assets or for the
provision of consulting services.
               (b) For a period of 90 days following the Closing Date, Seller
shall maintain its books and records and will afford promptly to Purchaser and
its counsel, financial advisers and other agents reasonable access during normal
business hours to, and the ability to make copies (at Purchaser’s sole expense)
of, its properties (including all data contained as of the date hereof on the
Seller’s information systems), Books and Records, auditors and counsel to the
extent reasonably requested by Purchaser; provided that nothing herein is meant
to preclude the conversion of the Bankruptcy Case to a case under chapter 7 of
the Bankruptcy Code.
               (c) For a period of 90 days following the Closing Date, Seller
shall provide Purchaser with such access to and copies of books, records and
personnel of Seller and its parent, subsidiaries and Affiliates as may be
required in order for Purchaser to operate the Purchased Assets or prepare any
financial statements, including historical or pro forma financial statements,
required for inclusion or incorporation by reference by Purchaser in its filings
with the SEC (the “Required Seller Financial Statements”), including, without
limitation, any registration, proxy or information statement or any periodic or
current report under the Securities Act, the Exchange Act and the rules and
regulations of the SEC. For a period of 90 days following the Closing Date,
Seller shall use its commercially reasonable efforts to provide Purchaser, at
Purchaser’s expense, with such assistance as Purchaser shall reasonably request
(i) in order to permit Purchaser at its sole cost and expense and without
liability to Seller to obtain or prepare any Required Seller Financial
Statements and to comply with any requirement pursuant to the Sarbanes-Oxley Act
of 2002 and the rules and regulations of the SEC thereunder with respect to
Seller and (ii) to enable the preparation and review or audit, as applicable, by
an independent registered public accounting firm of any Required Seller
Financial Statements as may be required under the Securities Act, the Exchange
Act and the rules and regulations of the SEC. Seller shall use its commercially
reasonable efforts at Purchaser’s sole cost and expense, and without liability
to Seller, to cause and permit the independent registered public accounting firm
or firms, if any, that have audited its financial statements, or that will audit
its financial statements, to provide Purchaser with such assistance as Purchaser
shall reasonably request in order to permit Purchaser to prepare and file any
Required Seller Financial Statements, including, without limitation, by issuing
or providing an original executed copy of any required audit report or consent
to the inclusion of such report and the identification of such audit firm or
firms as experts; provided, that nothing herein is meant to preclude the
conversion of the Bankruptcy Case to a case under chapter 7 of the Bankruptcy
Code.
          5.3. Notices of Certain Events. Seller shall promptly notify Purchaser
of:
               (a) any notice or other communication received by Seller on or
after the date hereof from any Person alleging that the consent of such Person
is or may be required in connection with the consummation of the Transactions;
               (b) any material communication from any Governmental Authority in
connection with or relating to the Transactions, but excluding any communication
delivered in connection with the Bankruptcy Case;

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               (c) the commencement of any actions, suits, investigations or
proceedings relating to Seller or the Business that, if pending on the date of
this Agreement, would have been required to have been disclosed pursuant to
Section 3.6; and
               (d) any Material Adverse Change to the Purchased Assets arising
after the date hereof through to the Closing.
          5.4. Further Assurances. At any time and from time to time after the
Closing Date, Seller shall, at the request of Purchaser, at the expense of
Purchaser, take any and all commercially reasonable actions necessary to fulfill
its obligations hereunder to put Purchaser in actual possession and control of
the Purchased Assets, execute and deliver such further instruments of
conveyance, sale, transfer and assignment, and take such other actions necessary
or desirable to effectuate, record or perfect the transfer of the Purchased
Assets to Purchaser free and clear of all Liens (other than Permitted Liens),
confirm the title of the Purchased Assets to Purchaser, assist Purchaser in
exercising rights relating thereto, and otherwise effectuate or consummate all
of the Transactions, provided however, that nothing herein shall require Seller
to put Purchaser in physical possession of (i) any motor vehicles or forklifts
not located at Plant on Closing Date, or (ii) any Finished Goods Inventory which
Purchaser elects to obtain after the Final Inventory Date, each of which shall
be Purchaser’s responsibility wherever such motor vehicles, forklifts or
Finished Goods Inventory, if any, are located.
          5.5. Payment of Taxes. Seller shall transfer the Purchased Assets free
and clear of all Liens in respect of or securing any Taxes or provide for the
payment of Seller’s obligation for such Taxes (including Taxes prorated under
Section 8.3). All Tax claims and deficiencies asserted against Seller shall be
treated in accordance with the Bankruptcy Code and an Order of the Bankruptcy
Court.
          5.6. Discharge of Liens, Claims and Encumbrances. The Purchased Assets
shall be transferred, pursuant to the Sale Approval Order, free and clear of all
Liens and Claims that are not Permitted Liens or Assumed Liabilities.
          5.7. Certain Liabilities. Seller shall pay and discharge through the
Closing Date the liabilities and obligations relating to the ongoing operation
of the Business as such liabilities and obligations come due for payment in the
ordinary course of business.
          5.8. Ownership and Use of Archway Name.
               (a) Seller covenants and agrees that, on and after the Closing
Date, Seller shall, and Seller shall cause all of its Affiliates in the U.S. or
abroad which use the Archway Name, to pass all required resolutions and to amend
their respective articles or certificate of incorporation or other
organizational documents to change their corporate or company name to a name
that does not include the words “Archway”, “A&M” or any other Archway Name, or
any name intended or likely to be confused or associated with any Archway Name
or product no later than one day following the Closing Date. Promptly following
receipt of confirmation that each such name change has been effected, Seller
shall provide to Purchaser written proof that each such name change has been
effected.

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               (b) Subsequent to the Closing, neither Seller nor any of its
Affiliates shall have any right, title or interest in or to, and Purchaser is
not granting Seller or any of its Affiliates, a license to use, the Archway
Name, other than as set forth in Section 5.8 (c) below.
               (c) Seller agrees that following the Closing, no stationery,
purchase order, invoice, receipt or other similar document containing any
reference to the Archway Name shall be printed, ordered or produced for use by
Seller or any of its Affiliates and that Seller shall, and Seller shall cause
each of its Affiliates to, following the Closing, cease to use any stationery,
purchase order, invoice, receipt or other similar document containing any
reference to the Archway Name or shall only use such stationery, purchase order,
invoice, receipt or other similar document after having deleted, pasted over or
placed a sticker over such references. The obligations in this paragraph
(c) shall not apply (x) to the extent use of the Archway Name is required by law
or otherwise reasonably required pending the registration of the change of
corporate names (as set out in this Section 5.8) or (y) to the extent use of the
Archway Name is reasonably required in order to enable collection or payment of
invoices issued by Seller or any of its Affiliates, or (z) to the extent use of
the Archway Name is reasonably required to dispose of, liquidate or otherwise
monetize the Finished Goods Inventory, but not beyond two (2) weeks following
the Closing Date. Notwithstanding anything contained in this Section 5.8 to the
contrary, A&M Cookie Company Canada shall be permitted to retain and use its
name solely for corporate purposes, (and not in connection with sales, marketing
or any other purpose) for 120 days following the Closing Date.
     6. Covenants of Purchaser. Purchaser agrees that:
          6.1. Confidentiality. Prior to the Closing Date and after any
termination of this Agreement, the Confidentiality Agreement dated as of
October 24, 2008 between Seller and Lance, Inc. (the “Confidentiality
Agreement”) shall remain in full force and effect. After the Closing has
occurred, the Confidentiality Agreement shall be terminated to the extent
relating to the Purchased Assets, Assumed Liabilities, and shall, with respect
to any of the Excluded Assets and Excluded Liabilities, remain in full force and
effect.
          6.2. Adequate Assurance. In connection with the assumption and
assignment of the Assumed Contracts pursuant to the procedures set forth in
section 7.6 of this Agreement, Purchaser shall take such actions needed to
provide “adequate assurance of future performance” with respect to the Assumed
Contracts pursuant to Section 365 of the Bankruptcy Code.
          6.3. Assumed Liabilities. From and after the Closing Date, Purchaser
shall (a) pay, perform and discharge, promptly when payment or performance is
due or required, all of the Assumed Liabilities, (b) take all actions necessary
to satisfy its obligations under the terms and conditions of each of the Assumed
Contracts in accordance with this Agreement.
          6.4. Guaranty. In order to induce Seller to execute this Agreement,
and for other good and valuable consideration, receipt and sufficiency of which
is hereby acknowledged, Lance, Inc. a North Carolina Corporation, hereby
directly and unconditionally guarantees the full and prompt payment and
performance of all liabilities and obligations of Purchaser (including any
Affiliate to whom Purchaser transfers its rights pursuant to Section 13.3) under
this Agreement and the Transactions (the “Guaranteed Obligations”), and waives
all suretyship

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defenses and defenses in the nature thereof. The guaranty of Lance pursuant to
this Section 6.4 is a guaranty of payment and not of collection. Lance agrees
that the Seller need not attempt to collect any amounts due from Purchaser or
any other Person responsible for the obligations of Purchaser under this
Agreement or the Transactions, but may require Lance to make immediate payment
of all of the Guaranteed Obligations to Seller when due, whether by maturity,
acceleration or otherwise, or at any time thereafter.
     7. Covenants of Purchaser and Seller. Purchaser and Seller agree that:
          7.1. Efforts. Subject to the terms and conditions of this Agreement,
Purchaser and Seller will use their respective commercially reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things reasonably necessary under applicable Laws to consummate the Transactions
contemplated by this Agreement prior to the End Date. Seller and Purchaser agree
to execute and deliver such other documents, certificates, agreements and other
writings and to take such other actions as may be reasonably necessary in order
to vest in Purchaser good title to the Purchased Assets or to evidence the
assumption by Purchaser of the Assumed Liabilities.
          7.2. Certain Filings. Seller and Purchaser shall cooperate in good
faith with one another (i) in determining whether any action by or in respect
of, or filing with, any governmental body, agency, official or authority is
required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any Assumed Contracts or Intellectual Property Rights,
in connection with the consummation of the Transactions, and (ii) in taking such
actions or making any such filings, furnishing information required in
connection therewith and seeking timely to obtain any such actions, consents,
approvals or waivers. If the Parties and their counsel determine that the
Transactions require antitrust review and filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (“HSR”), Seller and Purchaser
shall seek regulatory approval or clearance under HSR and prepare and submit, in
a timely manner, all necessary filings for Seller and Purchaser in connection
with this Agreement under HSR and the rules and regulations thereunder. Seller
and Purchaser shall request expedited treatment of such HSR filing by the
Federal Trade Commission and the Department of Justice, shall promptly make any
necessary subsequent or supplemental filings, and shall furnish to each other
copies of all HSR filings as they are filed with the governmental authorities.
          7.3. Public Announcements. Neither party shall make any press release
or public announcement concerning the transactions contemplated by this
Agreement without the consent of the other Party, unless a press release or
public announcement is required by Law, the rules of any stock exchange or order
of the Bankruptcy Court. If any such announcement or other disclosure is
required by Law, the rules of any stock exchange or order of the Bankruptcy
Court, either party may make any public disclosure it believes in good faith is
so required (in which case such party will use its best efforts to advise the
other party prior to making the disclosure).

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          7.4. Bankruptcy Matters.
               (a) Approval of Bidding Procedures. Within two (2) Business Days
after the execution of this Agreement, Seller shall obtain entry of the Bidding
Procedures Order approving and containing all of the provisions of this
Section 7.4.
               (b) Bidding Procedures. Seller shall seek, among other things,
approval of the following procedures (the “Bidding Procedures”), which shall be
incorporated into the Bidding Procedures Order:
          (i) Any Third Party that is interested in acquiring the Purchased
Assets must be a Qualified Bidder who submits an “Initial Overbid” in
conformance with this Section 7.4(b) at or prior to Bid Deadline. Any such
Initial Overbid must:
     (A) Contain a signed definitive asset purchase agreement (together with a
copy of the signed agreement that is marked to show changes from this Agreement)
with, at a minimum, the following requirements: (x) containing terms and
conditions no less favorable to Seller’s estate taken as a whole in Seller’s
good faith determination, than the terms and conditions in this Agreement,
except with higher and better consideration (provided that no Initial Overbid
shall provide for the payment to the overbidder of any breakup fee, topping fee,
expense reimbursement or other similar arrangement); (y) providing for a
purchase price equal to or greater than: (i) for the Purchased Assets, at least
twenty-six million two hundred thousand dollars ($26,200,000); (ii) for the
Mother’s Assets, at least five million three hundred thousand dollars
($5,300,000); or (iii) if a joint bid for the Purchased Assets and the Mother’s
Assets, at least thirty-one million five hundred thousand dollars ($31,500,000;
and (z) not being subject to any (1) financing contingency, (2) contingency
relating to the completion of unperformed due diligence, (3) contingency
relating to the approval of the overbidder’s board of directors or other
internal approvals or consents, or (4) any conditions precedent to the
overbidder’s obligation to purchase the Purchased Assets other than those
included in this Agreement;
     (B) Include a cashiers’ or certified check or by wire transfer, in an
amount equal to One Million Five Hundred Thousand Dollars ($1,500,000) as a
deposit ($2,000,000 if a joint bid for the Purchased Assets and the Mother’s
Assets); and
     (C) To the extent not previously provided to Seller, be accompanied by
evidence satisfactory to Seller in its commercially reasonable discretion that
the overbidder is willing, authorized, capable and qualified financially,
legally and otherwise, of

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unconditionally performing all obligations under the Agreement (or its
equivalent) in the event that it submits the Prevailing Bid at the Auction.
          (ii) Auction. In the event that Seller timely receives a conforming
Initial Overbid from a Qualified Bidder, then Seller will conduct an auction
(the “Auction”) with respect to the sale of the Purchased Assets. The Auction
shall be conducted by open bidding in accordance with the procedures set forth
herein. In order to participate in the Auction, each prospective purchaser must
be a Qualified Bidder and shall be required to comply with the requirements of
the Bidding Procedures and to submit an Initial Overbid that is timely and that
complies in all material respects with the Bidding Procedures. At the Auction,
Qualified Bidders or Purchaser may submit successive bids, and any successive
bid must be greater than any previous bid by an amount that is at least equal to
(i) $250,000, in the case of any bid on the Purchased Assets; (ii) $100,000, in
the case of any bid on the Mother’s Assets; and (iii) $350,000, in the case of
any combined bid for both the Purchased Assets and the Mother’s Assets (in each
case, the “Incremental Bid Amount”). Bidding shall continue until there is only
one offer that Seller determines, subject to Bankruptcy Court approval, is the
highest or best offer (the “Prevailing Bid”). When bidding at the Auction,
Purchaser shall receive a “credit” in the amount of the Breakup Fee. All bidding
for the Purchased Assets will be concluded at the Auction and there will be no
further bidding at the Bankruptcy Court hearing held in the Bankruptcy Case to
approve the highest or best bid for the Purchased Assets (the “Sale Hearing”).
If no conforming Initial Overbid from a Qualified Bidder shall have been
received at or prior to the Bid Deadline, the Auction will not be held and the
Sale Hearing will proceed with respect to this Agreement.
          (iii) Breakup Fee. Upon the consummation of a sale of the Purchased
Assets to any Third Party who submits the Prevailing Bid at the Auction, and
provided that Purchaser is not in breach of a material provision of this
Agreement, Seller shall pay to Purchaser from the proceeds of such sale in cash
or other immediately available funds an amount equal to (A) 3% of the cash
portion of the Purchase Price plus (B) expenses not to exceed $200,000 (the sum
of the amounts set forth in subsection (A) and (B) hereof, the “Breakup Fee.”
The Parties agree that the Breakup Fee, together with the return of the Deposit,
shall be the full and liquidated damages of Purchaser arising out of any
termination of this Agreement by Seller under Section 12.1(f), and the Breakup
Fee shall be paid to Purchaser at the closing of such sale to the Third Party
from the proceeds of such sale. The provisions of this Section 7.4(b)(iii) shall
survive any termination of this Agreement pursuant to Section 12.1(f).
          (iv) Notice of Auction and Sale Hearing;. No later than twenty (20)
days prior to the Sale Hearing or such shorter time that may be approved by the
Bankruptcy Court in the Bidding Procedures Order, Seller will cause a Notice of
Auction and Sale Hearing to be served upon The U.S. Trustee, counsel to the
Official Committee of Unsecured Creditors, counsel to the Bank Group, parties in

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interest who have requested notice pursuant to Bankruptcy Rule 2002, all
Governmental Authorities. The Notice shall specify that objections to the relief
requested by the Sale Motion shall be set forth in writing and shall specify
with particularity the grounds for such objections or other statements of
position and filed and served by the objection deadline set forth in the Bidding
Procedures Order, on counsel for Seller, counsel for Purchaser, counsel to the
Official Committee of Unsecured Creditors, counsel to the Bank Group, and the
U.S. Trustee. The failure to file and serve objections in accordance with the
foregoing procedure shall be deemed a waiver of such objections and the
objecting party shall be forever barred from asserting such objections with
respect to the consummation and closing of the Transactions Any objections filed
and served in accordance with the foregoing procedure shall be heard by the
Bankruptcy Court at the Sale Hearing.
                    (c) Bankruptcy Court Approval of Sale. Seller and Purchaser
shall each use their commercially reasonable efforts, and shall cooperate,
assist and consult with each other, to secure the entry of the Sale Approval
Order. In connection with the assumption and/or assignment of the Assumed
Contracts and any Intellectual Property Rights pursuant to Section 365 of the
Bankruptcy Code, Purchaser shall take all actions to provide “adequate assurance
of future performance” by Purchaser under the Assumed Contracts and such
Intellectual Property Rights after the Closing. Seller and Purchaser shall
consult with one another regarding pleadings that either of them intends to
file, or positions either of them intend to take, with the Bankruptcy Court in
connection with or that might reasonably affect, the Bankruptcy Court’s entry of
the Bidding Procedures Order.
                    (d) Section 363(m) Protection. The Sale Approval Order shall
provide, in either findings of fact or conclusions of law, that the transactions
contemplated by this Agreement are undertaken by Purchaser and Seller at arms
length, without collusion and in good faith within the meaning of Section 363(m)
of the Bankruptcy Code, and Purchaser is entitled to the protections of Section
363(m) of the Bankruptcy Code.
               7.5. Notices. If at any time prior to the End Date (i) Purchaser
becomes aware of any material breach by Seller of any representation, warranty,
covenant or agreement contained herein and such breach is capable of being cured
by Seller, or (ii) Seller becomes aware of any material breach by Purchaser of
any representation, warranty, covenant or agreement contained herein and such
breach is capable of being cured by Purchaser, the Party becoming aware of such
breach shall promptly notify the other Party, in accordance with Section 13.1,
in writing of such breach. Upon such notice of breach, the breaching Party shall
have 10 days to cure such breach prior to the exercise of any remedies in
connection therewith.
               7.6. Procedure for the Assumption of Contracts. To the extent
such information is not already provided on Schedule 3.13 of the Disclosure
Schedules, Seller shall use its commercially reasonable efforts given the
current state of the Business to provide to Purchaser a list of all executory
Contracts to which Seller is a party and shall make such Contracts available for
review by Purchaser. Purchaser shall have a period of sixty (60) days following
the Closing Date to designate those Contracts that Purchaser desires to be
assumed and assigned by Seller (collectively, the “Assumed Contracts”). Upon
such designation, Purchaser

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shall provide notice to any non-debtor party to an Assumed Contract that the
Assumed Contract has been designated for assumption and assignment to Purchaser.
Such notice shall be provided using a form reasonably acceptable to Purchaser
and approved by the Bankruptcy Court pursuant to the Sale Approval Order (such
form being referred to as the “Assumption Notice”). The Assumption Notice shall
be filed with the Bankruptcy Court and shall contain (i) the proposed Cure
Amount to be paid in connection with the assumption and assignment of the
designated Contract, (ii) notice that any objection to the proposed assumption
and assignment shall be filed within fifteen (15) days after the filing of the
Assumption Notice, (iii) notice that failure to object to the proposed
assumption and assignment within the time required shall result in the waiver of
any possible objection; and (iv) the form of a proposed order approving the
assumption and assignment of the Assumed Contract to Purchaser. In the event an
objection to the proposed assumption of an Assumed Contract is timely received,
Purchaser shall have the option to remove the Contract that is the subject of
the objection from the list of Assumed Contracts or request that the Bankruptcy
Court set a hearing to resolve the objection. In the absence of any objection to
the proposed assumption of an Assumed Contract, Purchaser shall be allowed to
submit the proposed order approving the assumption and assignment of the Assumed
Contract under certification of counsel.
          7.7. Releases.
               (a) At and subject to the consummation of the Closing, including
without limitation payment of the Purchase Price, and except as otherwise
provided herein or in the Sale Order Approval, Seller shall absolutely,
unconditionally, and irrevocably release and discharge Purchaser and Lance, Inc.
and each of their respective current and former directors, officers, employees,
agents, managers, financial advisors, attorneys, partners, members, equity
holders, Affiliates and representatives (in their capacity as such and in no
other capacity) from any and all Claims based in whole or in part upon any act,
omission, transaction, event or other occurrence taking place at any time on or
before the Closing Date, with the exception of acts, omissions, transactions,
events or occurrences resulting from or involving the gross negligence, breach
of fiduciary duties, ultra vires acts or fraud of any such Persons, as
determined by a final order of the Bankruptcy Court or other court of competent
jurisdiction; provided that nothing herein shall release any obligation or
liability of Purchaser or Lance, Inc. that are to be performed on or after the
Closing, including without limitation the payment of all Cure Amounts and the
guarantee of Lance, Inc. which shall expressly survive the Closing; and
providing further, that the releases granted pursuant to this section shall not
apply to liability to Seller’s bankruptcy estate under 11 U.S.C. Section 547 to
the extent that it is finally determined that such actual aggregate liability
exceeds $400,000, but only to the extent of any such excess with all liability
under 11 U.S.C. Section 547 in an aggregate amount less than $400,000 being
fully released hereunder.
               (b) At and subject to the consummation of the Closing, and except
as otherwise provided herein or in the Sale Order Approval, Purchaser and Lance,
Inc. shall absolutely, unconditionally, and irrevocably release and discharge
Seller and each of its respective current and former directors, officers,
employees, agents, managers, financial advisors, attorneys, partners, members,
equity holders, Affiliates and representatives (in their capacity as such and in
no other capacity) from any and all Claims based in whole or in part upon any
act, omission, transaction, event or other occurrence taking place at any time
on or

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before the Closing Date, with the exception of acts, omissions, transactions,
events or occurrences resulting from or involving the gross negligence, breach
of fiduciary duties, ultra vires acts or fraud of any such Persons, as
determined by a final order of the Bankruptcy Court or other court of competent
jurisdiction; provided that nothing herein shall release any obligation or
liability of Seller that are to be performed on or after the Closing.
               (c) Notwithstanding any other term in this Agreement to the
contrary, the waivers, covenants and agreements contained in this Section 7.7
shall survive the Closing and shall bind and inure to the benefit of, as the
case may be, the Purchaser and its successors and assigns and the Seller and its
estate, creditors, successors and assigns.
     8. Tax Matters.
          8.1. Tax Cooperation. Purchaser and Seller agree to furnish or cause
to be furnished to each other, upon request, as promptly as practicable, such
information and assistance relating to the Business and the Purchased Assets
(including access to books and records) as is reasonably necessary for the
preparation and filing of all Tax Returns, the making of any election relating
to Taxes, the preparation for any assessment or audit by any Taxing Governmental
Authority, and the prosecution or defense of any claim, suit or proceeding
relating to any Tax. Seller and Purchaser shall cooperate with each other in the
conduct of any audit or other proceeding relating to Taxes involving the
Purchased Assets or the Business.
          8.2. Allocation of Taxes. In the event that, notwithstanding the
provisions of Section 1146(a) of the Bankruptcy Code or for any other reason,
any sales, use, transfer and all other non-income Taxes, or any fees incurred in
connection with the purchase and sale of the Purchased Assets (collectively, the
“Transfer Taxes”) are assessed at Closing or at any time thereafter on the
transfer of any Purchased Assets, then in each instance such Transfer Taxes
incurred as a result of the transactions contemplated hereby shall be paid by
Seller, except that with respect to the Real Property the allocated value of the
Real Property shall not exceed $5,000,000. Purchaser and Seller shall cooperate
in providing each other with any appropriate resale exemption certifications and
other similar documentation for Tax purposes.
          8.3. Property Taxes. All Property Taxes for each Straddle Tax Period
(collectively, the “Apportioned Obligations”) shall be apportioned between
Seller and Purchase based on the collective number of days of such Tax period on
or prior to the Closing Date (the “Pre-Closing Straddle Period”) and the
collective number of days of such Tax period after the Closing Date (the
“Post-Closing Straddle Period”). Seller shall be liable for the proportionate
amount (based on number of days) of such Property Taxes that is attributable to
the portion of the Pre-Closing Straddle Period, and Purchaser shall be liable
for the proportionate amount o(based on number of days) of such Property Taxes
that is attributable to the Post-Closing Straddle Period. Notwithstanding the
foregoing, Seller shall be responsible for all Property Taxes for all prior
calendar years and periods prior to any Straddle Tax Period.
          8.4. Apportionment. Apportioned Obligations or Transfer Taxes shall,
subject to any necessary Bankruptcy Court approval, be timely paid, and all
applicable Tax Returns, filings and reports shall be filed, as provided by
applicable Law. The paying Party shall be entitled to reimbursement from the
non-paying Party in accordance with Section 8.2 or 8.3, as

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the case may be. Upon payment of any such Apportioned Obligation or Transfer
Tax, the paying Party shall present a statement to the nonpaying Party setting
forth the amount of reimbursement to which the paying Party is entitled under
Section 8.2 or 8.3, as the case may be, together with such supporting evidence
as is reasonably necessary to calculate the amount to be reimbursed. The
non-paying Party shall make such reimbursement promptly but in no event later
than 10 days after the presentation of such statement. Any payment not made
within such time shall bear interest at the rate per annum equal to the lesser
of 10% or the maximum rate permissible by applicable Law.
     9. Intentionally Omitted.
     10. Closing Conditions.
          10.1. Conditions to Obligations of Purchaser and Seller. The
obligations of Purchaser and Seller to consummate the Closing are subject to the
satisfaction of the following conditions:
               (a) The Bankruptcy Court shall have entered the Sale Approval
Order in the Bankruptcy Case, in form and substance reasonably acceptable to
Seller and Purchaser (including a finding that Purchaser is a “good faith”
purchaser within the meaning of Section 363(m) of the Bankruptcy Code and
waiving any stay that would otherwise be applicable pursuant to Bankruptcy Rules
6004(h) or 6006(d)), and as of the Closing Date the Sale Approval Order shall be
in full force and effect and shall not have been stayed, vacated or reversed;
               (b) No Order shall be in effect that restrains, enjoins, stays or
prohibits the consummation of the Transactions; and
               (c) Any applicable waiting period under the HSR Act relating to
the Transactions shall have expired or been terminated.
          10.2. Conditions to Obligations of Purchaser. The obligation of
Purchaser to consummate the Closing is subject to the satisfaction (or waiver by
Purchaser) of the following further conditions:
               (a) Seller shall have performed in all material respects all of
its covenants hereunder required to be performed by Seller on or prior to the
Closing Date, and Purchaser shall have received a certificate dated as of the
Closing Date executed by Seller certifying the foregoing statement.
               (b) The representations and warranties of Seller contained in
this Agreement shall be true and correct in all material respects at and as of
the Closing Date, as if made at and as of such date (or to the extent such
representations and warranties speak as of an earlier date, they shall be true
and correct as of such earlier date), and Purchaser shall have received a
certificate dated as of the Closing Date executed by Seller certifying the
foregoing statement.

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               (c) There shall not have occurred any Material Adverse Change
with respect to the Purchased Assets since the date hereof. Seller shall have
delivered to Purchaser a certificate dated as of the Closing Date executed by
Seller certifying the foregoing statement.
               (d) Purchaser shall have obtained documentation or other evidence
reasonably satisfactory to it that:
          (i) the Bidding Procedures Order has been entered by the Bankruptcy
Court and has become a Final Order, unless Purchaser, in its sole discretion,
waives the requirement that the Bidding Procedures Order be a Final Order;
          (ii) the Sale Approval Order has been entered by the Bankruptcy Court
and has become a Final Order, unless Purchaser, in its sole discretion, waives
the requirement that the Sale Approval Order be a Final Order; and
          (iii) the Purchased Assets are capable of being transferred to
Purchaser on the Closing Date free and clear of all Liens and interests.
               (e) Seller shall have provided Purchaser with written
confirmation acceptable to Purchaser evidencing Seller’s compliance with
Section 5.8(a).
          10.3. Conditions to Obligations of Seller. The obligation of Seller to
consummate the Closing is subject to the satisfaction (or waiver by Seller) of
the following further conditions:
               (a) Purchaser shall have performed in all material respects all
of its covenants hereunder required to be performed by it on or prior to the
Closing Date, and Seller shall have received a certificate dated as of the
Closing Date executed by Purchaser certifying the foregoing statement.
               (b) The representations and warranties of Purchaser contained in
this Agreement shall be true and correct in all material respects at and as of
the Closing Date, as if made at and as of such date (or to the extent such
representations and warranties speak as of an earlier date, they shall be true
and correct in all material respects as of such earlier date), and Seller shall
have received a certificate dated as of the Closing Date executed by Purchaser
certifying the foregoing statement.
               (c) Purchaser shall have delivered to Seller copies, certified by
the duly qualified and acting Secretary of Purchaser, of resolutions adopted by
the board of directors of Purchaser approving this Agreement and the
consummation of the Transactions.
               (d) Seller shall have received all necessary approvals and
consents for the consummation of the Transactions.

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     11. Survival; Indemnification.
          11.1. Survival. The covenants and agreements of Purchaser and Seller
that by their terms are to be performed at or before the Closing contained in
this Agreement or in any certificate or other writing delivered in connection
herewith, shall not survive the Closing, but the covenants and agreements of
Purchaser, Lance, Inc. and of Seller contained herein that by their terms are to
be performed after Closing shall survive the Closing for such terms. The
representations and warranties of Seller shall not survive the Closing.
          11.2. Indemnification. Purchaser agrees to indemnify Seller with
respect to any investment banking fees, financial advisory fees, brokerage fees,
finders’ fees, or other similar fees which are alleged to be due and payable
with respect to the Transactions and which are alleged to have been incurred by
Purchaser. Seller agree to indemnify Purchaser with respect to any investment
banking fees, financial advisory fees, brokerage fees, finders’ fees, or other
similar fees which are alleged to be due and payable with respect to the
Transactions and which are alleged to have been incurred by Seller. There shall
be no post Closing indemnification of Purchaser by Seller with respect to any
matter not set forth in this Section 11.2.
     12. Termination.
          12.1. Grounds for Termination. This Agreement may be terminated at any
time prior to the Closing:
               (a) by mutual written agreement of Seller and Purchaser;
               (b) by Seller or Purchaser, if the Closing shall not have been
consummated on or before (i) December 15, 2008, (ii) 10 days after any notice
delivered pursuant to Section 7.5 or (iii) the expiration or termination of any
waiting period under HSR (the later of clause (i), (ii) and (iii), the “End
Date”), unless the Party seeking termination is in breach of its obligations
hereunder. Notwithstanding the foregoing, in the event that Purchaser is
selected as the Back-up Bidder (as defined in the Bidding Procedures Order), the
End Date shall be extended to the extent necessary for the End Date to occur
upon the expiration of the period that the Back-up Bidder is required to keep a
bid open pursuant to the Bidding Procedures Order;
               (c) by Seller or Purchaser, if any condition set forth in
Section 10.1 is not satisfied, and such condition is incapable of being
satisfied by the End Date;
               (d) by Purchaser, if any condition set forth in Section 10.2 has
not been satisfied, and such condition is incapable of being satisfied by the
End Date or shall not have been cured during the 10-day period referred to in
Section 7.5; or
               (e) by Seller, if any condition set forth in Section 10.3 has not
been satisfied, and such condition is incapable of being satisfied by the End
Date or shall not have been cured during the l0-day period referred to in
Section 7.5; or
               (f) by Seller, if (i) Seller executes a definitive agreement with
a third party (other than Purchaser) for the acquisition of all or substantially
all the Purchased Assets,

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and (ii) the Bankruptcy Court enters an order in the Bankruptcy Case approving
such definitive agreement;
               (g) By Purchaser, if any of the following shall occur:
          (i) the Bankruptcy Case is dismissed or converted to cases under
Chapter 7 of the Bankruptcy Code or a trustee is appointed for a Seller;
          (ii) the Bidding Procedures Order shall not have been entered within
two (2) business days after the execution of this Agreement; or
          (iii) the Sale Approval Order shall not have been entered by
December 2, 2008.
The Party desiring to terminate this Agreement pursuant to this Section 12.1
(other than pursuant to Section 12.1(a)) shall give notice of such termination
to the other Party in accordance with Section 13.1.
          12.2. Effect of Termination. If this Agreement is terminated as
permitted by Section 12.1, such termination shall be without liability of any
Party (or any stockholder, director, officer, employee, counsel, financial
adviser, agent, consultant or representative of such Party) to the other Party
except as expressly provided in Sections 2.6(b) and 7.4(b), provided however,
that if this Agreement is terminated because of a breach of this Agreement by
Purchaser, or by Lance, Inc. with respect to Section 6.4, or because one or more
conditions or obligations of Purchaser, or Lance, Inc. with respect to
Section 6.4, is not satisfied as a result of Purchaser, or Lance, Inc.’s failure
to comply with its respective obligations under this Agreement, the Seller shall
have the right to pursue all legal and/or equitable rights and remedies which it
may have, including the right to enforce the specific performance of this
Agreement. The provisions of Sections 2.6(b), 6.1, 7.4(b), 11.2, 12.2, 12.3,
13.1, 13.4, 13.5, 13.6 and 13.9 shall survive any termination hereof pursuant to
Section 12.1.
          12.3. Expenses. Except as otherwise provided for herein, all costs and
expenses incurred in connection with this Agreement shall be paid by the Party
incurring such cost or expense.
     13. Miscellaneous.
          13.1. Notices. All notices, requests and other communications to any
Party hereunder shall be in writing (including facsimile transmission) and shall
be given,
     If to Purchaser:
Archer Acquisitions, LLC
Attn:  Rick D. Puckett
14120 Ballantyne Corporate Place
Suite 350
Charlotte, NC  28277
Fax:  (704) 554-5586    

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     with a copy (which shall not constitute notice) to:
Attn:  Edward H. Schuth, Esq.
Office of the General Counsel
Lance, Inc.
14120 Ballantyne Corporate Place
Suite 350
Charlotte, NC  28277
Fax:  (704) 557-8197
     with a copy (which shall not constitute notice) to:
K&L Gates LLP
Attn: A. Zachary Smith
214 North Tryon Street
Hearst Tower, 47th Floor
Charlotte, NC 28202
Fax: (704) 353-3174
     If to Seller:
c/o Catterton Partners
Attn: Nik Thukral
599 West Putnam Avenue
Greenwich, CT  06830
Fax: (203) 629-4903
     with a copy (which shall not constitute notice) to:
Michael R. Lastowski
Duane Morris LLP
1100 North Market Street
Suite 1200
Wilmington, DE 19801-1246
Fax: 302-657-4901
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5:00 p.m. in
the place of receipt and such day is a Business Day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding Business Day in the place of receipt.
          13.2. Waivers. No failure or delay by any Party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or

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privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by Law.
          13.3. Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the Parties and their respective
successors and assigns; provided, however, that no Party may assign, delegate or
otherwise transfer any of its rights or obligations under this Agreement without
the written consent of the other Party (except that Purchaser may assign its
rights and obligations to an Affiliate without the written consent of Seller).
Nothing herein shall be construed to permit Lance, Inc. to transfer or otherwise
assign its obligations as set forth in Section 6.4 above, which Guaranteed
Obligations shall remain in full force and effect and remain binding on Lance,
Inc. notwithstanding any permitted assignment or transfer of any rights or
obligations by a Party.
          13.4. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Delaware and any applicable
provisions of the Bankruptcy Code, without regard to the principles of conflicts
of law that would provide for application of another law.
          13.5. Jurisdiction.
               (a) Prior to the closing of the Bankruptcy Case, except as
otherwise expressly provided in this Agreement, the Parties hereto agree that
any suit, action or proceeding seeking to enforce any provision of, or based on
any matter arising out of or in connection with, this Agreement or the
Transactions shall be brought exclusively in the Bankruptcy Court, and each of
the Parties hereby irrevocably consents to the jurisdiction of the Bankruptcy
Court (and of the appropriate appellate courts therefrom) in any such suit,
action or proceeding and irrevocably waives, to the fullest extent permitted by
law, any objection that it may now or hereafter have to the laying of the venue
of any such suit, action or proceeding in the Bankruptcy Court or that any such
suit, action or proceeding which is brought in the Bankruptcy Court has been
brought in an inconvenient forum. Process in any such suit, action or proceeding
may be served on any Party anywhere in the United States, whether within or
without the jurisdiction of the Bankruptcy Court. Without limiting the
foregoing, each Party agrees that service of process on such Party as provided
in Section 13.1 shall be deemed effective service of process on such Party.
               (b) Upon the closing of the Bankruptcy Case, except as otherwise
expressly provided in this Agreement, the Parties hereto agree that any suit,
action or proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the Transactions may be
brought in any court having subject matter jurisdiction over such suit, action
or proceeding, and each of the Parties hereby irrevocably consents to the
jurisdiction of the State and federal courts located in Charlotte, Mecklenburg
County, North Carolina (and of the appropriate appellate courts therefrom) in
any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by law, any objection that it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such court has
been brought in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any Party anywhere in the world, whether within or
without the jurisdiction of any

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such court, Without limiting the foregoing, each Party agrees that service of
process on such Party as provided in Section 13.1 shall be deemed effective
service of process on such Party.
          13.6. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS.
          13.7. Third Party Beneficiaries. No provision of this Agreement is
intended to confer upon any Person other than the Parties hereto any rights or
remedies hereunder.
          13.8. Entire Agreement; Amendments; Counterparts. This Agreement
(including the Exhibits hereto and the Schedules contained in the Disclosure
Schedules) set forth the entire agreement among the Parties with respect to the
subject matter hereof and may be amended only by a writing executed by Purchaser
and Seller. This Agreement may be executed in counterparts, each of which when
taken together shall constitute an original. This Agreement shall become
effective when each Party hereto shall have received a counterpart hereof signed
by the other Party hereto.
          13.9. Captions, Headings, Interpretation. The captions herein are
included for convenience of reference only and shall be ignored in the
construction or interpretation hereof. The headings contained in this Agreement
are for convenience of reference only and shall not affect the meaning or
interpretation of this Agreement. Whenever the words “include,” “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by
the words “without limitation.” In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of authorship of any provisions of
this Agreement.
          13.10. Disclosure Schedules. The disclosure schedules are a series of
schedules (the “Disclosure Schedules”) corresponding to the sections contained
in Articles 2 and 3 of this Agreement and containing the information required to
be disclosed pursuant to, and certain exceptions to, the agreements,
representations and warranties in such Articles. From time to time prior to the
Closing, Seller shall have the right to supplement or amend the Disclosure
Schedules with respect to any matter hereafter arising or discovered after the
delivery of the Disclosure Schedules pursuant to this Agreement that, if
existing or known at, or occurring prior to, the date of this Agreement, would
have been required to be set forth or described in such Disclosure
Schedules.  Such supplement or amendment shall not be deemed a breach of
Section 10.2(b), and Purchaser shall not have any right to terminate this
Agreement as a result of any supplement or amendment of such Disclosure
Schedules, or any information contained therein, unless such information as
disclosed would (a) prevent Seller from performing its obligations under this
Agreement, or (b) have a material adverse effect, assuming the entry of the Sale
Approval Order, on the Purchased Assets taken as a whole after the Closing.
[Signature Pages Follow]

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     IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.

                  PURCHASER:    
 
                ARCHER ACQUISITIONS, LLC    
 
           
 
  By:   /s/ Rick Puckett    
 
  Name:  
 
   
 
  Title:  
 
   
 
     
 
   
 
                SELLER:    
 
                ARCHWAY COOKIES, LLC    
 
           
 
  By:   /s/ Jeff Granger    
 
  Name:  
 
Jeff Granger    
 
  Title:   Chief Restructuring Officer, and not    
 
      individually    
 
                Solely for Purposes of Section 6.4:    
 
                LANCE, INC.    
 
           
 
  By:   /s/ Rick Puckett    
 
  Name:  
 
   
 
  Title: