ASSET PURCHASE AGREEMENT

 

Exhibit 10.1

____________________

ASSET PURCHASE AGREEMENT

____________________

among

LENOX GROUP INC.,

 

LENOX, INCORPORATED,

 

LENOX WORLDWIDE, LLC,

 

LENOX RETAIL, INC.,

 

LENOX SALES, INC.,

 

FL 56 INTERMEDIATE, CORP.,

 

D 56, INC.

 

and

 

UPSTAIRS ACQUISITION CORP.

Dated as of February 14, 2009

 

 

 

 

 

		Page
ARTICLE I	DEFINITIONS	1
Section 1.01	Definitions	1
Section 1.02	Interpretation and Rules of Construction	14
ARTICLE II	PURCHASE AND SALE	14
Section 2.01	Purchase and Sale of Assets	14
Section 2.02	Assumption and Exclusion of Liabilities	18
Section 2.03	Purchase of Purchased Assets	21
Section 2.04	Purchase Price	21
Section 2.05	Purchase Price Deposit	21
Section 2.06	Payment of Purchase Price	21
Section 2.07	Purchase Price Adjustment	21
Section 2.08	Allocation of the Purchase Price	23
Section 2.09	Determined Cure Costs	24
Section 2.10	Closing	24
Section 2.11	Closing Deliveries by the Sellers	24
Section 2.12	Closing Deliveries by the Purchaser	25
Section 2.13	Relinquishment of Control	26
Section 2.14	Assignment of Contracts and Rights	26
ARTICLE III	REPRESENTATIONS AND WARRANTIES OF THE SELLERS	27
Section 3.01	Organization, Authority and Qualification of the Seller	27
Section 3.02	No Conflict	28
Section 3.03	Governmental Consents and Approvals	28
Section 3.04	SEC Filings; Financial Statements; Undisclosed Liabilities	29
Section 3.05	Litigation	29
Section 3.06	Compliance with Laws	29
Section 3.07	Environmental Matters	30
Section 3.08	Intellectual Property	31
Section 3.09	Real Property	32
Section 3.10	Employee Benefit Matters	33
Section 3.11	Taxes	33
Section 3.12	Material Contracts	34
Section 3.13	Brokers	35
Section 3.14	Insurance	35
Section 3.15	Permits	36
Section 3.16	Absence of Certain Changes	36
Section 3.17	Labor Matters	37
Section 3.18	Assets	37
ARTICLE IV	REPRESENTATIONS AND WARRANTIES OF THE PURCHASER	37
Section 4.01	Organization and Authority of the Purchaser	37

 

 

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		Page
Section 4.02	No Conflict	38
Section 4.03	Governmental Consents and Approvals	38
Section 4.04	Litigation	38
Section 4.05	Brokers and Finders	38
Section 4.06	Financial Capability	38
Section 4.07	Condition of the Business	39
ARTICLE V	ADDITIONAL AGREEMENTS	39
Section 5.01	Assumption of Assigned Contracts	39
Section 5.02	Conduct of Business Prior to the Closing	40
Section 5.03	Access to Information	43
Section 5.04	Regulatory and Other Authorizations; Notices and Consents	43
Section 5.05	Permits and Licenses	43
Section 5.06	Environmental Related Actions	44
Section 5.07	Intellectual Property	44
Section 5.08	Further Action	44
Section 5.09	Cooperation and Exchange of Information	45
Section 5.10	Conveyance Taxes	46
Section 5.11	Nondisclosure	46
Section 5.12	Documents at Closing	46
Section 5.13	Non-Competition; Non-Solicitation	46
Section 5.14	Parties’ Access to Records After Closing	47
Section 5.15	Notification of Certain Matters	47
Section 5.16	Customers and Suppliers	47
Section 5.17	COBRA Matters	48
ARTICLE VI	EMPLOYEE MATTERS	48
Section 6.01	Employment	48
Section 6.02	Employee Benefits	48
ARTICLE VII	BANKRUPTCY COURT MATTERS	50
Section 7.01	Bankruptcy Court Filings	50
ARTICLE VIII	CONDITIONS TO CLOSING	51
Section 8.01	Conditions to Obligations of the Sellers	51
Section 8.02	Conditions to Obligations of the Purchaser	52
ARTICLE IX	TERMINATION, AMENDMENT AND WAIVER	53
Section 9.01	Termination	53
Section 9.02	Effect of Termination	54
ARTICLE X	NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES	54
Section 10.01	Non-Survival of Representations and Warranties	54

 

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		Page
ARTICLE XI	GENERAL PROVISIONS	55
Section 11.01	Expenses	55
Section 11.02	Notices	55
Section 11.03	Public Announcements	56
Section 11.04	Severability	56
Section 11.05	Entire Agreement	56
Section 11.06	Successors and Assigns	56
Section 11.07	Non-Recourse	57
Section 11.08	Amendment	57
Section 11.09	Waiver	57
Section 11.10	No Third Party Beneficiaries	57
Section 11.11	Governing Law	57
Section 11.12	Waiver of Jury Trial	58
Section 11.13	Currency	58
Section 11.14	Construction	58
Section 11.15	Counterparts	58

 

EXHIBITS

 

Exhibit A	–	[Intentionally Left Blank]
Exhibit B	–	Form of Assignment of Intellectual Property
Exhibit C	–	Form of Bill of Sale and Assignment and Assumption Agreement
Exhibit D	–	Form of Deed
Exhibit E	–	Purchaser’s Disclosure Schedule
Exhibit F	–	Sellers’ Disclosure Schedule
Exhibit G	–	Equity Commitment Letter

 

 

 

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ASSET PURCHASE AGREEMENT (this “ Agreement ”), dated as of February 14, 2009, among Lenox Group Inc., a Delaware corporation (“ LGI ”), Lenox, Incorporated, a New Jersey corporation (“ LI ”), Lenox Worldwide, LLC, a Delaware limited liability company (“ LW ”), Lenox Retail, Inc., a Minnesota corporation (“ LRI ”), Lenox Sales, Inc., a Minnesota corporation (“ LSI ”), FL 56 Intermediate, Corp., a Delaware corporation (“ FL ”), D 56, Inc., a Minnesota corporation (“ D56 ” and collectively with LGI, LI, LW, LRI, LSI and FL, the “ Sellers ”), and Upstairs Acquisition Corp., a Delaware corporation (the “ Purchaser ”).

RECITALS

WHEREAS, the Sellers are engaged in the business of manufacturing, designing, distributing, sourcing, marketing and selling (including through wholesale, retail and direct channels) dinnerware, stemware, fine crystal and beverageware, flatware, giftware, other tableware and related decorative products, including under the Seller Brands (as defined below) and other brands (the “ Business ”), it being acknowledged and agreed that except as expressly set forth in this Agreement the Business shall not include any portion of the D56 Business or any D56 Assets or related Liabilities;

WHEREAS, on November 23, 2008, the Sellers commenced voluntary cases under chapter 11 (the “ Chapter 11 Cases ”) of title 11 of the United States Code (the “ Bankruptcy Code ”) in the United States Bankruptcy Court for the Southern District of New York (the “ Bankruptcy Court ”);

WHEREAS, on December 16, 2008, the Bankruptcy Court entered an order (the “ Bidding Procedures Order ”) approving procedures for the sale of all or substantially all of the Sellers’ assets;

WHEREAS, the Purchaser was the Successful Bidder (as defined in the Bidding Procedures Order) for the Sellers’ assets under the procedures approved in the Bidding Procedures Order; and

WHEREAS, the Sellers wish to sell, assign and transfer to the Purchaser, and the Purchaser wishes to purchase and acquire from the Sellers, the Purchased Assets (as defined below), and the Purchaser is willing to assume all of the Assumed Liabilities (as defined below), all upon the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the promises and the representations, warranties, agreements and covenants hereinafter set forth, and intending to be legally bound, the Sellers and the Purchaser hereby agree as follows:

ARTICLE I DEFINITIONS

Section 1.01    Definitions . For purposes of this Agreement:

“ Accounts Payable ” means any and all accounts payable of the Sellers to third parties (other than to any Seller or any Affiliate of any Seller) arising from the conduct of the Business, incurred by the Sellers before the Petition Date.

 

 

 

“ Action ” means any claim, as defined in the Bankruptcy Code, action, complaint, suit, litigation, arbitration, appeal, petition, demand, inquiry, hearing, proceeding, investigation or other dispute, whether civil, criminal, administrative or otherwise, at law or in equity, by or before any Governmental Authority or any third person.

“ Affiliate ” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.

“ Agreed Principles ” has the meaning given to it in Section 2.07(a) .

“ Agreement ” has the meaning given to it in the preamble hereto.

“ Allocation ” has the meaning given to it in Section 2.08 .

“ Ancillary Agreements ” means the Bill of Sale and Assignment and Assumption Agreement, the Deeds, the Assignments of Leased Properties, the Assignments of Intellectual Property and any other instrument or agreement contemplated by this Agreement or the foregoing.

“ Assigned Contract ” means any Contract concerning Transferred Intellectual Property or that relates to, or is used in or held for use in, the Business, including any Material Contract, that is not an Excluded Asset.

“ Assignments of Leased Properties ” means the Assignments of Leased Properties to be executed and delivered by the Sellers and the Purchaser at the Closing with respect to the leases of the Leased Real Property that are Assigned Contracts, in the form to be reasonably agreed by Purchaser and Sellers prior to the Closing.

“ Assignments of Intellectual Property ” means the Assignments of Owned Intellectual Property to be executed and delivered by the Sellers at the Closing, substantially in the form attached hereto as Exhibit B .

“ Assumed Employee Plans ” means the Employee Plans which the Purchaser agrees to assume in accordance with Section 2.02(a) .

“ Assumed Liabilities ” has the meaning given to it in Section 2.02(a) .

“ Assumption Notice ” has the meaning given to it in Section 2.14(a) .

“ Bankruptcy Code ” has the meaning given to it in the recitals hereto.

“ Bankruptcy Court ” has the meaning given to it in the recitals hereto.

“ Bill of Sale and Assignment and Assumption Agreement ” means the Bill of Sale and Assignment and Assumption Agreement to be executed and delivered by the Sellers and the Purchaser at the Closing, substantially in the form attached hereto as Exhibit C .

 

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“ Business ” has the meaning given to it in the recitals hereto.

“ Business Day ” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in the City of New York.

“ Business Employees ” means all current employees, officers and directors of Sellers and their Affiliates who perform, as of the date hereof, services primarily related to the Business.

“ Cash ” means all cash and cash equivalents as determined in accordance with GAAP, net of all outstanding checks and transfers; provided, that “Cash” shall not be less than $0.00.

“ Chapter 11 Cases ” has the meaning given to it in the recitals hereto.

“ Closing ” has the meaning given to it in Section 2.10 .

“ Closing Date ” has the meaning given to it in Section 2.10 .

“ Consent ” means any consent, waiver, approval, order or authorization of, or registration, declaration or filing with or notice to, any Governmental Authority or other Person.

“ Consent Pending Contract ” has the meaning given to it in Section 2.14(a) .

“ Contracts ” means any contract, arrangement, note, bond, commitment, purchase order, sales order, franchise, guarantee, indemnity, indenture, instrument, lease, license or other agreement, understanding, instrument or obligation, whether written or oral, all amendments, supplements and modifications of or for any of the foregoing and all rights and interests arising thereunder or in connection therewith, other than any Employee Plan.

“ Contract Retention Period ” has the meaning given to it in Section 2.14(b) .

“ control ” (including the terms “ controlled by ” and “ under common control with ”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly or as trustee, personal representative or executor, of the power to direct or cause the direction of the affairs, policies or management of a Person, whether through the ownership of voting securities, as trustee, personal representative or executor, by Contract, credit arrangement or otherwise.

“ Conveyance Taxes ” means all sales, use, value added, transfer, stamp, stock transfer, real property transfer and similar Taxes.

“ Corporate Name ” has the meaning given to it in Section 5.07(a) .

“ D56 ” has the meaning set forth in the preamble hereto.

“ D56 Assets ” has the meaning given to it in Section 2.01(b)(viii) .

 

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“ D56 Business ” means the business of manufacturing, designing, distributing, sourcing, marketing and selling (including through wholesale, retail and direct channels) of holiday, seasonal and home decorative, figurine and collectible products and accessories and other similar products under the Department 56 brands as conducted by or on behalf of D56.

“ D56 Scale Down ” means in connection with the D56 Business, the discontinuance of certain product lines, showrooms and retail stores, the restructuring of the D56 sales force, and the termination of employees publicly disclosed by LGI prior to the date hereof, including employees at the D56 headquarters in Eden Prairie, Minnesota, employees at the D56 offices in Petaluma, California, and field sales and showroom employees.

“ Deed ” means, with respect to each parcel of Owned Real Property, the instrument of conveyance customary to the applicable jurisdiction in registrable or recordable form where applicable, to be executed and delivered by the applicable Seller at the Closing in order to convey to the Purchaser such Seller’s interest, if any, in such parcel of Owned Real Property, free and clear of all Liens, other than Permitted Encumbrances, substantially in the form attached hereto as Exhibit D .

“ Determined Cure Costs ” means, in the aggregate, all amounts payable to counterparties of Assigned Contracts (other than Excluded Contracts) on account of the assumption of the Assigned Contracts (other than Excluded Contracts) by the Sellers as determined pursuant to a Final Order, which Order may be the Sale Order.

“ DIP Credit Agreement ” means that certain Senior Secured, Super-Priority Debtor-In-Possession Revolving Credit Agreement, dated as of November 25, 2008, among D56, LRI, LI, LGI, the DIP Lenders and other guarantors party thereto, UBS Securities LLC, JPMorgan Chase Bank, NA, UBS Loan Finance LLC, and UBS AG, Stamford Branch.

“ DIP Lenders ” means the several banks and other financial institutions or entities from time to time that made loans under the DIP Credit Agreement.

“ DIP Order ” means the Final Order of the Bankruptcy Court approving the Sellers’ Motion (A) for Authorization to (i) Obtain Post-Petition Financing Pursuant to 11 U.S.C. § 364; (ii) Utilize Cash Collateral Pursuant to 11 U.S.C. § 363; (iii) Grant Priming Liens and Superpriority Claims to Post-Petition Lenders Pursuant to 11 U.S.C. § 364(c) and (d); (iv) Provide Adequate Protection to Pre-Petition Lenders Pursuant to 11 U.S.C. §§ 361, 362, 363, and 364 and (B) to Schedule a Final Hearing Pursuant to Bankruptcy Rule 4001 dated November 23, 2008.

“ Employee Plans ” has the meaning given to it in Section 3.10(a) .

“ Environmental Claim ” means any and all written complaints, summons, citations, directives, orders, claims, litigation, investigations, notices of violation, judgments, administrative, regulatory or judicial actions, suits, demands or proceedings, or written notices of noncompliance or violation by any Governmental Authority or Person involving or alleging potential liability arising out of or resulting from any violation of Environmental Law or the presence or Release of Hazardous Material from or relating to: (i) any of the Owned Real Property, Leased Real Property or any other assets, properties or businesses of Sellers or any of

 

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their respective predecessors in interest; (ii) any facilities receiving or handling Hazardous Materials generated by any of the Sellers.

“ Environmental Law ” means all Federal, state, local and foreign Laws, statutes, ordinances, rules, regulations, permits, licenses, registrations, Orders, judgments, decrees, injunctions, or legally enforceable requirements of any Governmental Entity which are in effect on or prior to the Closing Date, and all final court orders and decrees and arbitration awards imposing Liability or establishing standards of conduct for protection of the environment and human health and safety including the Comprehensive Environmental Response, Compensation and Liability Act (“ CERCLA ”), 42 U.S.C. 9601 et seq., as amended; the Resource Conservation and Recovery Act (“ RCRA ”), 42 U.S.C. 6901 et seq., as amended; the Clean Air Act (“ CAA ”), 42 U.S.C. 7401 et seq., as amended; the Clean Water Act (“ CWA ”), 33 U.S.C. 1251 et seq., as amended; the Occupational Safety and Health Act (“ OSHA ”), 29 U.S.C. 655 et seq.

“ Environmental Liability ” means all Liabilities, monetary obligations, Remedial Actions, losses, damages, punitive damages, consequential damages, treble damages, natural resource damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts and consultants and costs of investigations and feasibility studies), fines, penalties, sanctions and interest of the Sellers arising under Environmental Laws, or otherwise incurred as a result of any claim or demand by any Governmental Authority or any third party, and which relate to any environmental condition, violation or alleged violation of Environmental Laws or Releases of Hazardous Materials at or from (i) any of the Owned Real Property, Leased Real Property or any other assets, properties or businesses of any Seller or any of their respective predecessors in interest; (ii) adjoining properties or businesses; or (iii) any facilities which received Hazardous Materials generated by any Seller or any predecessor in interest of any Seller.

“ Environmental Permits ” means any permit, registration, certificate, qualification, approval, identification number, license and other authorization required under or issued pursuant to any applicable Environmental Law or otherwise required by any applicable Governmental Authority.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

“ ERISA Affiliate ” means a Person required at any particular time to be aggregated with any of the Sellers under Sections 414(b), (c), (m) or (o) of the Tax Code or Section 4001 of ERISA.

“ Escrow Agreement ” means the escrow agreement dated as of the date of this Agreement among Purchaser, Sellers and Escrow Agent.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, including the rules and regulations promulgated thereunder.

“ Excess IBNR Liability ” has the meaning given to it in Section 6.01(h) .

“ Excluded Assets ” has the meaning given to it in Section 2.01(b) .

 

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“ Excluded Contract ” has the meaning given to it in Section 5.01(a) .

“ Excluded Liabilities ” has the meaning given to it in Section 2.02(b) .

“ Excluded Taxes ” means (i) all Taxes (other than Pre-Closing Lien Taxes and Conveyance Taxes) relating to the Purchased Assets or the Business for any Pre-Closing Period and (ii) any income Taxes imposed on the Sellers. For purposes of this Agreement, in the case of any Straddle Period, (a) Property Taxes relating to the Purchased Assets allocable to the Pre-Closing Period shall be equal to the amount of such Property Taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days during the Straddle Period that fall within the portion of the Straddle Period ending on (and including) the day before the Closing Date and the denominator of which is the number of days in the entire Straddle Period, and (b) Taxes (other than Property Taxes) relating to the Purchased Assets for the Pre-Closing Period shall be computed as if such taxable period ended as of 12:01 a.m. New York time on the Closing Date.

“ Final Order ” means an order, judgment or other decree of the Bankruptcy Court or any other court or judicial body with proper jurisdiction, as the case may be, which is in full force and effect, as to which no appeal is pending and which has not been, and is not subject to being, reversed, stayed, modified or amended.

“ FL ” has the meaning set forth in the preamble hereto.

“ GAAP ” means United States generally accepted accounting principles in effect from time to time throughout the periods involved.

“ Governmental Authority ” means any federal, national, supranational, foreign, state, provincial, local, county, municipal or other government, any governmental, regulatory or administrative authority, agency, department, bureau, board, commission or official or any quasi-governmental or private body exercising any regulatory, taxing, importing or other governmental or quasi-governmental authority, or any court (including the Bankruptcy Court), tribunal, judicial or arbitral body, or any Self-Regulatory Organization.

“ Hazardous Material ” shall include, without regard to amount and/or concentration (a) any element, compound, or chemical that is defined, listed or otherwise classified as a contaminant, pollutant, toxic pollutant, toxic or hazardous substances, extremely hazardous substance or chemical, hazardous waste, medical waste, biohazardous or infectious waste, special waste, or solid waste under Environmental Laws; (b) petroleum, petroleum-based or petroleum-derived products; (c) polychlorinated biphenyls; (d) any substance exhibiting a hazardous waste characteristic including but not limited to corrosivity, ignitibility, toxicity or reactivity as well as any radioactive or explosive materials; and (e) any raw materials, building components, including but not limited to asbestos-containing materials and manufactured products containing Hazardous Materials.

“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

“ HSR Approval ” has the meaning given to it in Section 3.03 .

 

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“ IBNR ” has the meaning given to it in Section 6.01(h) .

“ IBNR Claims Period ” has the meaning given to it in Section 6.01(h) .

“ IBNR Liabilities ” has the meaning given to it in Section 6.01(h) .

“ Indebtedness ” means any liabilities or obligations, whether contingent or otherwise (including penalties, interest and premiums), including any of the following: (i) in respect of borrowed money or with respect to advances of any kind (including under the DIP Credit Agreement or any applicable credit line); (ii) evidenced by bonds, notes, debentures or similar instruments, (iii) for the payment of money relating to any capitalized lease obligation; (iv) for the deferred purchase price of goods or services or for trade or barter arrangements; (v) evidenced by a letter of credit or reimbursement obligation with respect to any letter of credit; (vi) under interest rate, currency or commodity hedging, swap or similar derivative transactions; (vii) all guarantees, assumptions, endorsements or other agreements and arrangements having the economic effect of a guarantee of any Person by the Sellers; and (viii) all liabilities and other obligations of others of the kind described in clauses (i) – (vii) that are secured by a Lien on any properties or assets of the Sellers.

“ Intellectual Property ” means all (i) foreign and domestic trademarks, service marks, brand names, Internet domain names, logos, symbols, trade dress, assumed names, fictitious names and trade names that are utilized on or in connection with products and/or services, all applications and registrations for all of the foregoing, and all goodwill associated therewith and symbolized thereby, including without limitation all extensions, modifications and renewals of same (collectively, “ Trademarks ”); (ii) foreign and domestic patentable inventions, and all patents, registrations, and applications therefor, including without limitation divisions, continuations, continuations-in-part and renewal applications, and including without limitation renewals, extensions and reissues; and (iii) foreign and domestic published and unpublished copyrightable works of authorship and registrations and applications therefor, and all renewals, extensions, restorations and reversions thereof.

“ Intercompany Loans ” means, with respect to each Seller, any intercompany Indebtedness related to the Business between any such Seller and another Seller or Affiliates of another Seller, whether or not evidenced by promissory notes and/or recorded in the books and records of such Sellers.

“ Inventory ” means all inventory and all finished goods, merchandise, work in progress, residual by-products, samples, supplies, spare parts, shipping materials, packaging materials, raw materials and other consumables relating to the Business and current D56 inventory in Sellers’ company-owned stores and distribution centers which have been allocated for distribution through Seller’s Retail and Direct channels, owned by Sellers and maintained, held or stored by or for any of the Sellers as of the Closing Date and any prepaid deposits for any of the same, net of any applicable reserves to value the inventory at the lower of cost or market value.

“ IRS ” means the Internal Revenue Service of the United States.

 

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“ Law ” means any federal, national, supranational, foreign, state, provincial, local, county, municipal or similar statute, law, common law, writ, injunction, decree, guideline, policy, ordinance, regulation, rule, code, Order, constitution, treaty, requirement, judgment or judicial or administrative doctrines enacted, promulgated, issued, enforced or entered by any Governmental Authority.

“ Leased Real Property ” means the leasehold interests of the Sellers and the security deposits appurtenant thereto described in Section 3.09(b) of the Sellers’ Disclosure Schedule, together with (a) any prepaid rent, security deposits and options to renew or purchase relating to the foregoing and (b) all buildings and other structures, facilities or improvements currently or hereafter located thereon, all fixtures, systems and items of personal property of such Seller used or useful in the Business attached or appurtenant thereto and all easements, rights of way, options, renewal rights, licenses, rights and appurtenances relating to the foregoing.

“ LGI ” has the meaning set forth in the preamble hereto.

“ LGI SEC Documents ” means all forms, reports, schedules, statements and other documents (including, in each case, exhibits, schedules, amendments or supplements thereto, and any other information incorporated by reference therein) required to be filed with the SEC by LGI since January 1, 2005 under the Exchange Act or the Securities Act (as such documents have been amended or supplemented between the time of their respective filing and the date of this Agreement).

“ LI ” has the meaning set forth in the preamble hereto.

“ Liabilities ” means any and all debts, liabilities, obligations to perform services and other obligations, whether accrued or fixed, absolute or contingent, matured or unmatured, known or unknown or determined or determinable, including those arising under any Law, Action or Order and those arising under any Contract.

“ Licensed Intellectual Property ” means all Intellectual Property used in connection with the Business that any Seller is licensed or otherwise permitted by other Persons to use.

“ Liens ” means any mortgage, deed of trust, pledge, assignment, security interest, encumbrance, lien, Mechanics Lien, charge, hypothecation, deemed trust, Action, easement, charge or otherwise, or claim of any kind or nature whatsoever in respect of any property, other than any license of Intellectual Property, including any of the foregoing created by, arising under, or evidenced by any conditional sale or other title retention agreement, the interest of a lessor under a capital lease, any financing lease having substantially the same economic effect as any of the foregoing, or the filing of a financing statement naming the owner of the property as to which such lien relates as the debtor under the Uniform Commercial Code or any comparable Law in any other jurisdiction.

“ LRI ” has the meaning set forth in the preamble hereto.

“ LSI ” has the meaning set forth in the preamble hereto.

 

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“ LW ” has the meaning set forth in the preamble hereto.

“ Material Adverse Effect ” means any event, circumstance, development, change or effect that, individually or in the aggregate with all other events, circumstances, developments, changes or effects, (a) has had or would reasonably be expected to have or result in a material adverse effect or change in the results of operations, properties, assets, liabilities or condition (financial or otherwise) of the Business, the Purchased Assets or the Assumed Liabilities or (b) has or would reasonably be expected to prevent, materially delay or materially impair the ability of the Sellers to consummate the Transactions, except, in each case, for any such effects resulting from or attributable to (i) general economic or political conditions; (ii) any condition arising solely by reason of the commencement of the Chapter 11 Cases; (iii) changes caused by acts of war, armed hostilities or terrorism occurring after the date hereof; (iv) changes arising from the consummation of the Transactions or the announcement of the execution of this Agreement; and (v) any change that generally affects any industry in which any of the Sellers operates.

“ Material Contracts ” has the meaning given to it in Section 3.12 .

“ Mechanics Liens ” means mechanics’, carriers’, workers’, repairers’ and other similar liens arising or incurred in the ordinary course of business relating to obligations as to which there is no default on the part of any of the Sellers, or pledges, deposits or other liens securing the performance of bids, trade contracts, leases or statutory obligations (including workers’ compensation, unemployment insurance or other social security legislation).

“ Order ” means any order, writ, judgment, injunction, decree, rule, ruling, directive, stipulation, determination or award made, issued or entered by or with any Governmental Authority, whether preliminary, interlocutory or final, including, without limitation, any Order entered by the Bankruptcy Court in the Chapter 11 Cases (including, without limitation, the Sale Order).

“ Owned Intellectual Property ” means all Intellectual Property used or useful in connection with the Business that is owned by any Seller, directly or indirectly, jointly or individually.

“ Owned Real Property ” means the real property and interests therein described on Section 3.09(a) of the Sellers’ Disclosure Schedule, including all buildings and other structures, facilities or improvements currently or hereafter located thereon, all fixtures, systems, and items of personal property attached or appurtenant thereto and all interests, easements, rights of way, licenses, rights, privileges, covenants, restrictive covenants, possibilities of reverter, options to purchase, hereditaments and other appurtenances relating to the foregoing.

“ Permits and Licenses ” has the meaning given to it in Section 2.01(a)(x) .

“ Permitted Encumbrances ” means (a) statutory Liens for current Taxes not yet due or delinquent (or which may be paid without interest or penalties); (b) Liens (if any) securing the Assumed Liabilities; (c) zoning, landmarking, entitlement, conservation restriction and other land use and environmental regulations by Governmental Authorities which do not materially interfere with the occupancy or current use of the Purchased Assets; (d) all covenants,

 

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conditions, restrictions, easements, rights of way, licenses and other similar interests in land (excluding, for greater certainty, as of the Closing, any mortgages, assignments of rents or any other financial charges except those in the preceding clause (a)) which were recorded as of the Petition Date, including any rights of way, easements, or other instruments granting similar rights that may be registered or recorded after such times without the consent of the Sellers and which do not materially interfere with the occupancy, value or current use of any such real property or any interests therein; (e) Mechanics Liens; and (f) matters which would be disclosed by an accurate survey or inspection of the real property which do not or could not materially impair the occupancy, value or current use of such real property which they encumber.

“ Person ” means any individual, partnership, firm, corporation, limited liability company, association, joint venture, trust, Governmental Authority, first nation, aboriginal or native group or band, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Exchange Act.

“ Petition Date ” means the date on which the Chapter 11 Cases were commenced by the filing of voluntary petitions under the Bankruptcy Code, being November 23, 2008.

“ Pre-Closing Lien Taxes ” means any Property Taxes or other Taxes imposed on the Sellers that are not yet due or delinquent relating to the Purchased Assets or the Business for any Pre-Closing Period which if unpaid would result in the imposition of a Lien on any of the Purchased Assets.

“ Pre-Closing Period ” means any taxable period (or portion thereof) ending on or prior to the Closing Date.

“ Property Taxes ” means real and personal ad valorem property Taxes and any other Taxes imposed on a periodic basis and measured by the value of any item of property.

“ Purchased Assets ” has the meaning given to it in Section 2.01(a) .

“ Purchase Price ” has the meaning given to it in Section 2.04 .

“ Purchaser ” has the meaning given to it in the preamble hereto.

“ Purchaser’s Disclosure Schedule ” means the Disclosure Schedule attached hereto as Exhibit E , dated as of the date hereof, delivered by the Purchaser to LGI in connection with this Agreement.

“ Purchaser’s Knowledge ” means the actual knowledge of the persons set forth on Section 1.01(a) of the Purchaser’s Disclosure Schedule.

“ Receivables ” means any and all accounts receivable, notes and other amounts receivable from third parties, including customers, arising from the conduct of the Business before the Closing, whether or not in the ordinary course of business, together with any unpaid financing charges accrued thereon, net of any applicable reserves required to reflect the receivables at their net realizable value.

 

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“ Reference Statement ” has the meaning given to it in Section 2.07(a) .

“ Registered ” means, solely with respect to Intellectual Property, issued by, registered or filed with, renewed by or the subject of a pending application or registration before any Governmental Authority or Internet domain name registrar.

“ Regulations ” means the Treasury Regulations (including Temporary Regulations) promulgated by the United States Department of Treasury with respect to the Tax Code or other federal tax statutes.

“ Release ” means any spilling, leaking, pumping, emitting, emptying, discharging, injecting, escaping, leaching, migrating, dumping, or disposing of Hazardous Materials (including the abandonment or discarding of barrels, containers or other closed receptacles containing Hazardous Materials) into the environment in violation of Environmental Laws.

“ Remedial Action ” means all actions taken to (i) clean up, remove, remediate, contain, treat, monitor, assess, evaluate or in any other way address Hazardous Materials in the indoor or outdoor environment; (ii) prevent or minimize a Release or threatened Release of Hazardous Materials so they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment; (iii) perform pre-remedial studies and investigations and post-remedial operation and maintenance activities or (iv) any other actions authorized or required by any Environmental Law or Governmental Authority.

“ Representatives ” means, with respect to a particular Person, any director, officer, employee or other representative of such Person, including such Person’s attorneys, financial advisors and restructuring advisors. Without limiting the generality of the foregoing, the Sellers’ Financial Advisor and Sellers’ Restructuring Advisor shall be deemed Representatives of the Sellers.

“ Required Consent ” has the meaning given to it in Section 8.02(j) .

“ Revolving Credit Agreement ” means the Amended and Restated Revolving Credit Agreement, dated as of April 20, 2007, by and among LI, D56 and LRI, as borrowers, LGI and other guarantors party thereto as guarantors, UBS AG, Stamford Branch, as issuing bank and administrative agent, the Revolving Loan Lenders party thereto and the other parties thereto.

“ Revolving Loan Lenders ” means the several banks and other financial institutions or entities from time to time that made loans under the Revolving Credit Agreement.

“ Sale Hearing ” means the hearing at which the approval of the Sale Order is to be considered before the Bankruptcy Court.

“ Sale Order ” means the Order of the Bankruptcy Court approving the sale of the Purchased Assets to the Purchaser in form and substance reasonably acceptable to the Purchaser and the Sellers and authorizing Sellers to consummate the Transactions. Sellers shall use their commercially reasonable efforts to have included in such Order authorization for the Sellers and the Purchaser to execute, deliver and/or file the Uniform Commercial Code, lien releases,

 

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discharges, financing change statements and such other documents, notes or instruments as the Purchaser may deem reasonably necessary to release Liens (save and except for Permitted Encumbrances) on the Purchased Assets.

“ SEC ” means the United States Securities and Exchange Commission.

“ Securities Act ” shall mean the Securities Act of 1933, as amended, including the rules and regulations promulgated thereunder.

“ Self-Regulatory Organization ” means the New York Stock Exchange or any other securities exchange, futures exchange, contract market, any other exchange or corporation or similar self-regulatory body or organization applicable to a party to this Agreement.

“ Seller Brands ” means the brands owned by the Sellers as set forth in Section 1.01(a) of the Sellers’ Disclosure Schedule.

“ Seller Expenses ” means any costs and expenses (including all legal, accounting, financial advisory, valuation, investment banking and other third party advisory or consulting fees and expenses including those of Weil, Gotshal & Manges LLP, Sellers’ Financial Advisor and Sellers’ Restructuring Advisor) incurred by or on behalf of the Sellers in connection with the Chapter 11 Cases or the transactions contemplated by this Agreement.

“ Sellers ” has the meaning given to it in the preamble hereto.

“ Sellers’ Disclosure Schedule ” means the Disclosure Schedule attached hereto as Exhibit F , dated as of the date hereof, delivered by the Sellers to the Purchaser in connection with this Agreement.

“ Sellers’ Financial Advisor ” means Berenson & Company, LLC.

“ Sellers’ Knowledge ” means the actual knowledge of the persons set forth on Section 1.01(b) of the Sellers’ Disclosure Schedule.

“ Sellers’ Restructuring Advisor ” means Carl Marks Advisory Group LLC.

“ Straddle Period ” means any taxable period beginning on or prior to and ending after the Closing Date.

“ Subsequent Filings ” means, collectively, all subsequent filings made after the date of this Agreement amending or superseding any LGI SEC Documents (including any statements or schedules therein) and any forms, reports, schedules, statements, registration statements, proxy statements, or other documents (including in each case, exhibits, schedules, amendments or supplements thereto, and any other information incorporated by reference therein) filed with the SEC after the date of this Agreement.

“ Subsidiary ” means, when used with reference to any Person, any corporation, partnership, limited liability company, joint venture, stock company or other entity of which such Person (either acting alone or together with its other Subsidiaries), directly or indirectly, owns or

 

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has the power to vote or to exercise a controlling influence with respect to 50% of more of the capital stock or other voting interests, the holders of which are entitled to vote for the election of a majority of the board of directors or any similar governing body of such corporation, partnership, limited liability company, joint venture, stock company or other entity.

“ Tax ” or “ Taxes ” means any and all taxes, assessments, duties, levies or other governmental charges, including, without limitation, all federal, state, provincial, local, foreign and other income, franchise, profits, gross receipts, capital gains, capital stock, transfer, property, sales, use, value-added, occupation, property, excise, severance, windfall profits, stamp, license, payroll, social security, withholding and other taxes, assessments, duties, levies or other governmental charges of any kind whatsoever (whether payable directly or by withholding and whether or not requiring the filing of a Tax Return), all estimated taxes, deficiency assessments, additions to tax, penalties and interest and shall include any liability for such amounts as a result either of being a member of a combined, consolidated, unitary or affiliated group or of a contractual obligation to indemnify any person or other entity.

“ Tax Code ” means the U.S. Internal Revenue Code of 1986, as amended through the date hereof.

“ Tax Documents ” has the meaning given to it in Section 5.09(a) .

“ Tax Returns ” means any and all returns, reports, documents, declarations, claims for refund or other information or filings required to be supplied to any Governmental Authority or jurisdiction (foreign or domestic) with respect to Taxes together with all schedules or attachments thereto, including, without limitation, information returns where required, any documents with respect to or accompanying payments of estimated Taxes, or any documents with respect to or accompanying requests for the extension of time in which to file any such report, return, document, declaration or other information, and including any amendments of any of the foregoing.

“ Termination Date ” means April 30, 2009.

“ Term Loan Agreement ” means the Amended and Restated Term Loan Credit Agreement, dated as of April 20, 2007, by and among LI, D56 and LRI, as borrowers, LGI and other guarantors party thereto as guarantors, The Bank of New York Mellon, as administrative agent (as successor to UBS AG, Stamford Branch), the lenders party thereto, and the other party thereto.

“ Term Loan Lenders ” means the several banks and other financial institutions or entities from time to time that made loans under the Term Loan Agreement.

“ Trade Payables ” means any and all accounts payable (other than the Seller Expenses) of the Sellers to third parties (other than to any Seller or any Affiliate of any Seller) arising from the conduct of the Business, incurred by the Sellers after the Petition Date and prior to the Closing incurred in the ordinary course of business or with the approval of the Purchaser.

“ Transactions ” means the transactions contemplated by this Agreement and the Ancillary Agreements.

 

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“ Transferred Employees ” has the meaning given to it Section 6.01(a) .

“ Transferred Intellectual Property ” means all Owned Intellectual Property and all Licensed Intellectual Property.

“ Wachovia Deposit ” has the meaning given to it in Section 2.01(a)(iv) .

Section 1.02     Interpretation and Rules of Construction . In this Agreement, except to the extent otherwise provided or that the context otherwise requires:

(a)       when a reference is made in this Agreement to an Article, Section or Schedule, such reference is to an Article or Section of or Schedule to, this Agreement unless otherwise indicated;

(b)       the table of contents and headings for this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement;

(c)       whenever the words “include,” “includes” or “including” are used in this Agreement, they are deemed to be followed by the words “without limitation”;

(d)       the words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement;

(e)       all terms defined in this Agreement have the defined meanings when used in any certificate or other document made or delivered pursuant hereto, unless otherwise defined therein;

(f)        the definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms;

(g)       references to a Person are also to the Person’s heirs, executors, administrators, personal representatives, successors and permitted assigns, as applicable;

(h)       references to agreements are also to the same agreements as amended, restated or otherwise modified from time to time; and

(i)       references to the Sellers are also to each Seller individually.

ARTICLE II PURCHASE AND SALE

Section 2.01    Purchase and Sale of Assets .

(a)       Upon the terms and subject to the conditions of this Agreement, and subject to Section 5.01(b) and 5.07(b) , at the Closing, each Seller shall sell, assign, transfer, convey and deliver, or cause to be sold, assigned, transferred, conveyed and delivered, to the Purchaser, and the Purchaser shall purchase and acquire from such Seller, all of such Seller’s right, title and interest, as of the Closing Date, in and to any and all assets, properties, rights and

 

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claims of any kind or nature, whether tangible or intangible, real, personal or mixed, wherever located and whether or not carried or reflected on the books and records of any of the Sellers, whether now existing or hereinafter acquired, which relate to the Business or which are used in or held for use in, or were acquired in connection with, the operation of the Business, excluding only the Excluded Assets (such assets, properties, rights and claims to be acquired hereunder, collectively, the “ Purchased Assets ”), in “AS IS” and “WHERE IS” condition without any representations or warranties, except as otherwise expressly set forth in this Agreement. The Purchased Assets shall include, but not be limited to, the following:

(i)        the Owned Real Property and the Leased Real Property save and except any Leased Real Property that is leased under a lease that is an Excluded Contract;

(ii)       all tangible personal property related to, or used or useful in or held for use in the conduct of, the Business, including equipment, machinery, tools, supplies, spare parts, molds, trucks, cars, other vehicles and rolling stock, furniture, fixtures, trade fixtures, leasehold improvements, office materials and supplies, and other tangible personal property located on, or off, the premises of the Owned Real Property and Leased Real Property;

(iii)      the Inventory;

(iv)      all Cash, securities (other than any equity interests in the Sellers) and negotiable instruments of the Sellers on hand, in lock boxes, in financial institutions or elsewhere, but excluding the $1,200,000 that the Sellers deposited with Wachovia for payroll and sales tax (such funds deposited with Wachovia, the “ Wachovia Deposit ”);

(v)       the Receivables;

(vi)      all files, operating data, books of account, general, financial and Tax (other than income Tax) records, personnel records of the Transferred Employees, invoices, shipping records, supplier lists, price lists, vendor lists, mailing lists, catalogs, sales promotion literature, advertising materials, brochures, standard forms of documents, manuals of operations or business procedures, research materials, contracts, instruments, filings, administrative and pricing manuals, correspondence, memoranda, plats, architectural plans, surveys, title insurance policies, drawings, plans and specifications, environmental reports, maintenance or service records, soil tests, engineering reports, expired purchase orders, operating records, operating safety manuals, and other material and documents, books (including applicable portions of minute books), records and files (whether or not in the possession of any of the Sellers or their respective Representatives, stored in hardcopy form or on magnetic, optical or other media) and any rights thereto owned, associated with or employed by any of the Sellers in the conduct of the Business or otherwise related to the Purchased Assets or the Assumed Liabilities;

(vii)     all goodwill associated with the Purchased Assets, including rights under any confidentiality agreements executed by any third party for the benefit of any of the Sellers and assigned to the Purchaser to the extent relating to the Business;

(viii)    the Transferred Intellectual Property;

 

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(ix)      to the extent transferable after giving effect to the Sale Order, all of the rights and benefits accruing under any Assigned Contracts, including any outstanding deposits thereunder;

(x)       all of the rights and benefits accruing under any franchises, permits, consents, certificates, clearances, approvals, exceptions, variances, permissions, filings, publications, declarations, notices, licenses, agreements, waivers and authorizations, including Environmental Permits, of or with any Governmental Authority held, used or made by any of the Sellers in connection with the Business (collectively, the “ Permits and Licenses ”) and all deposits and prepaid expenses held by third parties and/or governmental agencies, save and except any such Permit and License that is an Excluded Contract;

(xi)      subject to the terms of the Sellers’ privacy policy the sales and promotional literature, customer lists and other sales related materials related to the Business;

(xii)     except for any such amounts required to be paid to the Term Loan Lenders or the DIP Lenders under the DIP Order, the amount of, and all rights to any, insurance proceeds received by any of the Sellers after the date hereof in respect of the loss, destruction or condemnation of any Purchased Assets occurring prior to, on or after the Closing or relating to any Assumed Liabilities;

(xiii)    all unexpired, transferable warranties, indemnities, or guaranties from any third party with respect to any Purchased Asset, including any item of real property, personal property or equipment;

(xiv)    to the extent transferable and to the extent related to the Purchased Assets, the full benefit of all representations, warranties, guarantees, indemnities, undertakings, certificates, covenants, agreements and all security therefor received by any of the Sellers on the purchase or other acquisition of the Purchased Assets;

(xv)     any rights, demands, claims, credits, allowances, rebates, or rights of setoff (other than against the Sellers or any of their Affiliates) arising out of or relating to any of the Purchased Assets;

(xvi)    all deposits received by any of the Sellers from any subtenants with respect to any subleases of Leased Real Property assumed by the Purchaser;

(xvii)   all prepaid and deferred items that relate to the Purchased Assets, including all prepaid rentals and unbilled charges, fees and deposits;

(xviii)  all confidentiality, non-compete and similar agreements entered into by any of the Sellers, or any of their respective Representatives, and assumed by the Purchaser in connection with a sale of the Purchased Assets;

(xix)    all current and prior insurance policies of any of the Sellers that relate to any of the Assumed Liabilities and all rights and benefits of any nature (except for any

 

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rights to insurance recoveries thereunder required to be paid to the Term Loan Lenders or the DIP Lenders under the DIP Order) with respect thereto, including all insurance recoveries thereunder and rights to assert claims with respect to any such insurance recoveries, but excluding any tail insurance policies that provide coverage to the Sellers or their Affiliates or Representatives after the Closing Date;

(xx)     all assets maintained pursuant to or in connection with any Assumed Employee Benefit Plan;

(xxi)    subject to the approval of the Department of Community and Economic Development for the Commonwealth of Pennsylvania, the assets set forth on Section 2.01(a)(xxi) of the Sellers’ Disclosure Schedule; and

(xxii)   all other assets, properties, rights and claims of any of the Sellers of any kind or nature which relate to the Business, which are used in or held for use in the Business, or which relate to the Purchased Assets (in each case, other than the Excluded Assets) not otherwise described above.

(b)       Notwithstanding anything in Section 2.01(a) to the contrary, the Sellers shall not sell, convey, assign, transfer or deliver, nor cause to be sold, conveyed, assigned, transferred or delivered, to the Purchaser, and the Purchaser shall not purchase or acquire, and the Purchased Assets shall not include, the Sellers’ right, title and interest in and to the following assets of the Sellers (collectively, the “ Excluded Assets ”):

(i)        all documents and other items related solely to the organization, existence or capitalization of the Sellers, including without limitation the company seal, charter documents, stock or equity record books and such other similar books and records (including applicable portions of minute books);

(ii)       all rights of the Sellers under this Agreement and the Ancillary Agreements;

(iii)      any rights to Tax refunds;

(iv)      Tax Returns of the Sellers (other than the copies of such Tax Returns obtained pursuant to Section 5.09 or otherwise);

(v)       any Excluded Contract and rights thereunder, and any Assigned Contract which the Bankruptcy Court has determined shall not be assigned to the Purchaser;

(vi)      any assets relating to the Employee Plans, except for assets maintained pursuant to or in connection with any Assumed Employee Plan;

(vii)     any right, property or asset that is listed or described in Section 2.01(b)(vii) of the Sellers’ Disclosure Schedule. The Purchaser at its sole discretion shall be allowed to amend or supplement Section 2.01(b)(vii) of the Sellers’ Disclosure Schedule at any time on or prior to the date that is ten (10) days prior to the Closing Date;

 

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(viii)    any assets primarily or exclusively used in, held for use in or related to the D56 Business, excluding current D56 inventory in Sellers’ company-owned stores and distribution centers which have been allocated for distribution through Sellers’ Retail and Direct channels (the “ D56 Assets ”); and

(ix)      funds constituting the Wachovia Deposit.

Section 2.02    Assumption and Exclusion of Liabilities .

(a)       The Purchaser shall assume no liability or obligation of the Sellers except the liabilities and obligations expressly set forth in this Section 2.02(a) (collectively, the “ Assumed Liabilities ”), which the Purchaser shall assume and pay, perform and discharge in accordance with their respective terms, subject to any defenses or claimed offsets asserted in good faith against the obligee to whom such liabilities or obligations are owed:

(i)        all Liabilities of the Sellers (other than Environmental Liabilities) under the Assigned Contracts for the lease of real property (other than any such lease that is an Excluded Contract) and the other Assigned Contracts (other than any that is an Excluded Contract), in each case (A) for which all necessary consents and/or Bankruptcy Court approval to transfer have been obtained and (B) all Determined Cure Costs, it being understood and agreed that all such Determined Cure Costs shall be paid as a portion of the Purchase Price in accordance with Section 2.04(b) ;

(ii)       all Liabilities in respect of Permits and Licenses (other than any that is an Excluded Contract), in each case arising and relating solely to the period from and after the Closing and not to the extent arising out of any breach or default thereof or other activities prior to the Closing;

(iii)      (A) all Property Taxes and assessments on the Purchased Assets that relate to the period from and after the Closing, and (B) all Pre-Closing Lien Taxes;

(iv)      all Trade Payables;

(v)       all obligations relating to any gift certificates issued by Sellers in connection with the Business prior to the Closing Date;

(vi)      all obligations to replace or repair any product, or to return the purchase price of any product, arising in the ordinary course of business from claims of retail or online customers under product warranties, product return policies or other retail or online customer programs set forth in Section 2.02(a)(vi) of the Sellers’ Disclosure Schedule, in each case (A) relating to the Purchased Assets and (B) excluding any Liabilities for personal injury claims or product recalls relating to the operation of the Business prior to the Closing;

(vii)     all Liabilities set forth in Section 2.02(a)(vii) of the Sellers’ Disclosure Schedule;

 

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(viii)    each of the Assumed Employee Plans set forth on Section 6.02(b) of the Sellers’ Disclosure Schedule and all Liabilities arising thereunder or relating thereto; and

(ix)      to the extent submitted pursuant to Section 6.02(h) prior to the termination of the IBNR Claims Period, any IBNR Liabilities which, individually or in the aggregate, do not exceed the IBNR Cap.

(b)       Notwithstanding anything to the contrary in this Agreement, the parties expressly acknowledge and agree that the Purchaser shall not assume or in any manner whatsoever be liable or responsible for any Liabilities of any of the Sellers, or of any predecessor or Affiliate of any of the Sellers, existing on the Closing Date or arising thereafter as a result of any act, omission or circumstance taking place prior to the Closing, other than the Assumed Liabilities. The Liabilities not specifically assumed by Purchaser pursuant to Section 2.02(a) shall be referred to herein collectively as the “ Excluded Liabilities .” Without limiting the foregoing, the Purchaser shall not be obligated to assume, and does not assume, and hereby disclaims all of the Excluded Liabilities, including, without limitation, all of the following Liabilities, of any of the Sellers, or of any predecessor or Affiliate of any of the Sellers:

(i)         all Excluded Taxes;

(ii)       any Liabilities relating to or arising out of the Excluded Assets, including the D56 Assets;

(iii)      all Accounts Payable;

(iv)      any pre-Petition Date accrued expenses of the Sellers;

(v)       any Environmental Liabilities in respect of the Owned Real Property, the Leased Real Property and any area used pursuant to the Permits and Licenses relating to the Business, or Hazardous Material or environmental conditions that exist on or prior to the Closing Date;

(vi)      the Sellers’ obligations under this Agreement and the Ancillary Agreements and any fees or expenses incurred by any of the Sellers in connection with the negotiation, preparation, approval or execution of this Agreement and the Ancillary Agreements and/or the sale of the Purchased Assets pursuant hereto, including, without limitation, the fees and expenses of counsel, independent auditors, brokers, bankers, investment bankers and other advisors or consultants and any success (or similar fees) arising in connection therewith;

(vii)     any Liabilities arising as a result of any Action initiated at any time, to the extent related to the Business or the Purchased Assets on or prior to the Closing Date, including any shareholder Actions, or Actions in tort or for breach of contract and any Liabilities arising in connection with the Actions set forth on Section 2.02(b)(vii) of the Sellers’ Disclosure Schedule;

(viii)    except as provided in Section 2.02(a)(viii) or to the extent specifically provided in Article VI , all Liabilities arising out of, relating to or with respect to (i) the

 

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employment or performance of services, or termination of employment or services by Sellers or any of their Affiliates of any individual on or before the Closing Date, (ii) each of the Employee Plans subject to Title IV of ERISA, all other Employee Plans (excluding the Assumed Employee Plans set forth on Section 6.02(b) of the Sellers’ Disclosure Schedule) and any other “employee benefit plan” (within the meaning of Section 3(3) of ERISA) or other benefit or compensation plan, program, agreement or arrangement at any time maintained, sponsored, contributed or required to be contributed to by any Seller or any Affiliate of any Seller, or with respect to which any Seller or any Affiliate of any Seller has any Liability or otherwise, or (iii) workers’ compensation claims against Sellers or any of their Subsidiaries that relate to the period ending on the Closing Date, irrespective of whether such claims are made prior to or after the Closing;

(ix)      any Liability relating to the employment or termination of employment of any Person arising from or related to the operation of the Business or the D56 Business prior to Closing (including but not limited to, any severance or stay or incentive bonuses) not expressly assumed by Purchaser under Article VI ;

(x)       any Liabilities arising under Intercompany Loans and all promissory notes related thereto;

(xi)      all Liabilities arising under the Term Loan Agreement;

(xii)     all Liabilities arising under the DIP Credit Agreement;

(xiii)    all Liabilities arising under the Revolving Credit Agreement;

(xiv)    all Liabilities with respect to Seller Expenses;

(xv)     subject to Section 2.02(a)(iii)(B) , Section 2.02(a)(iv) , Section 2.02(a)(v) , Section 2.02(a)(vi) and Section 2.02(a)(vii) any Liabilities arising from the ownership and operation of the Business prior to the Closing, including, without limitation, all Liabilities in respect of Indebtedness that relates to the period prior to the Closing;

(xvi)   any Liabilities arising from the operation of any successor liability Laws, including, without limitation, “bulk sales” statutes, to the extent that non-compliance therewith or the failure to obtain necessary clearances would subject the Purchaser or the Purchased Assets to the claims of any creditors of any of the Sellers, or would subject any of the Purchased Assets to any Encumbrances or other restrictions (except for Permitted Encumbrances);

(xvii)   any violation of an applicable Law or Order prior to the Closing by any of the Sellers, including, without limitation, any Environmental Law;

(xviii)  any (i) IBNR Liability submitted pursuant to Section 6.02(h) following the termination of the IBNR Claims Period and (ii) Excess IBNR Liability; and

(xix)    any Liability with respect to outstanding checks or other instruments issued by the Sellers.

 

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Section 2.03     Purchase of Purchased Assets . On the terms and subject to the conditions of this Agreement, on the Closing Date (a) the Purchaser shall purchase the Purchased Assets and assume the Assumed Liabilities from the Sellers, and (b) the Purchase Price shall be paid as set forth in Section 2.04 .

Section 2.04     Purchase Price . The purchase price (the “ Purchase Price ”) payable in consideration for the sale, transfer, assignment, conveyance and delivery by the Sellers to the Purchaser of the Purchased Assets shall consist of the following:

(a)       an amount in cash equal to (x) $42,500,000, subject to adjustments as provided in Section 2.07 minus (y) the Determined Cure Costs payable by the Purchaser under Section 5.01(c) , which shall be paid to the applicable counterparties of the applicable Assigned Contracts in accordance with Section 5.01(c) ; plus

(b)       the assumption at the Closing by the Purchaser of the Assumed Liabilities from the Sellers.

Section 2.05     Purchase Price Deposit . Prior to the execution of this Agreement, pursuant to the terms of the Escrow Agreement, Purchaser deposited with JPMorgan Chase Bank, National Association, in its capacity as escrow agent (the “ Escrow Agent ”) the sum of Four Million Two Hundred Fifty Thousand Dollars ($4,250,000) by wire transfer of immediately available funds (the “ Escrowed Funds ”), to be released by the Escrow Agent and delivered to either Purchaser or Sellers, in accordance with the provisions of the Escrow Agreement. Pursuant to the Escrow Agreement, the Escrowed Funds (together with all accrued investment income thereon) shall be distributed as follows:

(a)       if the Closing shall occur, the Escrowed Funds shall be applied towards the Purchase Price payable by Purchaser to Sellers under Section 2.04 and Section 2.06 hereof and all accrued investment income thereon shall be delivered to Purchaser at the Closing;

(b)       if this Agreement is terminated by Sellers pursuant to Section 9.01(f) , the Escrowed Funds, together with all accrued investment income thereon, shall be delivered to Sellers; or

(c)       if this Agreement is terminated for any reason other than by Sellers pursuant to Section 9.01(f) , the Escrowed Funds, together with all accrued investment income thereon, shall in each case be returned to Purchaser.

Section 2.06     Payment of Purchase Price . On the Closing Date, Purchaser shall pay the Purchase Price to Sellers, which shall be paid by wire transfer of immediately available funds into an account designated by Sellers.

Section 2.07     Purchase Price Adjustment . (a) As promptly as practicable, but no later than sixty (60) days after the Closing Date, Purchaser shall cause to be prepared and delivered to Sellers the final amount of IBNR Liabilities submitted pursuant to Section 6.02(h) during the IBNR Claims Period, together with a calculation of the Excess IBNR Liability, if any, and the Closing Statement (as defined below), together with a certificate based on such Closing Statement setting forth Purchaser’s calculation of Closing Working Capital (as defined below).

 

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The closing statement (the “ Closing Statement ”) shall present the Net Working Capital as of the close of business on the day prior to the Closing Date (“ Closing Working Capital ”). “ Net Working Capital ” means the consolidated current assets of the Business, reduced by the consolidated current liabilities of the Business, in each case as determined in accordance with the accounting principles set forth on Section 2.07(a)(i) of the Sellers’ Disclosure Schedule (the “ Agreed Principles ”). For additional clarity, Net Working Capital shall not include any Excluded Assets, Excluded Liabilities (including those related to the D56 Business) or deferred taxes. The preparation of the Closing Statement shall be for the sole purpose of determining changes in Net Working Capital from January 3, 2009 (the “ Reference Date ”) to the Closing Date. Attached hereto as Section 2.07(a)(ii) of the Sellers’ Disclosure Schedule is a schedule showing the Net Working Capital as of the Reference Date after giving effect to the pro forma adjustments required in the Agreed Principles (“ Reference Statement ”).

(b)       If Sellers disagree with Purchaser’s calculation of Closing Working Capital delivered pursuant to Section 2.07(a) , Sellers may, within thirty (30) days after delivery of the Closing Statement, deliver a notice to Purchaser disagreeing with such calculation and setting forth Sellers’ calculation of such amount. Purchaser shall provide Sellers and their Representatives with reasonable access to any files, books and records that relate to the Business that are in Purchaser’s possession or control to the extent that Sellers’ require such access to review the Closing Statement. Any such notice of disagreement shall specify those items or amounts as to which Sellers disagree, and Sellers shall be deemed to have agreed with all other items and amounts contained in the Closing Statement and the calculation of Closing Working Capital delivered pursuant to Section 2.07(a) .

(c)       If a notice of disagreement shall be duly and timely delivered pursuant to Section 2.07(b) , Purchaser and Sellers shall, during the fifteen (15) days following such delivery, use their commercially reasonable efforts to reach agreement on the disputed items or amounts in order to determine, as may be required, the amount of Closing Working Capital, which amount shall not be less than the amount thereof shown in Purchaser’s calculation delivered pursuant to Section 2.07(a) nor more than the amount thereof shown in Sellers’ calculation delivered pursuant to Section 2.07(b) . If during such period, Purchaser and Sellers are unable to reach such agreement, they shall promptly thereafter cause KPMG LLP (or if unable or unwilling to accept its mandate, an independent accountant to be mutually agreed upon by Sellers and Purchaser) (the “ Accounting Referee ”) to review this Agreement and the disputed items or amounts for the purpose of calculating Closing Working Capital. In making such calculation, the Accounting Referee shall consider only those items or amounts in the Closing Statement related to the Closing Working Capital and Purchaser’s calculation of Closing Working Capital as to which Sellers have disagreed. The Accounting Referee shall deliver to Purchaser and Sellers, as promptly as practicable (but in any case no later than thirty (30) days from the date of engagement of the Accounting Referee), a report setting forth such calculation. Such report shall be final and binding upon Purchaser and Sellers. The cost of such review and report shall be borne equally by Purchaser and Sellers.

(d)       Purchaser and Sellers shall, and shall cause their respective Representatives to, cooperate and assist in the preparation of the Closing Statement and the calculation of Closing Working Capital and in the conduct of the review referred to in this

 

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Section 2.07 , including, without limitation, the making available to the extent necessary of books, records, work papers and personnel.

(e)       If Final Working Capital exceeds Net Working Capital as of the Reference Date, Purchaser shall pay to Sellers, in the manner and with interest as provided in Section 2.07(f) , the amount of such excess and, if Net Working Capital as of the Reference Date exceeds Final Working Capital, Sellers shall pay to Purchaser the amount of such excess, as an adjustment to the Purchase Price, in the manner and with interest as provided in Section 2.07(f) . In addition to the foregoing, the Excess IBNR Liability (as defined in Section 6.02(h) ), if any, shall be paid by Sellers to Purchaser, as an adjustment to the Purchase Price, in the manner and with interest as provided in Section 2.07(f) . Notwithstanding anything to the contrary contained herein, the maximum adjustment that shall be made to the Purchase Price pursuant to this Section 2.07(e) shall not reduce the Purchase Price to less than an amount equal to the Obligations (as defined in the DIP Credit Agreement) outstanding under the DIP Credit Agreement (including all letters of credit to the extent not replaced) as of the Closing. “ Final Working Capital ” means Closing Working Capital (x) as shown in Purchaser’s calculation delivered pursuant to Section 2.07(a) if no notice of disagreement with respect thereto is duly delivered pursuant to Section 2.07(b) or (y) if such a notice of disagreement is delivered, (A) as agreed by Purchaser and Sellers pursuant to Section 2.07(c) or (B) in the absence of such agreement, as shown in the Accounting Referee’s calculation delivered pursuant to Section 2.07(c) ; provided , however , that in no event shall Final Working Capital be less than Purchaser’s calculation of Closing Working Capital delivered pursuant to Section 2.07(a) or more than Seller’s calculation of Closing Working Capital delivered pursuant to Section 2.07(b) .

(f)        Any payment pursuant to Section 2.07(e) shall be made at a mutually convenient time and place within five (5) Business Days after Final Working Capital has been determined by wire transfer by Purchaser or Sellers, as the case may be, of immediately available funds to the account of such other party as may be designated in writing by such other party. The amount of any payment to be made pursuant to this Section 2.07 shall bear interest from and including the Closing Date to but excluding the date of payment at a rate per annum equal to the rate of interest published from time to time by the Wall Street Journal as the “prime rate” at large U.S. money center banks during the period from the Closing Date to the date of payment. Such interest shall be payable at the same time as the payment to which it relates and shall be calculated daily on the basis of a year of three hundred sixty five (365) days and the actual number of days elapsed.

Section 2.08     Allocation of the Purchase Price . The Purchase Price (to the extent required by the Tax Code) shall be allocated among the Purchased Assets and by entity as of the Closing Date in accordance with the relative fair market value of the Purchased Assets at that time, to the extent relevant, and in a manner consistent with Section 1060 of the Tax Code and the Regulations which allocation will be set out in a schedule to be prepared by Purchaser and to be agreed upon by LGI within thirty (30) days after the Closing Date (the “ Allocation ”). If LGI and the Purchaser are unable to agree upon the Allocation within thirty (30) days after the Closing Date, the disputed items shall be resolved by the Accounting Referee. Subject to the foregoing provisions of this Section 2.08 , for all Tax purposes, the Purchaser and the Sellers agree that the Transactions shall be reported in a manner consistent with the terms of this Agreement, including the Allocation, and that none of them will take any position inconsistent

 

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therewith in any Tax Return, in any refund claim, in any litigation, or otherwise. The Sellers and the Purchaser agree to cooperate with each other in preparing IRS Form 8594 (including any subsequent adjustments required thereto), and to furnish the other with a copy of such form prepared in draft form within a reasonable period before its filing due date. If such allocation is disputed by any taxation or other Governmental Authority, the Purchaser or any Seller receiving notice of such dispute will promptly notify the other party and the parties will use their reasonable best efforts to sustain the final allocation. The parties will share information and cooperate in good faith to permit the Transactions to be properly, timely and consistently reported.

Section 2.09     Determined Cure Costs . The Purchaser agrees to promptly satisfy all Determined Cure Costs, as and when such Determined Cure Costs become due, in respect of Assigned Contracts (other than Excluded Contracts) for which all necessary consents and/or Bankruptcy Court approval to transfer have been obtained.

Section 2.10     Closing . Subject to the terms and conditions of this Agreement, the consummation of the transactions contemplated by this Agreement shall take place at a closing (the “ Closing ”) to be held at the offices of Weil, Gotshal, & Manges LLP, 767 Fifth Avenue, New York, New York at 10:00 a.m. New York time on the third Business Day following the satisfaction or waiver of the conditions to the obligations of the parties hereto set forth in Section 8.01 and Section 8.02 (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the fulfillment or waiver of those conditions), or at such other place or at such other time or on such other date as LGI and the Purchaser may mutually agree upon in writing. The date of the Closing is herein referred to as the “ Closing Date .”

Section 2.11     Closing Deliveries by the Sellers . At the Closing, the Sellers shall deliver or cause to be delivered to the Purchaser:

(a)       a certified copy of the Sale Order, as entered by the Bankruptcy Court;

(b)       the Bill of Sale and Assignment and Assumption Agreement, the Deeds applicable in the relevant jurisdictions for the Owned Real Property (with the Deeds for the Owned Real Property to be recorded with copies of all required Conveyance Tax stamps affixed, except for any Conveyance Taxes that are exempt pursuant to Section 1146(a) of the Bankruptcy Code), the Assignments of Leased Properties in recordation form, the Assignments of Intellectual Property and such other instruments, in form and substance and in registrable or recordation form where