ASSET PURCHASE AGREEMENT

Exhibit 10.1

 

 

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                    ASSET PURCHASE AGREEMENT (this “ Agreement ”), dated as of February 28, 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 LDG-Delaware Opco, Inc., 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, holiday, seasonal and home decorative, figurine and collectible products and accessories and other similar products, including under the Seller Brands (as defined below) and other brands (the “ Business ”);

                    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.

                    “ Accrued Professional Fees ” means any accrued but unpaid professional fees incurred by the Sellers or the Creditors’ Committee through the Closing Date that have been or subsequently will be approved by the Bankruptcy Court which shall be deemed to include without limitation the accrued and unpaid fees of Berenson approved by order of the court dated February 12, 2009, other than transaction, restructuring, success or financing fees unless consented to in writing by the Purchaser and the Sponsors.

                    “ 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.

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

                    “ Allocation ” has the meaning given to it in Section 2.06 .

                    “ 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 or useful 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 and Purchaser at the Closing, substantially in the form attached hereto as Exhibit B .

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

                    “ Assumption Notice ” has the meaning given to it in Section 2.12(b) .

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

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

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                    “ 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 .

                    “ 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 2.08 .

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

                    “ COBRA Notice Election ” has the meaning given to it in Section 5.17 .

                    “ 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 2.12(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 (except for any Contract set forth on Section 2.01(b)(vi) of the Sellers’ Disclosure Schedule).

                    “ Contract Retention Period ” has the meaning given to it in Section 2.12(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.

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

                    “ Credit Bid ” means a credit bid of a portion of the Pre-Petition Term Loan Obligations in an amount equal to $44,500,000.

                    “ Creditors’ Committee ” means the Official Committee of Unsecured Creditors appointed by the Office of United States Trustee in the Chapter 11 Cases.

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

                    “ 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.

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                    “ 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 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.

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

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

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

                    “ Excluded Incentive Assets ” means the Tax credits, incentives and grants set forth in the first three items of Section 2.01(b)(vii) of the Sellers’ Disclosure Schedule.

                    “ 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

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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 .

                    “ IBNR Claims Period ” has the meaning given to it in Section 6.02(g) .

                    “ IBNR Liabilities ” has the meaning given to it in Section 6.02(g) .

                    “ 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 owned by Sellers and maintained, held or stored by or for any of the Sellers as of the Closing Date, wherever located, and any prepaid deposits for any of the same.

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

                    “ 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.

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

                    “ 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

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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, 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.

                    “ Pre-Petition Term Loan Obligations ” means all indebtedness, obligations and liabilities of Sellers incurred prior to the Petition Date arising from or related to the Term Loan Agreement, together with all fees, expenses, indemnities and reimbursement obligations due thereunder and interest thereon accruing both before and after the Petition Date to the extent allowable under Section 506(b) of the US Bankruptcy Code, whether such indebtedness, obligations or liabilities are direct or indirect, joint or several, absolute or contingent, due or to become due, whether for payment or performance, now existing or hereafter arising.

                    “ 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) .

                    “ Purchased Intellectual Property ” means all (i) foreign and domestic trademarks, service marks, brand names, Internet domain names, logos, symbols, trade dress, assumed names, fictitious names, trade names and other indicia of origin, 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, “ Purchased Trademarks ”); (ii) foreign and domestic patentable inventions, and all patents, registrations, and applications therefor, including without limitation divisions, continuations, continuations-in-part

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and renewal applications, and including without limitation renewals, extensions and reissues; (iii) confidential and proprietary information, trade secrets and know-how, including without limitation processes, schematics, databases, formulae, drawings, prototypes, models, designs and customer lists; (iv) foreign and domestic published and unpublished works of authorship, whether copyrightable or not (including, but not limited to, computer software), copyrights therein and thereto, and registrations and applications therefor, and all renewals, extensions, restorations and reversions thereof; (v) electronic data processing, information, recordkeeping, communications, telecommunications, networking, account management, inventory management and other such applications, software, and hardware, equipment and services (including, but not limited to, all applications and software installed on all hardware and equipment, and all databases, firmware, and related documentation), and Internet websites and related content (collectively, “ IT Systems ”); and (vi) all other intellectual property or proprietary rights and claims or causes of action arising out of or related to any infringement, misappropriation or other violation of any of the foregoing, including without limitation rights to recover for past, present and future violations thereof.

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

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

                    “ 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 Financial Advisor ” means Miller Buckfire & Co., LLC.

                    “ 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.

                    “ 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.

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                    “ 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, 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.

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                    “ 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.

                    “ 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.

                    “ 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’ 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.

                    “ Sponsors ” means the Term Loan Lenders party to the Plan Support Agreement, dated November 23, 2008, among the Sellers and certain of the Term Loan Lenders.

                    “ 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 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

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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 March 31, 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 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.

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

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                    “ Transferred Intellectual Property ” means all Purchased Owned Intellectual Property and all Purchased 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 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,

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whether now existing or hereinafter acquired, which relate to the Business or which are used or useful 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:

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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:

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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) $44,500,000 of debt forgiveness evidenced by the Credit Bid, which shall become effective on the Closing Date; plus

                    (b) the assumption at the Closing by the Purchaser of the Assumed Liabilities from the Sellers, including the assumption of the obligation to pay to the applicable counterparties of the applicable Assigned Contracts in accordance with Section 5.01(c) an amount equal to the Determined Cure Costs payable by the Purchaser under Section 5.01(c); plus

                    (c) cash in 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 or subject to a back to back letter of credit) as of the Closing; plus

                    (d) cash in an aggregate amount equal to the sum of (A) up to $2,150,000 to pay allowed administrative, priority and secured tax claims (exclusive of Accrued Professional Fees), (B) an amount equal to the Accrued Professional Fees to pay the Accrued Professional Fees, (C) an amount equal to $250,000 to provide for distributions to the holders of allowed general unsecured claims against the Sellers, and (D) $100,000 to fund the costs and expenses of a plan administrator to wind down the Sellers’ estates from and after the Closing.

                    Section 2.05 Payment of Purchase Price . On the Closing Date, Purchaser shall pay the Purchase Price to Sellers (to the extent payable on the Closing Date), which shall be paid to the extent payable in cash by wire transfer of immediately available funds into an account designated by Sellers and to the extent not payable in cash, by a means reasonably acceptable to Sellers and Purchaser.

                    Section 2.06 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 KPMG LLP (or if unable or unwilling to accept its mandate, an independent accountant to be mutually agreed upon by Sellers and Purchaser). Subject to the foregoing provisions of this Section 2.06 , 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 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

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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 2.07 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; provided, however, that, notwithstanding anything to the contrary herein (including any limitation on the time period for identifying Contracts that will constitute Excluded Contracts pursuant to Section 5.01(a)), if the Determined Cure Costs for any Assigned Contract exceeds the amount reflected as due and owing as of the Petition Date on Sellers’ books and records, the Purchaser, in its sole discretion, may elect to make such Assigned Contract an Excluded Contract.

                    Section 2.08 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 2.09 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 applicable, reasonably satisfactory to the Purchaser, as may be reasonably requested by the Purchaser to effect the transfer of the Purchased Assets to the Purchaser, or to register or record or evidence such transfer on the public records, in each case duly executed by each applicable Seller and the other parties thereto (other than the Purchaser);

                    (c) the Ancillary Agreements, duly executed by each applicable Seller and the other parties thereto (other than the Purchaser) other than the Ancillary Agreements delivered pursuant to Section 2.09(b) ;

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                    (d) a certificate of non-foreign status pursuant to section 1.1445-2(b)(2) of the Regulations from each Seller;

                    (e) copies of resolutions of the board of directors (or equivalent governing body) of each Seller authorizing and approving the execution and delivery of this Agreement and the Ancillary Agreements and the performance by such Seller of its obligations hereunder and thereunder, certified by the Secretary of such Seller;

                    (f) an incumbency certificate dated the Closing Date for each Seller executed by the Secretary of such Seller which shall identify the names and titles and bear the signatures of the officers of such Seller individually authorized to execute and deliver this Agreement and the Ancillary Agreements to which such Seller is a party;

                    (g) copies of the certificate of incorporation and bylaws (or equivalent governance documents) of each Seller, in each case certified by the Secretary of such Seller;

                    (h) termination statements, lien releases, discharges, financing change statements or other documents, notices or other instruments as the Purchaser may reasonably deem necessary to release Liens (other than Permitted Encumbrances) on the Purchased Assets, each in form and substance reasonably satisfactory to the Purchaser duly executed by any holders of such Liens;

                    (i) subject to Section 5.01(b) , written consents in form and substance reasonably satisfactory to the Purchaser duly executed by the applicable Sellers and counterparties evidencing any consents necessary to effect the assignment to the Purchaser of Purchased Intellectual Property pursuant to Section 5.07(b) and 5.07(c) ;

                    (j) a certificate of a duly authorized officer of each of the Sellers certifying that all conditions set forth in Section 8.02 have been satisfied (or to the extent any such condition has been waived in accordance with the terms hereof, attaching thereto the applicable written waiver);

                    (k) an updated Section 2.09(k) of the Sellers’ Disclosure Schedule setting forth the Trade Payables outstanding as of 11:59:59 p.m. Eastern Standard Time on a date no earlier than three (3) Business Days prior to the Closing Date; and

                    (l) such other customary documents and instruments of transfer, assumptions and filings as may be reasonably required to be delivered by any Seller to consummate the Transactions or otherwise give effect to this Agreement.

                    Section 2.10 Closing Deliveries by the Purchaser . At the Closing, the Purchaser shall deliver, or cause to be