-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MGHK7ZtHNZ4MiD+xB3u1kBxkllFcLba+S+1a+fjG9stGmQjHcxmT7eSdhDxEhePG UTxD9/r5Ju6Ryngq06Bp5w== 0000902664-08-003301.txt : 20081126 0000902664-08-003301.hdr.sgml : 20081126 20081126112348 ACCESSION NUMBER: 0000902664-08-003301 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20081126 DATE AS OF CHANGE: 20081126 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CLINTON GROUP INC CENTRAL INDEX KEY: 0001134119 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 32 OLD SLIP 5TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10005 BUSINESS PHONE: 2128250400 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: LENOX GROUP INC CENTRAL INDEX KEY: 0000902270 STANDARD INDUSTRIAL CLASSIFICATION: POTTERY & RELATED PRODUCTS [3260] IRS NUMBER: 133684956 STATE OF INCORPORATION: DE FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-43517 FILM NUMBER: 081216196 BUSINESS ADDRESS: STREET 1: ONE VILLAGE PLACE STREET 2: 6436 CITY WEST PARKWAY CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 BUSINESS PHONE: 952-944-5600 MAIL ADDRESS: STREET 1: ONE VILLAGE PLACE STREET 2: 6436 CITY WEST PARKWAY CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 FORMER COMPANY: FORMER CONFORMED NAME: DEPARTMENT 56 INC DATE OF NAME CHANGE: 19930426 SC 13D/A 1 p08-1653sc13da.txt CLINTON GROUP, INC. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------- SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) Under the Securities Exchange Act of 1934 (Amendment No. 10)* Lenox Group Inc. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, $0.01 par value per share - -------------------------------------------------------------------------------- (Title of Class of Securities) 526262100 - -------------------------------------------------------------------------------- (CUSIP Number) Marc Weingarten, Esq. Schulte Roth & Zabel LLP 919 Third Avenue New York, New York 10022 (212) 756-2000 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) November 23, 2008 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box. [ ] NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. (Continued on following pages) (Page 1 of 9 Pages) - -------------------------- * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). - ------------------------------ --------------------- CUSIP NO. 526262100 SCHEDULE 13D PAGE 2 OF 9 PAGES - ------------------------------ --------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON CLINTON GROUP, INC. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* AF - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER -0- ---------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 2,725,575 OWNED BY ---------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH -0- ---------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,725,575 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON 2,725,575 - -------------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 18.9% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IA; CO - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS - ------------------------------ --------------------- CUSIP NO. 526262100 SCHEDULE 13D PAGE 3 OF 9 PAGES - ------------------------------ --------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON CLINTON MAGNOLIA MASTER FUND, LTD. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION CAYMAN ISLANDS - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER -0- ---------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 2,725,575 OWNED BY ---------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH -0- ---------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,725,575 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON 2,725,575 - -------------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 18.9% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS - ------------------------------ --------------------- CUSIP NO. 526262100 SCHEDULE 13D PAGE 4 OF 9 PAGES - ------------------------------ --------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON CLINTON MULTISTRATEGY MASTER FUND, LTD. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION CAYMAN ISLANDS - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER -0- ---------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY -0- OWNED BY ---------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH -0- ---------------------------------------------------------- 10 SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON -0- - -------------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS - ------------------------------ --------------------- CUSIP NO. 526262100 SCHEDULE 13D PAGE 5 OF 9 PAGES - ------------------------------ --------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON CLINTON SPECIAL OPPORTUNITIES MASTER FUND, LTD. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION CAYMAN ISLANDS - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER -0- ---------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY -0- OWNED BY ---------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH -0- ---------------------------------------------------------- 10 SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON -0- - -------------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS - ------------------------------ --------------------- CUSIP NO. 526262100 SCHEDULE 13D PAGE 6 OF 9 PAGES - ------------------------------ --------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON CLINTON LEXINGTON MASTER FUND, L.P. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION CAYMAN ISLANDS - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER -0- ---------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY -0- OWNED BY ---------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH -0- ---------------------------------------------------------- 10 SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON -0- - -------------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS - ------------------------------ --------------------- CUSIP NO. 526262100 SCHEDULE 13D PAGE 7 OF 9 PAGES - ------------------------------ --------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON GEORGE E. HALL - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* AF - -------------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION UNITED STATES - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 4,300 ---------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 2,725,575 OWNED BY ---------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH 4,300 ---------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,725,575 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON 2,729,875 - -------------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 18.9% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS - ------------------------------ --------------------- CUSIP NO. 526262100 SCHEDULE 13D PAGE 8 OF 9 PAGES - ------------------------------ --------------------- The Schedule 13D filed on February 12, 2007 by Clinton Group, Inc., a Delaware corporation ("CGI"), Clinton Multistrategy Master Fund, Ltd., a Cayman Islands company ("CMSF"), Clinton Special Opportunities Master Fund, Ltd., a Cayman Islands company ("CSO"), George E. Hall ("GEH") and Conrad Bringsjord with respect to the shares of Common Stock, par value $0.01 per share (the "Shares"), of Lenox Group Inc., a Delaware corporation (the "Issuer"), as amended by Amendment No. 1 dated February 16, 2007, Amendment No. 2 dated February 28, 2007, Amendment No. 3 dated March 15, 2007, Amendment No. 4 dated April 18, 2007, Amendment No. 5 dated August 18, 2007, Amendment No. 6 dated August 24, 2007, Amendment No. 7 dated September 13, 2007, Amendment No. 8 dated November 9, 2007, and Amendment No. 9, dated September 17, 2008 is hereby amended by this Amendment No. 10. In addition, this Amendment No. 10 adds Clinton Magnolia Master Fund, Ltd., a Cayman Islands exempted company ("CMMF") as a reporting person. CGI, CMSF, CSO, CMMF, Clinton Lexington Master Fund, L.P. ("CLF") and GEH are collectively referred to herein as the "Reporting Persons". Item 2. IDENTITY AND BACKGROUND Paragraphs (a)(b)(c) (d) and (e) of Item 2 of the Schedule 13D are hereby amended and supplemented as follows: (a)-(c) CMMF is a Cayman Islands exempted company. The principal business of CMMF is to invest in securities. The address of the principal business and principal office of CMMF is c/o Fortis Fund Services (Cayman) Limited, P.O. Box 2003GT, Grand Pavilion Commercial Centere, 802 West Bay Road, Grand Cayman, Cayman Islands. The directors of CMMF and their principal occupations and business addresses are set forth on Schedule B and incorporated by reference in this Item 2. CMMF has no executive officers. (d) During the last 5 years, none of CMMF or any person listed on Schedule B was convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors) or was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any such violation with respect to such laws. (e) Each director of CMMF is a citizen of the United Kingdom. ITEM 4. PURPOSE OF TRANSACTION. Item 4 of the Schedule 13D is hereby amended and supplemented by the addition of the following: On November 23, 2008, certain of the Reporting Persons and certain of the other Bank Debt Holders entered into a Plan Support Agreement (the "Plan Support Agreement") with the Issuer and certain subsidiaries of the Issuer (collectively, "Lenox") under which the parties thereto agreed to the terms of a restructuring of Lenox's indebtedness through the sale of substantially all of Lenox's assets to an entity owned by certain of the Bank Debt Holders, subject to higher and better offers by third parties, pursuant to either (i) a chapter 11 plan of reorganization, or (ii) upon the occurrence of certain events set out in the Plan Support Agreement, at the option of the Bank Debt Holders, through the sale under Section 363 of the Bankruptcy Code in accordance with bidding procedures set forth in the Plan Support Agreement ((i) and (ii) together, the "Transaction"). Pursuant to the Plan Support Agreement, the Bank Debt Holders party thereto agreed, among other things, to form an entity (the "Proposed Purchaser") and to use their commercially reasonable efforts to cause the Proposed Purchaser to negotiate in good faith and enter into a purchase agreement with Lenox pursuant to which the Proposed Purchaser shall agree, in accordance with the terms and subject to the conditions of such purchase agreement, to consummate the Transaction. Each Bank Debt Holder party to the Plan Support Agreement further agrees (i) subject to the receipt of a disclosure statement and to certain exceptions, to vote all obligations under the Issuer Term Loan held by such Bank Debt Holder in favor of the Plan (as defined in the Plan Support Agreement), and to not withdraw or revoke such vote, (ii) not to object to any DIP financing (except to the extent such DIP financing is inconsistent with the terms of such financing set out in Plan Support Agreement), (iii) not to object to, delay, or interfere with the acceptance and implementation of the Plan, or encourage any person or entity to do the foregoing, (iv) that, provided that Lenox conducts an auction in accordance with the bidding procedures set forth in the Plan Support Agreement, if the Proposed Purchaser is not the highest bidder, it will not object to the sale of the equity in a reorganized Lenox or the sale of all or substantially all of Lenox's assets to the prevailing bidder, and (v) except as permitted in the Plan Support Agreement, not to take any other action that is inconsistent with, or that would be reasonably likely to delay the consummation of, the restructuring contemplated by the Plan Support Agreement. The Plan Support Agreement is subject to termination upon the occurrence of certain events, including, without limitation, (i) the failure of Lenox to take certain actions by specified milestone dates, (ii) events related to a change in the nature of the bankruptcy proceeding, or (iii) at the option of the Required Term Lenders, upon the occurrence of a Material Adverse Change (as defined in the Plan Support Agreement). This description of the Plan Support Agreement is a summary only and is qualified in its entirety by reference to the Plan Support Agreement, of copy of which is filed as Exhibit H to this Schedule 13D and is incorporated by reference herein. Certain of the Reporting Persons and certain other Bank Debt Holders have also entered into a Letter Agreement, dated November 23, 2008 (the "Letter Agreement") in connection with the Plan Support Agreement. Under the Letter Agreement, the Bank Debt Holders party thereto each have agreed (i) to form the Proposed Purchaser, which will be governed in accordance with the terms and conditions set forth in the Letter Agreement, or on such alternate terms as are reasonably satisfactory to Bank Debt Holders holding at least sixty six and two-thirds percent (66 2/3%) of the amount due under the Issuer Term Loan, (ii) to contribute its pro rata share of the Obligations (as such term is defined in the Issuer Term Loan) to the Proposed Purchaser, (iii) that any bid by the Proposed Purchaser to purchase assets of Lenox will be on the terms and subject to conditions consistent with those set forth in the Letter Agreement, (iv) that the Required Lenders (as defined in the Issuer Term Loan) may direct the Term Loan Agent under the Issuer Term Loan to submit one or more credit bids for the assets of Lenox in an aggregate amount not to exceed the total amount due under the Issuer Term Loan, (v) that any asset purchase agreement to be delivered by the Proposed Purchaser shall be consistent with the terms set out in the Letter Agreement and (vi) to pay, in accordance with each's pro rata share, all costs and expenses incurred in connection with the transactions contemplated by the Letter Agreement that are not reimbursed by a third party. In addition, the Letter Agreement subjects the rights of Bank Debt Holders to sell or transfer any claims arising under the Issuer Term Loan to certain restrictions, including compliance with a right of first refusal granted to other Bank Debt Holders. This description of the Letter Agreement is a summary only and is qualified in its entirety by reference to the Letter Agreement, of copy of which is filed as Exhibit I to this Schedule 13D and is incorporated by reference herein. In addition, the penultimate paragraph of Item 4 of the Schedule 13D is hereby amended and restated as follows: The Reporting Persons have discussed, and expect to continue to discuss, their investment in the bank debt payable under the Issuer Term Loan, and the restructuring thereof, with other holders of such bank debt. The Reporting Persons also have had, and expect to continue to have, such discussions with the Issuer, together with other holders of such bank debt, and separately. The Reporting Persons and the other holders of debt issued under the Issuer Term Loan (collectively, the "Bank Debt Holders") have jointly retained counsel in connection with their respective investments in the bank debt payable under the Issuer Term Loan, to negotiate on behalf of the Bank Debt Holders in connection with the restructuring of such bank debt. Each Bank Debt Holder will make an independent decision regarding any proposal to or from the Issuer relating to its investment in the bank debt payable under the Issuer Term Loan. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. Paragraphs (a), (b) and (c) of Item 5 of the Schedule 13D are hereby amended and restated as follows: (a) As of the close of business on November 24, 2008, the Reporting Persons excepting GEH may be deemed the beneficial owners of an aggregate of 2,725,575 Shares, constituting approximately 18.9% of the Shares outstanding. GEH may be deemed the beneficial owner of an aggregate of 2,729,875 Shares, including 4,300 Shares beneficially owned individually, constituting approximately 18.9% of the Shares outstanding. Cesar Baez, who was appointed to the Issuer's board of directors at the suggestion of CGI, holds 500 shares of restricted common stock of the Issuer. The aggregate percentage of Shares beneficially owned by the Reporting Persons is based upon 14,429,998 Shares outstanding, which is the total number of Shares outstanding as of August 4, 2008 as reported in the Issuer's Quarterly Report on Form 10-Q filed August 7, 2008 for the period ended June 28, 2008. (b) By virtue of investment management agreements with each of CMSF, CSO, CLF and CMMF, CGI has the power to vote or direct the voting, and to dispose or direct the disposition, of all of the 2,725,575 Shares held by CMMF. By virtue of his direct and indirect control of CGI, GEH is deemed to have shared voting power and shared dispositive power with respect to all Shares as to which CGI has voting power or dispositive power. In addition, GEH individually holds 4,300 Shares with respect to which he has sole voting and sole dispositive power. Accordingly, GEH is deemed to have voting and dispositive power with respect to an aggregate of 2,729,875 Shares. (c) No transactions in the Shares have been effected by the Reporting Persons during the past 60 days. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. The third paragraph of Item 6 of the Schedule 13D is hereby amended and restated as follows: The Reporting Persons may, from time to time, enter into and dispose of cash-settled equity swap or other similar derivative transactions with one or more counterparties that are based upon the value of Shares, which transactions may be significant in amount. The profit, loss and/or return on such contracts may be wholly or partially dependent on the market value of the Shares, the relative value of Shares in comparison to one or more other financial instruments, indexes or securities, a basket or group of securities in which Shares may be included, or a combination of any of the foregoing. In addition to the Shares that they beneficially own without reference to these contracts, the Reporting Persons currently have long economic exposure to 86,082 Shares through such contracts. Such contracts do not give the Reporting Persons direct or indirect voting, investment or dispositive control over any securities of the Issuer and do not require the counterparties thereto to acquire, hold, vote or dispose of any securities of the Issuer. Accordingly, the Reporting Persons disclaim any beneficial ownership in any securities that may be referenced in such contracts or that may be held from time to time by any counterparties to such contracts. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS Item 7 of the Schedule 13D is hereby amended and supplemented as follows: Exhibit H - Plan Support Agreement, dated November 23, 2008 Exhibit I - Letter Agreement, dated November 23, 2008 - --------------------------- ------------------- CUSIP NO. 526262100 SCHEDULE 13D PAGE 9 OF 9 PAGES - --------------------------- ------------------- SIGNATURES After reasonable inquiry and to the best of his or its knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: November 26, 2008 CLINTON GROUP, INC. By: /s/ Francis Ruchalski --------------------------- Name: Francis Ruchalski Title: Chief Financial Officer CLINTON MULTISTRATEGY MASTER FUND, LTD. By: Clinton Group, Inc. its investment manager By: /s/ Francis Ruchalski --------------------------- Name: Francis Ruchalski Title: Chief Financial Officer CLINTON SPECIAL OPPORTUNITIES MASTER FUND, LTD. By: Clinton Group, Inc. its investment manager By: /s/ Francis Ruchalski --------------------------- Name: Francis Ruchalski Title: Chief Financial Officer CLINTON LEXINGTON MASTER FUND, L.P. By: Clinton Group, Inc. its investment manager By: /s/ Francis Ruchalski --------------------------- Name: Francis Ruchalski Title: Chief Financial Officer /s/ George E. Hall ------------------------------ George E. Hall SCHEDULE B Directors of Clinton Magnolia Master Fund, Ltd.
Name and Position Principal Occupation and Citizenship Principal Business Address - ------------------------------------------------------------------------------------------------ Jane Fleming Client Accountant of Queensgate Bank Queensgate Bank and Trust Director and Trust Company Ltd. Company Ltd. United Kingdom Harbour Place, 5th Floor 103 South Church Street P.O. Box 30464 SMB Grand Cayman, Cayman Islands Dennis Hunter Director of Queensgate Bank & Trust Queensgate Bank and Trust Director Company Ltd. Company Ltd. United Kingdom Harbour Place, 5th Floor 103 South Church Street P.O. Box 30464 SMB Grand Cayman, Cayman Islands Roger Hanson Director of dms Management Ltd. dms Management Ltd. Director United Kingdom P.O. Box 31910 SMB Ansbacher House 20 Genesis Close Grand Cayman, Cayman Islands
EX-99 2 p08-1653exhibit99.txt EXHIBIT H - PLAN SUPPORT AGREEMENT EXECUTION VERSION PLAN SUPPORT AGREEMENT PLAN SUPPORT AGREEMENT (this "AGREEMENT"), dated as of November 23, 2008, among (i) Lenox, Incorporated, a New Jersey corporation, D 56, Inc., a Minnesota corporation, and Lenox Retail, Inc., a Minnesota corporation, Lenox Group Inc., a Delaware corporation, FL 56 Intermediate, Corp., a Delaware corporation, Lenox Worldwide, LLC, a Delaware limited liability company, and Lenox Sales, Inc., a Minnesota corporation (collectively referred to as "LENOX"), (ii) the undersigned lenders (collectively, the "TERM LENDERS," together with Lenox, each referred to as a "Party" and collectively referred to as the "PARTIES"), who are "Lenders" under that certain Amended and Restated Term Loan Credit Agreement dated April 20, 2007 (as amended, the "TERM LOAN AGREEMENT") by and between Lenox, Incorporated, D 56, Inc., and Lenox Retail, Inc., as borrowers; and Lenox Group Inc. and other guarantors party thereto as guarantors; Bank of New York/Mellon as administrative agent (as successor to UBS AG, Stamford Branch) and the Lenders party thereto. W H E R E A S : A. Prior to the date hereof, representatives of Lenox and the Term Lenders have engaged in arm's length, good faith discussions regarding a financial restructuring of Lenox's indebtedness and other obligations (the "RESTRUCTURING") and the agreed upon terms of such Restructuring are as set forth in this Agreement. B. Each Party desires that the Restructuring will be implemented through the sale of substantially all of Lenox's assets to an entity owned by the Term Lenders pursuant to a chapter 11 plan of reorganization, subject to the non-occurrence of a 363 Hearing Event, or in the event of a 363 Hearing Event, through the sale of all or substantially all of the assets of Lenox under section 363 of the Bankruptcy Code in accordance with the Bidding Procedures (the "TRANSACTION"). C. This Agreement and the Plan Term Sheet set forth the agreement among the Parties concerning their commitment, subject to the terms and conditions hereof and thereof, to implement the Restructuring. NOW, THEREFORE, in consideration of the covenants and agreements contained herein, and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each Party, intending to be legally bound hereby, agrees as follows: 1. DEFINITIONS. The following terms shall have the following definitions: "363 HEARING EVENT" has the meaning set forth in paragraph 5 hereto. "AGREEMENT" has the meaning set forth in the preamble hereof. "AFFILIATE" means, with respect to any Person, any other Person which directly or indirectly controls, or is under common control with, or is controlled by, such Person. As used in this definition, "control" (including, with its correlative meanings, "controlled by" and "under common control with") shall mean, with respect to any Person, the possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise) of such Person. "BALLOT" means the ballot distributed with the Disclosure Statement for voting on the Plan. "BANKRUPTCY CODE" means title 11 of the United States Code, 11 U.S.C. ss.ss.101 ET SEQ. "BANKRUPTCY COURT" means the United States Bankruptcy Court for the Southern District of New York. "BANKRUPTCY RULES" means the Federal Rules of Bankruptcy Procedure. "BIDDING PROCEDUREs" means those procedures set forth in EXHIBIT B attached hereto to be employed with respect to the proposed sale of the equity of reorganized Lenox or substantially all of the assets of Lenox as the case may be. "BID PROCEDURES ORDER" means an order, in form and substance reasonably acceptable to the Proposed Purchaser, (i) fixing the date, time and location of the hearing (the "TRANSACTION APPROVAL HEARING") to approve the Transaction, (ii) fixing the time, date and location of an auction, (iii) containing such other appropriate buyer protections as may be reasonably requested by the Proposed Purchaser, and (iv) otherwise approving the Bidding Procedures. "BORROWERS" means D 56, Inc., a Minnesota corporation, Lenox Retail, Inc., a Minnesota corporation, and Lenox, Incorporated, a New Jersey corporation. "BUSINESS DAY" means any day other than Saturday, Sunday and any day that is a legal holiday or a day on which banking institutions in New York, New York are authorized by law or other governmental action to close. "CHAPTER 11 CASES" means the voluntary chapter 11 cases to be commenced by Lenox. "CONFIRMATION ORDER" has the meaning set forth in paragraph 5(f) hereof. "DIP FINANCING" means that certain debtor in possession financing, the principal terms of which shall be in form and substance acceptable to the Term Lenders. "DIP TERM SHEET" means the term sheet outlining the principal terms of the DIP Financing set forth as EXHIBIT A to this Agreement. "DISCLOSURE STATEMENT" means the disclosure statement in respect of the Plan. -2- "EQUITY COMMITMENT LETTER" refers to that certain letter agreement among the Term Lenders dated as of November 23, 2008, pursuant to which each Term Lender signatory thereto commits to contribute all or a portion of its Term Loans to the Proposed Purchaser in connection with the Transaction. "EXECUTION DATE" means the date on which the Purchase Agreement is executed and delivered to each of the parties thereto. "FINAL FINANCING ORDER" means the order authorizing the DIP Financing and use of cash collateral on a final basis in form and substance acceptable to the Term Lenders. "FINAL ORDER" means an order or judgment of the Bankruptcy Court, or other court of competent jurisdiction, as entered on the docket of such court, the operation or effect of which has not been stayed, reversed, vacated, modified or amended, and as to which order or judgment (or any revision, modification, or amendment thereof) the time to appeal, petition for certiorari, or seek review or rehearing has expired and as to which no appeal, petition for certiorari, or petition for review was filed, or if filed, remains pending; provided, however, that the possibility that a motion may be filed pursuant to Rules 9023 or 9024 of the Bankruptcy Rules or Rules 59 or 60(b) of the Federal Rules of Civil Procedure shall not mean that an order or judgment is not a Final Order. "INTERIM FINANCING ORDER" means the order authorizing the DIP Financing and use of cash collateral on an interim basis in form and substance acceptable to the Term Lenders. "MATERIAL ADVERSE CHANGE" means any change, effect, event, occurrence, development, circumstance or state of facts occurs which has had or would reasonably be expected to have a materially adverse effect on the business, properties, operations, financial condition or results of operations of Lenox (including its subsidiaries and their respective businesses), taken as a whole, or which would materially impair Lenox's ability to perform its obligations under this Agreement or have a materially adverse effect on or prevent or materially delay the consummation of the transactions contemplated by this Agreement. The filing of voluntary petitions commencing the Chapter 11 Cases contemplated by this Plan Support Agreement shall not constitute a Material Adverse Change. "MATERIAL CONTRACT" means (a) any license agreement, or (b) any agreement that involves the payment of, or the purchase or provision of goods or services having a value in excess of, $250,000 in any year or $500,000 over the life of such contract. "OUTSIDE DATE" means March 31, 2009. "PARTIES" has the meaning set forth in the preamble hereof. "PERSON" means an individual, a partnership, a joint venture, a limited liability company, a corporation, a trust, an unincorporated organization, a group or any legal entity or association. -3- "PETITION DATE" means the date on which Lenox files voluntary petitions under the Bankruptcy Code. "PLAN" means a joint plan of reorganization for Lenox to be filed in the Chapter 11 Cases based on the terms and conditions set forth in the Plan Term Sheet, and in form and substance acceptable to Required Term Lenders, as such Plan may be amended, modified or otherwise supplemented from time to time with the written consent of Required Term Lenders; provided, however, that any amendment, modification or supplement to the Plan that would require resolicitation under section 1127 of the Bankruptcy Code shall require the written consent of Supermajority Term Lenders. "PLAN TERM SHEET" means the term sheet annexed hereto as EXHIBIT A, as amended, modified or supplemented with the written consent of Required Term Lenders; provided, however, that any amendment, modification or supplement to the Plan Term Sheet, which, if made to the Plan, would require resolicitation under section 1127 of the Bankruptcy Code, shall require the written consent of Supermajority Term Lenders. "PREVAILING PURCHASER" means the person or entity that submits the Successful Bid (as defined in the Bidding Procedures). "PROPOSED PURCHASER" means an entity or entities to be formed by the Term Lenders or their Affiliates for the purpose of effecting the Transaction. "PURCHASE AGREEMENT" means a purchase agreement to be entered into between the Proposed Purchaser and Lenox, or such other agreement as may be entered into by and between Lenox and the Prevailing Purchaser in accordance with the Bidding Procedures, providing for the sale of the equity of reorganized Lenox or the sale of all or substantially all of the assets of Lenox, as the case may be. "REQUIRED TERM LENDERS" means, as of any date of determination, Term Lenders holding more than fifty percent (50%) of the Term Loans. "RESTRUCTURING" has the meaning set forth in the preamble hereof. "REVOLVING LENDERS" means the lenders under that certain Amended and Restated Revolving Credit Agreement, dated April 20, 2007, by and between Lenox, Incorporated, D 56, Inc., and Lenox Retail, Inc., as borrowers; Lenox Group Inc. and other guarantors party thereto as guarantors; UBS AG, Stamford Branch, as issuing bank and administrative agent; and the lenders party thereto. "SUPERMAJORITY TERM LENDERS" means, as of any date of determination, Term Lenders holding at least sixty-six and two-thirds percent (66 2/3%) of the Term Loans. "TERM LOAN AGREEMENT" has the meaning set forth in the preamble hereof. "TERM LOANS" means the obligations under the Term Loan Agreement. "TERMINATION DATE" has the meaning set forth in paragraph 4 hereto. -4- "TERMINATION EVENT" has the meaning set forth in paragraph 4 hereto. "TRANSACTION" has the meaning set forth in the preamble hereof. "TRANSACTION APPROVAL ORDER" means an order, which may be the Confirmation Order, in form and substance acceptable to the Prevailing Purchaser and Required Term Lenders, (i) approving the equity sale or asset sale by the Prevailing Purchaser (and, in the case of an asset sale, free and clear of all liens, claims and encumbrances pursuant to sections 363(b) and 363(f) of the Bankruptcy Code), (ii) approving the assumption by (and, if necessary, assignment to) the Prevailing Purchaser of any contracts assumed in connection with the sale pursuant to section 365 of the Bankruptcy Code, (iii) containing findings of fact and conclusions of law that the Prevailing Purchaser is a good faith purchaser entitled to the protections of Bankruptcy Code section 363(m), and (iv) which is otherwise reasonably acceptable to Required Term Lenders. "TRANSFER" has the meaning set forth in paragraph 6 hereto. 2. COMMITMENT OF THE TERM LENDERS. Subject to the terms and conditions hereof, each Term Lender shall (severally and not jointly): (a) use its commercially reasonable efforts to cause the Proposed Purchaser to negotiate in good faith and enter into a Purchase Agreement with Lenox pursuant to which, among other things, the Proposed Purchaser shall agree, subject to the terms and conditions contained therein, to consummate the Transaction; (b) subject to its receipt of a Bankruptcy Court approved Disclosure Statement, vote all Term Loans, now or hereafter beneficially owned by such Term Lender or for which it now or hereafter serves as the nominee, investment manager or advisor for beneficial holders thereof in favor of the Plan in accordance with the applicable procedures set forth in the Disclosure Statement and accompanying solicitation materials, and timely return a duly executed Ballot in connection therewith, PROVIDED, HOWEVER, no Term Lender shall be obligated to vote in favor of the Plan, -------- ------- and, notwithstanding subsection (c) of this paragraph 2, may withdraw or revoke its tender, consent or vote with respect to the Plan, upon (i) the termination of this Agreement (provided that if the Term Lenders are the terminating party, they are not then in material breach of their obligations under this Agreement); (ii) the withdrawal, amendment, modification of, or the filing of a pleading seeking to withdraw, amend, or modify, the Plan, Disclosure Statement or any documents related to the foregoing, including motions, notices, exhibits, appendices and orders, in a manner which is not acceptable to the Term Lenders to the extent that such amendments or modifications are adverse to them; (iii) the occurrence of a material breach of the Bidding Procedures; or (iv) the occurrence of a 363 Hearing Event as defined herein or in the Purchase Agreement, as applicable, if the Term Lenders elect that the Transaction be effected outside of a chapter 11 plan in accordance with section 5 below, as applicable; -5- (c) subject to subsection (b) of this paragraph 2, not withdraw or revoke its tender, consent or vote with respect to the Plan; (d) consent to Lenox granting the Revolving Lenders a first priority priming lien on those assets of Lenox as to which such Revolving Lenders currently have a first priority lien in connection with the DIP Financing; (e) following the commencement of the Chapter 11 Cases, not (i) object, on any grounds, to the terms, conditions, nature or amount of the DIP Financing, except to the extent that such terms are inconsistent in any material respect from those contained in the DIP Term Sheet, (ii) object to, delay, or take any other action to interfere, directly or indirectly, in any respect with acceptance or implementation of the Plan or the Transaction, so long as the Plan and the Transaction contain terms and conditions effectuating the Restructuring that conform in all material respects to the Plan and Purchase Agreement subject to the rights of the Term Lenders under sections (b) and (f) of this section, (iii) encourage any person or entity to do any of the foregoing in clauses (i) and (ii) herein, or (iv) directly or indirectly seek, solicit, support or encourage (x) post-petition financing other than the DIP Financing, (y) any plan of reorganization or liquidation other than the Plan or (z) any transaction involving the sale of a material portion of Lenox's assets or the equity of reorganized Lenox other than the Transaction; (f) so long as Lenox conducts an auction in accordance with the Bidding Procedures, if the Proposed Purchaser is not the Prevailing Purchaser, not object to the sale of the equity in reorganized Lenox or the sale of all or substantially all of the Lenox's assets to the prevailing bidder on lack of consent; and (g) except as otherwise permitted herein, not take any other action, including, without limitation, initiating or joining in any legal proceeding that is inconsistent with, or that would be reasonably likely to delay consummation of, the Restructuring. Notwithstanding the foregoing, nothing in this Agreement shall be construed to prohibit any Party from appearing as a party-in-interest in any matter to be adjudicated in the Chapter 11 Cases so long as such appearance and the positions advocated in connection therewith are not materially inconsistent with this Agreement and the Restructuring and are not for the principal purpose of hindering, delaying or preventing the consummation of the Restructuring. Notwithstanding anything contained in this Agreement, neither a vote to accept the Plan by the Term Lenders, nor the acceptance of the Plan by any class of creditors, shall in any way be deemed to impair or waive the rights of the Term Lenders to assert or raise any objection permitted under subsections (b), (c), (e), or (f) above in connection with the confirmation of the Plan or a hearing to approve a Transaction. 3. COMMITMENT OF LENOX. Subject to its fiduciary duties as debtor in possession based upon the advise of counsel, Lenox agrees to use its best efforts to (i) support and complete the Restructuring and all transactions contemplated under the Plan and Purchase Agreement, (ii) take any and all necessary and appropriate actions in furtherance of the Restructuring and the transactions contemplated under the DIP Term Sheet, (iii) complete the Restructuring and all -6- transactions contemplated under the Plan and Purchase Agreement within the time-frame outlined herein, including, without limitation, by filing the Plan and Disclosure Statement with the Bankruptcy Court on or as soon as reasonably practicable after the Petition Date and taking all steps necessary and desirable to obtain an order of the Bankruptcy Court confirming the Plan and close the Transaction prior to the Outside Date, and (iv) obtain any and all required regulatory and/or third-party approvals for the Restructuring. Furthermore, Lenox agrees to (i) pay the reasonable fees and expenses of a consultant(s) hired by the Term Lenders to advise them on the operation of Lenox's business and (ii) provide such consultant(s) an office at Lenox's corporate headquarters and reasonable access to Lenox's books, records, operations and employees; provided, however, that such consultant(s) shall not have access to Lenox's headquarters on days when a potential third party purchaser is on site to conduct diligence with respect to Lenox's assets. 4. TERMINATION. This Agreement may be terminated and the commitments contained herein shall be of no further force and effect, at the option of Required Term Lenders (in the exercise of their sole reasonable discretion) or Lenox (unless otherwise provided below or if the Termination Event is caused by the terminating party's breach of any provision hereof), upon the occurrence of any of the following events (each a "TERMINATION EVENT"): (a) Lenox fails to commence the Chapter 11 Cases on or before November 25, 2008; (b) Lenox fails to obtain entry of (i) the Interim Financing Order on or within three (3) Business Days following the Petition Date or (ii) the Final Financing Order within thirty (30) Business Days following the Petition Date; (c) Lenox fails to file a motion for approval of the Bidding Procedures by December 1, 2008 or fails to obtain entry of the Bid Procedures Order by December 19, 2008; (d) Lenox and the Term Lenders fail to enter into a Purchase Agreement by December 19, 2008; (e) Lenox fails to file the Plan and Disclosure Statement by December 19, 2008 or fails to obtain an order approving the Disclosure Statement and solicitation procedures by January 20, 2009; (f) Lenox fails to obtain entry of a Confirmation Order by March 15, 2009; (g) the effective date of the Plan (the "EFFECTIVE DATE") shall not have occurred by the Outside Date; (h) Lenox moves (1) to voluntarily dismiss any of the Chapter 11 Cases, (2) for conversion of any of the Chapter 11 Cases to a case under chapter 7 of the Bankruptcy Code, or (3) for appointment of a trustee or an examiner with expanded powers pursuant to Section 1104 of the Bankruptcy Code in any of the Chapter 11 Cases; (i) (1) a trustee or an examiner with expanded powers is appointed in any of the Chapter 11 Cases or (2) any of the Chapter 11 Cases is dismissed or converted to a case under chapter 7 of the Bankruptcy Code; -7- (j) the entry of an order by the Bankruptcy Court invalidating, disallowing or limiting in any respect, as applicable, either (1) the enforceability, priority, or validity of the liens securing the Term Loans, or (2) the claims of the Term Lenders; (k) Lenox is in material breach of any of its obligations under this Agreement or the agreements governing the Transaction and any such breach by Lenox is not cured by the earlier of five (5) calendar days after receipt of written notice from the Term Lenders, or, if applicable, the expiration of the cure period under the agreements governing the Transaction; (l) at the option of Required Term Lenders, upon the occurrence of an "Event of Default" under the DIP Financing resulting in the termination of the Revolving Lenders' commitment thereunder and an acceleration of the obligations owing thereunder; (m) at the option of Lenox, if the Term Lenders commit a material breach under this Agreement which is not cured within five (5) calendar days after receipt of written notice from Lenox; (n) at the option of Lenox, if any Term Lender commits a material breach under such Term Lender's Equity Commitment Letter that has an adverse effect on Lenox and that is not cured within five (5) calendar days after receipt of written notice thereof from Lenox; (o) any court of competent jurisdiction or other competent governmental or regulatory authority shall have issued a final and non-appealable order making illegal or otherwise restricting, preventing, or prohibiting the Transaction in a way that cannot reasonably be remedied by Lenox or the Term Lenders; or (p) at the option of Required Term Lenders, upon the occurrence of a Material Adverse Change. The date on which this Agreement is terminated in accordance with the foregoing provisions shall be referred to as the "TERMINATION DATE". Notwithstanding any provision in this Agreement to the contrary, upon the written consent of the Required Term Lenders, the dates set forth in sections 4(a) through (f) herein may be extended prior to or upon each such date and such later dates agreed to and in lieu thereof shall be of the same force and effect as the dates provided herein. Notwithstanding any provision in this Agreement to the contrary, upon the written consent of Supermajority Term Lenders, the date set forth in section 4(g) herein may be extended prior to or upon such date and such later date agreed to and in lieu thereof shall be of the same force and effect as the date provided herein. 5. CONVERSION TO HEARING STANDALONE 363 SALE. Notwithstanding anything to the contrary set forth in the Plan or this Agreement, at the option of Required Term Lenders, if one or more of the following events occurs (each, a "363 HEARING EVENT"), Lenox and the Term Lenders, in lieu of seeking to consummate the Transaction in conjunction with the Plan process, shall provide notice that they intend to seek Bankruptcy Court approval of the Transaction outside of a chapter 11 plan, -8- in the form of a sale pursuant to section 363 of the Bankruptcy Code at the Transaction Approval Hearing: (a) Lenox fails to file the Plan and Disclosure Statement with the Bankruptcy Court within the period set forth in section 4(e) hereof; (b) the Disclosure Statement shall not have been approved by the date set forth in section 4(e) hereof; (c) Lenox does not file a notice with the Bankruptcy Court identifying the Successful Bid (as defined in the Bidding Procedures) at least ten (10) Business Days prior to the deadline established by order of the Bankruptcy Court for the submission of Ballots; (d) the Confirmation Order shall not have been entered by the Bankruptcy Court by the date set forth in section 4(f); (e) entry of an order denying confirmation of the Plan; (f) the Effective Date shall not have occurred by the Outside Date; (g) any court of competent jurisdiction or other competent governmental or regulatory authority shall have issued a final and non-appealable order making illegal or otherwise restricting, preventing, or prohibiting solicitation, confirmation and/or consummation of the Plan in a way that cannot be reasonably remedied by the Parties; or (h) the withdrawal, amendment, modification of, or the filing of a pleading seeking to amend or modify, the Plan, Disclosure Statement or any documents related to the foregoing, including motions, notices, exhibits, appendices and orders, in a manner not reasonably acceptable to the Term Lenders. Notwithstanding any provision in this Agreement to the contrary, upon the written consent of the Required Term Lenders, the deadlines set forth in sections 5(a) through (d) herein may be waived or extended prior to or upon each such date and such later dates agreed to in lieu thereof and shall be of the same force and effect as the dates provided herein. Notwithstanding any provision in this Agreement to the contrary, upon the written consent of Supermajority Term Lenders, the date set forth in section 5(f) herein may be waived or extended prior to or upon such date and such later date agreed to in lieu thereof and shall be of the same force and effect as the date provided herein. 6. TRANSFER OF TERM LOANS. Prior to the consummation of the Transaction, no Term Lender will sell, contract to sell, give, assign, hypothecate, pledge, encumber, grant a security interest in, offer, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of (collectively, "TRANSFER") all or any portion of Term Loans or equity interest in the Proposed Purchaser, and no such Transfer will be effective, unless: (i) the transferee (in the case of a Transfer by a Term Lender) furnishes to Lenox and counsel to the Term Lenders, a joinder, in form and substance reasonably acceptable to Lenox and counsel to the Term Lenders, pursuant to which such transferee agrees to be bound by all -9- the terms and conditions of this Agreement and the transferor's Equity Commitment Letter, (ii) the Term Lender effecting such Transfer notifies counsel to the Term Lenders in writing of such Transfer prior to the settlement date of such Transfer, and (iii) from and after the formation of the Proposed Purchaser, the Proposed Purchaser shall be reasonably satisfied prior to such Transfer that registration under the Securities Act of 1933, as amended, and the applicable securities laws of any other jurisdiction, is not required in connection with or as a result of the transaction resulting in such Transfer. Notwithstanding anything to the contrary in the foregoing, the following Transfers shall be permitted: a) any Transfer by any Term Lender to (i) an Affiliate of such Term Lender, (ii) one or more affiliated funds or affiliated entity or entities with a common investment advisor (in each case, other than portfolio companies), or (iii) another Term Lender or an Affiliate of another Term Lender, in each case, so long as such entity agrees to be bound to the terms of this Agreement and the transferor's Equity Commitment Letter with respect to the Term Loans so transferred; b) any Transfer by any Term Lender to the Proposed Purchaser; c) any Transfer to an assignee who is not bound by terms and conditions of this Agreement free and clear of the terms of this Agreement if (i) such Term Lender has offered such claims to the other Term Lenders at a set asking price, (ii) such other Term Lenders have not agreed in writing to purchase all of the offered claims (subject to ratable cutback) at such set price (x) by the earlier of the tenth business day thereafter or January 20, 2009, if such offer is made prior to January 15, 2009 or (y) by the third business day thereafter, if such offer is made on or after January 15, 2009, and (iii) such Term Lender enters into a binding agreement to sell the claims to a buyer not a party to this Agreement in the immediately succeeding ten (10) business day period on terms and conditions, including price, no more favorable to the buyer than the terms it offered to the other Term Lenders; and d) any other Transfer that is approved in writing by Required Term Lenders. 7. OWNERSHIP OF TERM LOANS. Each Term Lender represents and warrants (severally and not jointly) that: a) as of the date of this Agreement, it is the beneficial owner of the principal amount of the Term Loans, or is the nominee, investment manager or advisor for beneficial holders of the Term Loans, as such Term Lender has indicated on its applicable signature page; and b) other than pursuant to this Agreement or the Term Loan Agreement, such Term Loans are free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction, right of first refusal or other limitation on disposition or encumbrances of any kind, that would adversely affect in any way such Term Lender's performance of its obligations contained in this Agreement at the time such obligations are required to be performed. 8. COOPERATION. Prior to the commencement of and during the Chapter 11 Cases, each Party shall use its reasonable best efforts to provide to counsel for the Company and counsel for the Term -10- Lenders advance copies of all motions, applications, requests for relief, objections, responses, replies and other documents such Party intends to file with the Bankruptcy Court relating to the Chapter 11 Cases. 9. CLAIM RESOLUTION MATTERS. Prior to the closing of the Transaction, Lenox shall not enter into any agreements with holders of Administrative Claims, Priority Claims or Secured Tax Claims (as such terms shall be defined in the Plan) relating to the allowance, estimation, validity, extent or priority of such claims, or the treatment and classification of such claims under the Plan, without the prior written consent of the Proposed Purchaser, except with respect to (i) trade payables and employee benefits (other than severance or any employee benefit payment which arises as a result of the consummation of the Transaction) and obligations which have arisen in the ordinary course of Lenox's business, (ii) claims asserted in a liquidated amount of $10,000 or less, and (iii) claims which Lenox is authorized to resolve or pay pursuant to "first day" orders and acceptable to the Term Lenders. 10. MATERIAL CONTRACTS. Prior to the closing of the Transaction, Lenox shall not enter into, terminate, amend, modify or supplement any Material Contract without prior consultation with, and the prior consent of, the Required Term Lenders (other than for the purchase or sale of inventory in the ordinary course of business). 11. ACCESS. Lenox will afford the Term Lenders and the Proposed Purchaser and their respective attorneys, consultants, accountants and other authorized representatives full access, upon reasonable notice during normal business hours, and at other reasonable times, to all properties, books, contracts, commitments, records, management personnel, lenders and advisors of Lenox. 12. ENTIRE AGREEMENT. This Agreement, including the exhibits, schedules and annexes hereto (and, solely with respect to the Term Lenders, the Equity Commitment Letters and governance documents relating to the Proposed Purchaser), constitutes the entire agreement of the Parties with respect to the subject matter of this Agreement, and supersedes all other prior negotiations, agreements and understandings, whether written or oral, among the Parties with respect to the subject matter of this Agreement; PROVIDED, HOWEVER, that any confidentiality agreement between any Term Lender and any other Party shall survive this Agreement and shall continue to be in full force and effect irrespective of the terms. 13. SURVIVAL OF AGREEMENT. Each of the Parties acknowledges and agrees that this Agreement is being executed in connection with negotiations concerning a possible financial restructuring of Lenox and in contemplation of possible Chapter 11 filings by Lenox, and (a) the rights granted in this Agreement are enforceable by each signatory hereto without approval of the Bankruptcy Court, and (b) the exercise of such rights will not violate the automatic stay provisions of the Bankruptcy Code. 14. LENOX UNDERTAKINGS. So long as this Agreement is in effect, absent the prior written consent of each of the Term Lenders, Lenox shall not take any action materially inconsistent with this Agreement, including, but not limited to, the sale of any substantial portion of Lenox's assets. Lenox shall take all reasonable steps necessary and desirable to obtain an order of the Bankruptcy Court confirming the Plan as expeditiously as possible under the Bankruptcy Code and the Bankruptcy Rules. -11- 15. CONFIDENTIALITY: PUBLICITY. Unless required by applicable law or regulation or requested by any regulatory authority, no Party shall disclose the amount of a Term Lender's holdings of claims without the prior written consent of such Term Lender; and if such disclosure is so required by law or regulation or requested by a regulatory authority, the Party required to disclose shall, to the extent permitted by law or advised by counsel, use commercially reasonable efforts to afford each Term Lender a reasonable opportunity to review and comment upon any such disclosure prior to the making of such disclosure. The foregoing shall not prohibit Lenox from disclosing the existence of this Agreement or the approximate aggregate holdings of claims by the Term Lenders as a group. 16. WAIVER. If the transactions contemplated herein are or are not consummated, or following the occurrence of the Termination Date, if applicable, nothing shall be construed herein as a waiver by any Party of any or all of such Party's rights and the Parties expressly reserve any and all of their respective rights. Pursuant to Federal Rule of Evidence 408 and any other applicable rules of evidence, this Agreement and all negotiations relating hereto shall not be admissible into evidence in any proceeding other than a proceeding to enforce its terms. 17. RESERVATION OF RIGHTS. This Agreement and the Restructuring are part of a proposed settlement of outstanding indebtedness loaned to Lenox by the Term Lenders. Except as expressly provided in this Agreement, nothing herein is intended to, or does, in any manner waive, limit, impair or restrict the ability of each of the Parties hereto to protect and preserve their rights, remedies and interests. Except as expressly set forth herein, nothing herein shall be deemed an admission of any kind. Nothing contained herein effects a modification of any Term Lender's rights until and unless the Restructuring becomes effective. If the transactions contemplated herein are not consummated, or if this Agreement is terminated for any reason, the parties hereto fully reserve any and all of their rights, pursuant to Federal Rule of Evidence 408 and any applicable state rules. 18. REPRESENTATIONS AND WARRANTIES OF ALL PARTIES. Each of the parties hereto (severally and not jointly) represents and warrants to each other that the following statements are true, correct and complete as of the date hereof. It has all requisite corporate or other power and authority to enter into this Agreement and to carry out the transactions contemplated by, and perform its respective obligations under, this Agreement. The execution and delivery of this Agreement and the performance of its obligations hereunder have been duly authorized by all necessary corporate or other action on its part. The execution, delivery and performance by it of this Agreement do not and shall not (i) violate any provision of law, rule or regulation applicable to it or any of its subsidiaries or its certificate of incorporation, bylaws or other organizational documents or those of any of its subsidiaries or (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any material contractual obligation to which it or any of its subsidiaries is a party or under its certificate of incorporation, by-laws or other organizational documents. 19. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which, when so executed, shall constitute the same instrument and the counterparts may be delivered by facsimile transmission or by electronic mail in portable document format (.pdf). 20. AMENDMENTS. Except as otherwise provided herein, this Agreement may not be modified, amended or supplemented without prior written consent of Lenox and Required Term Lenders. -12- 21. HEADINGS. The headings of the sections, paragraphs and subsections of this Agreement are inserted for convenience only and shall not affect the interpretation hereof. 22. RELATIONSHIP AMONG PARTIES. Notwithstanding anything herein to the contrary, the duties and obligations of the Term Lenders under this Agreement shall be several, not joint. It is understood and agreed that any Term Lender may trade in the debt or equity securities of Lenox and its Subsidiaries without the consent of Lenox or any other Term Lender, subject to applicable securities laws and Section 6 of this Agreement. No Term Lender shall have any responsibility for any such trading by any other entity by virtue of this Agreement. No prior history, pattern or practice of sharing confidences among or between Term Lenders shall in any way affect or negate this understanding and agreement. 23. SPECIFIC PERFORMANCE. It is understood and agreed by the Parties that money damages would be an insufficient remedy for any breach of this Agreement by any Party and each non-breaching Party shall be entitled to specific performance and injunctive or other equitable relief as a remedy of any such breach, including, without limitation, an order of the Bankruptcy Court or other court of competent jurisdiction requiring any Party to comply promptly with any of its obligations hereunder. 24. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to such state's choice of law provisions which would require the application of the law of any other jurisdiction. By its execution and delivery of this Agreement, each of the Parties irrevocably and unconditionally agrees for itself that any legal action, suit or proceeding against it with respect to any matter arising under or arising out of or in connection with this Agreement or for recognition or enforcement of any judgment rendered in any such action, suit or proceeding, may be brought in the United States District Court for the Southern District of New York, and by execution and delivery of this Agreement, each of the Parties irrevocably accepts and submits itself to the exclusive jurisdiction of such court, generally and unconditionally, with respect to any such action, suit or proceeding. Notwithstanding the foregoing consent to New York jurisdiction, if the Chapter 11 Cases are commenced, each Party agrees that the Bankruptcy Court shall have exclusive jurisdiction of all matters arising out of or in connection with this Agreement. 25. ACTIONS OF THE TERM LENDERS. Any action to be taken by the Term Lenders pursuant to this Agreement shall require the approval of the Required Term Lenders or Supermajority Term Lenders, as provided herein. Such action, when so taken, shall be evidenced by written notice thereof to Lenox, as applicable, by counsel to the Term Lenders, and Lenox shall be entitled to rely on such written notice. 26. NOTICES. All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally, by internationally recognized overnight courier service, by facsimile transmission, or by registered or certified mail (postage prepaid, return receipt requested) to the parties at the following addresses or facsimile numbers: -13- IF TO THE ADMINISTRATIVE AGENT OR TERM LENDERS: Schulte Roth & Zabel LLP 919 Third Ave New York, New York 10022 Attn: Adam C. Harris, Esq. Facsimile: 212-593-5955 IF TO LENOX: Weil, Gotshal & Manges LLP 700 Louisiana Street, Suite 1600 Houston, Texas 77002-2784 Attn: Alfredo R. Perez, Esq. Facsimile: 713-224-9511 27. SPECIAL PROVISION REGARDING CHASE LINCOLN FIRST COMMERCIAL CORPORATION. Notwithstanding anything to the contrary in this Agreement and the Plan Term Sheet, this Agreement applies only to the Credit Trading Group of Chase Lincoln First Commercial Corporation, in its capacity as a Term Lender (the "CHASE LINCOLN CREDIT TRADING GROUP"), and, the term "Term Lender" means only the Chase Lincoln Credit Trading Group and such business unit's position in the Term Loans and does not apply to (i) any securities, loans, other obligations or any other interests in the Term Loans that may be held, acquired or sold by, or any activities, services or businesses conducted or provided by, any other group or business unit within, or Affiliate of, Chase Lincoln First Commercial Corporation; or (ii) any Term Loans that may be beneficially owned by non-Affiliated clients of Chase Lincoln First Commercial Corporation or any Affiliate of Chase Lincoln First Commercial Corporation. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -14- < D56 INC. By: /s/ Marc Pfefferle -------------------------- Name: Marc Pfefferle Title: Chief Executive Officer LENOX RETAIL, INC. By: /s/ Marc Pfefferle -------------------------- Name: Marc Pfefferle Title: Chief Executive Officer LENOX, INCORPORATED By: /s/ Marc Pfefferle -------------------------- Name: Marc Pfefferle Title: Chief Executive Officer LENOX GROUP, INC. By: /s/ Marc Pfefferle -------------------------- Name: Marc Pfefferle Title: Chief Executive Officer FL 56 INTER CORP. By: /s/ Marc Pfefferle -------------------------- Name: Marc Pfefferle Title: Chief Executive Officer S-1 LENOX WORLDWIDE LLC By: /s/ Marc Pfefferle -------------------------- Name: Marc Pfefferle Title: Chief Executive Officer LENOX SALES, INC. By: /s/ Marc Pfefferle -------------------------- Name: Marc Pfefferle Title: Chief Executive Officer S-2 CEDARVIEW LEVERAGED OPPORTUNITES MA, LTD By: /s/ Burton Weinstein -------------------------- Name: Burton Weinstein Title: Managing Partner CEDARVIEW LEVERAGED OPPORTUNITES MA II, LTD By: /s/ Burton Weinstein -------------------------- Name: Burton Weinstein Title: Managing Partner CEDARVIEW OPPORTUNITES MASTER FUND, LP By: /s/ Burton Weinstein -------------------------- Name: Burton Weinstein Title: Managing Partner AII INVESTMENT HOLDINGS, LTD By: /s/ Burton Weinstein -------------------------- Name: Burton Weinstein Title: Managing Partner S-3 CETUS CAPITAL, LLC By: /s/ Richard Maybaum -------------------------- Name: Richard Maybaum Title: Managing Director S-4 CHASE LINCOLN FIRST COMMERCIAL CORPORATION, but only as to its Credit Trading Group and that group's Term Loan position By: /s/ Samantha E. Hamerman -------------------------- Name: Samantha E. Hamerman Title: Authorized Signatory S-5 CLINTON-MAGNOLIA MASTER FUND, LTD. By CLINTON GROUP, INC., as investment adviser By: /s/ Francis Ruchalski -------------------------- Name: Francis Ruchalski Title: Chief Financial Officer CLINTON MULTISTRATEGY MASTERFUND, LTD. By CLINTON GROUP, INC., as investment adviser By: /s/ Francis Ruchalski -------------------------- Name: Francis Ruchalski Title: Chief Financial Officer S-6 LBC CREDIT PARTNERS, L.P. By: /s/ David E. Fraimow -------------------------- Name: David E. Fraimow Title: Vice President LBC CREDIT PARTNERS PARALLEL, L.P. By: /s/ David E. Fraimow -------------------------- Name: David E. Fraimow Title: Vice President S-7 RAMIUS CREDIT OPPORTUNITIES MASTER FUND LTD (F/K/A RCG CARPATHIA MASTER FUND, LTD.) By: /s/ Marc Baum -------------------------- Name: Marc Baum Title: Authorized Signatory S-8 TOPAZ FUND By:_____________________________ Name: Title: S-9 TRUMPET INVESTORS LP By: /s/ Eric Kogan -------------------------- Name: Eric Kogan Title: Manager S-10 UBS STAMFORD LENDER By:_____________________________ Name: Title: S-11 EXHIBIT A PLAN TERM SHEET =============================================================================== LENOX GROUP, INC. PLAN TERM SHEET AS OF NOVEMBER 23, 2008 =============================================================================== The following is a summary (the "PLAN TERM SHEET") of certain material terms of a proposed Chapter 11 liquidating plan (the "PLAN") of the Company (as defined below). This Plan Term Sheet does not contain all the terms, conditions, and other provisions of the Plan and the transactions contemplated by this Plan Term Sheet are subject to conditions to be set forth in definitive documents. This Plan Term Sheet is proffered in the nature of a settlement proposal in furtherance of settlement discussions and is entitled to protection from any use or disclosure to any party or person pursuant to Federal Rule of Evidence 408 and any other rule of similar import. This Plan Term Sheet and the information contained herein are strictly confidential and contain material non-public information. It is being provided to the Term Loan Lenders and the Revolving Loan Lenders in accordance with the confidentiality provisions of the respective credit documents. This Plan Term Sheet does not constitute an offer of securities, nor is it an offer or solicitation for any chapter 11 plan, and is being presented for discussion and settlement purposes only. I. PARTIES DEBTORS Lenox Group, Inc., and certain of its subsidiaries (collectively, the "COMPANY" or the "DEBTORS"), including, without limitation, all Borrowers and Guarantors under the Term Loan Agreement and Revolving Credit Agreement. TERM LOAN Bank of New York/Mellon as administrative agent and the LENDERS leaders party to that certain Amended and Restated Term Loan Credit Agreement, dated as of April 20, 2007 (the "TERM LOAN AGREEMENT") (collectively, the "TERM LOAN LENDERS"), between the Lenders and D 56, Inc., Lenox Retail, Inc., and Lenox Incorporated, as borrowers (the "BORROWERS"), and Lenox Group Inc. and other guarantors party thereto as guarantors (the "GUARANTORS"). REVOLVING LOAN UBS Securities AG, Stamford Branch ("UBS") as LENDERS administrative agent and the lenders party to that certain Revolving Credit Agreement, dated as of April 20, 2007 (as amended, the "REVOLVING LOAN AGREEMENT") (collectively, the "REVOLVING LOAN LENDERS"), between the Lenders, the Borrowers, and the Guarantors. II. PROPOSED CHAPTER 11 SALE PURSUANT TO PLAN SALE OF ASSETS OF The proposed Plan contemplates (a) a sale (the "LENOX SALE") LENOX BUSINESS to the Term Loan Lenders of all or substantially all of the PURSUANT TO A assets of (i) the Lenox Business (as defined below) and CHAPTER 11 PLAN(1) (ii) the D56 Business (as defined below) that is remaining at the time of the Closing (as defined below), and (b) the subsequent disposition by the Term Loan Lenders of certain remaining portions of the D56 Business in accordance with the D56 Scale Down (as defined below) or as otherwise determined by New Lenox. The assets of the Lenox Business and the D56 Business to be purchased by the Term Loan Lenders (the "PURCHASED ASSETS") shall include all the assets of the Lenox Business and the D56 Business as of the Closing Date other than rejected contracts and any other assets or liabilities of either business designated as excluded assets by the Term Loan Lenders at least 10 days prior to the Effective Date. For purposes of this Plan Term Sheet the term "LENOX BUSINESS" shall mean all of the assets of the Debtors that are used or useful in connection with the manufacturing, sale and distribution of the Lenox, Dansk, Gorham and other similar brands, including (without limitation) all inventory, accounts, intellectual property and other real and personal property. For purposes of this Plan Term Sheet the term "D56 BUSINESS" shall mean all of the assets of the Debtors that are used or useful in connection with the manufacturing, sale and distribution of [collectibles], including (without limitation) all inventory, accounts, intellectual property and other real and personal property. To facilitate the Lenox Sale, the Term Loan Lenders will create a new entity or entities (collectively, "NEW LENOX") to which all or a portion of the loans under the Term Loan Agreement owned by the Term Loan Lenders party to the Plan Support Agreement dated as of November 23, 2008 (the "PLAN SUPPORT AGREEMENT") will be transferred. The Term Loan Lenders will credit bid an amount up to the aggregate amount of the obligations owned by the Term Loan Lenders and arising under the Term Loan Agreement for the Purchased Assets (the "PURCHASE PRICE"). Upon closing of the sale, which shall be the effective date of the Plan (the "CLOSING" or the "EFFECTIVE DATE"), New Lenox (and, indirectly, the Term Lenders, as the owners of New Lenox), will own 100% of the ________________ 1 The Term Loan Lenders reserve the right to direct the Company to consummate the Lenox Sale pursuant to a sale under section 363 of the Bankruptcy Code in the event of a default under the DIP Facility, undue delay in the confirmation of the Plan, in the event the cash payments to the holders of allowed administrative and priority claims required to confirm the Plan pursuant to section 1129 of the Bankruptcy Code exceed, in the aggregate, the aggregate claim amounts set forth herein, or for the other reasons set forth in the Plan Support Agreement. 2 equity in the Purchased Assets. The terms of the Lenox Sale shall be set forth in an asset purchase agreement in form and substance reasonably acceptable to the Company and the Term Loan Lenders (the "APA"). The APA will also provide for, among other things, the assumption by New Lenox of certain other liabilities of the Debtors, in each case as specified by New Lenox. Pursuant to the terms of the Plan the Company will undergo a tax liquidation as soon as reasonably practicable after the Effective Date of the Plan. III. PROPOSED SALE/LIQUIDATION OF D56 ASSETS D56 BUSINESS Beginning before the Effective Date and continuing after PROCESS the Effective Date, the D56 Business will be scaled down or disposed of by the Company or New Lenox, as applicable, either through a scale down plan, a sale process/royalty arrangement or another disposition (the "D56 SCALE DOWN"). The net proceeds received by the Company prior to the Effective Date in connection with the D56 Scale Down shall be applied in accordance with the terms of the Revolving Loan Agreement and the Term Loan Agreement. Any assets of the D56 Business that remain unsold as of the Closing shall be treated as "Purchased Assets" and shall be sold, transferred and assigned to New Lenox. Prior to the Effective Date, the Company will consult with the Term Loan Lenders before making any material decisions regarding the D56 Scale Down. IV. PLAN ADMINISTRATOR APPOINTMENT The Plan shall provide for the appointment of a plan administrator (the "PLAN ADMINISTRATOR") to, among other things, (a) oversee the claims resolution process, and (b) wind down the Company. On the Effective Date, pursuant to the Plan, the Plan Administrator will be provided with funding (the "PLAN ADMINISTRATOR FUND"), in an amount to be agreed upon by the Company and the Term Loan Lenders, which shall be sufficient to pay the fees and expenses of the Plan Administrator and its professionals and all costs incident to winding down the Company, objecting to and resolving claims, and distributing proceeds under the Plan (the "PLAN ADMINISTRATOR EXPENSES"). All amounts realized by the Plan Administrator from the sale, transfer or other disposition of assets, if any, shall be added to the Plan Administrator Fund. Any net recoveries from such proceeds that exceed amounts reasonably expected to be required to pay for the Plan 3 Administrator Expenses shall be immediately turned over to New Lenox. When all the duties of the Plan Administrator have been completed, the Company has been wound down, all allowed general unsecured claims have been paid the amount to which they are entitled under the Plan, there are no remaining disputed general unsecured claims, and the chapter 11 cases have been closed, any funds remaining in the Plan Administrator Fund shall be remitted to New Lenox. V. TREATMENT OF CLAIMS AND INTERESTS ADMINISTRATIVE/ On the Effective Date, pursuant to the Plan, the Plan PRIORITY/SECURED Administrator shall be provided with funding (the "APST TAX CLAIMS FUND CLAIMS FUND") in an amount to be determined by agreement of the Company and the Term Loan Lenders, but in any event, subject to the aggregate claim amounts set forth below, which funds shall be sufficient to pay all Administrative Expense Claims, Priority and Secured Tax Claims, and Other Priority Claims that are allowed on the Effective Date and that may become allowed after the Effective Date. The Plan Administrator shall be responsible for resolving and paying all Administrative Expense Claims, Priority and Secured Tax Claims, and Other Priority Claims. After all Administrative Expense Claims, Priority and Secured Tax Claims, and Other Priority Claims have been paid in full and there are no remaining Administrative Expense Claims, Priority and Secured Tax Claims, and Other Priority Claims, all funds remaining in the APST Claims Fund shall be remitted to New Lenox. ADMINISTRATIVE AND PRIORITY CLAIMS o ADMINISTRATIVE Except to the extent that a holder has been paid by the EXPENSE CLAIMS Company, in whole or in part, prior to the Effective Date or agrees to a less favorable treatment, each holder of an allowed administrative expense claim shall be paid in full, in cash, the full amount of its unpaid claim on or as soon as reasonably practicable following the later to occur of (a) the Effective Date or as soon thereafter as is reasonably practicable and (b) the date on which such claim becomes allowed; provided, however, that in no event shall the aggregate amount of non-professional fee Administrative Expense Claims (including, without limitation, cure costs) exceed $[1,800,000]. o SECURED TAX Except to the extent that a holder has been paid by the AND PRIORITY Company, in whole or in part, prior to the Effective Date or TAX CLAIMS agrees to a less favorable treatment, each holder of an allowed secured tax claim or allowed priority tax claim shall (a) be paid in full, in cash, the full amount of its unpaid claim on or as soon as reasonably practicable following the later to occur of (x) the Effective Date or as soon thereafter as is reasonably practicable and (y) the date on which such claim becomes allowed or (b) receive such other terms determined by the Bankruptcy Court to provide the holder deferred cash payments having a value, as of the Effective 4 Date, equal to such claim; provided, however, that in no event shall the aggregate amount of Secured Tax Claims and Priority Tax Claims exceed $[250,000]. o OTHER Except to the extent that a holder has been paid by the PRIORITY Company, in whole or in part, prior to the Effective Date CLAIMS or agrees to a less favorable treatment, each holder of an allowed other priority claim shall receive, in full satisfaction of such other unpaid priority claim, cash in the full amount of the claim, on or as soon as reasonably practicable after the later of (i) the Effective Date or as soon thereafter as is reasonably practicable, and (ii) the date such claim becomes allowed; provided, however, that in no event shall the aggregate amount of Other Priority Claims exceed $[100,000]. SECURED CLAIMS o REVOLVING LOAN The Revolving Loans (the "REVOLVING LOAN CLAIMS") arising FACILITY from the Revolving Loan Agreement shall be "rolled up" into the DIP Facility. o TERM LOAN Holders of secured claims arising from the Term Loan FACILITY Agreement shall contribute all of their claims to New Lenox. New Lenox will credit the Purchase Price and purchase the Purchased Assets free and clear of all liens, interests, claims or encumbrances, except as set forth in the APA. o MISCELLANEOUS To the extent not previously paid pursuant to an order of SECURED the Bankruptcy Court authorizing payment of lien claims CLAIMS during the chapter 11 cases, all holders of claims secured by valid liens (including, without limitation, mechanics', materialsmens', artisans', tax and any other lien) against property not abandoned or sold will retain their liens on such property and be paid in the ordinary course of business by New Lenox UNSECURED CLAIMS o GENERAL On the Effective Date, the Plan Administrator shall be UNSECURED provided with an amount to be agreed upon by the Term Lenders (the "GENERAL UNSECURED CLAIMS FUND") to pay holders of allowed general unsecured claims. On the Effective Date, each holder of an allowed unsecured claim shall receive its pro rata share of the General Unsecured Claims Fund. The Plan shall provide a mechanism for delaying distribution to holders of general unsecured claims pending a resolution of disputed general unsecured claims. The Plan will provide a release of all Chapter 5 causes of action against any person who provided goods and services in the ordinary course of business.(2) __________________ 2 Subject to review of potential claims by Term Loan Lenders. 5 EQUITY INTERESTS Holders of equity interests in the Company will not receive or retain any property or interest on account of their interests, and all such interests will be cancelled and extinguished. VI. SOURCES FOR PAYMENTS UNDER PLAN PLAN FUNDING At Closing, subject to the aggregate claim limits set forth above (compliance with which shall be a condition to effectiveness of the Plan), New Lenox will provide sufficient funds to make all payments required to be made, including to fund the Plan Administrator Fund, the APST Claims Fund, and the General Unsecured Claims Fund. VII. OTHER PLAN PROVISIONS RELEASES AND The Company/Debtors will release their respective officers EXCULPATION and directors, the Revolving Loan Lenders and agent under the Revolving Loan Agreement, the Term Loan Lenders and agent under the Term Loan Agreement, and the respective officers, directors, employees, agents, advisors and professionals of each of the foregoing, including of the Company/Debtors, from all claims arising on or before the Effective Date, other than for claims based on willful misconduct, intentional fraud, or criminal conduct as determined by a final order entered by a court of competent jurisdiction. The Plan will include standard exculpation for individuals and professionals participating in the Debtors' chapter 11 cases. The Term Loan Lenders will release the Debtors and their respective officers, directors, employees, agents, advisors, and professionals from all claims arising on or before the Effective Date, other than for claims based on willful misconduct, intentional fraud, or criminal conduct as determined by a final order entered by a court of competent jurisdiction. INDEMNIFICATION OF Under the Plan, all indemnification provisions currently PREPETITION OFFICES in place (whether in the by-laws, certificates of AND DIRECTORS incorporation, or employment contracts) for the current and former directors, officers, employees, attorneys, other professionals and agents of the Debtors and such current and former directors and officers' respective affiliates will be assumed by New Lenox and will survive effectiveness of the Plan for claims related to or in connection with any actions, omissions or transactions occurring prior to the Effective Date. Notwithstanding the foregoing, in no event will New Lenox's obligation with respect to indemnification exceed the amount of any deductible payable pursuant to the directors and officers liability policy. 6 EMPLOYEE TRANSITION The Plan will further provide that New Lenox may, in its PROGRAMS discretion, assume certain agreements and pre-petition obligations as currently formulated or as modified, including, but not limited to portions of the Company's existing Change in Control, Outplacement, Severance and other benefits and obligations to Company employees (3). PENSION AND RETIREE Pursuant to the Plan, and as a condition to the BENEFIT PLANS effectiveness of the Plan, all existing defined benefit and other pension and/or retiree benefit plans maintained by the Debtors shall be terminated in a manner reasonably acceptable to New Lenox. DEFINITIVE The Company, the agent for the Revolving Loan Lenders, the DOCUMENTATION agent for the Term Loan Lenders, the Postpetition Lenders, and the Exit Facility lender will negotiate in good faith definitive documentation for the Plan consistent with the terms hereof, including, without limitation, a plan support agreement, the DIP Facility, and any necessary documents to effectuate the Plan. OTHER TERMS AND The Plan and all related documentation shall reflect the CONDITIONS terms and conditions of this Plan Term Sheet to the parties' mutual satisfaction and shall contain such other terms and conditions as the parties mutually agree. This Plan Term Sheet will become part of the Plan Support Agreement containing customary terms and conditions to be executed by the Company and the Term Loan Lenders in support of the Plan. The distributions on and treatment of claims of the Term Loan Lenders contemplated herein shall become effective and binding only upon the confirmation and effective date of a Plan under Chapter 11 of the U.S. Bankruptcy Code which has been voted upon and approved by the Term Loan Lenders in accordance with section 1126(c) of the Bankruptcy Code, and confirmed by the Bankruptcy Court. The Company shall not enter into, terminate, amend, modify or supplement any Material Contract without prior consultation with, and the prior consent, which consent shall not unreasonably withheld or delayed, of, the Term Loan Lenders (other than for the purchase or sale of inventory in the ordinary course of business). For purposes hereof the term "Material Contract" shall mean (a) any license agreement, or (b) any agreement that involves the payment of, or the purchase or provisions of goods or services having a value in excess of, $250,000 in any year or $500,000 over the life of such contract. ________________ 3 The Term Loan Lenders will need to review all agreements related to these programs before determining whether to agree to this provision. 7 Prior to the Effective Date, the Company shall have taken the steps to perform an audit of 2008 financial results under a format reasonably acceptable to the Term Loan Lenders and consistent with privately held corporations. 8 EXHIBIT B BIDDING PROCEDURES BIDDING PROCEDURES Lenox, Incorporated, a New Jersey corporation, D 56, Inc., a Minnesota corporation, Lenox Retail, Inc., a Minnesota corporation, Lenox Group Inc., a Delaware corporation, FL 56 Intermediate, Corp., a Delaware corporation, Lenox Worldwide, LLC, a Delaware limited liability company, and Lenox Sales, Inc., a Minnesota corporation (collectively referred to as "LENOX" or the "DEBTORS") intend to sell all or substantially all of their assets (the "LENOX ASSETS") through confirmation of a plan of reorganization under chapter 11 of the Bankruptcy Code or through a sale under section 363 of the Bankruptcy Code. In order to attain the highest and best offer for the Lenox Assets, Lenox proposes to market the Lenox Assets and conduct an Auction (as defined below) pursuant to the bid procedures (the "BIDDING PROCEDURES") set forth herein. All terms not otherwise defined herein shall have the meanings given to them in the Plan Support Agreement dated as of November 23, 2008 among Lenox and other signatories thereto (collectively, the "TERM LOAN LENDERS"). 1. BID PROCEDURES MOTION A. The Bidding Procedures set forth herein are subject to the approval of the Bankruptcy Court presiding over Lenox's Chapter 11 Cases. On or before November 26, 2008, Lenox shall file a motion seeking approval of these Bidding Procedures and requesting that the Bankruptcy Court schedule a hearing to approve a sale of the Lenox Assets to the highest and best bidder. B. The hearing to approve the sale of the Lenox Assets (the "SALE HEARING") shall be held on or before March 15, 2009 and may be held at the same time as the Confirmation Hearing. 2. QUALIFYING BIDDERS A. The Debtors, after consultation with the Term Loan Lenders and the statutory committee of unsecured creditors (the "COMMITTEE"), will: (A) determine whether any Person is a Qualifying Bidder (as defined below); (B) determine whether a Qualifying Bidder has made a Qualified Bid (as defined below); and (C) negotiate any offer set forth in a Qualified Bid (collectively, the "BIDDING PROCESS"). Nothing in these Bidding Procedures shall constitute the consent of the Term Loan Lenders or the Committee to any bid. B. In order to participate in the Bidding Process, each Person (a "POTENTIAL BIDDER") must deliver to the Debtors: (i) an executed confidentiality agreement in form and substance satisfactory to the Debtors; and (ii) such financial and other information as the Debtors shall reasonably request (the "FINANCIAL INFORMATION") of such Potential Bidder, or, if the Potential Bidder is an entity formed for the purpose of purchasing the Business, then: (x) the Financial Information of the equity holder(s) of the Potential Bidder or such other form of financial disclosure acceptable to the Debtors, following consultation with the Term Loan Lenders and the Committee; and (y) the written commitment of such equity holder(s) to be responsible for the Potential Bidder's obligations in connection with the purchase of the Lenox Assets (collectively, the "PARTICIPATION REQUIREMENTS"). 1 C. A "Qualifying Bidder" is a Potential Bidder that satisfies the Participation Requirements, and which the Debtors, in their business judgment and after consultation with the Term Loan Lenders and the Committee, determine is financially able to consummate the purchase of the Lenox Assets in a timely manner. Within two (2) Business Days after receipt from the Potential Bidder of the materials required in connection with the Participation Requirements, the Debtors shall notify the Potential Bidder whether such Potential Bidder is a Qualifying Bidder. Each Qualifying Bidder shall be permitted to conduct reasonable due diligence with respect to the Lenox Assets during the period prior to the Auction. D. Notwithstanding anything to the contrary herein, the Term Loan Lenders (and any designee of the Term Loan Lenders) shall be deemed Qualifying Bidders and shall be entitled to credit bid at the Auction in accordance with section 363(k) of the Bankruptcy Code, subject to satisfaction of the requirements set forth in section 3.C.ii-v. E. The Debtors shall be entitled to request due diligence from each Qualifying Bidder, upon execution of a confidentiality agreement in form and substance reasonably equivalent to the confidentiality agreement executed by such Qualifying Bidder. Notwithstanding any other provision herein, failure by a Qualifying Bidder to fully comply with the reasonable due diligence requests and requests for additional information made by the Debtors shall be a basis for the Debtors, after consultation with the Term Loan Lenders and the Committee, to determine that a bid made by such Qualifying Bidder is not a Qualified Bid. 3. QUALIFIED BIDS A. A bid or offer received from a Qualifying Bidder will constitute a "Qualified Bid" only if such bid or offer includes all of the Qualified Bid Documents (as defined below), meets all of the Qualified Bid Requirements (as defined below), and is accompanied by the Good Faith Deposit (as defined below). B. In order to be deemed a Qualifying Bidder and participate in the Bidding Process, each Qualifying Bidder, must deliver the following documents (collectively, the "QUALIFIED BID DOCUMENTS") to counsel for the Debtors by no later than 4:00 P.M. (prevailing Eastern time) on January __, 2009 (the "BID DEADLINE"): i. a written offer stating that: (A) such Qualifying Bidder offers to purchase all, or substantially all, of the Lenox Assets and to assume such liabilities as may be identified by the Qualifying Bidder; (B) such Qualifying Bidder is prepared to enter into a legally binding purchase and sale agreement for the acquisition of the Lenox Assets and assumption of liabilities, on terms and conditions set forth in a mark-up of the Purchase Agreement submitted by such Qualifying Bidder; and (C) such Qualifying Bidder's offer is irrevocable through and including the date of the Auction; and ii. a copy of a Purchase Agreement marked to show changes made by the Qualifying Bidder executed by such Qualifying Bidder. C. In addition, all bids must satisfy the following requirements (collectively, the "QUALIFIED BID Requirements"): 2 i. the bid is in cash and the assumption of liabilities; ii. the bid provides for payment in full, in cash of all obligations outstanding under the Debtors' DIP Financing and/or all claims of the Revolving Lenders under the Amended and Restated Revolving Credit Agreement dated April 20, 2007; iii. the bid is not conditioned upon approval by the Bankruptcy Court of any bid protections, such as a termination fee, expense reimbursement or similar type of payment; iv. the bid fully discloses the identity of each entity that will be bidding or otherwise participating in connection with such bid, and the complete terms of any such participation; and v. the Qualifying Bidder acknowledges and represents that: (A) the Qualifying Bidder had an opportunity to conduct any and all due diligence regarding the Lenox Assets prior to submitting its bid; (B) the Qualifying Bidder has relied solely upon its own independent review, investigation and/or inspection of any documents and/or the Lenox Assets in making its bid; (C) the Qualifying Bidder did not rely upon any written or oral statements, representations, promises, warranties or guaranties whatsoever, whether express, implied, by operation of law or otherwise, regarding the Lenox Assets or the completeness of any information provided in connection therewith or the Auction, except as expressly stated in these Bidding Procedures; and (D) the bid is not contingent upon any additional due diligence. D. The Term Loan Lenders are deemed to have made an initial Qualifying Bid in the amount of $______. E. The Debtors, after consultation with the Term Loan Lenders and the Committee, may: (a) determine in their business judgment which Qualified Bid, if any, is the highest or otherwise best offer; and (b) reject any Qualified Bid that the Debtors, after consultation with the Term Loan Lenders and the Committee, determine to be: (i) inadequate or insufficient; (ii) not in conformity with the requirements of applicable bankruptcy laws or these Bidding Procedures; or (iii) contrary to the best interests of the Debtors, their estates and their creditors. The Debtors, after consultation with the Term Loan Lenders and the Committee, shall have the right to adopt such other rules for the Bidding Process which, in their sole judgment, will better promote the goals of the Bidding Process and which are not inconsistent with any of the provisions of these Bidding Procedures, or of any order of the Bankruptcy Court. F. All Qualifying Bidders (other than the Term Loan Lenders or their designee) that submit a bid must deliver to the Debtors via wire transfer (or other form acceptable to the Debtors and the Term Loan Lenders) by the Bid Deadline an amount equal to ten percent (10%) of the proposed cash portion of the purchase price set forth in such bid (the "GOOD FAITH DEPOSIT"). 3 G. If no Qualified Bids other than the Term Loan Lenders' Qualified Bid is received, no Auction shall be held and Lenox shall seek approval of the Term Loan Lenders' Qualified Bid as the highest and best offer for the Lenox Assets at the Sale Hearing. 4. AUCTION A. If the Debtors receive two or more Qualified Bids, the Debtors will, unless otherwise ordered by the Bankruptcy Court, conduct an auction (the "AUCTION") with respect to the Lenox Assets. In connection with the Auction, the Debtors will provide each Qualifying Bidder that submitted a Qualified Bid with a summary of the material terms of each Qualified Bid no later than 4:00 p.m. (prevailing Eastern time) on _____, 2009. B. The Auction, if required, will commence at 10:00 a.m. (prevailing Eastern time) on _____, 2009, or at such later time and at other place as the Debtors shall notify all Qualifying Bidders who have submitted Qualified Bids and all other Persons entitled to attend the Auction. C. Only the Debtors, Qualifying Bidders who have submitted Qualified Bids, the United States Trustee, the Term Loan Lenders, and the Committee, in each case with their respective advisors, will be entitled to attend, participate and be heard at the Auction; provided, however, that any financing contingency contained in a Qualified Bid must be either satisfied or waived prior to the commencement of the Auction as a condition to the participation in the Auction of the Qualified Bidder who made such Qualified Bid. Only Qualifying Bidders will be entitled to make any subsequent Qualified Bids at the Auction. D. During the Auction, bidding will begin at the purchase price stated in the highest or otherwise best Qualified Bid, and the first bid thereafter shall be at least $____ higher than such Qualified Bid. E. All subsequent bids will be made in minimum increments of at least $_____ (the "OVERBID INCREMENT") higher than the previous Qualified Bid. F. Subject to the Overbid Increments set forth herein, the Term Loan Lenders shall be permitted to increase their initial Qualified Bid by credit bidding up to the full amount of outstanding principal obligations under the Term Loan Agreement. G. Bidding at the Auction will continue until such time as the highest and best Qualified Bid (the "SUCCESSFUL BID") is selected as follows: immediately prior to conclusion of the Auction, the Debtors, after consultation with the Term Loan Lenders and the Committee, will: (i) review each Qualified Bid on the basis of financial and contractual terms and other factors relevant to (x) the determination of which transaction is in the best interests of the creditors and estates of the Debtors and their Affiliates, and (y) the sale process, including those factors affecting the speed and certainty of consummating a transaction; and (ii) in the exercise of their business judgment, select the Successful Bid and the second highest and best Qualified Bid (the "BACK-UP BID"). Any Successful Bid must not be conditioned upon satisfaction of a financing contingency. 4 H. Within two (2) Business Days after the conclusion of the Auction, the Qualifying Bidder submitting the Successful Bid (the "SUCCESSFUL BIDDER") must supplement its Good Faith Deposit such that its Good Faith Deposit equals 10% of the cash portion of the Successful Bid; PROVIDED, HOWEVER, that if the Term Loan Lenders (or their designee) are the Successful Bidder, no deposit shall be required. 5. APPROVAL AND CLOSING OF THE SALE A. In the event that the Auction is held, the Debtors shall seek entry of an order of the Bankruptcy Court approving the Successful Bid and the Back-up Bid (the "SALE ORDER"), which order shall be sought in form and substance reasonably acceptable to the Debtors, the Term Loan Lenders, the Committee and the Qualifying Bidders submitting the Successful Bid and the Back-up Bid. B. If, following the entry of the Sale Order by the Bankruptcy Court, the Successful Bidder fails to consummate a transaction with the Debtors in respect of such Successful Bid because of a breach or failure to perform on the part of such Qualifying Bidder, then the Back-up Bid shall be deemed to be the Successful Bid, and the Debtors, after consultation with the Term Loan Lenders and the Committee, will be authorized, but not required, to consummate a transaction in respect of the Back-up Bid with the Back-up Bidder without further order of the Bankruptcy Court, if applicable. C. The Debtors' presentation to the Bankruptcy Court for approval of a particular Qualified Bid as the Successful Bid does not constitute the Debtors' acceptance of such Qualified Bid. The Debtors will be deemed to have accepted any Qualified Bid only when such Qualified Bid is determined to be the Successful Bid and has been approved by the Bankruptcy Court. D. The Good Faith Deposits of the Successful Bidder and the Back-Up Bidder will be retained by the Debtors and such Qualified Bids will remain open until the closing of a transaction with the Successful Bidder in respect of the Successful Bid. The Good Faith Deposits of all other Qualifying Bidders shall be returned promptly after the entry of the Sale Order. The Good Faith Deposit of the Qualifying Bidder submitting the Back-Up Bid shall be returned promptly after the closing of the sale to the Successful Bidder. E. If the Successful Bidder fails to consummate a transaction in respect of the Successful Bid because of a breach or failure to perform on the part of such Successful Bidder and the Debtors are not then deemed to be in material breach of the applicable purchase and sale agreement, then the Debtors will not have any obligation to return the Good Faith Deposit to the Successful Bidder, and such Good Faith Deposit shall irrevocably become the property of the Debtors, and shall not be credited against the purchase price of any purchaser. 5 EX-99 3 p08-1653exhibit99_2.txt EXHIBIT I - LETTER AGREEMENT EXECUTION VERSION As of November 23, 2008 Ladies and Gentlemen: This letter agreement ("AGREEMENT") confirms certain understandings and agreements of the undersigned lenders (collectively, the "TERM LOAN LENDERS") with respect to (i) the Amended and Restated Term Loan Credit Agreement, dated April 20, 2007, by and between Lenox, Incorporated, D 56, Inc., and Lenox Retail, Inc., as borrowers, and Lenox Group Inc. and other guarantors party thereto as guarantors (Lenox, Incorporated, Lenox Retail, Inc. and Lenox Group Inc., collectively, "LENOX"); Bank of New York/Mellon (the "TERM LOAN AGENT") as administrative agent and the Term Loan Lenders party thereto (as amended, restated, supplemented or otherwise modified from time to time, the "TERM LOAN CREDIT AGREEMENT") and (ii) the undersigned's potential bid to purchase certain assets of Lenox and its subsidiaries pursuant to a chapter 11 plan of reorganization or, alternatively, through a sale under section 363 of the Bankruptcy Code. Capitalized terms used but not defined herein shall have the meanings set forth in the Term Loan Credit Agreement. For purposes of this Agreement, the term "REQUIRED LENDERS" shall mean Term Loan Lenders holding more than fifty percent (50%) of the outstanding principal amount of the Term Loans as of any date of determination and the term "SUPERMAJORITY LENDERS" shall mean Term Loan Lenders holding at least sixty-six and two-thirds percent (66 2/3%) of the outstanding principal amount of the Term Loans as of any date of determination. 1. STRUCTURE; CERTAIN OTHER MATTERS. (a) Each of the Term Loan Lenders have discussed with each other the possibility of submitting a bid (the "BID") to purchase some or all of the assets of Lenox and its affiliates, including (without limitation) the assets that are used or useful in connection with the manufacturing, sale and distribution of the Lenox, Dansk, Gorham and other similar brands, including (without limitation) all inventory, accounts, intellectual property and other real and personal property (the "PURCHASED ASSETS"), and have concluded that submission of a Bid consistent with the terms hereof (including all annexes hereto) is in the best interests of the Term Loan Lenders. (b) With respect to the Bid, the Term Loan Lenders agree that: (i) the terms and conditions of the Bid shall be consistent in all material respects with the terms of the Plan Term Sheet, dated as of November 23, 2008 attached hereto as Exhibit A (as amended, modified or otherwise supplemented with the written consent of Required Lenders, the "PLAN TERM SHEET"); provided, that any amendment, modification or supplement to the Plan Term Sheet, which, if made to a plan of reorganization, would require resolicitation under section 1127 of the United States Bankruptcy Code, shall require the written consent of Supermajority Lenders; (ii) the Purchased Assets shall be acquired by one or more newly formed entities (collectively, "NEW LENOX") pursuant to a structure to be determined following the completion of due diligence and analysis of potential tax and other relevant issues. Each of the Term Loan Lenders (either directly or through one or more affiliates) agrees to contribute to the capital of New Lenox all or, as may be determined by Required Lenders, a designated Pro Rata Share of their respective Obligations (as defined in the Term Loan Credit Agreement) in exchange for a Pro Rata Share of the equity interests in New Lenox. For purposes of this Agreement, a Term Loan Lender's "PRO RATA SHARE" shall mean a fraction, the numerator of which shall be the amount of Obligations contributed to the capital of New Lenox by such Term Loan Lender and the denominator of which shall be the aggregate amount of Obligations contributed to the capital of New Lenox by the Term Loan Lenders; (iii) prior to the execution of a definitive Asset Purchase Agreement and approval by the bankruptcy court pursuant to a confirmed plan of reorganization (or pursuant to an order under section 363 of the Bankruptcy Code), upon execution and delivery of this Agreement, Required Lenders may deliver to the Term Loan Agent a written direction to submit on behalf of New Lenox and all of the Term Loan Lenders, in accordance with any procedures established by the bankruptcy court, one or more credit bids for the Purchased Assets in an aggregate amount not to exceed the aggregate amount of the Obligations; (iv) any Asset Purchase Agreement to be executed and delivered by New Lenox shall be consistent with the terms set forth in the Plan Term Sheet and shall be in form and substance acceptable to Required Lenders. Any material amendment to the Asset Purchase Agreement shall require the consent of Required Lenders; and (v) New Lenox shall be governed in a manner consistent with the terms set forth in Exhibit B hereto or such alternative governance terms reasonably satisfactory to the Supermajority Lenders. The shareholders agreement or any other constituent documents of New Lenox shall be consistent in all material respects with the terms set forth in Exhibit B hereto. 2 (c) Except with the written consent of the other parties hereto, each party hereby covenants and agrees that it shall not (i) represent or hold itself out as the agent of any other party, (ii) enter into any contract, engage in any act or transaction or incur any obligation, liability, debt, cost or expense on behalf, for the account or in the name of any other party or (iii) purport to bind any other party. 2. TRANSFER. Until such time as the Plan Support Agreement dated as of November 23, 2008 between Lenox, its affiliates and the Term Loan Lenders is terminated or the Closing (as defined in the Asset Purchase Agreement) has occurred, each Term Loan Lender may transfer or dispose of any claim arising under the Term Loan Credit Agreement as follows: (a) Subject to the terms of this Agreement, to such party's affiliates, other Term Loan Lenders that are parties hereto, New Lenox, or, in accordance with the provisions of the Term Loan Credit Agreement, an assignee that agrees in writing to be bound by the terms of this Agreement by the execution of a joinder in form and substance reasonably acceptable to the Term Loan Agent, or (b) Free and clear of the terms of this Agreement if (i) such Term Lender has offered such claims to the other Term Lenders at a set asking price, (ii) such other Term Lenders have not agreed in writing to purchase all of the offered claims (subject to ratable cutback) at such set price (x) by the earlier of the tenth business day thereafter or January 20, 2009, if such offer is made prior to January 15, 2009 or (y) by the third business day thereafter, if such offer is made on or after January 15, 2009, and (iii) such Term Lender enters into a binding agreement to sell the claims to a buyer not a party to this Agreement in the immediately succeeding ten (10) business day period on terms and conditions, including price, no more favorable to the buyer than the terms it offered to the other Term Lenders. 3. EXPENSES; CERTAIN FEES. Each of the Term Loan Lenders shall bear a Pro Rata Share of all costs and expenses incurred in connection with the transactions referred to in this Agreement (including, without limitation, the costs and expenses of Schulte Roth & Zabel LLP and Miller Buckfire & Company, and any costs and expenses incurred by New Lenox) that are not reimbursed by a third party in accordance with the Term Loan Credit Agreement, and each Term Loan Lender shall make such payments to the Term Loan Agent as may be necessary to ensure that such costs and expenses are so borne. 4. FINANCING OF NEW LENOX. Each of the Term Loan Lenders consents to New Lenox (acting under the direction of its duly constituted Board of Directors) entering into one or more financing arrangements for the purposes of (i) paying any closing costs associated with the acquisition of the Purchased Assets, including, but not limited to, cure costs; (ii) refinancing any existing revolving loans secured by the Purchased Assets; and (iii) providing working capital from and after the closing date of the acquisition of the Purchased Assets. To the extent any such financing arrangement is provided by any Term Loan Lender, each Term Loan Lender shall be provided with the opportunity to participate in such financing arrangement to the extent of its Pro Rata Share. For the avoidance of doubt, other than as expressly provided in paragraph 2 hereof, no Term Loan Lender shall be required to provide any new capital or financial accommodation to New Lenox without such Term Loan Lender's express prior written 3 consent, which consent may be withheld in such Term Loan Lender's sole and complete discretion for any reason. 5. CONFIDENTIALITY. This Agreement, the terms included herein and the actual or prospective terms of any proposal for a transaction referred to herein are strictly confidential and may not be used for any purpose, or disclosed to any third party (other than a party's affiliates, agents, attorneys and accountants and, so long as they agree to be bound by the terms of this Paragraph 4, proposed assignees), without the express written consent of the other parties or as required under applicable law or as requested by any regulatory authority. Each party agrees not to use any information provided by or on behalf of any other in the context of the transactions contemplated hereby except to evaluate such transactions. Each party shall maintain the confidentiality of all confidential information provided by any other party with the same degree of care as is used for its own confidential information. Notwithstanding anything herein to the contrary, (a) counsel for the Term Loan Lenders may provide copies of this Agreement to Lenox and any third party in connection with the Bid and any effort of Lenox to obtain debtor-in-possession financing, and (b) a party may (i) disclose the terms of this Agreement to third party marking or rating agencies so long as such third party agrees to maintain the confidentiality of this Agreement, (ii) consult any tax advisor regarding the U.S. federal income tax treatment or tax structure of transactions contemplated hereby, and (iii) disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of such transactions and all materials of any kind (including opinions or other tax analyses) that are provided to such party relating to such tax treatment and tax structure. However, any information relating to the tax treatment or tax structure shall remain subject to the confidentiality provisions hereof (and the foregoing sentence shall not apply) to the extent reasonably necessary to enable the parties, their respective affiliates, and their respective affiliates' directors and employees to comply with applicable securities laws. For this purpose, "tax structure" means any facts relevant to the federal income tax treatment of the proposed transaction but does not include the identity of the parties or their respective affiliates. 6. REPRESENTATIONS AND WARRANTIES OF EACH PARTY. Each party hereby represents and warrants (severally and not jointly) to the others as follows: (a) Such party has the power and authority to enter into and perform all of such party's obligations under this Agreement. This Agreement has been duly and validly executed and delivered by such party and constitutes a legal, valid and binding agreement of such party, enforceable against such party in accordance with its terms. (b) Such party understands that there are substantial risks to the transactions contemplated by this Agreement and it has the capacity to protect its own interests in participating in such transactions. (c) Such party specifically understands and agrees that the other party has not made and will not make any representation or warranty with respect to the worthiness, terms, value or any other aspect of the transactions contemplated hereby and explicitly disclaims any warranty, express or implied, with respect to such matters. In addition, such party specifically 4 acknowledges, represents and warrants that it is not relying on any other party (i) for its due diligence concerning, or evaluation of, Lenox and its affiliates or their assets or businesses, (ii) for its decision with respect to participating in any such transaction or (iii) with respect to tax and other economic consideration involved in any such transaction. Such party acknowledges that (i) the other party may come into possession of information, with respect to Lenox and its affiliates or the Purchased Assets, that is not known to such party and that may be material to a decision to submitting a Bid ("EXCLUDED INFORMATION"), (ii) it has determined to enter into this Agreement notwithstanding its lack of knowledge of the Excluded Information, if any, and (iii) the other party shall have no liability to such party, and that such party waives and releases any claims that it might have against the other party pursuant to entering into transactions contemplated by this Agreement, with respect to any nondisclosure of Excluded Information, if any, now or in the future. (d) Except as disclosed on Schedule 5(d) annexed hereto, no broker, investment banker, financial advisor or other person is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of such party. 7. INDEMNIFICATION. Each of the parties to this Agreement agrees that the indemnification provided to the Term Loan Agent under the Term Loan Credit Agreement shall apply equally under this Agreement. 8. MISCELLANEOUS. (a) This Agreement (including the Schedules and Exhibits hereto) constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, between the parties hereto with respect to the subject matter hereof. This Agreement shall not be assigned by a party by operation of law or otherwise without the prior written consent of each other party. This Agreement may not be amended, changed, supplemented or otherwise modified except by an instrument in writing signed on behalf of each party. (b) This Agreement shall be binding upon and inure solely to the benefit of each party, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. (c) This Agreement shall be governed and construed in accordance with the laws of the State of New York. (d) The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that each party shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which they are entitled at law or in equity. 5 (e) This Agreement may be executed in counterparts, which together shall constitute one instrument. Facsimiles of duly executed signature pages are acceptable and shall deemed to be originals. 9. SPECIAL PROVISION REGARDING CHASE LINCOLN FIRST COMMERCIAL CORPORATION. Notwithstanding anything to the contrary in this Agreement and the Plan Term Sheet, this Agreement applies only to the Credit Trading Group of Chase Lincoln First Commercial Corporation, in its capacity as a Term Lender (the "CHASE LINCOLN CREDIT TRADING GROUP"), and, the term "Term Lender" means only the Chase Lincoln Credit Trading Group and such business unit's position in the Term Loans and does not apply to (i) any securities, loans, other obligations or any other interests in the Term Loans that may be held, acquired or sold by, or any activities, services or businesses conducted or provided by, any other group or business unit within, or Affiliate of, Chase Lincoln First Commercial Corporation; or (ii) any Term Loans that may be beneficially owned by non-Affiliated clients of Chase Lincoln First Commercial Corporation or any Affiliate of Chase Lincoln First Commercial Corporation. [THE REST OF THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK] 6 Please acknowledge your agreement to the foregoing by executing this Agreement in the space set forth below, whereupon this Agreement will become a binding contract among the parties hereto. Very truly yours, BANK OF NEW YORK/MELLON, as Administrative Agent By:_____________________________ Name: Title: 7 CEDARVIEW LEVERAGED OPPORTUNITES MA, LTD By: /s/ Burton Weinstein -------------------------- Name: Burton Weinstein Title: Managing Partner CEDARVIEW LEVERAGED OPPORTUNITIES MA II, LTD By: /s/ Burton Weinstein -------------------------- Name: Burton Weinstein Title: Managing Partner CEDARVIEW OPPORTUNITIES MASTER FUND, LP By: /s/ Burton Weinstein -------------------------- Name: Burton Weinstein Title: Managing Partner AII INVESTMENT HOLDINGS, LTD By: /s/ Burton Weinstein -------------------------- Name: Burton Weinstein Title: Managing Partner Notice Address: Cedarview Capital Management, LP One Penn Plaza, 45th FL New York, NY 10019 S-1 CETUS CAPITAL, LLC By: /s/ Richard Maybaum -------------------------- Name: Richard Maybaum Title: Managing Director Notice Address: Cetus Capital, LLC 8 Sound Shore Drive Greenwich, CT 06830 S-2 CHASE LINCOLN FIRST COMMERCIAL CORPORATION, but only as to its Credit Trading Group and that group's Term Loan position By: /s/ Samantha E. Hamerman -------------------------- Name: Samantha E. Hamerman Title: Authorized Signatory S-3 CLINTON-MAGNOLIA MASTER FUND, LTD. By CLINTON GROUP, INC., as investment adviser, By: /s/ Francis Ruchalski -------------------------- Name: Francis Ruchalski Title: Chief Financial Officer CLINTON MULTISTRATEGY MASTERFUND, LTD. By CLINTON GROUP, INC., as investment adviser By: /s/ Francis Ruchalski -------------------------- Name: Francis Ruchalski Title: Chief Financial Officer Notice Address: Clinton Group, Inc. 9 West 57th Street New York, NY 10019 S-4 LBC CREDIT PARTNERS, L.P. By: /s/ David E. Fraimow -------------------------- Name: David E. Fraimow Title: Vice President LBC CREDIT PARTNERS PARALLEL, L.P. By: /s/ David E. Fraimow -------------------------- Name: David E. Fraimow Title: Vice President Notice Address: LBC Credit Partners, Inc. Cira Centre 2929 Arch Street Philadelphia, PA 19104-2868 S-5 RAMIUS CREDIT OPPORTUNITIES MASTER FUND LTD (F/K/A RCG CARPATHIA MASTER FUND, LTD.) By: /s/ Marc Baum -------------------------- Name: Marc Baum Title: Authorized Signatory Notice Address: Ramius LLC 599 Lexington Avenue 21st Floor New York, NY 10022 S-6 TOPAZ FUND By:_____________________________ Name: Title: S-7 TRUMPET INVESTORS LP By: /s/ Eric Kogan -------------------------- Name: Eric Kogan Title: Manager Notice Address: Trumpet Investors L.P. 110 East 59th Street Suite 2100 New York, NY 10022 S-8 UBS STAMFORD LENDER By:_____________________________ Name: Title: Notice Address: UBS Investment Bank 677 Washington Blvd. Stamford, CT 06901 S-9 SCHEDULE 5(D) BROKERS' FEES 1. Miller Buckfire & Co., LLC 2. Berenson & Company EXHIBIT A PLAN TERM SHEET ================================================================================ LENOX GROUP, INC. PLAN TERM SHEET AS OF NOVEMBER 23, 2008 ================================================================================ The following is a summary (the "PLAN TERM SHEET") of certain material terms of a proposed Chapter 11 liquidating plan (the "PLAN") of the Company (as defined below). This Plan Term Sheet does not contain all the terms, conditions, and other provisions of the Plan and the transactions contemplated by this Plan Term Sheet are subject to conditions to be set forth in definitive documents. This Plan Term Sheet is proffered in the nature of a settlement proposal in furtherance of settlement discussions and is entitled to protection from any use or disclosure to any party or person pursuant to Federal Rule of Evidence 408 and any other rule of similar import. This Plan Term Sheet and the information contained herein are strictly confidential and contain material non-public information. It is being provided to the Term Loan Lenders and the Revolving Loan Lenders in accordance with the confidentiality provisions of the respective credit documents. This Plan Term Sheet does not constitute an offer of securities, nor is it an offer or solicitation for any chapter 11 plan, and is being presented for discussion and settlement purposes only. I. PARTIES DEBTORS Lenox Group, Inc., and certain of its subsidiaries (collectively, the "COMPANY" or the "DEBTORS"), including, without limitation, all Borrowers and Guarantors under the Term Loan Agreement and Revolving Credit Agreement. TERM LOAN LENDERS Bank of New York/Mellon as administrative agent and the lenders party to that certain Amended and Restated Term Loan Credit Agreement, dated as of April 20, 2007 (the "TERM LOAN AGREEMENT") (collectively, the "TERM LOAN LENDERS"), between the Lenders and D 56, Inc., Lenox Retail, Inc., and Lenox Incorporated, as borrowers (the "BORROWERS"), and Lenox Group Inc. and other guarantors party thereto as guarantors (the "GUARANTORS"). REVOLVING LOAN UBS Securities AG, Stamford Branch ("UBS") as LENDERS administrative agent and the lenders party to that certain Revolving Credit Agreement, dated as of April 20, 2007 (as amended, the "REVOLVING LOAN AGREEMENT") (collectively, the "REVOLVING LOAN LENDERS"), between the Lenders, the Borrowers, and the Guarantors. II. PROPOSED CHAPTER 11 SALE PURSUANT TO PLAN SALE OF ASSETS OF The proposed Plan contemplates (a) a sale (the "LENOX LENOX BUSINESS SALE") to the Term Loan Lenders of all or substantially PURSUANT TO A all of the assets of (i) the Lenox Business (as defined CHAPTER 11 PLAN(1) below) and (ii) the D56 Business (as defined below) that is remaining at the time of the Closing (as defined below), and (b) the subsequent disposition by the Term Loan Lenders of certain remaining portions of the D56 Business in accordance with the D56 Scale Down (as defined below) or as otherwise determined by New Lenox. The assets of the Lenox Business and the D56 Business to be purchased by the Term Loan Lenders (the "PURCHASED ASSETS") shall include all the assets of the Lenox Business and the D56 Business as of the Closing Date other than rejected contracts and any other assets or liabilities of either business designated as excluded assets by the Term Loan Lenders at least 10 days prior to the Effective Date. For purposes of this Plan Term Sheet the term "LENOX BUSINESS" shall mean all of the assets of the Debtors that are used or useful in connection with the manufacturing, sale and distribution of the Lenox, Dansk, Gorham and other similar brands, including (without limitation) all inventory, accounts, intellectual property and other real and personal property. For purposes of this Plan Term Sheet the term "D56 BUSINESS" shall mean all of the assets of the Debtors that are used or useful in connection with the manufacturing, sale and distribution of [collectibles], including (without limitation) all inventory, accounts, intellectual property and other real and personal property. To facilitate the Lenox Sale, the Term Loan Lenders will create a new entity or entities (collectively, "NEW LENOX") to which all or a portion of the loans under the Term Loan Agreement owned by the Term Loan Lenders party to the Plan Support Agreement dated as of November 23, 2008 (the "PLAN SUPPORT AGREEMENT") will be transferred. The Term Loan Lenders will credit bid an amount up to the aggregate amount of the obligations owned by the Term Loan Lenders and arising under the Term Loan Agreement for the Purchased Assets (the "PURCHASE PRICE"). Upon closing of the sale, which shall be the effective date of the Plan (the "CLOSING" or the "EFFECTIVE DATE"), New Lenox (and, indirectly, the Term Lenders, as the owners of New Lenox), will own 100% of the - --------------------- (1) The Term Loan Lenders reserve the right to direct the Company to consummate the Lenox Sale pursuant to a sale under section 363 of the Bankruptcy Code in the event of a default under the DIP Facility, undue delay in the confirmation of the Plan, in the event the cash payments to the holders of allowed administrative and priority claims required to confirm the Plan pursuant to section 1129 of the Bankruptcy Code exceed, in the aggregate, the aggregate claim amounts set forth herein, or for the other reasons set forth in the Plan Support Agreement. 2 equity in the Purchased Assets. The terms of the Lenox Sale shall be set forth in an asset purchase agreement in form and substance reasonably acceptable to the Company and the Term Loan Lenders (the "APA"). The APA will also provide for, among other things, the assumption by New Lenox of certain other liabilities of the Debtors, in each case as specified by New Lenox. Pursuant to the terms of the Plan the Company will undergo a tax liquidation as soon as reasonably practicable after the Effective Date of the Plan. III. PROPOSED SALE/LIQUIDATION OF D56 ASSETS D56 BUSINESS PROCESS Beginning before the Effective Date and continuing after the Effective Date, the D56 Business will be scaled down or disposed of by the Company or New Lenox, as applicable, either through a scale down plan, a sale process/royalty arrangement or another disposition (the "D56 SCALE DOWN"). The net proceeds received by the Company prior to the Effective Date in connection with the D56 Scale Down shall be applied in accordance with the terms of the Revolving Loan Agreement and the Term Loan Agreement. Any assets of the D56 Business that remain unsold as of the Closing shall be treated as "Purchased Assets" and shall be sold, transferred and assigned to New Lenox. Prior to the Effective Date, the Company will consult with the Term Loan Lenders before making any material decisions regarding the D56 Scale Down. IV. PLAN ADMINISTRATOR APPOINTMENT The Plan shall provide for the appointment of a plan administrator (the "PLAN ADMINISTRATOR") to, among other things, (a) oversee the claims resolution process, and (b) wind down the Company. On the Effective Date, pursuant to the Plan, the Plan Administrator will be provided with funding (the "PLAN ADMINISTRATOR FUND"), in an amount to be agreed upon by the Company and the Term Loan Lenders, which shall be sufficient to pay the fees and expenses of the Plan Administrator and its professionals and all costs incident to winding down the Company, objecting to and resolving claims, and distributing proceeds under the Plan (the "PLAN ADMINISTRATOR EXPENSES"). All amounts realized by the Plan Administrator from the sale, transfer or other disposition of assets, if any, shall be added to the Plan Administrator Fund. Any net recoveries from such proceeds that exceed amounts reasonably expected to be required to pay for the Plan 3 Administrator Expenses shall be immediately turned over to New Lenox. When all the duties of the Plan Administrator have been completed, the Company has been wound down, all allowed general unsecured claims have been paid the amount to which they are entitled under the Plan, there are no remaining disputed general unsecured claims, and the chapter 11 cases have been closed, any funds remaining in the Plan Administrator Fund shall be remitted to New Lenox. V. TREATMENT OF CLAIMS AND INTERESTS ADMINISTRATIVE/PRIORITY/ On the Effective Date, pursuant to the Plan, the Plan SECURED TAX CLAIMS FUND Administrator shall be provided with funding (the "APST CLAIMS FUND") in an amount to be determined by agreement of the Company and the Term Loan Lenders, but in any event, subject to the aggregate claim amounts set forth below, which funds shall be sufficient to pay all Administrative Expense Claims, Priority and Secured Tax Claims, and Other Priority Claims that are allowed on the Effective Date and that may become allowed after the Effective Date. The Plan Administrator shall be responsible for resolving and paying all Administrative Expense Claims, Priority and Secured Tax Claims, and Other Priority Claims. After all Administrative Expense Claims, Priority and Secured Tax Claims, and Other Priority Claims have been paid in full and there are no remaining Administrative Expense Claims, Priority and Secured Tax Claims, and Other Priority Claims, all funds remaining in the APST Claims Fund shall be remitted to New Lenox. ADMINISTRATIVE AND PRIORITY CLAIMS o ADMINISTRATIVE Except to the extent that a holder has been paid by the EXPENSE CLAIMS Company, in whole or in part, prior to the Effective Date or agrees to a less favorable treatment, each holder of an allowed administrative expense claim shall be paid in full, in cash, the full amount of its unpaid claim on or as soon as reasonably practicable following the later to occur of (a) the Effective Date or as soon thereafter as is reasonably practicable and (b) the date on which such claim becomes allowed; provided, however, that in no event shall the aggregate amount of non-professional fee Administrative Expense Claims (including, without limitation, cure costs) exceed $[1,800,000]. o SECURED TAX AND Except to the extent that a holder has been paid by the PRIORITY TAX Company, in whole or in part, prior to the Effective CLAIMS Date or agrees to a less favorable treatment, each holder of an allowed secured tax claim or allowed priority tax claim shall (a) be paid in full, in cash, the full amount of its unpaid claim on or as soon as reasonably practicable following the later to occur of (x) the Effective Date or as soon thereafter as is reasonably practicable and (y) the date on which such claim becomes allowed or (b) receive such other terms determined by the Bankruptcy Court to provide the holder deferred cash payments having a value, as of the Effective 4 Date, equal to such claim; provided, however, that in no event shall the aggregate amount of Secured Tax Claims and Priority Tax Claims exceed $[250,000]. o OTHER PRIORITY Except to the extent that a holder has been paid by the CLAIMS Company, in whole or in part, prior to the Effective Date or agrees to a less favorable treatment, each holder of an allowed other priority claim shall receive, in full satisfaction of such other unpaid priority claim, cash in the full amount of the claim, on or as soon as reasonably practicable after the later of (i) the Effective Date or as soon thereafter as is reasonably practicable, and (ii) the date such claim becomes allowed; provided, however, that in no event shall the aggregate amount of Other Priority Claims exceed $[100,000]. SECURED CLAIMS o REVOLVING LOAN The Revolving Loans (the "REVOLVING LOAN CLAIMS") FACILITY arising from the Revolving Loan Agreement shall be "rolled up" into the DIP Facility. o TERM LOAN FACILITY Holders of secured claims arising from the Term Loan Agreement shall contribute all of their claims to New Lenox. New Lenox will credit the Purchase Price and purchase the Purchased Assets free and clear of all liens, interests, claims or encumbrances, except as set forth in the APA. o MISCELLANEOUS To the extent not previously paid pursuant to an order SECURED CLAIMS of the Bankruptcy Court authorizing payment of lien claims during the chapter 11 cases, all holders of claims secured by valid liens (including, without limitation, mechanics', materialsmens', artisans', tax and any other lien) against property not abandoned or sold will retain their liens on such property and be paid in the ordinary course of business by New Lenox UNSECURED CLAIMS o GENERAL UNSECURED On the Effective Date, the Plan Administrator shall be provided with an amount to be agreed upon by the Term Lenders (the "GENERAL UNSECURED CLAIMS FUND") to pay holders of allowed general unsecured claims. On the Effective Date, each holder of an allowed unsecured claim shall receive its pro rata share of the General Unsecured Claims Fund. The Plan shall provide a mechanism for delaying distribution to holders of general unsecured claims pending a resolution of disputed general unsecured claims. The Plan will provide a release of all Chapter 5 causes of action against any person who provided goods and services in the ordinary course of business.(2) - --------------------- (2) Subject to review of potential claims by Term Loan Lenders. 5 EQUITY INTERESTS Holders of equity interests in the Company will not receive or retain any property or interest on account of their interests, and all such interests will be cancelled and extinguished. VI. SOURCES FOR PAYMENTS UNDER PLAN PLAN FUNDING At Closing, subject to the aggregate claim limits set forth above (compliance with which shall be a condition to effectiveness of the Plan), New Lenox will provide sufficient funds to make all payments required to be made, including to fund the Plan Administrator Fund, the APST Claims Fund, and the General Unsecured Claims Fund. VII. OTHER PLAN PROVISIONS RELEASES AND EXCULPATION The Company/Debtors will release their respective officers and directors, the Revolving Loan Lenders and agent under the Revolving Loan Agreement, the Term Loan Lenders and agent under the Term Loan Agreement, and the respective officers, directors, employees, agents, advisors and professionals of each of the foregoing, including of the Company/Debtors, from all claims arising on or before the Effective Date, other than for claims based on willful misconduct, intentional fraud, or criminal conduct as determined by a final order entered by a court of competent jurisdiction. The Plan will include standard exculpation for individuals and professionals participating in the Debtors' chapter 11 cases. The Term Loan Lenders will release the Debtors and their respective officers, directors, employees, agents, advisors, and professionals from all claims arising on or before the Effective Date, other than for claims based on willful misconduct, intentional fraud, or criminal conduct as determined by a final order entered by a court of competent jurisdiction. INDEMNIFICATION OF Under the Plan, all indemnification provisions PREPETITION OFFICERS currently in place (whether in the by-laws, AND DIRECTORS certificates of incorporation, or employment contracts) for the current and former directors, officers, employees, attorneys, other professionals and agents of the Debtors and such current and former directors and officers' respective affiliates will be assumed by New Lenox and will survive effectiveness of the Plan for claims related to or in connection with any actions, omissions or transactions occurring prior to the Effective Date. Notwithstanding the foregoing, in no event will New Lenox's obligation with respect to indemnification exceed the amount of any deductible payable pursuant to the directors and officers liability policy. 6 EMPLOYEE TRANSITION The Plan will further provide that New Lenox may, in PROGRAMS its discretion, assume certain agreements and pre-petition obligations as currently formulated or as modified, including, but not limited to portions of the Company's existing Change in Control, Outplacement, Severance and other benefits and obligations to Company employees (3). PENSION AND RETIREE Pursuant to the Plan, and as a condition to the BENEFIT PLANS effectiveness of the Plan, all existing defined benefit and other pension and/or retiree benefit plans maintained by the Debtors shall be terminated in a manner reasonably acceptable to New Lenox. DEFINITIVE DOCUMENTATION The Company, the agent for the Revolving Loan Lenders, the agent for the Term Loan Lenders, the Postpetition Lenders, and the Exit Facility lender will negotiate in good faith definitive documentation for the Plan consistent with the terms hereof, including, without limitation, a plan support agreement, the DIP Facility, and any necessary documents to effectuate the Plan. OTHER TERMS AND The Plan and all related documentation shall reflect CONDITIONS the terms and conditions of this Plan Term Sheet to the parties' mutual satisfaction and shall contain such other terms and conditions as the parties mutually agree. This Plan Term Sheet will become part of the Plan Support Agreement containing customary terms and conditions to be executed by the Company and the Term Loan Lenders in support of the Plan. The distributions on and treatment of claims of the Term Loan Lenders contemplated herein shall become effective and binding only upon the confirmation and effective date of a Plan under Chapter 11 of the U.S. Bankruptcy Code which has been voted upon and approved by the Term Loan Lenders in accordance with section 1126(c) of the Bankruptcy Code, and confirmed by the Bankruptcy Court. The Company shall not enter into, terminate, amend, modify or supplement any Material Contract without prior consultation with, and the prior consent, which consent shall not unreasonably withheld or delayed, of, the Term Loan Lenders (other than for the purchase or sale of inventory in the ordinary course of business). For purposes hereof the term "Material Contract" shall mean (a) any license agreement, or (b) any agreement that involves the payment of, or the purchase or provisions of goods or services having a value in excess of, $250,000 in any year or $500,000 over the life of such contract. (3) The Term Loan Lenders will need to review all agreements related to these programs before determining whether to agree to this provision. 7 Prior to the Effective Date, the Company shall have taken the steps to perform an audit of 2008 financial results under a format reasonably acceptable to the Term Loan Lenders and consistent with privately held corporations. 8 EXHIBIT B NEW LENOX SUMMARY TERM SHEET Reference is made to that certain letter agreement, dated as of November 23, 2008, between and among the Term Loan Agent and the Term Loan Lenders (collectively, the "SIGNATORY LENDERS") regarding the Term Loan Lenders' potential submission of a bid to purchase certain of the assets of Lenox Group Inc. and its affiliates (the "LETTER AGREEMENT"). This Term Sheet is annexed to the Letter Agreement and sets forth the material governance terms for one or more entities proposed to be formed by the Signatory Lenders in connection with any such purchase, it being understood that this Term Sheet is not intended to contain all matters upon which agreement must be reached among the Signatory Lenders in order to complete the transactions contemplated hereby, and that any such matters (including, without limitation, the terms of any certificate of incorporation, by-laws, shareholders agreement, operating agreement or other constituent documents) shall be in form and substance reasonably satisfactory to each of the Term Loan Lenders and Term Loan Agent. TRANSACTION: It is contemplated that: a. each of the Signatory Lenders pursuant to that certain Amended and Restated Term Loan Credit Agreement, dated April 20, 2007, by and between Lenox, Incorporated, D 56, Inc., and Lenox Retail, Inc., as borrowers; and Lenox Group Inc. and other guarantors party thereto as guarantors; Bank of New York/Mellon (the "TERM LOAN AGENT") as administrative agent and the Term Loan Lenders party thereto (as amended, restated, supplemented or otherwise modified from time to time, the "TERM LOAN CREDIT AGREEMENT"), will contribute all (or a lesser amount as may be determined by Required Lenders) of their respective interests in the "Term Loans" to one or more newly-organized Delaware C corporations (collectively, the "COMPANY"), in exchange for equity interests in, or debt securities issued by, the Company; and b. the Company will use such Term Loans to credit bid in connection with the possible purchase (the "TRANSACTION"), in the context of a U.S. bankruptcy proceeding, of certain assets of Lenox Group Inc. and its affiliates pursuant to the terms set forth in the Plan Term Sheet, dated as of November 23, 2008 (the "PLAN TERM SHEET"). COMPANY: The Company will consist of one or more newly-organized Delaware C corporations. When the Signatory Lenders contribute the Term Loans to the Company (the "TERM LOAN CONTRIBUTIONS"), the Company will issue equity interests, PRO RATA among the Signatory Lenders (or their designated affiliates) according to the amount of the Term Loan Contributions made by each of them. To the extent that the Company is comprised of more than one entity, the Signatory Lenders shall allocate the Term Loan Contributions based on the relative value of the assets to be held by each entity. GOVERNING The holders of equity interests in the Company (i.e., DOCUMENTS: the Signatory Lenders or their designated affiliates) (the "SHAREHOLDERS") will enter into a shareholders agreement (the "SHAREHOLDERS AGREEMENT") and adopt a Certificate of Incorporation and By-Laws in respect of their ownership of the Company in order to give effect to the provisions described herein. The Shareholders Agreement shall be governed by Delaware law. To the extent that the Company is comprised of more than one entity, the governing documents for each entity shall be substantially identical and the provisions described herein shall apply equally to each entity. BOARD OF Except where Shareholder approval is required by the DIRECTORS: Shareholders Agreement or by law, the Company shall be governed by a [seven] member Board of Directors (the "Board"). The Board shall be appointed as follows: [Board designation rights, ownership thresholds for designation rights and other board composition/ replacement matters TBD] [need to determine threshold for determination and modification of these rights.] BOARD OBSERVATION Shareholders who do not have the right to designate a RIGHTS: member of the Board shall, collectively, have the right to appoint one non-voting observer to the Board (the "OBSERVER"). The Observer may be present at all meetings of the Board, including any telephonic meetings, and the Company will send or make available to the Observer such notice of meetings and such copies of all minutes, consents, correspondence and other material as are sent, given or made available to members of the Board (except as may be necessary to preserve attorney-client privilege). The Observer may only be excluded from any meeting of the Board or portion thereof or from receiving any such materials, if, in any such case, the Company reasonably believes, upon advice of counsel, that such exclusion is reasonably necessary to preserve attorney-client privilege. TRANSFER: There generally will be no restrictions on transfers of equity interests in the Company; however, all transfers must comply with securities laws, the drag-along and tag-along rights set forth below and the right of first offer set forth below, and no transfers will be permitted without the approval of the holders of a majority of the Company's outstanding 2 equity interests to the extent such transfers would cause the Company to become subject to the reporting requirements of any securities laws, or would be reasonably likely to result in the loss of any licenses or approvals that are material to the Company or its subsidiaries. The applicable transferee must agree to be bound by the terms and conditions of the Shareholders Agreement for any such transfer to be effective. RIGHT OF FIRST Notwithstanding anything to the contrary in the OFFER: Transfer section above, to the extent that a Shareholder wants to sell all or a portion of its equity interests in the Company to a non-Shareholder (other than an affiliate of the selling Shareholder), it must first offer such equity interests to the other Shareholders at a set asking price. The other Shareholders shall have ten (10) business days to purchase all (but not less than all) of the offered equity interests (subject to ratable cutback) at such set price. If the offered equity interests are not purchased in their entirety by such other Shareholders within such ten (10) business day period, then, in the following ten (10) business days, the selling Shareholder may sell all (but not less than all) of the offered equity interests to non-Shareholders on terms and conditions, including price, no more favorable to the buyer than the terms it offered to the Shareholders. DRAG ALONG RIGHTS: At any time, the holders of two-thirds of the Company's outstanding equity interests may cause all of the other Shareholders to sell all or any portion of their equity interests in the Company, on a pro rata basis, to a buyer that is not affiliated with any of the holders initiating such sale if such sale would result in a change of control of the Company, pursuant to a customary drag along provision. TAG ALONG RIGHTS: In connection with any Shareholder's (or affiliated group of Shareholders') proposed sale of equity interests of the Company (other than a sale to such selling Shareholder's or affiliated group of Shareholders' affiliates), [representing more than 10% of the Company's outstanding equity interests], the other Shareholders shall be entitled to exercise tag along rights on a pro rata basis, subject to the same terms and conditions. PREEMPTIVE RIGHTS: At the Board's election, each Shareholder shall have a preemptive right in respect of all equity issuances by the Company, subject to customary carve-outs. ANTI-DILUTION RIGHTS: Each Shareholder will, subject to customary exceptions, have the right to purchase new equity interests in the Company in an amount that would maintain such Shareholder's percentage ownership of the equity interests in the Company pursuant to new equity issuances by the Company. The Company shall provide notice to each Shareholder no later than ten (10) business days after any such issuance in order to 3 permit such Shareholder to participate. INFORMATION RIGHTS: Each Term Loan Lender shall be entitled to receive quarterly and annual financial statements of the Company. ASSET PURCHASE The Signatory Lenders agree to prepare an Asset AGREEMENT: Purchase Agreement substantially incorporating the terms of the Plan Term Sheet. Any amendments to or modifications of such Asset Purchase Agreement must be ratified and approved by Shareholders holding, in the aggregate, at least a majority in amount of the Term Loan Contributions as of any date of determination. MATTERS Subject to affiliate transaction restrictions, the SUBMITTED TO A following actions will be submitted for a vote of all VOTE OF ALL of the Company's Shareholder and will require approval SHAREHOLDERS: of the holders of two-thirds of the Company's equity interests: o sale or merger of the Company or all or substantially all of its assets; and o any changes or amendments in or to the constitutive documents of the Company that disproportionately adversely affect the rights of any Signatory Lenders. AFFILIATE The Company will not engage in any material transaction TRANSACTIONS: with any Shareholder or any affiliate thereof unless such transaction is on arms'-length terms or is approved by (1) a majority of the members of the Board not appointed by such Shareholder or its affiliates or (2) a majority of the disinterested Shareholders. 4 -----END PRIVACY-ENHANCED MESSAGE-----