Item 1.01 Entry into a Material Definitive Agreement

As previously disclosed in the Current Report on 8-K that Lenox Group Inc. (the “Company”) filed on February 20, 2009, the Company, Lenox, Incorporated, a New Jersey corporation (“LI”), Lenox Worldwide, LLC, a Delaware limited liability company (“LW”), Lenox Retail, Inc., a Minnesota corporation (“LRI”), Lenox Sales, Inc., a Minnesota corporation (“LSI”), FL 56 Intermediate, Corp., a Delaware corporation (“FL”), and D 56, Inc., a Minnesota corporation (“D56” and collectively with the Company, LI, LW, LRI, LSI and FL, the “Sellers”) conducted an auction on February 11, 2009 (the “Auction”) pursuant to the bidding procedures that were approved by the United States Bankruptcy Court for the Southern District of New York (the “Court”) on December 16, 2009. At the conclusion of the Auction, the Sellers declared that the bid submitted by Upstairs Acquisition Corp., a Delaware corporation (“UAC”), was the highest qualified bid with the greatest certainty of closing quickly and entered into an Asset Purchase Agreement with UAC dated February 14, 2009 (the “UAC Asset Purchase Agreement”).

On February 23, 24 and 25, 2009, the Court conducted a hearing in respect of the proposed sale to UAC. At the conclusion of the hearing, the Court determined that it should exercise its discretion to reopen the Auction and directed that a new auction be conducted at which the bid that had been previously submitted by LDG-Delaware Opco, Inc., a Delaware corporation (“LDG”), would be a qualified bid. At the commencement of the reopened Auction, the Sellers determined that LDG’s bid was the highest and best offer and, after UAC declined to submit a further offer, the Sellers declared LDG the winner of the Auction.

Following the completion of the Auction, on February 28, 2009, the Sellers entered into an Asset Purchase Agreement (the “LDG Asset Purchase Agreement”) with LDG. Under the terms of the LDG Asset Purchase Agreement, LDG agrees to purchase substantially all of the assets of the Sellers, including all of the Sellers’ assets, properties, rights and claims in relation to the dinnerware, stemware, fine crystal and beverageware, flatware, giftware, other tableware, holiday, seasonal and home decorative, figurine and collectible products and accessories and other similar products, including under the Lenox, Gorham, Dansk, Department 56 and Snowbabies and other brands (the “Purchased Assets”), but excluding certain assets as set forth in the LDG Asset Purchase Agreement including (i) any rights that the Sellers may have to any tax refunds, and (ii) $1,200,000.00 that the Sellers have deposited with Wachovia for the payment of payroll and sales tax.

The purchase price that LDG has agreed to pay as consideration for the sale and purchase of the Purchased Assets consists of the following: (i) $44,500,000.00 of debt forgiveness as evidenced by the credit bid of a portion of the Sellers’ obligations under the Amended and Restated Term Loan Agreement, dated as of April 20, 2007, by and among LI, D56 and LRI, as borrowers, the Company and other guarantors party thereto as guarantors, The Bank of New York Mellon, as administrative agent (as successor to UBS AG, Stamford Branch), and the lenders party thereto (the “Term Loan Agreement”), (ii) the assumption by LDG of certain assumed liabilities as specified in the LDG Asset Purchase Agreement (including certain determined cure costs), (iii) cash in an amount equal to the outstanding obligations under the Debtor-in-Possession Revolving Credit Agreement, dated as of November 25, 2008, among D56, LRI, LI, the Company, UBS Securities LLC, JP Morgan Chase Bank, NA, UBS Loan Finance LLC, UBS AG, Stamford Branch and the lenders and other guarantors that are parties thereto as of the date on which the sale and purchase of the Purchased Assets is completed (the “Closing Date”), and (iv) cash in an aggregate amount equal to the sum of (A) up to $2,150,000.00 to pay allowed administrative, priority and secured tax claims (excluding accrued but unpaid professional fees that are incurred by the Sellers’ or the Official Committee of Unsecured Creditors through the Closing Date that have been or subsequently will be approved by the Court (the “Accrued Professional Fees”)), (B) the Accrued Professional Fees, (C) an amount equal to $250,000.00 to provide for distributions to the holders of allowed general unsecured claims against the Sellers, and (D) $100,000.00 to fund the costs and expenses of a plan administrator to wind down the Sellers’ estates from and after the Closing Date. LDG also agrees to offer employment to each of the Sellers’ employees who remain employed immediately prior to the Closing Date by Sellers or their subsidiaries. Those employees who accept such offers of employment shall, for a period of 1 year following the Closing Date or such longer period as required by law, receive compensation and benefits that are, in the aggregate, substantially equivalent to those provided to such employees prior to the Closing Date, provided that LDG shall not be required to provide equity-based benefits, defined benefit pension benefits, retiree medical or life insurance benefits, incentive or bonus plans or certain other benefits.

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