TO: All Lenox Group Inc Associates

FROM: Marc Pfefferle

RE: Business Plan Update

DATE: March 26, 2007

In my earlier communication to you, I indicated that the Carl Marks Advisory Group was retained to conduct a thorough and objective evaluation of all of the business initiatives of Lenox Group and, with your help, develop and implement a plan to return the Company to profitability.

Many of you have provided input to identify and help plan for necessary changes across our businesses. On behalf of the Board and senior management, I want to thank you for that. It may seem like this effort has been going on for a long time when in reality it has only been just over two months. In this short time, we have made good progress and intend to continue concentrating on the day-to-day business while we design and begin to implement our longer term plan.

Earlier this month, we met with our Board of Directors to present our business plan, which includes key actions for succeeding in both the short-term and long-term. These key actions include: building equity in our wonderful brands (Lenox, Dansk, Gorham and Department 56) with clearly defined brand strategies; designing exciting products which appeal to changing consumer preferences; improving our forecasting accuracy, product development processes, sourcing capabilities and customer delivery performance; and expanding into appropriate market channels where our consumers choose to shop.

With that in mind, let me bring you up to date on where we are on these fronts.

Update

On March 15, Lenox Group filed its annual report with the SEC and reported financial results for the fourth quarter 2006 and for the full year. Our operating results for the year from continuing operations, excluding unusual items, while unacceptable, were within the range of the guidance we had provided in January. As a public company, Lenox Group is keenly aware of its responsibility to deliver value for all shareholders. We expect that the actions we are currently taking will result directly in improved financial results over time.

A crucial element to our success is maintaining the support of our financial institutions and the restructuring of our balance sheet. We delivered a budget and an updated business plan for fiscal 2007 to our lending group earlier this month. The business plan, which includes a restructuring of our businesses to achieve growth and profitability, is substantially complete and has been approved by the Board. A key part of the new plan is a refinancing of our existing loan agreements to provide additional liquidity and flexibility to run our business. Today, I am pleased to report that we have signed a commitment letter with UBS, our existing lead lender, for $275 million which we will apply to pay off LGI’s current outstanding credit facilities of $106.1 million as of March 23, 2007, with the balance used to fund the Company's ongoing working capital requirements. We expect to close this refinancing by the end of April.

Other key foundations of our profit improvement plan are to:

• Develop clear brand strategies and implement a brand-focused organizational structure to support future top line growth, managed to maximize performance across all channels;

• Simplify and consolidate our infrastructure where appropriate;

• Improve gross margins in part through better sourcing and Kinston plant cost reductions;

• Implement processes to improve product development and inventory management with a focus on reducing the amount of excess inventory that must be liquidated at discounted prices; and

• Continue to identify ways to enhance efficiency and take expense out of the business, including implementing supply chain efficiencies and reductions of support costs.

From an operational standpoint, we have already accomplished the following:

• Developed a new strategic plan for D56 and have begun restructuring operations to eliminate unprofitable product lines, refocus core product lines/assortments to better satisfy customer requirements and realign resources to drive improved profitability;

• Announced a consolidation of the Rogers, MN facility into our distribution center in Hagerstown, MD;

• Reduced our work force and began other cost savings and efficiency initiatives at our fine bone china manufacturing facility in Kinston, NC to better align staffing levels with the facility’s decreased production volume, in part due to Lenox having fewer company-operated retail stores; and

• Appointed Lyle Eidelbes as the Company’s new Chief Information Officer. Lyle has already begun developing a plan for simplifying, integrating and improving our IT platforms. This will reduce the cost to support our IT systems and give people across the businesses better and more comprehensive access to information when they need it.

Last Friday, we announced several additional business improvements:

• At D56, we implemented organizational changes to reduce operating costs and align the business with our new market focused business strategy.

• In retail, we have decided not to open any additional Hoopla stores and are developing a longer range plan to exit the Hoopla retail business. Although the Hoopla concept was well received, the proper execution of this new retail business model requires a substantial investment, and, at this time, we need to focus our resources on improving our core businesses.

• To better leverage company-wide resources, David O’Connell has been named Corporate VP of Global Sourcing. David’s responsibilities will include the Lenox and D56 sourcing teams as well as the Quality Assurance and Technical Services functions for Lenox.

• Dale Doss has been named Corporate VP of Supply Chain and Logistics based in Bristol. In addition to his current responsibilities for leading our distribution centers across the Lenox and D56 supply chain functions, Dale will assume leadership responsibility for Inventory Planning, Import/Export, Procurement and Supply Chain Systems for Lenox.

• Pam Massenburg, has been appointed interim Brand leader of the Dansk Brand. Pam is an expert in branded consumer products and retail marketing with a great “feel” for the business. In the short time with our company, she has already made a positive contribution to the business.

• Ed Spinelli of Carl Marks has been named as interim VP of Manufacturing.

Over the next three weeks, we will be finalizing our new brand organization. I am looking forward to sharing the structure with you at that time.

Overall, we are making progress on a number of critical aspects of our business and financial condition. I believe Lenox Group and its brands are on the way to delivering value for all of our shareholders. However, there is still a lot of work ahead to build on the current momentum for improving our operational and financial performance. The successful implementation of our plan requires focus, hard work, open and continuous communication, and teamwork from all of us.

It is more important than ever that you not let any outside noise or speculation about our company’s challenges and opportunities distract you from executing on your responsibilities, as it could have significant negative effects on our positive momentum.

Thank you for your continued support. I look forward to updating you on future developments.