================================================================= BORDERS GROUP BANKRUPTCY NEWS Issue Number 8 ----------------------------------------------------------------- Copyright 2011 (ISSN XXXX-XXXX) March 25, 2011 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 215-945-7000 FAX 215-945-7001 ----------------------------------------------------------------- BORDERS GROUP BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 572 Fernwood Lane, Fairless Hills, Pennsylvania 19030, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. New issues are prepared by Michille P. Deiparine, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Subscription rate is US$45 per issue. Any re-mailing of BORDERS GROUP BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00125] BORDERS BEGINS LIQUIDATION OF 26 ADDITIONAL STORES [00126] PUBLISHERS REMAIN CAUTIOUS OF BORDERS' BANKRUPTCY PLAN [00127] DEBTORS' MOTION FOR KEY EMPLOYEE BONUS/RETENTION PLANS [00128] BORDERS GETS FINAL APPROVAL OF $505MM DIP CREDIT FACILITY [00129] DEBTORS' MOTION TO MODIFY TRADE TERMS WITH VENDORS [00130] COMMITTEE'S MOTION TO OKAY CREDITOR INFORMATION PROTOCOL [00131] COVENTRY RETAIL'S MOTION TO LIFT STAY TO EVICT DEBTOR [00132] SN WARRANTY'S MOTION TO COMPEL LEASE DECISION [00133] CIRQUA'S LETTER SEEKING PAYMENT OF $66,480 INVOICE [00134] ENTITIES FILE NOTICES OF SUBSTANTIAL STOCK OWNERSHIP [00135] SCHOLASTIC POSTS $3.5MM BORDERS-RELATED BAD DEBT EXPENSE [00136] BORDERS STORES TO HOST LEGO EVENT FOR KIDS ON MARCH 26 KEY DATE CALENDAR ----------------- 02/16/11 Voluntary Chapter 11 Petition Date 02/24/11 U.S. Trustee Appoints Official Creditors' Committee 03/18/11 Deadline to Provide Utilities with Adequate Assurance 03/22/11 First Meeting of Creditors under 11 USC Sec. 341 04/05/11 Deadline to File Schedules of Assets and Liabilities 04/05/11 Deadline to File Statement of Financial Affairs 04/05/11 Deadline to File Lists of Contracts and Leases 05/17/11 Deadline to Remove Actions Pursuant to F.R.B.P. 9027 06/16/11 Expiration of Debtors' Exclusive Plan Proposal Period 08/15/11 Expiration of Debtors' Exclusive Solicitation Period 09/14/11 Deadline to Make Decisions About Lease Dispositions 02/15/13 Deadline for Debtors' Commencement of Avoidance Actions Bar Date for filing Proofs of Claim ----------------------------------------------------------------- [00125] BORDERS BEGINS LIQUIDATION OF 26 ADDITIONAL STORES ----------------------------------------------------------------- See prior related entry at [00100] (Borders to Close 25 More Stores, Sales to Begin March 24), [00060] (Borders to Liquidate 75 Additional Stores) and [00012] (Borders Gets Court Nod to Liquidate 200+ Stores). Borders Group, Inc. commenced on March 24, 2011, store closing sales at 26 locations: (1) 4980 Stockdale Hwy, Bakersfield, California 93309 (2) Emery Bay Public Market, 5800 Shell Mound St, Emeryville, California 94608 (3) 7000 Marketplace Avenue, Goleta, California 93117 (4) 1501 Vine St., Hollywood, California 90028 (5) McCarthy Ranch Marketplace, 15 Ranch Drive, Milpitas, California 95035 (6) 120 Crescent Dr., Pleasant Hill, California 94523 (7) 11160 Rancho Carmel Drive, San Diego, California 92128 (8) 588 Francisco Blvd. West, San Rafael, California 94901 (9) 1499 Post Road, Fairfield, Connecticut 06430 (10) 1041 High Ridge Rd., Stamford, Connecticut 06905 (11) 3637 Peachtree Rd Ne Suite C, Atlanta, Georgia 30319 (12) 270 Dairy Rd., Kahului, Hawaii 96732 (13) 94-821 Lumiaina Street, Waikele Center, Waipahu, Hawaii 96797 (14) 4100 University Ave., West Des Moines, Iowa 50265 (15) 3232 Lake Ave., Wilmette, Illinois 60091 (16) 4320 Coldwater Rd., Fort Wayne, Indiana 46805 (17) 8675 River Crossing Blvd., Indianapolis, Indiana 46240 (18) 9108 Metcalf St., Overland Park, Kansas 66212 (19) 255 Grossman Dr., Braintree, Massachusetts 02184 (20) 476 Boston Turnpike, Shrewsbury, Massachusetts 01545 (21) 2740 E 21St Street, Tulsa, Oklahoma 74114 (22) 1 S Broad, Philadelphia, Pennsylvania 19107 (23) 2525 Westend, Nashville, Tennessee 37203 (24) Fountains On The Lake, 12788 Fountain Lake Circle, Stafford, Texas 77477 (25) 2000 South Commons, Federal Way, Washington 98003 (26) 2508 S 38Th Street, Tacoma, Washington 98409 Borders added the Emeryville, California, store in an updated store closure list posted in its reorganization Web site on March 24, 2011, a copy of which is available for free at: http://bankrupt.com/misc/Borders_Mar24StoreClosingList.pdf A joint venture composed of Hilco Merchant Resources, LLC, Gordon Brothers Group, SB Capital Group, LLC, and Tiger Capital Group disclosed in a March 24, 2011 public statement that nearly $50 million of inventory including books, magazines, music and movie media, calendars, posters and more would be liquidated. Discounts from 20% to 40% with limited exceptions are offered on all merchandise at these newly announced locations. Consumers will enjoy very substantial savings on the entire stock of books in every category, including new releases, best sellers, textbooks, rare and collectible books and children's books. There are also significant price reductions on thousands of music CDs, video DVDs and Blu-Ray, arts and crafts items, language learning systems, games, puzzles and more. Borders Rewards programs, including Borders Rewards Plus, remain in effect. Customers can continue to earn and redeem their Rewards in all stores and on Borders.com. Gift cards will also be honored as usual. The liquidation of inventory and store fixtures is being managed by the Hilco-Gordon Brothers joint venture. A spokesperson for the joint venture said, "This is an important opportunity for consumers to benefit from very compelling discounts on a vast assortment of literature, entertainment media and much more. Based on the tremendous response to the store closing sales already underway at 200 other Borders locations, we believe that today's value conscious consumers will take advantage of the exciting savings at these new locations. We anticipate that this will be a short sale." Based in Northbrook, Illinois, Hilco Merchant Resources (www.hilcomerchantresources.com) provides a wide range of analytical, advisory, operational, asset monetization and capital investment services to help retailers define and execute strategic initiatives. Founded in 1903, Gordon Brothers Group (www.gordonbrothers.com) is a global advisory, restructuring and investment firm specializing in the retail, consumer products, industrial and real estate sectors. SB Capital Group, a Schottenstein affiliate, is a leader in the field of asset recovery, rescue finance, restructuring and strategic store closing events. Tiger Capital Group (www.tigergroupllc.com) specializes in the planning, promotion, and management of store-closing events in connection with mergers, acquisitions, downsizing, corporate divestitures and Chapter 11 proceedings. ----------------------------------------------------------------- [00126] PUBLISHERS REMAIN CAUTIOUS OF BORDERS' BANKRUPTCY PLAN ----------------------------------------------------------------- See prior related entry at [00059] (Borders Targets Bankruptcy Exit in September, Says CEO). Book publishers are wary of Borders Group, Inc.'s turnaround plan as the bookseller hopes to exit bankruptcy in September, Jaclyn Trop of The Detroit News reports. According to The Detroit News, Borders' biggest hurdle is not a viable turnaround plan but the unpaid publishers that are taking steps to secure their business in the wake of the bookstore chain's bankruptcy. This "powerful bloc's unwillingness" to turn unpaid bills into loans helped force Borders to declare bankruptcy, Ms. Trop points out. Van Conway, turnaround expert, said there is no need for Borders' creditors to cut a deal with the company since they are unlikely to be paid in full, The Detroit News relays. Matt Norcross, owner of McLean & Eakin Booksellers, however, noted that given few major distribution channels for books, publishers care deeply about Borders' fate, the report relates. "Publishers feel ambivalent about Borders' financial prospects," commented Al Greco, a marketing professor at Fordham University's Graduate School of Business, The Detroit News notes. While publishers do not want to lose Borders as a major distribution channel, they do not want their businesses to suffer because of the booksellers' poor business decision, Mr. Greco explained, according to the report. The Detroit News mentions that two publishers are demanding payment from Borders. Other publishers and creditors also do not believe that Borders has a turnaround plan that is much different from what it has done before, and they do not see it surviving in an industry that is quickly turning to e-books and electronic readers, Mr. Greco further stated, the report states. Borders has acknowledged it is dependent on publishers due to the nature of its business, The Detroit News notes. Borders CEO Mike Edwards said during a March 11 conference call that "it is critical that new inventory hit our shelves," the news article recounts. Borders' largest vendors make up 63% of the Company's 2010 sales. Borders recently filed a motion with the bankruptcy court, seeking to modify trade terms with vendors to improve inventory. Borders narrated that as its financial difficulties were publicized, many publishers refused to ship merchandise under any terms. ----------------------------------------------------------------- [00127] DEBTORS' MOTION FOR KEY EMPLOYEE BONUS/RETENTION PLANS ----------------------------------------------------------------- Borders Group, Inc. and its debtor affiliates seek permission from Judge Martin Glenn of the U.S. Bankruptcy Court for the Southern District of new York to implement a key employee incentive plan and a key employee retention plan. The publicity surrounding the Debtors' prepetition restructuring negotiations, the commencement of these Chapter 11 cases, and the Debtors' store closing sales and attendant workforce reductions have raised substantial concerns for the Debtors' employees and exacerbated these difficulties, David M. Friedman, Esq., at Kasowitz, Benson, Torres & Friedman LLP, in New York, tells Judge Glenn. About 25 significant corporate employees have voluntarily departed from the Debtors since the Petition Date, according to Mr. Friedman. The Debtors, he notes, have also reduced corporate headcount by over 55% in the last two years and during that same period, over 85 director-level employees and officers exited the company. Recognizing that further employee losses will damage their estates, the Debtors have formulated new management bonus and incentive programs based on advice from Mercer (US) Inc. to ensure that the management team is appropriately incentivized to maximize their opportunity to reorganize. Key Employee Incentive Plan The Debtors propose to implement the KEIP for 17 key executives who are deemed critical to the Debtors' restructuring and reorganization efforts. For the five highest-level Executives, target award opportunities range from 90% to 150% of base salary and have an average award size of $623,000. For the other 12 Executives, target award opportunities range from 60% to 90% of base salary and have an average award size of $135,000. KEIP awards are set at 150% of historic annual incentive targets, and payout opportunities range from 0% to 150% of target. The size of KEIP awards will be determined upon the date of either (i) the filing of a Chapter 11 plan of reorganization, or (ii) the date on which an order is entered by the Court approving a sale of all or substantially all of the Debtors' assets as a going concern. No amounts will be earned or paid if the Debtors confirm a plan of liquidation or consummate a sale to liquidators. The possible payouts for Executives under the KEIP are: Number of KEIP Target KEIP Maximum Position Executives Range Range -------- ---------- ----------- -------------- Chief Executive Officer 1 $1,125,000 $1,688,000 Executive Vice 3 $420,000 $630,000 Presidents to $720,000 to $1,080,000 Senior Vice President, 1 $248,000 $371,000 Human Resources Other Key Executives 12 Aggregating Aggregating (Senior Vice President $1,623,000 $2,435,000 and Vice Presidents) ---------- ----------- -------------- Total $4,736,000 $7,104,000 =========== ============== The Executives' awards under the KEIP are based on the timing of an "Award Determination Event:" * For the Executives to obtain maximum KEIP awards, an Award Determination Event must occur within six months from the Petition Date, or by August 16, 2011. * To obtain target KEIP awards, an Award Determination Event would have to occur by nine months from the Petition Date, or by November 16, 2011. * Awards would be interpolated for Award Determination Events occurring between August 17, 2011 and November 15, 2011. * Payment of the KEIP awards will occur on the date that is 30 days after either (i) the effective date of a plan of reorganization, or (ii) the closing of a going concern sale. In a supporting declaration, John Dempsey, a partner at Mercer, disclosed that 70% of the 17 recommended KEIP participants have less than 18 months of service with the Debtors, and of the 70%, 50% have less than one year of service. Because of the short tenure, these leaders have been unable to earn any incentive compensation for the risks taken in working for a company with significant operational and market obstacles, he stressed. Key Employee Retention Plan As to the KERP, the Debtors seek to implement a retention plan for about 25 director-level employees that are critical to their day-to-day business operations. A group of other key employees, referred to as the Discretionary Employees, would also participate in a discretionary pool under the KERP, based on the judgment of the Debtors' Executive Committee, which will be comprised of the Debtors' five highest-level Executives. The Debtors estimate that the total aggregate payout under the KERP will be approximately $1.2 million, consisting of approximately $933,000 for the Critical Employees and $300,000 for the Discretionary Employees. "The KERP amounts, added to the KEIP's maximum cost, totals approximately $8.3 million, which represents 0.36% of the Debtors' 2010 revenue," Mr. Friedman relates. Lump sum award payments are equal to approximately 30% of each Critical Employee's base salary, commensurate with the historical Annual Performance Bonus Plan, and, as with the KEIP, would be made on the date that is 30 days after either (i) the effective date of a plan of reorganization, or (ii) the closing of a going concern sale. The KERP, however, is not tied to the timing of an Award Determination Event as is the KEIP. Proposed individual award amounts to Critical Employees have been pre-determined, and range from $28,000 to $53,000, depending on the particular Critical Employee's position, responsibilities and other business considerations. The average award size is $37,000. Individual awards to Discretionary Employees from the Discretionary Pool would not exceed $20,000 per Discretionary Employee, and would likewise be made at the same time as payments to Critical Employees. Holly Felder Etlin, Borders Group senior vice president, filed a declaration stating that if the KERP is not implemented, the Debtors fear that many of the KERP Employees may seek alternative career opportunities, which would impede the Debtors' ability to execute on critical business and restructuring initiatives. Put simply, the Debtors cannot afford to lose their most talented and valuable director-level corporate employees during this crucial time, she maintained. Employment Agreements The Debtors further seek the Court's authority to assume prepetition employee agreements with four of their employees. The Employee Agreements address salary, incentive compensation, benefits, and certain other agreements with these officers: (A) Scott Henry, as executive vice president and chief financial officer of the Debtors The Henry Agreement provides Mr. Henry with certain incentive compensation set forth as a varying percentage of his regular compensation, based on targets set by the Debtors' Board of Directors, but with guaranteed Deferred Compensation of $200,000 for fiscal year 2010. Pursuant to the Henry Agreement, 50% or $100,000 of Mr. Henry's Guaranteed Deferred Compensation is payable by April 1, 2011, and the remainder is to be paid on the first anniversary of his employment with the Debtors. Under the Borders Group, Inc. 2004 Long-Term Incentive Plan, subject to the approval of the Compensation Committee of the Board of Directors, Mr. Henry will be given a stock option grant for 300,000 shares, which vest 100% after three years, and a restricted stock grant of 200,000 shares, which vest one-third per year over the next three years. (B) Michele Cloutier, the Debtors' executive vice president and chief merchandising officer The Cloutier Agreement provides Ms. Cloutier with Deferred Compensation opportunities as a percentage of her regular compensation based on targets set by the Debtors' Board of Directors, but with Guaranteed Deferred Compensation of $200,000 for fiscal year 2010. The Cloutier Agreement provides for 50%, or $100,000, of Ms. Cloutier's Guaranteed Deferred Compensation to be paid to her by April 1, 2011, and for the remainder to be paid on the first anniversary of her employment with the Debtors. Under the 2004 Long-Term Incentive Plan, Ms. Cloutier will be given a stock option grant for 300,000 shares subject to the approval of the Compensation Committee of the Board of Directors. These options vest 100% after three years. (C) Glen Tomaszewski, the Debtors' vice president, chief accounting officer and controller The Tomaszewski Agreement provides for, among other things, certain deferred compensation he earned in respect of prepetition services provided, which was payable on Feb. 18, 2011, of $100,000, and an additional stock option grant of 10,000 shares. (D) Jason Cline, the Debtors' vice president of financial planning and analysis The Cline Agreement provides for Mr. Cline to receive, among other things, Prepetition Deferred Compensation of $75,000, so long as he remains in his position until at least February 18, 2011, and an additional stock option grant of 10,000 shares. The Debtors contemplate that Messrs. Henry, Tomaszewski, and Cline will work as a team. More importantly, the Employees were indispensable to the Debtors' prepetition negotiations and preparations, and are equally critical going forward with respect to restructuring negotiations and the Debtors' ongoing business, Mr. Friedman tells the Court. Full-text copies of the Employment Agreements are available for free at http://bankrupt.com/misc/Borders_EmploymentPacts.pdf The Debtors are concerned that they may not be able to find suitable candidates in the aggressive timeframe they have set for emergence through a plan or a going concern sale. The Debtors assert that it is crucial for them to create and maintain market competitive pay opportunities, reflecting practices in the markets in which they compete for talent, and bring compensation closer to market competitive levels for their most critical employees. In this light, the Incentive and Retention Plans are designed to create an incentive for Executives and KERP Employees to successfully restructure rapidly through a plan of reorganization or a going concern sale, Mr. Friedman emphasizes. Mr. Friedman also insists that the KEIP, KERP and Employment Agreements do not violate neither Section 503(c)(1) nor Section 503(c)(3) of the Bankruptcy Code. Section 503(c) restricts a debtor's abilities to make payments to insiders for retention or severance, and restricts payments that are outside of the ordinary course and not justified by the facts and circumstances of a debtor's case. The Debtors subsequently filed with the Court another Motion to Approve Incentive and Retention Programs, which is substantially similar to the original motion, to append copies of the Employment Agreements. The Court will consider the Debtors' request on April 14, 2011. Objections are due no later than April 7. ----------------------------------------------------------------- [00128] BORDERS GETS FINAL APPROVAL OF $505MM DIP CREDIT FACILITY ----------------------------------------------------------------- See prior entry at [00101] and prior related entries at [00075], [00061], [00049] and [00015] (Debtors' Motion to Obtain $505-Mil. in DIP Financing), [00050] and [00016] (Debtors' Motion for Authority to Use Cash Collateral) and [00031] and [00014] (Borders Get Interim Access to $400-Mil. in DIP Financing). Borders Inks First Amendment to DIP Agreement Borders Group, Inc. executed on March 16, 2011, a first amendment and waiver to its Credit Agreement and the Guaranty and Security Agreement with lender parties led by GE Capital Markets, according to the Company's March 22, 2011, filing with the U.S. Securities and Exchange Commission. Under the First Amendment, the parties agreed to waive and amend certain provisions of the Senior Secured, Super-Priority Debtor- in-Possession Credit Agreement, including the addition of a language stating that "effective upon entry of the Final DIP Order, the proceeds of any claims or causes of action to avoid a transfer of property or an obligation incurred by the Credit Parties pursuant to Section 549 of the Bankruptcy Code. Moreover, the carve-out amount is redefined to $6,500,000." The Debtors previously submitted to the Court on March 10, 2011, a draft copy of the First Amendment to the DIP Credit Agreement. A full-text copy of the First Amendment is accessible for free at http://ResearchArchives.com/t/s?7582 ----------------------------------------------------------------- [00129] DEBTORS' MOTION TO MODIFY TRADE TERMS WITH VENDORS ----------------------------------------------------------------- See prior related entry at [00126] (Publishers Remain Cautious of Borders' Bankruptcy Plan). In the ordinary course of business, the Debtors acquire goods based on trade credit terms that were negotiated on a vendor-by- vendor basis. The Debtors had the right to return books and magazines at the invoiced cost as a credit towards future invoices from the applicable vendor. As the Debtors' financial difficulties were publicized, many vendors refused to provide any trade credit or accept returns. Instead, vendors began demanding cash in advance or cash on delivery terms for deliveries to the Debtors. Many publishers refused to ship the Debtors merchandise under any terms, causing the Debtors to seek inventory replenishment using alternative channels. Before the Petition Date, the Debtors returned approximately 31% of their merchandise annually for Return Credit. The Debtors now seek to reduce the amount of goods returned to vendors to better manage their inventory, Andrew K. Glenn, Esq., at Kasowitz, Benson, Torres & Friedman LLP, in New York, tells the Court. The Debtors also want to return to an ordinary course business relationship with their vendors, which would include returning merchandise, he reveals. To make vendors comfortable with their individual credit decisions, the Debtors have discussed the imposition of caps on merchandise to be returned during these Chapter 11 cases, according to Mr. Glenn. The Debtors, he notes, have also discussed returning goods acquired prepetition for postpetition credit for the purchase of new inventory at a value equal to or greater than the cost value of the returned inventory. These transactions will be referred to as the Postpetition Credit Returns. Accordingly, by this motion, the Debtors seek the Court's permission to modify the trade terms and return prepetition merchandise to vendors for postpetition credit. In an abundance of caution, and at the request of certain vendors that are requiring the Court's approval as a condition to providing new trade terms to the Debtors and allowing the Debtors to assume ordinary course merchandise returns, the Debtors seek confirmation from the Court that they are authorized to enter into vendor agreements that may require caps on returned goods -- Return Limits. The Debtors also seek confirmation from the Court that the Postpetition Credit Returns will not violate Section 546(h) of the Bankruptcy Code. Mr. Glenn contends that Section 546(h) does not apply in the current case because the Debtors will not "offset the purchase price of such goods against any claim of the creditor against the debtor that arose before the commencement of the case." Nevertheless, to the extent Section 546(h) does apply, the Debtors seek Court approval to utilize Postpetition Credit Returns to the extent goods delivered prepetition are returned for credit solely against future invoices for new inventory at equal or greater cost value. Essentially, the Postpetition Credit Returns are in the best interests of the Debtors' estates because they afford the Debtors the flexibility to return prepetition goods on the same basis as postpetition goods, Mr. Glenn asserts. Given that it may be difficult to differentiate goods based on their date of acquisition, the Postpetition Credit Returns will not afford preferential treatment to any creditors, he assures the Court. The Court will consider the Debtors' request on April 7, 2011. Objections are due no later March 31. ----------------------------------------------------------------- [00130] COMMITTEE'S MOTION TO OKAY CREDITOR INFORMATION PROTOCOL ----------------------------------------------------------------- The Official Committee of Unsecured Creditors seeks a Court order clarifying its requirements and establishing creditor information protocol to provide access to information for the Debtors' unsecured creditors under Sections 1102(b)(3) and 1103(c) of the Bankruptcy Code. The Committee specifically asks Judge Glenn to confirm that Section 1102(b)(3)(A) does not authorize or require it to provide access to confidential information or privileged information to any entity. To balance the need to maintain the confidentiality of the Confidential Information and Privileged Information with the unsecured creditors' need for information regarding the Debtors, the Committee proposes these procedures for the dissemination of information to any entity: (A) The Committee is authorized to: (a) establish a Web site to make certain information available to creditors; (b) make available on the Web site information regarding the Debtors' Chapter 11 cases, including: (i) the Petition Date; (ii) the case number; (iii) the contact information for the Debtors, the Debtors' counsel and the Committee's counsel and financial advisors; (iv) the voting deadline with respect to any Chapter 11 plan filed by the Debtors; (v) access to the claims docket as and when established by the Debtors or the claims and noticing agent via internet link if possible; (vi) access to important filings in the Debtors Chapter 11 cases via internet link if possible; (vii) links to other relevant websites; and (viii) any other information that the Committee or its professionals deems appropriate, subject to the restrictions and limitations in the proposed order; (c) establish an e-mail address to allow unsecured creditors to send questions and comments in connection with the Debtors' bankruptcy cases; and (d) review or respond to any email correspondence. (B) The Committee Parties will not be authorized or required, pursuant to Section l102(b)(3)(A), to provide access to any Confidential Information and Privileged Information to any Entity, absent the specific prior written consent of the Debtors or a court order. Nonetheless, the Committee is permitted in its sole discretion to provide access to Privileged Information to any party so long as that Privileged Information is neither: (i) Confidential Information nor (ii) subject to a privilege other than that which is held or controlled solely by the Committee. (C) The Debtors will assist the Committee in identifying any Confidential Information or Privileged Information that is provided to the Committee or professionals by the Debtors or their agents or professionals. (D) If a creditor submits a written request for the Committee to disclose specific information, the Committee will: (i) provide a response to the Information Request, including by providing access to the information requested or the reasons the Information Request cannot be complied with; and (ii) if the Information Request involves the Debtors' Confidential or Privileged Information, provide the Debtors with (a) notice of the Information Request; and (b) a copy of the Response. If the Committee deems to deny the Information Request, the Requesting Creditor may meet and confer with an authorized representative of the Committee and the Debtors regarding the Information Request and the Response, seek to compel that disclosure for cause pursuant to a motion before the Court. That motion will be served on at least 20 days' notice on the Debtors, the U.S. Trustee for Region 2 and the Committee. (E) With respect to an Information Request that implicates Confidential Information of the Debtors, if: (i) the Committee agrees that the request should be satisfied; or (ii) the Committee on its own wishes to disclose that Confidential Information to creditors, then the Committee may make a demand with regard to Confidential Information that is information of the Debtors, by submitting a written request to the Debtors' counsel, stating that the information will be disclosed in the manner described in the Demand unless the Debtors object to the Demand within 10 days after the service of the Demand. In the event of any objection to the disclosure of Confidential Information, no information will be disclosed except to the extent provided in an order of the Court that has become final and non-appealable. (F) Unless the Court orders otherwise with respect to a Demand, the Committee will not provide any Confidential Information of the Debtors to any third party without the third party executing an appropriate confidentiality agreement that is acceptable in form and substance to the Debtors and the Committee. (G) Subject to any protective order or confidentiality agreement, any information received by the Committee from any Entity in connection with an examination pursuant to Rule 2004 of the Federal Rules of Bankruptcy Procedure or in connection with any formal discovery conducted pursuant to the Bankruptcy Rules or the Federal Rules of Civil Procedure in any contested matter, adversary proceeding or other litigation will not be governed by the Proposed Order, but rather by any court order or other agreement governing the discovery to the extent one exists. (H) Nothing in the Proposed Order requires the Committee to provide access to information or solicit comments from any Entity that has not demonstrated to the satisfaction of the Committee or to the Court that it holds claims of the kind described in Section 1102(b)(3). Counsel to the Committee, Bruce Buechler, Esq., at Lowenstein Sandler PC, in New York, asserts that granting the Committee's Motion will ensure that confidential, privileged, proprietary or material non-public information will not be disseminated to the detriment of the Debtors' estates or their unsecured creditors; and will aid the Committee in performing its statutory functions and duties, including promoting and protecting the interests of the unsecured creditor body. The Court will consider the Committee's Motion on April 7, 2011. Objections are due no later than March 31. ----------------------------------------------------------------- [00131] COVENTRY RETAIL'S MOTION TO LIFT STAY TO EVICT DEBTOR ----------------------------------------------------------------- See prior entry at [00052]. Parties Stipulate The Debtors and Coventry Retail, L.P. entered into a Court- approved stipulation resolving Coventry's motion to lift stay to evict the Debtors from the leased premises located in Coventry Mall, Coventry Township, Chester County, Pennsylvania. The parties agree that the lease agreement on the Premises is terminated effective as of April 9, 2011, and Coventry may take possession of the Premises on that date. The Debtors will pay Coventry pro-rata rent for each day that the Debtors or their agents use or occupy the Premises between April 1, 2011 and April 9, 2011. The Lift Stay Motion is deemed resolved. Likewise, the Lift Stay Motion as it relates to the Premises and Coventry's objection to the First Motion to Extend Lease Decision Period are withdrawn as moot. ----------------------------------------------------------------- [00132] SN WARRANTY'S MOTION TO COMPEL LEASE DECISION ----------------------------------------------------------------- SN Warranty, LLC and the Debtors entered into an agreement whereby the Debtors sell extended service agreements or ESAs to their customers who purchase e-readers and who also wish to purchase an extended service program in connection with the E-Reader purchase. SN Warranty alleges that the Debtors failed to remit service fees, totaling $153,999, for the period dated January 25, 2011 and continuing through the Petition Date. The unpaid prepetition Service Fees translate to about 5,979 ESAs that were not activated as a result of the Debtors' non-payment of the Service Fees, SN Warranty asserts. SN Warranty argues that the Debtors continued to sell the ESAs after the Petition Date, but have failed to remit the Service Fees in connection with SN invoices dated March 8, 2011 and March 15, 2011 and have only remitted a portion of the Service Fees in connection with SN invoice dated February 22, 2011. SN Warranty alleges that the Service Fees attributable to postpetition sales, which the Debtors failed to remit total $63,373 and translate to 2,470 ESAs that were not deactivated. Before the Petition Date, Service Net received two overpayments from the Debtors, aggregating $51,741, relating to ESAs which were cancelled by the purchasing customers. By this motion, SN Warranty asks the Court to: (i) compel the Debtors to assume or reject the Agreement; and (ii) to the extent the Debtors reject the Agreement, modify the automatic stay to permit setoff of the prepetition obligations. Stephen L. Yonaty, Esq., at Cannon Heyman & Weiss, LLP, in Buffalo, New York -- syonaty@chwattys.com -- argues that customers who have purchased the ESAs have no way of knowing that the Debtors have not complied with the two requirements necessary for activation of the ESAs. Thus, if a customer is to attempt to utilize services under the ESA only to learn that the ESA has never been activated, this would reflect quite badly primarily upon the Debtors, and also upon Service Net, he stresses. Moreover, to the extent the Debtors reject the Agreement, that rejection will result in a significant rejection claim in favor of SN Warranty, he notes. Thus, Mr. Yonaty asserts, any claim arising from the rejection of the Agreement should be available for setoff against the Prepetition Overpayment. ----------------------------------------------------------------- [00133] CIRQUA'S LETTER SEEKING PAYMENT OF $66,480 INVOICE ----------------------------------------------------------------- In a letter filed with the Court, David Beeman, founder of California-based Cirqua, Customized Water -- DRBeeman@Cirqua.com -- seeks the Debtors' immediate payment of $66,480 arising from labor-related service provided to the Debtors by his company. Mr. Beeman stresses that the Debtors' bankruptcy filing puts his company at risk of its own bankruptcy by forcing it to pay out money for services performed but not currently collectable. ----------------------------------------------------------------- [00134] ENTITIES FILE NOTICES OF SUBSTANTIAL STOCK OWNERSHIP ----------------------------------------------------------------- See prior entry at [00093] and related entry at [00033] (Debtors' Motion to Set Up Claims Trading Protocol). Pershing & Hachette File Ownership Notices Pershing Square Capital Management L.P. and Hachette Book Group, Inc. filed with Court on March 23 and 24, 2011, notices of substantial ownership of Borders Group, Inc. stock and claim. As set forth in its March 3, 2011 notice, Pershing Square Capital disclosed that it acquired on various dates (i) 10,597,980 shares of Borders common stock and (ii) 25,944,236 warrants to acquire shares of Borders common stock on behalf of Pershing Square entities. Hachette disclosed that it owns a $39,520,757 claim against the Debtors for invoices between January 5, 2010 and February 15, 2011. ----------------------------------------------------------------- [00135] SCHOLASTIC POSTS $3.5MM BORDERS-RELATED BAD DEBT EXPENSE ----------------------------------------------------------------- Scholastic Corporation stated that it recorded a one-time bad expense of $3.5 million or $0.07 per share related to Borders Group, Inc.'s bankruptcy filing for the third quarter ended November 30, 2010. Scholastic Corporation is a global children's publishing, education and media company. The company avers that it is the world's largest publisher and distributor of children's books and a leading provider of educational technology products and related services. ----------------------------------------------------------------- [00136] BORDERS STORES TO HOST LEGO EVENT FOR KIDS ON MARCH 26 ----------------------------------------------------------------- CHICAGO, Illinois -- March 24, 2011 -- What Great LEGO(R) building fun is in store for kids ages 8-12 at Borders Group, Inc. stores and surrounding areas. Up to 50 kids who attend Borders' free LEGO event will receive a free LEGO Racer, which they will have fun assembling at the event! Youngsters will also enjoy a number of racing-themed activities including a Checkered Flag art project, Pit Crew games as well as other games. Kids are encouraged to sign up at their local Borders to attend the Borders LEGO event. Visit www.borders.com and click on the Store Locator link for participating locations. The participating Borders stores that will host events on March 26, 2011 at 2 p.m. are: Chicago Area * 150 North State St., Chicago, Illinois 60601 * 1144 Lake St., Oak Park, Illinois 60301 * 1 N. LaGrange Rd., LaGrange, Illinois 60525 * 1500 16th Street, Suite D, Oak Brook, Illinois 60523 * 15260 S., La Grange Rd., Orland Park, Illinois 60462 * 1540 Golf Rd., Schaumburg, Illinois 60173 * 101 Rice Lake Square, Wheaton, Illinois 60187 New York Metro area: * 10 Columbus Circle, New York, New York 10019 * 2 Penn Plaza, New York, New York 10121 * 425 Jericho Turnpike, Syosset, New York 11791 * 162 East Main St., Mount Kisco, New York 10549 * 290 Commons Way, Bridgewater Township, New Jersey 08807 Boston area: * 10-24 School St., Boston, Massachusetts 02108 * Cambridge Side Galleria, Cambridge, Massachusetts 02141 * 430 Legacy Place, Dedham, Massachusetts 02026 Atlanta area: * 650 Ponce de Leon, Ste. 500, Atlanta, Georgia 30308 * 4475 Roswell Rd., Marietta, Georgia 30062 * 8000 Mall Pkwy., Lithonia, Georgia 30038 * 6594 Douglas Blvd., Douglasville, Georgia 30135 San Francisco area: * Stonestown Galleria, San Francisco, California 94132 * 5903 Shellmound St., Emeryville, California 94608 * 588 Francisco Blvd., West San Rafael, California 94901 * 120 Crescent Dr., Pleasant Hill, California 94523 Metro Detroit/Ann Arbor area: * 34300 Woodward, Birmingham, Michigan 48009 * Southland Mall, Taylor, Michigan 48180 * 460 W. 14 Mile Rd., Troy, Michigan 48083 * 43075 Crescent Blvd., Novi, Michigan 48375 * 612 E. Liberty St., Ann Arbor, Michigan 48104 * 3140 Lohr Rd., Ann Arbor, Michigan 48108 * 43435 Ford Rd., Canton, Michigan 48187 * 8101 Movie Drive, Brighton, Michigan 48116 Greater D.C. area: * 8518 Fenton St., Silver Spring, Maryland 20910 * 5871 Crossroads Center Way, Baileys Crossroads, Virginia 22041 * 6701 Frontier Dr., Springfield, Virginia 22150 * 11054 Lee Hwy., Fairfax, Virginia 22030 * 20926 Frederick Rd., Germantown, Maryland 20874 * 21031 Tripleseven Rd., Sterling, Virginia 20165 * 6151 Columbia Crossing Cir. Columbia, Maryland 21045 * 1201 Hayes Street, Arlington, Virginia 22202 *** End of Issue No. 8 ***