Source: https://www.scribd.com/document/48971319/10-10614
Timestamp: 2016-12-07 23:16:15
Document Index: 691904907

Matched Legal Cases: ['§ 1746', '§ 157', '§ 157', '§ 1408', '§ 157', '§ 157', '§ 1408', '§105']

BrowseInterestsBiography & MemoirBusiness & LeadershipFiction & LiteraturePolitics & EconomyHealth & WellnessSociety & CultureHappiness & Self-HelpMystery, Thriller & CrimeHistoryYoung AdultBrowse byBooksAudiobooksArticlesSheet MusicBrowse allUploadSign inJoinDavid M. Friedman (DFriedman@kasowitz.com) David S. Rosner (DRosner@kasowitz.com) Andrew K. Glenn (AGlenn@kasowitz.com) Jeffrey R.Gleit (JGleit@kasowitz.com) KASOWITZ, BENSON, TORRES & FRIEDMAN LLP 1633 Broadway New York, New York 10019 Telephone: (212) 506-1700 Facsimile: (212) 506-1800 Attorneys for Debtors and Debtors in Possession UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re BORDERS GROUP, INC., et al.,1 Debtors. Chapter 11 Case No. 11-______ (___) (Joint Administration Pending)
DECLARATION OF HOLLY FELDER ETLIN IN SUPPORT OF STORE CLOSING SALE MOTION I, Holy Felder Etlin, being duly sworn, hereby depose and say: 1. I am over the age of 18 and competent to testify. I am a Managing Director of AP
Services, LLC (“AP Services”), resident in AP Services’ New York office, located at 40 West 57th St. 29th Fl., New York, NY 10019. 2. I have approximately 30 years of restructuring and turnaround experience, having
begun my career in 1979 at the predecessor firm of Deloitte Consulting. During my career, I have worked on at least 24 transactions involving the sale or liquidation of retail merchandise by a bankrupt or distressed company.
The debtors in these cases, along with the last four digits of each Debtor’s federal tax identification number, are: Borders
Group, Inc. (4588); Borders International Services, Inc. (5075); Borders, Inc. (4285); Borders Direct, LLC (0084); Borders Properties, Inc. (7978); Borders Online, Inc. (8425); Borders Online, LLC (8996); and BGP (UK) Limited.
I submit this declaration (this “Declaration”) in accordance with Rule 1007-2 of
the Local Bankruptcy Rules for the Southern District of New York (the “Local Bankruptcy Rules”) in support of the Debtors’ Emergency Motion for Entry of Orders (I) Authorizing the Debtors to Sell Certain Assets Through Store Closing Sales and to Enter Into Agency Agreement with (A) Joint Venture Composed of Hilco Merchant Resources, LLC, SB Capital Group, LLC, and Tiger Capital Group, LLC or (B) Other Successful Bidder at The Auction, (II) Approving Stalking Horse Protections, (III) Authorizing Debtors To Abandon Unsold Property, (IV) Waiving Compliance With Contractual Store Closing Sale Restrictions, (V) Exempting (A) State and Local “Fast Pay” Laws and (B) Laws Restricting Store Closing Sales, and (VI) Granting Related Relief (the “Motion”). 2 4. The facts set forth in this Declaration are based upon my personal knowledge,
upon information and belief (where indicated), or upon client matter records kept in the ordinary course of business that were reviewed by me or other employees of AP Services under my supervision and direction. If called and sworn as a witness, I could and would testify competently to the matters set forth herein. 5. On February 9, 2011, Borders Group, Inc. and certain of its affiliates (the
“Debtors”) retained AP Services to provide restructuring advisory services. Upon retaining AP Services, the Debtors asked AP Services to undertake various tasks with respect to the Debtors’ preparation for bankruptcy filing and to assume certain tasks previously assigned to FTI Consulting, Inc. (“FTI”). 6. As a member of the AP Services team working on the Debtors’ engagement, my
primary responsibility has been and continues managing the process of soliciting and negotiating
Capitalized terms used but not defined herein are as defined in the Motion.
bids for the Debtors’ store closing sales (“SCS”), which will initially encompass approximately 200 stores with up to another up to 75 of 136 stores potentially added at the Debtors’ option (collectively, the “Closing Stores”). A. The Debtors’ Decision to Conduct Immediate Store Closing Sales. 7. It is my understanding that in early 2011, the Debtors, in consultation with their
advisors and key constituents, concluded that it was in the best interests of the Debtors and their stakeholders to close and liquidate the inventory at the Closing Stores because those stores could not sustain continued operations and were not saleable as going concerns. Based on my review to date of the Debtors’ records, I concur with this analysis. 8. It is also my understanding that the Debtors, with input from their then advisors at
FTI, determined that store closing sales conducted by one or more experienced and reputable liquidator(s) would achieve the maximum values for the assets located in the Closing Stores and would minimize administrative expenses. Indeed, based on my own experience, I believe that given the breadth of the store closing sales, it would be impossible for the Debtors to selfadminister the sales without outside liquidator assistance. B. The Bid Solicitation Process. 9. It is my understanding that on February 3, 2011, the Debtors through their then
advisors at FTI began contacting the nation’s largest liquidation firms to gauge interest in a process to solicit bids for store closing sales. It is my further understanding that at that time, the Debtors’ advisors informally contacted representatives of each of those liquidation firms and learned shortly thereafter -- as is customary of transactions of this size -- that the nation’s largest liquidator firms would form two groups for purposes of bidding on the store closing sales.
The two groups that participated in bidding for a stalking horse position consisted
of: (1) Great American Group LLC and Gordon Brothers Retail Partners LLC (collectively, the “GB Group”) and (2) Hilco Merchant Resources, LLC, Tiger Capital, and SB Capital Group (collectively, the “Hilco Group”). 11. It is my understanding that on February 7, 2011, the Debtors through their then
advisors at FTI transmitted bid solicitation packages (the “Bid Solicitation Packages”) containing: (a) a form non-disclosure agreement, and (b) a bid solicitation letter (the “Bid Solicitation Letter”) informing the parties of the Debtors’ intentions to conduct store closing sales and setting forth clear procedures for parties to request more information and to submit bids. See Ex. 1. The Bid Solicitation Letter specifically instructed interested parties to complete the non-disclosure agreement, at which time the parties would be provided diligence materials and a draft form agency agreement. 12. The Bid Solicitation Packages were transmitted to the GB Group and the Hilco
Group. Based on the small universe of liquidation firms that could handle a liquidation of this size and breadth and the limited time such firms require for diligence, I believe that this solicitation process ensured adequate notice to potential bidders. 13. It is my understanding that on February 8 and 9, 2011, the entities in the GB
Group and the Hilco Group signed non-disclosure agreements. (While the Debtors were contacted by other potential bidders that executed confidentiality agreements, they never participated in the stalking horse bidding). 14. It is my understanding that also on February 8, 2011, the Debtors’ advisors
provided the GB Group and the Hilco Group copies of a draft form agency agreement (which is customary for transaction of this type) and began providing them diligence materials, including
(a) detailed information regarding the Closing Stores including, as to each Closing Store: (i) the address, (ii) a schedule of Occupancy Expenses to be paid by the liquidators, (iii) 2010 P&Ls, (iv) historical weekly sales by SKU, and (v) inventory by SKU; (b) a summary of the Debtors’ perpetual inventory; (c) promotional calendars for the first and second quarters of 2011; (d) a detailed listing of certain inventory contained in the debtors distribution center to be included in the sale; and (e) employee manuals and benefits plan summary. 15. The Bid Solicitation Letter originally set February 10, 2011 as the deadline for
parties to submit bids (consisting of a marked-up agency agreement reflecting proposed deal terms). On February 9, 2011, at the request of one of the groups, the Debtors’ advisors informed the GB Group and the Hilco Group that the Debtors would extend the bid deadline to February 11, 2011. 16. On February 10, 2011, the FTI team began transitioning its work concerning the
store closing sale process to my team at AP Services. Both teams, along with management (the same individuals of which have been involved with the process throughout) and counsel, held a call that day to provide an information download, identify tasks and responsible parties, and discuss outstanding diligence requests from potential bidders. I immediately thereafter established contact with the two potential bidder groups. 17. On February 11, 2011, the GB Group and the Hilco Group each submitted bids. I
then contacted each group to discuss the terms of each bid and proceeded to engage in extensive negotiations as to specific terms related to their offers. In particular, I had numerous discussions with both groups regarding critical economic issues like the merchandise threshold, cost factor, and general economics of each bid. The Debtors also provided additional diligence to the bidders including with respect to the Debtors’ roll forward inventory.
All day on Saturday, February 12 and in the morning of Sunday, February 13,
2011, I had frequent discussions with each group in an effort to improve the terms of the bids. I would estimate that I spoke to each bidder group at least four times during this period. The discussions were successful in improving both bids. For example, after extensive negotiations, the Hilco Group agreed to reduce its merchandise threshold requirement from $184 million to $180 million, and increased its guaranteed amount from 71% of cost to 73%. The GB group increased its bid from 66.5% of cost to 71% after extensive negotiation, and modified its merchandise threshold by over $25 million. 19. By mid-day on Sunday, February 13, 2011, the Hilco Group emerged as the party
with the higher and better bid. Compared to the GB Group’s bid, the Hilco Group’s bid provides a guaranty percentage that is 2% higher, which equates to almost $4 million more in proceeds for the Debtors. In addition, the Hilco Group’s terms on inventory thresholds, cost-to-retail adjustments and expense reimbursement are more favorable to the Debtors, decreasing the Debtors’ potential exposure to excess expenses or inventory adjustments. The Debtors thus selected the Hilco Group’s bid as the Stalking Horse Bid. The Hilco Group agreed to have their bid subject to an auction on the condition they be afforded a break-up fee if their bid was not the winning bid at the Auction. 20. The Stalking Horse Bid would pay the Debtors (i) a guaranteed amount of 73% of
the cost value of all merchandise located at the Closing Stores and which the Debtors estimate will bring at least $131 million and as much as $148 million into the estates, plus (ii) a 50% share of any proceeds received during the SCSs after a 5% fee and recovery of expenses. 21. On February 14, 2011, the Debtors informed the GB Group that the Hilco
Group’s bid was selected as the Stalking Horse Bid. The Debtors’ advisors then worked with the
Hilco Group and its professionals to revise the draft form agency agreement, which resulted in the Agency Agreement (the “Agency Agreement”) executed by the Debtors on February 15, 2011 and which is subject to Court approval. 22. The Agency Agreement has been shared with the Debtors’ key constituencies
including (a) certain large publishers holding a substantial portion of the Debtors’ trade debts that individually decided to jointly retain the same professionals at Lowenstein Sandler and Alvarez & Marsal, and (b) the Debtors’ two proposed DIP Facility Agents. Each group provided comments to the agreement, which the Debtors and their advisors considered carefully and, where acceptable, revised the agreement to reflect. Moreover, each of those constituencies has been fully informed of the Debtors’ solicitation efforts and the economics of the agency agreement and, indeed, representatives of each constituency expressed satisfaction with the amount of consideration the Debtors and their bankruptcy estates will receive under the agency agreement and its terms. Finally, counsel representing many of the Debtors’ most significant landlords was also consulted regarding landlord specific issues reflected in the sale guidelines. C. The Stalking Horse Protections. 23. The Agency Agreement contemplates that if the Stalking Horse Bidder is not the
successful bidder at the Auction, then in consideration of the Stalking Horse Agent conducting its due diligence, entering into the Agency Agreement, and agreeing to subject its Stalking Horse Bid to the Auction, the Stalking Horse Bidder will receive a break-up fee of $1,000,000 (the “Break-Up Fee”). The Stalking Horse Bidder has agreed that it will not be permitted to apply the Break-Up Fee to offset amounts it is required to bid pursuant to set bidding increments. 24. I believe that the Break-Up Fee is reasonable and appropriate under the
circumstances. It is the result of good faith, arms-length negotiations, and provides a price floor and bidding structure for potential competing bids. I believe the Break-Up Fee will incentivize 7
competitive bidding thereby maximizing recovery to the Debtors and their estates in the SCSs. Indeed, the Break-Up Fee – which equates to approximately less than 1% of the consideration guaranteed by the Stalking Horse Bidder – will not be paid unless the Auction results in approximately $940,000 more in consideration to the Debtors, net of the Break-Up Fee. 25. I extensively negotiated the inclusion of the Break-Up Fee and its amount with
the Hilco Group, which negotiations resulted in the Hilco Group’s agreement to reduce the fee to its current level by $950,000. In exchange for this break-up fee, the Debtors were able to negotiate certain other valuable provisions including the sale of the periodicals inventory, cost to retail factors and a broader merchandise threshold. Based on those discussions, I believe that the Stalking Horse Bidder would not proceed with the sale without the Break-Up Fee. (Indeed, GB Group, the competing bidder, also requested a break-up fee). 26. Given that the Stalking Horse Bidder has come forward with a fair and reasonable
proposal to conduct the SCSs, that would benefit the Debtors and their constituencies, and considering that the Stalking Horse Bid sets the floor for other bidders to improve the value received by the Debtors, and taking in account the size of the transaction involved, I believe that the Stalking Horse Bidder should be entitled to the Break-Up Fee. D. Need for Immediate Relief. 27. I believe that it is critical to commence the store closing sales as soon as possible
for several important reasons including the following:  First, the Closing Stores are operating at a significant loss and represent a drain on the Debtors’ liquidity. Indeed, I estimate that each week the Closing Stores remain open causes the Debtors to suffer approximately $2 million of losses. Thus, the sooner the Debtors can liquidate the assets at the Closing Stores and reject the corresponding leases, the sooner and better the Debtors can mitigate the strain on their liquidity. Second, the Debtors have ceased supplying the Closing Stores, and delays in the liquidation process could cause portions of the Closing Store’s inventory to become less
valuable, not only due to lack of replenishment, but due to changes in the quality of the inventory mix due to ongoing sales, thus, of diminished value.  Third, the guaranteed amount liquidators are willing to pay to conduct the store closing sales would drop substantially if the sales cannot commence during Presidents’ Day weekend. That is because of the aforementioned lack of replenishment and resulting decrease in the quality of inventory available in the stores. Accordingly, the Stalking Horse Bidder has made its agreement contingent upon commencing the sales on Saturday, February 19, 2011. Indeed, based on discussions with liquidators, I believe that delaying the sales until after Presidents’ Day weekend will lower the sale price by as much as 1-2% of the Guaranty Percentage, resulting in approximately $2 million to $4 million less in proceeds. Fourth, continuing to operate the Closing Stores would distract the Debtors’ management team from properly focusing their attention and resource on operating the Chapter 11 cases and restructuring around a core group of profitable stores. 28. Based on my experience with such transactions, I believe that going forward on
an expedited basis will in no way impair recoveries because (a) all of the nationally-recognized potential liquidators (the only parties that can effectuate a transaction of this magnitude) have been directly involved in the process, (b) those parties were provided all necessary diligence and have expertise in quickly formulating and executing such bids, (c) the solicitation process I supervised was routine for such situations and the form of agency agreement used is mostly customary, and (d) the Debtors’ proposed DIP Facility Agent as well as representatives of unsecured creditor constituencies have had direct input in the process. 29. Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing
is true and correct to the best of my knowledge, information, and belief.
EXHIBIT 1 FOLLOWS BID SOLICITATION LETTER
CONFIDENTIAL REQUEST FOR PROPOSALS TO CONDUCT STORE CLOSING SALES I. Introduction
As you may be aware, FTI Consulting, Inc. has been retained as financial advisor (“Financial Advisors”) and Kasowitz, Benson, Torres & Friedman LLP has been retained as counsel (“Counsel”) by Borders Group, Inc. and its affiliates (the “Company”) to assist the Company, in connection with its solicitation of bids and conduct of an auction process for purposes of selecting an agent, on an exclusive basis, to assist the Company in the liquidation of inventory and associated assets, including certain furniture, fixtures and other store equipment (“FF&E”), located at certain retail store locations (collectively, the “Closing Locations”) through the conduct of “store closing” or similar themed sales (the “Sale”) at the Closing Locations. Under separate cover, the Company shall be delivering to each potential bidder who has executed and returned the required Confidentiality Agreement certain select financial information concerning the Closing Locations and the merchandise inventories located at each such location, as well as a form of Agency Agreement. EACH BIDDER MAY MAKE ARRANGEMENTS WITH THE COMPANY TO VISIT ANY CLOSING LOCATION AND TO CONDUCT SUCH OTHER DUE DILIGENCE AS THE BIDDER AND THE COMPANY DEEM APPROPRIATE. ANY SITE VISIT MUST BE ARRANGED IN ADVANCE WITH THE COMPANY BY CONTACTING JIM FRERING (CONTACT INFORMATION BELOW). REQUESTS FOR ADDITIONAL INFORMATION SHOULD BE DIRECTED TO JON NIGHSWANDER OF FTI CONSULTING, INC. (CONTACT INFORMATION BELOW). II. Request For Proposals
1. The Company desires to receive proposals which contemplate a bid for approximately 200 stores plus certain inventory in the distribution center. In addition, the Company desires to “put” up to 75 additional stores into the Sale within 30 days of the sale commencement date. Each Bidder shall also include as part of its proposal an offer to assist the Company in its disposition of the FF&E located in the Closing Locations and owned by the Company. Each bidder should also indicate whether it intends to continue operations of the café and newsstand portion of the Closing Stores and specifically address the economics of their bid relative to those operations. 2. All proposals to be considered must be received, in writing, no later than 4:00 PM (EST) on Thursday, February 10th (the “Proposal Deadline”) and must be submitted using the form of Agency Agreement, redlined to show proposed changes from the original. Electronic copies of the Agency Agreement may be obtained from the Financial Advisors. Joint venture proposals will not be considered unless previously approved by the Company. The Company anticipates selecting, in consultation with the Financial Advisors and Counsel, the highest and best proposal that arrives on or before the Proposal Deadline, and which conforms to the terms and provisions of this proposal solicitation, to serve as stalking horse not later than 12:00 Noon (EST) on Sunday, February 13th.
3. The Company anticipates conducting a final auction and to select the agent to conduct store closing sales beginning at 10:00 AM (EST) on Thursday, February 17th at Counsel’s offices (address below). In advance of the auction, the Company will inform each bidder submitting a conforming bid of the material terms of the stalking horse proposal and the stalking horse proposal will be the opening bid at the auction. It is Company’s intention to enter into a definitive Agency Agreement with the successful bidder(s) -- who will be determined by the Company in consultation with the Financial Advisors and Counsel -- which Agreement shall reflect the terms and conditions of the successful bid(s). The successful bidder(s) will be given undisturbed possession of the Closing Locations on the sale commencement date, which the Company presently expects will be on or about Saturday, February 19, 2011. Sales completed between the sale commencement date and the completion of the Inventory Taking (as defined in the Agency Agreement) at each particular Closing Location shall be recorded and accounted for under the “gross rings” method. 4. Proposals must be marked as “Strictly Confidential” and delivered by email, overnight courier, or by fax, simultaneously to each of the following on or before the Proposal Deadline: FTI Consulting, Inc. Bob Duffy Steve Coulombe Jon Nighswander 200 State Street Boston, MA 02110 Fax: (617) 897 1510 Email: bob.duffy@fticonsulting.com steve.coulombe@fticonsulting.com jonathan.nighswander@fticonsulting.com Kasowitz, Benson, Torres & Friedman LLP 1633 Broadway New York, New York 10019 David M. Friedman Adam L. Shiff Daniel A. Fliman Fax: (212) 506-1800 Email: dfriedman@kasowitz.com ashiff@kasowitz.com dfliman@kasowitz.com Borders Group, Inc. Jim Frering Senior vice president, Store Operations 100 Phoenix Dr. - Ann Arbor, MI 48108 Phone: (734) 477-1194 jfrering@bordersgroupinc.com
THE COMPANY RESERVES THE RIGHT TO MODIFY ANY PROCEDURES HEREIN, TO REJECT ANY OR ALL PROPOSALS SUBMITTED IN RESPONSE TO THIS REQUEST FOR PROPOSALS AND/OR TO WITHDRAW ANY OR ALL OF THE CLOSING LOCATIONS AT ANY TIME BEFORE, DURING OR AFTER THE AUCTION, IN ITS SOLE AND ABSOLUTE DISCRETION. The description of Sale terms in this letter are for illustrative purposes only. The terms of any Sale will be in all respects governed by the terms of the Agency Agreement executed between the Company and successful bidder(s). Any requests for additional information or clarification of the matters addressed herein shall be directed to the person identified below. No other contact with any representative of the Company shall be made without the express prior consent of the Company. Sincerely,
Jon Nighswander FTI Consulting, Inc.
EXHIBIT A LIST OF CLOSING STORES
EXHIBIT B AGENCY AGREEMENT
EXHIBIT C PROPOSED ORDER
UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ---------------------------------------------------------------x : In re : : BORDERS GROUP, INC., et al., : : 1 Debtors. : : ---------------------------------------------------------------x
Chapter 11 Case No. ___________________ (Jointly Administered)
ORDER APPROVING AGENCY AGREEMENT, STORE CLOSING SALES AND RELATED RELIEF Upon the Debtors’ Emergency Motion for Entry of Order (I) Authorizing the Debtors to Sell Certain Assets Through Store Closing Sales and to Enter Into Agency Agreement With (A) Joint Venture Composed of Hilco Merchant Resources, LLC, SB Capital Group, LLC, and Tiger Capital Group, LLC or (B) Other Successful Bidder at the Auction, (II) Approving Stalking Horse Fee, (III) Authorizing Debtors to Abandon Unsold Property, (IV) Waiving Compliance With Contractual Store Closing Sale Restrictions, (V) Exempting (A) State and Local “Fast Pay” Laws and (B) Laws Restricting Store Closing Sales, and (VI) Granting Related Relief, (the “Motion”);2 and upon the Declaration of Scott Henry Pursuant to Local Bankruptcy Rule 1007-2 in Support of First Day Motions (the “Henry Affidavit”) and the Declaration of Holly Felder Etlin in Support of Store Closing Sale Motion (the “Etlin Affidavit”); and the Court having jurisdiction to consider the Motion and the relief requested therein in accordance with 28 U.S.C. §§ 157 and 1334 and the Standing Order M-61 Referring to Bankruptcy Judges for the
The Debtors in these cases, along with the last four digits of the federal tax identification number for the Debtors are the following: Borders Group, Inc. (4588); Borders International Services, Inc. (5075); Borders, Inc. (4285); Borders Direct, LLC (0084); Borders Properties, Inc. (7978); Borders Online, Inc. (8425); Borders Online, LLC (8996); and BGP (UK) Limited. 2 Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Agency Agreement.
Southern District of New York Any and All Proceedings Under Title 11, dated July 10, 1984 (Ward, Acting C.J.); and consideration of the Motion and the relief requested therein being a core proceeding pursuant to 28 U.S.C. § 157(b); and venue being proper before this Court pursuant to 28 U.S.C. §§ 1408 and 1409; and due and proper notice of the Motion having been provided to the parties set for in the Motion; and it appearing that no other or further notice need be provided; and an auction having been held on February 16, 2011 (the “Auction”); and [____] (the “Agent”) having been the successful bidder at the Auction; and the Debtors and the Agent having agreed to the terms of the sales (the “Sales”) of certain assets (the “Assets”) in accordance with that certain Agency Agreement, dated February 16, 2011, by and between the Agent and the Debtors, a copy of which is attached hereto as Exhibit A (the “Agency Agreement”), pursuant to which the Agent shall act as the Debtors’ exclusive agent for the Sales of the Assets as set forth in the Agency Agreement; and a hearing having been held on February [16], 2011 (the “Sale Hearing”) to consider the relief requested in the Motion and approval of the Agency Agreement; and the appearances of all interested parties having been noted in the record of the Hearing; and upon all of the proceedings had before the Court; and the Court having found and determined that the relief sought in the Motion is in the best interests of the Debtors, their estates, their creditors, and all parties in interest and that the legal and factual bases set forth in the Motion establish just cause for the relief granted herein; and after due deliberation and sufficient cause appearing therefore, it is FOUND AND DETERMINED THAT: A. This Court has jurisdiction over the Motion pursuant to 28 U.S.C. §§ 157 and
1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b). Venue of these cases and this Motion in this District is proper pursuant to 28 U.S.C. §§ 1408 and 1409.
The statutory predicates for the relief requested are §§105(a), 363, 364, 365 and
554 of the Bankruptcy Code and Rules 2002, 4001, 6003, 6004, 6006 and 9014 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”). C. The findings and conclusions set forth herein constitute the Court’s findings of
fact and conclusions of law pursuant to Bankruptcy Rule 7052, made applicable to this proceeding pursuant to Bankruptcy Rule 9014. To the extent any of the findings of fact
constitute conclusions of law, they are adopted as such. To the extent any of the conclusions of law constitute findings of fact, they are adopted as such. D. Notice of the Motion and of the Hearing was provided as set forth in the Motion
and as required by applicable law. E. The notice of the Motion and of the Hearing was adequate and sufficient under
the circumstances, and any otherwise applicable requirement for notice is hereby waived and dispensed with. A reasonable opportunity to object or to be heard with respect to the Motion and the relief requested therein has been afforded to all interested persons and entities. F. As demonstrated by the Henry Affidavit, the Etlin Affidavit, and representations
of counsel to the Debtors and other parties in interest made at the Hearing, the Debtors have conducted the bidding solicitation and auction process fairly, with adequate opportunity for parties that either expressed an interest in liquidating the Debtors’ assets or who the Debtors believed may have an interest in liquidating the Debtors’ assets to submit competing bids. G. The Agency Agreement attached hereto as Exhibit A, including the form and total
consideration to be realized by the Debtors pursuant to the Agency Agreement, (i) is the highest and best offer received by the Debtors, (ii) is fair and reasonable; and (iii) is in the best interest of the Debtors, their estates, their creditors and all other parties in interest.
The Debtors’ decision to (i) enter into the Agency Agreement and (ii) perform
under and make payments required by the Agency Agreement is a reasonable exercise of the Debtors’ sound business judgment consistent with their fiduciary duties and is in the best interests of the Debtors, their estates, their creditors, and other parties in interest. I. The transactions contemplated by the Agency Agreement do not include the sale
or lease of personally identifiable information, as defined in section 101(41A) of the Bankruptcy Code (“Personally Identifiable Information”) (or assets containing personally identifiable information). J. Time is of the essence in effectuating the Agency Agreement and proceeding with
the Sales contemplated therein uninterrupted. K. The Debtors (i) have full corporate power and authority to execute and deliver the
Agency Agreement and all other documents contemplated thereby, and the Sales of the Assets have been duly and validly authorized by all necessary corporate action of the Debtors, (ii) have all of the corporate power and authority necessary to consummate the transactions contemplated by the Agency Agreement, and (iii) have taken all corporate action necessary to authorize and approve the Agency Agreement and the consummation of the transactions contemplated thereby. No consents or approvals, other than those expressly provided for in the Agency Agreement, are required for the Debtors to consummate such transactions. L. The Agency Agreement was negotiated between the Agent and the Debtors and
entered into in good faith, based upon arm’s length bargaining, and without collusion or fraud. Neither the Debtors nor Agent has engaged in any conduct that would prevent the application of section 363(m) of the Bankruptcy Code or cause the application of or implicate section 363(n) of the Bankruptcy Code to the Agency Agreement or to the consummation of the transactions
contemplated thereby. The Agent’s performance and payment of the Guaranteed Amount under the Agency Agreement are in good faith and for valid business purposes and uses. M. The Debtors have demonstrated a compelling and sound business justification for
authorization (i) to enter into the Agency Agreement between the Debtors and a joint venture composed of Hilco Merchant Resources, LLC, SB Capital Group, LLC, and Tiger Capital Group, LLC (collectively, the “Stalking Horse Bidder”) dated February 16, 2011 (the “Stalking Horse Agreement”) to establish a baseline offer by which other offers to enter into an agency agreement with the Debtors may be measured, [and (ii) to pay the break-up fee under the terms and conditions set forth in the Stalking Horse Agreement (the “Break-Up Fee”). The Stalking Horse Bidder performed substantial diligence that helped establish baselines values for the Debtors’ inventory, which in turn compelled competing bidders to submit higher offers for the opportunity to enter into the Agency Agreement. The benefit to the Debtors’ estates of the Stalking Horse Agreement and the Break-Up Fee provided for therein is further evidenced by the Debtors’ receipt of bids at the Auction that were higher than the Stalking Horse Agreement. Accordingly, the Stalking Horse Bidder has increased the value available to the Debtors’ estates by entering into the Stalking Horse Agreement, thereby providing a benefit to the Debtors’ estates and creditors. The Debtors’ payment of the Break-Up Fee (i) is an actual and necessary cost of preserving the Debtors’ estates, within the meaning of section 503(b) of the Bankruptcy Code, (ii) was of substantial benefit to the Debtors’ estates and creditors and all parties in interest herein, (iii) is reasonable and appropriate, and (iv) was a material inducement for, and condition necessary to ensure that the Stalking Horse Bidder would perform under the Stalking Horse Agreement. Payment of the Break-Up Fee is supported by the Debtors’ key creditor
constituencies.]
The Debtors were free to deal with any other party interested in liquidating some
or all of the Assets. The Agent has not violated section 363(n) of the Bankruptcy Code by any action or inaction. Specifically, the Agent has not acted in a collusive manner with any person and was not controlled by any agreement among bidders. The Agent is not an “insider” as that term is defined in section 101(31) of the Bankruptcy Code. No common identity of directors or controlling stockholders exists between the Agent and the Debtors. O. The Stalking Horse Agreement contemplates seeking authority to assume the
Letter Agreement Governing Inventory Disposition dated December 9, 2010, between Hilco Merchant Resources, LLC (“Hilco”) and Borders, Inc., a copy of which is attached to the Motion as Exhibit D (as amended by the First Amendment to Letter Agreement dated January 7, 2011, the “Existing Agreement”), under which Hilco continues to perform store liquidations at retail store locations identified on Exhibit A to the Existing Agreement. Now, therefore, it is hereby ORDERED, ADJUDGED AND DECREED THAT: 1. The Motion is granted to the extent provided herein. All objections to the Motion
that have not been withdrawn, waived, settled, or specifically addressed in this Order, and all reservations of rights included in such objections, are overruled in all respects and denied. 2. The Agency Agreement is approved pursuant to section 363 of the Bankruptcy
Code. The Debtors are hereby authorized and empowered to enter into the Agency Agreement, and the Agency Agreement (and each of the transactions contemplated therein) is hereby approved in its entirety and is incorporated herein by reference. All amounts payable to the Agent under the Agency Agreement shall be payable to the Agent without the need for any application of the Agent therefor or any further order of the Court. 3. [The Debtors are authorized and directed to pay the Stalking Horse Bidder the
Break-Up Fee in accordance with the terms and conditions of the Stalking Horse Agreement. 6
The Break-Up Fee constitutes a superpriority administrative expense claim in the Debtors’ chapter 11 cases pursuant to and in the priority set forth in section 364(c) of the Bankruptcy Code.] 4. The Debtors and the Agent are hereby authorized, pursuant to sections 105(a) and
363(b)(1) of the Bankruptcy Code, to conduct the Sales at the Stores in accordance with the Agency Agreement and the sale guidelines (the “Sale Guidelines”) attached hereto as Exhibit B, which Sale Guidelines are hereby approved in their entirety. 5. Pursuant to section 365 of the Bankruptcy Code, assumption by the Debtors of the
Existing Agreement is hereby directed, authorized and approved as a valid exercise of the Debtors’ business judgment and all amounts payable to Hilco under the Existing Agreement shall be payable to Hilco without the need for any application of Hilco therefor or any further order of the Court. 6. Except as otherwise provided in the Agency Agreement, pursuant to section
363(f) of the Bankruptcy Code, upon payment of the Guaranteed Amount Deposit and delivery of the Letter of Credit, the Agent shall be authorized to sell all Assets pursuant to the Agency Agreement free and clear of any and all mortgages, security interests, conditional sales or title retention agreements, pledges, hypothecations, liens, judgments, encumbrances or claims of any kind or nature (including, without limitation, any and all “claims” as defined in section 101(5) of the Bankruptcy Code), including, without limitation, the liens and security interests of GECC and GA, as agents for Lenders under the DIP Facility, as the same may have been amended from time to time, and the Debtors’ prepetition lenders whether arising by agreement, any statute or otherwise and whether arising before, on or after the date on which this chapter 11 case was commenced (collectively, the “Liens”), with any presently existing liens encumbering all or any
portion of the Assets or the Proceeds thereof attaching only to the Guaranteed Amount, or other amounts payable to the Debtors under the Agency Agreement (collectively, the “Transaction Proceeds”) with the same validity, force and effect as the same had with respect to the assets at issue, subject to any and all defenses, claims and/or counterclaims or setoffs that may exist. 7. All of the transactions contemplated by the Agency Agreement shall be protected
by section 363(m) of the Bankruptcy Code in the event that this Order is reversed or modified on appeal. The transactions contemplated by the Agency Agreement are not subject to avoidance pursuant to section 363(n) of the Bankruptcy Code. 8. Unless otherwise ordered by the Court, all newspapers and other advertising
media in which the Sales may be advertised and all landlords are directed to accept this Order as binding authority so as to authorize the Debtors and the Agent to consummate the Agency Agreement and to consummate the transactions contemplated therein, including, without limitation, to conduct and advertise the Sales in the manner contemplated by the Agency Agreement, including, without limitation, conducting and advertising of the Sales (at the contractual rates charged to the Debtors prior to the Petition Date) in accordance with the Agency Agreement, the Sale Guidelines, and this Order; and no further approval, license or permits of any governmental authority shall be required. 9. The Agent is authorized to conduct, advertise, post signs, utilize signwalkers, and
otherwise promote the Sales as a “store closing,” or similar-themed sale without compliance with the Liquidation Sale Laws (as defined below), but subject to compliance with the Sale Guidelines and this Order. 10. The Agent shall comply with applicable federal, state and local laws, regulations
and ordinances, including, without limitation, all laws and regulations relating to advertising,
permitting, privacy, consumer protection, occupational health and safety and the environment, together with all applicable statutes, rules, regulations and orders of, and applicable restrictions imposed by, governmental authorities (collectively, “General Laws”) other than all applicable Liquidation Sale Laws (as defined below). So long as the Sales are conducted in accordance with the Sale Guidelines and in a safe and professional manner, the Agent shall be deemed to be in compliance with any applicable General Laws. 11. The Debtors and Agent are hereby authorized to take such actions necessary and
appropriate to implement the Agency Agreement and to conduct the Sales without necessity of further order of this Court as provided in the Agency Agreement or the Sale Guidelines, including, but not limited to, advertising the Sales as “store-closing” or similar-themed sales through the posting of signs (including the use of exterior banners at non-enclosed mall Stores, and at enclosed mall Stores to the extent the applicable Store entrance does not require entry into the enclosed mall common area), use of signwalkers and street signage. The Agent shall not conduct the Sales as a “going out of business” or similar-themed sale. 12. Provided that the Sales are conducted in accordance with the terms of this Order,
the Sale Guidelines and the Agency Agreement, and in light of the provisions in the laws of many governmental units that exempt court-ordered sales from their provisions, the Debtors and the Agent shall be presumed to be in compliance with any General Laws and Liquidation Sale Laws (as defined herein) and, subject to Paragraphs 15 through 19, are authorized to conduct the Sales in accordance with the terms of this Order, the Sale Guidelines, and the Agency Agreement without the necessity of compliance with any Liquidation Sale Laws. For purposes of this Order, “Liquidation Sale Laws” shall mean any federal, state or local statute, ordinance, rule, or licensing requirement solely directed at regulating “store closing,” “going out of
business,” similar inventory or other liquidation sales, bankruptcy, auction or similar sales, (“Liquidation Sales”), bulk sales laws, laws restricting safe, professional and non-deceptive, customary advertising of Liquidation Sales, such as signs, banners, posting of signage, and use of sign walkers, including ordinances establishing licensing or permitting requirements, waiting periods, time limits or bulk sale restrictions that would otherwise apply to the Sales. 13. Subject to the provisions of Paragraphs 12 and 15, the Agent’s use, in conformity
with the Sale Guidelines and this Order, of (i) signwalkers; (ii) interior store signage and banners; and (iii) exterior banners (“Banner and Signwalker Advertising”), is authorized notwithstanding any lease provisions which purport to regulate, prohibit, restrict, or in any way limit such activity so long as such activity is undertaken by the Agent in a safe, professional and non-deceptive manner. Any person (including without limitation any landlord but excluding any governmental unit), that, after having received a copy of this Order, and after having been specifically advised in writing of the provisions of this Order, continues to interfere with Banner and Signwalker Advertising undertaken in compliance with this Order, shall be liable to the Agent, the Debtors, or affected landlord(s), as applicable, for any and all damages resulting from such continued interference. 14. Except as expressly provided in the Agency Agreement, the Sales shall be
conducted by the Debtors and the Agent notwithstanding any restrictive provision of any lease, sublease or other agreement relative to occupancy affecting or purporting to restrict the conduct of the Sales, the rejection of leases, abandonment of assets or “going dark” provisions; provided, however, that nothing in this Order shall impact any objection that any of the Debtors’ landlords may have to the assumption, assignment or rejection of their respective lease or to any proposed cure amount or rejection damages claim in association with such assumption, assignment or
rejection. The Agent and landlords of the Stores are authorized to enter into agreements between themselves modifying the Sale Guidelines without further order of the Court, and such agreements shall be binding as among the Agent and any such landlords. 15. Nothing in this Order shall be deemed to bar any governmental unit from
enforcing General Laws in the applicable non-bankruptcy forum, subject to the Debtors’ or the Agent’s right to assert that any such laws are not in fact General Laws or that such enforcement is impermissible under the Bankruptcy Code, this Order or otherwise. 16. To the extent reasonably practicable, each applicable governmental unit shall
provide the Debtors, the Agent, and any affected landlord with reasonable notice and opportunity to cure any alleged violation of any applicable law or regulation prior to instituting formal administrative or judicial proceedings; provided, however, cessation of alleged unlawful conduct after notice shall not, in and of itself, render moot court action by any State, including the imposition of injunctive relief, even if the Debtors or the Agent has ceased the alleged unlawful conduct. No party waives any rights to argue any position with respect to whether the conduct was in compliance with this Order and/or any applicable law, or that enforcement of such applicable law is preempted by the Bankruptcy Code. Nothing in this Order shall be deemed to have made any rulings on any such issues. 17. The Debtors shall serve copies of this Order within five (5) business days, via e-
mail, facsimile, or first class mail, upon (i) the State Attorney General’s offices (upon (x) Chief or Director of the Consumer Protection Division or Bureau; and (y) Chief or Director of the Bankruptcy Division or Bureau) and State Consumer Protection Agency for each State in which a Sale will be pending, and (ii) the Local mayor or similar official representative of each village,
town or city, and the county or parish where a Store is located, addressed to the attention of the municipal, city or county attorney, in each case to the consumer protection division. 18. Except as expressly provided for herein or in the Sale Guidelines, no person or
entity, including but not limited to any landlord, licensor, creditor, or federal or local governmental unit served with a copy of the Motion or this Order that does not object pursuant to the provisions of this Order, shall take any action to directly or indirectly prevent, interfere with, or otherwise hinder consummation of the Sales, or the advertising and promotion (including the posting of signs or the use of signwalkers) of such Sales, and all such parties and persons of every nature and description, including landlords, licensors, creditors and utility companies and all those acting for or on behalf of such parties, are prohibited and enjoined from (i) interfering in any way with, or otherwise impeding, the conduct of the Sales and/or (ii) instituting any action or proceeding in any court or administrative body seeking an order or judgment against, among others, the Debtors, the Agent, or the Debtors’ Stores that might in any way directly or indirectly obstruct or otherwise interfere with or adversely affect the conduct of the Sales or other liquidation sales at the Stores and/or seek to recover damages for breach(es) of covenants or provisions in any lease, sublease or license based upon any relief authorized herein. No Governmental Units (as defined in Bankruptcy Code section 101(27)) shall be bound by this injunctive provision unless it was either previously served with the Motion or subsequently served with this Order, and has had an opportunity to object as provided in this Order, and failed to timely file an objection. 19. If there is a dispute as to whether the general conduct of the Sales is in accordance
with this Order, the Agency Agreement, or the Sales Guidelines or would violate a Liquidation Sale Law and should be limited or barred (a “Reserved Dispute”), resolution of that Reserved
Dispute will take place before this Court, as provided in this paragraph. Any time before the fifteenth (15th) day following the service of this Order as provided for in Paragraph 17, any Governmental Unit may assert a Reserved Dispute by sending a notice explaining the nature of the dispute to counsel for the Debtor and the Agent. If the Debtor and the governmental unit are unable to resolve the Reserved Dispute within ten (10) days of receipt of the notice, either party may file a motion with the Court requesting resolution of the dispute (a “Dispute Resolution Motion”). Any such Dispute Resolution Motion shall also be served upon any affected
landlord(s). Any issues relating to a Reserved Dispute shall not affect the finality of this Order or limit or interfere with the conduct of the Sale prior to any ruling by this Court on said Reserved Dispute. 20. If such Dispute Resolution Motion is timely filed, the Debtors and/or the Agent
shall be entitled to assert that the provisions of this Order and/or the conduct of the Sales do not violate the Liquidation Sale Law, or, if they do, that such Liquidation Sale Law is subject to preemption by the Bankruptcy Code. The Governmental Unit filing the Dispute Resolution Motion shall be entitled to assert any jurisdictional, procedural, or substantive arguments it wishes with respect to the validity of this Order, the requirements of its Liquidation Sale Laws, or the lack of any preemption of such Liquidation Sale Laws by the Bankruptcy Code. Nothing in this Order, including the presumption stated in Paragraph 12, shall constitute a ruling with respect to any issues to be raised in the Dispute Resolution Motion, including whether the Liquidation Sale Law is preempted by the Bankruptcy Code, whether the automatic stay applies to any proposed action, or whether sovereign immunity applies to any action relating to a governmental unit.
If at any time a dispute arises between the Debtors or the Agent and a
Governmental Unit as to whether a particular law is a Liquidation Sale Law and subject to any provisions contained in this Order related to Liquidation Sale Laws, or whether enforcement of a conceded Liquidation Sale Law may be preempted, then any party to that dispute may utilize the provisions of Paragraphs 19 and 20 by sending a notice to the other party and proceeding thereunder in accordance with those paragraphs. Any determination with respect to whether a particular law is a Liquidation Sale Law shall be made de novo in accordance with the definitions in this Order. 22. This Court shall retain exclusive jurisdiction to resolve any additional dispute
relating to this Order or the Agency Agreement, including, but not limited to, (i) any claim or issue relating to any efforts to prohibit, restrict or in any way limit banner and signwalker advertising, including with respect to any allegations that such advertising is not being conducted in a safe, professional and non-deceptive manner, (ii) any claim of the Debtors, the landlords and/or the Agent for protection from interference with the Sales, and (iii) any other disputes related to the Sales. No parties or person shall take any action against the Debtors, the Agent, the landlords or the Sales until this Court has resolved such dispute. This Court shall hear the request of such persons or parties with respect to any such disputes on an expedited basis, as may be appropriate under the circumstances. 23. Neither the Debtors nor the Agent shall not be required to comply with any state
Fast Pay Laws (as defined in the Motion) when terminating employees. 24. The Agent shall have the right to use the Stores and all related Store services,
furniture, fixtures, equipment and other assets of the Debtors for the purpose of conducting the
Sales, free of any interference from any entity or person, subject to compliance with the Sale Guidelines and this Order. 25. Gift certificates, gift cards, coupons, and merchandise credits issued by the
Debtors prior to the Sale Commencement Date may be accepted and honored by the Agent during the Sale Term as and to the extent provided in the Agency Agreement. 26. Until the Sale Termination Date, the Agent shall be granted a limited license and
right to use the trade names, logos and customer, mailing and e-mail lists relating to and used in connection with the operation of the Stores, solely for the purpose of advertising the Sale in accordance with the terms of the Agency Agreement; provided, however, that the Agent shall not receive Personally Identifiable Information from the Debtors. 27. Except as expressly provided for in the Agency Agreement, nothing in this Order
or the Agency Agreement, and none of the Agent’s actions taken in respect of the Sale shall be deemed to constitute an assumption by Agent of any of the Debtors’ obligations relating to any of the Debtors’ employees. Moreover, the Agent shall not become liable under any collective bargaining or employment agreement or be deemed a joint or successor employer with respect to such employees. 28. The Agent shall not be liable for sales taxes except as expressly provided in the
Agency Agreement and the payment of any and all sale taxes is the responsibility of the Debtors. The Agent shall collect, remit to the Debtors and account for sales taxes as and to the extent provided in the Agency Agreement and has agreed to indemnify and hold harmless the Debtors from and against any and all costs, including, but not limited to, reasonable attorneys’ fees, assessments, fines or penalties which the Debtors sustain or incur as a result or consequence of the failure by Agent to collect and/or remit Sales Taxes and/or the failure by Agent to promptly
deliver any and all reports and other documents required to enable the Debtors to file any requisite returns with taxing authorities. 29. Except as set forth in the Agency Agreement or the Sale Guidelines, the Debtors
and/or the Agent (as the case may be) are authorized and empowered to transfer assets among the Stores as provided in the Agency Agreement. 30. In accordance with the terms of the Agency Agreement and effective as of the
Payment Date, pursuant to section 364(d) of the Bankruptcy Code, Agent is granted a valid, binding, enforceable and perfected first priority security interest in and lien upon (x) the Merchandise, (y) proceeds realized from the disposition of the Agent Sale FF&E up to the amount of the Agent’s disposition commission related to Agent Sale FF&E as provided for in Section 15.9 of the Agency Agreement, and (z) the Proceeds, to secure all obligations of the Debtors to Agent under the Agency Agreement, provided, however, that the security interest granted to Agent shall remain junior and subordinate in all respects to (a) Agent’s Payment Obligations and (b) the liens, security interests and claims of the GECC and the Lenders, to the extent of the unpaid portion of Agent’s Payment Obligations. Upon entry of this Order and payment of the Guaranteed Amount Deposit and the issuance of the Letter of Credit, the security interest granted to the Agent shall be deemed properly perfected without the necessity of filing financing statements or other documentation. Subject to the Agent having satisfied its payment
obligations under the Agency Agreement, any amounts owed by the Debtors to the Agent under the Agency Agreement are granted and shall have the status and priority of superpriority liens and claims pursuant to section 364(c) of the Bankruptcy Code, junior to the superpriority claims of the Lenders.
The Debtors shall have authority, in accordance with Section 5.6 of the Agency
Agreement, to include the Put Option Stores (as such term is defined in the Agency Agreement) in the Sales, and to enter into an agreement with the Agent governing the Sales related to the Put Option Stores, either through a new agency agreement or an amendment to the Agency Agreement, without further motion to or order of the Court; provided that the Debtors will provide written notice to the relevant parties and the landlord of each affected store identifying each Put Option Store the Debtors elect to include in the Sales, which notice shall be given as soon as practicable upon notifying the Agent of such election, but at least five (5) days prior to commencement of Sales at such locations. 32. The Agent’s performance and payment of the Guaranteed Amount under the
Agency Agreement will be made in good faith and for valid business purposes and uses, and accordingly the Agent is entitled to the protection and benefits of section 364(e) of the Bankruptcy Code. In the event any provisions of this Order are modified, amended or vacated by a subsequent order of the Bankruptcy Court or any other court, the Agent shall be entitled to the protections provided in section 364(e) of the Bankruptcy Code and no such appeal, modification, amendment or vacatur shall affect the validity and enforceability of the liens or priority authorized or created under the Agency Agreement or this Order. 33. This Order and the terms and provisions of the Agency Agreement shall be
binding on all of the Debtors’ creditors (whether known or unknown), the Debtors, the Agent, and their respective affiliates, successors and assigns, and any affected third parties including, but not limited to, all persons asserting an interest in the Assets, notwithstanding any subsequent appointment of any trustee, party, entity or other fiduciary under any section of the Bankruptcy Code with respect to the forgoing parties, and as to such trustee, party, entity or other fiduciary,
such terms and provisions likewise shall be binding. The provisions of this Order and the Agency Agreement, and any actions taken pursuant hereto or thereto shall survive the entry of any order which may be entered confirming or consummating any plan of the Debtors or converting the Debtors’ cases from chapter 11 to chapter 7, and the terms and provisions of the Agency Agreement, as well as the rights and interests granted pursuant to this Order and the Agency Agreement, shall continue in these or any superseding cases and shall be binding upon the Debtors, the Agent and their respective successors and permitted assigns, including any trustee or other fiduciary hereafter appointed as a legal representative of the Debtors under chapter 7 or chapter 11 of the Bankruptcy Code. Any trustee appointed in these cases shall be and hereby is authorized to operate the business of the Debtors to the fullest extent necessary to permit compliance with the terms of this Order and the Agency Agreement, and Agent and the trustee shall be and hereby are authorized to perform under the Agency Agreement upon the appointment of the trustee without the need for further order of this Court. 34. The Agent shall not be liable for any claims against the Debtors, and the Debtors
shall not be liable for any claims against Agent, in each case, other than as expressly provided for in the Agency Agreement. The Agent shall have no successor liability whatsoever with respect to any Liens or claims of any nature that may exist against the Debtors. 35. No bulk sale or similar law shall prohibit the Debtors or the Agent from taking
action contemplated by the Agency Agreement. 36. Pursuant to section 554(a) of the Bankruptcy Code, the Debtors and the Agent, as
applicable, are permitted to abandon property of the Debtors’ estates in accordance with the terms and provisions of the Agency Agreement without incurring liability to any person or entity. In the event of any such abandonment, all applicable landlords shall be authorized to
dispose of such property without any liability to any individual or entity that may claim an interest in such abandoned property, and such abandonment shall be without prejudice to any landlord’s right to assert any claim based on such abandonment and without prejudice to the Debtors or other party in interest to object thereto. 37. All entities that are presently in possession of some or all of the Assets in which
the Debtors hold an interest hereby are directed to surrender possession of the Assets to the Agent. 38. The Debtors, the Agent and each of their respective officers, employees and
agents are hereby authorized to execute such documents and to do such acts as are necessary or desirable to carry out the Sales and effectuate the Agency Agreement and each of the transactions and related actions contemplated or set forth therein. 39. To the extent that anything contained in this Order explicitly conflicts with a
provision in the Agency Agreement or the Sale Guidelines, this Order shall govern and control. This Court shall retain jurisdiction with respect to any matters, claims, rights or disputes arising from or related to the implementation of this Order or otherwise arising from or related to the Agency Agreement and shall retain jurisdiction over the parties to the Agency Agreement. 40. Nothing contained in any plan confirmed in the Debtors’ chapter 11 cases or any
order of this Court confirming such plan or in any other order in these chapter 11 cases (including any order entered after any conversion of these cases to cases under chapter 7 of the Bankruptcy Code) shall alter, conflict with, or derogate from, the provisions of the Agency Agreement or the terms of this Order. 41. Notwithstanding Bankruptcy Rules 4001 and 6004, or any other law that would
serve to stay or limit the immediate effect of this Order, this Order shall be effective and
enforceable immediately upon entry and its provisions shall be self-executing. In the absence of any person or entity obtaining a stay pending appeal, the Debtors and the Agent are free to perform under the Agency Agreement at any time, subject to the terms of the Agency Agreement. 42. The Agent is a party in interest and shall have the ability to appear and be heard
on all issues related to or otherwise connected to this Agency Agreement and the conduct of the Sale.
Dated: February___, 2011 New York, New York ____________________________________ UNITED STATES BANKRUPTCY JUDGE
EXHIBIT A AGENCY AGREEMENT
EXHIBIT B SALE GUIDELINES
GUIDELINES FOR CONDUCT OF THE SALE1 1. The Sale shall be conducted so that the Stores in which sales are to occur remain open no longer than the normal hours of operation provided for in the respective leases or other occupancy agreements for the Stores. 2. The Sale shall be conducted in accordance with applicable state and local “Blue Laws,” and thus, where applicable, no sale shall be conducted on Sunday unless the Merchant had been operating such Store on a Sunday. 3. All in-Store display and hanging signs used by the Merchant and the Agent in connection with Sale shall be professionally produced and all hanging signs shall be hung in a professional manner. The Merchant and the Agent may advertise the Sale using the term “store closing” or any similar theme, but will not utilize the term “going out of business,” or any similar theme. The Merchant and the Agent shall not use neon or day-glo signs. Furthermore, with respect to enclosed mall locations no exterior signs or signs in common areas of a mall shall be used. In addition, the Merchant and the Agent shall be permitted to utilize exterior banners at (i) non-enclosed mall Stores, and (ii) enclosed mall Stores to the extent the applicable Store entrance does not require entry into the enclosed mall common area; provided, however, that such banners shall be located or hung so as to make clear that the Sale is being conducted only at the affected store and shall not be wider than the storefront of the Store. In addition, the Merchant and the Agent shall be permitted to utilize sign walkers. 4. Conspicuous signs shall be posted in the cash register areas of each Store to the effect that all sales are “final” and that customers with any questions or complaints subsequent to the conclusion of the Sale may contact a named representative of the Merchant at a specified telephone number. 5. Within a “shopping center”, the Agent shall not distribute handbills, leaflets or other written materials to customers outside of any of the Stores, unless permitted by the applicable lease or, if distribution is customary in the “shopping center” in which the Store is located. Otherwise, the Agent may solicit customers in the Stores themselves. The Agent shall not use any flashing lights or amplified sound to advertise the Sale or solicit customers, except as permitted under the applicable lease or agreed to by the landlord. 6. At the conclusion of the Sale, Agent shall vacate the Stores in “broom-clean” condition, and shall otherwise leave the Stores in the same condition as on the commencement of the Sale, ordinary wear and tear excepted; provided, however, that the Merchant and/or the Agent shall be authorized to leave any FF&E or other materials not sold in the Sale (the “Abandoned Property”) at the closing store premises at the conclusion of the Sale; provided, further, that the Merchant hereby does not undertake any greater obligation than as set forth in an applicable lease with respect to a Store. Any Abandoned Property left in a Store after a lease is rejected shall be deemed abandoned with the landlord having the right to dispose of the same as
Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Agency Agreement.
the landlord chooses without any liability whatsoever on the part of the landlord and without waiver of any damage claims against the Merchant or Agent. 7. During the Sale, the Agent may sell the Agent Sale FF&E located in the Stores subject to Section 15.9 of the Agency Agreement. The Agent may advertise the sale of such Agent Sale FF&E consistent with the guidelines provided in paragraphs 3 and 5 hereof. Additionally, the purchasers of any Agent Sale FF&E sold during the Sale shall only be permitted to remove the Agent Sale FF&E either through the back shipping areas or through other areas after store business hours unless otherwise agreed to by the center or mall management or if such Agent Sale FF&E can be removed by one person and can fit within a shopping bag in which case such Agent Sale FF&E can be removed at anytime or any entrance. 8. Landlords will be provided with the name and telephone number of a representative of the Merchant to notify of any problem arising during the Sale. 9. The Agent shall not make any alterations to interior or exterior Store lighting. No property of any landlord of a Store shall be removed or sold during the Sale. The hanging of exterior banners or other signage shall not constitute an alteration to a Store. 10. At the conclusion of the Sale at each Store, pending assumption or rejection of applicable leases, the landlord of a Store shall have reasonable access to the Store’s premises as set forth in the applicable lease. The Merchant and, to the extent provided for in the Agency Agreement, the Agent, and each of their agents and representatives shall continue to have exclusive and unfettered access to the Stores. 11. The Merchant shall notify a representative of the relevant landlord of the date on which the Sale is scheduled to conclude at a given Store, within three business days of the Merchant’s receipt of such notice from the Agent. 12. Nothing contained herein shall be construed to create or impose upon the Merchant or the Agent any additional restrictions not contained in the applicable lease or other occupancy agreement. 13. As to the relative rights of the Debtors and the Agent, any conflicts between this document and the Agency Agreement shall be resolved in favor of the Agency Agreement and nothing contained in these Sale Guidelines shall be deemed to modify, limit or expand such provisions of the Agency Agreement. As to landlords’ rights hereunder, the Sale Guidelines shall control and nothing in the Agency Agreement shall be deemed to modify, limit or expand landlord’s rights hereunder.
EXHIBIT D HILCO PRE-PETITION CONSULTING AGREEMENTS
EXHIBIT E SALE NOTICE
David M. Friedman (DFriedman@kasowitz.com) David S. Rosner (DRosner@kasowitz.com) Andrew K. Glenn (AGlenn@kasowitz.com) Jeffrey R. Gleit (JGleit@kasowitz.com) KASOWITZ, BENSON, TORRES & FRIEDMAN LLP 1633 Broadway New York, New York 10019 Telephone: (212) 506-1700 Facsimile: (212) 506-1800 Attorneys for Debtors and Debtors in Possession UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re BORDERS GROUP, INC., et al.,1 Debtors. Chapter 11 Case No. 11-______ (___) (Joint Administration Pending)
NOTICE OF (A) PROPOSED SALE OF CERTAIN ASSETS FREE AND CLEAR OF LIENS, CLAIMS, AND ENCUMBRANCES THROUGH STORE CLOSING SALES AND (B) SALE HEARING PLEASE TAKE NOTICE that on February 16, 2011, Borders Group, Inc. and its debtor affiliates, as debtors and debtors in possession in the above-captioned chapter 11 cases (collectively, the “Debtors”), filed a motion (the “Sale Motion”) with the United States Bankruptcy Court for the Southern District of New York (the “Court”) seeking, among other things, authority to sell assets located at certain of the Debtors’ closing store locations identified in Exhibit 1 hereto through store closing sales, free and clear of all liens, claims, and encumbrances. PLEASE TAKE FURTHER NOTICE that a copy of the Sale Motion including the form Agency Agreement may be obtained by (a) contacting the attorneys for the Debtors, Kasowitz, Benson, Torres & Friedman LLP, 1633 Broadway, New York, New York, 10019, Attn: Julia Balduzzi, Telephone: (212) 506-1700; (b) accessing the Court’s website at http://www.nysb.uscourts.gov (please note that a PACER password is needed to access documents on the Court’s website); (c) viewing the docket of these cases at the Clerk of the Court, United States Bankruptcy Court for the Southern District of New York, Alexander Hamilton Custom House, One Bowling Green, New York, New York 10004; or (d) accessing the
The Debtors in these cases, along with the last four digits of each Debtor’s federal tax identification number, are: Borders Group, Inc. (4588); Borders International Services, Inc. (5075); Borders, Inc. (4285); Borders Direct, LLC (0084); Borders Properties, Inc. (7978); Borders Online, Inc. (8425); Borders Online, LLC (8996); and BGP (UK) Limited.
2209099v1 2/16/2011 5:16 AM
public website maintained by the Debtors proposed court-appointed claims and noticing agent in this case at http://www.bordersreorganization.com. An auction to select a liquidator to conduct the store closing sales is currently scheduled to take place on Wednesday, February 16, 2011 beginning at 10:00 AM (EST) at the offices of Kasowitz, Benson, Torres & Friedman LLP, 1633 Broadway, New York, New York, 10019. PLEASE TAKE FURTHER NOTICE that the Debtors will provide additional notice upon the determination of the date and time of the hearing for approval of the Sale Motion, which the Debtors are seeking to have heard on February 16, 2011 or as soon thereafter as the Court determines. Objections, if any, will be due at the hearing. Dated: February 16, 2011 New York, New York KASOWITZ, BENSON, TORRES & FRIEDMAN LLP By: /s/ Jeffrey R. Gleit David M. Friedman (DFriedman@kasowitz.com) David S. Rosner (DRosner@kasowitz.com) Andrew K. Glenn (AGlenn@kasowitz.com) Jeffrey R. Gleit (JGleit@kasowitz.com) 1633 Broadway New York, New York 10019 Telephone: (212) 506-1700 Facsimile: (212) 506-1800 Attorneys for Debtors and Debtors-in-Possession
EXHIBIT 1 TO SALE NOTICE LIST OF CLOSING STORES
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