SC 13D/A

0000950123-09-006015.txt : 20090402 0000950123-09-006015.hdr.sgml : 20090402 20090402171315 ACCESSION NUMBER: 0000950123-09-006015 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20090402 DATE AS OF CHANGE: 20090402 GROUP MEMBERS: BGP HOLDINGS CORP. GROUP MEMBERS: PERSHING SQUARE GP, LLC GROUP MEMBERS: PS MANAGEMENT GP, LLC GROUP MEMBERS: WILLIAM A. ACKMAN SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BORDERS GROUP INC CENTRAL INDEX KEY: 0000940510 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS SHOPPING GOODS STORES [5940] IRS NUMBER: 383294588 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-52269 FILM NUMBER: 09728647 BUSINESS ADDRESS: STREET 1: 100 PHOENIX DRIVE CITY: ANN ARBOR STATE: MI ZIP: 48108 BUSINESS PHONE: (734) 477-1100 MAIL ADDRESS: STREET 1: 100 PHOENIX DRIVE CITY: ANN ARBOR STATE: MI ZIP: 48108 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Pershing Square Capital Management, L.P. CENTRAL INDEX KEY: 0001336528 IRS NUMBER: 383694136 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 888 SEVENTH AVENUE STREET 2: 29TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 212-813-3700 MAIL ADDRESS: STREET 1: 888 SEVENTH AVENUE STREET 2: 29TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 SC 13D/A 1 y01401sc13dza.htm AMENDMENT TO SCHEDULE 13D SC 13D/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934
(Amendment No. 11 )*

Borders Group, Inc.

(Name of Issuer)

Common Stock

(Title of Class of Securities)

099709107

(CUSIP Number)

Roy J. Katzovicz, Esq.
Pershing Square Capital Management, L.P.
888 Seventh Avenue, 42^nd Floor
New York, New York 10019
212-813-3700

(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)

with copies to:

Andrew G. Dietderich, Esq.
Alan J. Sinsheimer, Esq.
Sullivan & Cromwell LLP
125 Broad Street, New York, New York 10004
212-558-4000

March 30, 2009

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Section 240.13d-7 for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).


CUSIP No.		099709107

NAME OF REPORTING PERSON

Pershing Square Capital Management, L.P.

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

— 0 —

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

25,297,980

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

— 0 —

WITH

SHARED DISPOSITIVE POWER

25,297,980

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

25,297,980

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

34.1%¹

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

¹ This calculation is based on 74,172,033 shares of common stock of Borders Group, Inc. (the “ Common Stock”). This figure is based on 59,471,933 shares of Common Stock outstanding as of March 24, 2009 as reported in its annual report on Form 10-K for the fiscal year ended January 31, 2009 plus 100 shares of Common Stock issued to Pershing Square, L.P. on March 30, 2009 and warrants covering 14,700,000 shares of Common Stock.


CUSIP No.		099709107

NAME OF REPORTING PERSON

PS Management GP, LLC

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

— 0 —

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

25,297,980

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

— 0 —

WITH

SHARED DISPOSITIVE POWER

25,297,980

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

25,297,980

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

34.1%²

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

² This calculation is based on 74,172,033 shares of common stock of Borders Group, Inc. (the “Common Stock”). This figure is based on 59,471,933 shares of Common Stock outstanding as of March 24, 2009 as reported in its annual report on Form 10-K for the fiscal year ended January 31, 2009 plus 100 shares of Common Stock issued to Pershing Square, L.P. on March 30, 2009 and warrants covering 14,700,000 shares of Common Stock.


CUSIP No.		099709107

NAMES OF REPORTING PERSON

Pershing Square GP, LLC

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

— 0 —

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

14,779,533

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

— 0 —

WITH

SHARED DISPOSITIVE POWER

14,779,533

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

14,779,533

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

19.9%³

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

³ This calculation is based on 74,172,033 shares of common stock of Borders Group, Inc. (the “Common Stock”). This figure is based on 59,471,933 shares of Common Stock outstanding as of March 24, 2009 as reported in its annual report on Form 10-K for the fiscal year ended January 31, 2009 plus 100 shares of Common Stock issued to Pershing Square, L.P. on March 30, 2009 and warrants covering 14,700,000 shares of Common Stock.


CUSIP No.		099709107

NAME OF REPORTING PERSON

William A. Ackman

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

U.S.A.

SOLE VOTING POWER

NUMBER OF

— 0 —

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

25,297,980

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

— 0 —

WITH

SHARED DISPOSITIVE POWER

25,297,980

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

25,297,980

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

34.1%⁴

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

⁴ This calculation is based on 74,172,033 shares of common stock of Borders Group, Inc. (the “Common Stock”). This figure is based on 59,471,933 shares of Common Stock outstanding as of March 24, 2009 as reported in its annual report on Form 10-K for the fiscal year ended January 31, 2009 plus 100 shares of Common Stock issued to Pershing Square, L.P. on March 30, 2009 and warrants covering 14,700,000 shares of Common Stock.


CUSIP No.		099709107

NAME OF REPORTING PERSON

BGP Holdings Corp.

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

— 0 —

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

8,798,000

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

— 0 —

WITH

SHARED DISPOSITIVE POWER

8,798,000

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

8,798,000

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

11.9%⁵

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

⁵ This calculation is based on 74,172,033 shares of common stock of Borders Group, Inc. (the “Common Stock”). This figure is based on 59,471,933 shares of Common Stock outstanding as of March 24, 2009 as reported in its annual report on Form 10-K for the fiscal year ended January 31, 2009 plus 100 shares of Common Stock issued to Pershing Square, L.P. on March 30, 2009 and warrants covering 14,700,000 shares of Common Stock.

This Amendment No. 11 (this “Amendment No. 11”) amends and supplements the statement on Schedule 13D, as amended to date (the “Schedule 13D”), by (i) Pershing Square Capital Management, L.P., a Delaware limited partnership (“Pershing Square”), (ii) PS Management GP, LLC, a Delaware limited liability company (“PS Management”), (iii) Pershing Square GP, LLC, a Delaware limited liability company (“Pershing Square GP”), (iv) William A. Ackman, a citizen of the United States of America, and (v) BGP Holdings Corp., a Delaware corporation (collectively, the “Reporting Persons”), relating to the common stock (the “Common Stock”) of Borders Group, Inc., a Michigan corporation (the “Issuer”). Unless otherwise defined herein, capitalized terms used herein shall have such defined meanings as previously used in the Schedule 13D filed by the Reporting Persons.

As of March 30, 2009, as reflected in this Amendment No. 11, the Reporting Persons are reporting beneficial ownership on an aggregate basis of 25,297,980 shares of Common Stock (approximately 34.1% of the outstanding shares) (the “Subject Shares”). This includes warrants covering 14,700,000 shares of Common Stock (the “Warrants”), which represents 9,550,000 Warrants received on April 9, 2008 and 5,150,000 Warrants received on October 1, 2008 (each, as previously disclosed). The Reporting Persons own cash settled total return equity swaps covering 4,376,163 notional shares of Common Stock (as previously disclosed). The notional shares that underlie such swaps are not included in the totals set forth in the charts earlier in the Schedule 13D. The aggregate economic exposure of the Reporting Persons to shares of Common Stock, including the aggregate shares of Common Stock beneficially owned by the Reporting Persons plus the aggregate notional shares underlying such swaps, represents approximately 40.0% of the sum of the outstanding shares of Common Stock and the shares of Common Stock underlying the Warrants.

Item 3. Source and Amount of Funds or Other Consideration

Item 3 is hereby supplemented, as follows:

On March 30, 2009, Pershing Square, L.P. (“PSI”) purchased from the Issuer 100 shares of Common Stock (the “Subscribed Shares”) for a total consideration of $65.0 derived from the capital of PSI.

Item 4. Purpose of Transaction

Item 4 is hereby supplemented, as follows:

As described in detail below, on March 30, 2009 Pershing Square and certain of its affiliates and their managed funds (“PS Entities”) entered into a series of transactions. In consideration for the adjustment of the exercise price of the Warrants to $0.65 per share and on the condition that the Issuer does not accept PS Entities’ backstop purchase offer, as set forth in the Purchase Offer Letter, PS Entities agreed to extend the $42,500,000 senior secured term loan owed under the Credit Agreement until April 1, 2010.

On March 30, 2009, PSI and the Issuer entered into the Subscription and Purchase Agreement (the “Subscription and Purchase Agreement”), under which PSI subscribed for and purchased and the Issuer issued and sold to PSI the Subscribed Shares at a price of $0.65 per share of Common Stock.

On March 30, 2009, Pershing Square and the Issuer entered into a letter agreement (the “Second Side Letter”), which provides that the Warrants received pursuant to the Warrant Agreement will be exercisable on the following basis: (i) prior to June 30, 2009, 3,675,000 Warrants, (ii) prior to September 30, 2009, 7,350,000 Warrants and (iii) prior to December 31, 2009, 11,025,000 Warrants, all Warrants being exercisable on or after December 31, 2009. The foregoing is subject to the condition that in the event of the earlier of (i) a change of control event, public stock merger, recapitalization event or reorganization event or (ii) the public announcement by the Issuer or any other party of such person’s intent to enter into such an event, all of the Warrants will immediately become exercisable. The Second Side Letter further provides that registrable securities will include, in addition to the Warrants and the Common Stock issuable under the Warrants, any other shares of Common Stock owned by Pershing Square, from time to time. Under the Warrant Agreement, as modified by the Second Side Letter, the Issuer is obligated to file with the Securities and Exchange Commission a registration statement with respect to the registrable securities by no later than June 30, 2009 and will use commercially reasonable efforts to cause such registration statement to be declared or become effective as promptly as practicable, but in no event later than September 30, 2009. The Second Side Letter also provides that as a result of the issuance to PSI of the Subscribed Shares, pursuant to Section 5.6 of the Warrant Agreement, the exercise price of the Warrants has been adjusted to $0.65 per share subject to further adjustments to be made on or prior to the date of exercise thereof in accordance with the provisions of the Warrant Agreement.

On March 30, 2009, Pershing Square, certain of its affiliates and the Issuer entered into the Third Amendment to the Senior Secured Credit Agreement (the “Third Amendment to the Senior Secured Credit Agreement”) to extend the deadline for repayment of the $42,500,000 senior secured term loan owed under the Credit Agreement by the Issuer to Pershing Square and certain of its affiliates, as previously amended pursuant to the Second Amendment to the Senior Secured Credit Agreement and the First Amendment to the

Senior Secured Credit Agreement, from April 15, 2009 to April 1, 2010. The Third Amendment to the Senior Secured Credit Agreement is conditioned on, in addition to certain other customary conditions, the Issuer (including without limitation any of its affiliates) not providing any notice of acceptance to Pershing Square under the Purchase Offer Letter prior to March 31, 2009 and the payment of fees and expenses of Pershing Square’s counsel. On March 31, 2001, upon satisfaction of the conditions set forth in the Third Amendment to the Senior Secured Credit Agreement, the extension of the loan became effective. Other than as set forth in the Third Amendment to the Senior Secured Credit Agreement, all terms and conditions of the Credit Agreement remain in place.

Upon the Issuer not delivering a notice of acceptance to Pershing Square of Pershing Square’s backstop purchase offer on behalf of certain funds managed by Pershing Square, as set forth in the Purchase Offer Letter, such backstop purchase offer expired on March 31, 2009.

The foregoing summary of the above-referenced agreements and the contemplated transactions is not complete and is subject in its entirety to the Subscription and Purchase Agreement, the Second Side Letter and the Third Amendment to the Senior Secured Credit Agreement, which are filed as Exhibits 99.1, 99.2 and 99.3 hereto and are incorporated herein by reference.

Item 5. Interest in Securities of the Issuer

Items 5(a) and (b) and are hereby amended and restated in their entirety, as follows:

(a), (b) Based upon the Issuer’s annual report on Form 10-K for the fiscal year ended January 31, 2009, there were 59,471,933 shares of Common Stock outstanding as of March 24, 2009, and together with the Warrants covering 14,700,000 shares of Common Stock and the Subscribed Shares issued to PSI on March 30, 2009, there were 74,172,033 shares of Common Stock outstanding. Based on the foregoing, the shares (the “Subject Shares”) of Common Stock beneficially owned by the Reporting Persons represented approximately 34.1% of the shares of the Common Stock issued and outstanding as of the date hereof. The Reporting Persons own cash settled total return equity swaps covering 4,376,163 notional shares of Common Stock. The notional shares that underlie such swaps are not included in the totals set forth herein. The aggregate economic exposure of the Reporting Persons to shares of Common Stock, including the aggregate shares of Common Stock beneficially owned by the Reporting Persons plus the aggregate notional shares underlying such swaps, represents approximately 40.0% of the sum of the outstanding shares of Common Stock and the shares of Common Stock underlying the Warrants.

Pershing Square, as the investment adviser to the Pershing Square Funds, may be deemed to have the shared power to vote or direct the vote of (and the shared power to dispose or direct the disposition of) the Subject Shares. As the general partner of Pershing Square, PS Management may be deemed to have the shared power to vote or to direct the vote of (and the shared power to dispose of or direct the disposition of) the Subject Shares. As the general partner of PSI and Pershing Square II, L.P. (“PSII”) (each of which has ownership interests in BGP Holdings Corp.), Pershing Square GP may be deemed to have the shared power to vote or to direct the vote of (and the shared power to dispose or direct the disposition of) the 14,779,533 shares of Common Stock (including the 14,700,000 shares of Common Stock underlying the Warrants) beneficially owned by PSI and PSII. BGP Holdings Corp. has the shared power to vote or to direct the vote of (and the shared power to dispose or direct the disposition of) the 8,798,000 shares of Common Stock underlying the 8,798,000 Warrants it beneficially owns. By virtue of William A. Ackman’s position as managing member of each of PS Management and Pershing Square GP, William A. Ackman may be deemed to have the shared power to vote or direct the vote of (and the shared power to dispose or direct the disposition of) the Subject Shares and, therefore, William A. Ackman may be deemed to be the beneficial owner of the Subject Shares.

Items 5(c) is hereby supplemented, as follows:

(c) On March 30, 2009, PSI purchased, pursuant to the Subscription and Purchase Agreement (as described in Item 4), for its own account, the Subscribed Shares for a price of $0.65 per share. Since the filing of Amendment No. 10 to the Schedule 13D on February 17, 2009, no transactions in shares of the Common Stock other than as disclosed herein were effected by any Reporting Person.

Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer

Item 6 is hereby supplemented, as follows:

On March 30, 2009, PSI and the Issuer entered into the Subscription and Purchase Agreement, which is summarized in Item 4 above, is filed as Exhibit 99.1 hereto and is incorporated herein by reference.

On March 30, 2009, Pershing Square and the Issuer entered into the Second Side Letter, which is summarized in Item 4 above, is filed as Exhibit 99.2 hereto and is incorporated herein by reference.

On March 30, 2009, Pershing Square, certain of its affiliates and the Issuer entered into the Third Amendment to the Senior Secured Credit Agreement, which is summarized in Item 4 above, is filed as Exhibit 99.3 hereto and is incorporated herein by reference.

Item 7. Material to be Filed as Exhibits

Item 7 is hereby supplemented by adding the following exhibits:


Exhibit 99.1		Subscription and Purchase Agreement, dated March 30, 2009, between Pershing Square, L.P. and Borders Group, Inc.

Exhibit 99.2		Letter Agreement, dated March 30, 2009, between Pershing Square Capital Management, L.P. and Borders Group, Inc.

Exhibit 99.3		Third Amendment to the Senior Secured Credit Agreement, dated March 30, 2009, between Borders Group, Inc., the guarantors named therein, the lenders named therein and Pershing Square Capital Management, L.P., as administrative agent and collateral agent.

SIGNATURES

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete, and correct.


Date: April 2, 2009	PERSHING SQUARE CAPITAL MANAGEMENT, L.P.
	By:	PS Management GP, LLC, its General Partner

	By:	/s/ William A. Ackman
		William A. Ackman
		Managing Member

	PS MANAGEMENT GP, LLC
	By:	/s/ William A. Ackman
		William A. Ackman
		Managing Member

	PERSHING SQUARE GP, LLC
	By:	/s/ William A. Ackman
		William A. Ackman
		Managing Member


	/s/ William A. Ackman
	WILLIAM A. ACKMAN


	BGP HOLDINGS CORP.
	By:	/s/ William A. Ackman
		William A. Ackman
		Authorized Representative

EX-99.1 2 y01401exv99w1.htm EX-99.1 EX-99.1

SUBSCRIPTION AND PURCHASE AGREEMENT

This SUBSCRIPTION AND PURCHASE AGREEMENT dated as of March 30, 2009 (this “Agreement”), is entered into by and between Pershing Square, L.P. (“Pershing Square”), and Borders Group, Inc. (the “Company”).

WHEREAS, Pershing Square desires to subscribe for and acquire 100 shares of common stock, no par value, of the Company (the “Subscribed Shares”) in consideration of the payment of an amount in cash of $0.65 per share of common stock (such per share price multiplied by the total number of Subscribed Shares, the “Subscription Price”);

NOW, THEREFORE, Pershing Square and the Company, intending to be legally bound hereby, agree as follows:

Section 1.1 Subscription. Pershing Square hereby subscribes for and purchases, and the Company hereby accepts such offer, agrees to issue and sells to Pershing Square, the Subscribed Shares, in consideration of the payment in cash by Pershing Square to the Company on or before the date hereof of the Subscription Price, the receipt of which is hereby acknowledged.

Section 1.2 Corporate action. Each party to this Agreement represents and warrants that the execution and delivery of this Agreement and the performance by each party of its respective obligations hereunder has been duly authorized by all necessary corporate action on its part.

Section 1.3 Issuance of the Subscribed Shares. The Company represents and warrants that the allotment and issuance of the Subscribed Shares has been duly and validly authorized by all necessary corporate action on its part and that the Subscribed Shares are fully paid and nonassessable.

Section 1.4 Delivery of certificate. Promptly after execution of this Agreement, the Company shall deliver to Pershing Square a stock certificate representing the Subscribed Shares purchased hereunder.

Section 1.5 Further Assurances. The parties hereto agree that, from time to time after the date hereof, each of them will execute and deliver such further instruments of conveyance and transfer and take such other actions as may be necessary to carry out the purposes and intents of this Agreement and the transactions contemplated hereby, including the taking or causing the taking of all such actions and the making, execution and delivery of any and all documents, instruments and certificates, in such form and with such terms as may reasonably be required to effect the foregoing.

Section 1.6 Investment Intent. Pershing Square represents and warrants that it is acquiring the Subscribed Shares for its own account, for the purpose of investment only and not with a view to, or for sale in connection with, any distribution thereof in violation of applicable securities laws.

Section 1.7 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or other electronic transmittal shall be effective as delivery of a manually executed counterpart of this Agreement.

Section 1.8 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the state of New York, without regard to principles thereof relating to conflicts of laws.

Section 1.9 Amendments and Waivers. This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument executed by the parties hereto or, in the case of a waiver, by the party waiving compliance.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date hereof.


PERSHING SQUARE, L.P. By: Pershing Square Capital Management, L.P., its Investment Advisor By: PS Management GP, LLC, its General Partner
By:	/s/ Roy J. Katzovicz
	Name:	Roy J. Katzovicz
	Title:	Authorized Signatory and Chief Legal Officer


By:	/s/ Nicholas Botta
	Name:	Nicholas Botta
	Title:	Authorized Signatory and Chief Financial Officer

BORDERS GROUP, INC.
By:	/s/ Mark Bierley
	Name:	Mark Bierley
	Title:	Executive Vice President and Chief Financial Officer

EX-99.2 3 y01401exv99w2.htm EX-99.2 EX-99.2

Borders Group, Inc.
100 Phoenix Drive
Ann Arbor, Michigan 48108

March 30, 2009

Pershing Square Capital Management, L.P.
888 Seventh Avenue, 42nd Floor
New York, New York 10019
Attention: William A. Ackman, Managing Member


	Re:		Warrant Agreement

Ladies and Gentlemen:

Reference is hereby made to the Warrant and Registration Rights Agreement dated as of April 9, 2008 by and between Borders Group, Inc. (the “Company”) and Computershare Inc. and Computershare Trust Company, N.A., as Warrant Agent (the “Warrant Agreement”), pursuant to which Warrants to purchase Common Stock of the Company were issued, and may in the future be issued, to Pershing Square Capital Management, L.P., its Affiliates and certain of their respective managed funds (collectively, “Pershing Square”). Capitalized terms used and not defined herein shall have the meaning set forth in the Warrant Agreement.

The Company and Pershing Square hereby agree that the Warrants shall only be exercisable in the following amounts at the following times: (i) prior to June 30, 2009, 3,675,000 Warrants, (ii) prior to September 30, 2009, 7,350,000 Warrants and (iii) prior to December 31, 2009, 11,025,000 Warrants. For the avoidance of doubt, on or after December 31, 2009, all of the Warrants shall be exercisable. Notwithstanding the foregoing, in the event of the earlier of (i) a Change of Control Event, Public Stock Merger, Recapitalization Event or Reorganization Event, or (ii) the public announcement by the Company or any other party of such person’s intent to enter into a transaction, which if consummated would constitute a Change of Control Event, Public Stock Merger, Recapitalization Event or Reorganization Event, all of the Warrants shall immediately become exercisable.

The Company and Pershing Square also hereby acknowledge and agree that: (i) as a result of the issuance of common stock to Pershing Square, L.P. pursuant to the Subscription Agreement between Pershing Square, L.P. and the Company dated as of the same date as this letter agreement, and in accordance with Section 5.6 of the Warrant Agreement, the Exercise Price has been adjusted to $0.65 per share, which Exercise Price shall be subject to further adjustments to be made on or prior to the date of exercise thereof as provided and in accordance with the provisions of the Warrant Agreement, and (ii) the requirements of Section 5.10 of the Warrant Agreement in relation to the adjustment of the Exercise Price to $0.65 per share shall be

deemed satisfied in full, with respect to each Holder only, by this letter agreement without any further action by the Company.

The Company and Pershing Square hereby further agree that, the Company shall comply with its obligations under Section 4.1 of the Warrant Agreement, provided, that the reference to “October 1, 2008” in Section 4.1(a) shall be deemed “June 30, 2009”, the reference to “January 1, 2009” in Section 4.1(a) shall be deemed “September 30, 2009”, and the term “Registrable Securities” shall be deemed to include, in addition to all Warrants and Common Stock issuable under the Warrants, any other shares of Common Stock owned by Pershing Square, from time to time.

This letter agreement may not be amended or any provision hereof waived or modified except by an instrument in writing signed by each of the parties hereto. This letter agreement shall be governed by, and construed in accordance with, the laws of the State of New York. This letter agreement may be executed in any number of counterparts, each of which shall be an original and all of which, when taken together, shall constitute one agreement.

Please indicate your agreement with the foregoing by executing a copy of this letter and returning it to the undersigned.


Very truly yours, BORDERS GROUP, INC.
By:	/s/ Mark Bierley
	Name:	Mark Bierley
	Title:	Executive Vice President and Chief Financial Officer

Agreed to and accepted this
30th day of March, 2009


PERSHING SQUARE CAPITAL MANAGEMENT, L.P. By: PS Management GP, LLC, its General Partner
By:	/s/ Roy J. Katzovicz
	Name:	Roy J. Katzovicz
	Title:	Authorized Signatory and Chief Legal Officer


By:	/s/ Nicholas Botta
	Name:	Nicholas Botta
	Title:	Authorized Signatory and Chief Financial Officer

EX-99.3 4 y01401exv99w3.htm EX-99.3 EX-99.3

THIRD AMENDMENT TO THE SENIOR SECURED CREDIT AGREEMENT, dated as of March 30, 2009 (this “Amendment”), made by and among (a) Borders Group, Inc., a Michigan corporation (the “Borrower”), (b) Pershing Square Credit Partners LLC, a Delaware limited liability company (“Pershing Square” or a “Lender”), (c) PSRH, Inc., a Cayman Islands exempted company (a “Lender”, and collectively with Pershing Square, the “Lenders”), and (d) Pershing Square Capital Management, L.P., a Delaware limited partnership (the “Collateral Agent” and the “Administrative Agent”). Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Credit Agreement (as hereinafter defined).

RECITALS

WHEREAS, the Borrower, the Lenders, the Collateral Agent, the Administrative Agent and certain other parties entered into that certain Senior Secured Credit Agreement, dated as of April 9, 2008 as amended by the First Amendment to the Senior Secured Credit Agreement, dated as of December 22, 2008 and the Second Amendment to the Senior Secured Credit Agreement, dated as of February 13, 2009 (the “Credit Agreement”); and

WHEREAS, the Borrower, the Lenders, the Collateral Agent and the Administrative Agent desire to amend the Credit Agreement in accordance with Section 14.12 of the Credit Agreement in the manner set forth in this Amendment in order to extend the Maturity Date until April 1, 2010.

NOW, THEREFORE, in order to carry out their intent as expressed above and in consideration of the mutual agreements hereinafter contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

Section 1.1 of the Credit Agreement is hereby amended by deleting the definition of “Maturity Date” and replacing it in its entirety with the following new definition:

“Maturity Date. April 1, 2010.”

References in the Credit Agreement to “this Credit Agreement” or any particular Section thereof shall be deemed to refer to the Credit Agreement or such Section as amended hereby.

The Borrower represents and warrants to the Lenders and the Agents as follows:

(i)

All representations and warranties in the Credit Agreement other than Section 6.6.2, Section 6.18, Section 6.19, Section 6.26, Section 6.27 and Section 6.28 are true and correct with the same effect as if made at and as of the date hereof (except to the extent that such representations and warranties relate expressly to an earlier date); provided, that (a) clauses (c) and (d) of the definition of “Material Adverse Effect” shall be deemed to

be omitted for purposes of this representation, (b) the related disclosure schedules to the Credit Agreement shall be deemed amended by any facts set forth in the Borrower’s public filings with the Securities Exchange Commission from the date of the Credit Agreement to date hereof and the draft Form 10-K for the fiscal year ended January 31, 2009, a copy of which has been provided to the Administrative Agent’s Special Counsel prior to the date hereof, (c) there may be other changes to the related disclosure schedules to the Credit Agreement since the date of the Credit Agreement, and to the extent that such changes are not material and have resulted from the Borrower’s conduct of its business in the ordinary course, such changes shall not be deemed to be a breach of this representation; provided further that for purposes of Section 6.4.2 the term “FQ3 2007” shall be replaced with the term “FQ3 2008”.

(ii)

All filings, assignments, pledges and deposits of documents or instruments have been made and all other actions have been taken that are necessary or advisable, under applicable law, to establish and perfect the Administrative Agent’s security interest in the Collateral, including, with respect to any United Kingdom security, the filing of any applicable UK security documents at the Companies Registration Office under Section 395 of the Companies Act of 1985 and such other filing as may be required under English law. The Collateral and the Administrative Agent’s rights with respect to the Collateral are not subject to any setoff, claims, withholdings or other defenses and the Borrower and all Subsidiaries of the Borrower that are a party to Pledge Agreement are the owners of the Collateral free from any Lien.

(iii)

The Credit Agreement or any of the other Loan Documents do not contain any untrue statement of a material fact or omit to state a material fact (known to the Borrower or any of its Subsidiaries in the case of any document or information not furnished by it or any of its Subsidiaries) necessary in order to make the statements herein or therein not misleading.

(iv)

The representations and warranties of the Borrower and any of its Subsidiaries contained in Section 6.1.2, Section 6.1.3 and Section 6.2 of the Credit Agreement are true and correct at and as of the date hereof, with the same effect as if made with respect to this Amendment, at and as of the date hereof.

Notwithstanding anything in this Amendment to the contrary, this Amendment shall become effective on March 31, 2009 (the “Effective Date”), provided that:

(i)

on or prior to the Effective Date, the Administrative Agent shall have received a duly executed copy of this Amendment by each of the parties hereto;

(ii)

the Borrower (including without limitation any of its affiliates) shall not have provided any notice of acceptance (or any other similar notice) to Pershing Square Capital Management, L.P. pursuant to the Purchase Offer Letter, including without limitation under Section 1 thereof, on or prior to the Effective Date;

(iii)

the Administrative Agent shall have received a certificate of the Borrower signed by an authorized officer of the Borrower to the effect that each of the representations and warranties of the Borrower in this Amendment are true and correct at and as of the Effective Date;

(iv)

no Default or Event of Default shall have occurred and be continuing as of the Effective Date;

(v)

the Borrower shall have paid to the Lenders or the Administrative Agent, as appropriate, the fees and expenses of the Administrative Agent’s Special Counsel.

Except as expressly amended hereby, the Credit Agreement remains unmodified and is in full force and effect.

This Amendment may be executed in two or more counterparts, each of which constitutes an original and all of which, when taken together, constitute one agreement. This Amendment may be delivered by facsimile and when executed and so delivered, shall be an original for all purposes.

THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first above written.

BORROWER:


BORDERS GROUP, INC.
By:	/s/ Mark Bierley
	Name:	Mark Bierley
	Title:	EVP and Chief Financial Officer

LENDERS:


PERSHING SQUARE CREDIT PARTNERS LLC
By:	PERSHING SQUARE CAPITAL MANAGEMENT, L.P., its Managing Member

By:	PS MANAGEMENT GP, LLC, its General Partner

By:	/s/ Roy J. Katzovicz
	Name:	Roy J. Katzovicz
	Title:	Authorized Signatory and Chief Legal Officer


By:	/s/ Nicholas Botta
	Name:	Nicholas Botta
	Title:	Authorized Signatory and Chief Financial Officer

PSRH, INC.
By:	PERSHING SQUARE CAPITAL MANAGEMENT, L.P., its Authorized Representative

By:	PS MANAGEMENT GP, LLC, its General Partner

By:	/s/ Roy J. Katzovicz
	Name:	Roy J. Katzovicz
	Title:	Authorized Signatory and Chief Legal Officer


By:	/s/ Nicholas Botta
	Name:	Nicholas Botta
	Title:	Authorized Signatory and Chief Financial Officer

ADMINISTRATIVE AGENT/COLLATERAL AGENT:


PERSHING SQUARE CAPITAL MANAGEMENT, L.P. By: PS MANAGEMENT GP, LLC, its General Partner
By:	/s/ Roy J. Katzovicz
	Name:	Roy J. Katzovicz
	Title:	Authorized Signatory and Chief Legal Officer


By:	/s/ Nicholas Botta
	Name:	Nicholas Botta
	Title:	Authorized Signatory and Chief Financial Officer