EMPLOYMENT AGREEMENT
 
AGREEMENT by and between Borders Group, Inc., a Michigan corporation (the
“Company”) and George L. Jones (“Executive”) dated as of the 13th day of July,
2006.
 
WHEREAS, the Company is desirous of employing Executive in an executive capacity
on the terms and conditions, and for the consideration, hereinafter set forth,
and Executive is desirous of being employed by the Company on such terms and
conditions and for such consideration.
 
NOW, THEREFORE, for and in consideration of the mutual promises, covenants and
obligations contained herein, the Company and Executive agree as follows:
 
1.  Employment Period. The initial term of Executive’s employment will commence
on July 17, 2006 (the “Effective Date”) and end on the third anniversary of the
Effective Date (the “Initial Employment Period”), unless terminated earlier
pursuant to Section 3 of this Agreement; provided, however, that as of the
expiration date of each of (a) the Initial Employment Period and (b) if
applicable, any Renewal Period (as defined below), the Employment Period will
automatically be extended for a one-year period (each, a “Renewal Period”),
unless either party gives at least ninety (90) days written notice prior to such
expiration date of its intention not to renew the Employment Period (the Initial
Employment Period and each subsequent Renewal Period shall constitute the
“Employment Period”). The Employment Period shall automatically end upon
termination of Executive’s employment for any reason. Notwithstanding anything
to the contrary contained herein, (i) absent the occurrence of a Change of
Control (as defined below) prior thereto, the Employment Period shall
automatically terminate on the five-year anniversary of the Effective Date,
unless terminated prior thereto pursuant to the terms hereof, and (ii) upon a
Change of Control occurring prior to the five-year anniversary of the Effective
Date, the Employment Period shall automatically be extended so as to end no
earlier than the two-year anniversary of the Change of Control. Upon Executive’s
termination of employment with the Company for any reason, he shall immediately
resign all positions (including directorships) with the Company or any of its
subsidiaries or affiliates.
 
2.  Terms of Employment.
 
(a) Position and Duties.
    
    (i) During the Employment Period, Executive shall serve as President and
Chief Executive Officer of the Company with such authority, duties and
responsibilities as are commensurate with such position and as may be consistent
with the Company’s practices from time to time with respect to the management of
its subsidiaries and businesses, and Executive’s services shall be performed at
the Company’s headquarters in the Ann Arbor, Michigan area, subject to
reasonable business travel at the Company’s request. In addition, effective as
of the Effective Date, the Company shall cause Executive to be appointed as a
member of the Board of Directors of the Company (the “Board of Directors”), and
shall nominate Executive for election and re-election to the Board of Directors
as and when Executive’s term expires while Executive remains employed under this
Agreement. Executive shall report directly to the Board of Directors.
 
(ii)  During the Employment Period, and excluding any periods of vacation and
sick leave to which Executive is entitled, Executive agrees to devote
substantially all of his business attention and time to the business and affairs
of the Company and, to the extent necessary to discharge the responsibilities
assigned to Executive hereunder, to use his reasonable best efforts to perform
faithfully and efficiently such responsibilities and not to engage, directly or
indirectly, in any other business or businesses, whether or not similar to that
of the Company, except with the consent of the Board of Directors. The foregoing
notwithstanding, the parties recognize and agree that Executive may engage in
non-profit, civic and charitable activities that do not conflict with the
business and affairs of the Company or interfere with Executive’s performance of
his duties hereunder without the necessity of obtaining the consent of the Board
of Directors.
 
(b)  Compensation.
 
(i)  Base Salary. During the Employment Period, Executive shall receive an
annual base salary (“Base Salary”) of $775,000. The Base Salary shall be
reviewed from time to time for increase (but not decrease) in accordance with
the Company’s regular practices, and, if increased, the term “Base Salary” shall
refer to such increased amount. Executive’s Base Salary shall be pro rated to
take into account any fiscal year of the Company during which Executive is not
employed by the Company for the entire fiscal year of the Company. Executive’s
Base Salary shall be paid in equal installments in accordance with the Company’s
standard policy regarding payment of compensation to executives.
 
(ii)  Annual Bonus. With respect to each fiscal year of the Company ending
during the Employment Period, Executive shall be eligible to receive an annual
bonus (the “Annual Bonus”) pursuant to the terms of the Company’s Annual
Incentive Bonus Plan or any successor plan of the Company (“AIP”) in an amount
determined by the Compensation Committee of the Board of Directors (the
“Compensation Committee”), based on performance goals established by the
Compensation Committee in accordance with the terms of the AIP, and with a
target Annual Bonus equal to 80% of Executive’s Base Salary as in effect at the
beginning of the Company’s fiscal year (the “Target Bonus”), but subject to a
maximum Annual Bonus equal to 160% of Base Salary; provided, however, that with
respect to the Company’s fiscal year 2006, Executive’s Annual Bonus shall be
based on his Base Salary at the beginning of the Employment Period and shall be
pro rated to take into account the fact that Executive did not commence service
with the Company until July 17, 2006, such amount to be determined by the
Compensation Committee. Pursuant to the terms of the AIP, Executive shall
receive at least twenty percent of each Annual Bonus in the form of restricted
shares of common stock of the Company (“Restricted Common Stock”). Subject to
the terms of the AIP and any deferral election procedures thereunder, Executive
may elect to receive up to 100% of each Annual Bonus in the form of Restricted
Common Stock. Any Annual Bonus award made pursuant to this Section 2(b)(ii)
(including any Restricted Common Stock granted in lieu of a cash payment) shall
be subject to the applicable terms of the AIP and, in the case of Restricted
Common Stock granted in satisfaction of Annual Bonus, shall be on similar terms
and conditions as those applicable to the awards granted to similarly situated
executives of the Company in respect of the same fiscal year and otherwise shall
be in accordance with the Company’s 2004 Long-Term Incentive Plan or any
successor plan of the Company (the “LTIP”).
 
(iii)  Annual LTIP Awards. With respect to each fiscal year of the Company
ending during the Employment Period (other than the 2006 fiscal year), Executive
shall be eligible to receive an annual long-term incentive award under the LTIP
in an amount determined by the Compensation Committee, which award shall vest
based on the achievement of performance goals or such other criteria as
established by the Compensation Committee in accordance with the terms of the
LTIP.  For fiscal years of the Company commencing after the Company’s 2006
fiscal year, the target value of Executive’s annual LTIP award shall equal two
times Executive’s Base Salary. For the Company’s 2006 fiscal year, Executive
shall be granted a number of restricted share units (“2006 Restricted Share
Units”) with a Fair Market Value (as defined in the LTIP) on the grant date
equal to $1 million. The 2006 Restricted Share Units shall be deemed to be
earned and vested on January 31, 2008, subject solely to Executive’s continued
employment with the Company through such date, and the number of shares of
Common Stock underlying the 2006 Restricted Share Units shall not be subject to
increase or decrease based on performance above or below target. Except as
expressly provided herein, any annual long-term incentive awards granted
pursuant to this Section 2(b)(iii) shall be on similar terms and conditions as
are applicable to annual long-term incentive awards granted to similarly
situated executives of the Company with respect to the same fiscal year and
otherwise shall be in accordance with the terms of the LTIP.
 
(iv)  Management Stock Purchase Right (“MSPR”).
 
A.  Executive has elected to pay $1 million to purchase shares of Restricted
Common Stock for a per share purchase price equal to 80% of the Fair Market
Value of the Common Stock on the purchase date (such shares purchased pursuant
to this sentence, the “MSPR Shares”), one hundred percent of which MSPR Shares
shall vest on the three-year anniversary of the purchase date, subject to
Executive’s continued employment with the Company through the three-year
anniversary of the purchase date. The MSPR Shares shall otherwise be subject to
the applicable terms of the LTIP and the Agreement Regarding Restricted Shares
Acquired Pursuant to Management Stock Purchase Right in the form previously
provided to Executive.
 
B.  In addition, as soon as reasonably practicable after the later to occur of
the Effective Date and the date Executive purchases the MSPR Shares, the Company
shall grant to Executive an option (the “MSPR Option”) to purchase a number of
shares of Common Stock equal to the lesser of the number of MSPR Shares and
50,000 shares, with a per share exercise price equal to the Fair Market Value of
the Common Stock on the grant date. The MSPR Option shall vest on the three-year
anniversary of the grant date, subject to Executive’s continued employment with
the Company through the three-year anniversary of the grant date. The MSPR
Option shall otherwise be subject to the applicable terms of the LTIP.
 
(v)  Inducement Option. As an inducement to Executive’s willingness to enter
into this Agreement, as soon as reasonably practicable after the Effective Date,
the Company shall grant to Executive an option (the “Inducement Option”) to
purchase 400,000 shares of Common Stock with an exercise price equal to the Fair
Market Value of the Common Stock on the grant date, which option shall vest
ratably (in equal increments) on the first, second and third anniversaries of
the grant date, subject to Executive’s continued employment with the Company
through the applicable vesting date. The Inducement Option shall otherwise be
subject to the applicable terms of the LTIP.
 
(vi)  Other Employee Benefit Plans. During the Employment Period, Executive
shall be eligible to participate in the Company’s employee benefit plans, and to
receive vacation and perquisites at the same level as other senior executives of
the Company.
 
(vii)  Expenses. Upon presentation of appropriate documentation, Executive shall
be reimbursed in accordance with the Company’s expense reimbursement policy for
all reasonable and necessary business and entertainment expenses incurred in
connection with the performance of Executive’s duties hereunder.
 
(viii)  Relocation Assistance. The Company shall provide Executive with a
relocation allowance of up to $200,000 of documented expenses incurred by
Executive in connection with the relocation of Executive and Executive’s family
and dependents, pursuant to and in accordance with the Company’s 2006 Relocation
Assistance Program (Chief Executive Officer) previously provided to Executive;
provided that the individual dollar-amount limitations applicable to the
categories of relocation expenses enumerated in such program shall not apply to
such relocation, subject in all events to the aggregate allowance of $200,000.
 
(ix)  Legal Fees. The Company shall pay up to $15,000 of documented attorney’s
fees incurred by Executive in connection with the negotiation of this Agreement.
 
(x)  Indemnification; Insurance. The Company shall indemnify Executive and hold
Executive harmless to the fullest extent permitted by applicable law and under
the by-laws of the Company against and in respect to any and all actions, suits,
proceedings, claims, demands, judgments, costs, expenses (including reasonable
attorneys’ fees), losses, and damages resulting from Executive’s good faith
performance of Executive’s duties and obligations with the Company. The Company
shall cover Executive under directors and officers liability insurance during
the Employment Period and thereafter in the same amount and to the same extent
as the Company covers its other officers and directors (if at all).
 
(c)  Stock Ownership Requirement. While employed by the Company, Executive shall
generally be expected to maintain ownership of a minimum of 200,000 shares of
Common Stock in accordance with the guidelines as established by the
Compensation Committee. Although no minimum period of time has been established
for Executive’s achievement of the foregoing Common Stock ownership target,
Executive agrees to make continuous progress toward satisfaction of this
objective via mandatory and voluntary “purchases” of Restricted Common Stock as
contemplated by the second and third sentences of Section 2(b)(ii) and by
retaining shares of Common Stock earned and/or received upon exercise of stock
options granted pursuant to the LTIP. Unvested shares of Restricted Common Stock
(including MSPR Shares) will be credited towards this requirement. Executive
shall be required to obtain the prior approval of the Board of Directors before
selling shares of Common Stock, if the sale would reduce Executive’s ownership
below this required level.
 
3.  Termination of Employment.
 
(a)  Death or Disability. Executive’s employment shall terminate automatically
upon Executive’s death during the Employment Period. If the Company determines
in good faith that the Disability of Executive has occurred during the
Employment Period (pursuant to the procedures and definition of Disability set
forth below), the Company may give to Executive written notice in accordance
with Section 9(b) of this Agreement of its intention to terminate Executive’s
employment. In such event, Executive’s employment with the Company shall
terminate effective on the 30th day after receipt of such notice by Executive
(the “Disability Effective Date”), provided that, within the 30 days after such
receipt, Executive shall not have returned to full-time performance of
Executive’s duties. For purposes of this Agreement, “Disability” shall mean
Executive’s inability to perform Executive’s duties and responsibilities by
reason of illness or incapacity for a total of 180 days in any twelve-month
period as determined in writing by a qualified independent physician selected by
the Company or its insurers and reasonably acceptable to Executive or his legal
representative. If the Company and Executive cannot agree as to a qualified
independent physician, each shall appoint such a physician and those two
physicians shall select a third who shall make such determination in writing.
Such determination of Disability shall be delivered to the Company and Executive
and shall be final and conclusive for all purposes of this Agreement.
 
(b)  Cause. The Company may terminate Executive’s employment during the
Employment Period for Cause or without Cause. For purposes of this Agreement,
with respect to any award made pursuant to the LTIP, “Cause” shall mean (i)
conduct which is a material violation of Company policy or which is fraudulent
or unlawful or which materially interferes with Executive’s ability to perform
Executive’s duties, (ii) misconduct which damages or injures the Company or
substantially damages the Company’s reputation, or (iii) gross negligence in the
performance of, or willful failure to perform, Executive’s duties and
responsibilities. For all other purposes of this Agreement, “Cause” shall mean
(i) Executive’s conviction of, or plea of guilty or nolo contendere to a charge
of commission of, a felony, or of a misdemeanor involving the money or property
of the Company or any subsidiary, (ii) Executive’s (x) willful and continued
failure to substantially perform the duties and responsibilities of his position
or (y) failure to comply in all material respects with the written policies of
the Company, which failure, to the extent subject to cure, is not remedied
within twenty-one days after written notice thereof from the Company to
Executive, (iii) Executive having willfully engaged in misconduct that
materially damages or injures the reputation of the Company or any subsidiary,
(iv) Executive having breached the provisions of Sections 6(a) or 6(b) of this
Agreement, (v) Executive’s willful breach of the confidentiality provisions of
this Agreement, or (vi) gross negligence in the performance of Executive’s
duties and responsibilities. For purposes of this Section 3(b), no act or
failure to act, on Executive’s part shall be deemed to be “willful” unless done,
or omitted to be done, by Executive not in good faith and without reasonable
belief that such act or omission was in the best interest of the Company. Any
termination of Executive’s employment by the Company for Cause shall be
effective only upon delivery to Executive of a certified copy of a resolution of
the Board of Directors, adopted by the affirmative vote of a majority of the
entire membership of the Board of Directors (excluding Executive) following a
meeting at which Executive was given an opportunity to be heard on at least five
business days’ advance notice, finding that Executive was guilty of the conduct
constituting Cause, and specifying the particulars thereof.
 
(c)  Good Reason. Executive’s employment may be terminated by Executive for Good
Reason or other than for Good Reason. For purposes of this Agreement, “Good
Reason” shall mean, in the absence of a written consent of Executive: (i) the
involuntary relocation of Executive from the Ann Arbor, Michigan area, (ii) any
failure of the Company to comply with any provisions of Section 2 of this
Agreement, other than an insubstantial and inadvertent failure remedied by the
Company promptly after receipt of notice thereof given by Executive, (iii) a
reduction in Executive’s duties or status as a result of or after a Change of
Control (as defined below), (iv) the delivery by the Company of a notice of
non-renewal pursuant to Section 1 hereof, provided that Executive provides
Notice of Termination for Good Reason under this clause (iv) no later than
twenty-one days following receipt of the notice of non-renewal, or (v) the
failure of the Company to obtain a satisfactory agreement from any successor to
all or substantially all of the assets or business of the Company to expressly
assume and agree to perform this Agreement within fifteen (15) days after a
merger, consolidation, sale or similar transaction as required by Section 7 of
this Agreement.
 
(d)  Notice of Termination. Any termination by the Company for Cause or without
Cause, or by Executive for Good Reason or other than for Good Reason, shall be
communicated by Notice of Termination to the other party hereto given in
accordance with Section 9(b) of this Agreement. For purposes of this Agreement,
a “Notice of Termination” means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive’s employment under the provision
so indicated and (iii) if the Date of Termination (as defined below) is other
than the date of receipt of such notice, specifies the termination date (which
date shall be not more than thirty days after the giving of such notice).
 
(e)  Date of Termination. “Date of Termination” means (i) if Executive’s
employment is terminated by the Company for Cause or without Cause, or by
Executive for or other than for Good Reason, the date of receipt of the Notice
of Termination or any later date specified therein within 30 days of such
notice, as the case may be (except that in the case of a termination by
Executive other than for Good Reason, the Company may in its sole discretion
change any such later date to a date of its choosing between the date of such
receipt and such later date), and (ii) if Executive’s employment is terminated
by reason of death or Disability, the Date of Termination shall be the date of
death of Executive or the Disability Effective Date, as the case may be. The
Employment Period shall automatically terminate on the Date of Termination.
 
(f)  Change of Control. “Change of Control” means:
 
(i)  The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended)
(the “Exchange Act”) (a “Person”) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the
then outstanding shares of Common Stock (the “Outstanding Company Common Stock”)
or (B) the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the
“Outstanding Company Voting Securities”); provided, however, that for purposes
of this subsection (i), the following acquisitions shall not constitute a Change
of Control: (w) any acquisition directly from the Company, (x) any acquisition
by the Company, (y) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company or (z) any acquisition by any corporation pursuant to a transaction
which complies with clauses (A), (B) and (C) of subsection (iii) of this
definition; or
 
(ii)  Individuals who, as of the date hereof, constitute the Board of Directors
(the “Incumbent Board”) cease for any reason to constitute at least a majority
of the Board of Directors; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company’s shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
 
(iii)  Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
“Business Combination”), in each case, unless, following such Business
Combination, (A) all or substantially all the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company’s assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (B) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
 
(iv)  Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.
 
4.  Obligations of the Company upon Termination. (a) Good Reason or Other than
for Cause or Disability Prior to a Change of Control. Subject to the mitigation
provisions set forth below and to Executive’s compliance with Sections 5 and 6
of this Agreement, if, during the Employment Period and prior to and not in
connection with a Change of Control, Executive’s employment with the Company is
terminated by the Company other than for Cause or Disability or if Executive
terminates Executive’s employment with the Company for Good Reason:
 
(i)  the Company will pay to Executive in a lump sum (A) the Base Salary through
the Date of Termination to the extent not previously paid; (B) accrued and
unused vacation pay; (C) any unpaid cash portion of the Annual Bonus earned with
respect to the fiscal year ending on or immediately preceding the Date of
Termination; (D) reimbursement for any unreimbursed expenses incurred through
the Date of Termination; and (E) reimbursement for any unpaid relocation
expenses in accordance with Section 2(b)(viii) (the amounts in (A), (B), (C),
(D), and (E), the “Accrued Obligations”); and
 
(ii)  the Company will pay to Executive a monthly severance payment equal to
1/18 of the product of (A) the sum of (1) Base Salary plus (2) Target Bonus and
(B) 1.5, such monthly severance payments to commence in the month following the
Date of Termination (to be paid on or about the 15th day of the month) and to
continue for eighteen months; provided, however, that in the event that
Executive’s employment terminates solely on the basis of clause (iv) of the
definition of Good Reason, then the monthly payments contemplated by this
Section 4(a)(ii) shall continue until the first to occur of (x) the five-year
anniversary of the Effective Date or (y) the eighteen-month anniversary of the
Termination Date (such shorter period hereinafter referred to as the
“Non-Renewal Severance Period”); and
 
(iii)  during the eighteen-month period following the Date of Termination (or in
the event that Executive’s employment terminates solely on the basis of clause
(iv) of the definition of Good Reason, during the Non-Renewal Severance Period),
the Company shall continue health and welfare benefits (excluding long-term
disability coverage) to Executive and, where applicable, Executive’s dependents
on the same terms that such benefits would have been provided had Executive
continued employment with the Company in accordance with the health and welfare
benefits provided pursuant to Section 2(b)(vi) of this Agreement (the “Welfare
Benefits”); provided, however, that, in the event Executive becomes reemployed
with another employer and is eligible to receive comparable medical or other
welfare benefits under any employer provided plan (determined on a
benefit-by-benefit basis), the Welfare Benefits provided herein shall cease as
of the date of eligibility under such other employer’s plans; and
 
(iv)   to the extent not theretofore paid or provided, the Company shall timely
pay or provide, in accordance with the terms of the applicable plan, program,
policy, practice, or contract, to Executive any other amounts or benefits
required to be paid or provided under any plan, program, policy, practice or
contract of the Company (other than any severance plan) through the Date of
Termination (such other amounts and benefits shall be hereinafter referred to as
the “Other Benefits”).
 
In the event of a termination of Executive’s employment upon which Executive is
entitled to severance pursuant to this Section 4(a), Executive shall have no
obligation to find new employment during the first nine months following the
Date of Termination; provided, however, that following the nine-month
anniversary of the Date of Termination, subject to Section 6, Executive agrees
to make reasonable efforts to seek (and to immediately notify the Company of his
obtaining) other employment and, to the extent that Executive receives, earns or
is eligible to receive cash compensation from other employment, the cash
severance payments provided under Section 4(a)(ii) shall be correspondingly
reduced.

(b)  Good Reason or Other than for Cause or Disability Following a Change of
Control. Subject to Executive’s compliance with Sections 5 and 6 of this
Agreement, if, (x) during the twenty-four month period immediately following a
Change of Control, Executive’s employment with the Company is terminated by the
Company other than for Cause or Disability or if Executive terminates
Executive’s employment with the Company for Good Reason, or (y) during the
period following the public announcement of a definitive agreement to effectuate
a transaction that if consummated would be a Change of Control and prior to the
consummation of any such transaction, (1) Executive’s employment with the
Company is terminated by the Company other than for Cause or Disability and (2)
Executive demonstrates that such termination was at the request of a third party
that has taken steps reasonably calculated to effect a Change of Control, then,
in the case of either clause (x) or clause (y), in lieu of any payment or
benefits under Section 4(a) of this Agreement:
 
(i)  the Company will pay to Executive in a lump sum in cash within 30 days
after the Date of Termination an amount equal to the sum of (A) the Accrued
Obligations, and (B) the product of (1) the sum of (x) the Base Salary and (y)
the Target Bonus and (2) 2.5; and
 
(ii)  during the thirty-month period following the Date of Termination, the
Company shall continue the Welfare Benefits; provided, however, that, in the
event Executive becomes reemployed with another employer and is eligible to
receive comparable medical or other welfare benefits under any employer provided
plan (determined on a benefit-by-benefit basis), the Welfare Benefits provided
herein shall cease as of the date of eligibility under such other employer’s
plans.
 
(iii)  to the extent not theretofore paid or provided, the Company shall timely
pay or provide, in accordance with the terms of the applicable plan, program,
policy, practice, or contract, to Executive the Other Benefits. For the
avoidance of doubt, upon a Change of Control, all unvested 2006 Restricted Share
Units, MSPR Shares, the MSPR Option and the Inducement Option shall fully vest
in accordance with the terms of Section 14 of the LTIP.
 
In the event of a termination of Executive’s employment upon which Executive is
entitled to severance pursuant to this Section 4(b), Executive shall have no
affirmative obligation to find new employment and, in the event Executive
becomes reemployed following the Date of Termination, the amounts earned by
Executive from any such subsequent employer shall not reduce or limit
Executive’s right to receive or retain the severance payments under this Section
4(b) (except as expressly provided in Section 4(b)(iii)).
 
(c)  Section 409A Delay. Notwithstanding the foregoing provisions of Sections
4(a) and 4(b), to the extent required in order to comply with Section 409A of
the Internal Revenue Code of 1986, as amended (the “Code”), amounts and benefits
to be paid or provided under Sections 4(a) and 4(b) shall be paid or provided to
Executive on the first business day after the date that is six months following
Executive’s “separation from service” within the meaning of Section 409A of the
Code. To the extent that the health care benefits to be provided to Executive
under Section 4(a)(iii) or Section 4(b)(iii), as applicable, are so delayed,
Executive shall be entitled to COBRA continuation coverage under Section 4980B
of the Code (“COBRA Coverage”) during such period of delay, and the Company
shall reimburse Executive for the premiums for such COBRA Coverage in the
seventh month following Executive’s “separation from service” within the meaning
of Section 409A of the Code.
 
(d)  Death; Disability; Cause; Other than for Good Reason. If Executive’s
employment is terminated by reason of Executive’s death or Disability, by the
Company for Cause or by Executive other than for Good Reason during the
Employment Period, the Employment Period shall terminate without further
obligations to Executive and his legal representatives under this Agreement,
other than for payment of Accrued Obligations and the timely payment or
provision of the Other Benefits. Accrued Obligations shall be paid to
Executive’s estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. Notwithstanding the foregoing provisions of
this Section 4(d), to the extent required in order to comply with Section 409A
of the Code, amounts to be paid under this Section 4(d) shall be paid to
Executive on the first business day after the date that is six months following
Executive’s “separation from service” within the meaning of Section 409A of the
Code.
 
5.  General Release. The payments provided hereunder shall constitute the
exclusive payments due Executive from, and the exclusive obligation of, the
Company in the event of any termination of Executive’s employment. The
obligation to make the payments hereunder is conditioned upon Executive’s
execution, delivery to the Company and non-revocation of a release, which shall
be substantially in the form attached hereto as Exhibit A (with such changes
therein or additions thereto as needed under then applicable law to give effect
to its intent and purpose), of any claims Executive may have as a result of
Executive’s employment or termination of employment under any federal, state or
local law.
 
6.  Non-Solicitation; Non-Competition; Confidentiality; Work Product.
 
(a)  Executive acknowledges and agrees that any attempt to interfere with the
Company’s existing employment relationships would result in significant harm to
the Company’s interests. Accordingly, Executive agrees that while employed by
the Company and for two years following Executive’s termination of employment
for any reason (the “Restricted Period”), Executive shall not, without the prior
written consent of the Company, directly or indirectly, solicit, recruit, or
employ (whether as an employee, officer, director, agent, consultant or
independent contractor) any person who is or was at any time during the previous
six months an employee, representative, officer or director of an Affiliated
Entity. Further, during the Restricted Period, Executive shall not take any
action that could reasonably be expected to have the effect of encouraging or
inducing any employee, representative, officer or director of any member of the
Affiliated Entities to cease their relationship with any member of the
Affiliated Entities for any reason. For purposes of this agreement, the term
“Affiliated Entities” shall mean the Company and its subsidiaries and affiliated
companies. Notwithstanding anything to the contrary contained herein, in the
event that Executive’s employment terminates solely on the basis of clause (iv)
of the definition of Good Reason, the Restricted Period shall terminate on the
last day of the Non-Renewal Severance Period. This Section 6(a) shall cease to
be effective if the Employment Period ends on the fifth anniversary of the
Effective Date and the Executive’s employment has not terminated prior thereto.
 
(b)  Executive agrees that, during the Restricted Period, Executive shall not,
without the prior written consent of the Company, become directly or indirectly
engaged or involved, as an owner, principal, employee, officer, director,
independent contractor, representative, stockholder, agent, advisor, lender or
in any other capacity, of any business or entity (including any division or
subsidiary of a larger business or entity) primarily engaged in (i) the sale of
books, music, gifts, stationary or videos directly to the public (whether
through traditional retail sales or over the Internet) or (ii) the provision of
café-type services (“Competitive Activities”) in any jurisdiction in which the
Company or any Affiliated Entity conducts such Competitive Activities by
selling, sending or delivering goods to customers in such jurisdiction or
providing such services in such jurisdiction (or in any jurisdiction in which
the Company has proposed to conduct such Competitive Activities); provided,
however, that in no event shall Executive’s ownership of less than 3% of the
outstanding capital stock of any corporation, in and of itself, be deemed a
Competitive Activity if such capital stock is listed on a national securities
exchange or regularly traded in an over-the-counter market. Executive further
agrees that, during the Restricted Period, Executive shall not, without the
prior written consent of the Company, directly or indirectly solicit, or cause
another person to solicit, any person who is a customer of the businesses
conducted by the Company, on behalf of a business engaged in a Competitive
Activity. This Section 6(b) shall cease to be effective if the Employment Period
ends on the fifth anniversary of the Effective Date and the Executive’s
employment has not terminated prior thereto.
 
(c)  While employed by the Company and at all times thereafter, Executive shall
hold in a fiduciary capacity for the benefit of the Affiliated Entities and
shall not disclose to others, copy, use, transmit, reproduce, summarize, quote
or make commercial, directly or indirectly, any secret or confidential
information, knowledge or data relating to any of the Affiliated Entities and
their businesses (including without limitation information about the Affiliated
Entities’ clients’ and customers’ and their proprietary knowledge and trade
secrets, software, technology, research, secret data, customer lists, investor
lists, business methods, business plans, training materials, operating
procedures or programs, pricing strategies, employee lists and other business
information) that Executive has obtained during Executive’s employment with the
Company and/or any of the other Affiliated Entities (“Confidential
Information”), provided that the foregoing shall not apply to information that
is generally known to the public other than as a result of Executive’s breach of
this Agreement. Notwithstanding the foregoing provisions, if Executive is
required to disclose any such confidential or proprietary information pursuant
to applicable law or a subpoena or court order, Executive shall promptly notify
the Company in writing of any such requirement so that the Company or the
appropriate Affiliated Entity may seek an appropriate protective order or other
appropriate remedy or waive compliance with the provisions hereof. Executive
shall reasonably cooperate with the Affiliated Entities to obtain such a
protective order or other remedy. If such order or other remedy is not obtained
prior to the time Executive is required to make the disclosure, or the Company
waives compliance with the provisions hereof Executive shall disclose only that
portion of the confidential or proprietary information which Executive is
advised by counsel that Executive is legally required to so disclose.
 
(d)  Executive acknowledges and agrees that the terms of this Section 6: (i)
were agreed to by mutual assent of the parties hereto; (ii) are supported by
adequate consideration; (iii) are reasonable in time and scope; and (iv) serve
to protect the legitimate economic interests of the Affiliated Entities,
including the goodwill of the Affiliated Entities and the Confidential
Information from misuse. Executive further acknowledges and agrees that (x)
Executive’s breach of the provisions of this Section 6 will cause the Company
irreparable harm, which cannot be adequately compensated by money damages, and
(y) if the Company elects to prevent Executive from breaching such provisions by
obtaining an injunction against Executive, there is a reasonable probability of
the Company’s eventual success on the merits. Executive consents and agrees that
if Executive commits any such breach or threatens to commit any breach, the
Company shall be entitled to temporary and permanent injunctive relief from a
court of competent jurisdiction, without posting any bond or other security and
without the necessity of proof of actual damage, in addition to, and not in lieu
of, such other remedies as may be available to the Company for such breach,
including the recovery of money damages. If any of the provisions of this
Section 6 are determined to be wholly or partially unenforceable, Executive
hereby agrees that this Agreement or any provision hereof may be reformed so
that it is enforceable to the maximum extent permitted by law. If any of the
provisions of this Section 6 are determined to be wholly or partially
unenforceable in any jurisdiction, such determination shall not be a bar to or
in any way diminish the Company’s right to enforce any such covenant in any
other jurisdiction.
 
(e)  Notwithstanding anything to the contrary contained in this Agreement, the
terms of this Section 6 shall survive the termination of this Agreement and of
Executive’s employment for the periods set forth therein.
 
7.  Successors. This Agreement is personal to Executive and without the prior
written consent of the Company shall not be assignable by Executive otherwise
than by will or the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by Executive’s legal representatives.  This
Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns. The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, “Company” shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
 
8.  Representation By Executive. Executive hereby represents and warrants to the
Company that, as of the Effective Date and as of the date of execution of this
Agreement, Executive is not a party to any employment agreement with any third
party which would preclude Executive from accepting Employment with the Company
and performing Executive’s obligations under this Agreement.
 
9.  Miscellaneous. (a) Construction; Amendments. This Agreement shall be
governed by and construed in accordance with the laws of the State of Michigan,
without reference to principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall have no force or
effect. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement. This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective successors
and legal representatives.
 
(b)  Notices. All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party, by registered or
certified mail, return receipt requested, postage prepaid, or by reputable
overnight courier, charges prepaid, addressed as follows:
 
If to Executive: To the most recent address on file with the Company.
 
If to the Company:

Borders Group, Inc.
100 Phoenix Drive
Ann Arbor, Michigan 48108
Attention: General Counsel
 
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
 
(c)  Waiver of Breach. No waiver by any party hereto of a breach of any
provision of this Agreement by any other party, or of compliance with any
condition or provision of this Agreement to be performed by such other party,
will operate or be construed as a waiver of any subsequent breach by such other
party of any similar or dissimilar provisions and conditions at the same or any
prior or subsequent time. The failure of any party hereto to take any action by
reason of such breach will not deprive such party of the right to take action at
any time while such breach continues.
 
(d)  Tax Withholding. The Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
 
(e)  Section 409A. If any compensation or benefits provided by this Agreement
may result in the application of Section 409A of the Code, the Company shall, in
consultation with Executive, modify the Agreement in the least restrictive
manner necessary in order to exclude such compensation from the definition of
“deferred compensation” within the meaning of such Section 409A or in order to
comply with the provisions of Section 409A.
 
(f)  Certain Additional Payments by the Company.
 
(i)  Anything in this Agreement to the contrary notwithstanding and except as
set forth below, in the event it shall be determined that any Payment (as
defined below) would be subject to the Excise Tax (as defined below), then
Executive shall be entitled to receive an additional payment (the “Gross-Up
Payment”) in an amount such that, after payment by Executive of all taxes (and
any interest or penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and penalties imposed
with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, but
excluding any income taxes and penalties imposed pursuant to Section 409A of the
Code, Executive retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this
Section 9(f)(i), if it shall be determined that Executive is entitled to the
Gross-Up Payment, but that the Parachute Value (as defined below) of all
Payments does not exceed 115% of the Safe Harbor Amount (as defined below), then
no Gross-Up Payment shall be made to Executive and the amounts payable under
this Agreement shall be reduced so that the Parachute Value of all Payments, in
the aggregate, equals the Safe Harbor Amount. The reduction of the amounts
payable hereunder, if applicable, shall be made in such a manner as to maximize
the Value (as defined below) of all Payments actually made to Executive. For
purposes of reducing the Payments to the Safe Harbor Amount, only amounts
payable under this Agreement (and no other Payments) shall be reduced. If the
reduction of the amounts payable under this Agreement would not result in a
reduction of the Parachute Value of all Payments to the Safe Harbor Amount, no
amounts payable under the Agreement shall be reduced pursuant to this Section
9(f)(i). The Company’s obligation to make Gross-Up Payments under this Section
9(f) shall not be conditioned upon Executive’s termination of employment.
 
(ii)  Subject to the provisions of Section 9(f)(iii), all determinations
required to be made under this Section 9(f), including whether and when a
Gross-Up Payment is required, the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made by
PricewaterhouseCoopers, or such other nationally recognized certified public
accounting firm as may be designated by the Company (the “Accounting Firm”). The
Accounting Firm shall provide detailed supporting calculations both to the
Company and Executive within 15 business days of the receipt of notice from
Executive that there has been a Payment or such earlier time as is requested by
the Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change of Control,
Executive may appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 9(f), shall be paid by the Company to Executive within
5 days of the receipt of the Accounting Firm’s determination. Any determination
by the Accounting Firm shall be binding upon the Company and Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments that will not have been made by the Company
should have been made (the “Underpayment”), consistent with the calculations
required to be made hereunder. In the event the Company exhausts its remedies
pursuant to Section 9(f)(iii) and Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid
by the Company to or for the benefit of Executive.
 
(iii)  Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable, but no later than 10 business days after Executive is informed in
writing of such claim. Executive shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. Executive shall
not pay such claim prior to the expiration of the 30-day period following the
date on which Executive gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies Executive in writing prior to the expiration of such
period that the Company desires to contest such claim, Executive shall:
 
A.  give the Company any information reasonably requested by the Company
relating to such claim,
 
B.  take such action in connection with contesting such claim as the Company
shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company,
 
C.  cooperate with the Company in good faith in order effectively to contest
such claim, and
 
D.  permit the Company to participate in any proceedings relating to such claim;
 
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest, and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties) imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section
9(f)(iii), the Company shall control all proceedings taken in connection with
such contest, and, at its sole discretion, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the
applicable taxing authority in respect of such claim and may, at its sole
discretion, either pay the tax claimed to the appropriate taxing authority on
behalf of Executive and direct Executive to sue for a refund or contest the
claim in any permissible manner, and Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that, if the Company pays such claim and directs
Executive to sue for a refund, the Company shall indemnify and hold Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties) imposed with respect to such payment or with respect to
any imputed income in connection with such payment; and provided, further, that
any extension of the statute of limitations relating to payment of taxes for the
taxable year of Executive with respect to which such contested amount is claimed
to be due is limited solely to such contested amount. Furthermore, the Company’s
control of the contest shall be limited to issues with respect to which the
Gross-Up Payment would be payable hereunder, and Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.

(iv)  If, after the receipt by Executive of a Gross-Up Payment or payment by the
Company of an amount on Executive’s behalf pursuant to Section 9(f)(iii),
Executive becomes entitled to receive any refund with respect to the Excise Tax
to which such Gross-Up Payment relates or with respect to such claim, Executive
shall (subject to the Company’s complying with the requirements of Section
9(f)(iii), if applicable) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto). If, after payment by the Company of an amount on Executive’s behalf
pursuant to Section 9(f)(iii), a determination is made that Executive shall not
be entitled to any refund with respect to such claim and the Company does not
notify Executive in writing of its intent to contest such denial of refund prior
to the expiration of 30 days after such determination, then the amount of such
payment shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
 
(v)  Notwithstanding any other provision of this Section 9(f), the Company may,
in its sole discretion, withhold and pay over to the Internal Revenue Service or
any other applicable taxing authority, for the benefit of Executive, all or any
portion of any Gross-Up Payment, and Executive hereby consents to such
withholding.
 
(vi)  Definitions. The following terms shall have the following meanings for
purposes of this Section 9(f).
 
A.  “Excise Tax” shall mean the excise tax imposed by Section 4999 of the Code,
together with any interest or penalties imposed with respect to such excise tax.
 
B.  “Parachute Value” of a Payment shall mean the present value as of the date
of the change of control for purposes of Section 280G of the Code of the portion
of such Payment that constitutes a “parachute payment” under Section 280G(b)(2),
as determined by the Accounting Firm for purposes of determining whether and to
what extent the Excise Tax will apply to such Payment.
 
C.  A “Payment” shall mean any payment or distribution in the nature of
compensation (within the meaning of Section 280G(b)(2) of the Code) to or for
the benefit of Executive, whether paid or payable pursuant to this Agreement or
otherwise.
 
D.  The “Safe Harbor Amount” means 2.99 times Executive’s “base amount,” within
the meaning of Section 280G(b)(3) of the Code.
 
E.  “Value” of a Payment shall mean the economic present value of a Payment as
of the date of the change of control for purposes of Section 280G of the Code,
as determined by the Accounting Firm using the discount rate required by Section
280G(d)(4) of the Code.
 
(g)  Entire Agreement. No representation, promise or inducement has been made by
either party that is not embodied in this Agreement, and neither party shall be
bound by or be liable for any alleged representation, promise or inducement not
so set forth.
 
(h)  Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same agreement.
 

--

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IN WITNESS WHEREOF, Executive has hereunto set Executive’s hand and, pursuant to
the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.
 
BORDERS GROUP, INC.
By:
/s/ Gregory P. Josefowicz
 
Gregory P. Josefowicz
 
Chairman, President & Chief Executive Officer
   
GEORGE L. JONES
     
/s/ George L. Jones
         

 

 

 
 

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Exhibit A
 
AGREEMENT AND GENERAL RELEASE
 
Borders Group, Inc., its affiliates, subsidiaries, divisions, successors and
assigns in such capacity, and the current, future and former employees,
officers, directors, trustees and agents thereof (each, solely in his or her
capacity as officer, director, trustee or agent) (collectively referred to
throughout this Agreement as “Company”) and George L. Jones (“Executive”) agree:
 
1.  Last Day of Employment. Executive’s last day of employment with the Company
is [DATE]. In addition, effective as of [DATE], Executive resigns from
Executive’s position as [President and Chief Executive Officer] of the Company
and will not be eligible for any benefits or compensation after [DATE], other
than as specifically provided in Section 4 of the Employment Agreement between
the Company and Executive dated as of July 13, 2006 (the “Employment Agreement”)
and Executive’s right to indemnification.
 
2.  Consideration. The parties acknowledge that this Agreement and General
Release is being executed in accordance with Section 5 of the Employment
Agreement. Executive hereby acknowledges the sufficiency of the consideration
being received in exchange for the release in this Agreement and agrees that
absent signing this Agreement, he is not otherwise entitled to the payments and
benefits under Section 4 of the Employment Agreement.
 
3.  Release of Claims.
 

(a)  
For and in consideration of the payments and benefits to be made or provided to
Executive under Section 4 of the Employment Agreement and other good and
valuable consideration, Executive, for himself and for his heirs, dependents,
executors, administrators, trustees, legal representatives and assigns
(collectively referred to as “Releasors”), hereby forever releases, waives and
discharges (i) the Company, its subsidiaries and affiliates, their respective
employee benefit and/or pension plans or funds, insurers, successors and
assigns, (ii) all past, present and/or future officers, directors, trustees,
members, partners, employees, fiduciaries, administrators, controlling persons
and successors and assigns of the foregoing, and (iii) all of the past, present
and/or future agents, representatives and attorneys (including outside legal
counsel) of any of the persons or entities described in (i) or (ii) in this
Section 3 and any of its and their successors and assigns in all cases whether
acting as agents for or with respect to the Company, its subsidiaries or
affiliates and their respective successors and assigns or in their individual
capacities (collectively referred to as “Releasees”), from any and all claims,
demands, causes of action, fees and liabilities of any kind whatsoever, whether
known or unknown, which Releasors ever had or now have against Releasees by
reason of any actual or alleged act, omission, transaction, practice, policy,
procedure, conduct, occurrence, or other matter up to and including the date of
Executive’s execution of this Release, including without limitation, those in
connection with, or in any way related to or arising out of, Executive’s
employment, service as a director, service as an officer, service as a trustee,
service as a fiduciary or termination of any of the foregoing or any other
agreement, understanding, relationship, arrangement, act, omission or
occurrence, with the Company, its subsidiaries or affiliates and their
respective successors and assigns or other claims and (x) any claim of
discrimination or retaliation under the Age Discrimination in Employment Act
(“ADEA”) 29 U.S.C. Section 621 et seq., Title VII of the Civil Rights Act, the
Americans with Disabilities Act, the Employee Retirement Income Security Act of
1974, as amended (“ERISA”) or the Family and Medical Leave Act; (y) any claim
under the Michigan Elliott-Larsen Civil Rights Act, as amended, the Michigan
Whistle Blowers’ Protection Act, as amended, the Michigan Persons with
Disabilities Civil Rights Act; and (z) any claim for attorney’s fees, costs,
disbursements and the like related to any claim described in this Section 3(a).

 

(b)  
Adversarial Actions. Executive agrees that he will not, from any source or
proceeding, seek or accept any award or settlement with respect to any claim or
right covered by Section 3(a) above. Except as otherwise required by law,
Executive further agrees that he will not, at any time hereafter, commence,
maintain, prosecute, participate in as a party, permit to be filed by any other
person on Executive’s behalf (to the extent it is within Executive’s control or
permitted by law), or assist in the commencement or prosecution of as an
advisor, or otherwise, any action or proceeding of any kind, judicial or
administrative (on his behalf, on behalf of any other person and/or on behalf of
or as a member of any alleged class of persons) in any court, agency,
investigative or administrative body against any Releasee with respect to any
actual or alleged act, omission, transaction, practice, conduct, occurrence or
any other matter up to and including the date of Executive’s execution of this
Release which Executive released pursuant to Section 3(a) above. Executive
further represents that, as of the date he signs this Release, he has not taken
any action encompassed by this Section 3(b). If, notwithstanding the foregoing
promises, Executive violates this Section 3(b), he will indemnify and hold
harmless Releasees from and against any and all demands, assessments, judgments,
costs, damages, losses and liabilities and attorneys’ fees and other expenses
which result from, or are incidents to, such violation. Notwithstanding anything
herein to the contrary, this Section 3(b) will not apply to any claims that
Executive may have under the ADEA and will not apply to the portion of the
release provided for in Section 3(a) relating to the ADEA.

 

(c)  
Preserved Rights. The sole matters to which the release and covenants in this
Section 3 do not apply are: (i) Executive’s rights under Section 2(b) and
Section 4 [and Section 9(f)] of the Employment Agreement, Executive’s rights of
indemnification and related rights or otherwise with regard to Executive’s
service as an officer or director of the Company (if any) and Executive’s rights
under any D&O policy maintained by or for the benefit of the Company or its
employees or directors at any time during or after the course of Executive’s
employment with the Company (if any); (ii) Executive’s rights to contribution
(if any) with regard to his service as an officer and director of the Company;
(iii) Executive’s rights as a shareholder of the Company (if any); and
(iv) Executive’s rights to vested benefits under any employee benefit plan of
the Company. Nothing contained herein shall relieve Executive of his continuing
obligations under Section 6 of the Employment Agreement.

 
4.  Governing Law; Enforceability. The interpretation of this Release will be
governed and construed in accordance with the laws of the State of Michigan,
without reference to principles of conflict of laws. If any provisions of this
Release will be declared to be invalid or unenforceable, in whole or in part,
such invalidity or unenforceability will not affect the remaining provisions
hereof which will remain in full force and effect.
 
5.  Acknowledgement. Executive acknowledges that he has been advised by the
Company in writing to consult independent legal counsel of his choice before
signing this Release. Executive further acknowledges that he has had the
opportunity to consult, and Executive has consulted with, independent legal
counsel and to consider the terms of this Release for a period of at least 21
days.
 
6.  Effective Date. Executive further acknowledge that this Release will not
become effective until the eighth day following his execution of this Release
(the “Effective Date”), and that he may at any time prior to the Effective Date
revoke this Release by delivering written notice of revocation to the Company at
100 Phoenix Drive, Ann Arbor, MI 48108-2202, to the attention of the General
Counsel. In the event that Executive revokes this Release prior to the eighth
day after its execution, this Release and the promises contained in the
Agreement, will automatically be null and void.
 
7.  Entire Agreement. Executive understands that this Release and the Agreement
constitute the complete understanding between the Company and Executive relating
to the subject matter hereof and that no other promises or agreements will be
binding unless in writing and signed by Executive and the Company after the date
hereof.
 
8.  Counterparts. This Release may be executed in several counterparts, each of
which will be deemed to be an original but all of which together will constitute
one and the same instrument.
 

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IN WITNESS WHEREOF, the parties hereto knowingly and voluntarily executed this
Agreement and General Release as of the date set forth below:
 
 
 
/s/ George L. Jones 
George L. Jones
 
Borders Group, Inc.
 
By: /s/ Gregory P. Josefowicz  
Name: Gregory P. Josefowicz 
Title: Chairman, President & Chief Executive Officer 
 
Date: July 13, 2006
 
Date: July 13, 2006
 

 

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