January 25, 2006
 
Dear Greg:
 
This letter agreement sets forth the terms of our agreement relating to your
transition from the role of Chairman, President and Chief Executive Officer of
Borders Group, Inc. (the “Company”), and your assistance in the transition
process that the Board of Directors (the “Board”) is undertaking as a result of
your planned retirement (the “Agreement”).
 
1.  Continued Employment/Retirement. The term of this Agreement shall commence
on January 29, 2006 and end on February 2, 2008 (the “Term”). You will serve as
Chairman, President and Chief Executive Officer of the Company until a date to
be specified by the Board (the “Retirement Date”), which shall not be later than
the last day of the Term (such term the “Continued Employment Period”).
 
2.  Consulting Services. From your Retirement Date through the end of the Term
(the “Consulting Period”), you will serve as a non-exclusive, senior-level
consultant to the Company, assisting the Company in the transition process
relating to your retirement and on other projects as may reasonably be requested
by the Board or the Chief Executive Officer of the Company (the “CEO”) (such
services, the “Consulting Services”). During the Consulting Period, you will
report to the Board, and you will devote an amount of time necessary to perform
the Consulting Services, it being understood that (i) such Consulting Services
will not involve full-time service to the Company and (ii) you will not be
required, without your consent, to perform the Consulting Services at a location
other than the Company’s principal executive offices in Ann Arbor, Michigan
(other than as a result of normal travel arrangements).
 
3.  Compensation/Benefits. (a) During the Continued Employment Period, (i) you
will be paid an annual base salary of $710,000, payable in accordance with the
Company’s normal payroll practices and (ii) you will be entitled to participate
in the Company’s annual bonus plan and shall be entitled to an annual bonus with
respect to the Company’s fiscal year beginning in 2006 (“Fiscal 2006”) and the
Company’s fiscal year beginning in 2007 (“Fiscal 2007”), if applicable, to the
extent that applicable performance goals are met; provided, however, that in the
event your Retirement Date occurs prior to the last day of Fiscal 2006, (A) your
base compensation during any period of the Consulting Period during Fiscal 2006
will be at an annualized rate of $710,000 per year ($27,308 per normal pay
period for 26 periods per year), (B) you shall be entitled to your target bonus
under the Fiscal 2006 bonus plan as soon as practicable following your execution
and non-revocation of a release of claims against the Company substantially in
the form attached as Exhibit A to this Agreement and (C) your base compensation
during any period of the Consulting Period after Fiscal 2006 will be at an
annualized rate of $1,278,000 per year ($49,153 per normal pay period for 26
periods per year). In the event your Retirement Date occurs on or after the last
day of Fiscal 2006 but prior to the last day of Fiscal 2007, (x) your base
compensation during any period of the Consulting Period will be at an annualized
rate of $710,000 per year ($27,308 per normal pay period for 26 periods per
year) and (y) you shall be entitled to your target bonus under the Fiscal 2007
bonus plan as soon as practicable following your execution and non-revocation of
a release of claims against
 
1
 

--------------------------------------------------------------------------------

 
the Company substantially in the form attached as Exhibit A to this Agreement.
In the event your Retirement Date occurs on or after the last day of Fiscal
2006, you shall be entitled to a lump sum cash payment in the amount of $40,000
for each month of the Continued Employment Period (the “Retention Bonus”), which
Retention Bonus shall be paid to you as soon as practicable after your
Retirement Date, subject to your execution and non-revocation of a release of
claims against the Company substantially in the form attached as Exhibit A to
this Agreement. It is understood that these payment levels are based upon your
current salary and target bonus, and that you will not be eligible for any
further bonus or other short or long-term incentive awards of any nature
whatsoever from the Company during the Consulting Period. You will not receive
additional equity grants during the Term and you will not be entitled to any
additional benefits or payments in connection with a change in control of the
Company.
 
(b)  In addition to the payments described above, you shall be entitled to the
following payments: (i) an aggregate of $1.5 million, payable to you in a lump
sum as soon as practicable following the last day of the Term (but in any event
during calendar year 2008) in lieu of any rights to your 2004 and 2005 awards
under the Company’s 2004 Long-Term Incentive Plan (the “Replacement LTIP
Award”), it being understood and agreed that such awards shall be cancelled as
of the commencement of the Term and you shall not have any further rights with
respect to such awards; (ii) such amount, if any, as shall be payable with
respect to your 2003 long-term incentive award, with any such payment to made at
the same time as payment is made to other executives of the Company; and (iii)
the final payment of $120,000 relating to your continued ownership of 90,000
shares of stock of the Company, with such payment to be made on January 15,
2007, assuming your continued ownership of the 90,000 shares through such date.
 
(c)  During the Term, (i) to the extent that you continue to remain eligible,
you may participate in the Company’s savings and deferred compensation plans and
medical, dental and other welfare plans on the same basis as other salaried
employees, and (ii) you will be entitled to four weeks of paid vacation per
year.
 
(d)  Prior to your Retirement Date, you and the Company shall each use
reasonable best efforts to try to extend, at the Company’s cost, your coverage
under the Company’s death and disability plans at a similar Company cost to
their current costs (or any similarly-costed replacement plans) for the
remainder of the Term following the Retirement Date. In the event that either
(i) such replacement coverage is obtained or (ii) you die or experience a
“Disability” (as defined under Section 409A of the Internal Revenue Code of
1986, as amended (the “Code”)) during the Continued Employment Period, the
payments under Section 3(a) shall immediately cease but the payments under
Section 3(b) shall be made to you or your beneficiary, as the case may be, at
the times specified therein. In the event such replacement coverage is not
obtained and you die or experience a “Disability” during the Consulting Period,
(A) any payments that would have otherwise been owed to you under Section 3(a)
shall be paid to you or your beneficiary, as the case may be, at the times
specified therein, and (B) the payments under Section 3(b) shall be made to you
or your beneficiary, as the case may be, at the times specified therein.
 
(e)  In the event of your resignation of employment or consultancy or the
Company’s termination of your employment or consultancy for Cause, the payments
under this Section 3 (other than those under subclauses (b)(ii) and (b)(iii)
above) shall immediately cease.
 
2
 

--------------------------------------------------------------------------------

 
(f)  Any payments or benefits to be provided to you under Section 3 of this
Agreement after the Retirement Date are subject to your execution and
nonrevocation of a release of claims against the Company substantially in the
form attached as Exhibit A to this Agreement as soon as practicable after the
Retirement Date and your compliance with the terms of this Agreement. In
addition to, and without limiting, the foregoing sentence, the payment to you of
the Replacement LTIP Award and the Retention Bonus is subject to your execution
and nonrevocation of a release of claims against the Company substantially in
the form attached as Exhibit A to this Agreement as soon as practicable after
the expiration of the Term.
 
4.  Existing Equity Awards. Your existing stock options, as well as the
restricted shares that you have purchased with funds earned prior to the date
hereof under the Company’s Annual Incentive Bonus Plan (which are set forth on
Exhibit B to this Agreement), shall continue to vest (if applicable) and remain
exercisable in accordance with the terms of the applicable plan.
 
5.  Resignation from Positions. Upon the request of the Board, you agree to
resign as a director of the Company and its subsidiaries and affiliated
companies (collectively, the “Affiliated Entities” and any such entity, an
“Affiliated Entity”), and from any offices, positions, trusteeships, committee
memberships and fiduciary capacities that you hold with, or on behalf of, any
Affiliated Entity.
 
6.  Termination of Employment/Consultancy. Except as provided in Section 1 of
this Agreement with respect to your transition of employment, your employment or
consultancy with the Company may be terminated by the Company during the Term
only for “Cause”, which shall mean the occurrence of any of the following
events:
 
(a)  Your conviction of, or plea of guilty or nolo contendere to, a felony, or
of a misdemeanor involving the money or property of the Company or any of its
Affiliated Entities;
 
(b)  Your willful and continued failure without proper cause to substantially
perform the duties and responsibilities of your position or to comply in all
material respects with the material written policies or directives of the
Company, which failure shall not be remedied within twenty-one days after
written notice thereof from the Company to you;
 
(c)  You shall have willfully engaged in misconduct that materially damages or
injures the reputation of the Company or any of its Affiliated Entities;
 
(d)  You shall have been guilty of gross negligence in the performance of your
duties and responsibilities; or
 
(e)  You shall have breached the terms of this Agreement in any material
respect.
 
For purposes of this Section 6, no act or failure to act, on your part shall be
deemed to be “willful” unless done, or omitted to be done, by you not in good
faith and without reasonable belief that such act or omission was in the best
interest of the Company.
 
7.  Cooperation. Following your Retirement Date, you agree that you will use
your reasonable best efforts to respond and provide information to the Company
with regard to
 
3
 

--------------------------------------------------------------------------------

 
matters in which you have knowledge as a result of your employment,
directorship, consulting or other relationship with the Company and its
Affiliated Entities, and will provide reasonable assistance to the Company and
its representatives in defense of any claims that may be made against or by the
Company and its Affiliated Entities (other than a claim by the Company against
you or any claims that you have against that Company that you have not released
under Exhibit A to this Agreement), to the extent that such claims may relate to
the period of your employment, directorship, consulting or other relationship
with the Company and its Affiliated Entities of any kind whatsoever. Upon
presentation of appropriate documentation, the Company will pay or reimburse you
for all out-of-pocket out-of-town travel expenses you incur in complying with
this Section 7.
 
8.  Non-Solicitation; Non-Competition; Confidentiality; Workproduct.
 
(a)  You acknowledge and agree that any attempt to interfere with the Company’s
existing employment relationships would result in significant harm to the
Company’s interests. Accordingly, you agree that during the Term and for two
years following the expiration of the Term (the “Restricted Period”), you 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, you 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.
 
(b)  You agree that, during the Restricted Period, you 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 (A) the sale of books, music,
gifts and stationary or videos directly to the public (whether through
traditional retail sales or over the Internet) or (B) 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 your 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. Notwithstanding the foregoing, it shall not be a violation of
this Section 8(b) for you to become engaged or involved with a division or
business line of a business or entity with multiple divisions or business lines
if such division or business line does not engage in Competitive Activities,
provided that you perform services solely for such non-competitive division or
business line, and perform no functions on behalf of (and have no involvement
with or direct or indirect responsibilities with respect to) businesses or
entities engaged in Competitive Activities. You further agree that, during the
Restricted Period, you shall not, without the prior written consent of the
Company, directly or indirectly solicit, or cause
 
4
 

--------------------------------------------------------------------------------

 
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.
 
(c)  You 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 you have obtained during your employment with the Company
and/or any of the other Affiliated Entities, provided that the foregoing shall
not apply to information that is generally known to the public other than as a
result of your breach of this Agreement (“Confidential Information”).
Notwithstanding the foregoing provisions, if you are required to disclose any
such confidential or proprietary information pursuant to applicable law or a
subpoena or court order, you 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. You 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 the you are required to
make the disclosure, or the Company waives compliance with the provisions hereof
you shall disclose only that portion of the confidential or proprietary
information which you are advised by counsel that you are legally required to so
disclose.
 
(d)  You acknowledge and agree that the terms of this Section 8: (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. You further acknowledge and agree that (x) your breach of the provisions
of this Section 8 will cause the Company irreparable harm, which cannot be
adequately compensated by money damages, and (y) if the Company elects to
prevent you from breaching such provisions by obtaining an injunction against
you, there is a reasonable probability of the Company’s eventual success on the
merits. You consent and agree that if you commit 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 8 are determined to be wholly or partially
unenforceable, you hereby agree 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 8 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.
 
9.  Return of Property. Upon the Retirement Date, you shall surrender
immediately to the Company, except as specifically provided otherwise herein,
all Confidential Information
 
5
 

--------------------------------------------------------------------------------

 
and all other property of the Company or any of the other Affiliated Entities in
your possession and all property made available to you in connection with your
employment by the Company or any of the other Affiliated Entities, including,
without limitation, any and all other records, manuals, customer and client
lists, notebooks, files, papers, computers, computer programs, computer discs,
lists, data, cellular phones, two-way pagers, palm held electronic devices,
electronically stored information and all other documents (and all copies
thereof) held or made by you in the course of your employment with the Company
or any of the other Affiliated Entities.  
 
10.  Miscellaneous.
 
(a)  Entire Agreement. This Agreement supersedes any prior agreement or
understanding between you and the Company relating to your employment or any
termination thereof. Without limiting the generality of the foregoing, the
letter agreement between you and the Company dated November 15, 1999 is
terminated and of no further force or effect. Except as specifically set forth
herein, you shall not be entitled to any payment or other benefit relating to
your employment or termination of employment with the Company. This Agreement
and the agreements herein may be amended only by written amendment duly executed
by both parties hereto or their legal representatives and authorized by action
of the Board. Except as otherwise specifically provided in this Agreement and
the agreements herein, no waiver by either party hereto of any breach by the
other party hereto of any condition or provision of this Agreement and the
agreements herein to be performed by such other party shall be deemed a waiver
of a subsequent breach of such condition or provision or waiver of a similar or
dissimilar provision or condition at the same or at any prior or subsequent
time.
 
(b)  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 you, modify this Agreement in the least restrictive manner
necessary in order to, where applicable, (i) exclude such compensation from the
definition of “deferred compensation” within the meaning of such Section 409A or
(ii) comply with the provisions of Section 409A, other applicable provision(s)
of the Code and/or any rules, regulations or other regulatory guidance issued
under such statutory provisions and to make such modifications, in each case, to
the extent permissible, without any material diminution in the payments to you.
To the extent required in order to comply with Section 409A of the Code, amounts
to be paid to you under Section 3 of this Agreement shall be paid or provided to
on the first business day after the date that is six months following your
“separation from service” (as defined under Section 409A of the Code) (such
date, the “409A Payment Date”), provided that any amounts that would have
otherwise been paid to you during such period of delay shall be paid to you in a
lump sum on the 409A Payment Date.
 
(c)  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.
 
(d)  Indemnification. During the Consulting Period and after the end of the
Term, the Company shall continue to indemnify you for your actions as a
consultant, officer, Board member, or employee and the Company shall provide you
with defense costs for any and
 
6
 

--------------------------------------------------------------------------------

 
all claims or actions against you in connection with such actions occurring
during your employment and during the Consulting Period to the same extent as
you were indemnified and provided with defense costs as of the end of the
Continued Employment Period, to the maximum extent permitted under the laws of
the State of Michigan.
 
(e)  Full Discharge. You agree and acknowledge that the entitlements provided to
you under this Agreement through the Term (including any payments that you are
entitled to receive after the Term) are in settlement of any and all
severance-type liabilities and obligations of the Company to you, monetarily or
with respect to employee benefits.
 
(f)  Severability. If any one or more of the provisions or parts of a provision
contained in this Agreement and the agreements herein shall for any reason be
held to be invalid, illegal or unenforceable in any respect, such invalidity or
unenforceability shall not affect any other provision or part of a provision of
this Agreement and the agreements herein, but this Agreement and the agreements
herein shall be reformed and construed as if such invalid, illegal or
unenforceable provision or part of a provision had never been contained herein
and such provisions or part thereof shall be reformed so that it would be valid,
legal and enforceable to the maximum extent permitted by law. This Agreement is
not assignable without the written authorization of both parties.
 
(g)  Governing Law. This Agreement shall be governed in accordance with the laws
of the State of Michigan without regard to its conflict of laws provision.
Should any provision of this Agreement be declared illegal or unenforceable by
any court of competent jurisdiction, it shall be modified to the extent
enforceable and shall become null and void to the extent that it cannot be so
modified, leaving the remainder of this Agreement in full force and effect. Any
dispute that may exist respecting (i) the interpretation or application of any
provision of the agreement (including, without limitation, the provisions of
this Section) or (ii) your entitlement to payments or other benefits after
termination of your employment shall be resolved by arbitration in Detroit,
Michigan in accordance with the rules of the American Arbitration Association
and judgment on the award may be entered in any court having jurisdiction. If
you substantially prevail on at least one material issue in any such dispute,
the Company will pay or reimburse you for your expenses in connection with the
resolution of such dispute (including, without limitation, counsel fees and
disbursements and other charges).
 
(h)  Successors. This Agreement shall be binding upon, and inure to the benefit
of, any successors and assigns of the Company. Except in the event of your death
or Disability, you may not assign any of your rights or obligations hereunder.
 
7
 

--------------------------------------------------------------------------------

Please confirm your agreement by signing below and retain one copy for your
records.
 
 Sincerely,
 
BORDERS GROUP, INC.
 
 
By: /s/ EDWARD W. WILHELM
 
 
Agreed:
 
/s/ GREGORY P. JOSEFOWICZ
Gregory P. Josefowicz
 
 
8
 

--------------------------------------------------------------------------------

Exhibit A
 
Release of Claims
 
1.  I hereby sign this Release for and in consideration of the payments and
benefits previously paid or provided to me or to be made or provided to me and
the promises set forth herein and the letter agreement, dated January 25, 2006
between Borders Group, Inc. (the “Company”) and me (the “Agreement”). I further
acknowledge that the payments, benefits and other entitlements under the
Agreement exceed any payment benefit or other thing of value to which I might
otherwise be entitled under any policy, plan or procedure of the Company or any
prior agreement between me and the Company.
 
2.  Release of Claims. (a) For and in consideration of the payments and benefits
to be made or provided to me under the Agreement and other good and valuable
consideration, I, for myself and for my heirs, dependents, executors,
administrators, trustees, legal representatives and assigns (collectively
referred to as “Releasors”), hereby forever release, waive and discharge (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 2(a) 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 my
execution of this Release, including without limitation, those in connection
with, or in any way related to or arising out of, my 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 2(a).
 

(b)  
Adversarial Actions. I agree that I will not, from any source or proceeding,
seek or accept any award or settlement with respect to any claim or right
covered by Section 2(a) above. Except as otherwise required by law, I further
agree that I will not, at any time hereafter, commence, maintain, prosecute,
participate in as a party, permit to be filed by any other person on my behalf
(to the extent it is within my control or permitted by law), or assist in

 
A-1

--------------------------------------------------------------------------------

 
 

 
the commencement or prosecution of as an advisor, or otherwise, any action or
proceeding of any kind, judicial or administrative (on my 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 my execution of this Release which I released pursuant to Section 2(a) above.
I further represent that, as of the date I sign this Release, I have not taken
any action encompassed by this Section 2(b). If, notwithstanding the foregoing
promises, I violate this Section 2(b), I 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 2(b) will not apply to any claims that I
may have under the ADEA and will not apply to the portion of the release
provided for in Section 2(a) relating to the ADEA.
 

 

(c)  
Preserved Rights. The sole matters to which the release and covenants in this
Section 2 do not apply are: (i) my rights under the Agreement, my rights of
indemnification and related rights or otherwise with regard to my service as an
officer or director of the Company (if any) and my 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 my employment with the Company (if any);
(ii) my rights to contribution (if any) with regard to my service as an officer
and director of the Company; (iii) my rights as a shareholder of the Company (if
any); and (iv) my rights to vested benefits under any employee benefit plan of
the Company.

 
3.  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.
 
4.  Acknowledgement. I acknowledge that I have been advised by the Company in
writing to consult independent legal counsel of my choice before signing this
Release. I further acknowledge that I have had the opportunity to consult, and I
have consulted with, independent legal counsel and to consider the terms of this
Release for a period of at least 21 days.
 
5.  Effective Date. I further acknowledge that this Release will not become
effective until the eighth day following my execution of this Release (the
“Effective Date”), and that I 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 I revoke 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.
 
6.  Entire Agreement. I understand that this Release and the Agreement
constitute the complete understanding between the Company and me and that no
other promises or agreements will be binding unless in writing and signed by me
and the Company after the date hereof.

A-2

--------------------------------------------------------------------------------

 
 
7.  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.
 

 
EXECUTIVE:

_________________________         _______________________
Name: Gregory P. Josefowicz          Date:

BORDERS GROUP, INC.
 
By: _______________________         _______________________
                            Date:

 

 

A-3

--------------------------------------------------------------------------------

 

Exhibit B
 
Outstanding Equity Awards
 
Stock Options
 
1. 275,000 stock options granted on 1/15/99, with an exercise price of $13.3125.
 
2. 50,000 stock options granted on 11/01/02, with an exercise price of $17.23.
 
Restricted Shares
 
1. 8,378 restricted shares purchased on 4/4/03, with a purchase price of $11.44
per share.
 
2. 7,877 restricted shares purchased on 3/19/04, with a purchase price of
$18.928 per share.
 
3. 4,809 shares purchased on 4/1/05, with a purchase price of $18.634 per share.
 

 

B-1

--------------------------------------------------------------------------------