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                                                                  EXHIBHI 10.32


                                                                January 24, 2000


GEORGE R. MRKONIC

Dear George:

This letter will confirm our agreement concerning your employment with Borders
Group, Inc. ("BGI").

1. During the term of this Agreement, you will be the Vice-Chairman of BGI and,
subject to your election by the shareholders, a member of the Board of Directors
of BGI (the "Board"). You will report to the Chairman of the Board and your
place of employment shall be in Ann Arbor, Michigan.

2. Subject to Section 6 and Section 12, for fiscal 2000, your salary will be
$257,500 and your "stretch" bonus opportunity will be $257,500. Pursuant to your
agreement with the Compensation Committee of the Board, all of your salary and
bonus will be paid in compensation replacement options.

3. You shall have authority consistent with your position and shall have such
duties consistent with your position as shall be assigned to you by the Board
from time to time. Such duties shall involve approximately 50% of your time
commitment as a full-time employee.

4. You may participate in the savings and welfare programs of BGI in accordance
with their respective terms in the same manner as other senior executives of
BGI.

5. The term of this Agreement shall be from January 24, 2000 through January 27,
2001. Subsequent to the expiration of the term, it is anticipated that you will
continue to serve as a director of BGI, subject to your annual election by the
shareholders of BGI. Continuance of employment after the term of this Agreement
shall be subject to the mutual agreement of you and BGI.

6. Subject to Section 12, during the term of this Agreement, your position with
BGI may be terminated by BGI only for "Cause" by written notice given to you
after action by a majority of the members of the Board of Directors of BGI and
only within ninety days after the occurrence of BGI learning of one of the
following events:

     (a)  Your conviction of a felony, or of a misdemeanor involving the money
          or property of BGI or any subsidiary;

     (b)  You shall have willfully engaged in misconduct that materially damages
          or injures the reputation of BGI or any subsidiary;

     (c)  You shall have breached the noncompetition provisions of this
          Agreement and such breach is not cured within 7 days after


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          notice thereof from BGI; or

     (d)  Any willful and material breach of the confidentiality provisions of
          this Agreement.

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 BGI.

In the event that BGI breaches this Agreement and either (i) your employment is
terminated by BGI without Cause prior to the expiration of the term, or (ii) you
voluntarily terminate your employment following any such breach which is not
cured by BGI within 30 days after BGI's receipt of written notice from you
describing the breach, you shall continue to receive the benefits that you would
have received had such breach not occurred, including, but not limited to, the
continued vesting of stock options and MSPP shares through the balance of the
term and the extended exercise period for vested options and options that vest
during the balance of the term as described in Section 16 below whether or not
you shall have satisfied the ten year service requirement as of the date of such
termination. In the event that any aspect of the foregoing is inconsistent with
the terms of the relevant plan, BGI shall provide the same benefits outside of
such plan. You shall not be obligated to seek other employment to mitigate
damages and BGI's obligations hereunder shall not be reduced by any compensation
that you may earn from other employment or self-employment.

7. You will be entitled to reimbursement for travel (at full coach rate) and
entertainment and other business expenses incurred on BGI's behalf in accordance
with BGI's policy upon submission of vouchers and documentation relating thereto
in accordance with BGI procedures.

8. You agree that during the Restricted Period neither you nor your Affiliates
will (i) Compete with BGI in the Restricted Area or (ii) directly or indirectly
(whether as owner, principal, employee, partner, lender or venturer with or
consultant to any person, firm, partnership, corporation or other entity): (A)
cause or seek to cause any of BGI's suppliers, purchasing agents or customers to
cease transacting business with BGI; or (B) cause or seek to cause any of BGI's
prospective suppliers, purchasing agents or customers not to transact business
with BGI.

For purposes of this Agreement:

     (i)  The term "Affiliate" means any corporation, person or entity which,
directly or indirectly, through one or more intermediaries, you control or is
under common control with you;

    (ii)  The term "Company" means BGI and its subsidiaries.

   (iii)  The term "Compete" means to manage, operate, control or participate
in, or have any ownership interests in or make loans to, or aid or advise as an
employee, consultant or otherwise, whether directly or indirectly, any business
(whether an individual, sole proprietorship, partnership, corporation, firm,
joint venture, trust or other entity) which is engaged in, directly or
indirectly, the retail (including internet) or wholesale book business or in a
business where principal business is the retail or wholesale sale of video
cassettes, videotapes, musical records, compact discs or audio cassettes;
provided, however, that you


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may (i) own equity securities in Kmart or any subsidiary of Kmart and (ii) own
up to 1% of a corporation where equity securities are listed for trading on a
national securities exchange;

   (iv)  The term "Restricted Period" means the period from the date hereof
through December 31, 2002, provided, that in the event that you breach the
covenant not to Compete set forth above, such breach shall suspend and toll the
running of the Restricted Period from the date of such breach until such time as
such violation ceases; and

    (v)  The term "Restricted Area" means anywhere in North America or any other
country in which BGI is doing business at the time of your termination of
employment.

Nothing in this Section 8 shall be deemed to prohibit you or any of your
Affiliates from owning shares of BGI.

9.  You agree that you and your Affiliates will maintain in strict confidence
and will not, directly or indirectly, divulge, transmit, publish, release or
otherwise use or cause to be used in any manner to Compete with or that is
contrary to the interests of BGI, any confidential information relating to BGI's
systems, operations, processes, computer programs and data bases, records,
development data and reports, store designs, quality control specifications,
cost analysis, flow charts, know-how, customer lists, supplier lists, marketing
data, personnel data, or any other information of like nature. You acknowledge
that all information regarding BGI compiled or obtained by, or furnished to, you
in connection with your employment or association with BGI is confidential
information and BGI's exclusive property. Upon demand by BGI, you will surrender
to BGI all original and facsimile records, documents and data in your possession
pertaining to BGI. The foregoing covenant of confidentiality has no temporal,
geographical or territorial limitation.

    Notwithstanding the foregoing, this provision does not apply to the
extent, and only to the extent, such information: (a) is clearly obtainable in
the public domain; (b) becomes obtainable in the public domain, through no fault
of yours; (c) was not acquired by you in connection with your employment or
affiliation with BGI; (d) was not acquired by you from BGI or its
representatives; (e) is required to be disclosed by rule of law or by order of a
court or governmental body or agency; or (f) is reasonably necessary to be
disclosed to defend yourself or assert your rights in connection with any
proceeding to which BGI or its affiliates is a party.

10. The restrictive covenants contained herein shall be construed as independent
of the other provisions of this Agreement, and the existence of any claim or
cause of action that you may have, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by BGI of any of
the restrictive covenants contained herein.

11. You acknowledge that if you breach any of the restrictive covenants
contained herein, the injuries that will be suffered by BGI will be irreparable,
and BGI will not have an adequate remedy at law. You therefore, agree that in
the event of such a breach, BGI shall be entitled to relief by way of injunction
from any court of proper jurisdiction, in addition to all other rights that BGI
may have at law, in equity, or otherwise.

12. In the event of your death, Disability or a Change in Control of BGI, all of
your outstanding options and restricted shares will vest as provided in the
applicable plan. In event of the occurrence of any such events: (i) your
employment shall thereupon terminate; (ii) no other


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payments will be due to you; and (iii) the noncompete provisions set forth
herein shall remain in effect until December 31, 2002. "Change in Control" shall
have the meaning set forth in the Borders Group, Inc. Stock Option Plan.
"Disability" shall mean that you are unable to perform your duties and
responsibilities by reason of a specific mental or physical illness or injury
and such inability shall have existed for an aggregate of at least 180 days in
the twelve-month period. Any question as to the existence of a Disability as to
which you and BGI cannot agree shall be determined in writing by a qualified
independent physician mutually acceptable to you and BGI. If you and BGI 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
BGI and to you and shall be final and conclusive for all purposes of this
agreement.

13. You shall not be entitled to any severance or other payment upon your
employment termination, either prior to or after the expiration of the term of
this Agreement, regardless of the reason for the termination, except that,
subject to Section 12, if, prior to the expiration of the term, either your
employment is terminated by BGI without Cause or you voluntarily resign
following a breach of this Agreement by BGI which is not cured within the time
specified in Section 6, you shall receive the payments/benefits described in
Section 6 as your sole and exclusive remedy.

14. All provisions of this Agreement are intended to be severable. In the event
any provision or restriction contained herein is held to be invalid or
unenforceable in any respect, in whole or in part, such finding shall in no way
affect the validity or enforceability of any other provisions of this Agreement.
The parties hereto further agree that any such invalid or unenforceable
provision shall be deemed modified so that it shall be enforced to the greatest
extent permissible under law, and to the extent that any court of competent
jurisdiction determines any restriction herein to be overly broad or
unenforceable, such court is hereby empowered and authorized to limit such
restriction so that it is enforceable for the longest duration of time and
largest geographical area possible.

15. 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
your position in any such dispute is sustained in the arbitration, BGI 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).

16. BGI hereby confirms that, assuming that you remain employed by BGI through
November 4, 2000, you will have served for ten (10) years with BGI and Kmart
Corporation. Therefore, under the terms of the Borders Group, Inc. Stock Option
Plan, you will have three years after your employment termination date to
exercise options that are vested on your employment termination date.


17. This Agreement shall be effective as of January 24, 2000.

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Please confirm your agreement by signing below and retain one copy for your
records.

                                                 Sincerely,


                                                 BORDERS GROUP, INC.

                                                 By: /s/ GREGORY P. JOSEFOWICZ
                                                    --------------------------
                                                         Gregory P. Josefowicz
Agreed:

  /s/ GEORGE R. MRKONIC
-----------------------
      George R. Mrkonic