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                                                                   EXHIBIT 10.21

                               THIRD AMENDMENT TO

                             THE BORDERS GROUP, INC.

                               DIRECTOR STOCK PLAN



The Borders Group, Inc. Director Stock Plan (the "Plan") is hereby amended in
the following particulars, effective as of December 14, 2000:

1. The word "nonemployee" is hereby deleted from Section 1.1 of the Plan, so
that directors who are employees of the Company may benefit from the Plan in
accordance with the terms of the Plan, as amended.


2. Paragraph (i) of Article 2 of the Plan is hereby amended in its entirety to
read as follows:

    "Participant" shall mean a nonemployee member of the Board, except that such
term shall include a member of the Board who is an employee of the Company for
purposes of any Restricted Shares granted under Section 4.2(b) and (b) options
granted under Section 19.1 (b) and any related provisions of the Plan.

3. Section 4.2 of the Plan is hereby amended to make the existing provisions
paragraph (a) and to add the following paragraph (b):

                 "(b) The Committee, in its discretion, may grant Restricted
            Shares to directors who are employees of the Company."


4. Article 19 is of the Plan is hereby amended in its entirety to read as
follows:

   "19.     Stock Options

            19.1 Grant of Options.

                 (a) On the date of each Annual Meeting of shareholders of the
            Company commencing with the May 16, 1996 Annual Meeting, each
            eligible director shall receive an Option to purchase 5,000 shares
            of common stock of the Company.

                 (b) The Committee, in its discretion, may grant options,
            including compensation replacement options, to directors who are
            employees of the Company.


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                  19.2 Eligibility for Annual Grants under Section 19.1(a).
         Each director of the Company who (i) is not an officer or employee of
         the Company , (ii) is serving as a director of the Company on the date
         of an Annual Meeting, and (iii) has held at least of 10,000 shares of
         common shares of common stock of the Company since the preceding Annual
         Meeting, shall be eligible to receive Options on that date; provided,
         however, that the minimum shareholding requirement shall not be
         applicable to a director who is being initially elected on the date of
         the applicable Annual Meeting. In calculating the number of shares
         owned by a director for purposes of the minimum shareholding
         requirement, all shares previously issued to the director under Section
         4 of the Plan and then held by the director, whether restricted or
         unrestricted, shall be deemed owned by the director.

                  19.3 Terms and Conditions of Options. The Options granted to
         directors under this Plan shall have the following terms and
         conditions:

                       (a) EXERCISE PRICE. The exercise price shall be the Fair
                  Market Value per Share on the date of grant.

                       (b) TERM OF OPTIONS. The term of each Option shall be ten
                  years from the date of grant or such other term as shall be
                  determined by the Committee.

                       (c) VESTING AND EXERCISE DATE. Each Option granted under
                  Section 19.1 (a) shall vest and become exercisable on the
                  third anniversary of the date of grant; provided, however,
                  that (i) such an Option shall be forfeited in its entirety if
                  the director ceases, at any time prior to his or her exercise
                  of the Option, to hold the minimum number of shares that he or
                  she was required to hold for the one year period prior to the
                  grant to be eligible therefor; (ii), and all such options held
                  by a director who has served as a director for six years or
                  more shall vest as of the date upon which he or she ceases to
                  serve as a director. Options granted under Section 19.1 (b)
                  shall vest as of a date or dates determined by the Committee
                  at the time of grant. In addition, all outstanding Options
                  shall vest and become immediately exercisable in the event of
                  a Change in Control.

                       (d) DISCONTINUANCE OF SERVICE AS A DIRECTOR. An Option
                  may be exercised by a director only while he or she is serving
                  as a director or employee or within three months thereafter
                  and only if the Option is fully vested and exercisable and has
                  not expired on the date of exercise; provided however, that if
                  on the later of date upon which the director ceases to serve
                  as a director or as an employee, he or she has ten or more
                  years of full time service as a director and/or an employee of
                  the Company, or if termination of service as a director or an
                  employee results from the death or Disability of the director,
                  such three month period shall be extended to three years. In
                  the event of a death of a director, either before or after
                  termination of his or her service as a director, an Option
                  which is otherwise exercisable may be exercised by


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                  the person or persons whom the director shall have designated
                  in writing on forms prescribed by and filed with the Board
                  ("Beneficiaries") or, if no such designation has been made, by
                  the person or persons to whom the director's rights shall have
                  passed by the laws of decent and distribution ("Successors").
                  In the event of a Disability of a director, an option which is
                  otherwise exercisable may be exercised by the director's legal
                  representative or guardian. The Board may require an indemnity
                  and/or such other evidence or assurances as it may deem
                  necessary in connection with an exercise by a legal
                  representative, guardian, Beneficiary, or Successor.

                       (e) EXERCISE AND PAYMENT. Subject to the terms hereof, an
                  Option may be exercised by noticed in writing to the Company
                  specifying the number of shares to be purchased. Payment for
                  the number of shares purchased upon the exercise of an Option
                  shall be made in full at the per share exercise price and such
                  purchase price shall be paid by delivery to the Company of
                  cash (including check or similar draft), in United States
                  dollars or previously owned whole shares otherwise not subject
                  to holding periods under Rule 16b-3. Shares used in payment of
                  the purchase price shall be valued at their Fair Market Value
                  as of the date of notice of exercise is received by the
                  Company. Any shares delivered to the Company shall be in such
                  form as acceptable to the Company.

                       (f) WITHHOLDING TAXES. The Company may defer making
                  delivery of shares under the Plan until satisfactory
                  arrangements have been made for the payment of any tax
                  attributable to the exercise of the Option. A director may pay
                  all or any portion of all taxes: (i) in cash; (ii) by having
                  the Company withhold whole Shares; (iii) by delivering to the
                  Company whole Shares previously owned by the director having a
                  Fair Market Value not greater than the amount to be withheld;
                  provided, however, that the amount to be withheld may not
                  exceed the director's estimated total Federal, State and local
                  tax obligations associated with the transaction.

                       (g) NON-TRANSFERABILITY. No Option or any rights with
                  respect thereto shall be subject to any debts or liabilities
                  of an Director, nor be assignable or transferable except by
                  will or the laws of decent and distribution, or be exercisable
                  during the Director's lifetime other than by him or her, nor
                  shall shares be issued to or in the name of anyone other than
                  the Director, provided, however that an Option may be
                  exercised after the death of an Director in accordance with
                  Section 19.3 above and, provided further that any shares
                  issued to an Director may be, at the request of the Director,
                  issued in the name of the Director and/or one other person, as
                  joint tenants with right of survivorship and not as
                  tenants-in-common, or in the name of a trust for the benefit
                  of the Director or for the benefit of the Director and others.

                       (h) TERMINATION BY A DIRECTOR. A director may at any time
                  elect, in a written notice filed with the Board, to terminate
                  an Option


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                  with respect to any number of shares as to which such Option
                  shall not have been exercised.

                       (i) TYPE OF OPTION. All Options issued under the Plan
                  shall be non-qualified Options.

                       (j) RIGHTS AS A STOCKHOLDER. A director shall not have
                  any rights as a stockholder with respect to shares covered by
                  his or her Option until the date of issuance to him or her of
                  a certificate evidencing such shares after the exercise of
                  such Option and payment in full of the exercise price. No
                  adjustment will be made for dividends or other rights for
                  which the record date is prior to the date such certificate is
                  issued.



         Except as herein amended, the Plan shall remain in full force and
effect.

                                             Borders Group, Inc.

                                             By /s/ BRUCE A. QUINNELL
                                                ---------------------

                                                Vice Chairman
                                                ---------------------