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                                                                   EXHIBIT 10.12

                             THIRD AMENDMENT TO THE
                               BORDERS GROUP, INC.
                         MANAGEMENT STOCK PURCHASE PLAN



         The Borders Group Management Stock Purchase Plan (as amended, the
"Plan") is hereby amended in the following particulars, effective as of the
dates indicated:

         1.       Paragraph (u) of Article 2 of the Plan hereby amended to read
as follows, effective as of September 16, 1998:

         "(u)     "Stock Option Plan" shall mean the Borders Group, Inc. Stock 
Option Plan, the Borders Group International Stock Option Plan or the 1998
Borders Group, Inc. Stock Option Plan, as determined by the Committee or its 
delegate at the time that a Tandem Option is granted."

         1.       Paragraph (a) is of Article 16 of the Plan is hereby amended 
for clarification purposes to read as follows, effective as of June 1, 1995 
(August 28, 1997 with respect to references to director level employee):

         (a)      UP TO $1  MILLION  PURCHASE.  The  Committee,  or, to the  
                  extent permitted by Article 4 hereof, the Chairman of the
                  Board and/or President, may grant a Participant who (i) is not
                  a Section 16 Person, and (ii) did not receive Management Stock
                  Purchase Options under the Stock Option Plan, an opportunity
                  or opportunities to use up to $1 million ($250,000 in the case
                  of director level employees) to purchase Restricted Shares
                  under this Plan. The price of Restricted Shares acquired under
                  this Article 16(a) shall be discounted 20% from its Fair
                  Market Value on the date of purchase, provided, however, that,
                  unless otherwise determined by the Committee or its delegate,
                  (A) with respect to a Participant who was recently hired at
                  the time that he or she was granted rights under this Article
                  16, the price shall be discounted 20% from its Fair Market
                  Value on the date that the Participant commenced employment,
                  and (B) with respect to a Participant who was recently
                  promoted at the time that he or she was granted rights under
                  this Article 16, the price shall be discounted 20% from its
                  Fair Market Value on the date that the Participant's promotion
                  was effective. The rights granted under this Section 16 shall
                  be granted only on a one time basis except that, (i) in the
                  event of the promotion of a director level employee to the
                  officer level, the Participant may be given an additional
                  opportunity to use up to the difference between $1,000,000 and
                  the amount that he or she previously used to purchase
                  Restricted Shares, to acquire additional Restricted Shares,
                  and (ii) if a Participant elects to purchase Restricted Shares
                  utilizing the proceeds of a Share Loan, and his or he
                  application for the Share Loan is rejected on the terms
                  initially requested, all elections 


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                  made by such Participant shall be null and void and such
                  Participant shall not be precluded from receiving additional
                  rights under the Plan.

         2.       The first sentence of Paragraph (a) of Article 16 of the Plan 
is hereby amended to read as follows, effective as of September 16, 1998:

                  "The Committee, or, to the extent permitted by Article 4
                  hereof, the Chairman of the Board and/or President, may grant
                  a Participant who did not receive Management Stock Purchase
                  Options under the Stock Option Plan, an opportunity or
                  opportunities to use up to $1 million ($250,000 in the case of
                  director level employees) to purchase Restricted Shares under
                  this Plan.

         3.       Clause (1) of paragraph (b) is of Article 16 of the Plan is 
hereby amended for clarification purposes to read as follows, effective as of 
June 1, 1995:

                   " (1) up to 100 percent of his or her Annual Bonus (less
                  applicable payroll deductions) for the year in which the
                  purchase occurs (or, with respect to newly hired or promoted
                  employees, the bonus or portions of bonuses attributable to
                  the twelve months following his or her hire or promotion date,
                  regardless of the year(s) in which such bonus or bonuses is or
                  are earned);"

         4.       The following paragraph (f) is hereby added to Article 16 of 
the Plan, effective as of September 16, 1998:


         (f)      LOANS BY THE COMPANY TO PARTICIPANTS. The Company, in its 
                  discretion, may make loans to Participants (a "Company Loan")
                  in amounts that do not exceed the lesser of: (i) the amount of
                  interest payable by the Participant with respect to any Share
                  Loan of the Participant, or (ii) an amount such that,
                  immediately after the proceeds of the Company Loan are used to
                  pay interest on the Share Loan, the total amount outstanding
                  under all Share Loans and Company Loans of the Participant
                  (including accrued interest, if any) shall not exceed 100% of
                  the then Fair Market Value of such Participant's Restricted
                  Shares on the date that the Company Loan is made. A Company
                  Loan shall become due and payable not later than the date upon
                  which the restrictions on the Participant's Restricted Shares
                  lapse, shall bear interest at the same rate as Share Loan to
                  which it relates and shall have such other terms and
                  conditions as the Company shall determine. The proceeds of any
                  Company Loan may be used only to pay interest on a Share Loan,
                  and the Company may pay the proceeds directly to the lender of
                  the Share Loan for such purpose. Each Company Loan shall be
                  secured by a lien on the Restricted Shares of the Participant,
                  which lien shall become effective 



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                  immediately upon lapse of the restrictions and shall be
                  subordinate to any lien relating to a Share Loan. In the event
                  of a default under any Company Loan, the Company may, subject
                  to the rights of any lender of the related Share Loan, offset
                  against any payment (whether in cash or Shares) that the
                  Participant would otherwise be entitled to receive, an amount
                  equal to the amount then owing under the Company Loan
                  (including accrued interest). In the event of a distribution
                  of Shares, the number of Restricted Shares to be canceled to
                  effectuate such offset shall be determined by dividing the
                  amount outstanding under the Company Loan by the Fair Market
                  Value per Restricted Share as of the date upon which the
                  payment to the Participant is being made (or otherwise would
                  be made if the amount to be offset exceeds the amount owing to
                  the Participant).

         5.       For clarification purposes, the following phrase is added at 
the beginning of Section 5(c) of the Plan, effective as of June 1, 1995:

                  "Except in connection with any Share Loan or a Company Loan 
                  provided for in Article 16 of the Plan, "

         6.       All references in the Plan to (i) the "Share Option Plan" are
                  hereby amended retroactively to refer to the "Stock Option
                  Plan" to correct a typographical error; (ii) "par value" of
                  the Shares are eliminated from the Plan; and (iii) "one-time
                  purchase right" or "one-time opportunity" are amended to read
                  "purchase right under Article 16" or "opportunity under
                  Article 16", as the case may be.

         Except as herein amended the Plan remains in full force and effect.


                                              BORDERS GROUP, INC.



                                              By: /s/ George R. Mrkonic
                                                 -------------------------