EXHIBIT 14.2
BUSINESS CONDUCT POLICY
I. GENERAL STATEMENT OF POLICY
The policy of Borders Group and its subsidiaries (the “Company”) is to complywith all applicable laws and to adhere to the highest ethical standards in theconduct of our business. Employees shall endeavor to deal fairly with theCompany’s customers, suppliers, competitors and employees. It is each theresponsibility of each director, officer and employee to adhere to this Policy,and references herein to an “employee” or “employees” shall include officersand directors.
Because the business and legal environment in which the Company operates isextremely complex, it would be impossible to formulate a single Policy thatwould govern all possible situations. If employees have any questionsconcerning the application of this Policy to a particular situation, or need additionalinformation concerning an issue not covered by the Policy, they are encouragedto, and should, contact the Legal staff of the Company.
It is each employee’s responsibility to acquire and maintain a workingknowledge of the business laws and ethics policies as applicable to your responsibilitieswith the Company, both by studying this Policy and other materials given toemployees by the Company, and by reading publications and other generallyavailable sources of information about these matters. If employees have anyquestions about the proper application of this Policy or about what is requiredby the law in any given situation, they must consult with the Legal Staff ofthe Company.
II. BUSINESS PRACTICES AND LEGAL COMPLIANCE
 A. CORPORATE OPPORTUNITIES AND CONFLICTS OF INTEREST
As an employee of the Company, each individual owes a duty of loyalty to theCompany. Therefore, employees must use the Company’s property, its businessopportunities and their positions with the Company exclusively for the benefitof the Company. This means that employees must act in the best interests of theCompany, not their own, and that they are prohibited from (a) taking forthemselves personally opportunities that are discovered through the use ofcorporate property, information or position; and (b) using corporate property,information or position for personal gain. Employees must always seek toadvance the goals of the Company as established by Executive Management and the Boardof Directors.
It is essential that all employees, both professionally and personally, avoidsituations that may create a conflict of interest, or the potential forconflict of interest or the appearance of a conflict of interest. A full and timelydisclosure of the facts will help the Company and its employees avoid problems.In instances where the facts are disclosed and no illegal or unethical conductis involved, the Company could consent to the proposed activity even though atechnical conflict of interest exists. Employees must avoid any situation inwhich their obligations to the Company compete with their own financialinterests, obligations to another company or governmental body, or desire toassist relatives or friends.
 

 

Some examples of (but not limited to) potential conflicts of interest are:
 1. Investing in any company that sells products or servicessimilar to the Company’s, or any company doing or seeking todo business with the Company, other than relatively smallinvestments in securities widely held by the general public;  2. Working for, or on behalf of, any such company;  3. Placing Company business with relatives or friends, or workingon a Company project that will have a direct impact on thefinancial interests of relatives or friends;  4. Encouraging companies dealing with the Company to buy suppliesor services from relatives or friends;  5. The receipt by an employee or a member of his or her family ofimproper personal benefits as a result of his or her positionwith the Company, it being recognized that loans to, orguarantees of obligations of, the employee or his or herfamily members present special concern and that the Companymust comply with laws prohibiting or restricting loans toexecutive officers and directors.  6. Borrowing money from companies doing or seeking to do businesswith the Company other than on generally available terms;  7. Participating in the regulatory or other activities of acommunity or governmental body that have a direct impact on the business of theCompany;  8. Hiring or supervising a relative or friend;  9. A personal relationship with another employee or vendor thataffects one’s ability to do one’s job or disrupts the workplace;  10. Working for another company which conflicts with one’s duties andresponsibilities at BGI by affecting one’s ability to do his/her job, workhis/her regularly scheduled shift, or work his/her stated available hours.
Each employee is responsible for recognizing situations in which a conflict ofinterest is present or might arise and for taking appropriate action toeliminate or prevent such conflict, including reporting the situation to theappropriate level of management. Where an employee believes it is not possibleto avoid any of these situations, or to avoid any other conflict of interest,he/she must inform his/her supervisor and make full written disclosure (inadvance whenever possible) to the Legal Staff of the Company.
 B. GIFTS AND SAMPLES
In addition to avoiding actual conflicts of interest, employees must also avoidcreating any appearance that their judgment as an employee of the Company mayhave been influenced by personal considerations, or that they are seeking toobtain business or contracts for the Company based on improper considerations.
For this reason employees may not accept any gifts from any person doing, orseeking to do, business with the Company or from any competitor of the Company.For this purpose a “gift” includes any gratuitous service, loan, discount,meal, entertainment, money, commissions, bonuses, trips or article of valueother than (i) loans from financial institutions on customary terms, (ii)Holiday gifts of food and similar items that are placed by the recipient in aworkplace area where all employees at the recipient’s location may share inthem, and (iii) meals with vendors or potential vendors of the Company;provided, that each supervisor may require reporting with respect to youracceptance of meals with vendors or potential vendors. Entertainment, such astickets to sporting events, may be accepted only if the employee
 

 

promptly reimburses the vendor or potential vendor for the full cost thereof.Any exceptions to the foregoing must be approved by the Chief Financial Officerof the Company or his designee.
Samples of books, music, movies and other items sold or under consideration forsale by the Company shall not be considered gifts and may be accepted fromvendors or potential vendors. Employees may read or otherwise evaluate samplesbut no samples shall be sold, auctioned, or given away without the writtenauthorization of the Chief Financial Officer of the Company or his designee.
Concert Tickets provided by vendors may be used for the sole purpose ofevaluating product for sale. Store employees receiving tickets should notifytheir manager who then must notify the District Manager of Regional Manager.Under no circumstances shall tickets be sold.
The same general prohibition and limited exceptions noted above also apply toGIVING OR OFFERING gifts, meals, entertainment, etc., on behalf of the Companyto other companies or persons not employed by the Company. Under nocircumstances should an employee give gifts, meals, or entertainment to anyUnited States or foreign governmental personnel, to any persons employed by theUnited States or foreign political parties, to any candidates for politicaloffice, or to any intermediaries (for example, commission agents, salesrepresentatives, or consultants) who might pass on any gifts to these persons.Giving gratuities to such persons may violate United States and/or foreignstatutes.
 C. CONFIDENTIAL INFORMATION
All information about the Company’s business and its plans that has not beendisclosed to the public is a valuable asset that belongs to the Company.Employees must never (i) use any confidential information relating to theCompany for any purpose other than the performance of their duties to theCompany, or (ii) disclose any confidential information/trade secrets relatingto the Company to anyone, including relatives, friends, or other persons orcompanies, without written advance authorization by the Legal Staff of theCompany.
 D. INTELLECTUAL PROPERTY
In the performance of assigned duties, employees may develop ideas, inventions,software, or create original works of authorship relating to the business ofthe Company (herein known as “Intellectual Property”). In consideration of thecompensation paid to each employee by the Company, it is the understandingbetween the Company and each employee that the Company shall have certainrights in the Intellectual Property. Where the subject matter of suchIntellectual Property (i) results from or is suggested by any activity whichthe employee may do for or on behalf of the Company, (ii) is created, inventedor developed on the Company time or using the Company’s facilities, or (iii) isrelated to the Company’s business, the employee shall assign all rights in suchIntellectual Property to the Company.
At the request of the Company, either during employment or after terminationthereof, each employee shall execute or join in executing all papers ordocuments required for filing of a patent or copyright applications in theUnited States and such foreign countries as the Company may elect for theIntellectual Property. Each employee shall assign such patent and copyrightapplications to the Company or its nominee and shall provide the Company andits agents or
 

 

attorneys with all reasonable assistance in the preparation and prosecution ofsuch applications, including drawings, specifications and the like, all at theexpense of the Company. Each employee shall do all things that may be necessaryto establish, protect, and maintain the rights of the Company or its nominee inthe Intellectual Property in accordance with the intent of this Agreement.
 E. FINANCIAL STATEMENTS
The integrity of the Company’s financial reporting is of the utmost importance.Accounting and financial reporting practices must be fair and proper, inaccordance with generally accepted accounting principles (GAAP), and usingmanagement’s best judgments where necessary.
The Company does not condone practices that might lead to fraudulent financialreporting. While difficult to give an all-inclusive definition of fraudulentfinancial reporting, it is in general any intentional or reckless conduct,whether by act or omission, that results in materially misleading financialstatements. Clear, open and frequent communication among all management levelsand personnel on all significant financial and operating matters willsubstantially reduce the risk of problems in the accounting and financialreporting areas as well as help achieve operating goals. All managementemployees are expected to be aware of these risks and to communicateaccordingly.
 F. SECURITIES LAWS AND INSIDER TRADING
It is both illegal and against this Policy for any individual to profit fromundisclosed information relating to the Company or any Company with which we dobusiness. If an employee is in possession of material inside information thatthe Company has not yet disclosed to the public, he/she may not purchase orsell any of the securities of the Company or “tip” others to trade in ourstock. Material inside information is defined as facts that have not beendisclosed to the public that could influence a reasonabl investor’s decisionto buy or sell a company’s stock or other securities. Also, if an employee hasinside or unpublished knowledge about any of the Company’s suppliers, customersor any other company that we do business with, he/she may not purchase or sellsecurities of those companies or tip others to do so. Examples of insidematerial information include, but are not limited to, a stock split, a changein the dividend policy, potential mergers, acquisitions or other businessopportunities, or financial performance different than market expectations.
The securities laws have been amended to provide for penalties not only forthose who engage in insider trading, but also for those controlling persons whofail to take appropriate actions when they either knew or should have knownthat those people within their control were violating these rules. Therefore,it is essential that employees be alert to those situations where others withinthe Company (particularly over those of whom an employee has some supervisoryauthority) may not be observing the rules of insider trading.
 G. ANTITRUST LAWS
The United States antitrust laws prohibit agreements or actions in “restraintof trade”, defined as restrictive practices that may reduce or hindercompetition. These laws require that decisions be made and activitiesundertaken without any agreement or coordination with competitors. Among thoseagreements and activities constituting clear violations are agreements andunderstandings to fix or control prices and other terms of sale; to allocateproducts, territories or markets (including store locations); or to limit theproduction or sale of products. Accordingly,
 

 

employees must take great care to avoid any communications with the Company’scompetitors with respect to these or other business matters.
The antitrust laws also regulate conduct with suppliers and others. For example,resale price agreements are prohibited and the Robinson-Patman Act prohibitsprice discrimination by suppliers and knowingly inducing or receivingdiscriminatory pricing by buyers. Individuals involved in pricing discussionswith suppliers must be knowledgeable with respect to the price discriminationrules and must consult with the Legal Staff as issues arise.
Because of the complexity of the antitrust laws, it is imperative that advicebe sought from the Legal Staff regarding this subject.
 H. POLITICAL ACTIVITY
The Company will not financially support or otherwise endorse or aid anypolitical party or candidate in any country. This includes indirect support orendorsement, such as the purchase of advertising space or the provision ofgoods, services, or facilities.
If employees engage in personal political activity on their own time, they musttake care not to imply that they are acting on behalf of the Company.
 I. PROTECTION AND PROPER USE OF PERSONNEL INFORMATION AND OTHERCOMPANY ASSETS
Employees shall protect the Company’s assets and ensure their proper andefficient use. All assets of the Company shall be used only for legitimatebusiness purposes.
An employee may not collect or maintain in the Company’s files informationabout employees that is not directly related to their employment. Nor may anemployee disclose any information about another active employee to personsoutside the Company. Refer all inquiries relating to verifying the fact ofemployment or providing information that must be disclosed by law to theappropriate HR representative. If an employee is unclear about what informationmust be disclosed by law, he/she must consult with the Legal Staff or theappropriate Human Resource representative.
Inappropriate access or modifications to, or unauthorized destruction of,accounting or other business records is prohibited. These prohibitions apply toall business records and data, regardless of whether such data and records arein written form or electronically stored.
 J. DISCRIMINATION AND SEXUAL HARASSMENT
The Company is committed to a work environment free of any form of sexualharassment. The Company will not tolerate any conduct which constitutes sexualharassment, whether engaged in by supervisory or non-supervisory personnel. TheEqual Employment Opportunity Commission (EEOC) defines sexual harassment asconsisting of unwelcome sexual advances, requests for sexual favors, orphysical acts of a sexual or gender based nature where:
 

 

 • Submission to such conduct is made either explicitly orimplicitly a term or condition of employment.  • An employment decision is based on an individual’s acceptance orrejection of such conduct.  • Such conduct interferes with an individual’s work performance orcreates a hostile or offensive work environment.
One may not in his/her capacity as an employee of the Company discriminateagainst any individual or group on the basis of age, race, color, sex, sexualorientation, citizenship, religion, national origin, disability or any othercharacteristic protected by federal, state, and local laws. This policy appliesto all elements of the employee or perspective employee’s work life, including,but not limited to, all decisions with respect to hiring, consideration forpromotion or advancement and participation in educational and trainingprograms.
Please refer to the Employee Handbook for additional information.
 K. ENVIRONMENT
The Company is committed to doing all that it can to assist in minimizing thedegradation of our natural environment. Accordingly, employees should alwaystake care in disposing of any waste materials or releasing any discharges intothe air or water and comply with all applicable regulations and proceduresrequired by law and by Company policy. If an employee is unclear about what isrequired, he/she must not dispose of any material or release any dischargesuntil he/she has determined what procedures apply.
 L. CONTESTS
Company employees may not enter or profit directly or indirectly from any instore contests run by vendors or by Borders Group, Inc., unless the contest isexpressly offered to employees. Employees may not enter a contest indirectlythrough a spouse, domestic partner, friend or relative as defined in theConflict of Interest section.
 M. OBSERVANCE OF AUTHORITY LIMITS
The Company has established an approval matrix that sets forth specificauthority limits for the most common transactions conducted by officers andemployees of the Company. Employees are required to observe these limits andany action that they take beyond the limits of their authority will be deemedto be a violation of this Policy. If an employee has questions concerningwhether or not he/she is authorized to take a particular action, he/she shouldcontact the Director of Internal Audit. Approval matrixes are available onStore Documentation and also the Borders Group, Inc. Homepage.
 N. NO CONTRACTUAL RIGHTS
All statements contained in this Policy are intended to reflect generalpolicies, principles, and procedures, do not represent contractual commitmentson the part of the Company and may be changed at any time without notice.Without limiting the generality of the foregoing, nothing in this Policy shallbe construed to alter the “at will” nature of employment relationships or toprovide any contractual or other rights to any employees or third parties.
 

 

III. DISSEMINATION AND ENFORCEMENT OF THE POLICY
 A. DISSEMINATION
A copy of this Policy is to be provided to all employees of the Company. TheCorporate HR department will restate the policy once per year to serve as arenewal and will remind employees of their responsibilities under this Policy.
 B. COMPLIANCE CERTIFICATION
All employees of the Company at the director level and above will be asked tocertify this policy upon receipt. By certifying, the employee acknowledges thathe/she has read and understands the conditions of the policy. Employeecertifies the Business Conduct Policy by signing and submitting the EmployeeHandbook Acknowledgement form (back cover of the handbook). In addition, annualcertifications shall be required of employees at the level of director andabove.
 C. PENALTIES FOR VIOLATIONS OF THE POLICY
It is each employee’s responsibility to resolve with the Legal Staff of theCompany any potential conflicts with this Policy. Violations of this Policy,even in the first instance, may result in disciplinary action up to andincluding dismissal of employment from the Company. In addition, violations oflaws applicable to the Company could result in substantial fines to the Companyand individual violators and, in certain instances, imprisonment. No improperor illegal behavior will be justified by a claim that it was ordered by someonein higher authority. No one, regardless of his or her position, is authorizedto direct an employee to commit a wrongful act.
 D. REPORTING VIOLATIONS OF THE POLICY
Any employee of the Company who observes or otherwise becomes aware of anyviolation of the Policy shall report the violation to the General Counsel orthe Director of Internal Audit of the Company. If the reporting individual isnot satisfied with the response that he or she receives from the GeneralCounsel or the Director of Internal Audit, he or she may report the matter toany member of the Audit Committee of the Board of Directors.
 C. WAIVERS OF THE POLICY
Any waiver of this Policy for executive officers or directors of the Companymust be made only by the Nominating and Corporate Governing Committee of theBoard of Directors of the Company and must be promptly disclosed to theshareholders of the Company. Only the Chief Financial Officer of the Companymay waive the Policy for other employees.