##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
    Washington, D.C. 20549
    FORM 10-K
   (MARK ONE)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    January 31, 2009ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to          .   Commission File Number 1-13740
    BORDERS GROUP, INC.
 (Exact name of registrant as
    specified in its charter)
  Michigan(State or other jurisdiction of
    incorporation or organization)

38-3294588(I.R.S. Employer
    Identification No.)100 Phoenix Drive, Ann Arbor, Michigan(Address of principal executive
    offices)

48108(Zip code)   (734) 477-1100(Registrants telephone
    number, including area code)
    Title of Class

Name of Exchange on which registeredCommon Stock

New York Stock Exchange   Securities
    registered pursuant to Section 12(g) of the act:
    None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
 Large accelerated
    filer o

Accelerated
    filer þ

Non-accelerated
    filer o
    (Do not check if a smaller reporting company)

Smaller reporting
    company o   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




---



##### 





BORDERS
    GROUP, INC. INDEX
  
  PagePART IItem 1.

Business


1Item 1A.

Risk Factors


8Item 1B.

Unresolved Staff Comments


13Item 2.

Properties


14Item 3.

Legal Proceedings


14Item 4.

Submission of Matters to a Vote of Security
    Holders


15PART IIItem 5.

Market for the Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


16Item 6.

Selected Financial Data


19Item 7.

Managements Discussion and Analysis of
    Financial Condition and Results of Operations


20Item 7A.

Quantitative and Qualitative Disclosures About
    Market Risk


44Item 8.

Financial Statements and Supplementary Data


45Item 9.

Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


78Item 9A.

Controls and Procedures


78Item 9B.

Other Information


80PART IIIItem 10.

Directors, Executive Officers and Corporate
    Governance


80Item 11.

Executive Compensation


80Item 12.

Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


80Item 13.

Certain Relationships and Related Transactions
    and Director Independence


80Item 14.

Principal Accountant Fees and Services


80PART IVItem 15.

Exhibits, Financial Statement Schedules


81Signatures


87EX-10.52EX-10.60EX-10.61EX-10.62EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2




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##### Table of Contents



PART I  Item 1.
    Business  Forward-Looking
    Statements
        General
    e-commerce www.Borders.com
    Business
    Strategy
   1




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##### Table of Contents



Segment
    Information
    Borders
    Superstores
     2




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##### Table of Contents



3




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##### Table of Contents



Number ofState

StoresAlaska


1Arizona


11Arkansas


1California


82Colorado


14Connecticut


11Delaware


2District of Columbia


3Florida


26Georgia


15Hawaii


8Idaho


2Illinois


36Indiana


13Iowa


4Kansas


6Kentucky


5Louisiana


3Maine


3Maryland


11Massachusetts


16Michigan


19Minnesota


7Mississippi


1Missouri


11Montana


3Nebraska


3Nevada


7New Hampshire


4New Jersey


15New Mexico


5New York


28North Carolina


10Ohio


19Oklahoma


4Oregon


7Pennsylvania


25Rhode Island


2South Dakota


1Tennessee


7Texas


24Utah


3Vermont


1Virginia


15Washington


13West Virginia


2Wisconsin


6Total


515   Waldenbooks
    Specialty Retail Stores
   4




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##### Table of Contents



Number ofState

StoresAlabama


1Alaska


2Arizona


4Arkansas


2California


21Colorado


2Connecticut


5Delaware


2District of Columbia


2Florida


23Georgia


8Hawaii


4Idaho


1Illinois


16Indiana


9Iowa


3Kansas


4Kentucky


7Louisiana


2Maine


1Maryland


13Massachusetts


12Michigan


21Minnesota


2Mississippi


2Missouri


5Montana


2Nebraska


4Nevada


3New Hampshire


5New Jersey


14New Mexico


2New York


18North Carolina


14North Dakota


1Ohio


25Oklahoma


8Oregon


6Pennsylvania


41Rhode Island


2South Carolina


6South Dakota


2Tennessee


3Texas


21Utah


1Vermont


3Virginia


12Washington


5West Virginia


6Wisconsin


7Wyoming


1Total


386   International
    Stores
   5




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##### Table of Contents



Internet
  e-commerce e-commerce e-commerce
  Distribution
  store-by-store
      Approx SquareLocality, Country

Number


FootageBedfordshire, United Kingdom (services Paperchase)


1



67,000California, United States


1



414,000Pennsylvania, United States


1



600,000Puerto Rico


1



10,500Tennessee, United States


3



926,000Total


7



2,017,500     Employees
   6




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##### Table of Contents



Trademarks
    and Service Marks
  ® ® ® ® ® ® ® ® ® ®
  Executive
    Officers of the Company
    Name

Age

PositionRon Marshall


54


President and Chief Executive OfficerAnne M. Kubek


42


Executive Vice President, Merchandising and MarketingMark R. Bierley


42


Executive Vice President, Chief Financial OfficerThomas D. Carney


62


Executive Vice President, General Counsel and SecretaryDaniel T. Smith


44


Executive Vice President, Chief Administrative Officer            7




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##### Table of Contents



Additional
    Information
  http://www.borders.com/about Form 10-K, Form 10-Q, Form 8-K Form 8-K.
  48108-2202.
  Form 10-K
  Item 1A.
    Risk
    Factors  Risk
    Factors
  Form 10-K
  Consumer
    Spending Patterns
    Economic
    Conditions
   8




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##### Table of Contents



Competitive
    Environment
          Availability
    of Capital Resources
       9




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##### Table of Contents



Planned
    Strategy for Borders Superstores
        Planned
    Strategy for the Waldenbooks Specialty Retail
    Business
     10




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##### Table of Contents



Planned
    Strategy for International Business
      Planned
    Strategy for
    E-commerce
    Business
  e-commerce e-commerce e-commerce e-commerce e-commerce
  Business
    Strategy
    Seasonality
    Foreign
    Exchange Risk
    Guarantees
    of Disposed Foreign Businesses
   11




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##### Table of Contents



New
    York Stock Exchange Listing
  trading-day
      Potential
    for Uninsured Losses
    Litigation
    and Other Claims
   12




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##### Table of Contents



Information
    Technology Systems Risks
        Reliance
    on Key Personnel
    Other
    Risks
    Item 1B.
    Unresolved
    Staff Comments   13




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##### Table of Contents



Item 2.
    Properties    Number ofLease Terms to
    Expire During 12 Months Ending on or About January 31

Stores2010


112011


262012


82013


172014


202015 and later


433Total


515     Number ofLease Terms to
    Expire During 12 Months Ending on or About January 31

Stores2010


2402011


792012


322013


142014


92015 and later


12Total


386       Item 3.
    Legal
    Proceedings   14




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##### Table of Contents



e-commerce.
      Item 4.
    Submission
    of Matters to a Vote of Security Holders   15




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##### Table of Contents



PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities    DividendsHigh


Low


DeclaredFiscal Quarter 2008First Quarter

$
11.23


$
5.07


$
Second Quarter

$
7.30


$
4.12


$
Third Quarter

$
7.80


$
2.44


$
Fourth Quarter

$
3.39


$
0.35


$
Fiscal Quarter 2007First Quarter

$
22.34


$
19.52


$
0.11Second Quarter

$
23.41


$
15.02


$
0.11Third Quarter

$
16.32


$
12.28


$
0.11Fourth Quarter

$
13.88


$
9.21


$
0.11     trading-day
         16




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##### Table of Contents



Stock
    Performance Graph
    COMPARISON OF CUMULATIVE FIVE YEAR TOTAL RETURN
  
 17




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##### Table of Contents



Equity
    Securities Authorized for Issuance Under Equity Compensation
    Plans
    Number ofNumber of


Weighted-


SharesAwards


Average


AvailablePlan Category

Outstanding(2)


Exercise
    Price(3)


for IssuancePlans approved by stockholders:2004 Long-Term Incentive
    Plan(1)


2,567


$
12.53



4,851   (1)
    
    The 2004 Long-Term Incentive Plan (the 2004 Plan)
    was approved by shareholders in May 2004, and replaced all prior
    equity compensation plans (the Prior Plans). At
    January 31, 2009 there were approximately 0.5 million
    stock options outstanding under the Prior Plans with a
    weighted-average exercise price of $16.92, which, if forfeited
    or cancelled, become available for issuance under the 2004 Plan.
    At January 31, 2009, there were 1.8 million stock
    options outstanding related to the employment inducement award
    granted to Mr. Marshall with an exercise price of $0.57 per
    share, representing the fair market value on the date of grant,
    which, if forfeited or cancelled, also become available for
    issuance under the 2004 Plan.(2)
    
    Number of awards outstanding as of January 31, 2009
    includes approximately 317,131 restricted share units and
    approximately 2,249,769 stock options.(3)
    
    Reflects the weighted-average exercise price of stock options
    outstanding as of January 31, 2009.  Purchases
    of Equity Securities
   18




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##### Table of Contents



Item 6.
    Selected
    Financial Data  SELECTED
    CONSOLIDATED FINANCIAL AND OPERATING DATA
    Fiscal Year EndedJan. 31,


Feb. 2,


Feb. 3,


Jan. 28,


Jan. 23,(dollars in millions except per share data)

2009


2008


2007(1)


2006(1)


2005Statement of Operations DataBorders Superstores sales

$
2,625.4


$
2,847.2


$
2,750.0


$
2,709.5


$
2,588.9Waldenbooks Specialty Retail sales


480.0



562.8



663.9



744.8



779.9International
    sales(2)


136.7



145.1



118.4



99.9



63.9Total
    sales(2)

$
3,242.1


$
3,555.1


$
3,532.3


$
3,554.2


$
3,432.7Operating income
    (loss)(2)

$
(149.2
)

$
4.1


$
5.2


$
172.0


$
195.5Income (loss) from continuing
    operations(2)

$
(184.7
)

$
(19.9
)

$
(21.9
)

$
96.7


$
112.9Income (loss) from operations of discontinued operations


(1.7
)


(8.7
)


(129.4
)


4.3



19.0Loss from disposal of discontinued operations


(0.3
)


(128.8
)










Income (loss) from discontinued operations


(2.0
)


(137.5
)


(129.4
)


4.3



19.0Net income (loss)

$
(186.7
)

$
(157.4
)

$
(151.3
)

$
101.0


$
131.9Per Share DataDiluted (basic) earnings (loss) from continuing operations per
    common
    share(2)


(3.07
)


(0.34
)


(0.35
)


1.36



1.45Diluted (basic) earnings (loss) from discontinued operations per
    common share


(0.03
)


(2.34
)


(2.09
)


0.06



0.24Diluted (basic) earnings (loss) per common share

$
(3.10
)

$
(2.68
)

$
(2.44
)

$
1.42


$
1.69Cash dividends declared per common share

$



$
0.44


$
0.41


$
0.37


$
0.33Balance Sheet DataWorking capital  continuing
    operations(2)

$
77.5


$
(6.3
)

$
69.0


$
254.9


$
486.2Working capital

$
77.5


$
38.2


$
127.7


$
326.7


$
569.4Total assets  continuing
    operations(2)

$
1,609.0


$
2,147.1


$
2,234.9


$
2,146.8



2,220.6Total assets

$
1,609.0


$
2,302.7


$
2,613.4


$
2,572.2


$
2,628.8Short-term borrowings  continuing
    operations(2)

$
329.0


$
548.4


$
501.4


$
183.0


$
138.7Short-term borrowings

$
329.0


$
548.4


$
542.0


$
206.4


$
141.0Long-term debt, including current portion

$
6.6


$
5.6


$
5.4


$
5.6


$
55.9Long-term capital lease obligations, including current portion

$
2.0


$



$
0.4


$
0.5


$
0.1Stockholders equity

$
262.6


$
476.9


$
642.0


$
927.8


$
1,088.9   (1)
    
    Our 2006 and 2005 fiscal years
    consisted of 53 weeks.(2)
    
    Excludes the results of
    discontinued operations (Borders Ireland Limited, Books etc.,
    U.K. Superstores, Australia, New Zealand, and Singapore). 19




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##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  General
    e-commerce www.Borders.com
    Business
    Strategy
            Grow comparable
    store sales and profitability in Borders
    Superstores. We
    are focused on improving key retailing practices at our
    superstores in order to become the book store for the serious
    reader. This includes increasing effectiveness of merchandise
    presentation, improving assortment planning, expense
 20




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##### Table of Contents



Right-size the
    Waldenbooks Specialty Retail
    business. The
    Waldenbooks Specialty Retail segment has generally experienced
    negative comparable store sales percentages for the past several
    years, primarily due to an overall decrease in mall traffic,
    sluggish bestseller sales and increased competition from all
    channels. Although we expect that comparable store sales
    percentages will continue to decrease over the next few years,
    we believe that the Company has the potential to operate
    mall-based stores profitably. An important element of this
    strategy is the signing of short-term lease agreements for
    desirable locations, which enables us to negotiate rents that
    are responsive to the then-current sales environment. We will,
    however, continue to close stores that do not meet our
    profitability goals, a process which could result in additional
    future asset impairments and store closure costs. We have
    recently increased the store profitability targets required for
    store lease renewals, which could also lead to increased numbers
    of asset impairments and store closures.
    Leverage
    innovation, technology and strategic alliances to differentiate
    our business. We
    will continue to drive sales to our recently-launched Web site,
    Borders.com, and continue our efforts to integrate the site with
    our physical stores. Borders.com launched in May 2008, and
    in-store
    e-commerce
    kiosks were introduced into Borders stores during the fourth
    quarter of 2008. This strategy creates a distinctive,
    cross-channel experience for customers, allows us to engage in
    key partnerships that are expected to build incremental revenues
    and margins, and enables the connection of
    e-commerce
    sales to the Borders Rewards loyalty program.
       21




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##### Table of Contents



Other
    Information
      e-commerce
      Discontinued
    Operations
     22




---



##### Table of Contents



23




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##### Table of Contents



Results
    of Operations
    Jan. 31,


Feb. 2,


Feb. 3,2009


2008


2007Sales


100.0
%


100.0
%


100.0
%Other revenue


1.0



1.2



1.1Total revenue


101.0



101.2



101.1Cost of merchandise sold (includes occupancy)


76.7



75.1



74.1Gross margin


24.3



26.1



27.0Selling, general and administrative expenses


25.9



25.5



25.0Pre-opening expense






0.1



0.2Goodwill impairment


1.2







Asset impairments and other writedowns


1.8



0.4



1.7Operating income (loss)


(4.6
)


0.1



0.1Interest expense


0.1



1.2



0.8Loss before income tax


(4.7
)


(1.1
)


(0.7
)Income tax expense (benefit)


0.9



(0.5
)


(0.1
)Loss from continuing operations


(5.6
)%


(0.6
)%


(0.6
)%   Consolidated
    Results  Comparison of 2008 to 2007
  Sales
         24




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##### Table of Contents



Other
    revenue
      Gross
    margin
      Selling,
    general and administrative expenses
   25




---



##### Table of Contents



Goodwill
    Impairment
    Asset
    Impairments and Other Writedowns
          Interest
    expense
   26




---



##### Table of Contents



Taxes
      Loss
    from continuing operations
    Consolidated
    Results  Comparison of 2007 to 2006
  Sales
          Other
    Revenue
   27




---



##### Table of Contents



Gross
    Margin
      Selling,
    General and Administrative Expenses
     28




---



##### Table of Contents



Asset
    Impairments and Other Writedowns
      Interest
    Expense
    Taxes
    Loss
    from Continuing Operations
    Borders
    Superstores
  (dollar amounts in
    millions)

2008


2007


2006Sales

$
2,625.4


$
2,847.2


$
2,750.0Other revenue

$
26.5


$
35.3


$
31.6Operating income (loss)

$
(100.9
)

$
30.6


$
92.4Operating income (loss) as % of sales


(3.8
)%


1.1
%


3.4
%Store openings


12



18



31Store closings


6



8



5Store count


515



509



499   Borders
    Superstores  Comparison of 2008 to 2007
  Sales
   29




---



##### Table of Contents



Other
    revenue
    Gross
    margin
      Selling,
    general and administrative expenses
      Goodwill
    Impairment
    Asset
    Impairments and Other Writedowns
   30




---



##### Table of Contents



Operating
    loss
    Borders
    Superstores  Comparison of 2007 to 2006
  Sales
    Other
    Revenue
    Gross
    Margin
      Selling,
    General and Administrative Expenses
     31




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##### Table of Contents



Asset
    Impairments and Other Writedowns
      Operating
    Income
    Waldenbooks
    Specialty Retail
  (dollar amounts in
    millions)

2008


2007


2006Sales

$
480.0


$
562.8


$
663.9Other revenue

$
1.7


$
3.8


$
4.3Operating loss

$
(27.5
)

$
(21.4
)

$
(78.0
)Operating loss as % of sales


(5.7
)%


(3.8
)%


(11.7
)%Store openings


8



1



10Store closings


112



75



124Store count


386



490



564   Waldenbooks
    Specialty Retail  Comparison of 2008 to
    2007
  Sales
    Other
    revenue
    Gross
    margin
   32




---



##### Table of Contents



Selling,
    general and administrative expenses
      Asset
    Impairments and Other Writedowns
      Operating
    loss
    Waldenbooks
    Specialty Retail  Comparison of 2007 to
    2006
  Sales
    Other
    Revenue
    Gross
    Margin
   33




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##### Table of Contents



Selling,
    General and Administrative Expenses
      Asset
    Impairments and Other Writedowns
      Operating
    Loss
    International
  (dollar amounts in
    millions)

2008


2007


2006Operating income

$
3.7


$
8.0


$
6.1   International 
    Comparison of 2008 to 2007
  Operating
    Income
    International 
    Comparison of 2007 to 2006
  Operating
    Income
   34




---



##### Table of Contents



Corporate
  (dollar amounts in
    millions)

2008


2007


2006Operating loss

$
(24.5
)

$
(13.1
)

$
(15.3
)     Corporate 
    Comparison of 2008 to 2007
    Corporate 
    Comparison of 2007 to 2006
    Costs
    Associated with Turnaround Effort
      (dollar amounts in
    millions)

2008Consulting and legal fees

$
11.2Severance costs


16.4Retention costs


2.3Music inventory markdowns


6.5Paperchase strategic alternative costs


0.1Total

$
36.5     Liquidity
    and Capital Resources
  Cash
    Flows
  Operating
    Activities
   35




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##### Table of Contents



Investing
    Activities
  e-commerce
  Financing
    Activities
    Capital
    Expenditures
   36




---



##### Table of Contents



Dividends
    Sources
    of Liquidity
             37




---



##### Table of Contents



Warrants
      Off-Balance
    Sheet Arrangements
       38




---



##### Table of Contents



Significant
    Contractual Obligations
    Fiscal Year2014 and(dollars in millions)

2009


2010-2011


2012-2013


Thereafter


TotalCredit Agreement borrowings

$
286.7


$



$



$



$
286.7Term Loan borrowings(1)


42.5















42.5Operating lease obligations


310.9



562.0



518.6



1,248.7



2,640.2Capital lease obligations


0.7



1.3











2.0Debt of consolidated VIEs


0.2



0.4



0.6



3.8



5.0Letters of credit


32.9















32.9Other borrowings


0.3















0.3Total

$
674.2


$
563.7


$
519.2


$
1,252.5


$
3,009.6     (1)
    
    Subsequent to year-end, the maturity date of the term loan was
    extended to April 1, 2010.     39




---



##### Table of Contents



Seasonality
    Fiscal 2008(dollars in millions)

Q1


Q2


Q3


Q4Sales

$
729.5


$
749.2


$
682.1


$
1,081.3Operating income (loss)


(44.9
)


(23.1
)


(108.2
)


27.0% of full year:Sales


22.5
%


23.1
%


21.0
%


33.4
%   Fiscal 2007(dollars in millions)

Q1


Q2


Q3


Q4Sales

$
751.4


$
804.6


$
757.8


$
1,241.3Operating income (loss)


(39.4
)


(20.7
)


(53.2
)


117.4% of full year:Sales


21.1
%


22.6
%


21.3
%


35.0
%   Critical
    Accounting Policies and Estimates
    Long-Lived
    Assets
     40




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##### Table of Contents



Inventory
    Reserves
    location-by-location
    Costs
    Associated With Exit Activities
    Self-Insured
    Liabilities
    Liabilities
    For Lease Guarantees of Disposed Foreign
    Businesses
   41




---



##### Table of Contents



Gift
    Cards
    Income
    Taxes
           42




---



##### Table of Contents



New
    Accounting Guidance
  No. 157-2, No. 157-2), No. 157-2
         43




---



##### Table of Contents



Related
    Party Transactions
    Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk    Interest
    Rate Risk
      Foreign
    Currency Exchange Risk
  and/or
 44




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  INDEX TO
    FINANCIAL STATEMENTS
  PageConsolidated Statements of Operations for the
    fiscal years ended January 31, 2009, February 2, 2008,
    and February 3, 2007


46Consolidated Balance Sheets as of
    January 31, 2009 and February 2, 2008


47Consolidated Statements of Cash Flows for the
    fiscal years ended January 31, 2009, February 2, 2008,
    and February 3, 2007


48Consolidated Statements of Stockholders
    Equity for the fiscal years ended January 31, 2009,
    February 2, 2008, and February 3, 2007


49Notes to Consolidated Financial Statements


50Report of Independent Registered Public
    Accounting Firm


77   45




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##### Table of Contents



CONSOLIDATED
    STATEMENTS OF OPERATIONS
    (dollars in millions except per share data)  Jan. 31,


Feb. 2,


Feb. 3,2009


2008


2007Sales

$
3,242.1


$
3,555.1


$
3,532.3Other revenue


33.3



42.3



37.1Total revenue

$
3,275.4


$
3,597.4


$
3,569.4Cost of merchandise sold (includes occupancy)


2,484.8



2,668.3



2,615.7Gross margin


790.6



929.1



953.7Selling, general and administrative expenses


839.6



907.0



879.8Pre-opening expense


2.8



5.0



8.1Goodwill impairment


40.3







Asset impairments and other writedowns


57.1



13.0



60.6Operating income (loss)


(149.2
)


4.1



5.2Interest expense, net


5.3



43.1



29.9Loss before income tax


(154.5
)


(39.0
)


(24.7
)Income tax provision (benefit)


30.2



(19.1
)


(2.8
)Loss from continuing operations

$
(184.7
)

$
(19.9
)

$
(21.9
)Loss from operations of discontinued operations (net of income
    tax benefit of $0.9, $2.9 and $15.2)


(1.7
)


(8.7
)


(129.4
)Loss from disposal of discontinued operations (net of income tax
    benefit of $3.1, $7.6 and $0.0)


(0.3
)


(128.8
)


Loss from discontinued operations (net of tax)


(2.0
)


(137.5
)


(129.4
)Net loss

$
(186.7
)

$
(157.4
)

$
(151.3
)Loss per common share data (Note 2)Basic:Loss from continuing operations per common share

$
(3.07
)

$
(0.34
)

$
(0.35
)Loss from discontinued operations per common share

$
(0.03
)

$
(2.34
)

$
(2.09
)Net loss per common share

$
(3.10
)

$
(2.68
)

$
(2.44
)Weighted-average common shares outstanding


60.2



58.7



61.9    46




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##### Table of Contents



CONSOLIDATED
    BALANCE SHEETS
    (dollars in millions except share amounts)  Fiscal Year EndedJan. 31,


Feb. 2,2009


2008AssetsCurrent assets:Cash and cash equivalents

$
53.6


$
58.5Merchandise inventories


915.2



1,242.0Accounts receivable and other current assets


102.4



103.5Current assets of discontinued operations






102.0Total current assets


1,071.2



1,506.0Property and equipment, net


494.2



592.8Other assets


39.4



64.9Deferred income taxes


4.0



44.9Goodwill


0.2



40.5Noncurrent assets of discontinued operations






53.6Total assets

$
1,609.0


$
2,302.7Liabilities, Minority Interest and Stockholders
    EquityCurrent liabilities:Short-term borrowings and current portion of long-term debt

$
329.8


$
548.6Trade accounts payable


350.0



511.9Accrued payroll and other liabilities


279.8



321.6Taxes, including income taxes


30.1



18.3Deferred income taxes


4.0



9.9Current liabilities of discontinued operations






57.5Total current liabilities


993.7



1,467.8Long-term debt


6.4



5.4Other long-term liabilities


345.8



325.0Noncurrent liabilities of discontinued operations






25.4Contingencies (Note 8)






Total liabilities


1,345.9



1,823.6Minority interest


0.5



2.2Total liabilities and minority interest


1,346.4



1,825.8Stockholders equity:Common stock, 300,000,000 shares authorized; 59,903,232 and
    58,794,224 shares issued and outstanding at
    January 31, 2009 and February 2, 2008, respectively


186.9



184.0Accumulated other comprehensive income


11.9



42.4Retained earnings


63.8



250.5Total stockholders equity


262.6



476.9Total liabilities, minority interest and stockholders
    equity

$
1,609.0


$
2,302.7    47




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##### Table of Contents



CONSOLIDATED
    STATEMENTS OF CASH FLOWS
    (dollars in millions)  Fiscal Year EndedJan. 31,


Feb. 2,


Feb. 3,2009


2008


2007Cash provided by (used for):Net loss

$
(186.7
)

$
(157.4
)

$
(151.3
)Net loss from discontinued operations


(2.0
)


(137.5
)


(129.4
)Net loss from continuing operations


(184.7
)


(19.9
)


(21.9
)OperationsAdjustments to reconcile net loss from continuing operations to
    operating cash flows:Depreciation


107.1



103.7



111.2Gain on sale of investments










(5.0
)Loss on disposal of assets


1.9



0.5



2.0Stock-based compensation cost


3.0



5.1



4.1Decrease in minority interest






0.4



0.6Decrease (increase) in deferred income taxes


34.5



(3.7
)


(24.7
)Decrease (increase) in other long-term assets


23.6



0.3



(1.3
)(Decrease) increase in other long-term liabilities


(14.9
)


4.5



8.8Goodwill impairment


40.3







Asset impairments and other writedowns


57.1



13.0



60.6Cash provided by (used for) current assets and current
    liabilities:Decrease (increase) in inventories


321.4



52.2



(23.3
)Decrease (increase) in accounts receivable


10.2



13.3



(7.5
)Decrease (increase) in prepaid expenses


9.8



(1.0
)


10.4Decrease in accounts payable


(160.2
)


(59.2
)


(55.7
)Increase (decrease) in taxes payable


13.7



(36.4
)


(70.0
)(Decrease) increase in accrued payroll and other liabilities


(29.2
)


32.2



50.8Net cash provided by operating activities of continuing
    operations


233.6



105.0



39.1InvestingCapital expenditures


(79.9
)


(131.3
)


(165.6
)Investment in Paperchase


(3.6
)


(0.8
)


Proceeds from the sale of discontinued operations


97.3



20.4



Proceeds from sale of investments










21.6Net cash provided by (used for) investing activities of
    continuing operations


13.8



(111.7
)


(144.0
)FinancingProceeds from the excess tax benefit of options exercised


0.5



0.9



4.3Net (repayment of) funding from credit facility


(261.7
)


43.4



303.4Funding from short-term note financing


42.5







Issuance of long-term debt


1.2



0.4



Repayment of long-term debt


(1.4
)






Repayment of long-term capital lease obligations


(0.4
)


(0.4
)


(0.1
)Issuance of common stock


(0.4
)


3.1



21.9Repurchase of common stock


(0.2
)


(0.6
)


(148.7
)Payment of cash dividends


(6.5
)


(19.4
)


(25.2
)Net cash (used for) provided by financing activities of
    continuing operations


(226.4
)


27.4



155.6Effect of exchange rates on cash and cash equivalents of
    continuing operations


(0.9
)


0.8



(0.6
)Net cash (used for) provided by operating activities of
    discontinued operations


(21.3
)


(0.7
)


16.2Net cash used for investing activities of discontinued operations


(6.5
)


(17.8
)


(41.9
)Net cash (used for) provided by financing activities of
    discontinued operations






(41.9
)


13.9Effect of exchange rates on cash and cash equivalents of
    discontinued operations


2.8



(0.2
)


0.5Net cash used for discontinued operations


(25.0
)


(60.6
)


(11.3
)Net increase (decrease) in cash and cash equivalents


(4.9
)


(39.1
)


38.8Cash and cash equivalents at beginning of year


58.5



97.6



58.8Cash and cash equivalents at end of year

$
53.6


$
58.5


$
97.6Supplemental cash flow disclosures:Interest paid

$
36.3


$
43.8


$
32.8Income taxes (received) paid

$
(34.6
)

$
12.4


$
63.5    48




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##### Table of Contents



CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY
    (dollars in millions except share amounts)  AccumulatedOtherCommon Stock





Comprehensive


RetainedShares


Amount


Income (Loss)


Earnings


TotalBalance at January 28, 2006


64,149,397


$
293.9


$
19.4


$
614.5


$
927.8Net loss














(151.3
)


(151.3
)Foreign currency translation adjustments










9.1







9.1Comprehensive income


















(142.2
)Cash dividends declared ($0.41 per common share)














(25.2
)


(25.2
)Issuance of common stock


1,544,904



26.0











26.0Repurchase and retirement of common stock


(7,217,995
)


(148.7
)










(148.7
)Tax benefit of equity compensation






4.3











4.3Balance at February 3, 2007


58,476,306


$
175.5


$
28.5


$
438.0


$
642.0Net loss














(157.4
)


(157.4
)Discontinued operations currency translation adjustment










8.7







8.7Foreign currency translation adjustments










5.2







5.2Comprehensive income


















(143.5
)Adoption of FIN 48














(4.2
)


(4.2
)Cash dividends declared ($0.41 per common share)














(25.9
)


(25.9
)Issuance of common stock


450,855



8.2











8.2Repurchase and retirement of common stock


(132,937
)


(0.6
)










(0.6
)Tax benefit of equity compensation






0.9











0.9Balance at February 2, 2008


58,794,224


$
184.0


$
42.4


$
250.5


$
476.9Net loss














(186.7
)


(186.7
)Discontinued operations currency translation adjustment










(17.1
)






(17.1
)Foreign currency translation adjustments










(13.4
)






(13.4
)Comprehensive income


















(217.2
)Issuance of common stock


1,787,776



2.6











2.6Repurchase and retirement of common stock


(678,768
)


(0.2
)










(0.2
)Tax benefit of equity compensation






0.5











0.5Balance at January 31, 2009


59,903,232


$
186.9


$
11.9


$
63.8


$
262.6    49




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (dollars in millions except per share data)  NOTE 1 
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  Nature of
    Business: Borders
    Group, Inc., through its subsidiaries, Borders, Inc.
    (Borders), Walden Book Company, Inc.
    (Waldenbooks), and others (individually and
    collectively, we, our or the
    Company), is an operator of book, music and movie
    superstores and mall-based bookstores. At January 31, 2009,
    we operated 518 superstores under the Borders name, including
    515 in the United States and three in Puerto Rico. We also
    operated 386 mall-based and other small format bookstores,
    including stores operated under the Waldenbooks, Borders Express
    and Borders Outlet names, as well as Borders-branded airport
    stores. In addition, we owned and operated United Kingdom-based
    Paperchase Products Limited (Paperchase), a designer
    and retailer of stationery, cards and gifts. As of
    January 31, 2009, Paperchase operated 117 stores, primarily
    in the United Kingdom, and Paperchase shops have been added to
    333 Borders superstores.
  e-commerce
    Principles of
    Consolidation: The
    consolidated financial statements include the accounts of the
    Company and all majority-owned subsidiaries. All significant
    intercompany transactions and balances have been eliminated.
    Use of
    Estimates: The
    preparation of financial statements in conformity with
    accounting principles generally accepted in the United States
    requires management to make estimates and assumptions that
    affect the reported amounts of assets and liabilities and
    disclosure of contingent assets and liabilities at the date of
    the financial statements, as well as the reported amounts of
    revenues and expenses during the reporting period. Actual
    results could differ from those estimates.
  Fiscal
    Year: Our fiscal
    year ends on the Saturday closest to the last day of January.
    Fiscal 2008 consisted of 52 weeks and ended on
    January 31, 2009. Fiscal 2007 consisted of 52 weeks
    and ended February 2, 2008. Fiscal 2006 consisted of
    53 weeks and ended February 3, 2007. References herein
    to years are to our fiscal years.
  Foreign Currency
    and Translation of Foreign
    Subsidiaries: The
    functional currencies of the our foreign operations are the
    respective local currencies. All assets and liabilities of our
    foreign operations are translated into U.S. dollars at
    fiscal period-end exchange rates. Income and expense items are
    translated at average exchange rates prevailing during the year.
    The resulting translation adjustments are recorded as a
    component of stockholders equity and comprehensive income.
    Excluding discontinued operations, foreign currency transaction
    gains/(losses) were $1.5, $(1.9), and $(0.8) in 2008, 2007, and
    2006, respectively.
  Cash and
    Equivalents: Cash
    and equivalents include short-term investments with original
    maturities of 90 days or less. The recorded value of our
    cash and cash equivalents approximates their fair value.
  Inventories: Merchandise
    inventories are valued on a
    first-in,
    first-out (FIFO) basis at the lower of cost or
    market using the retail inventory method. The Company includes
    certain distribution and other expenses in its inventory costs,
    totaling $80.9 and $98.1 as of January 31, 2009, and
    February 2, 2008, respectively.
 50




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
    Property and
    Equipment: Property
    and equipment are recorded at cost, including capitalized
    interest, and depreciated over their estimated useful lives on a
    straight-line basis for financial statement purposes and on
    accelerated methods for income tax purposes. Store properties
    are leased and improvements are amortized over the shorter of
    their estimated useful lives or the initial term of the related
    lease, generally over three to 20 years. Other annual rates
    used in computing depreciation for financial statement purposes
    approximate 3% for buildings and 10% to 33% for other fixtures
    and equipment. Amortization of assets under capital leases is
    included in depreciation expense.
    Goodwill: Pursuant
    to the provisions of Statement of Financial Accounting Standards
    No. 142, Goodwill and Other Intangible Assets
    (FAS 142), our goodwill is tested for
    impairment annually (or more frequently if impairment indicators
    arise). Pursuant to FAS 142, a reporting unit is defined as
    an operating segment or one level below an operating segment (a
    component), for which discrete financial information is
    available and reviewed by management. Our reporting units were
    identified as the operating segments of Borders Superstores and
    Waldenbooks Specialty Retail, and the regional components of the
    International operating segment. The carrying amounts of the net
    assets of the applicable reporting units (including goodwill)
    are compared to the estimated fair values of those reporting
    units. Fair value is principally estimated using a discounted
    cash flow model which depends on, among other factors, estimates
    of future sales and expense trends, liquidity and
    capitalization. The discount rate used approximates the weighted
    average cost of capital of a hypothetical third party buyer.
    Changes in any of the assumptions underlying these estimates may
    result in the future impairment of goodwill.
     51




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
  Leases: All
    leases are reviewed for capital or operating classification at
    their inception under the guidance of Statement of Financial
    Accounting Standards No. 13, Accounting for
    Leases (FAS 13), as amended. We use our
    incremental borrowing rate in the assessment of lease
    classification, and define initial lease term to include the
    construction build-out period, but to exclude lease extension
    period(s). We conduct operations primarily under operating
    leases. For leases that contain rent escalations, we record the
    total rent payable during the lease term, as defined above, on a
    straight-line basis over the term of the lease and record the
    difference between the rents paid and the straight-line rent as
    a deferred rent liability, under Other long-term
    liabilities on our consolidated balance sheets, totaling
    $125.3 and $126.6 as of January 31, 2009 and
    February 2, 2008, respectively.
  Landlord
    Allowances: We
    classify landlord allowances as deferred rent liabilities, under
    Other long-term liabilities on our consolidated
    balance sheets, totaling $106.7 and $114.4 as of
    January 31, 2009 and February 2, 2008, respectively,
    in accordance with the provisions of FASB Technical
    Bulletin No. 88-1,
    Issues Relating to Accounting for Leases (FTB
    88-1),
    and as an operating activity on our consolidated statements of
    cash flows. Also in accordance with the provisions of FTB
    88-1, we
    amortize landlord allowances over the life of the initial lease
    term, and classify this amortization as a reduction of occupancy
    expense, included as a component of Cost of merchandise
    sold (includes occupancy) in our consolidated statements
    of operations.
  Financial
    Instruments: The
    recorded values of our financial instruments, which include
    accounts receivable, accounts payable and indebtedness,
    approximate their fair values.
    Accumulated Other
    Comprehensive Income
    (Loss): Accumulated
    other comprehensive income (loss) includes exchange rate
    fluctuations. Disclosure of comprehensive income (loss) is
    incorporated into the consolidated statements of
    stockholders equity for all years presented. Accumulated
    other comprehensive income (loss) includes $11.9 and $42.4 for
    exchange rate fluctuations as of January 31, 2009 and
    February 2, 2008, respectively.
  Revenue: Revenue
    is recognized, net of estimated returns, at the point of sale
    for all of our segments. Revenue excludes sales taxes and any
    value-added taxes.
    Pre-Opening
    Costs: We expense
    pre-opening costs as incurred in accordance with
    SOP 98-5,
    Reporting on the Costs of
    Start-Up
    Activities.
  Closing
    Costs: Pursuant to
    the provisions of Statement of Financial Accounting Standards
    No. 146, Accounting for Costs Associated with Exit or
    Disposal Activities (FAS 146), the
    Company expenses when incurred all amounts related to the
    discontinuance of operations of stores identified for closure.
    For vacated locations that are under long-term leases, we record
    a liability for the difference between our
 52




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
    Borders
    Rewards: We
    launched the Borders Rewards loyalty program during the first
    quarter of 2006. Membership in Borders Rewards is free, with no
    enrollment costs or annual fees. Five percent of all qualifying
    purchases made by members throughout 2006 were credited to
    personal Holiday Savings accounts, which were eligible for use
    on holiday purchases made from November 15, 2006 through
    January 31, 2007. Beginning April 12, 2007, we
    replaced the programs previous member benefits with
    Borders Bucks. Members can earn Borders Bucks in increments of
    $5 for each cumulative $150 they spend on qualifying purchases
    in a calendar year at Borders and Waldenbooks stores nationwide.
    Borders Bucks expire 30 days after receipt by the member if
    not redeemed. We accrue the full cost of all rewards as they are
    earned by members. This cost is categorized as Cost of
    merchandise sold on the consolidated statements of
    operations for the applicable periods.
  Gift
    Cards: We sell
    gift cards to our customers and record a liability for the face
    value of all certificates issued and unredeemed within the last
    12 months. For certificates older than 12 months, we
    record a liability for a portion of the certificates face
    value based upon historical redemption trends, and record the
    related income as a component of Other revenue in
    our consolidated statements of operations. We have included the
    liability for gift cards as a component of Accrued payroll
    and other liabilities on our consolidated balance sheets,
    totaling $122.9 and $138.6 as of January 31, 2009 and
    February 2, 2008, respectively.
  Advertising
    Costs: We expense
    advertising costs as incurred, and recorded approximately $24.8,
    $32.5 and $33.4 of gross advertising expenses in 2008, 2007 and
    2006, respectively.
    No. 02-16, (EITF 02-16),
      Income
    Taxes: We must
    make certain estimates and judgments in determining income tax
    expense for financial statement purposes. These estimates and
    judgments occur in the calculation of certain tax assets and
    liabilities, which arise from differences in the timing of
    recognition of revenue and expense for tax and financial
    statement purposes.
 53




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
        Equity-Based
    Compensation: We
    account for equity-based compensation in accordance with the
    provisions of Statement of Financial Accounting Standards
    No. 123 (revised 2004), Share-Based Payment
    (FAS 123(R)). We use the modified prospective
    method. Under the modified prospective method, compensation cost
    is recognized for all share-based payments granted after the
    adoption of FAS 123(R) and for all awards granted to
    employees prior to the adoption date of FAS 123(R) that
    remain unvested on the adoption date. We record compensation
    cost for equity-based compensation in the Selling, general
    and administrative line of the consolidated statements of
    operations.
    New Accounting
    Guidance: In
    September 2006, the FASB issued Statement of Financial
    Accounting Standards No. 157, Fair Value
    Measurements (FAS 157), which provides a consistent
    definition of fair value that focuses on exit price and
    prioritizes, within a measurement of fair value, the use of
    market-based inputs over entity-specific inputs. FAS 157
    requires expanded disclosures about fair value measurements and
    establishes a three-level hierarchy for fair value measurements
    based on the observability of inputs to the valuation of an
    asset or liability as of the measurement date. The standard also
    requires that a company consider its own nonperformance risk
    when measuring liabilities carried at fair value, including
    derivatives. In February 2008, the FASB approved FASB Staff
    Position
    No. 157-2,
    Effective Date of FASB Statement No. 157 (FSP
    No. 157-2),
    that permits companies to partially defer the effective date of
    FAS 157 for one year for nonfinancial assets and
    nonfinancial liabilities that are recognized or disclosed at
    fair value in the financial statements on a nonrecurring basis.
    FSP
    No. 157-2
    does not permit companies to defer recognition and disclosure
    requirements for financial assets and financial liabilities or
    for nonfinancial assets and nonfinancial liabilities that are
    remeasured at least annually. FAS 157 is effective for
    financial assets and financial liabilities and for nonfinancial
    assets and nonfinancial liabilities that are remeasured at least
    annually for fiscal years beginning after November 15, 2007
    and interim periods within those fiscal years. The provisions of
    FAS 157 are applied prospectively. We decided to defer
    adoption of FAS 157 for nonfinancial assets and
    nonfinancial liabilities that are recognized or disclosed at
    fair value in the financial statements on a nonrecurring basis.
    The effect of the adoption of FAS 157 on February 3,
    2008 was not material and no adjustment to retained earnings was
    required.
   54




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
            Reclassifications: Certain
    prior year amounts have been reclassified to conform to current
    year presentation.
 55




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
  NOTE 2 
    WEIGHTED-AVERAGE
    SHARES OUTSTANDING    2008


2007


2006Weighted-average common shares outstanding  basic


60,212



58,742



61,940Dilutive effect of employee stock options










Weighted-average common shares outstanding  diluted


60,212



58,742



61,940     NOTE 3 
    GOODWILL IMPAIRMENT
           56




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
    NOTE 4 
    ASSET
    IMPAIRMENTS AND OTHER WRITEDOWNS  Asset
    Impairments: In
    accordance with the provisions of FAS 144, Accounting
    for the Impairment or Disposal of Long-Lived Assets, we
    evaluate the carrying values of long-lived assets whenever
    changes in circumstances indicate the carrying amounts of such
    assets may not be recoverable. When an indicator of impairment
    is present, we evaluate the recoverability of the affected
    assets.
            Store
    Closings: In
    accordance with the provisions of FAS 146, Accounting
    for Costs Associated with Exit or Disposal Activities, we
    expense when incurred all amounts related to the discontinuance
    of operations of stores identified for closure. These expenses
    typically pertain to inventory markdowns, asset impairments,
    occupancy costs, and store payroll and other costs. When we
    close any of our stores, the inventory of the closed stores is
    either returned to vendors or marked down and sold. Stores
    leasehold improvements, furniture, fixtures and equipment are
    generally discarded or sold for nominal amounts.
     57




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
            2008


2007


2006Sales

$
21.9


$
28.0


$
6.9Operating loss


(2.6
)


(3.8
)


(2.0
)     2008


2007


2006Sales

$
64.4


$
37.1


$
76.0Operating loss


(5.7
)


(3.2
)


(4.9
)   NOTE 5 
    COSTS ASSOCIATED WITH TURNAROUND EFFORT
      2008Consulting and legal fees

$
11.2Severance costs


16.4Retention costs


2.3Music inventory markdowns


6.5Paperchase strategic alternative costs


0.1Total

$
36.5  58




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
    NOTE 6 
    PROPERTY
    AND EQUIPMENT    2008


2007Property and equipmentBuildings

$
6.3


$
6.3Leasehold improvements


585.0



586.8Furniture and fixtures


1,008.0



997.8Construction in progress


3.2



9.71,602.5



1,600.6Less  accumulated depreciation and amortization


(1,108.3
)


(1,007.8
)Property and equipment, net

$
494.2


$
592.8   NOTE 7 
    INCOME
    TAXES    2008


2007


2006CurrentFederal

$
(12.4
)

$
(24.5
)

$
3.8State and local


0.3



(3.5
)


2.3Foreign


2.3



5.8



10.2DeferredFederal


31.4



4.5



(11.8
)State and local


8.7



0.9



(7.6
)Foreign


(0.1
)


(2.3
)


0.3Total income tax provision (benefit)

$
30.2


$
(19.1
)

$
(2.8
)  59




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
    2008


2007


2006Federal statutory rate

$
(54.1
)

$
(13.7
)

$
(8.6
)State and local taxes, net of federal tax benefit


0.2



(2.6
)


(0.6
)Foreign income taxes


(1.1
)


(0.1
)


5.3Increase (decrease) in valuation allowance


85.4



(2.7
)


1.0Non-deductible goodwill impairment


14.1







Income from stock warrant remeasure


(14.0
)






Other


(0.3
)






0.1Total income tax provision (benefit)

$
30.2


$
(19.1
)

$
(2.8
)     2008


2007Deferred tax assetsAccruals and other current liabilities

$
17.5


$
8.9Deferred revenue


10.6



13.2Other long-term liabilities


12.5



3.4Deferred compensation


4.1



4.2Deferred rent


54.7



57.8State deferred tax assets


8.6



8.2Foreign deferred tax assets


2.5



6.7Asset impairments and other writedowns


30.7



19.1Capital loss carryforward


22.1



25.8Net operating loss carryforward


30.7



Tax credit carryforwards


0.7



Total deferred tax assets


194.7



147.3Less: valuation allowance


(112.1
)


(32.3
)Net deferred tax assets


82.6



115.0Deferred tax liabilitiesInventory


15.8



18.4Property and equipment


65.0



56.2Foreign deferred tax liabilities


1.8



5.4Total deferred tax liabilities


82.6



80.0Net deferred tax assets

$



$
35.0  60




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
                 61




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
      2008


2007Beginning balance

$
21.2


$
11.2Additions to tax positions related to current year


5.0



15.3Additions to tax positions related to prior years


2.0



0.3Reductions to tax positions related to prior years


(3.7
)


(3.2
)Reductions to tax positions related to settlements with tax
    authorities


(0.2
)


(0.2
)Reductions to tax positions related to lapse of statutory
    limitations


(0.8
)


(2.2
)Ending balance

$
23.5


$
21.2         NOTE 8 
    CONTINGENCIES  Litigation: In
    February 2009, three former employees, individually and on
    behalf of a purported class consisting of all current and former
    employees who work or worked as General Managers in Borders
    stores in the State of California at any time from
    February 19, 2005, through February 19, 2009, have
    filed an action against us in the Superior Court of California
    for the County of Orange. The Complaint alleges, among other
    things, that the individual plaintiffs and the purported class
    members were improperly classified as exempt employees and that
    we violated the California Labor Code by failing to (i) pay
    required overtime and (ii) provide meal periods and rest
    periods, and (iii) that those practices also violate the
    California Business and Professions Code. The relief sought
    includes damages, restitution, penalties, injunctive relief,
    interest, costs, and attorneys fees and such other relief
    as the court deems proper. We have not included any liability in
    our consolidated financial statements in connection with this
    matter. Discovery has not commenced and the Company cannot
    reasonably estimate the potential exposure, if any, at this
    time. The Company intends to vigorously defend this action.
  e-commerce.
 62




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
        NOTE 9 
    DEBT  Credit
    Facility: We have
    a Multicurrency Revolving Credit Agreement, as amended (the
    Credit Agreement), which expires in July 2011. The
    Credit Agreement provides for borrowings of up to $1,125.0
    secured by eligible inventory and accounts receivable and
    related assets. Borrowings under the Credit Agreement are
    limited to a specified percentage of eligible inventories and
    accounts receivable and bear interest at a variable base rate
    plus the applicable increment or LIBOR plus the applicable
    increment at our option. Eligible inventory is based upon the
    approximate liquidation value, as determined from time to time
    by an independent third party. The Credit Agreement
    (i) includes a fixed charge coverage ratio requirement of
    1.1 to 1 that is applicable only if outstanding borrowings under
    the facility exceed 90% of permitted borrowings thereunder,
    (ii) contains covenants that limit, among other things, our
    ability to incur indebtedness, grant liens, make investments,
    consolidate or merge or dispose of assets, (iii) prohibits
    dividend payments and share repurchases that would result in
    borrowings under the facility exceeding 90% of permitted
    borrowings thereunder, and (iv) contains default provisions
    that are typical for this type of financing, including a cross
    default provision relating to other indebtedness of more than
    $25.0 and a default provision should we receive a going concern
    qualification on our annual financial statements from our
    independent registered public accounting firm.
   63




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
      Term
    Loan: On
    April 9, 2008, we completed a financing agreement with
    Pershing Square Capital Management, L.P. (Pershing
    Square) on behalf of certain of its affiliated investment
    funds. Under the terms of the agreement, Pershing Square loaned
    $42.5 to us with an original maturity of January 15, 2009.
    This agreement contains covenants, restrictions, and default
    provisions similar to those contained in the Credit Agreement
    described above. The agreements were subsequently amended twice,
    in December 2008 and February 2009, which extended the maturity
    date of the term loan to April 15, 2009. The agreement was
    most recently amended on March 30, 2009, extending the
    expiration date of the term loan to April 1, 2010. Please
    see Note 18  Subsequent Event for
    further discussion of this amendment.
    Debt of
    Consolidated
    VIEs: We include
    the debt of two variable interest entities (VIEs),
    consolidated pursuant to Financial Accounting Standards Board
    Interpretation No. 46R, Consolidation of Variable
    Interest Entities (FIN 46R), in our
    consolidated balance sheets. Scheduled principal payments of
    this debt as of January 31, 2009 total $0.2 in 2009, $0.2
    in 2010, $0.2 in 2011, $0.3 in 2012, $0.3 in 2013, $3.8 in all
    later years, and in the aggregate, total $5.0. See
    Note 10  Leases for further
    discussion of the Companys consolidation of these VIEs.
      NOTE 10 
    LEASES  Operating
    Leases: We conduct
    operations primarily in leased facilities. Store leases are
    generally for initial terms of three to 20 years.
    Borders leases generally contain multiple three- to
    five-year renewal options which allow Borders the option to
    extend the life of the leases up to 25 years beyond the
    initial noncancellable term. Waldenbooks Specialty Retails
    leases generally do not contain renewal options. Certain leases
    provide for additional rental payments based on a percentage of
    sales in excess of a specified
 64




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
    Lease
    Commitments: Future
    minimum lease payments under operating leases at
    January 31, 2009 total $310.9 in 2009, $289.5 in 2010,
    $272.5 in 2011, $264.8 in 2012, $253.8 in 2013, and $1,248.7 in
    all later years, and in the aggregate, total $2,640.2. Future
    minimum lease payments to be received under subleasing
    arrangements at January 31, 2009 total $5.4 in 2009, $4.8
    in 2010, $4.5 in 2011, $4.3 in 2012, $3.8 in 2013, and $11.7 in
    all later years, and in the aggregate, total $34.5.
  Rental
    Expenses: A
    summary of operating lease minimum and percentage rental
    expense, excluding discontinued operations, follows:
  2008


2007


2006Minimum rentals

$
353.4


$
340.2


$
341.0Percentage rentals


1.7



30.3



23.2Total

$
355.1


$
370.5


$
364.2   Capitalized
    Leases: We, at
    times, account for certain items under capital leases. Scheduled
    principal payments of capitalized leases as of January 31,
    2009 total $0.7 in 2009, $0.8 in 2010, $0.5 in 2011, and in the
    aggregate, total $2.0.
  Consolidated
    VIEs: At
    January 31, 2009, we are the primary beneficiary of two
    variable interest entities (VIEs), due to our
    guarantee of the debt of these entities. These entities were
    established by third-party developers to own, construct, and
    lease two of our store locations. To refinance the debt
    associated with the construction of these stores, we were
    required to guarantee the debt of these two entities. As a
    result, we consolidate these VIEs and have recorded property and
    equipment, net of accumulated depreciation, of $4.7, long-term
    debt (including current portion) of $5.0 and minority interest
    of $0.3 at January 31, 2009, and have recorded property and
    equipment, net of accumulated depreciation, of $4.9, long-term
    debt (including current portion) of $5.2 and minority interest
    of $0.3 at February 2, 2008.
  NOTE 11 
    EMPLOYEE
    BENEFIT PLANS  Employee Savings
    Plan: Employees
    who meet certain requirements as to age and service are eligible
    to participate in our 401(K) Savings Plan. Our expense related
    to this plan was $1.6, $4.0, and $4.2 for 2008, 2007 and 2006,
    respectively, and consisted primarily of a match of certain
    employee contributions. We suspended this match payment as of
    July 1, 2008.
  NOTE 12 
    STOCK-BASED
    COMPENSATION PLANS  2004 Long-Term
    Incentive Plan: We
    maintain the 2004 Long-Term Incentive Plan (the 2004
    Plan), under which we may grant stock-based awards to our
    employees and non-employee directors, including restricted
    shares and share units of our common stock and options to
    purchase our common stock. The 2004 Plan was approved by
    shareholders in May 2004, and replaced all prior stock-based
    benefit plans on a go-forward basis. Three million shares were
    authorized for the grant of stock-based awards under the 2004
    Plan (plus any shares forfeited or cancelled under the 2004 Plan
    or any prior plan). At January 31, 2009, 4.9 million
    shares remained available for grant.
   65




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
        Weighted-


Aggregate


Weighted-Number


Average


Intrinsic


AverageAll Plans

of Shares


Exercise Price


Value


Contract LifeOutstanding at January 28, 2006


6,365



22.98Granted


531



18.59Exercised


1,338



16.03


$
9.7Forfeited


717



24.34Outstanding at February 3, 2007


4,841



24.22Granted


1,781



18.24Exercised


173



16.43


$
0.9Forfeited


2,813



26.79Outstanding at February 2, 2008


3,636



19.69


$
71.6



4.3Granted


2,700



0.96Exercised














Forfeited


1,827



20.36Outstanding at January 31, 2009


4,509



8.20







5.5Balance exercisable atFebruary 3, 2007


4,238



24.93February 2, 2008


1,666



21.71


$
36.2



2.1January 31, 2009


1,187



18.44







2.2       2008


2007


2006Risk-free interest rate


1.9-3.2
%


3.9-5.1
%


4.7-5.1
%Expected life


3-5 years



3-5 years



3-5 yearsExpected volatility


45.0-90.8
%


25.3-29.7
%


25.1-25.5
%Expected dividends






1.8-4.1
%


1.6-2.3
%  66




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
      Outstanding


ExercisableRange of

Number of


Weighted-Average


Weighted-Average


Number of


Weighted-AverageExercise Prices

Shares


Remaining Life


Exercise Price


Shares


Exercise Price$0.00-$3.40


2,500



6.94



0.57







$3.41-$6.81


















$6.82-$10.22


















$10.23-$13.63


65



3.6



12.19



40



12.62$13.64-$17.03


800



4.6



15.20



219



14.62$17.04-$20.44


935



2.7



19.10



744



18.77$20.45-$23.84


141



3.8



21.84



116



21.86$23.85-$27.25


68



4.1



24.60



68



24.60     Number of


Weighted-Average


Weighted-AverageShares


Purchase Price


at Grant Date FMVStock purchased:2004 Plan (or prior plan)2006


75



14.17



17.752007


30



16.82



21.372008


30



4.54



6.15Stock and stock units issued:Time-vested shares issued:2004 Plan2006


114







24.162007


250







18.062008


1,726







5.86Performance-based stock units issued:2004 Plan2006


405







23.592007


46







20.422008


4







5.87  67




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
    Number of


Weighted-AverageAll Plans

Shares


at Grant Date FMVOutstanding at February 2, 2008


307



21.33Granted


1,730



5.86Vested


22



23.94Forfeited


703



7.01Outstanding at January 31, 2009


1,312



8.57   NOTE 13 
    ACQUISITION
    OF REMAINING INTEREST IN PAPERCHASE PRODUCTS, LTD.      NOTE 14 
    SEGMENT
    INFORMATION    2008


2007


2006SalesBorders Superstores

$
2,625.4


$
2,847.2


$
2,750.0Waldenbooks Specialty Retail


480.0



562.8



663.9International


136.7



145.1



118.4Total

$
3,242.1


$
3,555.1


$
3,532.3Depreciation expenseBorders Superstores

$
90.7


$
90.2


$
86.7Waldenbooks Specialty Retail


10.6



7.7



20.9International


5.8



5.8



3.6Total depreciation expense

$
107.1


$
103.7


$
111.2 68




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
  2008


2007


2006Operating income (loss)Borders Superstores

$
(100.9
)

$
30.6


$
92.4Waldenbooks Specialty Retail


(27.5
)


(21.4
)


(78.0
)International


3.7



8.0



6.1Corporate


(24.5
)


(13.1
)


(15.3
)Total operating income (loss)

$
(149.2
)

$
4.1


$
5.2Total assetsBorders Superstores

$
1,312.7


$
1,719.5


$
1,714.6Waldenbooks Specialty Retail


185.9



264.9



322.3International


74.2



86.2



69.6Corporate


36.2



76.5



128.4Total assets of continuing operations

$
1,609.0


$
2,147.1


$
2,234.9Discontinued operations






155.6



378.5Total assets

$
1,609.0


$
2,302.7


$
2,613.4Capital expendituresBorders Superstores

$
55.2


$
101.1


$
133.3Waldenbooks Specialty Retail


6.5



8.9



13.4International


14.5



10.0



4.8Corporate


3.7



11.3



14.1Total capital expenditures

$
79.9


$
131.3


$
165.6     2008


2007


2006Borders Superstores

$
7.2


$
10.4


$
12.9Waldenbooks Specialty Retail


1.9



0.1



6.1International






0.2



0.3Total

$
9.1


$
10.7


$
19.3  69




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
    2008


2007


2006Long-lived assets:Domestic

$
508.9


$
714.5


$
705.3International


28.9



28.6



17.5Total long-lived assets of continuing operations

$
537.8


$
743.1


$
722.8Discontinued operations






53.6



167.0Total long-lived assets

$
537.8


$
796.7


$
889.8     2008


2007


2006SalesBooks

$
2,001.8


$
2,148.4


$
2,295.8Music


182.5



264.8



308.6Video


188.0



248.6



235.5Gifts & stationery


283.8



287.0



249.3Other


586.0



606.3



443.1Total Sales

$
3,242.1


$
3,555.1


$
3,532.3   NOTE 15 
    DISCONTINUED
    OPERATIONS         70




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
           71




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
    2008


2007


2006Total revenue

$
80.8


$
455.6


$
544.1Loss from operations of discontinued operations before income tax


(2.6
)


(11.6
)


(144.6
)Loss from operations of discontinued operations (net of income
    tax benefit of $0.9, $2.9 and $15.2, respectively)


(1.7
)


(8.7
)


(129.4
)Loss on disposal of discontinued operations (net of income tax
    benefit of $3.1, $7.6, and $0.0 respectively)


(0.3
)


(128.8
)


Loss from discontinued operations (net of income tax benefit of
    $4.0, $10.5 and $15.2, respectively)


(2.0
)


(137.5
)


(129.4
)   February 2,2008Cash and cash equivalents

$
2.5Merchandise inventories


85.2Accounts receivable and other current assets


14.3Current assets of discontinued operations


102.0Property and equipment (net of accumulated depreciation)


46.0Other assets


7.6Noncurrent assets of discontinued operations


53.6Short-term borrowings and current portion of long-term debt


Accounts payable


38.4Accrued payroll and other liabilities


23.0Deferred income taxes


(3.9
)Current liabilities of discontinued operations


57.5Long-term liabilities


25.4Noncurrent liabilities of discontinued operations

$
25.4   NOTE 16 
    PERSHING
    SQUARE FINANCING ARRANGEMENT   72




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
           73




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
      Warrant exercise price:

$7.00 per
    warrant(1)Stock price at issuance date:

$6.60 per shareStock volatility:

38.18%(2)Risk-free interest rate:

3.21%(3)Annual dividend yield:

0%Expected life:

6.5 years(4)     (1)

    
    Represents contractual value.(2)

    
    Represents volatility over the period matching the
    warrants expected life.(3)

    
    Represents the seven-year treasury note rate.(4)

    
    Assumes that the warrants will be held the duration of their
    contractual lives.    Warrant exercise price:

$7.00 per warrantStock price at January 30, 2009:

$0.44 per shareStock volatility:

70.44%Risk-free interest rate:

1.60%Annual dividend yield:

0%Expected life:

5.68 years    74




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
  NOTE 17 
    UNAUDITED
    QUARTERLY FINANCIAL DATA  Fiscal 2008Q1


Q2


Q3


Q4Total revenue

$
735.8


$
758.5


$
693.4


$
1,087.7Gross margin


168.2



182.0



147.0



293.4Income (loss) from continuing operations


(30.1
)


(11.3
)


(172.2
)


28.9Income (loss) from discontinued operations


(1.6
)


2.1



(3.2
)


0.7Net income (loss)


(31.7
)


(9.2
)


(175.4
)


29.6Diluted:Income (loss) from continuing operations per common share


(0.50
)


(0.19
)


(2.85
)


0.48Income (loss) from discontinued operations per common share


(0.03
)


0.04



(0.05
)


0.01Net income (loss) per common share


(0.53
)


(0.15
)


(2.90
)


0.49Basic:Income (loss) from continuing operations per common share


(0.50
)


(0.19
)


(2.85
)


0.48Income (loss) from discontinued operations per common share


(0.03
)


0.04



(0.05
)


0.01Net income (loss) per common share


(0.53
)


(0.15
)


(2.90
)


0.49   Fiscal 2007Q1


Q2


Q3


Q4Total revenue

$
757.1


$
812.6


$
765.3


$
1,262.4Gross margin


175.3



202.6



166.8



384.4Income (loss) from continuing operations


(28.9
)


(18.4
)


(39.9
)


67.3Loss from discontinued operations


(7.0
)


(6.7
)


(121.2
)


(2.6
)Net income (loss)


(35.9
)


(25.1
)


(161.1
)


64.7Diluted:Income (loss) from continuing operations per common share


(0.49
)


(0.31
)


(0.68
)


1.15Loss from discontinued operations per common share


(0.12
)


(0.11
)


(2.06
)


(0.05
)Net income (loss) per common share


(0.61
)


(0.42
)


(2.74
)


1.10Basic:Income (loss) from continuing operations per common share


(0.49
)


(0.31
)


(0.68
)


1.15Loss from discontinued operations per common share


(0.12
)


(0.11
)


(2.06
)


(0.05
)Net income (loss) per common share


(0.61
)


(0.42
)


(2.74
)


1.10     NOTE 18 
    SUBSEQUENT
    EVENT   75




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (dollars in millions except per share data)
     76




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    ON CONSOLIDATED FINANCIAL STATEMENTS           Accounting for Uncertainty in Income Taxes
        77




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##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Controls and
    Procedures: Our
    Chief Executive Officer and Chief Financial Officer have
    evaluated the effectiveness of our disclosure controls and
    procedures, as such term is defined in
    Rules 13a-15(e)
    and
    15d-15(e)
    under the Securities Exchange Act of 1934, as amended (the
    Exchange Act), as of January 31, 2009 (the
    Evaluation Date). Based on such evaluation, such
    officers have concluded that our controls and procedures were
    effective to ensure that information required to be disclosed in
    this annual report is recorded, processed, summarized and
    reported within the time periods specified in the SECs
    rules and forms, and that such information is accumulated and
    communicated to management, including our Chief Executive
    Officer (principal executive officer) and Chief Financial
    Officer (principal financial officer), to allow timely decisions
    regarding required disclosure.
  Changes in
    Internal
    Control: There
    have been no changes in our internal control over financial
    reporting that occurred in the last fiscal quarter that have
    materially affected, or are reasonably likely to materially
    affect, our internal control over financial reporting.
  Managements
    Annual Report on Internal Control over Financial
    Reporting: Management is responsible for establishing and maintaining
    adequate internal control over financial reporting (as defined
    in
    Rule 13a-15(f)
    under the Securities Exchange Act of 1934, as amended).
    Management assessed the effectiveness of our internal control
    over financial reporting as of January 31, 2009. In making
    this assessment, management used the criteria set forth by the
    Committee of Sponsoring Organizations of the Treadway Commission
    (COSO) in Internal Control  Integrated
    Framework.Based on this assessment, management has
    concluded that, as of January 31, 2009, our internal
    control over financial reporting was effective to provide
    reasonable assurance regarding the reliability of financial
    reporting and the preparation of financial statements for
    external purposes in accordance with generally accepted
    accounting principles. Our independent registered public
    accounting firm, Ernst & Young LLP, has issued an
    audit report on our effectiveness of internal control over
    financial reporting as of January 31, 2009, which is
    included herein.
 78




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    ON INTERNAL CONTROL OVER FINANCIAL REPORTING
  
              ERNST &
    YOUNG LLP
    79




---



##### Table of Contents



Item 9B.
    Other
    Information   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance      Section 16(a)
    Beneficial Ownership Reporting Compliance
    Code
    of Ethics and Other Corporate Governance
    Information
    Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence    Item 14:
    Principal
    Accounting Fees and Services   80




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##### Table of Contents



PART IV  Item 15.
    Exhibits,
    Financial Statement Schedules    PageConsolidated Statements of Operations for the fiscal years ended
    January 31, 2009, February 2, 2008 and
    February 3, 2007


46Consolidated Balance Sheets as of January 31, 2009 and
    February 2, 2008


47Consolidated Statements of Cash Flows for the fiscal years ended
    January 31, 2009, February 2, 2008 and
    February 3, 2007


48Consolidated Statements of Stockholders Equity for the
    fiscal years ended January 31, 2009, February 2, 2008
    and February 3, 2007


49Notes to Consolidated Financial Statements


50Report of Independent Registered Public Accounting Firm


77     Schedule II
  Valuation
    and Qualifying Accounts  Deferred Tax Asset
 Fiscal
    Year Ended January 31, 2009, February 2, 2008 and
    February 3, 2007
  Balance at


Charged to
    Costs


Balance at EndBeginning of
    Year


and
    Expenses


of YearBalance at January 31, 2009

$
32.3


$
79.8


$
112.1Balance at February 2, 2008

$
14.6


$
17.7


$
32.3Balance at February 3, 2007

$
9.4


$
5.2


$
14.6     ExhibitNumber

Description2
.1(1)

Agreement and plan of Merger dated as of April 8, 1997
    between Michigan Borders Group, Inc. and Borders Group, Inc.3
.1(3)

Restated Articles of Incorporation of Borders Group, Inc.3
.2(20)

Amendment to the Restated Articles of Incorporation of Borders
    Group, Inc.3
.3(5)

Restated bylaws of Borders Group, Inc.3
.4(16)

First Amendment to the Restated By laws of Borders Group, Inc.3
.5(20)

Second Amendment to the Restated By laws of Borders Group, Inc.3
.6(23)

Third Amendment to the Restated By laws of Borders Group, Inc.3
.7(24)

Fourth Amendment to the Restated By laws of Borders Group, Inc.4
.1(27)

Warrant and Registration Rights Agreement, dated as of
    April 9, 2008, among Borders Group, Inc. and Computershare
    Inc. and Computershare Trust Company, N.A., as Warrant
    Agent.4
.2(27)

Side Letter, dated as of April 9, 2008, between Pershing
    Square Capital Management, L.P. and Borders Group, Inc.10
.1(11)

Restated Borders Group, Inc. Annual Incentive Bonus Plan10
.2

First Amendment to the Restated Borders Group, Inc. Annual
    Incentive Bonus Plan dated as of March 31, 200810
.3(7)

Borders Group, Inc. 2004 Long-Term Incentive Plan 81




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##### Table of Contents



ExhibitNumber

Description10
.4(8)

First Amendment to the Borders Group, Inc. 2004 Long Term
    Incentive Plan dated as of May 20, 200410
.5(26)

Second Amendment to the Borders Group, Inc. 2004 Long Term
    Incentive Plan dated as of March 30, 200710
.6(1)

Borders Group, Inc. Stock Option Plan10
.7(5)

Amendment to the Borders Group, Inc. Stock Option Plan10
.8(2)

Borders Group, Inc. Stock Option Plan for International Employees10
.9(3)

1998 Borders Group, Inc. Stock Option Plan10
.10(4)

Amendment No. 1 to 1998 Borders Group, Inc. Stock Option
    Plan10
.11(9)

Non-Qualified Deferred Compensation Plan10
.12(10)

Restricted Share Unit Grant Agreement10
.13(12)

Restricted Share Grant Agreement10
.14(14)

2006 Restricted Share Unit Grant Agreement10
.15(14)

Summary of terms of fiscal 2006 compensation for non-employee
    directors and executive officers10
.16(18)

Summary of terms of fiscal 2006 compensation for
    Mr. Lawrence I. Pollock related to his role as
    non-executive chairman of the board of directors10
.17(13)

Employment and Consultancy Agreement between Mr. Josefowicz
    and the Company10
.18(15)

Revised Form of Severance Agreement for Executive Officers
    (other than Mr. Josefowicz)10
.19(16)

Summary of Employment Agreement between Mr. Jones and the
    Company10
.20(16)

Employment Agreement between Mr. Jones and the Company10
.21(25)

Employment terms between Mr. Armstrong and the Company10
.22(25)

Employment terms between Mr. Gruen and the Company10
.23(3)

Participation Agreement dated as of December 1, 1998 by and
    among Borders Group, Inc., Borders, Inc. and Parties thereto10
.24(5)

Participation Agreement dated as of January 22, 2001 by and
    among Borders Group, Inc., Borders, Inc. and Parties thereto10
.25(6)

Participation Agreement dated as of November 15, 2002 by
    and among Borders Group, Inc., Borders, Inc. and Parties thereto10
.26(8)

Security Agreement dated as of July 30, 2004 among Borders
    Group, Inc., its subsidiaries and Parties thereto10
.27(17)

Second Amended and Restated Multicurrency Revolving Credit
    Agreement dated as of July 31, 2006 among Borders Group,
    Inc., its subsidiaries and Parties thereto10
.28(19)

Amendment No. 1 to the Second Amended and Restated
    Multicurrency Revolving Credit Agreement dated as of
    April 2, 2007, among the Company, its subsidiaries named
    therein and the lenders named therein10
.29(21)

Amendment No. 2 to the Second Amended and Restated
    Multicurrency Revolving Credit Agreement dated as of
    July 31, 2006 among Borders Group, Inc. its subsidiaries
    and Parties thereto10
.30(27)

Amendment No. 3 to the Second Amended and Restated
    Multicurrency Revolving Credit Agreement among Borders Group,
    Inc. its subsidiaries and Parties thereto10
.31(22)

Deed of Tax Covenant between BGI (UK) limited and Bookshop
    Acquisitions Limited10
.32(22)

Brand License Agreement between Borders Properties, Inc. and
    Borders (UK) Limited and Borders Books Ireland Limited10
.33(22)

Transitional Services Agreement between Borders International
    Services, Inc. and Borders (UK) Limited and Borders Books
    Ireland Limited 82




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##### Table of Contents



ExhibitNumber

Description10
.34(22)

Subscription and Shareholders Agreement between Bookshop
    Acquisitions Limited and, Luk Johnson and BGI (UK) Limited10
.35(26)

Commitment Letter from Pershing Square Capital Management, L.P.
    to Borders Group, Inc., dated as of March 19, 200810
.36(27)

Purchase Offer Letter, dated as of April 9, 2008, between
    Pershing Square Capital Management, L.P. and Borders Group, Inc.10
.37(27)

Deed of Charge Over Shares between BGP (UK) Limited (as Chargor)
    and Pershing Square Capital Management, L.P. (as Collateral
    Agent).10
.38(27)

Senior Secured Credit Agreement among Borders Group, Inc. (the
    Borrower), Pershing Square Capital Management, L.P. (as
    Administrative Agent and as Collateral Agent) and the lenders
    named therein, dated as of April 9, 2008.10
.39(28)

Sale and Purchase Agreement between Borders Group, Inc.,
    A&R Whitcoulls Group Holdings Pty Limited, Spine Newco (NZ)
    Limited and Spine Newco Pty Limited.10
.40(28)

Brand License Deed between Borders Properties, Inc. and Spine
    Newco Pty Limited10
.41(28)

Purchasing Agreement between Borders Group, Inc., Borders
    Australia Pty Limited, Borders New Zealand Limited, Borders Pte.
    Limited, Spine Newco Pty Limited, Spine Newco (NZ) Limited and
    A&R Witcoulls Group Holdings Pty Limited.10
.42(28)

Transition Services Agreement between Borders International
    Services, Inc., Borders Australia Pty Limited, Borders New
    Zealand Limited, Borders Pte. Limited, Spine Newco Pty Limited,
    and Spine Newco (NZ) Limited.10
.43(29)

Stock Option Agreement between Mr. Jones and the Company.10
.44(29)

Restricted Share Agreement between Mr. Jones and the
    Company.10
.45(29)

Form of Executive Officer Severance Agreement.10
.46(29)

Form of Restricted Share Agreement for Executive Officers.10
.47(29)

Form of Enhanced Incentive Bonus for Executive Officers.10
.48(29)

Form of Enhanced Incentive Bonus Agreement between
    Mr. Jones and the Company10
.49(30)

Non-Qualified Deferred Compensation Plan for Directors of
    Borders Group, Inc.10
.50(31)

Borders Group, Inc. Indemnification Letter Agreement with
    Directors and Officers10
.51(32)

Third Amendment to the Borders Group, Inc. 2004 Long Term
    Incentive Plan dated December 9, 2008.10
.52

Fourth Amendment to the Borders Group, Inc. 2004 Long Term
    Incentive Plan dated March 20, 2009.10
.53(33)

Extension of Purchase Offer Letter, dated as of
    December 22, 2008, between Pershing Square Capital
    Management, L.P. and Borders Group, Inc.10
.54(34)

Amendment to Purchase Offer Letter, dated as of January 16,
    2009, between Pershing Square Capital Management, L.P. and
    Borders Group, Inc.10
.55(35)

Extension and Amendment of Purchase Offer Letter, dated as of
    February 13, 2009, between Pershing Square Capital
    Management, L.P. and Borders Group, Inc.10
.56(33)

First Amendment to the Senior Secured Credit Agreement, dated as
    of December 22, 2008, among Borders Group, Inc. as borrower
    and the guarantors listed therein, the Lenders listed therein
    and Pershing Square Capital Management, L.P. as administrative
    agent and collateral agent10
.57(35)

Second Amendment to the Senior Secured Credit Agreement, dated
    as of February 13, 2009, among Borders Group, Inc. as
    borrower and the guarantors listed therein, the Lenders listed
    therein and Pershing Square Capital Management, L.P. as
    administrative agent and collateral agent10
.58(36)

Employment Agreement by and between Borders Group, Inc. and Ron
    Marshall dated as of January 3, 2009 83




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##### Table of Contents



ExhibitNumber

Description10
.59(36)

Resignation Letter of Edward Wilhelm dated as of January 4,
    200910
.60

Separation Agreement between Kenneth H. Armstrong and the
    Company dated as of February 6, 2009.10
.61

Separation Agreement between Edward W. Wilhelm and the Company
    dated as of March 18, 2009.10
.62

Separation Agreement between Robert P. Gruen and the Company
    dated as of January 15, 2009.10
.63(37)

Third Amendment to the Senior Secured Credit Agreement, dated as
    of March 30, 2009, among Borders Group, Inc. as borrower and the
    guarantors listed therein, the lenders listed therein and
    Pershing Square Capital Management, L.P. as administrative agent
    and collateral agent.10
.64(37)

Side Letter to the Warrant and Registration Rights Agreement,
    dated as of March 30, 2009 from Borders Group, Inc. to Pershing
    Square Capital Management, L.P.10
.65(37)

Subscription and Purchase Agreement, dated as of March 30, 2009
    by and between Pershing Square, L.P. and Borders Group, Inc.21
.1

Subsidiaries of Registrant23
.1

Consent of Ernst & Young LLP31
.1

Statement of Ron Marshall, President and Chief Executive Officer
    of Borders Group, Inc. pursuant to Section 302 of the
    Sarbanes-Oxley Act of 200231
.2

Statement of Mark R. Bierley, Executive Vice President and Chief
    Financial Officer of Borders Group, Inc. pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200232
.1

Statement of Ron Marshall, President and Chief Executive Officer
    of Borders Group, Inc. pursuant to Section 906 of the
    Sarbanes-Oxley Act of 200232
.2

Statement of Mark R. Bierley, Executive Vice President and Chief
    Financial Officer of Borders Group, Inc. pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002   (1)
    
    Incorporated by reference from the Companys Proxy
    Statement dated April 9, 1997 of Borders Group, Inc. (File
    No. 1-13740).(2)
    
    Incorporated by reference from the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended July 26, 1998 (File
    No. 1-13740).(3)
    
    Incorporated by reference from the Companys Annual Report
    on
    Form 10-K
    for the year ended January 24, 1999 (File
    No. 1-13740).(4)
    
    Incorporated by reference from the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended October 24, 1999 (File
    No. 1-13740).(5)
    
    Incorporated by reference from the Companys Annual Report
    on
    Form 10-K
    for the year ended January 28, 2001 (File
    No. 1-13740).(6)
    
    Incorporated by reference from the Companys Annual Report
    on
    Form 10-K
    for the year ended January 25, 2004 (Filed
    No. 1-13740).(7)
    
    Incorporated by reference from the Companys Proxy
    Statement dated April 18, 2004 (File
    No. 1-13740).(8)
    
    Incorporated by reference from the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended July 25, 2004 (File
    No. 1-13740).(9)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated November 5, 2004 (File
    No. 1-13740).(10)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated March 16, 2005 (File
    No. 1-13740).(11)
    
    Incorporated by reference from the Companys Proxy
    Statement dated April 18, 2005 (File
    No. 1-13740). 84




---



##### Table of Contents



(12)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated March 21, 2005 (File
    No. 1-13740).(13)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated January 25, 2006 (File
    No. 1-13740).(14)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated March 24, 2006 (File
    No. 1-13740).(15)
    
    Incorporated by reference from the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended April 29, 2006 (File
    No. 1-13740).(16)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated July 13, 2006 (File
    No. 1-13740).(17)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated July 31, 2006 (File
    No. 1-13740).(18)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated September 14, 2006 (File
    No. 1-13740).(19)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated April 2, 2007 (File
    No. 1-13740).(20)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated May 25, 2007 (File
    No. 1-13740).(21)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated August 28, 2007 (File
    No. 1-13740).(22)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated September 21, 2007 (File
    No. 1-13740).(23)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated October 2, 2007 (File
    No. 1-13740).(24)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated January 17, 2008 (File
    No. 1-13740).(25)
    
    Incorporated by reference from the Companys Annual Report
    on
    Form 10-K
    for the year ended February 3, 2007 (Filed
    No. 1-13740).(26)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated March 19, 2008 (File
    No. 1-13740).(27)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated April 9, 2008 (File
    No. 1-13740).(28)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated June 4, 2008 (File
    No. 1-13740).(29)
    
    Incorporated by reference from the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended May 3, 2008 (File
    No. 1-13740).(30)
    
    Incorporated by reference from the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended August 2, 2008 (File
    No. 1-13740).(31)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated November 25, 2008 (File
    No. 1-13740).(32)
    
    Incorporated by reference from the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended November 1, 2008 (File
    No. 1-13740).(33)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated December 22, 2008 (File
    No. 1-13740).(34)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated January 20, 2009 (File
    No. 1-13740). 85




---



##### Table of Contents



(35)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated February 13, 2009 (File
    No. 1-13740).(36)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated January 5, 2009 (File
    No. 1-13740).(37)
    
    Incorporated by reference from the Companys Current Report
    on Form 8-K dated March 30, 2009 (File No. 1-13740). 86




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##### Table of Contents



SIGNATURES    
  By:
    /s/  RON
    MARSHALL   Chief Executive Officer and President
    Name

Title

Date/s/  Ron
    MarshallRon
    Marshall

Chief Executive Officer and President

March 31, 2009/s/  Mark
    R. BierleyMark
    R. Bierley

Executive Vice President and
    Chief Financial Officer (Principal Financial and Accounting
    Officer)

March 31, 2009/s/  Michael
    G. ArchboldMichael
    G. Archbold

Director

March 31, 2009/s/  Donald
    G. CampbellDonald
    G. Campbell

Director

March 31, 2009/s/  Joel
    J. CohenJoel
    J. Cohen

Director

March 31, 2009/s/  Amy
    B. LaneAmy
    B. Lane

Director

March 31, 2009/s/  Brian
    T. LightBrian
    T. Light

Director

March 31, 2009/s/  Dr. Edna
    MedfordDr. Edna
    Medford

Director

March 31, 2009/s/  Richard
    McGuireRichard
    McGuire

Director, Non-Executive Chairman

March 31, 2009/s/  Lawrence
    I. PollockLawrence
    I. Pollock

Director

March 31, 2009/s/  Michael
    WeissMichael
    Weiss

Director

March 31, 2009  87




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber

Description2
.1(1)

Agreement and plan of Merger dated as of April 8, 1997
    between Michigan Borders Group, Inc. and Borders Group, Inc.3
.1(3)

Restated Articles of Incorporation of Borders Group, Inc.3
.2(20)

Amendment to the Restated Articles of Incorporation of Borders
    Group, Inc.3
.3(5)

Restated bylaws of Borders Group, Inc.3
.4(16)

First Amendment to the Restated By laws of Borders Group, Inc.3
.5(20)

Second Amendment to the Restated By laws of Borders Group, Inc.3
.6(23)

Third Amendment to the Restated By laws of Borders Group, Inc.3
.7(24)

Fourth Amendment to the Restated By laws of Borders Group, Inc.4
.1(27)

Warrant and Registration Rights Agreement, dated as of
    April 9, 2008, among Borders Group, Inc. and Computershare
    Inc. and Computershare Trust Company, N.A., as Warrant
    Agent.4
.2(27)

Side Letter, dated as of April 9, 2008, between Pershing
    Square Capital Management, L.P. and Borders Group, Inc.10
.1(11)

Restated Borders Group, Inc. Annual Incentive Bonus Plan10
.2

First Amendment to the Restated Borders Group, Inc. Annual
    Incentive Bonus Plan dated as of March 31, 200810
.3(7)

Borders Group, Inc. 2004 Long-Term Incentive Plan10
.4(8)

First Amendment to the Borders Group, Inc. 2004 Long Term
    Incentive Plan dated as of May 20, 200410
.5(26)

Second Amendment to the Borders Group, Inc. 2004 Long Term
    Incentive Plan dated as of March 30, 200710
.6(1)

Borders Group, Inc. Stock Option Plan10
.7(5)

Amendment to the Borders Group, Inc. Stock Option Plan10
.8(2)

Borders Group, Inc. Stock Option Plan for International Employees10
.9(3)

1998 Borders Group, Inc. Stock Option Plan10
.10(4)

Amendment No. 1 to 1998 Borders Group, Inc. Stock Option
    Plan10
.11(9)

Non-Qualified Deferred Compensation Plan10
.12(10)

Restricted Share Unit Grant Agreement10
.13(12)

Restricted Share Grant Agreement10
.14(14)

2006 Restricted Share Unit Grant Agreement10
.15(14)

Summary of terms of fiscal 2006 compensation for non-employee
    directors and executive officers10
.16(18)

Summary of terms of fiscal 2006 compensation for
    Mr. Lawrence I. Pollock related to his role as
    non-executive chairman of the board of directors10
.17(13)

Employment and Consultancy Agreement between Mr. Josefowicz
    and the Company10
.18(15)

Revised Form of Severance Agreement for Executive Officers
    (other than Mr. Josefowicz)10
.19(16)

Summary of Employment Agreement between Mr. Jones and the
    Company10
.20(16)

Employment Agreement between Mr. Jones and the Company10
.21(25)

Employment terms between Mr. Armstrong and the Company10
.22(25)

Employment terms between Mr. Gruen and the Company10
.23(3)

Participation Agreement dated as of December 1, 1998 by and
    among Borders Group, Inc., Borders, Inc. and Parties thereto




---



##### Table of Contents



ExhibitNumber

Description10
.24(5)

Participation Agreement dated as of January 22, 2001 by and
    among Borders Group, Inc., Borders, Inc. and Parties thereto10
.25(6)

Participation Agreement dated as of November 15, 2002 by
    and among Borders Group, Inc., Borders, Inc. and Parties thereto10
.26(8)

Security Agreement dated as of July 30, 2004 among Borders
    Group, Inc., its subsidiaries and Parties thereto10
.27(17)

Second Amended and Restated Multicurrency Revolving Credit
    Agreement dated as of July 31, 2006 among Borders Group,
    Inc., its subsidiaries and Parties thereto10
.28(19)

Amendment No. 1 to the Second Amended and Restated
    Multicurrency Revolving Credit Agreement dated as of
    April 2, 2007, among the Company, its subsidiaries named
    therein and the lenders named therein10
.29(21)

Amendment No. 2 to the Second Amended and Restated
    Multicurrency Revolving Credit Agreement dated as of
    July 31, 2006 among Borders Group, Inc. its subsidiaries
    and Parties thereto10
.30(27)

Amendment No. 3 to the Second Amended and Restated
    Multicurrency Revolving Credit Agreement among Borders Group,
    Inc. its subsidiaries and Parties thereto10
.31(22)

Deed of Tax Covenant between BGI (UK) limited and Bookshop
    Acquisitions Limited10
.32(22)

Brand License Agreement between Borders Properties, Inc. and
    Borders (UK) Limited and Borders Books Ireland Limited10
.33(22)

Transitional Services Agreement between Borders International
    Services, Inc. and Borders (UK) Limited and Borders Books
    Ireland Limited10
.34(22)

Subscription and Shareholders Agreement between Bookshop
    Acquisitions Limited and, Luk Johnson and BGI (UK) Limited10
.35(26)

Commitment Letter from Pershing Square Capital Management, L.P.
    to Borders Group, Inc., dated as of March 19, 200810
.36(27)

Purchase Offer Letter, dated as of April 9, 2008, between
    Pershing Square Capital Management, L.P. and Borders Group, Inc.10
.37(27)

Deed of Charge Over Shares between BGP (UK) Limited (as Chargor)
    and Pershing Square Capital Management, L.P. (as Collateral
    Agent).10
.38(27)

Senior Secured Credit Agreement among Borders Group, Inc. (the
    Borrower), Pershing Square Capital Management, L.P. (as
    Administrative Agent and as Collateral Agent) and the lenders
    named therein, dated as of April 9, 2008.10
.39(28)

Sale and Purchase Agreement between Borders Group, Inc.,
    A&R Whitcoulls Group Holdings Pty Limited, Spine Newco (NZ)
    Limited and Spine Newco Pty Limited.10
.40(28)

Brand License Deed between Borders Properties, Inc. and Spine
    Newco Pty Limited10
.41(28)

Purchasing Agreement between Borders Group, Inc., Borders
    Australia Pty Limited, Borders New Zealand Limited, Borders Pte.
    Limited, Spine Newco Pty Limited, Spine Newco (NZ) Limited and
    A&R Witcoulls Group Holdings Pty Limited.10
.42(28)

Transition Services Agreement between Borders International
    Services, Inc., Borders Australia Pty Limited, Borders New
    Zealand Limited, Borders Pte. Limited, Spine Newco Pty Limited,
    and Spine Newco (NZ) Limited.10
.43(29)

Stock Option Agreement between Mr. Jones and the Company.10
.44(29)

Restricted Share Agreement between Mr. Jones and the
    Company.10
.45(29)

Form of Executive Officer Severance Agreement.10
.46(29)

Form of Restricted Share Agreement for Executive Officers.10
.47(29)

Form of Enhanced Incentive Bonus for Executive Officers.




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##### Table of Contents



ExhibitNumber

Description10
.48(29)

Form of Enhanced Incentive Bonus Agreement between
    Mr. Jones and the Company10
.49(30)

Non-Qualified Deferred Compensation Plan for Directors of
    Borders Group, Inc.10
.50(31)

Borders Group, Inc. Indemnification Letter Agreement with
    Directors and Officers10
.51(32)

Third Amendment to the Borders Group, Inc. 2004 Long Term
    Incentive Plan dated December 9, 2008.10
.52

Fourth Amendment to the Borders Group, Inc. 2004 Long Term
    Incentive Plan dated March 20, 2009.10
.53(33)

Extension of Purchase Offer Letter, dated as of
    December 22, 2008, between Pershing Square Capital
    Management, L.P. and Borders Group, Inc.10
.54(34)

Amendment to Purchase Offer Letter, dated as of January 16,
    2009, between Pershing Square Capital Management, L.P. and
    Borders Group, Inc.10
.55(35)

Extension and Amendment of Purchase Offer Letter, dated as of
    February 13, 2009, between Pershing Square Capital
    Management, L.P. and Borders Group, Inc.10
.56(33)

First Amendment to the Senior Secured Credit Agreement, dated as
    of December 22, 2008, among Borders Group, Inc. as borrower
    and the guarantors listed therein, the Lenders listed therein
    and Pershing Square Capital Management, L.P. as administrative
    agent and collateral agent10
.57(35)

Second Amendment to the Senior Secured Credit Agreement, dated
    as of February 13, 2009, among Borders Group, Inc. as
    borrower and the guarantors listed therein, the Lenders listed
    therein and Pershing Square Capital Management, L.P. as
    administrative agent and collateral agent10
.58(36)

Employment Agreement by and between Borders Group, Inc. and Ron
    Marshall dated as of January 3, 200910
.59(36)

Resignation Letter of Edward Wilhelm dated as of January 4,
    200910
.60

Separation Agreement between Kenneth H. Armstrong and the
    Company dated as of February 6, 2009.10
.61

Separation Agreement between Edward W. Wilhelm and the Company
    dated as of March 18, 2009.10
.62

Separation Agreement between Robert P. Gruen and the Company
    dated as of January 15, 2009.10
.63(37)

Third Amendment to the Senior Secured Credit Agreement, dated as
    of March 30, 2009, among Borders Group, Inc. as borrower and the
    guarantors listed therein, the lenders listed therein and
    Pershing Square Capital Management, L.P. as administrative agent
    and collateral agent.10
.64(37)

Side Letter to the Warrant and Registration Rights Agreement,
    dated as of March 30, 2009 from Borders Group, Inc. to Pershing
    Square Capital Management, L.P.10
.65(37)

Subscription and Purchase Agreement, dated as of March 30, 2009
    by and between Pershing Square, L.P. and Borders Group, Inc.21
.1

Subsidiaries of Registrant23
.1

Consent of Ernst & Young LLP31
.1

Statement of Ron Marshall, President and Chief Executive Officer
    of Borders Group, Inc. pursuant to Section 302 of the
    Sarbanes-Oxley Act of 200231
.2

Statement of Mark R. Bierley, Executive Vice President and Chief
    Financial Officer of Borders Group, Inc. pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200232
.1

Statement of Ron Marshall, President and Chief Executive Officer
    of Borders Group, Inc. pursuant to Section 906 of the
    Sarbanes-Oxley Act of 200232
.2

Statement of Mark R. Bierley, Executive Vice President and Chief
    Financial Officer of Borders Group, Inc. pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002




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##### Table of Contents



(1)
    
    Incorporated by reference from the Companys Proxy
    Statement dated April 9, 1997 of Borders Group, Inc. (File
    No. 1-13740).(2)
    
    Incorporated by reference from the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended July 26, 1998 (File
    No. 1-13740).(3)
    
    Incorporated by reference from the Companys Annual Report
    on
    Form 10-K
    for the year ended January 24, 1999 (File
    No. 1-13740).(4)
    
    Incorporated by reference from the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended October 24, 1999 (File
    No. 1-13740).(5)
    
    Incorporated by reference from the Companys Annual Report
    on
    Form 10-K
    for the year ended January 28, 2001 (File
    No. 1-13740).(6)
    
    Incorporated by reference from the Companys Annual Report
    on
    Form 10-K
    for the year ended January 25, 2004 (Filed
    No. 1-13740).(7)
    
    Incorporated by reference from the Companys Proxy
    Statement dated April 18, 2004 (File
    No. 1-13740).(8)
    
    Incorporated by reference from the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended July 25, 2004 (File
    No. 1-13740).(9)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated November 5, 2004 (File
    No. 1-13740).(10)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated March 16, 2005 (File
    No. 1-13740).(11)
    
    Incorporated by reference from the Companys Proxy
    Statement dated April 18, 2005 (File
    No. 1-13740).(12)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated March 21, 2005 (File
    No. 1-13740).(13)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated January 25, 2006 (File
    No. 1-13740).(14)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated March 24, 2006 (File
    No. 1-13740).(15)
    
    Incorporated by reference from the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended April 29, 2006 (File
    No. 1-13740).(16)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated July 13, 2006 (File
    No. 1-13740).(17)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated July 31, 2006 (File
    No. 1-13740).(18)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated September 14, 2006 (File
    No. 1-13740).(19)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated April 2, 2007 (File
    No. 1-13740).(20)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated May 25, 2007 (File
    No. 1-13740).(21)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated August 28, 2007 (File
    No. 1-13740).(22)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated September 21, 2007 (File
    No. 1-13740).(23)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated October 2, 2007 (File
    No. 1-13740).(24)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated January 17, 2008 (File
    No. 1-13740).




---



##### Table of Contents



(25)
    
    Incorporated by reference from the Companys Annual Report
    on
    Form 10-K
    for the year ended February 3, 2007 (Filed
    No. 1-13740).(26)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated March 19, 2008 (File
    No. 1-13740).(27)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated April 9, 2008 (File
    No. 1-13740).(28)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated June 4, 2008 (File
    No. 1-13740).(29)
    
    Incorporated by reference from the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended May 3, 2008 (File
    No. 1-13740).(30)
    
    Incorporated by reference from the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended August 2, 2008 (File
    No. 1-13740).(31)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated November 25, 2008 (File
    No. 1-13740).(32)
    
    Incorporated by reference from the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended November 1, 2008 (File
    No. 1-13740).(33)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated December 22, 2008 (File
    No. 1-13740).(34)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated January 20, 2009 (File
    No. 1-13740).(35)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated February 13, 2009 (File
    No. 1-13740).(36)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    dated January 5, 2009 (File
    No. 1-13740).(37)
    
    Incorporated by reference from the Companys Current Report
    on Form 8-K dated March 30, 2009 (File No. 1-13740).