BORDERS
GROUP, INC.




NON-QUALIFIED
DEFERRED COMPENSATION PLAN




FOR
NONEMPLOYEE DIRECTORS
















































CERTIFICATE










I, Thomas
D. Carney, General Counsel of Borders Group, Inc., hereby certify that the
attached document is a correct copy of the Borders Group, Inc. Non-Qualified
Deferred Compensation Plan for Nonemployee Directors effective as of March 1,
2004.




Dated
this 4th day of March, 2004.







General Counsel as Aforesaid




(Corporate Seal)



























BORDERS
GROUP, INC.


NON-QUALIFIED
DEFERRED COMPENSATION PLAN




FOR
NONEMPLOYEE DIRECTORS




Article
1




Introduction




1.1  Purpose of the Plan,
Effective Date.  The Borders Group, Inc. Non-Qualified Deferred
Compensation Plan for Nonemployee Directors (the “Plan”) has been established by
Borders Group, Inc. (the “Company”), effective as of March 1, 2004 (the
“Effective Date”), with respect to nonemployee members of the Board of Directors
of the Company (“Eligible Directors”).  The purpose of the Plan is to
provide those Eligible Directors with an opportunity to defer the receipt and
income taxation of a portion of such directors’ fees.




1.2  Plan Administrator, Plan
Year.  The Plan is administered by the Company (the “Plan
Administrator”).  The Plan is administered on the basis of a Plan Year
which, with respect to the initial Plan Year, is the period beginning on the
Effective Date and ending on December 31, 2004, and thereafter is the calendar
year.  Article 8 describes certain specific powers, duties and
responsibilities of the Plan Administrator with respect to the administration of
the Plan.




1.3  Supplements.  From
time to time supplements may by amendment be attached to and form a part of this
Plan.  Such supplements may modify or supplement the provisions of the
Plan as they apply to the Eligible Directors, shall specify the person affected
by such supplements and shall supersede the other provisions of the Plan to the
extent necessary to eliminate inconsistencies between the Plan provisions and
the provisions of such supplements.




Article
2




Plan
Participation




2.1  Eligibility. Each
nonemployee director as of the Effective Date of the Plan shall be an Eligible
Director as of the Effective Date.  Each other nonemployee director of
the Company shall be an Eligible Director as of the date he first becomes a
nonemployee director of the Company.




2.2  Participation.  Each
Eligible Director may irrevocably elect to have Deferral Contributions made on
his behalf for a Plan Year, or portion of a Plan Year, pursuant to Section 3.2
and thereby become a Plan Participant.  “Participant” means any
individual who has been admitted to, and has not been removed from,
participation in the Plan pursuant to this Article 2.  A Participant
must complete such forms and provide such data in a timely manner as is required
by the Plan Administrator.  Such forms and data may include, without
limitation, his acceptance of the terms and conditions of the Plan and his
designation of a beneficiary to receive any death benefits payable
hereunder.




2.3  Cessation of Active
Participation.




(a)  Cessation of Eligible
Status.  A Participant shall be considered an active
Participant during any period when Deferral Contributions are being made to the
Plan on his behalf.  A Participant’s active participation in the Plan
shall cease as of the date he ceases to be a nonemployee director of the
Company, whether because of death, retirement, resignation, removal, employment
by the Company or any of its subsidiaries, or any other reason.  Upon
cessation of, or removal from, active participation in the Plan, a Participant’s
deferrals under the Plan shall cease.




(b)  Inactive Participant
Status.  Even if his active participation in the Plan ends, a
director or former director shall remain an inactive Participant in the Plan
until the earlier of (i) the date the full amount of his Deferral Contribution
Account (as defined in Section 3.1) is distributed from the Plan, or (ii) the
date he again recommences active participation in the Plan as an Eligible
Director by electing to have Deferral Contributions made to the Plan on his
behalf pursuant to Section 3.2.  During the period of time that a
director or former director is an inactive Participant in the Plan, his Deferral
Contribution Account shall continue to be credited with earnings and losses
pursuant to the terms of Section 3.5, and he shall continue to be eligible to
direct the manner in which his Deferral Contribution Account shall be deemed
invested pursuant to Section 4.2.




(c)  Participation after
Recommencement of Service.  If an Eligible Director ceases to
be a nonemployee director of the Company and then becomes a nonemployee director
of the Company again, he shall become eligible to participate or to recommence
his participation in the Plan as of the date he again becomes a nonemployee
director.







Article
3




Participants’ Deferral
Contribution Accounts; Deferrals and Crediting




3.1  Participants’ Deferral
Contribution Accounts.  The Plan Administrator shall establish
and maintain on behalf of each Participant a separate bookkeeping account (a
“Deferral Contribution Account”) under the Plan.  With respect to any
Participant, this Deferral Contribution Account shall represent the amount of
his Deferral Contributions (as defined in Section 3.2) and earnings or losses
attributable thereto.




Each
Participant shall at all times have a 100 percent vested interest in his
Deferral Contribution Account. Each Participant’s Deferral Contribution Account
shall be maintained until the value thereof has been distributed to or on behalf
of such Participant or his beneficiary.




3.2  Deferral
Contributions.  Each Participant may irrevocably elect to have
Deferral Contributions made on his behalf for a Plan Year by completing and
submitting to the Plan Administrator (or its designee) a Deferral Election (as
defined in Section 3.3) setting forth the terms of his election.  A
“Deferral Contribution” means that portion of a Participant’s Compensation that
the Participant elects to defer receipt of, in lieu of receiving such
Compensation currently.  “Compensation” means the cash retainer
payable to a nonemployee director for service on the Board, for service as a
member of any Board committee, or for service as the chairman of any Board
committee, together with other cash fees, if any, payable to a nonemployee
director in that capacity for attending meetings or otherwise for service on the
Board or any Board committee.  Grants of equity awards, including but
not limited to restricted stock and stock options, and reimbursement of expenses
do not constitute Compensation for purposes of this Plan.  A
Participant may elect to defer a fixed dollar amount, or an amount designated in
whole percentages, that is no more than 100 percent of his Compensation for such
Plan Year.  Deferral Contributions may only be made from Compensation
earned while the Participant is serving as a nonemployee director of the
Company.




3.3  Deferral
Election.  A Participant must complete and submit a written
Deferral Election to the Plan Administrator providing for the reduction of his
Compensation for the appropriate amount of Deferral
Contributions.  The following terms and conditions shall apply to
Deferral Elections:




(a)  Initial Deferral
Election.  The Eligible Director’s initial Deferral Election
under the Plan with respect to his Compensation for any Plan Year shall be
effective for any Compensation earned after the date the Deferral Election
becomes effective, except that a deferral election made during March 2004 will
not apply to any Compensation earned on or before March 31, 2004.  To
be effective, the initial Deferral Election under the Plan with respect to
Compensation must be made within the time period prescribed by the Plan
Administrator (generally, before the first day of the Plan Year for which
Deferral Contributions attributable to Compensation will be made or, if later
during such Plan Year, within 30 days after the date on which the Eligible
Director first becomes an Eligible Director pursuant to Section 2.1). Until such
time as an Eligible Director submits an initial Deferral Election in a timely
manner, he shall be deemed to have elected not to make Deferral Contributions
and to have elected not to become a Participant in the Plan.




(b)  Subsequent Deferral
Election.  A Participant’s subsequent Deferral Election with
respect to his Compensation for any Plan Year must be made within the time
period prescribed by the Plan Administrator, but before the first day of the
Plan Year for which the Compensation to be deferred is payable.




(c)  Term.  Each
Participant’s Deferral Election shall remain in effect for the Compensation
earned during a Plan Year until the date the Participant ceases to be an active
Participant.




(d)  Crediting
Contributions.  For each Plan Year that a Participant has a
Deferral Election in effect, the Plan Administrator shall credit the amount of
such Participant’s Deferral Contributions to his Deferral Contribution Account
on the day such amount would have been paid to him but for his Deferral Election
(or such other date or time as the Plan Administrator, in its sole discretion,
determines from time-to-time).







3.4  Debiting of Distributions
and Forfeitures.  As of each business day, the Plan
Administrator shall debit each Participant’s Deferral Contribution Account for
any amount distributed or forfeited from such Deferral Contribution Account
since the immediately preceding business day.




3.5  Crediting of Earnings or
Losses on Contributions.  As of each business day, the Plan
Administrator shall credit to each Participant’s Deferral Contribution Account
the amount of earnings or losses applicable thereto for the period since the
immediately preceding business day.  To effect such crediting of
earnings and losses, the Plan Administrator shall, as of each business day,
first subtract all distributions and forfeitures since the immediately preceding
business day from the Deferral Contribution Account, add to the Deferral
Contribution Account the amount of the contributions, and allocate the net
earnings or losses to the Participant’s Deferral Contribution Account based on
the individual account activity of the Deferral Contribution Account during such
period pursuant to a share accounting method under which each Participant’s
deemed investment in an Investment Fund (as defined in Section 4.1) shall be
accounted for in deemed shares in funds selected by the Plan Administrator and
offered within the Plan for purposes of calculating earnings and losses for
Participants’ Deferral Contribution Accounts.  For this purpose, the
Plan Administrator shall adopt uniform rules which conform generally to accepted
accounting practices.




3.6  Errors in Deferral
Contribution Accounts.  If an error or omission is discovered
in the Deferral Contribution Account of a Participant, the Plan Administrator,
in its sole discretion, shall cause appropriate equitable adjustments to be made
as soon as administratively practicable following the discovery of such error or
omission.




Article
4




Investment
Funds




4.1  Selection by Plan
Administrator.  From time to time, the Plan Administrator shall
select two or more investment funds (the “Investment Funds”) for purposes of
determining the rate of return on amounts deemed invested in accordance with the
terms of the Plan. The Plan Administrator will notify Participants in writing
prior to the beginning of each Plan Year and at such other times as the Plan
Administrator deems necessary or desirable of the Investment Funds available
under the Plan for such Plan Year.  The Plan Administrator may change,
add or remove Investment Funds on a prospective basis at any time and in any
manner it deems appropriate.




4.2  Participant Direction of
Deemed Investments.  Each Participant generally may direct the
manner in which his Deferral Contribution Account shall be deemed invested in
and among the Investment Funds; provided, such investment directions shall be
made in accordance with the following terms:




(a)  Nature of Participant
Direction.  The selection of Investment Funds by a Participant
shall be for the sole purpose of determining the rate of return to be credited
to his Deferral Contribution Account, and shall not be treated or interpreted in
any manner whatsoever as a requirement or direction to actually invest assets in
any Investment Fund or any other investment media. The Plan, as an unfunded,
nonqualified deferred compensation plan, at no time shall have any actual
investment of assets relative to the benefits or Deferral Contribution Accounts
hereunder.




(b)  Investment of
Contributions.  Except as otherwise provided in this Section
4.2, each Participant may make an investment election, made in such form as the
Plan Administrator may direct or permit, prescribing the percentage of his
future contributions that will be deemed invested in each Investment Fund. An
initial investment election of a Participant shall be made as of the date the
Participant commences or recommences participation in the Plan and shall apply
to all contributions credited to such Participant’s Deferral Contribution
Account after such date. Such Participant may make subsequent investment
elections at such times as permitted by the Plan Administrator, and such
elections shall apply to all such specified contributions credited to such
Participant’s Deferral Contribution Account after the effective date of such
election.  Any investment election timely and properly made pursuant
to this subsection with respect to future contributions shall remain effective
until changed by the Participant.




(c)  Investment of Existing
Deferral Contribution Account Balances.  Each Participant may
make an investment election, effective as of the date the Participant commences
or recommences participation in the Plan, prescribing a different percentage of
his existing Deferral Contribution Account balance that will be deemed invested
in each Investment Fund.  Such Participant may make subsequent
investment elections at such times as permitted by the Plan Administrator
prescribing a different percentage of his existing Deferral Contribution Account
balance that will be deemed invested in each Investment Fund.  Each
such election which is timely and properly made shall remain in effect until
changed by such Participant.




(d)  Plan Administrator
Discretion.  The Plan Administrator shall have complete
discretion to adopt and revise procedures to be followed in making such
investment elections.  Such procedures may include, but are not
limited to, the process of making elections, the permitted frequency of making
elections, the incremental size of elections, the deadline for making elections
and the effective date of such elections. Any procedures adopted by the Plan
Administrator that are inconsistent with the deadlines or procedures specified
in this Section 4.2 shall supersede such provisions of this Section 4.2 without
the necessity of a Plan amendment.







Article
5




Payment of Deferral
Contribution Account Balances




5.1  Benefit Payments Upon
Termination of Service.




(a)  General.  In
accordance with the terms of subsection (b) hereof, if a Participant has both
ceased to be a director of the Company and is not an employee of the Company or
any of its subsidiaries, he (or his beneficiary, in the event of his death)
shall be entitled to receive a distribution of the total of (i) the entire
amount credited to his Deferral Contribution Account, as adjusted for earnings
or losses attributable thereto, determined as of the business day on which such
distribution is processed; plus (ii) the amount of Deferral Contributions,
if any, made since such business day; and minus (iii) the amount of any
distributions made to the Participant since such business day.  For
purposes of this subsection, the “business day on which such distribution is
processed” refers to the business day established for such purpose by
administrative practice, even if actual payment is made at a later date due to
delays in valuation, administration or any other procedure.




(b)  Timing of
Distribution.  Unless a Participant otherwise elects on his
Deferral Election, the distribution of the benefit payable to a Participant
under this Section shall be made or commence as soon as reasonably practicable
after the last business day of the calendar quarter in which the Participant
both ceases to be a director of the Company and terminates his employment, if
any, with the Company and any of its subsidiaries.  Notwithstanding
the foregoing, a Participant may elect on his Deferral Election to receive a
distribution of the total of the aggregate Deferral Contributions made pursuant
to such Deferral Election, as adjusted for earnings or losses attributable
thereto and reduced for any distributions or forfeitures thereof, determined as
of the date such distribution is processed, at any one time during any of the
ten Plan Years following the Plan Year in which distribution of such amounts
would otherwise have been made under the terms of this subsection
(b).




5.2  Form of
Distribution.  The benefit payable to a Participant under
Section 5.1 shall be distributed in the form of a lump sum payment.




5.3  In-Service
Distributions.




(a)  Specified In-Service
Distributions.  Notwithstanding any other provision of this
Article 5 to the contrary, a Participant may elect on his Deferral Election to
receive an in-service distribution of the total of the aggregate Deferral
Contributions made pursuant to such Deferral Election, as adjusted for earnings
or losses attributable thereto and reduced for any distributions or forfeitures
thereof, determined as of the date such distribution is
processed.  Such distribution shall be made in a lump sum payment in
the first quarter of the Plan Year designated by the Participant on his Deferral
Election provided that such Plan Year begins after the third anniversary of the
date the Deferral Contribution to be distributed would have been paid to the
Participant but for his Deferral Election.  The amount of such
distribution shall reduce the Participant’s Deferral Contribution Account
balance as provided in Section 3.4.  Any portion of the Participant’s
Deferral Contribution Account which is not distributed under this subsection (a)
shall be distributed in accordance with Section 5.1 and shall remain available
for distributions under this Section 5.3.  If the Participant both
ceases to be a director of the Company and terminates his employment, if any,
with the Company and any of its subsidiaries for any reason prior to the payment
of his in-service distribution hereunder, his in-service distribution election
shall be cancelled and of no effect and the Participant’s Deferral Contribution
Account shall be distributed in accordance with Section 5.1.  In the
event a Participant elects to receive an in-service distribution under this
subsection (a), such Participant may elect once per Deferral Election, in
writing, at any time that is at least one year before the first day of the
calendar quarter that the in-service distribution would otherwise be paid, to
defer such in-service distribution to the first quarter of any subsequent Plan
Year, provided that such quarter is at least 11 full calendar quarters after the
quarter in which the in-service distribution would otherwise have been
paid.




(b)  Change in
Control.  Notwithstanding any other provision of this Article 5
to the contrary, a Participant may elect on his Deferral Election, upon a Change
in Control, to receive a distribution of the total of the aggregate Deferral
Contributions made pursuant to such Deferral Election, as adjusted for earnings
or losses attributable thereto and reduced for any distributions or forfeitures
thereof, determined as of the date such distribution is
processed.  Such distribution shall be made in a lump sum payment on
the date on which a Change in Control occurs.  The amount of such
distribution shall reduce the Participant’s Deferral Contribution Account
balance as provided in Section 3.4.  Any portion of the Participant’s
Deferral Contribution Account which is not distributed under this subsection (b)
shall be distributed in accordance with Section 5.1 and shall remain available
for distribution under this Section 5.3.  If the Participant both
ceases to be a director of the Company and terminates his employment, if any,
with the Company and any of its subsidiaries for any reason prior to the payment
of his in-service distribution hereunder, his in-service distribution election
shall be cancelled and of no effect and the Participant’s Deferral Contribution
Account shall be distributed in accordance with Section 5.1.  “Change
in Control” shall mean the first occurrence of one of the following
events:







(i)  the
“beneficial ownership” (as defined in Rule 13d-3 of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”)) of securities representing more than
20% of the combined voting power of the Company is acquired by any “person,” as
defined in Sections 13(d) and 14(d) of the Exchange Act, (other than the
Company, any trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any corporation owned, directly or indirectly, by
the shareholders of the Company in substantially the same proportions as their
ownership of shares of the Company’s common stock ($.001 par value) (the
“Shares”)), or




(ii)  the
shareholders of the Company approve a definitive agreement to merge or
consolidate the Company with or into another corporation or to sell or otherwise
dispose of all or substantially all of its assets, or adopt a plan of
liquidation, or




(iii)  during
any period of three consecutive years, individuals who at the beginning of such
period were members of the Board cease for any reason to constitute at least a
majority thereof (unless the election, or the nomination for election by the
Company’s shareholders, of each new director was approved by a vote of at least
a majority of the directors then still in office who were directors at the
beginning of such period or whose election or nomination was previously so
approved).




5.4  Beneficiary
Designation.  Participants shall designate and from time to
time may redesignate their beneficiaries to receive any death benefits that may
be payable under the Plan upon such Participant’s death in such form and manner
as the Plan Administrator may determine.  In the event
that:




(i)           a
Participant dies without designating a beneficiary;




(ii)           the
beneficiary designated by a Participant is not alive when a payment is to be
made to such person under the Plan, and no contingent beneficiary has been
designated; or




(iii)           the
beneficiary designated by a Participant cannot be located by the Plan
Administrator within one year from the date benefits are to be paid to such
person;




then, in
any of such events, the beneficiary of such Participant with respect to any
benefits that remain payable under the Plan shall be the estate of the
Participant.




Article
6




Claims




6.1  Initial
Claim.  Claims for benefits under the Plan may be filed with
the Plan Administrator on such form, as the Plan Administrator may
prescribe.  The Plan Administrator shall furnish to the claimant
notice of the disposition of a claim within 90 days after the application
therefor is filed.  In the event the claim is denied, the notice of
the disposition of the claim shall provide the specific reasons for the denial,
citations of the pertinent provisions of the Plan, and, where appropriate, an
explanation as to how the claimant can perfect the claim or submit the claim for
review.




6.2  Appeal.  Any
Participant or beneficiary who has been denied a benefit shall be entitled, upon
request to the Plan Administrator, to appeal the denial of his claim. The
claimant (or his duly authorized representative) may review pertinent documents
related to the Plan and in the Plan Administrator’s possession in order to
prepare the appeal. The request for review, together with a statement of the
claimant’s position, must be filed with the Plan Administrator no later than 60
days after receipt of the notification of denial of a claim provided for in
Section 6.1.  The Plan Administrator’s decision shall be made within
60 days following the filing of the request for review.  If
unfavorable, the notice of the decision shall explain the reasons for denial and
indicate the provisions of the Plan or other documents used to arrive at the
decision.







6.3  Satisfaction of
Claims.  Any payment to a Participant or beneficiary shall to
the extent thereof be in full satisfaction of all claims hereunder against the
Plan Administrator and the Company, either of whom may require such Participant
or beneficiary, as a condition to such payment, to execute a receipt and release
therefor in such form as shall be determined by the Plan Administrator or the
Company.  If receipt and release is required but the Participant or
beneficiary (as applicable) does not provide such receipt and release in a
timely enough manner to permit a timely distribution in accordance with the
general timing of distribution provisions in the Plan, the payment of any
affected distribution may be delayed until the Plan Administrator or the Company
receives a proper receipt and release.




Article
7




No Funding of Plan
Benefits




The
Company may establish a trust (known as a “grantor trust” within the meaning of
the Code) for the purpose of accumulating funds to satisfy the obligations
incurred by the Company under the Plan.  Notwithstanding the preceding
sentence, nothing herein shall require the Company to segregate or set aside any
funds or other property for the purpose of paying any benefits under the
Plan.  Nothing contained in this Plan, and no action taken pursuant to
its provisions by the Company or the Plan Administrator shall create, nor be
construed to create, a trust of any kind or a fiduciary relationship between the
Company and the Participant, his beneficiary, or any other
person.  Benefits hereunder shall be paid from assets which shall
continue, for all purposes, to be a part of the general, unrestricted assets of
the Company.  The obligation of the Company hereunder shall be an
unfunded and unsecured promise to pay money in the future.  To the
extent that the Participant or his beneficiary is entitled to receive payments
from the Company under the provisions hereof, such right shall be no greater
than the right of any unsecured general creditor of the Company; no such person
shall have nor acquire any legal or equitable right, interest or claim in or to
any property or assets of the Company.  It is intended that the Plan
be unfunded for tax purposes and for purposes of Title I of ERISA.




Article
8




Plan
Administrator




8.1  Plan Administrator’s
Duties.  Except as otherwise specifically provided and in
addition to the powers, rights and duties specifically given to the Plan
Administrator elsewhere in the Plan, the Plan Administrator shall have the
following discretionary powers, rights and duties:




(a)  To
construe and interpret the Plan, to decide all questions of Plan eligibility, to
determine the amount, manner and time of payment of any benefits under the Plan,
and to remedy ambiguities, inconsistencies or omissions in its sole and complete
discretion.




(b)  To adopt
such rules of procedure as may be necessary for the efficient administration of
the Plan and as are consistent with the Plan, and to enforce the Plan in
accordance with its terms and such rules.




(c)  To make
determinations as to the right of any person to a benefit, to afford any person
dissatisfied with such determination the right to a hearing thereon, and to
direct payments or distributions in accordance with the provisions of the
Plan.




(d)  To
furnish the Company and Participants with such information as may be required by
them for tax or other purposes in connection with the Plan.




(e)  To enroll
Participants in the Plan, distribute and receive Plan administration forms and
comply with all applicable governmental reporting and disclosure
requirements.




(f)  To employ
agents, attorneys, accountants, actuaries or other persons (who also may be
employed by the Company), and to allocate or delegate to them such powers,
rights and duties as the Plan Administrator considers necessary or advisable to
properly carry out the administration of the Plan, provided that any such
allocation or delegation and the acceptance thereof must be in
writing.




(g)  To report
at least annually to the Board any significant problems which have developed in
connection with the administration of the Plan and any recommendations which the
Plan Administrator may have as to the amendment of the Plan or the modification
of Plan administration.  At least once for each Plan Year, the Plan
Administrator shall cause a statement of a Participant’s Deferral Contribution
Account balance to be distributed to the Participant.







8.2  Action by
Administrator.  If a committee is serving as Plan
Administrator, any action by the committee will be subject to the following
provisions:




(a)  The
committee may act by meeting (including a meeting from different locations by
telephone conference) or by document signed without meeting, and documents may
be signed through the use of a single document or concurrent documents;
provided, action shall be taken only upon the vote or other affirmative
expression of a majority of the committee members qualified to vote with respect
to such action.




(b)  A
committee member by writing may delegate part or all of his rights, powers,
duties and discretion to any other committee member, with such other committee
member’s consent.




(c)  No member
of the committee shall be liable or responsible for an act or omission of other
committee members in which the former has not concurred.




(d)  The
committee shall choose a secretary who shall keep minutes of the committee’s
proceedings and all records and documents pertaining to the administration of
the Plan.  The secretary may execute any certificate or other written
direction on behalf of the committee.




8.3  Information Required for
Plan Administration.  The Company shall furnish the Plan
Administrator with such data and information as the Plan Administrator considers
necessary or desirable to perform its duties with respect to Plan
administration.  The records of the Company as to a Participant’s
period or periods of service and Compensation will be conclusive on all persons
unless determined to the Plan Administrator’s satisfaction to be
incorrect.  Participants and other persons entitled to benefits under
the Plan also shall furnish the Plan Administrator with such evidence, data or
information as the Plan Administrator considers necessary or desirable for the
Plan Administrator to perform its duties with respect to Plan
administration.




8.4  Decision of Plan
Administrator Final.  Subject to applicable law and Article 6,
any interpretation of the provisions of the Plan and any decision on any matter
within the discretion of the Plan Administrator made by the Plan Administrator
in good faith shall be binding on all persons.  A misstatement or
other mistake of fact shall be corrected when it becomes known and the Plan
Administrator shall make such adjustment on account thereof as the Plan
Administrator considers equitable and practicable.




8.5  Indemnification.  No
person (including any present or former director, officer or employee of the
Company) shall be personally liable for any act done or omitted to be done in
good faith in the administration of the Plan.  Each present or former
director, officer or employee of the Company to whom the Company has delegated
any portion of its responsibilities under the Plan shall be indemnified and
saved harmless by the Company (to the extent not indemnified or saved harmless
under any liability insurance or other indemnification arrangement with respect
to the Plan) from and against any and all claims of liability to which they are
subjected by reason of any act done or omitted to be done in good faith in
connection with the administration of the Plan, including all expenses
reasonably incurred in their defense if the Company fails to provide such
defense.




Article
9




Action by
Company




Any
action required or permitted of the Company under the Plan shall be by
resolution of its Board or by a duly authorized committee of its Board, or by a
person or persons authorized by resolution of its Board or such
committee.







Article
10




Amendment and
Termination




10.1  Amendment.  While
the Company expects and intends to continue the Plan, the Company must
necessarily reserve and hereby does reserve the right to amend the Plan from
time to time.  Any amendment of the Plan will be by resolution of the
Board or any committee of the Board to whom such authority has been
delegated.  No amendment shall reduce the value of a Participant’s
Deferral Contribution Account balance to less than the amount (as subsequently
adjusted for earnings and losses attributable thereto) he would be entitled to
receive if he had become entitled to receive a distribution under Section 5.1 on
the day of the amendment.




10.2  Termination. The Plan
will terminate on the first to occur of the following:




(a)  The date
it is terminated by the Company.




(b)  The date
the Company is judicially declared bankrupt or insolvent.




(c)  The
dissolution, merger, consolidation or reorganization of the Company, or the sale
of all or substantially all of its assets, except that in any such event
arrangements may be made whereby the Plan will be continued by any successor to
the Company or any purchaser of all or substantially all of its assets without a
termination thereof, in which case the successor or purchaser will be
substituted for the Company under the Plan.




10.3  Distribution on
Termination.  On termination of the Plan, each affected
Participant’s Deferral Contribution Account shall be distributed in a lump sum
payment as soon as practicable after the date the Plan is
terminated.  The amount of any such distribution shall be determined
as of the business day on which such distribution is processed.  For
purposes of this Section, the “business day on which such distribution is
processed” refers to the business day established for such purpose by
administrative practice, even if actual payment is made at a later date due to
delays in valuation, administration or any other procedure.  Such
determination shall be binding on all Participants and
beneficiaries.




Article
11




General
Provisions




11.1  Notices.  Unless
the Plan provides otherwise, any notice or document relating to the Plan
required to be given to or filed with the Plan Administrator or the Company
shall be considered as given or filed at such time and in such form as required
or permitted in accordance with uniform procedures adopted by the Plan
Administrator.




11.2  Nonalienation of Plan
Benefits.  To the extent permitted by applicable law, the
rights or interests of any Participant or any Participant’s beneficiaries to any
benefits or future payments under the Plan shall not be subject to attachment or
garnishment or other legal process by any creditor of any such Participant or
beneficiary nor shall any such Participant or beneficiary have any right to
alienate, anticipate, commute, pledge, encumber or assign any of the benefits or
rights which he may expect to receive under the Plan, except as may be required
by the tax withholding provisions of the Code or a state’s income tax act.




11.3  Payment with Respect to
Incapacitated Persons.  If any person entitled to benefits
under the Plan is under a legal disability or, in the Plan Administrator’s
opinion, is incapacitated in any way so as to be unable to manage his financial
affairs, the Plan Administrator may direct the payment of such benefits to such
person’s legal representative or to a relative or friend of such person for such
person’s benefit, or the Plan Administrator may direct the application of such
benefit for the benefit of such person in any manner which the Plan
Administrator may select that is consistent with the Plan.  Any
payments made in accordance with the foregoing provisions of this Section 11.3
shall be a full and complete discharge of any liability for such
payments.




11.4  No Benefit
Guaranty.  None of the establishment of the Plan, any
modification thereof, the creation of any fund or account, or the payment of any
benefits shall be construed as giving to any Participant or other person any
legal or equitable right against the Company or the Plan Administrator except as
provided herein.




11.5  Litigation.  In
any action or proceeding regarding any Plan benefits or the administration of
the Plan, directors or former directors of the Company, their beneficiaries and
any other persons claiming to have an interest in the Plan shall not be
necessary parties and shall not be entitled to any notice of
process.  Any final judgment which is not appealed or appealable and
which may be entered in any such action or proceeding shall be binding and
conclusive on the parties hereto and on all persons having or claiming to have
any interest in the Plan.  Acceptance of participation in the Plan
shall constitute a release of the Company, the Plan Administrator and its agents
from any and all liability and obligation not involving willful misconduct or
gross neglect.







11.6  Headings.  The
headings of the various Articles and Sections in the Plan are solely for
convenience and shall not be relied upon in construing any provisions hereof.
Any reference to a Section shall refer to a Section of the Plan unless specified
otherwise.




11.7  Evidence.  Evidence
required of anyone under the Plan shall be signed, made or presented by the
proper party or parties and may be by certificate, affidavit, document or other
information which the person acting thereon considers pertinent and
reliable.




11.8  Gender and
Number.  Words denoting the masculine gender shall include the
feminine and neuter genders, the singular shall include the plural and the
plural shall include the singular wherever required by the context.




11.9  Waiver of
Notice.  Any notice required under the Plan may be waived by
the person entitled to notice.




11.10  Applicable
Law.  The Plan shall be construed in accordance with the laws
of the State of Michigan.




11.11  Severability.  Whenever
possible, each provision of the Plan shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of the Plan is
held to be invalid, illegal or unenforceable in any respect under any applicable
law or rule in any jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision or any other jurisdiction, and the Plan
shall be reformed, construed and enforced in such jurisdiction so as to best
give effect to the intent of the Company under the Plan.




11.12  Withholding for
Taxes.  Notwithstanding any other provisions of the Plan, the
Company may withhold from any payment to be made under the Plan such amount or
amounts as may be required for purposes of complying with the tax withholding
provisions of the Code, any state or local income tax act or any applicable
similar laws.




11.13  Successors.  The
Plan is binding on all persons entitled to benefits hereunder and their
respective heirs and legal representatives, and on the Company and its
successor, whether by way of merger, consolidation, purchase or
otherwise.




11.14  Effect on Other Benefit
Plans.  Any benefit paid or payable under this Plan shall not
be included in compensation for purposes of computing benefits under any benefit
plan maintained or contributed to by the Company except as may otherwise be
required under the terms of such benefit plan.




BORDERS
GROUP, INC.
 NON-QUALIFIED
DEFERRED COMPENSATION PLAN
 
 TABLE
OF CONTENTS
 Page


ARTICLE 1
            INTRODUCTION
            1




1.1
            Purpose
      of the Plan, Effective Date
            1




1.2
            Plan
      Administrator, Plan Year
            1




1.3
            Supplements
            1




ARTICLE
      2
            PLAN
      PARTICIPATION
            1




2.1
            Eligibility
            1




2.2
            Participation
            1




2.3
            Cessation
      of Active Participation
            1




ARTICLE
      3
            PARTICIPANTS’
      DEFERRAL CONTRIBUTION ACCOUNTS; DEFERRALS AND
    CREDITING
            2




3.1
            Participants’
      Deferral Contribution Accounts
            2




3.2
            Deferral
      Contributions
            2




3.3
            Deferral
      Election
            3




3.4
            Debiting
      of Distributions and Forfeitures
            3




3.5
            Crediting
      of Earnings or Losses on Contributions
            3




3.6
            Errors
      in Deferral Contribution Accounts
            4




ARTICLE
      4
            INVESTMENT
      FUNDS
            4




4.1
            Selection
      by Plan Administrator
            4




4.2
            Participant
      Direction of Deemed Investments
            4




ARTICLE
      5
            PAYMENT
      OF DEFERRAL CONTRIBUTION ACCOUNT BALANCES
            5




5.1
            Benefit
      Payments Upon Termination of Service
            5




5.2
            Form
      of Distribution
            5




5.3
            In-Service
      Distributions
            6




5.4
            Beneficiary
      Designation
            7




ARTICLE
      6
            CLAIMS
            7




6.1
            Initial
      Claim
            7




6.2
            Appeal
            7




6.3
            Satisfaction
      of Claims
            8




ARTICLE
      7
            NO
      FUNDING OF PLAN BENEFITS
            8




ARTICLE
      8
            PLAN
      ADMINISTRATOR
            8




8.1
            Plan
      Administrator’s Duties
            8




8.2
            Action
      by Administrator
            9




8.3
            Information
      Required for Plan Administration
            9




8.4
            Decision
      of Plan Administrator Final
            10




8.5
            Indemnification
            10




ARTICLE
      9
            ACTION
      BY COMPANY
            10




ARTICLE
      10AMENDMENT AND TERMINATION10




10.1
            Amendment
            10




10.2
            Termination
            10




10.3
            Distribution
      on Termination
            11




ARTICLE
      11GENERAL PROVISIONS11




11.1
            Notices
            11




11.2
            Nonalienation
      of Plan Benefits
            11




11.3
            Payment
      with Respect to Incapacitated Persons
            11




11.4
            No
      Benefit Guaranty
            11




11.5
            Litigation
            11




11.6
            Headings
            12




11.7
            Evidence
            12




11.8
            Gender
      and Number
            12




11.9
            Waiver
      of Notice
            12




11.10Applicable
      Law12




11.11Severability12




11.12Withholding
      for Taxes12




11.13Successors12




11.14Effect
      on Other Benefit Plans12