Document:

<PAGE>   1
                                                                    EXHIBIT 10.4

                                AMENDMENT TO THE
                     BORDERS GROUP, INC. STOCK OPTION PLAN

         The Borders Group, Inc. Stock Option Plan (the "Plan"), as restated in
the Proxy Statement of Borders Group, Inc. (the "Company") dated April 9, 1997
and approved by the shareholders of the Company on May 15, 1997, is hereby
amended as follows pursuant to a resolution duly adopted by the Board of
Directors of the Company:

1. Section 8 of the Plan is amended in its entirety to read as follows:

   8. Term of Plan.  No option shall be granted under the Plan after December
   31, 2005. Options granted on or before December 31, 2005, however, may extend
   beyond such date and the provisions of the Plan shall continue to apply
   thereto. Notwithstanding the foregoing, no option may be granted after
   December 31, 2000 to any executive officer or director of the Company in
   contravention of any applicable rule of the New York Stock Exchange.

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

                                             BORDERS GROUP, INC.

                                             By:  /s/
                                                  ------------------------

December 14, 2000<PAGE>   1
                                                                    EXHIBIT 10.7

                                    AGREEMENT

                  THIS AGREEMENT ("Agreement") dated as of January 25, 2001, by
and among KMART CORPORATION, a Michigan corporation ("Kmart"), having an address
at 3100 West Big Beaver Road, Troy, Michigan 48084, BORDERS GROUP, INC., a
Michigan corporation ("BGI"), and BORDERS, INC., a Colorado corporation
("Borders"), each of BGI and Borders having an address at 100 Phoenix Drive, Ann
Arbor, Michigan 48108.

                  A. Borders is a wholly-owned subsidiary of BGI.

                  B. Prior to the date hereof, Borders entered into certain
leases, as tenant, with various landlords, which leases are described on
Schedule "1", Schedule "2" and Schedule "3" attached hereto and incorporated
herein by this reference (the "Leases"), for certain real properties described
in the Leases and referenced by street address on said Schedules "1", "2" and
"3".

                  C. Prior to the date hereof, Kmart executed certain lease
guaranty agreements pursuant to which Kmart guaranteed certain obligations of
Borders under the Leases (the "Guaranties").

                  D. Prior to the date hereof, Kmart, Borders and BGI entered
into that certain Lease Guaranty, Indemnification and Reimbursement Agreement,
dated May 24, 1995 (the "LGIRA"), whereby Borders and BGI agreed, among other
things, to indemnify Kmart in connection with the obligations of Borders under
the Leases and to accept certain financial and other covenants in favor of
Kmart.

                  E. Borders and BGI have requested that Kmart waive certain
requirements of Borders and BGI under the LGIRA in consideration of the
agreement of BGI and Borders to cause Kmart to be released from certain of the
Guaranties, and Kmart desires to satisfy such request, subject to and in
accordance with the terms and conditions of this Agreement.

                  NOW, THEREFORE, in consideration of the foregoing recitals and
for other good and valuable consideration the receipt and sufficiency of which
is hereby acknowledged, Kmart, BGI and Borders agree as follows:

         1. Release of Kmart from Obligations under the Leases and Related
            Guaranties.

                  1.1 Group A Leases. As soon as practicable after the date
hereof but in no event later than April 15, 2001, BGI shall cause Ernst & Young
LLP (or another national accounting firm) to prepare audited financial
statements (the "Financial Statements") for Walden Book Company, Inc., a
wholly-owned subsidiary of BGI ("Walden"), as of the end of Walden's current
fiscal year. If the Financial Statements confirm that Walden has a tangible net
worth in excess of $250 million, then (i) Borders shall promptly, after receipt
of the Financial Statements, assign the Leases described on Schedule "1"
attached hereto and incorporated herein by this reference (the "Group A Leases")
to Walden, and Walden shall assume the Group A Leases pursuant

<PAGE>   2

to an Assignment and Assumption Agreement with respect to each Group A Lease in
the form of Exhibit A attached hereto and incorporated herein by this reference
(the "Assignment Agreement"), and (ii) Walden shall send to the landlords under
the Group A Leases the Financial Statements, the Assignment Agreements and the
other documentation set forth in Exhibit B; provided, however, that the
foregoing requirements set forth in clauses (i) and (ii) shall not apply to any
Group A Lease as to which, subsequent to the date hereof, the applicable Kmart
Guaranty shall have previously been released; and, provided further, that,
notwithstanding the foregoing, in the case of the Group A Lease for the premises
in Aventura, Florida (Reference No. 83 on Schedule "1" hereto), in lieu of
taking the actions referenced in clauses (i) and (ii) of this sentence, BGI
shall guarantee to the applicable ground lessor the obligations of the ground
lessee under the underlying ground lease and shall provide such ground lessor
evidence that BGI's net worth exceeds $250 million and notice that BGI's
replacement guaranty has caused the termination of the applicable Guaranty from
Kmart. If the Financial Statements do not confirm that Walden has a net worth in
excess of $250 million, then this Agreement shall terminate and be of no further
force or effect, except with respect to the obligations of BGI and Borders
pursuant to Section 3 hereof.

                  1.2 Group B Leases. Commencing upon BGI's delivery of the
Financial Statements to Kmart pursuant to Section 1.1 to confirm that Walden's
tangible net worth exceeds $250 million, except to the extent the applicable
Guaranty shall have previously been released subsequent to the date hereof, BGI
and Borders shall use their reasonable best efforts (without the payment of
money other than for their own overhead and for the fees of their own counsel,
advisors, representatives and other third party service providers representing
BGI or Borders, and without being required to take any action other than as
described in the following clauses (i), (ii), (iii) and (iv)) to cause Kmart to
be fully, absolutely and unconditionally released from any and all obligations
and liabilities under the Leases described on Schedule "2" attached hereto and
incorporated herein by this reference (the "Group B Leases") and the related
Guaranties by (i) offering in writing (each such offer, a "BGI Guaranty Offer")
to each landlord under the Group B Leases, as a substitute for the applicable
Kmart Guaranty and in exchange for such landlord's release of Kmart as
aforesaid, a guaranty from BGI of the obligations of Borders under such
landlord's Group B Lease, (ii) responding diligently to requests for information
(including, without limitation, financial statements of BGI) and other queries
by landlords under the Group B Leases in connection with the BGI Guaranty Offer,
(iii) negotiating in good faith the terms of any guaranty to be issued by BGI,
and (iv) keeping Kmart apprised as to the progress of their efforts under this
Section 1.2 and seeking to effect and evidence any releases obtained pursuant to
this Section 1.2 with documentation in form and substance acceptable to Kmart in
Kmart's sole and absolute discretion.

                  1.3 Group C Leases. Each of BGI and Borders represents and
warrants that Kmart has been fully, absolutely and unconditionally released from
any and all obligations and liabilities under the Leases described on Schedule
"3" attached hereto and incorporated herein by this reference (the "Group C
Leases") and the related Guaranties pursuant to notices referenced in Schedule
"4".

                  1.4 Continuing Obligation. The rights and obligations of the
parties set forth in Sections 1.1 and 1.2 shall survive the effective date of
the Amendment (as defined below), if

<PAGE>   3

any, and shall continue until Kmart has been fully, absolutely and
unconditionally released from any and all obligations and liabilities under the
Leases and the related Guaranties.

         2. Amendment of LGIRA.

                  2.1 Conditions. BGI, Borders and Kmart have executed an
amendment to the LGIRA in the form of Exhibit C attached hereto and incorporated
herein by this reference (the "Amendment"), which Amendment has been delivered
to Skadden, Arps, Slate, Meagher & Flom ("Escrow Agent") to be held in escrow
pending satisfaction of the following conditions (the "Conditions"):

                      (a)  BGI shall have delivered the Financial Statements to
                           Kmart and the Financial Statements shall disclose
                           that Walden's tangible net worth exceeds $250
                           million;

                      (b)  The Assignment Agreement shall have been executed by
                           Borders and Walden, to the extent required under
                           Section 1.1 hereof;

                      (c)  Borders shall have sent to each landlord under the
                           Group A Leases a copy of the Financial Statements,
                           the applicable Assignment Agreement and the other
                           documentation (if any) set forth in Exhibit B, in
                           accordance with the provisions of Section 1.1 (or, in
                           the case of the Group A Lease for the Aventura,
                           Florida premises, the other documentation required
                           under Section 1.1 above);

                      (d)  BGI and Borders shall have sent a BGI Guaranty Offer
                           to each landlord under the Group B Leases as required
                           under Section 1.2; and

                      (e)  During the 120 day period following satisfaction of
                           the Condition set forth in clause (c) above (the
                           "Objection Period"), Objection Notices (as defined
                           below) shall have been received by the parties hereto
                           (and shall not have been withdrawn by the applicable
                           landlords) in respect of no more that seven Group A
                           Leases; provided, however, that if Objection Notices
                           shall have been received by any of the parties hereto
                           (and not withdrawn) during the Objection Period in
                           respect of more that seven Group A Leases but any one
                           or more of such Objection Notices shall have been
                           withdrawn in writing within 95 days following the end
                           of the Objection Period such that there shall be
                           seven or fewer Group A Leases in respect of which
                           Objection Notices are outstanding, then the Condition
                           set forth in this clause (e) shall be deemed to have
                           been satisfied as of the date following the Objection
                           Period on which there are seven or fewer Group A
                           Leases in respect of which Objection Notices are
                           outstanding. The term "Objection Notice" shall mean,
                           collectively, one or more notices from a landlord
                           under a Group A Lease which are received by any of
                           the parties hereto during the

<PAGE>   4

                           Objection Period and which contest the termination of
                           the Guaranty applicable to such landlord's Group A
                           Lease.

If any of the parties hereto shall receive an Objection Notice it shall promptly
provide written notice thereof (including a copy thereof) to the other parties
hereto and to Escrow Agent. The parties hereto and Escrow Agent have executed a
separate agreement of even date herewith to evidence the agreement of Escrow
Agent to hold the Amendment in trust in accordance with the terms hereof and to
release the Amendment to Kmart and BGI upon receipt of notice from BGI or Kmart
certifying that the Conditions have been satisfied. The Amendment shall not be
effective until it is released by Escrow Agent, and Escrow Agent is hereby
directed to date the Amendment (by filling in the date in the first paragraph
thereof) as of the date of its release from escrow (the "Effective Date").

                  2.2 Alternative Arrangement. If the Conditions shall have been
satisfied but Objection Notices in respect of more than three Group A Leases
shall have been received by any of the parties hereto prior to the Effective
Date, then (x) Borders and BGI shall exercise their reasonable best efforts
(without the payment of money other than for their own overhead and for the fees
of their own counsel, advisors, representatives and other third party service
providers representing BGI or Borders) to cause each landlord who issued an
Objection Notice to withdraw its Objection Notice by offering to provide such
landlord a guaranty from BGI of the tenant's obligations under such landlord's
Group A Lease and by taking such other actions as Borders or BGI shall determine
in their sole discretion to be appropriate, and (y) if, despite such efforts
described in clause (x), there shall remain more than three Group A Leases in
respect of which Objection Notices are outstanding on the date which is 90 days
after the Effective Date, then BGI or Borders shall provide Kmart an Acceptable
Letter of Credit (as defined below) as security for the obligation of Borders
and BGI under Section 2 of the LGIRA to indemnify Kmart for any payments Kmart
makes under any of the Guaranties. An "Acceptable Letter of Credit" shall be a
letter of credit which: (i) is issued by a national bank; (ii) has a face amount
equal to the lesser of (A) $3 million and (B) the product of (x) Six Hundred
Seven Thousand Four Hundred Thirty-Five Dollars ($607,435) multiplied by (y) the
number of Group A Leases in excess of three in respect of which Objection
Notices remain outstanding at the expiration of the aforesaid 90 day period
commencing on the Effective Date; (iii) shall be renewed annually for five years
following the Effective Date; and (iv) is otherwise in form and substance
reasonably acceptable to Kmart.

         3. Payment of Legal Fees. BGI and Borders shall reimburse Kmart from
time to time for legal fees and costs incurred by Kmart in connection with this
Agreement, including legal fees and costs relating to: (i) review of the
Guaranties for termination rights, (ii) negotiation and drafting of this
Agreement and the Amendment, (iii) review of documentation effecting and
evidencing the release of Kmart from any and all obligations and liabilities
under the Leases and related Guaranties, and (iv) enforcement of the parties'
respective rights and obligations under this Agreement; provided, however, that
in no event shall BGI or Borders be required to reimburse Kmart more than
Fifty-Eight Thousand Dollars ($58,000) for legal fees and costs incurred
pursuant to subsections (i), (ii) and (iii) of this Section 3. There shall be no
such cap with respect to fees and costs incurred by Kmart pursuant to subsection
(iv) hereof. The obligations of the parties set forth in this Section 3 shall
survive termination of this Agreement pursuant to Sections 1.1 or 4.10 hereof,
with respect to fees and costs incurred pursuant to subsections (i), (ii) and
(iii)

<PAGE>   5

prior to the termination of the Agreement, and with respect to fees and costs
incurred pursuant to subsection (iv), whenever incurred.

         4. Miscellaneous.

                  4.1 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given upon receipt if delivered personally or sent by facsimile
transmission (receipt of which is confirmed) or by courier service promising
overnight delivery (with delivery confirmed the next day) or three (3) Business
Days after sent by registered or certified mail (postage prepaid, return receipt
requested). Notices shall be addressed as follows:

To Kmart:                  Kmart Corporation
                           3100 West Big Beaver Road
                           Troy, Michigan  48084-33163
                           Attention:   General Counsel
                           Facsimile:   (248) 643-1054
                                        Treasurer
                           Facsimile:   (248) 643-5398

With a copy to:            Skadden, Arps, Slate,
                           Meagher & Flom (Illinois)
                           333 West Wacker Drive
                           Chicago, Illinois  60606
                           Attention:   John Wm. Butler, Jr., Esq.
                                        Marian P. Wexler, Esq.
                           Facsimile:   (312) 407-0411

To BGI or Borders:         Borders Group, Inc.
                           100 Phoenix Drive
                           Ann Arbor, Michigan  48108
                           Attention:   General Counsel
                           Facsimile:   (734) 477-1285

With a copy to:            Wachtell, Lipton, Rosen & Katz
                           51 West 52nd Street
                           New York, New York  10019
                           Attention:   Richard D. Katcher, Esq.
                                        Robin Panovka, Esq.
                           Facsimile:   (212) 403-2000

Any party may from time to time change its address for the purpose of notices by
a similar notice specifying the new address but no such change shall be
effective as against any person or entity until such person or entity shall have
actually received it.

                  4.2 Final Agreement. This Agreement contains the final and
entire agreement among the parties with respect to the transactions contemplated
hereby and supersedes all written or verbal representations, warranties,
commitments and other understandings prior to the date

<PAGE>   6

hereof. No reference shall be made to any draft of this Agreement for purposes
of interpretation or resolution of ambiguity or otherwise.

                  4.3 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

                  4.4 Unenforceability. If any provision hereof shall be held to
be unenforceable or invalid by any court of competent jurisdiction or as a
result of future legislative action, such holding or action shall be strictly
construed and shall not alter the enforceability, validity or effect of any
other provision hereof.

                  4.5 Successors and Assigns. This Agreement shall be binding
upon, inure to the benefit of, and be enforceable by, the parties hereto and
their respective successors and permitted assigns; provided, however, that in no
event shall any party to this Agreement assign or transfer any of its right,
title or interest in or to this Agreement without the written consent of the
other parties to this Agreement, which consent may be withheld in the sole and
absolute discretion of such parties.

                  4.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Michigan.

                  4.7 Further Actions. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all commercially
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable, whether under
applicable laws and regulations or otherwise, to make effective the transactions
contemplated by this Agreement. If at any time after the date hereof any further
action is necessary or desirable to carry out the purposes of this Agreement,
the parties hereto shall take or cause to be taken all such necessary action,
including the execution and delivery of such further instruments and documents
as may be reasonably requested by the other party for such purposes or otherwise
to make effective the transactions contemplated hereby.

                  4.8 Interpretation. The term "including" (and with correlative
"include") shall mean including without limiting the generality of any
description preceding such term.

                  4.9 Amendment. This Agreement may be amended only by a written
instrument duly executed by a duly authorized officer of each of the parties
hereto.

                  4.10 Termination. If this Agreement shall be terminated
pursuant to Sections 1.1 or if the Condition set forth in Section 2.1(e) hereof
shall not have been satisfied by the first anniversary of the date of the
satisfaction of the Condition set forth in Section 2.1(c), then Escrow Agent
shall promptly destroy the Amendment and this Agreement (including Section 1.4
hereof) shall terminate as of such date and the parties shall have no further
obligation hereunder, except with respect to the obligations of BGI and Borders
pursuant to Section 3 hereof.

                  4.11 Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any manner the
meaning or interpretation of this Agreement.

<PAGE>   7

                  IN WITNESS WHEREOF, the undersigned have executed and
delivered this Agreement as of the date first written above.

                                          KMART CORPORATION

                                          By:/s/
                                             ---------------------------------
                                             Name:
                                             Title:

                                          BORDERS GROUP, INC.

                                          By:/s/
                                             ---------------------------------
                                             Name:
                                             Title:

                                          BORDERS, INC.

                                          By:/s/
                                             ---------------------------------
                                             Name:
                                             Title:

<PAGE>   8

                                   EXHIBIT "A"

                       ASSIGNMENT AND ASSUMPTION OF LEASE

                  ASSIGNMENT AND ASSUMPTION OF LEASE (this "Assignment") dated
as of ____________________, 2001, between BORDERS, INC., a Colorado corporation
having an address at 100 Phoenix Drive, Ann Arbor, Michigan 48101 ("Assignor")
and WALDEN BOOK COMPANY, INC., a ____________________ corporation having an
address at [100 Phoenix Drive, Ann Arbor, Michigan 48108] ("Assignee").

                                   Background

                  Assignor has agreed to assign, and Assignee has agreed to
assume, from and after the date hereof, the obligations of the tenant under that
certain lease (the "Lease") dated ____________________, between Assignee, as
tenant, and ____________________, as landlord, with respect to premises located
at ____________________ [, as such lease has been amended by amendment[s] dated
___________________].

                            Assignment and Assumption

                  In consideration of Ten Dollars and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
Assignor and Assignee: (i) Assignor does hereby assign, transfer and set over
unto Assignee all of Assignor's right, title and interest in the Lease, and (ii)
Assignee does hereby assume the performance of all of the terms, covenants and
conditions of the Lease on Assignor's part to be performed thereunder from and
after the date hereof and agrees to perform all of the terms, covenants and
conditions of the Lease from and after the date hereof, all with the same force
and effect as though the Assignee had signed such Lease as the tenant named
therein.

                  TO HAVE AND TO HOLD, the same unto Assignee, its successors
and assigns, from and after the date hereof, subject to the terms, covenants,
conditions and provisions contained in the Lease.

                  This Assignment and Assumption of Lease shall inure to the
benefit of, and be binding upon, Assignor, Assignee and their respective
successors and assigns.

<PAGE>   9

                  IN WITNESS WHEREOF, the Assignor and Assignee have duly
executed this instrument as of the day first above written.

                                    ASSIGNOR:

                                    BORDERS, INC.

                                    By:/s/
                                       -----------------------------------------
                                       Name:
                                       Title:

                                    ASSIGNEE:

                                    WALDEN BOOK COMPANY, INC.

                                    By:/s/
                                       -----------------------------------------
                                       Name:
                                       Title:

<PAGE>   10

                                   EXHIBIT "B"

                              NOTICE OF ASSIGNMENT

[Borders Letterhead]

[Date]

VIA CERTIFIED MAIL
RETURN RECEIPT REQUESTED

[Landlord Name and Address]

         Re:      [Describe Lease] (the "LEASE")

Dear [Landlord]:

                  This notice is delivered to advise you that the
above-referenced Lease has been assigned by the tenant, Borders, Inc.
("BORDERS"), to Walden Book Company, Inc. ("WALDEN"), an affiliate of Borders,
effective on [Effective Date of Assignment] (the "EFFECTIVE DATE"). Copies of
the Assignment and Assumption Agreement between Borders and Walden and the
audited financial statements for Walden as of the end of its most recent fiscal
year are enclosed herewith.

                  As you can see, Walden's financial statements indicate that,
as of the end of its fiscal year 2000, it had a net worth in excess of
[$250,000,000/FOR #79 and #89 - $200,000,000] [FOR #89 - and has maintained its
net worth in excess of $200,000,000 continuously throughout the prior fiscal
year]. Therefore, Walden has satisfied the net worth requirements set forth in
the Lease Guaranty Agreement dated [Date] between [Landlord] and Kmart
Corporation (the "GUARANTY"), and this letter shall constitute notice that the
Guaranty is hereby terminated as of the Effective Date.

                  Please address any and all notices and other communications to
the tenant under or in connection with the Lease to Walden at the address of the
tenant set forth in the Lease or otherwise provided to you pursuant to the terms
of the Lease. Thank you in advance for your cooperation.

                                                     Very Truly Yours,

                                                     BORDERS, INC.

                                                     By:/s/
                                                        ------------------------

cc:      Kmart Corporation

<PAGE>   11

                                   EXHIBIT "C"

 FIRST AMENDMENT TO LEASE GUARANTY, INDEMNIFICATION AND REIMBURSEMENT AGREEMENT

                  THIS FIRST AMENDMENT TO LEASE GUARANTY, INDEMNIFICATION AND
REIMBURSEMENT AGREEMENT ("Amendment") is made as of the _____ day of
___________, 2000, by and among KMART CORPORATION, a Michigan corporation
("Kmart"), having an address at 3100 West Big Beaver Road, Troy, Michigan 48084,
BORDERS GROUP, INC., a Michigan corporation ("BGI"), and BORDERS, INC., a
Colorado corporation ("Borders"), each of BGI and Borders having an address at
100 Phoenix Drive, Ann Arbor, Michigan 48108.

                  A. Prior to the date hereof, Kmart, Borders and BGI entered
into that certain Lease Guaranty, Indemnification and Reimbursement Agreement,
dated May 24, 1995 (the "LGIRA"), whereby Borders and BGI agreed, among other
things, to indemnify Kmart in connection with the obligations of Borders under
the Leases (as defined in the LGIRA) and to accept certain financial and other
covenants in favor of Kmart.

                  B. Prior to the date hereof, Kmart, Borders and BGI entered
into that certain Agreement, dated January ___, 2001 (the "Agreement"), whereby
Kmart agreed to amend the LGIRA upon the satisfaction of certain conditions set
forth in Section 2 of the Agreement.

                  C. The conditions set forth in Section 2 of the Agreement have
been satisfied, and thus Kmart, Borders and BGI desire to amend the LGIRA in
accordance with the Agreement.

                  NOW, THEREFORE, in consideration of the foregoing recitals and
for other good and valuable consideration the receipt and sufficiency of which
is hereby acknowledged, Kmart, BGI and Borders agree as follows:

         1.       Representation of Satisfaction of Conditions. Each of Borders
and BGI represent and warrant to Kmart that the conditions set forth in Section
2 of the Agreement have been fully satisfied. Without limiting the foregoing
sentence, BGI and Borders are unconditionally and irrevocably committed to
continue to take the actions required under Section 1.2 of the Agreement to seek
to cause Kmart to be fully, absolutely and unconditionally released from any and
all obligations and liabilities relating to the Group B Leases (as defined in
the Agreement) and related Guaranties (as defined in the Agreement).

         2.       Amendment of LGIRA. The LGIRA is amended as follows:

                        (a) Sections 5(a) and 5(b) of the LGIRA (other than the
                            definition of the term "Indebtedness") are hereby
                            deleted in their entirety;

                        (b) Clause (ii) of Section 5(c) is hereby deleted in its
                            entirety; and

                        (c) Clause (i) of Section 5(e) is hereby deleted in its
                            entirety.
<PAGE>   12

         3.      Prior Agreements/Conflicts. This Amendment contains all of the
agreements of the parties hereto with respect to the matters contained herein,
and no prior agreement (other than the Agreement and the LGIRA as modified by
this Amendment), arrangement or understanding pertaining to any of such matters
shall be effective for any purpose.

         4.      LGIRA Ratification. With the sole exception of the matters
expressly set forth in this Amendment, each and every one of the terms,
conditions, agreements and provisions of the LGIRA shall remain unchanged and in
full force and effect, and all of rights and obligations of the parties under
the LGIRA are hereby reaffirmed, ratified, and confirmed in their entirety.

         5.      Counterparts. This Amendment may be executed in several
counterparts and all such counterparts shall constitute one agreement binding on
the parties hereto.

         6.      Headings. The section headings contained in this Amendment are
for reference purposes only and shall not affect in any manner the meaning or
interpretation of this Amendment.

                     IN WITNESS WHEREOF, the undersigned have executed and
delivered this Amendment as of the date first written above.

                                      KMART CORPORATION

                                      By:/s/
                                         ---------------------------------------
                                         Name:
                                         Title:

                                      BORDERS GROUP, INC.

                                      By:/s/
                                         ---------------------------------------
                                         Name:
                                         Title:

                                      BORDERS, INC.

                                      By:/s/
                                         ---------------------------------------
                                         Name:
                                         Title:

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