Schedule 13D/A

0000950123-10-052043.txt : 20100521 0000950123-10-052043.hdr.sgml : 20100521 20100521171458 ACCESSION NUMBER: 0000950123-10-052043 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20100521 DATE AS OF CHANGE: 20100521 GROUP MEMBERS: BGP HOLDINGS CORP. GROUP MEMBERS: PERSHING SQUARE CAPITAL MANAGEMENT, L.P. GROUP MEMBERS: PERSHING SQUARE GP, LLC GROUP MEMBERS: PS MANAGEMENT GP, LLC GROUP MEMBERS: WILLIAM A. ACKMAN SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BORDERS GROUP INC CENTRAL INDEX KEY: 0000940510 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS SHOPPING GOODS STORES [5940] IRS NUMBER: 383294588 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-52269 FILM NUMBER: 10851841 BUSINESS ADDRESS: STREET 1: 100 PHOENIX DRIVE CITY: ANN ARBOR STATE: MI ZIP: 48108 BUSINESS PHONE: (734) 477-1100 MAIL ADDRESS: STREET 1: 100 PHOENIX DRIVE CITY: ANN ARBOR STATE: MI ZIP: 48108 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Pershing Square Capital Management, L.P. CENTRAL INDEX KEY: 0001336528 IRS NUMBER: 383694136 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 888 SEVENTH AVENUE STREET 2: 42ND FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 212-813-3700 MAIL ADDRESS: STREET 1: 888 SEVENTH AVENUE STREET 2: 42ND FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 SC 13D/A 1 c01602sc13dza.htm SCHEDULE 13D/A Schedule 13D/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934
(Amendment No. 12 )*

Borders Group, Inc.

(Name of Issuer)

Common Stock

(Title of Class of Securities)

099709107

(CUSIP Number)

Roy J. Katzovicz, Esq.
Pershing Square Capital Management, L.P.
888 Seventh Avenue, 42^nd Floor
New York, New York 10019
212-813-3700

(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)

with copies to:

Andrew G. Dietderich, Esq.
Alan J. Sinsheimer, Esq.
Sullivan & Cromwell LLP
125 Broad Street, New York, New York 10004
212-558-4000

May 20, 2010

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).


CUSIP No.		099709107

NAMES OF REPORTING PERSONS

Pershing Square Capital Management, L.P.

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

— 0 —

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

27,999,817

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

— 0 —

WITH

SHARED DISPOSITIVE POWER

27,999,817

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

27,999,817

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

31.5%¹

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

¹ This calculation is based on 88,965,637 shares of common stock of Borders Group, Inc. (the “Common Stock”). This figure is based on 71,563,800 shares of Common Stock outstanding as of May 21, 2010 as notified to the filing persons by Borders Group, Inc. plus warrants covering 17,401,837 shares of Common Stock.


CUSIP No.		099709107

NAMES OF REPORTING PERSONS

PS Management GP, LLC

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

— 0 —

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

27,999,817

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

— 0 —

WITH

SHARED DISPOSITIVE POWER

27,999,817

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

27,999,817

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

31.5%²

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

² This calculation is based on 88,965,637 shares of common stock of Borders Group, Inc. (the “Common Stock”). This figure is based on 71,563,800 shares of Common Stock outstanding as of May 21, 2010 as notified to the filing persons by Borders Group, Inc. plus warrants covering 17,401,837 shares of Common Stock.


CUSIP No.		099709107

NAMES OF REPORTING PERSONS

Pershing Square GP, LLC

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

— 0 —

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

17,481,370

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

— 0 —

WITH

SHARED DISPOSITIVE POWER

17,481,370

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

17,481,370

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

19.6%³

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

³ This calculation is based on 88,965,637 shares of common stock of Borders Group, Inc. (the “Common Stock”). This figure is based on 71,563,800 shares of Common Stock outstanding as of May 21, 2010 as notified to the filing persons by Borders Group, Inc. plus warrants covering 17,401,837 shares of Common Stock.


CUSIP No.		099709107

NAMES OF REPORTING PERSONS

William A. Ackman

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

U.S.A.

SOLE VOTING POWER

NUMBER OF

— 0 —

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

27,999,817

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

— 0 —

WITH

SHARED DISPOSITIVE POWER

27,999,817

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

27,999,817

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

31.5%⁴

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

⁴ This calculation is based on 88,965,637 shares of common stock of Borders Group, Inc. (the “Common Stock”). This figure is based on 71,563,800 shares of Common Stock outstanding as of May 21, 2010 as notified to the filing persons by Borders Group, Inc. plus warrants covering 17,401,837 shares of Common Stock.


CUSIP No.		099709107

NAMES OF REPORTING PERSONS

BGP Holdings Corp.

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

— 0 —

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

10,415,059

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

— 0 —

WITH

SHARED DISPOSITIVE POWER

10,415,059

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

10,415,059

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

11.7%⁵

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

⁵ This calculation is based on 88,965,637 shares of common stock of Borders Group, Inc. (the “Common Stock”). This figure is based on 71,563,800 shares of Common Stock outstanding as of May 21, 2010 as notified to the filing persons by Borders Group, Inc. plus warrants covering 17,401,837 shares of Common Stock.

This Amendment No. 12 (this “Amendment No. 12”) amends and supplements the statement on Schedule 13D, as amended to date (the “Schedule 13D”), by (i) Pershing Square Capital Management, L.P., a Delaware limited partnership (“Pershing Square”), (ii) PS Management GP, LLC, a Delaware limited liability company (“PS Management”), (iii) Pershing Square GP, LLC, a Delaware limited liability company (“Pershing Square GP”), (iv) William A. Ackman, a citizen of the United States of America, and (v) BGP Holdings Corp., a Delaware corporation (collectively, the “Reporting Persons”), relating to the common stock (the “Common Stock”) of Borders Group, Inc., a Michigan corporation (the “Issuer”). Unless otherwise defined herein, capitalized terms used herein shall have such defined meanings as previously used in the Schedule 13D filed by the Reporting Persons.

As of May 21, 2010, as reflected in this Amendment No. 12, the Reporting Persons are reporting beneficial ownership on an aggregate basis of 27,999,817 shares of Common Stock (approximately 31.5% of the outstanding shares) (the “Subject Shares”). This includes warrants covering 17,401,837 shares of Common Stock (the “Warrants”), which represents 9,550,000 Warrants received on April 9, 2008, 5,150,000 Warrants received on October 1, 2008 (each, as previously disclosed) and 2,701,837 Warrants received on May 21, 2010 as disclosed herein. The Reporting Persons own cash settled total return equity swaps covering 4,376,163 notional shares of Common Stock (as previously disclosed). The notional shares that underlie such swaps are not included in the totals set forth in the charts earlier in the Schedule 13D. The aggregate economic exposure of the Reporting Persons to shares of Common Stock, including the aggregate shares of Common Stock beneficially owned by the Reporting Persons plus the aggregate notional shares underlying such swaps, represents approximately 36.4% of the sum of the outstanding shares of Common Stock and the shares of Common Stock underlying the Warrants.

Item 4. Purpose of Transaction

Item 4 is hereby supplemented, as follows:

On May 20, 2010, in anticipation of a Securities Purchase Agreement (the “Securities Purchase Agreement”) to be entered into between the Issuer and LeBow Gamma Limited Partnership (“LeBow”), BGP Holdings Corp., PSI, Pershing Square II, L.P. (“PSII”), the Issuer, and Computershare Inc. and Computershare Trust Company, N.A. (collectively, the “Warrant Agent”) entered into a letter agreement (the “Third Side Letter”) to amend the definition of the term “Change of Control Event” in the Warrant Agreement so as to allow the issuance of certain securities pursuant to the Securities Purchase Agreement and ancillary documentation without triggering the protections in the Warrant Agreement.

The Third Side Letter also confirms that, in accordance with the Warrant Agreement, BGP Holdings Corp., PSI and PSII will be issued (i) additional Warrants that are exercisable to acquire 2,701,837 shares of Common Stock, at an initial exercise price of $0.65 per share, subject to adjustment as provided in the Warrant Agreement, concurrently with the issuance to LeBow of 11,111,111 shares of Common Stock on or about May 21, 2010 as provided in the Securities Purchase Agreement; and (ii) Warrants that are exercisable to acquire 8,542,399 shares of Common Stock at an initial exercise price of $0.65 per share, subject to adjustment as provided in the Warrant Agreement, concurrently with the issuance to LeBow of a stock purchase warrant exercisable to acquire 35,130,000 shares of Common Stock or a stock appreciation right in lieu thereof.

The foregoing summary of the Third Side Letter and the transactions contemplated therein is not complete and is subject in its entirety to the Third Side Letter, which is filed as Exhibit 99.1 hereto and is incorporated herein by reference.

As previously reported, the Reporting Persons intend to review their holdings in the Issuer on a continuing basis. While none of the Reporting Persons has any present plan to acquire additional interests in the Issuer, one or more of them could determine, depending upon, among other things, current and anticipated future trading prices for the Issuer's securities, the financial condition, results of operations and prospects of the Issuer and its businesses, general economic, market and industry conditions, and the Reporting Persons' overall investment portfolio, strategic objectives and financial condition, to dispose of interests in the Issuer.

Item 5. Interest in Securities of the Issuer

Items 5(a) and (b) and are hereby amended and restated in their entirety, as follows: (a), (b) Based upon information provided to the Reporting Persons by the Issuer, there were 71,563,800 shares of Common Stock outstanding as of May 21, 2010 (following the issuance of the LeBow Shares to LeBow), and together with the Warrants covering 17,401,837 shares of Common Stock, there were 88,965,637 shares of Common Stock outstanding. Based on the foregoing, the shares (the “Subject Shares”) of Common Stock beneficially owned by the Reporting Persons represented approximately 31.5% of the shares of the Common Stock issued and outstanding as of the date hereof. The Reporting Persons own cash settled total return equity swaps covering 4,376,163 notional shares of Common Stock. The notional shares that underlie such swaps are not included in the totals set forth herein. The aggregate economic exposure of the Reporting Persons to shares of Common Stock, including the aggregate shares of Common Stock beneficially owned by the Reporting Persons plus the aggregate notional shares underlying such swaps, represents approximately 36.4% of the sum of the outstanding shares of Common Stock and the shares of Common Stock underlying the Warrants. Pershing Square, as the investment adviser to the Pershing Square Funds, may be deemed to have the shared power to vote or direct the vote of (and the shared power to dispose or direct the disposition of) the Subject Shares. As the general partner of Pershing Square, PS Management may be deemed to have the shared power to vote or to direct the vote of (and the shared power to dispose of or direct the disposition of) the Subject Shares. As the general partner of PSI and PSII (each of which has ownership interests in BGP Holdings Corp.), Pershing Square GP may be deemed to have the shared power to vote or to direct the vote of (and the shared power to dispose or direct the disposition of) the 17,481,370 shares of Common Stock (including the 17,401,837 shares of Common Stock underlying the Warrants) beneficially owned by PSI and PSII. BGP Holdings Corp. has the shared power to vote or to direct the vote of (and the shared power to dispose or direct the disposition of) the 10,415,059 shares of Common Stock underlying the 10,415,059 Warrants it beneficially owns. By virtue of William A. Ackman’s position as managing member of each of PS Management and Pershing Square GP, William A. Ackman may be deemed to have the shared power to vote or direct the vote of (and the shared power to dispose or direct the disposition of) the Subject Shares and, therefore, William A. Ackman may be deemed to be the beneficial owner of the Subject Shares.

Items 5(c) is hereby supplemented, as follows:

Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer

Item 6 is hereby supplemented, as follows:

On May 20, 2010, BGP Holdings Corp., PSI, PSII, the Issuer and the Warrant Agent entered into the Third Side Letter, which is summarized in Item 4 above, is filed as Exhibit 99.1 hereto and is incorporated herein by reference.

Item 7. Material to be Filed as Exhibits

Item 7 is hereby supplemented by adding the following exhibits:

Exhibit 99.1

Letter Agreement, dated May 20, 2010, between BGP Holdings Corp., Pershing Square, L.P., Pershing Square II, L.P., Borders Group, Inc., Computershare Inc. and Computershare Trust Company, N.A.

SIGNATURES

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete, and correct.


Date: May 21, 2010	PERSHING SQUARE CAPITAL MANAGEMENT, L.P. PS Management GP, LLC,
	By:	its General Partner


	By:	/s/ William A. Ackman
		William A. Ackman
		Managing Member

	PS MANAGEMENT GP, LLC
	By:	/s/ William A. Ackman
		William A. Ackman
		Managing Member

	PERSHING SQUARE GP, LLC
	By:	/s/ William A. Ackman
		William A. Ackman
		Managing Member


	/s/ William A. Ackman
	WILLIAM A. ACKMAN

	BGP HOLDINGS CORP.


	By:	/s/ William A. Ackman
		William A. Ackman
		Authorized Representative

EX-99.1 2 c01602exv99w1.htm EXHIBIT 99.1 Exhibit 99.1

Exhibit 99.1

May 20, 2010

Borders Group, Inc.
100 Phoenix Drive
Ann Arbor, Michigan 48108

Computershare Inc.
Computershare Trust Company, N.A.
250 Royall Street
Canton, Massachusetts 02021

Re: Amendment of Warrant and Registration Rights Agreement.

Ladies and Gentlemen:

Borders Group, Inc., a Michigan corporation (the “Company”), and Computershare Inc., a Delaware corporation, and its wholly-owned subsidiary, Computershare Trust Company, N.A., a federally-chartered trust company (collectively, the “Warrant Agent”), are parties to a Warrant and Registration Rights Agreement dated as of April 9, 2008, as amended (the “Warrant Agreement”). Except as otherwise provided herein, all capitalized terms used without definition herein have the respective meanings provided in the Warrant Agreement.

BGP Holdings Corp., Pershing Square, L.P. and Pershing Square II, L.P. (collectively, “Pershing Square”) are the record holders and beneficial owners of all 14,700,000 outstanding Warrants issued pursuant to the Warrant Agreement.

The Company proposes to enter into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with LeBow Gamma Limited Partnership, a Delaware limited partnership (the “Purchaser”). Pursuant to the Securities Purchase Agreement, the Company expects to issue to the Purchaser 11,111,111 shares (the “Purchaser Shares”) of the Company’s common stock, no par value per share (“Common Shares”). Subject to approval by the shareholders of the Company in accordance with the listing rules of the New York Stock Exchange (the “Shareholder Approval”), the Company is also obligated pursuant to the Securities Purchase Agreement to issue to the Purchaser a stock purchase warrant (the “Purchaser Warrant”) exercisable to acquire 35,130,000 Common Shares (as adjusted as provided in the Purchaser Warrant, the “Purchaser Warrant Shares”). In the event that the Shareholder Approval is not obtained, the Company will be obligated pursuant to the Securities Purchase Agreement to issue to the Purchaser a Stock Appreciation Right (the “Purchaser Stock Appreciation Right”). In accordance with Section 1.3(c) of the Purchaser Stock Appreciation Right, the Purchaser may, under certain limited circumstances, elect to receive Common Shares (“Section 1.3(c) Shares”) upon its exercise of the Purchaser Stock Appreciation Right. In addition, in accordance with Section 1.4 of the Purchaser Stock Appreciation Right, the Company has the right under certain circumstances to replace the Purchaser Stock Appreciation Right in whole or in part with a warrant substantially in the form of the Purchaser Warrant (the “Purchaser Substitute Warrant”).

Copies of the Securities Purchase Agreement, form of Purchaser Warrant and form of Purchaser Stock Appreciation Right are attached hereto as Exhibit A.

In order to facilitate the transactions contemplated by the Securities Purchase Agreement, the Company, Pershing Square and the Warrant Agent hereby agree that the definition of the term “Change of Control Event” as set forth in the Warrant Agreement is hereby amended to add the following at the end of such definition:

“Notwithstanding the foregoing, in accordance with the letter agreement dated as of May 20, 2010 (the “Letter Agreement”) between and among the Company, the Warrant Agent and BGP Holdings Corp., Pershing Square, L.P. and Pershing Square II, L.P. (collectively, “Pershing Square”), the acquisition by the Purchaser, any Affiliate of the Purchaser, any BSL Affiliate (in each case, and only for purposes of this sentence, as such terms are defined in the Securities Purchase Agreement) or any permitted transferee, successor or assignee thereof of (i) up to 11,111,111 shares of Common Stock, (ii) if the Shareholder Approval is obtained, the Purchaser Warrant and the Purchaser Warrant Shares issuable upon the exercise of the Purchaser Warrant, (iii) if the Shareholder Approval is not obtained, the Purchaser Stock Appreciation Right, (iv) if the Purchaser Stock Appreciation Right is issued, any Section 1.3(c) Shares in accordance with Section 1.3(c) of the Purchaser Stock Appreciation Right and (v) if the Purchaser Stock Appreciation Right is issued, any Purchaser Substitute Warrant issued in accordance with Section 1.4 of the Purchaser Stock Appreciation Right and any Common Shares issued upon the exercise of any Purchaser Substitute Warrant, shall not by themselves constitute a Change of Control Event, so long as (i) the Company is in compliance with the Warrant Agreement, as amended and supplemented from time to time, and (ii) the Company seeks the Shareholder Approval at or prior to its next annual general meeting of shareholders, the Company recommends the Shareholder Approval without material qualification, and all shares of Common Stock held by Purchaser, any Affiliate of Purchaser or any BSL Affiliate are voted in favor of the Shareholder Approval to the fullest extent permitted by the rules of the Trading Market and applicable law. All capitalized terms used without definition in the preceding sentence shall have the respective meanings provided in the Letter Agreement.”

In accordance with Section 5.5 of the Warrant Agreement, concurrently with the issuance of the Purchaser Shares to the Purchaser pursuant to the Securities Purchase Agreement, the Company will cause the Warrant Agent to issue to Pershing Square such number of additional Warrants (having the same terms as the current outstanding Warrants) that are exercisable to acquire 2,701,837 Common Shares, at an initial exercise price, subject to adjustment as provided in the Warrant Agreement, of $0.65 per share.

In accordance with Section 5.5 of the Warrant Agreement, the Company will concurrently with the issuance of the Purchaser Warrant or the Purchaser Stock Appreciation Right to the Purchaser pursuant to the Securities Purchase Agreement cause the Warrant Agent to issue to Pershing Square additional Warrants (having the same terms as the current outstanding Warrants) that are exercisable to acquire 8,542,399 Common Shares at an initial exercise price, subject to adjustment as provided in the Warrant Agreement, of $0.65 per share.

In the event of any amendment or modification of the Securities Purchase Agreement (or any related document) from the forms of such documents provided to Pershing Square as of the date hereof, as attached hereto as Exhibit A, which change affects the amount or pricing terms of any securities issued or issuable in connection therewith, and as a condition to effecting any such change, the Company and Pershing Square will agree upon any necessary adjustments to the Exercise Price and the issuance of new Warrants to Pershing Square, as applicable, in each case in accordance with and as contemplated by the Warrant Agreement.

* * * * *

Except as amended as expressly provided herein, the parties agree that the Warrant Agreement will remain in full force and effect in accordance with its terms and conditions.


	BGP HOLDINGS CORP.
	By:	/s/ William A. Ackman
	Name:	William A. Ackman
	Its:	Authorized Representative

	PERSHING SQUARE, L.P.
	By:	Pershing Square Capital Management,
		L.P., its Investment Manager

	By:	PS Management GP, LLC
	Its:	General Partner

	By:	/s/ William A. Ackman
	Name:	William A. Ackman
	Its:	Managing Member

	PERSHING SQUARE II, L.P.
	By:	Pershing Square Capital Management,
		L.P., its Investment Manager

	By:	PS Management GP, LLC
	Its:	General Partner

	By:	/s/ William A. Ackman
	Name:	William A. Ackman
	Its:	Managing Member

Agreed and acknowledged this May 20, 2010:


BORDERS GROUP, INC.
By:	/s/ Mark R. Bierley
	Mark R. Bierley
Its:	Executive Vice President and Chief Financial Officer

COMPUTERSHARE INC.
By:	/s/ Neda Sheridan
Its:	Vice President


COMPUTERSHARE TRUST COMPANY, N.A.
By:	/s/ Neda Sheridan
Its:	Vice President