Warrant Agreement

Exhibit 4.2

EXECUTION COPY

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

April 9, 2008

Pershing Square Capital Management, L.P.
888 Seventh Avenue, 29th Floor
New York, New York 10019
Attention: William A. Ackman, Managing Member

               Re: Warrant Agreement

Ladies and Gentlemen:

     Reference is hereby made to the Warrant and Registration Rights Agreement dated as of April 9, 2008 by and between Borders Group, Inc. (the “Company”) and Computershare Inc. and Computershare Trust Company, N.A., as Warrant Agent (the “ Warrant Agreement ”), pursuant to which Warrants to purchase Common Stock of the Company were issued, and may in the future be issued, to Pershing Square Capital Management, L.P. (“Pershing Square”). Reference is also made to the Senior Secured Credit Agreement, dated as of April 9, 2008 (the “Credit Agreement”), by and among Borders Group, Inc., Borders, Inc., Walden Book Company, Inc., BGP (UK) Limited, Borders Properties, Inc. Borders Online, LLC, Borders Fulfillment, Inc., Borders Online, Inc., Pershing Square Credit Partners LLC and PSRH, Inc., as Lenders, and Pershing Square Capital Management, L.P., as administrative agent and as collateral agent. Capitalized terms used but not defined herein shall have the meanings attributed to them in the Warrant Agreement.

     By execution of this side letter (the “Side Letter”), executed simultaneously with the Warrant Agreement, each of the Company and Pershing Square does hereby agree to the provisions set forth herein.

1.

Covenants of the Initial Investor .

(a)

The Initial Investor shall not, without the prior written approval of the Company, exercise any Warrants or sell or transfer (other than internally among the entities comprising the Initial Investor) any Warrants or shares of Common Stock until the earlier of (i) January 1, 2009, and (ii) the public announcement of the entry into a definitive agreement with respect to, or the completion of, a Change of Control Event or other extraordinary transaction involving the Company to which the Initial Investor is not a party; provided, however, if the definitive agreement relates to a Public Stock Merger, the Initial Investor may not exercise Warrants for cash prior to the consummation of the Public Stock Merger.

	(b)		The Initial Investor shall not, without the prior written approval of the Company, exercise or take any other action with respect to the Warrants if such action would cause a “Change of Control” as defined in the Existing Facility as in effect on the date hereof.
	(c)		Until after the Company’s 2009 annual shareholders’ meeting, the Initial Investor will not seek to prevent the Board from maintaining a majority of directors who are independent of the Initial Investor and the Company and will condition any material transactions between the Company and the Initial Investor on the receipt of the approval of a majority of such directors (it being agreed for the avoidance of doubt that in the event that either the Company or the Initial Investor nominates any person to serve as a director of the Company’s board, the fact of that nomination does not by itself deem that person not to be independent of the Company or the Initial Investor, as applicable).
	(d)		The Initial Investor agrees that it will vote at any shareholder meeting all of its shares of Common Stock to approve the issuance of the Underlying Common Stock upon the exercise of the Warrants.

2.

Purchase for Investment . The Initial Investor acknowledges that the Registrable Securities have n