COMMITMENT LETTER

Exhibit 10.1

COMMITMENT LETTER

Ladies and Gentlemen:

               We write in response to your request for a non-exclusive financing commitment from Pershing Square Capital Management, L.P., on behalf of one or more of its managed funds or affiliates of such managed funds (“Pershing Square”) to (i) provide a senior secured term loan facility for up to $42,500,000 (the “Term Loan Facility”) to Borders Group, Inc. (the “Company”) and (ii) make an offer to purchase (the “Purchase Offer”) the Company’s business in Australia, New Zealand and Singapore, which consists of Borders Australia Pty. Ltd, Borders New Zealand Limited and Borders Pte., Ltd (Singapore) and their subsidiaries (the “Oceania/Singapore Business”), and the Company’s United Kingdom business which includes Paperchase Products Ltd and its subsidiaries and the Company’s 17% equity interest in Bookshop Acquisitions Ltd (the “UK Business”, and together with the Oceania/Singapore Business, the “Foreign Businesses”) for an aggregate cash price of $125,000,000 (less any attributable indebtedness for borrowed money of the Foreign Businesses). You have informed us that

the proceeds of the Term Loan Facility and any future sale under the Purchase Offer would be used (a) to pay fees and expenses associated with the Transactions (as defined below), (b) in the case of the sale under the Purchase Offer, to prepay the Term Loan and (c) to the extent of remaining proceeds, for working capital and general corporate purposes.

Our Commitment

               Pershing Square is pleased to inform you of its commitment to provide 100% of the Term Loan Facility and of its commitment to enter into the Purchase Offer, subject to the terms and conditions set forth in this letter, the summary of proposed terms and conditions for the Term Loan Facility attached as Exhibit A (the “Term Loan Term Sheet”), the summary of proposed terms and conditions of the Purchase Offer attached as Exhibit B (the “Purchase Offer Term Sheet”) and the summary of proposed terms and conditions of the Warrant Agreement (defined below) attached as Exhibit C (the “Warrant Agreement Term Sheet”, together with the Term Loan Term Sheet, the Purchase Offer Term Sheet and this letter, the “Commitment Letter”). The Term Loan Facility (together with all related security agreements and other documents), the Purchase Offer (together with the related definitive stock purchase agreement) and the Warrant Agreement are collectively referred to herein as the “Definitive Agreements” and the transactions they contemplate are referred to herein as the “Transactions”.

Syndication of Term Loan Facility

               Pershing Square reserves the right, prior to or after execution of the definitive credit documentation for the Term Loan Facility, to syndicate all or part of the Term Loan Facility to one or more lenders (each, a “Lender”) that will become parties to such definitive credit documentation pursuant to a syndication to be managed by Pershing Square, provided that the commitment of Pershing Square hereunder will not be reduced by any such syndication prior to the execution of definitive credit documentation. Pershing Square, in consultation with the Company, will manage all aspects of any syndication, including decisions as to the selection of institutions to be approached and when they will be approached (which institu tions shall be selected with the consent of the Company, which consent shall not be unreasonably withheld), when their commitments will be accepted, which institutions will participate, the allocation of the commitments among the Lenders, and the amount and distribution of fees among the Lenders.

               Successful syndication will require active cooperation. Each party hereto agrees that the Company and its subsidiaries (each, a “Company Party”) and their respective officers, directors, employees, accountants and advisors (each a “Company Representative”) will reasonably assist Pershing Square actively and diligently to achieve a syndication that is satisfactory to Pershing Square, including without limitation by: (a) providing Pershing Square, the Lenders and potential Lenders with such information, as and when such information becomes available, as Pershing Square determines is reasonably necessary to complete syndication, including without limitation business and

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financial information, projections and evaluations, (b) assisting us in the preparation of a customary information memorandum and other materials about the Term Loan Facility, the Company and the Company Parties, (c) using commercially reasonable efforts to make the senior management of the Company available to attend and make presentations regarding the business and prospects of the Company and its subsidiaries at meetings with Lenders or potential Lenders, (d) using commercially reasonable efforts to ensure that any syndication efforts benefit materially from existing lending and investment banking relationships of the Company and (e) hosting, with Pershing Square, of one or more meetings with potential Lenders upon reasonable advance notice and on a reasonable number of occasions.

               The Company will be solely responsible for the contents of all information (the “Company Information”) that has been or will hereafter be made available by or on behalf of any Company Party or Company Representative to Pershing Square, any Lender or any of their respective affiliates in connection with the Term Loan Facility and acknowledges that Pershing Square and other Lenders will be using and relying upon the Company Information without independent verification thereof.

Conditions to Our Commitment

               Our commitment to enter into the Definitive Agreements and other obligations arising under or relating to this Commitment Letter are made in reliance on and are subject to the satisfaction or waiver by us in our sole discretion of the following conditions as of the Closing Date (as defined in the Term Loan Term Sheet): (a) compliance by the Company Parties with the terms of this Commitment Letter at all times prior to the Closing Date, (b) the negotiation and execution and delivery of definitive documentation with respect to each of the Definitive Agreements and each of the Transactions in form and substance consistent with this Commitment Letter and otherwise reasonably acceptable to us, (c) the absence of a material adverse effect on the business, financial condition or results of operations of the Company and its subsidiaries, taken as a whole, from the date hereof, ( d) no issuance of additional debt, equity or related financial instruments (other than borrowings under the Existing Facility or exercises or grants under employee plans in the ordinary course of business) by the Company or its subsidiaries without the consent of Pershing Square, (e) confirmation that no amendments with respect to employment agreements, change of control severance agreements, equity compensation plans or other compensation arrangements or plans are required to avoid the Transactions triggering change of control, severance, accelerated payment or funding, increased potential severance or similar payments or rights (assuming the Warrants are only issued as Cash Settled Warrants as defined in Exhibit C), (f) our approval, not to be unreasonably withheld or delayed, of the text of your public announcement of the Transactions and the Company’s plan to pursue strategic alternatives, (g) approval of your acceptance of this Commitment Letter and the entering into of the Definitive Agreements an d the Transactions by a majority of the disinterested directors of the Company and the determination of such directors, after receiving advice from the Company’s financial and legal advisors, that the Transactions, taken as a whole,

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are not less favorable to the Company than would be negotiated at arm’s-length and are in the best interests of the Company and its stockholders who are not affiliated with Pershing Square, (h) the approval of the terms of the Transactions by Required Lenders under the Existing Facility, (i) receipt of such customary legal opinions, officers certificates, evidence of authority, good standing, incumbency and similar closing documents as we may reasonably request and (j) all the conditions to the effectiveness and funding of the Term Loans described in the Term Loan Facility Term Sheet.

Expenses and Indemnification

               In further consideration of this Commitment Letter and recognizing that in connection herewith Pershing Square and its affiliates are incurring costs and expenses, the Company agrees to reimburse Pershing Square and its affiliates on request from time to time (promptly upon presentation of invoices specifying the costs and expenses so incurred) for all reasonable fees and expenses, up to $5,000,000, incurred in connection with this Commitment Letter, the Term Loan Facility, the Purchase Offer and the Warrant Agreement and the Transactions (including without limitation reasonable fees and expenses of one counsel and of consultants and advisors, filing and recording fees and costs and expenses of due diligence, syndication efforts, environmental, transportation, duplication, messenger services, appraisal, audit and electronic reporting) (the “Expenses”), whether or not the Term Loan Facility, the Purchase Offer or the Warrant Agreement become effective or definitive documents are executed. The Company also agrees to pay all costs and expenses we and our affiliates incur in connection with the enforcement of any rights and remedies hereunder.

               In the event there is no Closing, the Company also agrees to indemnify and hold harmless Pershing Square, the Lenders, their respective accountants, attorneys, advisors, consultants, agents, affiliates and representatives and each director, officer, employee and partner thereof (each an “Indemnified Person”) from and against any and all third party actions, suits, proceedings (including any investigations or inquiries), claims, losses, costs, damages, liabilities or expenses of any kind or nature whatsoever that may be incurred by or asserted against or involve any such Indemnified Person as a result of or arising out of or related to this Commitment Letter or any of the Definitive Agreements or Transactions, or the use of the proceeds thereof. The Company further agrees to reimburse each Indemnified Person upon demand for any legal or other expenses incurred in connection with investigating, defending or preparing to defend any such action, suit, proceeding (including without limitation any inquiry or investigation) or claim (whether or not Pershing Square or any such other Indemnified Person is a party to any action or proceeding out of which any such expenses arise). Notwithstanding the foregoing, the Company’s obligation to indemnify any Indemnified Person hereunder does not extend to any loss, claim, damage, expense or liability to the extent of a final and non-appealable determination by a court of competent jurisdiction that such loss, claim, damage, expense or liability arose directly from such Indemnified Person’s gross negligence or willful misconduct. No Indemnified Person will be responsible or liable to the Company, or any other person, for any consequential, special, lost profits, punitive or

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similar damages that may be alleged as a result of this Commitment Letter. In the event of a Closing, the Definitive Agreements will provide for customary indemnification.

Other Activities of Pershing Square

               As you know, Pershing Square and certain of its affiliates are engaged, either directly or through its affiliates, in various activities, including securities trading, investment management, financing and financial planning. In the ordinary course of these activities, Pershing Square and its affiliates may actively trade the debt and equity securities (or related derivative securities) of the Company and other companies which may be the subject of the arrangements contemplated by this letter for their own account and for the accounts of others and may at any time hold long and short positions in such securities. Pershing Square and its affiliates may also co-invest with, make direct investments in, and invest or co-invest client monies in or with funds or other investment vehicles managed by other parties, and such funds or other investment vehicles may trade or make inv estments in securities or other debt obligations of the Company or other companies which may be the subject of the arrangements contemplated by this Commitment Letter.

               Pershing Square and its affiliates may have economic interests that conflict with those of the Company. You agree that we will act under this letter as an independent contractor and that nothing in this Commitment Letter or otherwise will be deemed to create an advisory, fiduciary or agency relationship or fiduciary or other implied duty between any of Pershing Square or its affiliates on the one hand and, on the other, the Company or any of its stockholders or affiliates. You acknowledge and agree that (i) the transactions contemplated by this Commitment Letter are arm’s-length commercial transactions between Pershing Square and its affiliates on the one hand, and you, on the other, (ii) in connection therewith and with respect to the process leading to such transaction each of Pershing Square and its affiliates is acting solely as a principal and not the agent or fiduciary of the Company or its management, stockholders, creditors or any other person, (iii) none of Pershing Square and/or its affiliates has assumed an advisory or fiduciary responsibility in favor of the Company with respect to the transactions contemplated hereby or the process leading thereto (irrespective of whether any of Pershing Square or its affiliates has advised or is currently advising the Company or its subsidiaries on other matters and irrespective of the activities of employees of Pershing Square as directors of the Company or in any other capacity) and has not assumed any other obligation to the Company or its subsidiaries except the obligations expressly set forth in this Commitment Letter and (iv) the Company has consulted its own legal and financial advisors to the extent it deemed appropriate. You further acknowledge and agree that you are responsible for making your own independent judgment with respect to all of the transactions contemplated herein and the process leading thereto. Yo u agree that you will not claim that any of Pershing Square or its affiliates has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to you or any subsidiary of the Company, whether in connection with such transactions or the process leading thereto. In addition, we may employ the services of

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our affiliates in providing certain services hereunder and may exchange with such affiliates information concerning the Company and other companies that may be the subject of this arrangement, and such affiliates will be entitled to the benefits afforded to us hereunder. Nothing herein shall negate any fiduciary duties owed by law by any director of the Company.

               In addition, please note that none of Pershing Square or its affiliates provides any accounting, tax or legal advice.

Public Announcement

               Prior to the Closing Date, neither Pershing Square nor the Company shall issue any press release or make any public statement concerning this Commitment Letter or the Transactions unless the releasing party provides a written copy to the other parties and allows such parties the opportunity to review and comment on any such disclosure.

Alternative Transactions

               The Company will promptly inform Pershing Square of any written or oral proposal or indication of interest it receives from any person prior to the Closing Date with respect to a transaction (an “Alternative Transaction”) that is an alternative to any of the Transactions (other than a proposal or indication of interest that is solely with respect to a sale of assets of the Company, a sale of stock or assets of a subsidiary of the Company, a sale of the Company as a whole or an amendment to the Existing Credit Facility that does not increase its committed amount), identify the parties involved and the material proposed or indicative terms and thereafter keep Pershing Square reasonably informed about the status and material changes in proposed terms thereof. The Company agrees that it shall not enter into any definitive agreement with respect to any Alternative Transaction unless (a) it has received a bona fide proposal for an Alternative Transaction that a majority of the disinterested directors of the Company has determined is reasonably capable of being implemented and, as implemented, would be more favorable to the Company than the Transactions, taking into account the circumstances of the Company and any risks or delay associated with the Alternative Transactions and the Transactions, (b) the Company shall have informed Pershing Square of such determination of the disinterested directors and shall have provided to Pershing Square at least two business days thereafter to modify its commitment to enter into the Transactions and (c) Pershing Square has failed to modify its commitment such that, in the judgment of a majority of the disinterested directors of the Company, the Alternative Transaction continues to be more favorable to the Company than the Transactions taking into account the circumstances of the C ompany and any risks or delay associated with the Alternative Transaction and the Transactions. In the event that Pershing Square does not modify the Transaction as provided in clause (d) above, the Company may proceed to consummate the Alternative Transaction on substantially the terms proposed, provided that the Company shall not agree to any material change to the terms of the Alternative Transaction that is adverse to the Company unless it provides Pershing Square one

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business day in which to modify its commitment and the Alternative Transaction continues to be more favorable to the Company than the Transactions taking into account Pershing Square's modifications.

Termination of Our Commitment

               Once accepted, Pershing Square’s commitment to provide the Term Loan Facility and to enter into the Purchase Offer and other obligations under this Commitment Letter will terminate on the earlier of (a) April 4, 2008, unless all of the Definitive Agreements are executed and are delivered and all the related conditions precedent are satisfied on or before such date or (b) 5 business days after our written notice to the Company of material non-compliance by any Company Party with the terms of this Commitment Letter, which has not been cured.

               Your and our obligations under the sections of this letter entitled “Expenses and Indemnification” and “Other Activities of Pershing Square”, and, to the extent applicable, “Governing Law and Jurisdiction” and “Miscellaneous” will survive the termination of our commitment and obligations (it being understood that the reimbursement and indemnification provisions contained herein shall be superseded by the reimbursement and indemnification provisions contained in the definitive financing documentation when such documentation becomes effective).

Governing Law and Jurisdiction

               THIS COMMITMENT LETTER WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

               To the fullest extent permitted by applicable law, each party hereto hereby irrevocably and unconditionally (a) submits to the exclusive jurisdiction of any New York State or United States Federal court sitting in the Borough of Manhattan, The City of New York in any claim, action, suit or proceeding arising out of or relating to this Commitment Letter or any matters contemplated hereby or thereby, (b) agrees that all claims in such proceeding may be decided in such court and (c) waives any objection it may now or hereafter have to the laying of venue in any such court and any claim that any such proceeding brought in any such court has been brought in an inconvenient forum. Each party hereto agrees that a final judgment in any such proceeding will be conclusive and may be enforced in other jurisdictions.

               EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO TRIAL BY JURY IN RESPECT OF ANY CLAIM, ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS COMMITMENT LETTER, THE FEE LETTER OR ANY MATTERS CONTEMPLATED HEREBY OR THEREBY.

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               Each party hereto has agreed as a material term that, to the fullest extent permitted by New York law, no party hereto will be liable for any special, consequential or similar damages relating to this Commitment Letter or the transactions contemplated hereby or thereby or on any cause of action based on promissory estoppel, detrimental reliance or a similar theory of relief, in each case regardless of whether or not damages or reliance was foreseeable.

Miscellaneous

               This Commitment Letter sets forth your and our entire understanding with respect to the subject matter herein and supersedes all existing agreements concerning the subject matter hereof. This Commitment Letter may be modified or waived only pursuant to an instrument in writing executed by or on behalf of each party hereto. Your rights and obligations under this Commitment Letter may not be assigned without the consent of Pershing Square, and any purported assignment made without such consent will be void. If any provision of this Commitment Letter is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions of this Commitment Letter will not in any way be affected or impaired thereby.

               If you are in agreement with the foregoing, please sign and return to Pershing Square the enclosed copy of this Commitment Letter to Pershing Square at the address or pursuant to the wire instructions set forth below, on or prior to March 19, 2008, New York time. Delivery of an executed counterpart of this Commitment Letter by facsimile, telecopier or electronic mail will be as effective as delivery of a manually executed counterpart. This Commitment Letter may be executed in any number of separate counterparts, each of which will be an original and all of which, taken together, will constitute a single instrument.

[signatures on following page]

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               We are pleased to deliver this Commitment Letter and look forward to working with you to consummate the Transactions.

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EXHIBIT A

     SUMMARY OF TERMS AND CONDITIONS
$42.5 MILLION SENIOR SECURED TERM LOAN FACILITY

EXHIBIT B

SUMMARY OF TERMS AND CONDITIONS
US$125 MILLION PURCHASE OFFER

EXHIBIT C

SUMMARY OF TERMS AND CONDITIONS
WARRANTS