GUARANTY OF PAYMENT OF LEASE

(Traverse City, Michigan)

1. RECITALS.

TRAVERSE RETAIL LIMITED PARTNERSHIP, a Delaware limited partnership (together with its successors and assigns, "Landlord"), and BORDERS, INC., a Colorado corporation ("Tenant"), are parties to the Lease, as hereinafter defined, pursuant to which Landlord leases the Property, as defined in the Lease, to Tenant for use as a retail store. BORDERS GROUP, INC., a Michigan corporation ("Guarantor"), desires that Landlord continue to lease the Property to Tenant.

Guarantor, the owner of all of Tenant's outstanding stock, deems it to be in the direct pecuniary and business interests of Guarantor that Tenant continue to lease the Property from Landlord.

Guarantor understands that Landlord is willing to continue to lease the Property to Tenant only upon certain terms and conditions, one of which is that Guarantor guarantee the payment and performance of the Lease Obligations, as hereinafter defined, and this Guaranty of Payment of Lease (as the same may from time to time be amended, restated or otherwise modified, this "Agreement") is being executed and delivered in consideration of Landlord continuing to lease the Property to Tenant and for other valuable considerations.

2. DEFINITIONS. As used herein, the following terms shall have the following meanings:

2.1 "Guarantor Credit Agreement" shall mean the Multi currency Credit Agreement among Guarantor, Tenant, Walden Book Company, Inc., BGP (UK) Limited, Borders (UK) Limited, the banks a party thereto, and PNC Bank, National Association, as agent, dated as of July 9, 1999, as the same may from time to time be amended, restated or otherwise modified.

2.2 "Guarantor Participation Agreement" shall mean the Amended and Restated Participation Agreement among Guarantor, Tenant, Walden Book Company, Inc., Walden books Properties, Inc., Borders Properties, Inc., Wilmington Trust Company, as Owner Trustee, Sam Project Funding Corp. I, as Investor, PNC Bank, National Association, as Administrative Agent, The First National Bank of Chicago, as Syndication Agent, Bankers Trust Company, as Real Estate Administrative Agent, and the Lenders a party thereto, dated as of November 22,1995, as amended and restated as of October 17, 1997, as the same may from time to time be amended, restated or otherwise modified.

2.3 "Guaranty Enforcement Event" means the occurrence of any one of the following events: (a) a Lease Default or Lease Event of Default, (b) the termination of the Lease by Tenant or the failure of the Lease to be valid, binding and enforceable against Tenant, or (c) the existence of any default, or any event or condition that, with the lapse of time or the giving of notice or both, would constitute a default, under the Guarantor Credit Agreement, or any agreement executed in connection therewith, or the Guarantor Participation Agreement, or any Operative Document (as defined in the Guarantor Participation Agreement).

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