<PAGE>
                                                                   EXHIBIT 10.46

                                                                  EXECUTION COPY


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                          CONSTRUCTION AGENCY AGREEMENT

                            dated as of June 21, 2002


                                      among


                         ATLANTIC FINANCIAL GROUP, LTD.


                                       and


                         BORDERS, INC., as Construction
                                      Agent





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<PAGE>


                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                             Page

<S>                                                                                          <C>


ARTICLE I         DEFINITIONS ...........................................................      1
1.1.              Defined Terms .........................................................      1

ARTICLE II        APPOINTMENT OF CONSTRUCTION AGENT .....................................      2
2.1.              Appointment ...........................................................      2
2.2.              Acceptance; Construction ..............................................      2
2.3.              Commencement of Construction ..........................................      2
2.4.              Supplements to this Agreement .........................................      2
2.5.              Term ..................................................................      3
2.6.              Identification of Properties; Construction Documents ..................      3
2.7.              Scope of Authority ....................................................      3
2.8.              Covenants of the Construction Agent ...................................      4

ARTICLE III       THE BUILDINGS .........................................................      5
3.1.              Amendments; Modifications .............................................      5
3.2.              Casualty and Condemnation .............................................      6

ARTICLE IV        PAYMENT OF FUNDS ......................................................      6
4.1.              Funding of Property Acquisition Costs and Property Buildings Costs ....      6

ARTICLE V         CONSTRUCTION AGENCY EVENTS OF DEFAULT .................................      7
5.1.              Construction Agency Events of Default .................................      7
5.2.              Damages ...............................................................      7
5.3.              Remedies, Remedies Cumulative .........................................      8
5.4.              Construction Return Procedures ........................................      8

ARTICLE VI        NO CONSTRUCTION AGENCY FEE ............................................      9
6.1.              Lease as Fulfillment of Lessor's Obligations ..........................      9

ARTICLE VII       LESSOR'S RIGHTS; CONSTRUCTION AGENT'S RIGHTS ..........................      10
7.1.              Exercise of the Lessor's Rights .......................................      10
7.2.              Lessor's Right to Cure Construction Agent's Defaults ..................      10

ARTICLE VIII      MISCELLANEOUS .........................................................      10
8.1.              Successors and Assigns ................................................      10
8.2.              Notices ...............................................................      10
8.3.              GOVERNING LAW .........................................................      10
8.4.              Amendments and Waivers ................................................      11
8.5.              Counterparts ..........................................................      11
8.6.              Severability ..........................................................      11
8.7.              Headings and Table of Contents ........................................      11
8.8.              Documentary Conventions ...............................................      11
</TABLE>



EXHIBITS

Exhibit A        Form of Supplement to Construction Agency Agreement


                                       i

<PAGE>

                      CONSTRUCTION AGENCY AGREEMENT




         CONSTRUCTION AGENCY AGREEMENT, dated as of June 21, 2002 (as amended,
supplemented or otherwise modified from time to time, this "Agreement"), between
ATLANTIC FINANCIAL GROUP, LTD., a Texas limited partnership, (the "Lessor"), and
BORDERS, INC., a Colorado corporation ("Borders", and in its capacity as
construction agent, the "Construction Agent").


                              PRELIMINARY STATEMENT

         A. Lessor, Borders Group, Inc. ("BGI"), and certain Subsidiaries of BGI
that may become signatories thereto, as Guarantors, Borders and certain other
Subsidiaries of BGI that may become signatories thereto, as Lessees, the Lenders
signatory thereto, Fleet National Bank, as Co-Arranger and Syndication Agent,
and SunTrust Bank, Co-Arranger, Documentation Agent and as agent for such
Lenders (in such capacity, the "Agent") are parties to that certain Master
Agreement, dated as of June 21, 2002 (as amended, supplemented or otherwise
modified from time to time pursuant thereto, the "Master Agreement").

         B. Subject to the terms and conditions hereof, (i) the Lessor desires
to appoint Borders as the Construction Agent to act as its sole and exclusive
agent for the identification and acquisition of the Land pursuant to the Master
Agreement and construction of the Buildings in accordance with the Plans and
Specifications and pursuant to the Master Agreement, and (ii) the Construction
Agent desires, for the benefit of the Lessor, to cause the Buildings to be
constructed in accordance with the Plans and Specifications and pursuant to the
Master Agreement and this Agreement, in each case in accordance with the terms
herein set forth.

         NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:


                                    ARTICLE I

                                   DEFINITIONS

         1.1. Defined Terms. Capitalized terms used but not otherwise defined in
this Agreement shall have the meanings set forth in Appendix A to the Master
Agreement.

<PAGE>

                                   ARTICLE II

                            APPOINTMENT OF CONSTRUCTION AGENT

         2.1. Appointment. Pursuant to and subject to the terms and conditions
set forth herein and in the Master Agreement and the other Operative Documents,
the Lessor hereby irrevocably designates and appoints Borders as the
Construction Agent to act as its exclusive agent for (i) the identification and
acquisition from time to time of Land to be acquired or leased by the Lessor and
leased or subleased to a Lessee and (ii) the construction of the Buildings in
accordance with the Plans and Specifications on such Land.

         2.2. Acceptance; Construction. Borders hereby unconditionally accepts
the designation and appointment as Construction Agent. The Construction Agent
will cause the Buildings to be constructed on the Land substantially in
accordance with the Plans and Specifications and in accordance with the
Operative Documents, and to be equipped in all material respects with all
Applicable Law and insurance requirements. If a Leased Property will be leased
by a Lessee other than Borders, Borders may appoint such Lessee as its
sub-construction agent with respect to such Leased Property, provided that such
appointment shall not affect Borders' obligations hereunder, which obligations
shall be primary and shall remain in full force and effect.

         2.3. Commencement of Construction. Subject to Construction Force
Majeure Events, the Construction Agent hereby agrees, unconditionally and for
the benefit of the Lessor, to cause Construction of a Building to commence on
each parcel of Land as soon as is reasonably practicable, in its reasonable
judgment, after the Closing Date in respect of such Land. For purposes hereof,
Construction of a Building shall be deemed to commence on the date after the
Closing Date for the related Leased Property (the "Construction Commencement
Date") on which excavation for the foundation for such Building or any other
Construction of such Building commences. Without limiting the foregoing, no
phase of such Construction shall be undertaken until all permits then required
for such phase have been issued therefor.

         2.4. Supplements to this Agreement. On the Closing Date of each parcel
of Land, the Lessor and the Construction Agent shall each execute and deliver to
the Agent a supplement to this Agreement in the form of Exhibit A to this
Agreement, appropriately completed, pursuant to which the Lessor and the
Construction Agent shall, among other things, each acknowledge and agree that
the Construction of such parcel of Land will be governed by the terms of this
Agreement. Following the execution and delivery of a supplement to this
Agreement as provided above, such supplement and all supplements previously
delivered under this Agreement shall constitute a part of this Agreement. On or
prior to the Closing Date of each parcel of Land, the Construction Agent shall
prepare and deliver to the Lessor and the Agent a construction budget (the
"Construction Budget") for the related Leased Property, setting forth in
reasonable detail the budget for the Construction of the proposed Building on
such Land in accordance with the Plans and Specifications therefor, and all
related costs, including the capitalized interest and Yield


                                       2

<PAGE>

expected to accrue during the related Construction Term; such Construction
Budget shall include a line item for the amount of self-insurance or deductibles
applicable to such Leased Property.

         2.5. Term. This Agreement shall commence on the date hereof and shall
terminate with respect to any given Leased Property upon the first to occur of:

                  (a) payment by the Lessee of the Leased Property Balance and
         termination of the Lease with respect to such Leased Property in
         accordance with the Lease;

                  (b) the expiration or earlier termination of the Lease;

                  (c) termination of this Agreement pursuant to Article V
         hereof;

                  (d) the Completion Date for such Leased Property and the
         completion of all punch list items as set forth in Section 2.8(d); and

                  (e) the payment by the Construction Agent of the Leased
         Property Balance or the Construction Failure Payment with respect to
         such Leased Property pursuant to this Agreement.

         2.6. Identification of Properties; Construction Documents. The
Construction Agent may execute any of its duties and obligations under this
Agreement by or through agents, contractors, developers, Affiliates, employees
or attorneys-in-fact, and the Construction Agent shall enter into such
agreements with architects and contractors as the Construction Agent deems
necessary or desirable for the construction of the Buildings pursuant hereto
(the "Construction Documents"); provided, however, that no such delegation shall
limit or reduce in any way the Construction Agent's duties and obligations under
this Agreement; provided, further, that contemporaneously with the execution and
delivery of a Construction Document, the Construction Agent will execute and
deliver to the Lessor the Security Agreement and Assignment, pursuant to which
the Construction Agent assigns to the Lessor, among other things, all of the
Construction Agent's rights under and interests in such Construction Documents.
Each construction contract shall be with a reputable general contractor with
experience in constructing projects that are similar in scope and type to the
proposed Building, and shall provide for at least 10% retainage.

         2.7. Scope of Authority. (a) Subject to the terms, conditions,
restrictions and limitations set forth in the Operative Documents, the Lessor
hereby expressly authorizes the Construction Agent, or any agent or contractor
of the Construction Agent, and the Construction Agent unconditionally agrees,
for the benefit of the Lessor, to take all action necessary or desirable for the
performance and satisfaction of all of the Construction Agent's obligations
hereunder with respect to the Leased Properties acquired or leased by the
Lessor, including, without limitation:

                  (i) the identification and assistance with the acquisition or
         lease of Land in accordance with the terms and conditions of the Master
         Agreement;


                                       3

<PAGE>

                  (ii) all design and supervisory functions relating to the
         construction of the Buildings and performing all engineering work
         related to the construction of the Buildings;

                  (iii) negotiating and entering into all contracts or
         arrangements to procure the equipment and services necessary to
         construct the Buildings on such terms and conditions as are customary
         and reasonable in light of local standards and practices;

                  (iv) obtaining all necessary permits, licenses, consents,
         approvals and other authorizations, including those required under
         Applicable Law, from all Governmental Authorities in connection with
         the construction and the development of the Leased Property on the Land
         in accordance with the Plans and Specifications;

                  (v) maintaining all books and records with respect to the
         construction, operation and management of the Leased Properties; and

                  (vi) performing any other acts necessary or appropriate in
         connection with the identification, and acquisition (or leasing) and
         development of the Land and construction of the Buildings in accordance
         with the Plans and Specifications, and all other functions typically
         undertaken for the construction and development of similar properties.

         (b) Neither the Construction Agent nor any of its Affiliates or agents
shall enter into any contract which would, directly or indirectly, impose any
liability or obligation on the Lessor unless such contract expressly contains an
acknowledgment by the other party or parties thereto that the obligations of the
Lessor are non-recourse, and that the Lessor shall have no personal liability
with respect to such obligations. Any contract entered into by the Construction
Agent or any of its Affiliates or agents not meeting the requirements of the
foregoing sentence shall be ineffective. Subject to the foregoing, the Lessor
shall execute such documents and take such other actions as the Construction
Agent shall reasonably request, at the Construction Agent's expense, to permit
the Construction Agent to perform its duties hereunder.

         (c) Subject to the terms and conditions of this Agreement and the other
Operative Documents, the Construction Agent shall have sole management and
control over the means, methods, sequences and procedures with respect to the
Construction. The parties agree that the Construction Agent shall be in
possession and control of each Leased Property during the Construction Term
therefor.

         2.8. Covenants of the Construction Agent. The Construction Agent hereby
covenants and agrees that it will:

                  (a) following the Construction Commencement Date for each
         parcel of Land, cause construction of a Building on such Land to be
         prosecuted diligently and without undue interruption substantially in
         accordance with the Plans and Specifications for such


                                       4




<PAGE>

         Land, in accordance with the Construction Budget for such Leased
         Property and in compliance in all material respects with all Applicable
         Law and insurance requirements;

                  (b) notify the Lessor and the Agent in writing not less than
         five (5) Business Days after the occurrence of each Construction Force
         Majeure Event;

                  (c) take all reasonable and practical steps to cause the
         Completion Date for such Leased Property to occur on or prior to the
         Scheduled Construction Termination Date for such Leased Property, and
         cause all Liens (including, without limitation, Liens or claims for
         materials supplied or labor or services performed in connection with
         the construction of the Buildings), other than Permitted Liens and
         Lessor Liens, to be discharged;

                  (d) following the Completion Date for each Leased Property,
         cause all outstanding punch list items with respect to the Buildings on
         such Leased Property to be completed within sixty (60) days after said
         Completion Date;

                  (e) at all times during Construction, cause all title to all
         personalty financed by the Lessor on or within such Leased Property to
         be and remain vested in the Lessor and cause to be on file with the
         applicable filing office or offices all necessary documents under
         Article 9 of the Uniform Commercial Code to perfect Lessor's interest
         therein free of all Liens other than Permitted Liens, it being
         understood and acknowledged that such Lessor's rights, title and
         interest in and to said personalty have been assigned to the Agent
         pursuant to the Operative Documents;

                  (f) not enter into any agreements or arrangements with any
         Person (other than the Funding Parties pursuant to the Operative
         Documents) that would result in any claim against, or liability of, the
         Agent or any Funding Party resulting from the fact that any Leased
         Property is not completed on or prior to the Scheduled Construction
         Termination Date therefor; and

                  (g) take all reasonable and practical steps to minimize the
         disruption of the construction process arising from Construction Force
         Majeure Events.


                                   ARTICLE III

                                  THE BUILDINGS

         3.1. Amendments; Modifications. The Construction Agent may, subject to
the restrictions and limitations set forth herein and in the Operative Documents
(but not otherwise), at any time during the term hereof revise, amend or modify
the Plans and Specifications and the related Construction Documents without the
consent of the Lessor; provided, however, that the Lessor's prior written
consent in the following

                                       5

<PAGE>

instances: (x) such revision, amendment or modification by its terms
would result in the Completion Date of the Buildings occurring after the
Scheduled Construction Termination Date, or (y) such revision, amendment or
modification would result in the cost for such Leased Property exceeding the
then remaining Commitments, minus the then remaining costs for completing each
other Leased Property for which the Completion Date has not occurred, or
increase the Construction Budget therefor, or (z) the aggregate effect of such
revision, amendment or modification, when taken together with any previous or
contemporaneous revision, amendment or modification to the Plans and
Specifications for such Leased Property, would be to reduce the Fair Market
Sales Value of such Leased Property in a material respect when completed, unless
there has been a corresponding reduction in the related Construction Budget.

         3.2. Casualty and Condemnation. If at any time prior to the Completion
Date with respect to any Building there occurs a Casualty or a Construction
Force Majeure Event or the Lessor or the applicable Construction Agent receives
notice of a Condemnation, then, except as otherwise provided in the related
Lease, in each case such Construction Agent shall promptly and diligently take
all commercially reasonable and practical steps to cause the construction of the
Building to be completed substantially in accordance with the Plans and
Specifications and with the terms hereof, and cause the Completion Date to occur
on or prior to the Scheduled Construction Termination Date.

                                   ARTICLE IV

                                PAYMENT OF FUNDS

         4.1. Funding of Property Acquisition Costs and Property Buildings
Costs. (a) In connection with the acquisition or lease of any Land and existing
Buildings and during the course of the construction or renovation of the
Buildings on any Land, the Construction Agent may request that the Lessor
advance funds for the payment of Construction Costs, and the Lessor will comply
with such request to the extent provided for under, and subject to the
conditions, restrictions and limitations contained in, the Master Agreement and
the other Operative Documents.

         (b) The proceeds of any funds made available to the Lessor to pay
Construction Costs shall be made available to the Construction Agent in
accordance with the Funding Request relating thereto and the terms of the Master
Agreement. The Construction Agent will use such proceeds only to pay the
acquisition, transaction and closing costs or improvement costs for Leased
Properties set forth in the Funding Request relating to such funds.


                                       6

<PAGE>

                                    ARTICLE V

                      CONSTRUCTION AGENCY EVENTS OF DEFAULT

         5.1. Construction Agency Events of Default. If any one or more of the
following events (each a "Construction Agency Event of Default") shall occur and
be continuing:

                  (a) the Construction Agent fails to apply any funds paid by,
         or on behalf of, the Lessor to the Construction Agent for Construction
         Costs to the payment of Construction Costs or improvements costs for
         such Leased Property;

                  (b) the Construction Commencement Date with respect to any
         Leased Property shall fail to occur for any reason on or prior to the
         date that is one year after the Closing Date with respect to such
         Leased Property;

                  (c) the Completion Date with respect to any Leased Property
         shall fail to occur for any reason on or prior to the earlier of the
         Funding Termination Date and the Scheduled Construction Termination
         Date for such Leased Property;

                  (d) any Event of Default shall have occurred and be
         continuing; or

                  (e) the Construction Agent shall fail to observe or perform in
         any material respect any term, covenant or condition of this Agreement
         (except those specified in clauses (a) through (d) above), and such
         failure shall remain uncured for a period of thirty (30) days after
         notice thereof to the Construction Agent;

then, in any such event, the Lessor may, in addition to the other rights and
remedies provided for in this Article, immediately terminate this Agreement as
to any Leased Property or Properties or all of the Leased Properties,
separately, successively or concurrently (all in Lessor's sole discretion) by
giving the Construction Agent written notice of such termination, and upon the
giving of such notice, this Agreement shall terminate as to such Leased Property
or Properties or all of the Leased Properties (as the case may be) and all
rights of the Construction Agent and, subject to the terms of the Operative
Documents, all obligations of the Lessor under this Agreement with respect to
such Leased Property or Properties or all of the Leased Properties (as the case
may be) shall cease. The Construction Agent shall pay upon demand all reasonable
costs, expenses, losses, expenditures and damages (including, without
limitation, attorneys' fees and disbursements) actually incurred by or on behalf
of the Lessor in connection with any Construction Agency Event of Default.

         5.2. Damages. The termination of this Agreement pursuant to Section 5.1
shall in no event relieve the Construction Agent of its liability and
obligations hereunder, all of which shall survive any such termination.

                                        7


<PAGE>

         5.3. Remedies, Remedies Cumulative. (a) If a Construction Agency Event
of Default hereunder relates only to a specific Leased Property or specific
Leased Properties but not all Leased Properties, the Construction Agent shall
have the right, at its option, to cure such Construction Agency Event of Default
by purchasing (a "Construction Purchase") such affected Leased Property or
Properties for the Leased Property Balance(s) therefor from the Lessor within
five (5) Business Days of the delivery of the notice of termination referred to
in Section 5.1 in accordance with the terms and subject to the conditions,
restrictions and limitations of Section 14.5 of the Lease, in which case no
Construction Agency Event of Default shall be deemed to have occurred hereunder
for the purposes of the other Operative Documents. If the Construction Agent
does not exercise its option to purchase such Leased Property or Properties,
such Construction Agent shall pay to the Lessor the Construction Failure
Payment(s) therefor within five (5) Business Days of the demand therefor by the
Lessor, and shall surrender and return such Leased Property or Properties to the
Lessor or its designee in accordance with the terms of Section 5.4.

         (b) No failure to exercise and no delay in exercising, on the part of
the Lessor any right, remedy, power or privilege under this Agreement or under
the other Operative Documents shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege under this
Agreement preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges provided in this Agreement and in the other Operative Documents are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.

         5.4. Construction Return Procedures. In the case of any return of any
Leased Property to the Lessor pursuant to Article V hereof (a "Construction
Return"), the Construction Agent shall, at its cost and expense, do each of the
following on or prior to the return date specified by the Lessor in a written
notice to the Construction Agent given at least ten (10) Business Days prior
thereto:

         (a) the Construction Agent shall, on or prior to the return date,
execute and deliver to the Lessor (or to the Lessor's designee): (i) a deed with
respect to all of the interest of the Lessee and the Construction Agent in the
Leased Property containing representations and covenants of grantor to the
Lessor (or such other Person) solely regarding the absence of Liens (other than
Lessor Liens and the Liens of the Operative Documents (other than Liens in favor
of the related Lessee)), (ii) an agreement granting easements and rights of way
to such Leased Property as reasonably deemed necessary by the Lessor, (iii) a
bill of sale without warranty (except as to the absence of liens other than
Lessor Liens) with respect to all of the interest of the Lessee and the
Construction Agent in all personalty and equipment financed by the Funding
Parties and (iv) an assignment of such Construction Agent's entire interest in
such Leased Property (which shall include an assignment of all such Construction
Agent's right, title and interest in and to all awards, compensation and
insurance proceeds payable in connection with any Casualty, Condemnation or
Construction Force Majeure Event affecting such Leased Property and an
assignment of leases of such Leased Property), in the case of the documents
referred to in clauses

                                       8


<PAGE>

(i), (ii) and (iv) in recordable form and otherwise in conformity with local
custom and free and clear of any Liens other than Lessor Liens;

         (b) the Construction Agent shall, on the Construction Return Date, pay
over to the Agent (as assignee of the Lessor) any awards, compensation and
insurance previously received by the Construction Agent in connection with such
Leased Property which have not been applied in connection with the Construction,
repair or maintenance of the Leased Property except such amounts as may be
necessary to reimburse the Construction Agent for expenditures incurred in
connection with such Construction, repair or maintenance during the Construction
Term which have not been reimbursed;

         (c) The Construction Agent shall execute and deliver to the Lessor a
statement of termination of this Agreement and each of the other Operative
Documents with respect to the affected Leased Property to be executed by the
Funding Parties and delivered to the Construction Agent;

         (d) the Construction Agent shall, on or prior to the Construction
Return Date, vacate the Leased Property and transfer possession of such Leased
Property to the Lessor or any Person designated by the Lessor, in each case by
surrendering the same into the possession of the Lessor or such Person, as the
case may be, free and clear of all Liens (other than Lessor Liens and the liens
of the Operative Documents) in compliance with all Applicable Law (including
Environmental Laws);

         (e) on or prior to the return date, the Construction Agent shall
deliver to the Lessor or any Person designated by the Lessor copies of all
Construction Documents, permits, licenses, books and records regarding the
maintenance of such Leased Property and the Construction Agent's interest in
such Leased Property, and a current copy of the Plans and Specifications; and

         (f) the Construction Agent shall take all actions reasonably requested
by the Lessor to fully assign to the Lessor all of its rights and claims in, to
and under, all of the Construction Documents, and all permits and other
governmental authorizations related to such Leased Property or the Construction.


                                   ARTICLE VI

                           NO CONSTRUCTION AGENCY FEE

         6.1. Lease as Fulfillment of Lessor's Obligations. All obligations,
duties and requirements imposed upon or allocated to the Construction Agent
shall be performed by the Construction Agent at the Construction's Agent's sole
cost and expense, and the Construction Agent will not be entitled to, and the
Lessor shall not have any obligation to pay, any agency fee or other fee or
compensation, and the Construction Agent shall not be entitled to, and the
Lessor

                                       9


<PAGE>

shall not have any obligation to make or pay, any reimbursement therefor, it
being understood that this Agreement is being entered into as consideration for
and as an inducement to the Lessor entering into the Lease and the other
Operative Documents.


                                   ARTICLE VII

                  LESSOR'S RIGHTS; CONSTRUCTION AGENT'S RIGHTS

         7.1. Exercise of the Lessor's Rights. The Construction Agent hereby
acknowledges and agrees that the rights and powers of the Lessor under this
Agreement have been assigned to, and may be exercised by, the Agent.

         7.2. Lessor's Right to Cure Construction Agent's Defaults. The Lessor,
without waiving or releasing any obligation or Construction Agency Event of
Default, may, upon prior written notice to the Construction Agent (but shall be
under no obligation to), remedy any Construction Agency Event of Default for the
account of and at the sole cost and expense of the Construction Agent. All
reasonable out of pocket costs and expenses so incurred (including actual and
reasonable fees and expenses of counsel), together with interest thereon at the
Overdue Rate from the date on which such sums or expenses are paid by the
Lessor, shall be paid by the Construction Agent to the Lessor on demand;
provided that such amount shall not exceed the Construction Failure Payment for
the related Leased Property, unless such Construction Agency Event of default
arose from the circumstances described in Section 5.3(b).


                                  ARTICLE VIII

                                  MISCELLANEOUS

         8.1. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Lessor, the Construction Agent and their respective
legal representatives, successors and permitted assigns. The Construction Agent
shall not assign its rights or obligations hereunder without the prior written
consent of the Lessor and the Agent.

         8.2. Notices. All notices, consents, directions, approvals,
instructions, requests, demands and other communications required or permitted
by the terms hereof to be given to any Person shall be given in writing in the
manner provided in, shall be sent to the respective addresses set forth in, and
the effectiveness thereof shall be governed by the provisions of, Section 8.2 of
the Master Agreement.

         8.3. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH,

                                       10


<PAGE>

THE LAWS OF THE STATE OF GEORGIA, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.

         8.4. Amendments and Waivers. Subject to the Documentary Conventions,
the Lessor and the Construction Agent may from time to time, enter into written
amendments, supplements or modifications hereto.

         8.5. Counterparts. This Agreement may be executed on any number of
separate counterparts and all of said counterparts taken together shall be
deemed to constitute one and the same agreement.

         8.6. Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

         8.7. Headings and Table of Contents. The headings and table of contents
contained in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.

         8.8. Documentary Conventions. The Lessor and the Construction Agent
hereby acknowledge that the Documentary Conventions apply to this Agreement.


                                       11


<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.

                                     BORDERS, INC.


                                     By /s/ Edward W. Wilhelm
                                       ---------------------------------------
                                       Name  Printed: Edward W.  Wilhelm
                                      Title: Senior Vice President and Treasurer


                                                                    CONSTRUCTION
                                                                AGENCY AGREEMENT




                                      S-1
<PAGE>

                                          ATLANTIC FINANCIAL GROUP, LTD.

                                          By: ATLANTIC FINANCIAL MANAGERS,
                                          INC., its General Partner


                                          By____________________________________
                                          Name:_________________________________
                                          Title:________________________________


                                      S-2

                                                                    CONSTRUCTION
                                                                AGENCY AGREEMENT

<PAGE>

                                                                       EXHIBIT A
                   Supplement to Construction Agency Agreement


         SUPPLEMENT to Construction Agency Agreement, dated as of
______________, 200_, between ATLANTIC FINANCIAL GROUP, LTD., a Texas limited
partnership (the "Lessor"), and BORDERS, INC., a Colorado corporation (in its
capacity as construction agent, the "Construction Agent"). Capitalized terms
used but not otherwise defined herein shall have the meanings given them in the
Construction Agency Agreement.

         The Lessor and the Construction Agent are parties to that certain
Construction Agency Agreement, dated as of June 21, 2002 (as amended,
supplemented or otherwise modified, the "Construction Agency Agreement"),
pursuant to which (i) the Lessor has appointed the Construction Agent as its
sole and exclusive agent in connection with the construction of the Buildings in
accordance with the Plans and Specifications, and (ii) the Construction Agent
has agreed, for the benefit of the Lessor, to cause the construction of the
Buildings to be completed in accordance with the Plans and Specifications.

         Subject to the terms and conditions of the Construction Agency
Agreement, the Lessor and the Construction Agent desire that the terms of the
Construction Agency Agreement apply to the Land described in Schedule 1 and wish
to execute this Supplement to provide therefor.

         NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:

         1. The Construction Agent agrees to act as Construction Agent and to
perform its obligations under the Construction Agency Agreement in connection
with the completion of construction of the Building on the Land described in
Schedule 1 in accordance with the Plans and Specifications for such Land. The
Construction Agent hereby represents and warrants to Lessor that the
Construction Agent has heretofore delivered to Lessor a true, correct and
complete copy of the Plans and Specifications for the Building on the Land
described in Schedule 1 or, if not available on the date hereof, will deliver
such Plans and Specifications as soon as available.

         2. Each of the Lessor and the Construction Agent acknowledges and
agrees that the construction of the Buildings on the Land described in Schedule
1 shall be governed by the terms of the Construction Agency Agreement.

                                      A-1


<PAGE>

         3. The anticipated construction budget relating to the construction and
development of the Building on the Land described in Schedule 1 is $__________.
[The acquisition cost of the Land described in Schedule 1 is $___________.]*/

         4. This Supplement shall, upon its execution and delivery, constitute a
part of the Construction Agency Agreement.



----------------
 */      May not be applicable if Ground Lease is used.


                                      A-2
<PAGE>


         IN WITNESS WHEREOF, the parties hereto have caused this Supplement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.

                                          BORDERS, INC.

                                          By____________________________________
                                          Name:_________________________________
                                          Title:________________________________

                                          ATLANTIC FINANCIAL GROUP, LTD.

                                          By: ATLANTIC FINANCIAL MANAGERS,
                                              INC., its General Partner


                                          By____________________________________
                                          Name:_________________________________
                                          Title:________________________________


                                      A-3


<PAGE>

                                                        Schedule 1 to Supplement



                          Description of Land Interest