Credit Facility

1.

BORROWER:

2.

FACILITY:

(a)

Facility A : Single advance non-revolving loan in an amount of up to Twenty-five Million Dollars ($25,000,000.00) (the “ Facility A Loan ”).

(b)

Facility B : Single advance non-revolving loan in an amount of up to Ten Million Dollars ($10,000,000.00) (the “ Facility B Loan ” and collectively with the Facility A Loan, the “ Loan ”).

3.

PURPOSE:

4.

DEFINITIONS:

(a)

“ Additional Closing Documents ” has the meaning attributed thereto in Paragraph 13 of this Agreement.

(b)

“ Affiliate ” has the same meaning as that term is given in the Business Corporations Act (Ontario).

(c)

“ Applicable Laws ” means, with respect to any person, property, transaction or event, all present or future statutes, regulations, rules, orders, codes, treaties, conventions, judgments, awards, determinations and decrees of any governmental, regulatory, fiscal or monetary body or court of competent jurisdiction, in each case, having the force of law in any applicable jurisdiction.

(d)

“ Authorization ” means, with respect to any person, any authorization, order, permit, approval, grant, licence, consent, right, notification, condition, franchise, privilege, certificate, judgment, writ, injunction, award, determination, direction, decree, by-law, rule or regulation of any Governmental Entity having jurisdiction over such person, whether or not having the force of law.

(e)

“ Availability Deficiency ” has the meaning attributed thereto in Paragraph 15(g) of this Agreement.

(f)

“ BBI ” means Blockbuster Inc.

(g)

“ BCI ” means Blockbuster Canada Inc.

(h)

“ Blocked Account ” has the meaning attributed thereto in Paragraph 15(a) of this Agreement.

(i)

“ Blocked Account Agreement ” has the meaning attributed thereto in Paragraph 15(b) of this Agreement.

(j)

“ Blocked Account Banks ” mean the bank or banks in which the Blocked Accounts are maintained.

(k)

“ Borrowing ” means each use of the Credit Facility and all such usages outstanding at any time are “ Borrowings ”.

(l)

“ Business Day ” means a day, excluding Saturday, Sunday and any other day which shall be a legal holiday or a day on which banking institutions are closed in the province of Ontario.

(m)

“ Cash Collateral Deficiency ” has the meaning attributed thereto in Paragraph 15(g) of this Agreement.

(n)

“ Collateral ” means any and all assets of the Borrower in respect of which the Lender has or will have a Lien securing any amount owing under a Credit Document.

(o)

“ Cost ” means the aggregate of the supplier’s invoice cost of the inventory in question (net of all discounts, rebates and allowances and excluding all applicable taxes) plus inbound freight charges including to the Borrower’s distribution centre and/or retail locations, clearing charges and customs duties, and, provided there is no duplication, allocated distribution centre costs.

(p)

“ Credit Documents ” means this Agreement, the Security Agreements, and all other documents to be executed and delivered to the Lender by the Borrower or any other person, as the case may be, as the same have been or may at any time and from time to time hereafter be amended, restated, supplemented, otherwise modified or replaced.

(q)

“ Default ” means an event which, with the giving of notice or passage of time, or both, would constitute an Event of Default.

(r)

“ Disbursement Account ” means the Borrower’s existing account listed in Schedule “A” to this Agreement from which the Borrower shall make all of its payments and disbursements.

(s)

“ Disclosure Schedule ” means Schedule “B” attached hereto as amended from time to time with the written consent of the Lender.

(t)

“ Distribution ” means, in respect of any person and subject to the prohibitions and restrictions contained in Paragraph 18(b) of this Agreement, the amount of (i) any dividend or other distribution on issued shares or other equity interests of such person; (ii) the purchase, redemption or retirement amount of any issued shares, warrants or any other options or rights to acquire shares of the person redeemed, retired or purchased by such person; (iii) the payment of any management fees, the making of loans or advances to Borrower’s Affiliates or payment of fees and amounts payable under the License Agreements; and (iv) any payment made on, under or in respect of any debt of such person. For greater certainty, the exercise of a warrant or option for shares in the Borrower shall not constitute a Distribution.

(u)

“ EBITDA ” means, with respect to any period, an amount equal to the net income of the Borrower for such period determined in accordance with U.S. GAAP (except item (v) below), plus or minus, to the extent deducted or added in determining such net income for such period, and without duplication:

(i)

interest paid or payable or received or receivable;

(ii)

income taxes paid or payable or refunds received or receivable in respect of income taxes;

(iii)

depreciation and amortization expenses (other than depreciation and amortization of Rental Inventory) and other non-cash charges;

(iv)

extraordinary gains or losses and other one-time cash charges or gains; and

(v)

royalty and management fees paid to BBI pursuant to the License Agreements.

(v)

“ Eligible Inventory ” means Merchandise Inventory and Rental Inventory:

(i)

which is not, in the opinion of the Lender, obsolete or damaged;

(ii)

title to which is held by the Borrower;

(iii)

which is and continues to be acceptable to the Lender, in its sole discretion, for margining purposes;

(iv)

which is insured under an all-risks insurance policy acceptable to the Lender in its sole discretion and in which the Lender is named as the loss payee, and a certified copy of which is provided to the Lender by the Borrower;

(v)

which is not subject to any liens or any other security interest in favour of any person other than the Lender unless subordinated to the Lender in a manner acceptable to the Lender in its discretion; and

(vi)

which is not purchased or sold on consignment.

(w)

“ Encumbrances ” means any mortgage, lien, pledge, assignment, charge, security interest, title retention agreement, hypothec, levy, execution, seizure, attachment, garnishment, right of distress or other claim in respect of property of any nature or kind whatsoever howsoever arising (whether consensual, statutory or arising by operation of law or otherwise) and includes arrangements known as sale and lease-back, sale and buy-back and sale with option to buy-back or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the PPSA or Uniform Commercial Code (or equivalent statutes) of any jurisdiction.

(x)

“ Equity ” means the aggregate amount of:

(i)

the stated capital of all of the outstanding shares or other ownership interests of the Borrower;

(ii)

the Borrower’s accumulated retained earnings; and

(iii)

the amount without duplication, of any contributed surplus;

(y)

“ ET ” means eastern daylight savings or standard time, as the case may be.

(z)

“ Events of Default ” has the meaning attributed thereto in Paragraph 25 of this Agreement.

(aa)

“ Excluded Cash ” means:

(i)

petty cash for minor store disbursements consistent with past practices; and

(ii)

cash floats for stores consistent with past practices.

(bb)

“ Facility A Loan Availability ” has the meaning attributed thereto in Paragraph 5 of this Agreement.

(cc)

“ Fiscal Month ” means the relevant 4 or 5 week period based upon the Borrower’s accounting cycle which is currently based on 4-4-5 week rotating periods.

(dd)

“ GAAP ” means generally accepted accounting principles in effect from time to time in Canada or, where so indicated, in the United States of America, applied in a consistent manner from period to period.

(ee)

“ Governmental Entity ” means any (i) multinational, federal, provincial, state, municipal, local or other government, governmental or public department, central bank, court, commission, board, bureau, agency or instrumentality, domestic or foreign; (ii) any crown corporation incorporated by the foregoing; (iii) any subdivision or authority of any of the foregoing; or (iv) any quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the above.

(ff)

“ Indemnified Person ” has the meaning attributed thereto in Paragraph 23(b) of this Agreement.

(gg)

“ Initial Blocked Accoun t” means Bank of Montreal account number 0002 1590 118 at its 100 King Street West, Toronto, Ontario branch.

(hh)

“ License Agreements ” means the Master Services Agreement referred to in Paragraph 14(a)(xi) of this Agreement and the License Agreement referred to in Paragraph 14(a)(xii) of this Agreement;

(ii)

“ Lien ” means any mortgage, charge, pledge, hypothecation, security interest, assignment, encumbrance, lien (statutory or otherwise), charge, title retention agreement or arrangement, restrictive covenant or other encumbrance of any nature or any other arrangement or condition that in substance secures payment or performance of an obligation.

(jj)

“ Material Adverse Change ” means any change, condition or event which, when considered individually or together with other changes, conditions, events or occurrences could reasonably be expected to have a Material Adverse Effect.

(kk)

“ Material Adverse Effect ” means a material adverse effect on (i) the business, revenues, operations, assets, liabilities (contingent or otherwise), financial condition or prospects of the person in question; (ii) on the rights and remedies of the Lender under the Credit Documents; (iii) on the ability of the Borrower to perform its obligations under the Credit Documents; or (iv) on the Liens created by the Security Agreements.

(ll)

“ Material Permits ” means the Authorizations, the breach, non-performance, cancellation or non-availability of which or failure of which to renew or maintain could reasonably be expected to have a Material Adverse Effect.

(mm)

“ Merchandise Inventory ” means inventory of pre-recorded videos and movies, video games, confections, licensed merchandise, audio books, music, consumer electronics, games hardware, games accessories and other entertainment related merchandise for in-store sale by Borrower to customers.

(nn)

“ Monthly Borrowing Base Report ” has the meaning attributed thereto in Paragraph 6 of this Agreement.

(oo)

“ NOLV ” means with respect to any real or personal property at any time, the Canadian dollar amount of the “net orderly liquidation value” of such property determined pursuant to an appraisal which is current at the time NOLV is being determined conducted by an appraiser acceptable to the Lender in its sole discretion.

(pp)

“ Other Borrowing Base Report ” has the meaning attributed thereto in Paragraph 5 of this Agreement.

(qq)

“ Payroll Account ” means the Borrower’s payroll account at Royal Bank of Canada account number 0002 119 109 7.

(rr)

“ Pension Plans ” means each of the pension plans which the Borrower sponsors or administers or into which the Borrower makes contributions.

(ss)

“ Permitted Encumbrances ” means, without Lender having or being deemed to have acknowledged, acquiesced or agreed to the quantum of such Encumbrances or to the priority, enforceability, or validity of same:

(i)

any “ purchase money security interests ” or vendor’s hypothecs or other Encumbrances, in each case on equipment (as defined in the PPSA) used by the Borrower in the operation of its business and which is not for resale, lease or rental to its customers which is assumed, created or reserved to secure the unpaid purchase price of, or future lease payments for, such equipment after the date hereof provided that any such Encumbrance is limited to the equipment so acquired and the proceeds thereof including, subject to Paragraph 14(a)(ii) of this Agreement, Ontario PPSA File No. 643893183 in favour of CBSC Capital and the lease in respect thereof;

(ii)

any Statutory Encumbrances;

(iii)

zoning restrictions, easements, licenses, covenants and other restrictions affecting the use of real property which do not interfere in any material respect with the use of such real property or ordinary conduct of the business of the Borrower as presently conducted thereon or materially impair the value of the real property which may be subject thereto;

(iv)

the rights reserved to or vested in any person by the terms of any lease, license (but subject to the Rights Agreements) or permit held by the Borrower or by any statutory provision, to terminate any such lease, license or permit, or to require annual or periodic payments as a condition to the continuance thereof;

(v)

Encumbrances (including servicing agreements, development agreements, site plan agreements and other agreements) with or given to a public utility or any municipality or governmental or other public authority, provided that such Encumbrances do not interfere in any material respect with the use of the real property affected thereby or ordinary conduct of the business of the Borrower as presently conducted;

(vi)

applicable municipal and other governmental restrictions, including municipal by-laws and regulations, affecting the use of land or the nature of any structures which may be erected thereon, provided such restrictions have been complied with and do not interfere in any material respect with the use of the real property affected thereby or ordinary conduct of the business of the Borrower as presently conducted;

(vii)

subject to the continued subordination of same to the security of the Lender as contemplated in Paragraph 14(a)(i) of this Agreement and only so long as such subordination continues, RPMRR conventional hypothec without delivery #01-0181494-0001 against the Borrower in favour of Du Bocage Co-Propriete Enr., Rene Beaucage, acting under the business name Du Bocage Co-Propriete Enr., Joseph Beaucage, acting under the business name Du Bocage Co-Propriete Enr., Gerald Beaucage, acting under the business name Du Bocage Co-Propriete Enr.;

(viii)

Encumbrances in the nature of title retention provisions contained in Supply Agreements and in a Scan Based Trading Short Form Agreement dated November 7, 2008 between the Borrower and Sony Pictures Home Entertainment Canada Ltd.; and

(ix)

Encumbrances in favour of the Lender created by the Credit Documents.

(tt)

“ person ” includes a natural person, a partnership, a joint venture, a trust, a fund, an unincorporated organization, a company, a corporation, an association, a government or any department or agency thereof, and any other incorporated or unincorporated entity.

(uu)

“ PPSA ” means the Personal Property Security Act as in effect from time to time in the Province of Ontario; provided that, if validity, perfection or the effect of perfection or non-perfection or the priority of the security interest granted by any Security Agreement in any Collateral and the rights and remedies of the Lender are governed by the PPSA or other similar legislation as in effect in a jurisdiction other than Ontario, then “ PPSA ” shall mean the Personal Property Security Act or other similar legislation as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such validity, perfection, effect of perfection or non-perfection or priority and to such rights and remedies.

(vv)

“ Priority Claims ” means the aggregate of any amounts accrued or payable by the Borrower which under any law may rank prior to or pari passu with any of the Security Agreements or otherwise in priority to any claim by the Lender for payment or repayment of any amounts owing under this Agreement, including to the extent of such priority: (i) wages, salaries, commissions or other remuneration (including, without limitation, amounts payable pursuant to the Wage Earner Protection Program Act); (ii) vacation pay; (iii) pension plan contributions; (iv) amounts required to be withheld from payments to employees or other persons for federal and provincial income taxes, employee Canadian Pension Plan contributions and employee Employment Insurance premiums, additional amounts payable on account of employer Canada Pension Plan contributions and employer Employment Insurance premiums; (v) federal goods and services tax; (vi) provincial sales or other consumption taxes; (vii) Workers’ Compensation Board and Workplace Safety and Insurance Board premiums or similar premiums; (viii) rent and other amounts payable in respect of the use of real property; and (ix) claims which suppliers could assert pursuant to Section 81.1 or Section 81.2 of the Bankruptcy and Insolvency Act (Canada).

(ww)

“ Receiver ” has the meaning attributed thereto in Paragraph 25 of this Agreement.

(xx)

“ related person ” means all of the Borrower’s Affiliates, subsidiaries, officers, employees, agents, directors or other persons.

(yy)

“ Rental Inventory ” means inventory of pre-recorded videos and movies and video games for in-store rental by Borrower to customers.

(zz)

“ Repayment Date ” has the meaning attributed thereto in Paragraph 8 of this Agreement.

(aaa)

“ Restatement Effective Date ” means May 11, 2009.

(bbb)

“ Rights Agreements ” means the Rights Agreements referred to in Paragraph 14(a)(xiii) of this Agreement.

(ccc)

“ Security Agreements ” means, collectively, the agreements referred to in Paragraph 13 and any other security granted to the Lender, as security for the obligations of the Borrower under this Agreement and the other Credit Documents, as the same have been or may at any time and from time to time hereafter be amended, restated, supplemented, otherwise modified or replaced.

(ddd)

“ Shrink Reserve ” means a reserve for inventory shrinkage established from time to time by the Lender in its discretion and which is, inter alia , based upon the Borrower’s actual historical shrink results disclosed by its current and prior physical inventory counts and adjusted, if necessary, for then current economic conditions.

(eee)

“ Solvent ” means, with respect to any person on a particular date, that on such date (a) the fair value of the property of such person is greater than the total amount of liabilities, including contingent liabilities, of such person; (b) the present fair salable value of the assets of such person is not less than the amount that will be required to pay the probable liability of such person on its debts as they become absolute and matured; (c) such person does not intend to, and does not believe that it will, incur debts or liabilities beyond such person’s ability to pay as such debts and liabilities mature; and (d) such person is not engaged in a business or transaction, and is not about to engage in a business or transaction, for which such person’s property would constitute an unreasonably small capital. The amount of contingent liabilities (such as litigation, guarantees and pension plan liabilities) at any time shall be computed as the amount that, in light of all the facts and circumstances existing at the time, represents the amount that can be reasonably be expected to become an actual or matured liability.

(fff)

“ Statutory Encumbrances ” means any Encumbrances arising by operation of Applicable Laws, including, without limitation, for carriers, warehousemen, repairers’, taxes, assessments, statutory obligations and government charges and levies for amounts not yet due and payable or which may be past due but which are being contested in good faith by appropriate proceedings (and as to which there are no other enforcement proceedings or they shall have been effectively stayed).

(ggg)

“ Supply Agreements ” has the meaning attributed thereto in Paragraph 16(s) of this Agreement;

(hhh)

“ Term of this Agreement ” means the period from and including the date on which this Agreement is executed to and including the date on which all amounts owing by the Borrower to the Lender hereunder have been paid in full and the Lender has no further obligations hereunder.

(iii)

“ Termination Date ” has the meaning attributed thereto in the U.S. Credit Amending Agreement.

(jjj)

“ U.S. Credit Agreement ” means the Credit Agreement dated as of August 20, 2004 as amended and restated as of April 2, 2009 among BBI, JPMorgan Chase Bank, N.A. and others.

(kkk)

“ U.S. Credit Amending Agreement ” means the Amendment dated as of April 2, 2009 among BBI, JPMorgan Chase Bank, N.A. and others which, inter alia , provides for the coming into force of the U.S. Credit Agreement.

5.

FACILITY A LOAN AVAILABILITY:

(a)

sixty percent (60%) of the Cost of Rental Inventory and the weighted average Cost of Merchandise Inventory, determined in a manner consistent with the Borrower’s current practices (save as otherwise provided in the definition herein of Cost), and as reflected in the then current Monthly Borrowing Base Report or Other Borrowing Base Report, as the case may be;

(b)

ninety percent (90%) of the then NOLV of the Eligible Inventory as reflected in its then current Monthly Borrowing Base Report or Other Borrowing Base Report, as the case may be;

(c)

the amount of the Facility A Loan then outstanding, together with all amounts owing by the Borrower to the Lender under this Agreement (including, without limitation, interest owing on the amount of the Loan then outstanding, but excluding any principal amount outstanding, but not yet payable, in respect of the Facility B Loan) or under any other Credit Document;

(d)

reserves, determined by the Lender in its sole discretion, in respect of actual and/or potential Priority Claims and Statutory Encumbrances, Shrink Reserve, outstanding rental reserve and obsolesence reserve for Rental Inventory;

(e)

any other reserves, determined by the Lender in its sole discretion.

6.

ADVANCE OF FACILITY A LOAN:

(a)

There shall be only one Facility A Loan advance. Provided that no Default or Event of Default has occurred, and that at the time the advance is to be made the conditions contained in Paragraph 14(a) of this Agreement have then been satisfied, the Lender shall advance the sum of Twenty-five Million Dollars ($25,000,000) as the Facility A Loan advance on May 8, 2009. The full amount of the said Facility A Loan advance shall be deposited into the Initial Blocked Account and shall thereafter be transferred to the Lender by way of a cash sweep of the Initial Blocked Account by Bank of Montreal pursuant to the blocked account agreement among the Lender, the Borrower and the said Bank to be held by the Lender as cash collateral pursuant to the agreement contemplated in Paragraph 13(e) of this Agreement.

(b)

Provided that no Default or Event of Default has occurred and that the conditions contained in Paragraph 14(b) of this Agreement have then been satisfied, the Lender shall transfer the amount contemplated in Paragraph 6(a) of this Agreement (less the amount, if any, contemplated in Paragraph 6(c) of this Agreement) to the Borrower’s Disbursement

Account on the day on which the last of the conditions contained in Paragraph 14(b) of this Agreement is satisfied and if same occurs by 3:00 p.m. ET, or on the Business Day following the day on which the last of such conditions is satisfied if same occurs after 3:00 p.m. ET.

(c)

Prior to the transfer contemplated in Paragraph 6(b) of this Agreement, the Lender shall calculate the then Facility A Loan Availability. To the extent that the then Facility A Loan Availability is less than Twenty-five Million Dollars ($25,000,000), the Lender shall retain an amount equal to such difference, shall not transfer such amount pursuant to Paragraph 6(b) of this Agreement, and shall continue to hold such amount as cash collateral pursuant to the cash collateral agreement contemplated in Paragraph 13(e) of this Agreement.

(d)

Notwithstanding any other provision of this Agreement and for greater clarity, the Lender and Borrower acknowledge and agree that, prior to a Default and following a Default but prior to the Lender exercising any of its rights and remedies herein or as hereafter referred to with respect to the funds hereinafter referred to, each of (i) the funds advanced by the Lender as contemplated in Paragraph 6(a) of this Agreement, (ii) the funds that are from time to time deposited into the Initial Blocked Account or the Blocked Accounts as provided in this Agreement, and (iii) the funds that are from time to time held by the Lender as cash collateral pursuant to this Agreement or any other Credit Document, are and shall be the property of the Borrower, subject to: (iv) the rights of the Lender contained in this Agreement; (v) any and all other rights granted to the Lender in any other agreement now or hereafter in effect between the Borrower and the Lender; and (vi) any other rights and remedies the Lender may have as a secured party at law or in equity.

7.

ADVANCES OF FACILITY B LOAN

(a)

There shall be only one Facility B Loan advance. A request for a Facility B Loan advance shall be made by the Borrower in writing. A request for a Facility B Loan advance may not be made until after the sixtieth (60 ^th ) day following the first Facility A Loan advance made hereunder. The Lender may, in its absolute discretion, determine whether or not it wishes to provide a Facility B Loan advance and, if so, the amount thereof. Any Facility B Loan advance to be made hereunder will, less any amounts to be deducted therefrom as provided for hereunder, be deposited into the Borrower’s Disbursement Account.

(b)

Notwithstanding anything to the contrary contained in this Agreement, any Facility B Loan advance to be made by the Lender shall be subject to a maximum to be advanced under this Paragraph 7 by the Lender of Ten Million Dollars ($10,000,000).

8.

TERM:

(a)

September 30, 2010;

(b)

the occurrence of an Event of Default and written notice to the Borrower (it being acknowledged that such notice may be immediate) declaring the Borrowings outstanding hereunder to be immediately due and payable; or

(c)

on or after the amendments and restatements provided for in the U.S. Credit Amending Agreement become effective, the termination of all of the Revolving Commitments pursuant to (and as defined in) the U.S. Credit Agreement.

9.

INTEREST RATE:

(a)

Interest on the principal amount of each advance made hereunder and outstanding from time to time shall be calculated at a rate of eighteen percent (18%) per annum, which interest shall be calculated daily on the daily closing principal balance owing hereunder in respect of the Loan, not in advance, and shall be payable both before and after default and/or judgment as well after as before maturity. Interest calculated as aforesaid shall be payable monthly, on the first day of each month until the full amount outstanding hereunder on account of the Loan has been paid. The first payment of interest hereunder shall be payable on the first day of June, 2009, computed from the 8 ^th day of May, 2009.

(b)

Interest on overdue interest payable in respect of the Loan shall be calculated at the aforementioned interest rate, shall be compounded monthly and shall be payable on demand.

(c)

Any unpaid costs and expenses and other fees and charges contemplated herein which are not paid when due hereunder shall bear interest calculated at the aforementioned interest rate which interest shall be payable on demand.

(d)

For purposes of disclosure under the Interest Act (Canada), where in this Agreement or in any Security Agreement an annual rate of interest is to be calculated during a leap year, the yearly rate of interest to which such rate is equivalent is such rate multiplied by 366 and divided by 365.

(e)

For greater certainty, whenever any amount is payable under any Credit Document by the Borrower as interest or as a fee which requires the calculation of an amount using a percentage per annum, each party to this Agreement acknowledges and agrees that such amount shall be calculated as of the date payment is due without application of the “deemed reinvestment principle” or the “effective yield method”.

10.

PREPAYMENT:

(a)

Subject to Paragraph 10(b), prepayment of the Loan in part (but subject to Paragraph 10(d) of this Agreement) or in full (together in any such case with all accrued interest and other amounts payable hereunder) is permitted at any time.

(b)

If prepayment of the Loan is made on or before November 8, 2009, the Borrower shall pay a prepayment fee in the amount of Two Hundred Thousand Dollars ($200,000).

(c)

If prepayment of the Loan is made after November 8, 2009, but before the Repayment Date, the Borrower shall pay a prepayment fee in the amount of One Hundred Thousand Dollars ($100,000).

(d)

Prepayment of the Loan in part shall only be permitted where the then outstanding principal amount of the Loan is more than Ten Million Dollars ($10,000,000) and where the result of such partial prepayment does not reduce the then outstanding principal

amount of the Loan after such prepayment to an amount less than Ten Million Dollars ($10,000,000).

11.

FACILITY FEE:

(a)

The Borrower shall pay a non-refundable facility fee in the amount of Two Hundred and Fifty Thousand Dollars ($250,000.00) which fee shall be payable by deduction from the Facility A Loan advance and shall be fully earned at the time of the execution of this Agreement.

(b)

The Borrower shall pay a further non-refundable facility fee in the amount of one percent (1%) of the amount of any Facility B Loan advance made hereunder, which fee shall be payable by deduction from the Facility B Loan advance and shall be fully earned at the time of the making of the said Facility B Loan advance.

12.

MAINTENANCE AND MONITORING FEE:

13.

SECURITY:

(a)

a promissory note made by the Borrower;

(b)

a general security agreement from the Borrower in favour of the Lender granting a first-ranking security interest in all of its present and after-acquired real and personal property, assets and undertaking, subject to Permitted Encumbrances;

(c)

a deed of moveable hypothec under Quebec law granting a first-ranking charge in all present and future personal (moveable) collateral of the Borrower located in the Province of Quebec, subject to Permitted Encumbrances;

(d)

an assignment of all of the Borrower’s rights and interests pursuant to the License Agreements;

(e)

a cash collateral agreement pursuant to which the Borrower will, from time to time and as adjusted from time to time, deposit cash with the Lender as additional security for the liabilities and obligations of the Borrower hereunder and in respect of which the Borrower will grant to the Lender a security interest pursuant to the PPSA; and

(f)

an assignment of insurance from the Borrower covering fire and all risks normally insured against by similar businesses to that carried on by the Borrower and in such form

and amount as the Lender may require in respect of all of the Collateral and in respect of which the Lender is shown as a loss payee.

(g)

such officers’ certificates with respect to the Borrower and such legal opinions and other supporting documents as the Lender shall require; and

(h)

an acknowledgement by the head landlord of the Borrower’s distribution centre and by 3E Logistics Inc. of the Lender’s security interest in the assets of the Borrower, waivers satisfactory to the Lender by such persons of any Lien or other claims by either of them to the Borrower’s assets and agreements permitting the Lender access to, and a right to remain on, the premises in question to exercise its rights and remedies and otherwise deal with the Borrower’s assets.

14.

CONDITIONS:

(a)

Each of the following is a condition precedent to the initial Borrowing hereunder:

(i)

The Lender shall have received from the secured creditor described in Schedule “D” hereto, a postponement and subordination of the security held by such secured party in favour of the Lender;

(ii)

The Lender shall have received from CBSC Capital an acknowledgement in favour of the Lender and its successors and assigns, in a form acceptable to the Lender, specifying the collateral which is the subject matter of the PPSA registration in its favour, and confirming that such secured creditor will not take any new security which ranks or purports to rank ahead of the Security Agreements pursuant to such registration;

(iii)

The Borrower shall have opened its Initial Blocked Account and shall have entered into a blocked account agreement satisfactory to the Lender in its discretion with respect to such account;

(iv)

The Security Agreements shall have been duly executed and delivered and, where required, registered;

(v)

The Lender shall have received the Additional Closing Documents;

(vi)

At or prior to the time the advance in question is to be made, no Default or Event of Default shall have occurred and be continuing;

(vii)

The Lender shall have completed all of its due diligence investigations and shall, in its sole discretion, be satisfied with the results of same;

(viii)

The Lender shall have received an appraisal satisfactory to it in its sole discretion with respect to the Borrower’s Eligible Inventory;

(ix)

The Lender shall have received evidence satisfactory to it that all insurance coverage contemplated in this Agreement is then in place;

(x)

The Lender shall have received payment of all fees (including all legal fees of the Lender), expenses and other amounts then payable under the Credit Documents;

(xi)

The Borrower and BBI shall have entered into a Master Services Agreement in the form attached hereto as Schedule “E”;

(xii)

The Borrower and BBI shall have entered into a License Agreement with respect to, inter alia, trademarks and other intellectual property in the form attached hereto as Schedule “F”;

(xiii)

The Lender and BBI shall have entered into Rights Agreements in the form attached hereto as Schedules “G” and “H”;

(xiv)

The Lender shall have received the deposit referred to in Paragraph 24 of this Agreement from the Borrower;

(xv)

The Lender shall have received from the Borrower the facility fee referred to in Paragraph 11(a) of this Agreement;

(xvi)

The board of directors of BBI shall, by no later than 2:30 p.m. ET on May 8, 2009, have approved the amendments and restatements contemplated in the U.S. Credit Amending Agreement becoming effective on or before May 11, 2009 and shall have approved the U.S. Credit Agreement and its coming into force on or before May 11, 2009 and the Borrower shall have delivered to the Lender a letter from BBI’s general counsel in a form acceptable to Lender certifying that said approvals have been properly given by BBI’s board of directors;

(xvii)

Contemporaneously with the execution of this Agreement, the Lender and the Borrower shall have entered into an agreement, in a form acceptable to the Lender, pursuant to which the Borrower agrees that if it at any time prior to

payment and repayment in full of all of the Borrower’s liabilities and obligations owing and payable to the Lender pursuant to this Agreement wishes to arrange new or additional debt financing (including financing of any future acquisitions by the Borrower) it shall acknowledge that it requires the consent of the Lender and will further agree that the Lender shall be granted a first right of refusal to provide such debt financing;

(xviii)

There shall not have occurred or become known any Material Adverse Change with respect to the Borrower or any condition or event that could reasonably be expected to result in a Material Adverse Change with respect to the Borrower, in each case, since January 4, 2009;

(xix)

There shall not have occurred or become known any Material Adverse Change with respect to BBI or any condition or event that could reasonably be expected to result in a Material Adverse Change with respect to BBI, in each case, since January 4, 2009 (provided that the Lender acknowledges and accepts the “going concern” qualification on BBI’s financial statements for its year ended January 4, 2009 and that a similar qualification will be included in BBI’s financial statements for its year ended January 3, 2010); and

(xx)

No other event shall have occurred that, in the Lender’s sole discretion, materially adversely affects or could materially adversely affect either: (i) the business, assets, liabilities, prospects, financial condition or operations of the Borrower or of BBI, or (ii) the value of the Collateral which is the subject matter of the Security Agreements.

(b)

Each of the following is a condition precedent to the transfer contemplated in Paragraph 6(b) of this Agreement and to any subsequent Borrowing hereunder:

(i)

All of the conditions contained in Paragraph 14(a) shall have been satisfied and shall as at the time of the making of the subsequent advance in question continue to be satisfied;

(ii)

All of the representations and warranties of the Borrower herein are true and correct on and as of such date as though made on and as of such date, except in the case of a representation or warranty of the Borrower that is made with respect to a specific date, in which case such representation or warranty shall have been true on such date;

(iii)

No event or condition has occurred and is continuing, or would result from such Borrowing, which constitutes or which, with notice, lapse of time, or both, would constitute, a breach of any covenant or other term or condition of this Agreement or of any Credit Document. For the purposes of this Paragraph, the covenants referred to in Paragraph 18(d) of this Agreement shall be deemed to have been in effect since the execution of this Agreement notwithstanding Paragraph 18(d) of this Agreement;

(iv)

Such Borrowing will not violate any Applicable Law then in effect;

(v)

If such subsequent advance is a Facility B Loan advance, the Lender shall have received the facility fee referred to in Paragraph 11(b) of this Agreement at or prior to the time of the making of the advance in question;

(vi)

No Default or Event of Default shall have occurred and be continuing;

(vii)

The amendments and restatements provided for in the U.S. Credit Amending Agreement shall have become effective as contemplated therein and the U.S. Credit Agreement shall be in full force and effect and the Borrower shall have delivered to the Lender a letter from BBI’s general counsel in a form acceptable to the Lender certifying to such effect;

(viii)

There shall not have occurred or become known any Material Adverse Change with respect to the Borrower or any condition or event that could reasonably be expected to result in a Material Adverse Change with respect to the Borrower, in each case, since January 4, 2009;

(ix)

There shall not have occurred or become known any Material Adverse Change with respect to BBI or any condition or event that could reasonably be expected to result in a Material Adverse Change with respect to BBI, in each case, since January 4, 2009 (provided that the Lender acknowledges and accepts the “going concern” qualification on BBI’s financial statements for its year ended January 4, 2009 and that a similar qualification will be included in BBI’s financial statements for its year ended January 3, 2010); and

(x)

No other event shall have occurred that, in the Lender’s sole discretion, acting reasonably, materially adversely affects or could materially adversely affect either: (i) the business, assets, liabilities, prospects, financial condition or operations of the Borrower or of BBI, or (ii) the value of the Collateral.

(c)

The making of Borrowings hereunder, without the fulfillment of one or more conditions set forth in Paragraphs 14(a) or 14(b), shall not constitute a waiver of any such condition, and the Lender reserves the right to require fulfillment of such condition in connection with any subsequent Borrowing.

15.

CASH MANAGEMENT SYSTEMS:

(a)

Within thirty (30) days following execution of this Agreement, the Borrower shall use its reasonable best efforts to establish and, once established, shall continue to maintain, at its expense, blocked accounts at the banks identified at level A on Schedule “I” hereto as determined by the Lender (“ Blocked Accounts ”) into which the Borrower shall promptly deposit all funds received from all sources other than Excluded Cash but including, without limitation, all account receivable payments, cash sales receipts, credit card payments, any and all refunds received from any source whatsoever and any proceeds of any advances or other loans made to them and shall direct their account debtors that remit payments by electronic funds transfers to directly remit all payments into the Blocked Accounts. For greater certainty, the Borrower’s agreement to use its reasonable best efforts to establish the Blocked Accounts shall not require the Borrower to change any of its banking relationships if a bank refuses to establish the Blocked Accounts contemplated hereby. Until the Blocked Accounts are established as aforesaid, or if the Borrower, following the use of its reasonable best efforts to do so, is unsuccessful in

establishing some or all of the Blocked Accounts contemplated hereby then, with respect to those banks where it is unable to do so, the Borrower shall, on a daily basis, wire transfer to the Initial Blocked Account all monies in all of the Borrower’s deposit accounts other than Excluded Cash (including, without limitation, all of the accounts shown on Schedule “I” hereto) and which monies shall thereafter be transferred to the Lender by way of cash sweeps of the Blocked Accounts by the Blocked Account Banks pursuant to the Blocked Account Agreements to be held by the Lender as cash collateral pursuant to the agreement contemplated in Paragraph 13(e) of this Agreement.

(b)

The Blocked Account Banks and the Borrower shall enter into agreements (“ Blocked Account Agreements ”), in form and substance satisfactory to the Lender providing that the Blocked Account Banks have no Lien upon, or right to setoff against, the Blocked Accounts, the items received for deposit therein, or the funds from time to time on deposit therein and that the Blocked Account Banks will wire, or otherwise transfer, in immediately available funds, on a daily basis, all funds received or deposited into the Blocked Accounts to the Lender’s account, as the Lender may from time to time designate for such purpose, to be held by the Lender as cash collateral pursuant to the agreement contemplated in Paragraph 13(e) of this Agreement.

(c)

Within thirty (30) days following execution of this Agreement, the Borrower shall take all steps necessary to cause all monies currently deposited into the account identified on Schedule “I” hereto as the “credit and debit cards” account to be instead deposited into one of the Blocked Accounts (or, in the interim, into the Initial Blocked Account).

(d)

Any monies, cheques, notes, drafts or any other payment which come into the possession or under the control of the Borrower or, in the case of any related person, comes into its possession or under its control and is rightfully that of the Borrower, shall, immediately upon receipt thereof where received by the Borrower or upon the Borrower becoming aware of the receipt thereof where received by a related person, be deposited by the Borrower, or shall be caused by the Borrower to be deposited, in the Blocked Accounts and shall be dealt with as contemplated in Paragraph 15(b) of this Agreement. In no event shall the same be commingled with any of the Borrower’s own funds. The Borrower agrees to reimburse the Lender on demand for any amounts owed or paid to the Blocked Account Banks regarding the Blocked Accounts or any other bank or person involved in the transfer of funds to or from such Blocked Accounts arising out of the Lender’s payments to or indemnification of such bank or person.

(e)

The Lender shall, on each Business Day in respect of amounts received from the Borrower’s Blocked Accounts on the previous Business Day and held by the Lender as cash collateral as aforesaid, provided that no Default or Event of Default has occurred and subject to Paragraph 15(g) of this Agreement, transfer such amounts to the Borrower’s Disbursement Account.

(f)

The Borrower shall make all of its payments and disbursements only from its Disbursement Account or from its Payroll Account.

(g)

Upon receipt of the Monthly Borrowing Base Report or Other Borrowing Base Report, as the case may be, the Lender shall calculate the then Facility A Loan Availability as contemplated in Paragraph 5 of this Agreement and shall calculate the amount, if any, by which the amount of the Loan then outstanding (including principal, accrued and unpaid interest, unpaid fees and expenses and all other amounts owing by the Borrower to the

Lender under this Agreement but excluding any principal amount then outstanding but not yet payable in respect of the Facility B Loan) exceeds the then Facility A Loan Availability (such excess, if any, being the “ Availability Deficiency ”). The Lender shall further calculate the amount, if any, by which the Availability Deficiency exceeds the amount of cash then held by the Lender as cash collateral pursuant to the agreement contemplated in Paragraph 13(e) of this Agreement (such excess, if any, being the “ Cash Collateral Deficiency ”). The Lender shall, in addition to any cash collateral then held by it, retain amounts received from the Borrower’s Blocked Accounts as additional cash collateral until it has retained amounts which in the aggregate equal the Cash Collateral Deficiency and only thereafter shall the provisions of Paragraph 15(e) of this Agreement apply.

16.

BORROWER’S REPRESENTATIONS: