SENIOR SECURED CREDIT AGREEMENT

Exhibit 10.1

SENIOR SECURED CREDIT AGREEMENT

Dated as of April 9, 2008

among

BORDERS GROUP, INC.
As Borrower

and

THE LENDERS LISTED HEREUNDER
and

PERSHING SQUARE CAPITAL MANAGEMENT, L.P.
As Administrative Agent

and

TABLE OF CONTENTS

1.		DEFINITIONS, RULES OF INTERPRETATION, ETC.					1
		1.1.		Definitions			1
		1.2.		Rules of Interpretation			16
		1.3.		Accounting Principles			17
2.		THE TERM LOAN FACILITY					18
		2.1.		Loan Commitment			18
				2.1.1.   Term Loan Facility			18
				2.1.2.   Notice of Borrowing			18
				2.1.3.   Deposit of Commitment Amount			18
				2.1.4.   Lending Obligation			18
				2.1.5.   Payment at Maturity			18
		2.2.		Premiums			18
				2.2.1.   Closing Discount			18
				2.2.2.   Repayment Premium			19
		2.3.		Evidence of Loan Obligations			19
				2.3.1.   Notes			19
				2.3.2.   Delivery of Notes			19
		2.4.		Interest on Loans			19
				2.4.1.   Interest on Loans			19
				2.4.2.   Maximum Interest			19
		2.5.		Allocation			20
3.		REPAYMENT OF THE LOANS					20
		3.1.		Maturity			20
		3.2.		Voluntary Prepayments			21
		3.3.		Mandatory Prepayments			21
		3.4.		Application of Proceeds			21
4.		CERTAIN GENERAL PROVISIONS					21
		4.1.		Funds for Payments			21
				4.1.1.   Payments to Administrative Agent			21
				4.1.2.   No Offset, etc			21
				4.1.3.   Non-U.S. Lenders			22
		4.2.		Computations			23
		4.3.		Additional Costs, etc			23
		4.4.		Capital Adequacy			24
		4.5.		Certificate			25
		4.6.		Interest After Default			25
				4.6.1.   Overdue Amounts			25
				4.6.2.   Amounts Not Overdue			25
		4.7.		Replacement of Lenders			25

5.		GUARANTY AND COLLATERAL SECURITY					26
		5.1.		Guaranty of Payment and Performance			26
		5.2.		Guaranty Absolute			26
		5.3.		Effectiveness, Enforcement			28
		5.4.		Waiver			28
		5.5.		Subordination; Subrogation			28
		5.6.		Payments			29
		5.7.		Setoff			29
		5.8.		Further Assurances			30
		5.9.		Successors and Assigns			30
		5.10.		Contribution			30
		5.11.		Security of Borrower			30
6.		REPRESENTATIONS AND WARRANTIES					31
		6.1.		Corporate Authority			31
				6.1.1.   Incorporation; Good Standing			31
				6.1.2.   Authorization			31
				6.1.3.   Enforceability			31
		6.2.		Governmental Approvals			31
		6.3.		Title to Properties; Leases			32
		6.4.		Fiscal Year; Financial Statements and Projections			32
				6.4.1.   Fiscal Year			32
				6.4.2.   Financial Statements			32
				6.4.3.   Projections			32
		6.5.		No Material Adverse Effect, Etc			33
		6.6.		Intellectual Property			33
				6.6.1.   Franchises, Patents, Copyrights, Etc			33
				6.6.2.   Paperchase Companies Intellectual Property			33
		6.7.		Litigation			33
		6.8.		No Materially Adverse Contracts, Etc			33
		6.9.		Compliance With Other Instruments, Laws, etc			34
		6.10.		Tax Status			34
		6.11.		No Event of Default			34
		6.12.		Holding Company and Investment Company Acts			34
		6.13.		Certain Transactions			34
		6.14.		Employee Benefit Plans			34
				6.14.1.   In General			34
				6.14.2.   Terminability of Welfare Plans			35
				6.14.3.   Guaranteed Pension Plans			35
				6.14.4.   Multiemployer Plans			35
		6.15.		Use of Proceeds			36
		6.16.		Environmental Compliance			36
		6.17.		Subsidiaries			37
		6.18.		No Other Guarantors			38
		6.19.		Disclosure			38
		6.20.		Senior Debt Status			38
		6.21.		Solvency			38

		6.22.		Updates to Schedules			38
		6.23.		Insurance			39
		6.24.		Perfection of Security Interest			39
		6.25.		Foreign Assets Control Regulations, Etc			39
		6.26.		No Additional Issuances			39
		6.27.		No Amendments			39
		6.28.		Existing Indebtedness			40
7.		AFFIRMATIVE COVENANTS					40
		7.1.		Punctual Payment			40
		7.2.		Maintenance of Office			40
		7.3.		Records and Accounts			40
		7.4.		Financial Statements, Certificates and Information			40
		7.5.		Notices			42
				7.5.1.   Defaults			42
				7.5.2.   Environmental Events			42
				7.5.3.   Notice of Litigation, Judgments and Claims Against Assets			42
				7.5.4.   Notice Regarding Certain Events			43
				7.5.5.   Notices Regarding Existing Credit Agreement			43
		7.6.		Legal Existence; Maintenance of Properties			43
		7.7.		Taxes			44
		7.8.		Compliance with Laws, Contracts, Licenses, and Permits			44
		7.9.		Employee Benefit Plans			44
		7.10.		Use of Proceeds			45
		7.11.		Subsidiary Guaranties			45
		7.12.		Further Assurances			45
		7.13.		Paperchase Companies as Separate Entities			45
		7.14.		Permitted Restructuring Transactions			45
8.		CERTAIN NEGATIVE COVENANTS					45
		8.1.		Restrictions on Indebtedness			45
		8.2.		Restrictions on Liens			46
		8.3.		Restrictions on Investments			49
		8.4.		Restricted Payments			51
		8.5.		Merger, Consolidation, Disposition of Assets and Sale Leaseback Transactions			51
				8.5.1.   Mergers and Consolidations			52
				8.5.2.   Disposition of Assets			52
		8.6.		Acquisitions			54
		8.7.		Compliance with Environmental Laws			55
		8.8.		Employee Benefit Plans			55
		8.9.		Business Activities			56
		8.10.		Fiscal Year			56
		8.11.		Transactions with Affiliates			56
		8.12.		Changes in Governing Documents			57
		8.13.		Inconsistent Agreements			57
		8.14.		Additional Paperchase Companies Covenants			57

		8.15.		Permitted Restructuring Transactions			58
9.		CLOSING CONDITIONS.					58
		9.1.		Loan Documents			58
		9.2.		Certified Copies of Governing Documents			58
		9.3.		Corporate or Other Action			58
		9.4.		Incumbency Certificate			59
		9.5.		UCC Search Results			59
		9.6.		Solvency Certificate			59
		9.7.		Opinion of Counsel			59
		9.8.		Payment of Premium and Expenses			59
		9.9.		Disbursement Instructions			59
		9.10.		Validity of Liens			59
		9.11.		Consents and Approvals			60
		9.12.		Other Transactions			60
		9.13.		Representations True; No Event of Default			60
		9.14.		No Legal Impediment			60
		9.15.		Proceedings and Documents			60
10.		[RESERVED]					61
11.		EVENTS OF DEFAULT; ACCELERATION; ETC.					61
		11.1.		Events of Default and Acceleration			61
		11.2.		Remedies			64
		11.3.		Distribution of Proceeds			65
12.		THE AGENTS.					65
		12.1.		Authorization			65
		12.2.		Employees and Agents			66
		12.3.		No Liability			67
		12.4.		No Representations			67
				12.4.1.   General			67
				12.4.2.   Closing Documentation, Etc			68
		12.5.		Payments.			68
				12.5.1.   Payments to Administrative Agent			68
				12.5.2.   Distribution by Administrative Agent			68
				12.5.3.   Delinquent Lenders			69
		12.6.		Holders of Notes			69
		12.7.		Indemnity			69
		12.8.		The Agents as Lenders			70
		12.9.		Resignation			70
		12.10.		Notification of Defaults and Events of Default			70
		12.11.		Administrative Agent May File Proofs of Claim			70
		12.12.		Duties in the Case of Enforcement			71
		12.13.		Release of Collateral and Guarantors			71
		12.14.		Matters Relating to Collateral			72

13.		SUCCESSORS AND ASSIGNS					72
		13.1.		General Conditions			72
		13.2.		Assignments			72
		13.3.		Register			73
		13.4.		Participations			73
		13.5.		Payments to Participants			74
		13.6.		Miscellaneous Assignment Provisions			74
		13.7.		New Notes			74
14.		PROVISIONS OF GENERAL APPLICATION					75
		14.1.		Setoff			75
		14.2.		Expenses			76
		14.3.		Indemnification			76
		14.4.		Treatment of Certain Confidential Information			77
				14.4.1.   Confidentiality			77
				14.4.2.   Prior Notification			78
				14.4.3.   Other			78
		14.5.		Survival of Covenants, Etc			78
		14.6.		Notices			78
		14.7.		GOVERNING LAW			80
		14.8.		Headings			80
		14.9.		Counterparts			80
		14.10.		Entire Agreement, Etc			80
		14.11.		WAIVER OF JURY TRIAL			80
		14.12.		Consents, Amendments, Waivers, Etc			81
		14.13.		Severability			82
15.		USA PATRIOT ACT NOTICE					82

EXHIBITS

Exhibit A		Form of Pledge Agreement
Exhibit B		Form of Promissory Note
Exhibit C		Assignment and Acceptance
Exhibit D		Form of Joinder Agreement

SCHEDULES

Schedule 1		Lenders and Commitments
Schedule 6.3		Title to Properties; Leases
Schedule 6.5		Restricted Payments
Schedule 6.6.2		Intellectual Property
Schedule 6.7		Litigation
Schedule 6.13		Transactions with Affiliates

Schedule 6.16		Environmental Compliance
Schedule 6.17		Subsidiaries, Etc.
Schedule 6.23		Insurance
Schedule 8.1		Existing Indebtedness
Schedule 8.2		Existing Liens
Schedule 8.3		Existing Investments

SENIOR SECURED CREDIT AGREEMENT

          This SENIOR SECURED CREDIT AGREEMENT (this “Credit Agreement”) is made as of April 9, 2008, by and among (a) BORDERS GROUP, INC. (the “Borrower”), a Michigan corporation, (b) BORDERS, INC., a Colorado corporation (“Borders”), WALDEN BOOK COMPANY, INC., a Colorado corporation (“Walden”), BGP (UK) LIMITED, a company with limited liability organized under the laws of England and Wales (“BGP (UK)”), BORDERS PROPERTIES, INC., a Delaware corporation (“BPI”), BORDERS ONLINE, LLC, a Delaware limited liability company (“Online”), BORDERS FULFILLMENT, INC., a Delaware corporation (“Fulfillment”), BORDERS ONLINE, INC., a Colorado corporation (“BOI” and together with Borders, Walden, BGP(UK), BPI, Online and Fulfillment, the “Guarantors”), (c) Pershing Square Credit Partners LLC, a Delaware limited liability company (“Pershing Square” or a “Lender) and PSRH, Inc., a Cayman Islands exempted company (a “Lender”, and collectively with Pershing Square, the “Lenders”), (d) Pershing Square Capital Management, L.P., a Delaware limited partnership (“Pershing Square Capital”), as administrative agent and as collateral agent for itself and the Lenders (in its capacity as administrative agent, the “Administrative Agent”, and in its capacity as collateral agent, the “Collateral Agent”).

     WHEREAS, the Borrower has requested that the Lenders make available to it the Commitments, on the terms and conditions set forth herein, to, among other things, fund transaction costs, working capital requirements and other general corporate purposes of the Borrower and its Subsidiaries; and

     WHEREAS, the Lenders are willing to make the Loans to the Borrower upon the terms and conditions set forth herein;

     NOW THEREFORE, in consideration of the premises and the covenants and agreements contained herein and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

     1.1. Definitions . The following terms shall have the meanings set forth in this Section 1 or elsewhere in the provisions of this Credit Agreement referred to below:

      Accounts Receivable . All rights of the Borrower or any of its Subsidiaries to payment for goods sold, leased or otherwise marketed in the ordinary course of business and all rights of the Borrower or any of its Subsidiaries to payment for services rendered in the ordinary course of business and all sums of money or other proceeds due thereon pursuant to transactions with account debtors, except for that portion of the sum of money or other proceeds due thereon that relate to sales, use or property taxes in conjunction with such transactions, recorded on books of account in accordance with GAAP.

      Acquisition . Any transaction, or any series of related transactions, entered into or consummated on or after the date of this Credit Agreement, by which the Borrower or any of its Subsidiaries (a) acquires any ongoing business or all or substantially all of the assets of any Person or division thereof, whether through a purchase of assets, merger or otherwise, or (b) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) a majority of the securities of a corporation, which securities have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage and voting power) of the outstanding partnership interests of a partnership or membership interests of a limited liability company.

      Administrative Agent . Pershing Square Capital acting as administrative agent for the Lenders, and each other Person appointed as the successor Administrative Agent in accordance with Section 12.9.

      Administrative Agent Account. Deposit account as the Administrative Agent may from time to time specify in writing to the Borrower and the Lenders.

      Administrative Agent’s Office . The Administrative Agent’s office located at 888 Seventh Avenue, 29th Floor, New York, NY 10019 or at such other location as the Administrative Agent may designate from time to time.

      Administrative Agent’s Special Counsel . Sullivan & Cromwell LLP or such other counsel as may be approved by the Administrative Agent.

      Affected Lender. See Section 4.7.

      Affiliate . Any Person which, directly or indirectly, controls, is controlled by or is under common control with any Person. “Control” of a Person means the power, directly or indirectly, (a) to vote five percent (5%) or more of the Capital Stock (on a fully diluted basis) of such Person having ordinary voting power for the election of directors, managing members or general partners (as applicable); or (b) to direct or cause the direction of the management and policies of such Person (whether by contract or otherwise). Notwithstanding the foregoing, the Lenders and Pershing Square Capital shall not be an Affiliate of the Borrower or any of its Subsidiaries and the Borrower and any of its Subsidiaries shall not be an Affiliate of the Lenders or Pershing Square Capital for purposes of this Credit Agreement.

      Agents . Collectively, the Administrative Agent and the Collateral Agent.

      Applicable Pension Legislation . At any time, any pension or retirement benefits legislation (be it national, federal, provincial, territorial or otherwise) then applicable to the Borrower or any of its Subsidiaries.

      Approved Fund . Any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

      Assignment and Acceptance . An assignment and acceptance entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 13.2), and accepted by the Administrative Agent, in substantially the form of Exhibit C or any other form approved by the Administrative Agent.

      Authorized Officers . The President, Senior Vice President – Finance and Chief Financial Officer, Vice President – Financial Planning and Reporting, Vice President – Finance and Asset Protection, Associate Director, Treasury or Treasurer of the Borrower and with respect to any Foreign Subsidiary, a director of such Foreign Subsidiary or, in any case, any Person designated in writing by any of the foregoing.

      Balance Sheet Date . February 2, 2008.

      BGP (UK) . As defined in the preamble hereto.

      BOI . Borders Online, Inc., a Colorado corporation.

      Borders . As defined in the preamble hereto.

      Borders UK . As defined in the preamble hereto.

      Borrower . As defined in the preamble hereto.

      BPI . Borders Properties, Inc., a Delaware corporation.

      Business Day . Any day on which banking institutions in New York, New York are open for the transaction of banking business.

      Capital Assets . Fixed assets, both tangible (such as land, buildings, fixtures, machinery and equipment) and intangible (such as Intellectual Property, franchises and good will); provided that Capital Assets shall not include any item customarily charged directly to expense or depreciated over a useful life of twelve (12) months or less in accordance with GAAP.

      Capital Expenditures . Amounts paid or Indebtedness incurred by the Borrower or any of its Subsidiaries in connection with the purchase or lease by the Borrower or any of its Subsidiaries of Capital Assets that would be required to be capitalized and shown on the balance sheet of such Person in accordance with GAAP, provided that Capital Expenditures shall not include any expenditures made to effect any Acquisition.

      Capital Stock . Any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.

      Capitalized Leases . Leases under which the Borrower or any of its Subsidiaries is the lessee or obligor, the discounted future rental payment obligations under which are

required to be capitalized on the balance sheet of the lessee or obligor in accordance with GAAP.

      CERCLA . See Section 6.16(a).

      Change of Control . An event or series of events by which (i) any Person or group of Persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934), excluding the Initial Investor (as defined in the Warrant and Registration Rights Agreement in effect on the date hereof), shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the SEC under said Act), directly or indirectly, of thirty-five percent (35%) or more of the outstanding shares of common stock of the Borrower, (ii) all or substantially all of the consolidated assets of the Borrower are sold, leased, exchanged or transferred to any Person or group of Persons (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934), (iii) the Borrower is consolidated, merged, amalgamated, reorganized or otherwise enters into a similar transaction in which it is combined with another Person other than the Initial Investor (as defined in the Warrant and Registration Rights Agreement in effect on the date hereof), unless the Persons who beneficially own the outstanding Voting Securities (as defined in the Warrant and Registration Rights Agreement in effect on the date hereof) of the Company immediately before consummation of the transaction beneficially own a majority of the outstanding Voting Securities (as defined in the Warrant and Registration Rights Agreement in effect on the date hereof) of the combined or surviving entity immediately thereafter, (iv) the majority of the seats (other than vacant seats) on the board of the directors of the Borrower (or similar governing body) ceases to be occupied by Persons who either (a) were members of the board of directors of the Borrower on the date hereof or (b) were nominated for election by the board of directors of the Borrower, a majority of whom were directors on the date hereof or whose election or nomination for election was previously approved by a majority of such directors or (v) the approval by the holders of capital stock of the Borrower of any plan or proposal for the liquidation or dissolution of the Borrower.

      Closing Date . The Business Day, on or before April 10, 2008, on which the conditions set forth in Section 9 have been satisfied (or waived in accordance with terms of this Credit Agreement).

      Closing Discount . See Section 2.2.1.

      Code . The Internal Revenue Code of 1986.

      Collateral . All of the property, rights and interests that are or are intended to be subject to the Liens created by the Pledge Agreement.

      Collateral Agent . Pershing Square Capital.

      Commitment . With respect to any Lender, the obligation of such Lender to make a Loan pursuant to the terms and conditions of this Credit Agreement, and which shall not exceed the principal amount set forth opposite such Lender’s name on Schedule 1 under the heading “Commitment”, and “Commitments” means the aggregate principal

amount of the Commitments of all the Lenders (it being understood and agreed that the maximum aggregate principal amount of the Commitments shall be $42,500,000).

      Commitment Letter. Commitment letter by Pershing Square Capital and the Borrower, dated March 19, 2008, containing the summaries and proposed terms and conditions for the Term Loan Facility, the Purchase Offer and the Warrant and Registration Rights Agreement, including all exhibits attached thereto.

      Consolidated or consolidated . With reference to any term defined herein, shall mean that term as applied to the accounts of the Borrower and its Subsidiaries, consolidated in accordance with GAAP.

      Consolidated Net Income (or Deficit) . The consolidated net income (or deficit) of the Borrower and its Subsidiaries, after deduction of all expenses, taxes, and other proper charges, determined in accordance with GAAP.

      Consolidated Tangible Net Worth . The excess of Consolidated Total Assets over Consolidated Total Liabilities, and less the sum of:

     (a) the total book value of all assets of the Borrower and its Subsidiaries properly classified as intangible assets under GAAP, including such items as good will, the purchase price of acquired assets in excess of the fair market value thereof, Intellectual Property and licenses, and rights with respect to the foregoing; plus

     (b) all amounts representing any write-up in the book value of any assets of the Borrower or its Subsidiaries resulting from a revaluation thereof subsequent to the Balance Sheet Date, excluding adjustments to translate foreign assets and liabilities for changes in foreign exchange rates made in accordance with Financial Accounting Standards Board Statement No. 52; plus

     (c) to the extent otherwise includable in the computation of Consolidated Tangible Net Worth, any subscriptions receivable.

      Consolidated Total Assets . The sum of all assets (“consolidated balance sheet assets”) of the Borrower and its Subsidiaries determined on a consolidated basis in accordance with GAAP.

      Consolidated Total Liabilities . All liabilities of the Borrower and its Subsidiaries determined on a consolidated basis in accordance with GAAP and classified as such on the consolidated balance sheet of the Borrower and its Subsidiaries.

      Contract. See Section 6.8.

      Credit Agreement . This Senior Secured Credit Agreement, including the Schedules and Exhibits hereto.

      Default . See Section 11.1.

      Delinquent Lender . See Section 12.5.3.

      Disposition. Any transaction, or series of related transactions, pursuant to which the Borrower or any of its Subsidiaries conveys, sells, leases or subleases, assigns, transfers or otherwise disposes of any part of its business, property or assets (whether now owned or hereafter acquired) to any other Person, in each case whether or not the consideration therefor consists of cash, securities or other assets, excluding any sales of inventory in the ordinary course of business.

      Distribution . The declaration or payment of any dividend on or in respect of any shares of any class of Capital Stock of a Person, other than dividends payable solely in shares of common stock of such Person; the purchase, redemption, defeasance, retirement or other acquisition of any shares of any class of Capital Stock of a Person, directly or indirectly through a Subsidiary of such Person or otherwise (including the setting apart of assets for a sinking or other analogous fund to be used for such purpose); the return of capital by a Person to its shareholders as such; or any other distribution on or in respect of any shares of any class of Capital Stock of such Person.

      Dollars or $ . Dollars in lawful currency of the United States of America.

      Domestic Lending Office . The office of each Lender designated as such in Schedule 1 hereto.

      Domestic Subsidiary . Any Subsidiary of the Borrower organized under the laws of the United States of America, any state or territory thereof or the District of Columbia.

      Eligible Assignee . Any of (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund or (d) any other Person (other than a natural person) (i) approved by the Administrative Agent, and (ii) unless a Default or an Event of Default has occurred and is continuing, approved by the Borrower (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, “Eligible Assignee” shall not include the Borrower or any of the Borrower’s Affiliates or Subsidiaries.

      Employee Benefit Plan . Any employee benefit plan within the meaning of Section 3(3) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate, other than a Guaranteed Pension Plan or a Multiemployer Plan.

      Environmental Laws . See Section 6.16(a).

      EPA . See Section 6.16(b).

      ERISA . The Employee Retirement Income Security Act of 1974.

      ERISA Affiliate . Any Person which is treated as a single employer with any of the Borrower under Section 414 of the Code.

      ERISA Reportable Event . A reportable event with respect to a Guaranteed Pension Plan within the meaning of Section 4043 of ERISA and the regulations promulgated thereunder.

      Event of Default . See Section 11.1.

      Exchange Rate . At any date of determination thereof, the Spot Rate of exchange for the conversion of a currency not denominated in Dollars into Dollars and with respect to Dollars, at any date of determination thereof, the Spot Rate of exchange for the conversion of Dollars into the applicable currency not denominated in Dollars.

      Existing Credit Agreement . Second Amended and Restated Multicurrency Revolving Credit Agreement dated as of July 31, 2006, as amended from time to time, by and among the Borrower, the co-borrowers therein, the guarantors therein, the lenders therein and Bank of America as administrative agent.

      Financial Affiliate . A Subsidiary of the bank holding company controlling any Lender, which Subsidiary is engaging in any of the activities permitted by Section 4(e) of the Bank Holding Company Act of 1956 (12 U.S.C. Section 1843).

      Fiscal Quarter . Subject to Section 6.4.1, for the first three Fiscal Quarters of each year, the 13 week period commencing on the day after the last day of the preceding Fiscal Quarter and for the fourth Fiscal Quarter of each year, the period commencing on the day after the last day of the third Fiscal Quarter and ending on the Saturday closest to January 31 of each year. As used herein, “FQ1 2xxx” refers to the first Fiscal Quarter of the 2xxx Fiscal Year, “FQ2 2xxx” refers to the second Fiscal Quarter of the 2xxx Fiscal Year and so on.

      Fiscal Year . Subject to Section 6.4.1, the 52/53 week period commencing on the day after the last day of the preceding Fiscal Year and ending on the Saturday closest to January 31 of each year. By way of illustration, the Borrower’s 2007 Fiscal Year ended February 2, 2008.

      Foreign Subsidiary . Any Subsidiary of the Borrower (other than BGP (UK)) organized under the laws of any jurisdiction other than the United States of America, any state or territory thereof or the District of Columbia.

      Fulfillment . Borders Fulfillment, Inc., a Delaware corporation.

      Fund . Any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

      GAAP or generally accepted accounting principles . In case of a US Person, principles that are (i) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, as in effect from time to time, and (ii) consistently applied with past financial statements of the Borrower adopting the same principles. In the case of the Paperchase Companies, principles that are (i)

consistent with the International Financial Reporting Standards, and (ii) consistently applied with past financial statements of the Paperchase Companies adopting the same principles.

      Governing Documents . With respect to any Person, its certificate or articles of incorporation or organization, its by-laws, or, as the case may be, its certificate of formation, limited partnership certificate, operating agreement, limited partnership agreement or other constitutive documents and all shareholder agreements, voting trusts and similar arrangements applicable to any of its Capital Stock.

      Governmental Authority . Any foreign, federal, state, regional, local, municipal or other government, or any department, commission, board, bureau, agency, public authority or instrumentality thereof, or any court or arbitrator.

      Guaranteed Obligations . See Section 5.1.

      Guaranteed Pension Plan . Any employee pension benefit plan within the meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate the benefits of which are guaranteed on termination in full or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer Plan.

      Guarantors . Borders, Walden, BGP(UK), BPI, Online, Fulfillment, BOI, and any Subsidiary of the Borrower which executes a Joinder Agreement as a Guarantor of all of the obligations pursuant to the provisions of this Credit Agreement after the Closing Date.

      Guaranty . The guarantee made by each Guarantor set forth in Section 5 of this Credit Agreement.

      Hazardous Substances . See Section 6.16(b).

      Hedging Agreement . (a) Any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

      Highest Lawful Rate. See Section 2.4.2.

      Indebtedness . As to any Person and whether recourse is secured by or is otherwise available against all or only a portion of the assets of such Person and whether or not contingent, but without duplication:

     (a) every obligation of such Person for money borrowed,

     (b) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses,

     (c) every reimbursement obligation of such Person with respect to letters of credit, bankers’ acceptances or similar facilities issued for the account of such Person,

     (d) every obligation of such Person issued or assumed as the deferred purchase price of property or services (including securities repurchase agreements but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business which are not overdue or which are being contested in good faith),

     (e) every obligation of such Person under any Capitalized Lease,

     (f) every obligation of such Person under any Synthetic Lease,

     (g) all sales by such Person of (i) accounts or general intangibles for money due or to become due, (ii) chattel paper, instruments or documents creating or evidencing a right to payment of money or (iii) other receivables (collectively “receivables”), whether pursuant to a purchase facility or otherwise, other than in connection with the disposition of the business operations of such Person relating thereto or a disposition of defaulted receivables for collection and not as a financing arrangement, and together with any obligation of such Person to pay any discount, interest, fees, indemnities, penalties, recourse, expenses or other amounts in connection therewith,

     (h) every obligation of such Person (an “equity related purchase obligation”) to purchase, redeem, retire or otherwise acquire for value any shares of Capital Stock issued by such Person or any rights measured by the value of such Capital Stock,

     (i) every obligation of such Person under any forward contract, futures contract, swap, option or other financing agreement or arrangement (including, without limitation, caps, floors, collars and similar agreements), the value of which is dependent upon interest rates, currency exchange rates, commodities or other indices (a “derivative contract”),

     (j) every obligation in respect of Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent that such Person is liable therefor as a result of such Person’s ownership interest

in or other relationship with such entity, except to the extent that the terms of such Indebtedness provide that such Person is not liable therefor and such terms are enforceable under applicable law,

     (k) every obligation, contingent or otherwise, of such Person guaranteeing, or having the economic effect of guarantying or otherwise acting as surety for, any obligation of a type described in any of clauses (a) through (j) (the “primary obligation”) of another Person (the “primary obligor”), in any manner, whether directly or indirectly, and including, without limitation, any obligation of such Person (i) to purchase or pay (or advance or supply funds for the purchase of) any security for the payment of such primary obligation, (ii) to purchase property, securities or services for the purpose of assuring the payment of such primary obligation, or (iii) to maintain working capital, equity capital or other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such primary obligation.

     The “amount” or “principal amount” of any Indebtedness at any time of determination represented by (t) any Indebtedness, issued at a price that is less than the principal amount at maturity thereof, shall be the amount of the liability in respect thereof determined in accordance with GAAP, (u) any Capitalized Lease shall be the principal component of the aggregate of the rentals obligation under such Capitalized Lease payable over the term thereof that is not subject to termination by the lessee, (v) any sale of receivables shall be the amount of unrecovered capital or principal investment of the purchaser (other than the Borrower or any of its Wholly-owned Subsidiaries) thereof, excluding amounts representative of yield or Interest earned on such investment, (w) any Synthetic Lease shall be the stipulated loss value, termination value or other equivalent amount, (x) any derivative contract shall be the maximum amount of any termination or loss payment required to be paid by such Person if such derivative contract were, at the time of determination, to be terminated by reason of any event of default or early termination event thereunder, whether or not such event of default or early termination event has in fact occurred, (y) any equity related purchase obligation shall be the maximum fixed redemption or purchase price thereof inclusive of any accrued and unpaid dividends to be comprised in such redemption or purchase price and (z) any guaranty or other contingent liability referred to in clause (k) shall be an amount equal to the stated or determinable amount of the primary obligation in respect of which such guaranty or other contingent obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith.

     Notwithstanding anything to the contrary in this definition of Indebtedness, the obligations (whether for cash, common shares of the Borrower or otherwise) of the Borrower and its Subsidiaries to settle the warrants pursuant to the Warrant and Registration Rights Agreement, any stock appreciation rights issued in lieu thereof or any debt or equity instruments (including interest and fees thereon) issued as a result of or in connection with the deferral of any payment in respect of the warrants pursuant to the Warrant and Registration Rights Agreement or any settlement, exercise, purchase,

redemption, defeasance, retirement, payment, acquisition or otherwise thereof shall not constitute Indebtedness hereunder.

      Insolvency Proceeding . As to any Person, any of the following: (i) any case or proceeding, whether voluntary or involuntary, with respect to such Person under the U.S. Bankruptcy Code or any other Federal, state or foreign bankruptcy, insolvency, reorganization or other law affecting creditors’ rights or any other or similar proceedings seeking any stay, reorganization, arrangement, composition or readjustment of the obligations and indebtedness of such Person or (ii) any proceeding seeking the appointment of any trustee, receiver, liquidator, custodian, administrator or other insolvency official with similar powers with respect to such Person or any of its assets or (iii) any proceeding for liquidation, dissolution or other winding up of the business of such Person or (iv) any assignment for the benefit of creditors or any marshalling of assets of such Person.

      Intellectual Property. See Section 6.6.2.

      Interest Payment Date . The first Business Day of the calendar month for the immediately preceding calendar month with respect to interest accrued during such calendar month. “Interest Payment Date” shall also include (a) with respect to the amount of the Loan prepaid, the date of such repayment and (b) the Maturity Date.

      Interest Rate . 9.8% per annum, calculated on a 365/366 day basis.

      Investments . All expenditures made and all liabilities incurred (contingently or otherwise) by any Person for the acquisition of stock, membership interests, partnership interests or other equity interests, other than repurchases or redemptions of stock, membership interests, partnership interests or other equity interests of such Person, or Indebtedness of, or for loans, advances, capital contributions or transfers of property to, or in respect of any guaranties (or other commitments as described under Indebtedness), or obligations of, any Person. In determining the aggregate amount of Investments outstanding at any particular time: (a) the amount of any Investment represented by a guaranty shall be taken at not less than the principal amount of the obligations guaranteed and still outstanding; (b) there shall be deducted in respect of each such Investment any amount received as a return of capital (but only by repurchase, redemption, retirement, repayment, liquidating dividend or liquidating distribution); (c) there shall not be deducted in respect of any Investment any amounts received as earnings on such Investment, whether as dividends, interest or otherwise; (d) there shall not be deducted from the aggregate amount of Investments any decrease in the value thereof; and (e) the amount of any Investment made by a transfer of property shall be valued at the fair market value of such transferred property at the time of such transfer.

      Joinder Agreements . Joinder agreements in substantially the form of Exhibit D hereto pursuant to which Subsidiaries of the Borrower become parties to and agree to be bound by the provisions of this Credit Agreement as a Guarantor.

      Joint Venture . Any corporation, partnership, limited liability company, joint venture or other entity in which the Borrower and its Subsidiaries own not more than 50% of the capital stock, partnership interests, membership interests or other ownership interests and which does not meet the definition of “Subsidiary” herein.

      Lender Affiliate . With respect to any Lender, (a) an Affiliate of such Lender or (b) any Approved Fund.

      Lenders . Pershing Square and PSRH, Inc., together with their respective successors and permitted assigns.

      Lien . Any mortgage, deed of trust, security interest, charge, pledge, hypothecation, assignment, attachment, deposit arrangement, encumbrance, lien (statutory, judgment or otherwise, but excluding any right of set off arising by operation of law or pursuant to agreements entered into in the ordinary course of business), or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any Capitalized Lease, any Synthetic Lease, any financing lease involving substantially the same economic effect as any of the foregoing and the filing of any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction).

      Loan Documents or Finance Documents . This Credit Agreement, the Pledge Agreement, the Joinder Agreements and any other instruments, certificates or documents delivered or contemplated to be delivered hereunder or thereunder or in connection herewith or therewith (excluding Hedging Agreements).

      Loans . Loans under the Term Loan Facility.

      Material Adverse Effect . With respect to any event or occurrence of whatever nature (including any adverse determination in any litigation, arbitration or governmental investigation or proceeding):

     (a) a material adverse effect on the business, properties, prospects, condition (financial or otherwise), assets, operations or income of the Borrower, individually, or the Borrower and its Subsidiaries, taken as a whole;

     (b) a material adverse effect on the ability of the Borrower or any of the Guarantors, taken as a whole, to perform any of its Obligations under any of the Loan Documents to which it is a party;

     (c) a material adverse effect on the business, properties, prospects, condition (financial or otherwise), assets, operations or income of the Paperchase Companies, taken as a whole;

     (d) a material adverse effect on the value of the Pledged Shares as pledged to the Collateral Agent or the Collateral Agent’s Lien with respect to the Pledged Shares or the right and remedies of the Collateral Agent and the Lenders relating thereto;

     or

     (e) any material impairment of the validity, binding effect or enforceability of this Credit Agreement or any of the other Loan Documents or any material impairment of the rights, remedies or benefits available to any Agent or any Lender under any Loan Document.

      Maturity Date . January 15, 2009.

      Multiemployer Plan . Any multiemployer plan within the meaning of Section 3(37) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate.

      Net Cash Proceeds. Cash or cash equivalents received by the Borrower or any Subsidiary from time to time in connection with a Disposition (whether as initial consideration or through the payment of deferred consideration) other than any Disposition pursuant to Section 8.5.2(a)-(g) inclusive after deducting therefrom only reasonable fees and expenses related thereto incurred by the Borrower or such Subsidiary in connection therewith and, in connection with a Disposition of or by the Paperchase Companies, any Indebtedness of a Paperchase Company required to be paid in connection therewith.

      Note. See Section 2.3.1.

      Obligations . All of the Borrower’s obligations under this Credit Agreement.

      Online . Borders Online, LLC, a Delaware limited liability company.

      outstanding . With respect to the Loans, the aggregate unpaid principal thereof as of any date of determination.

      Paperchase. Paperchase Products Ltd.

      Paperchase Businesses. Paperchase and its Subsidiaries and Superstores and its Subsidiaries, together with their respective assets and businesses.

      Paperchase Companies. Paperchase and its Subsidiaries and Superstores and its Subsidiaries.

      Participant . See Section 13.4.

      PBGC . The Pension Benefit Guaranty Corporation created by Section 4002 of ERISA and any successor entity or entities having similar responsibilities.

      Person . Any individual, corporation, limited liability company, partnership, limited liability partnership, trust, other unincorporated association, business, or other legal entity, and any Governmental Authority.

      Permitted Liens. Liens permitted by Section 8.2.

      Permitted Restructuring Transactions. As defined in the Existing Credit Agreement in effect on the date hereof.

      Pershing Square Capital . As defined in the preamble hereto.

      Pledge Agreement. Deed of Charge over Shares, dated April 9, 2008, by the Pledgor in favor of the Collateral Agent, in the form of Exhibit A attached hereto.

      Pledged Shares. See Section 5.11.

      Pledgor. BGP (UK).

      Premiums . Collectively, the Closing Discount and the Repayment Premium.

      Property . Any and all property and assets, whether real, personal, tangible, intangible or mixed, and owned, licensed and leased (including pursuant to Capitalized Leases), of any Person.

      Purchase Offer. See Section 6.15.

      RCRA . See Section 6.16(a).

      Real Estate . All real property at any time owned or leased (as lessee or sublessee) by the Borrower or any of its Subsidiaries.

      Record . The grid attached to a Note, or the continuation of such grid, or any other similar record, including computer records, maintained by any Lender with respect to the Loan referred to in such Note.

      Register . See Section 13.3.

      Related Parties . With respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.

      Replacement Lender. See Section 4.7.

      Restricted Payment . In relation to the Borrower and its Subsidiaries, any (a) Distribution, (b) payment in cash or other property (other than common shares or additional warrants or rights to acquire common shares or other equity securities or stock appreciation rights of the Borrower) arising or resulting from the settlement, exercise, purchase, redemption, defeasance, retirement, payment, acquisition or otherwise of the warrants pursuant to the Warrant and Registration Rights Agreement or any debt or equity instruments (including interest and fees thereon) issued as a result of or in connection with the deferral of any payment in respect of the warrants pursuant to the

Warrant and Registration Rights Agreement or any settlement, exercise, purchase, redemption, defeasance, retirement, payment, acquisition or otherwise thereof or (c) derivatives or other transactions (other than pursuant to the Transactions or employee stock options, stock appreciation rights or similar instruments issued to employees in the ordinary course of business) obligating the Borrower or any of its Subsidiaries to make payments to any Person as a result of any change in market value of any Capital Stock of the Borrower or such Subsidiary.

      Required Lenders. Lenders holding more than 50% of the total Commitment of the aggregate outstanding principal amount of the Loans.

      Same Day Funds . Immediately available funds.

      SARA . See Section 6.16(a).

      Solvent . 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, without limitation, contingent liabilities, of such Person, (b) the present fair saleable 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 is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (d) 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 (e) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person is engaged. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

      Subsidiary . With respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise controlled, directly or indirectly, by the parent or one or more subsidiaries of the parent.

      Superstores. Borders Superstores (UK) Limited.

      Synthetic Lease . Any lease of goods or other property, whether real or personal, which is treated as an operating lease under GAAP and as a loan or financing for U.S. income tax purposes.

      Term Loan Facility. See Section 2.1.1.

      Transactions. Transactions contemplated by this Credit Agreement and the other Loan Documents, the Purchase Offer and the Warrant and Registration Rights Agreement, including without limitation the performance by the Borrower and its Subsidiaries of their respective obligations thereunder.

      Total Commitment . See Section 2.1.1.

      Total Facility Usage Ratio. As defined in the Existing Credit Agreement in effect on the date hereof.

      Walden . As defined in the preamble hereto.

      Warrant and Registration Rights Agreement. See Section 6.15.

      Wholly-owned Subsidiary . Any Subsidiary of the Borrower of which all of the outstanding shares of capital stock or other equity interests are owned by the Borrower (whether directly or through one or more Wholly-owned Subsidiaries of the Borrower) except for directors’ qualifying shares in jurisdictions where such qualifying shares are required.

     1.2. Rules of Interpretation .

     (a) A reference to any document or agreement shall include such document or agreement as amended, modified or supplemented from time to time in accordance with its terms and the terms of this Credit Agreement.

     (b) The singular includes the plural and the plural includes the singular.

     (c) A reference to any law includes any amendment or modification to such law.

     (d) A reference to any Person includes its permitted successors and permitted assigns.

     (e) Accounting terms not otherwise defined herein have the meanings assigned to them by GAAP applied on a consistent basis by the accounting entity to which they refer.

     (f) The words “include”, “includes” and “including” are not limiting.

     (g) All terms not specifically defined herein or by GAAP, which terms are defined in the Uniform Commercial Code as in effect in the State of New York, have the

meanings assigned to them therein, with the term “instrument” being that defined under Article 9 of the Uniform Commercial Code.

     (h) Reference to a particular “Section “ refers to that section of this Credit Agreement unless otherwise indicated.

     (i) The words “herein”, “hereof”, “hereunder” and words of like import shall refer to this Credit Agreement as a whole and not to any particular section or subdivision of this Credit Agreement.

     (j) Unless otherwise expressly indicated, in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including,” the words “to” and “until” each mean “to but excluding,” and the word “through” means “to and including.”

     (k) This Credit Agreement and the other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are, however, cumulative and are to be performed in accordance with the terms thereof.

     (l) This Credit Agreement and the other Loan Documents are the result of negotiation among, and have been reviewed by counsel to, among others, the Administrative Agent and the Borrower and are the product of discussions and negotiations among all parties. Accordingly, this Credit Agreement and the other Loan Documents are not intended to be construed against any Agent or any of the Lenders merely on account of any Agent’s or any Lender’s involvement in the preparation of such documents.

     1.3. Accounting Principles . Except as otherwise provided in this Credit Agreement, all computations and determinations as to accounting or financial matters and all financial statements to be delivered pursuant to this Credit Agreement shall be made and prepared in accordance with GAAP (including principles of consolidation where appropriate); provided, however, that if any change in GAAP or the application thereof occurs hereafter, or if the Borrower adopts a change to its accounting principles or methods with the agreement of its independent certified public accountants, and such change results in a change in the calculation of any financial covenant or restriction set forth herein, then the parties hereto agree to enter into and diligently pursue negotiations in order to amend such financial covenant or restriction so as to equitably reflect such change, with the desired result that the criteria for evaluating the financial condition and results of operations of the Borrower and its Subsidiaries shall be the same after such change as if such change had not been made. Pending the resolution of any such negotiations, the Borrower agree to provide to each of the Lenders such unaudited financial information and pro forma statements using the accounting methods and principles used in the preparation of the audited financial statements for the fiscal year ended as of the Balance Sheet Date, as are necessary to enable the Lenders to test the financial covenants contained herein.

     2.1. Loan Commitment .

     2.1.1. Term Loan Facility. Subject to the terms and conditions set forth herein, each Lender hereby severally agrees to make a term loan (each, a “Loan”) in the principal amount set forth opposite each such Lender’s name on Schedule 1 hereto to the Borrower on the Closing Date, in accordance with this Section 2.1. The aggregate principal amount under this senior secured term loan facility (the “Term Loan Facility”) of the Loans to be advanced will be $42,500,000 (the “Total Commitment”). An increase in the Total Commitment requires consent of the Required Lenders (as defined in the Existing Credit Agreement in effect on the date hereof). Amounts repaid or prepaid may not be reborrowed.

     2.1.2. Notice of Borrowing. If the Borrower desires to borrow under Section 2.1.1 the Borrower shall deliver to the Administrative Agent a Notice of Borrowing not later than 9:00 a.m. on the Closing Date. Such Notice of Borrowing shall specify the proposed Closing Date, which must be a Business Day. The Notice of Borrowing given pursuant to this Section 2.1.2 shall be irrevocable and binding on the Borrower.

     2.1.3. Deposit of Commitment Amount. The Administrative Agent shall promptly notify each Lender of the Loans requested by the Borrower. Each Lender shall deposit in the Administrative Agent Account an amount equal to its Commitment, in immediately available funds, not later than 12:00 p.m. on the Closing Date. Subject to the satisfaction of the conditions precedent set forth in Section 9, the Administrative Agent shall make the proceeds of the Loans received by it available to the Borrower on the Closing Date.

     2.1.4. Lending Obligation. Except as otherwise provided in this Section 2.1.4, the Loans under this Credit Agreement shall be made by the Lenders simultaneously and proportionately. The failure of any Lender to deposit the amount described in 2.1.1 above with the Administrative Agent on the Closing Date shall not relieve any other Lender of its obligations hereunder to make its Loan on the Closing Date. In the event of any failure by any other Lender to perform its obligation to make a Loan hereunder, Pershing Square Capital shall make such Loan to the Borrower.

     2.1.5. Payment at Maturity. The aggregate principal amount of the Loans shall be payable in Dollars on the Maturity Date.

     2.2. Premiums .

     2.2.1. Closing Discount . The Borrower agrees to pay to Pershing Square Capital for the account of the Lenders on the Closing Date an amount (the “Closing Discount”) in Dollars equal to 2.25% of the Total Commitment. The payment of the Closing Discount shall be deducted from the principal amount of

the Loans such that, for the avoidance of doubt, the net amount advanced to the Borrower under the Term Loan Facility is $41,543,750.

     2.2.2. Repayment Premium . The Borrower agrees to pay to Pershing Square Capital for the account of the Lenders on the date of the repayment of the Loans an amount (the “Repayment Premium”) in Dollars equal to 2.25% of the principal amount of the Loans then repaid. Payment of the Repayment Premium shall be a condition to the effectiveness of the repayment of the principal amount of the Loans.

     2.3. Evidence of Loan Obligations .

     2.3.1. Notes. The Borrower’s obligation to pay the principal of, and interest on, the Loans made to the Borrower by each Lender shall be set forth on the Register maintained by the Administrative Agent pursuant to Section 13.3 and, subject to the provisions of Section 2.3.2, shall be evidenced by a promissory note substantially in the form of Exhibit B with blanks appropriately completed in conformity herewith (each, as the same may be amended, supplemented or otherwise modified from time to time, a “Note”).

     2.3.2. Delivery of Notes. Notwithstanding anything to the contrary contained above or elsewhere in this Agreement, Notes shall only be delivered to Lenders which at any time specifically request the delivery of such Notes. No failure of any Lender to request or obtain a Note evidencing its Loans to the Borrower shall affect or in any manner impair the obligations of the Borrower to pay the Loans (and all related Obligations) which would otherwise be evidenced thereby in accordance with the requirements of this Agreement, and shall not in any way affect the security or Guaranties therefor provided pursuant to the Loan Documents. At any time when any Lender requests the delivery of a Note to evidence any of its Loans, the Borrower shall promptly execute and deliver to that Lender the requested Note in the appropriate amount or amounts to evidence such Loans.

     2.4. Interest on Loans . Except as otherwise provided in Section 4.6,

     2.4.1. Interest on Loans. The Borrower agrees to pay interest on the unpaid principal amount of each Loan on each Interest Payment Date from the date of such Loan until such Loan is repaid in full at a rate equal to the Interest Rate for such Loan. The Borrower shall pay accrued and unpaid interest on the Loans in cash on each Interest Payment Date. All computations of interest hereunder shall be made on the actual number of days elapsed over a year of 365/366 days.

     2.4.2. Maximum Interest. Notwithstanding anything to the contrary set forth in this Section 2.4.2, if at any time until payment in full of the Loans, the interest rate payable on any Loan exceeds the highest rate of interest permissible under any law which a court of competent jurisdiction shall deem applicable

hereto (the “Highest Lawful Rate”), then in such event and so long as the Highest Lawful Rate would be so exceeded, the rate of interest payable on such Loans shall be equal to the Highest Lawful Rate. Thereafter, the interest rate payable on such Loans shall be the applicable interest rate pursuant to Section 2.4.1 above unless and until such rate again exceeds the Highest Lawful Rate, in which event this paragraph shall again apply. In no event shall the total interest received by any Lender for any Loans pursuant to the terms hereof exceed the amount which it could lawfully have received for such Loans had the interest due hereunder for such Loans been calculated for the full term thereof at the Highest Lawful Rate. Interest on the Highest Lawful Rate shall be calculated at a daily rate equal to the Highest Lawful Rate divided by the number of days in the year in which such calculation is made. In the event that a court of competent jurisdiction, notwithstanding the provisions of this Section 2.4.2, shall make a determination that a Lender has received interest hereunder or under any of the Loan Documents in excess of the Highest Lawful Rate, such Lender shall, to the extent permitted by Applicable Law, promptly apply such excess first to any interest due or accrued and not yet paid under the Loans, then to the outstanding principal of the Loans, then to other unpaid Obligations and thereafter shall refund any excess to the Borrower or as a court of competent jurisdiction may otherwise order.

     2.5. Allocation. The Borrower, on the one hand, and Pershing Square Capital and its managed funds and affiliates, on the other hand, as parties to this Credit Agreement, the Purchase Offer and the Warrant and Registration Rights Agreement, agree to work together in good faith to agree on amounts to be allocated for U.S. federal tax purposes to the Term Loan Facility and to the warrants to be issued as of the date hereof pursuant to the Warrant and Registration Rights Agreement (such allocations, the “Tax Allocations”), and further agree that if they do not agree on Tax Allocations initially, they will appoint a mutually satisfactory valuation expert (such as an accounting firm of national standing) to determine the Tax Allocations (the fees, costs and expenses of such expert to be shared equally between the Borrower, on the one hand, and Pershing Square Capital and its managed funds and affiliates, on the other hand). The Borrower and the Lenders agree that they will each calculate the original issue discount arising from the amount advanced pursuant to this Credit Agreement based on such Tax Allocations and make their respective tax determinations and filings consistent therewith, unless otherwise required pursuant to a “determination” within the meaning of Section 1313(a) of the Code. Notwithstanding anything to the contrary in this Credit Agreement, this provision shall survive until 90 days after the expiration of the relevant statute of limitations.

     3.1. Maturity . The Borrower promises to pay on the Maturity Date, and there shall become absolutely due and payable on the Maturity Date, all of the Loans outstanding on such date, together with any and all accrued and unpaid interest thereon and, as a condition to the effectiveness of such payment, the Repayment Premium.

     3.2. Voluntary Prepayments . The Borrower shall have the right, upon at least three (3) Business Days’ prior written notice to the Administrative Agent, to voluntarily prepay all or any portion (in multiples of not less than $1,000,000 or such lesser amount as may then be outstanding) of the Loans on any Business Day. Any prepayment of any Loan shall be accompanied by the payment of all accrued and unpaid interest with respect to the principal being prepaid through the date of prepayment and, as a condition to the effectiveness of such prepayment, the Repayment Premium.

     3.3. Mandatory Prepayments. On the date of receipt by the Borrower or any Subsidiary of the Borrower of any Net Cash Proceeds of any Disposition of any direct or indirect interest in the Paperchase Businesses, the Borrower shall cause 100% of such Net Cash Proceeds to be applied to prepay the Loans. All prepayments under this Section 3.3 shall be accompanied by all accrued and unpaid interest on the Loans being prepaid and, as a condition to the effectiveness of such prepayment, the Repayment Premium.

     3.4. Application of Proceeds. All prepayments under this Section 3.4 with respect to a particular Loan shall be applied to: first , to reimburse the Agents and Lenders for any amounts due to them under this Credit Agreement; second , to pay interest accrued and unpaid; third , to pay the Repayment Premium; and fourth , to pay outstanding principal amount of such Loan until all of such Loan is repaid in full.

     4.1. Funds for Payments .

     4.1.1. Payments to Administrative Agent . Unless provided otherwise in this Credit Agreement, all payments of principal and interest on Loans and any other amounts due hereunder or under any of the other Loan Documents shall be made on the due date thereof to the Administrative Agent, for the respective accounts of the applicable Lenders or any Agent, as the case may be, at the Administrative Agent’s Office or at such other place that the Administrative Agent may from time to time designate, in each case at or about 11:00 a.m. (Eastern time or other local time at the place of payment) and in Same Day Funds.

     4.1.2. No Offset, etc . All payments by the Borrower hereunder and under any of the other Loan Documents shall be made without recoupment, setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless the Borrower is compelled by law to make such deduction or withholding. If any such obligation is imposed upon the Borrower with respect to any amount payable by them hereunder or under any of the other Loan Documents, the Borrower will pay to the Administrative Agent, for the account of the applicable Lender or the applicable Agent, as the case may be, on the date on which such amount is due and payable hereunder or under such other Loan Document, such additional amount in Dollars as shall be necessary to enable such Lender or such

Agent to receive the same net amount which such Lender or such Agent would have received on such due date had no such obligation been imposed upon the Borrower. The Borrower will deliver promptly to the Administrative Agent certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by the Borrower hereunder or under such other Loan Document.

     4.1.3. Non-U.S. Lenders . Each Lender and Agent that is not a U.S. Person as defined in Section 7701(a)(30) of the Code for federal income tax purposes (a “Non-U.S. Lender”) hereby agrees that, if and to the extent it is legally able to do so, it shall, prior to the date of the first payment by the Borrower hereunder to be made to such Lender or Agent or for such Lender’s or Agent’s account, deliver to the Borrower and the Administrative Agent, as applicable, such certificates, documents or other evidence, as and when required by the Code or Treasury Regulations issued pursuant thereto, including (a) in the case of a Non-U.S. Lender that is a “bank” for purposes of Section 881(c)(3)(A) of the Code, two (2) duly completed copies of Internal Revenue Service Form W-8BEN or Form W-8ECI and any other certificate or statement of exemption required by Treasury Regulations, or any subsequent versions thereof or successors thereto, properly completed and duly executed by such Lender or Agent establishing that with respect to payments of principal, interest or fees hereunder it is (i) not subject to United States federal withholding tax under the Code because such payment is effectively connected with the conduct by such Lender or Agent of a trade or business in the United States or (ii) totally exempt or partially exempt from United States federal withholding tax under a provision of an applicable tax treaty and (b) in the case of a Non-U.S. Lender that is not a “bank” for purposes of Section 881(c)(3)(A) of the Code, a certificate in form and substance reasonably satisfactory to the Administrative Agent and the Borrower and to the effect that such Non-U.S. Lender (i) is not a “bank” for purposes of Section 881(c)(3)(A) of the Code, is not subject to regulatory or other legal requirements as a bank in any jurisdiction, and has not been treated as a bank for purposes of any tax, securities law or other filing or submission made to any governmental authority, any application made to a rating agency or qualification for any exemption from any tax, securities law or other legal requirements, (ii) is not a ten (10) percent shareholder for purposes of Section 881(c)(3)(B) of the Code and (iii) is not a controlled foreign corporation receiving interest from a related person for purposes of Section 881(c)(3)(C) of the Code, together with a properly completed Internal Revenue Service Form W-8 or W-9, as applicable (or successor forms). Each Lender and Agent agrees that it shall, promptly upon a change of its lending office or the selection of any additional lending office, to the extent the forms previously delivered by it pursuant to this section are no longer effective, and promptly upon the Borrower’s or the Administrative Agent’s reasonable written request after the occurrence of any other event (including the passage of time) requiring the delivery of a Form W-8BEN, Form W-8ECI, Form W-8 or W-9 in addition to or in replacement of the forms previously delivered, deliver to the Borrower and the Administrative Agent, as applicable, if and to the extent it is properly entitled to do so, a properly completed and executed Form W-8BEN,

Form W-8ECI, Form W-8 or W-9, as applicable (or any successor forms thereto). Without limiting the obligations of the Lenders set forth above regarding delivery of certain forms and documents to establish each Lender’s status for U.S. withholding tax purposes, each Lender agrees promptly to deliver to the Administrative Agent, as the Administrative Agent shall reasonably request, on or prior to the Closing Date, and in a timely fashion thereafter, such other documents and forms required by any relevant taxing authorities under the laws of any other jurisdiction, duly executed and completed by such Lender, as are required under such laws to confirm such Lender’s entitlement to any available exemption from, or reduction of, applicable withholding taxes in respect of all payments to be made to such Lender outside of the U.S. by the Borrower pursuant to this Credit Agreement or otherwise to establish such Lender’s status for withholding tax purposes in such other jurisdiction. Each Lender shall promptly (A) notify the Administrative Agent of any change in circumstances which would modify or render invalid any such claimed exemption or reduction, and (B) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Lender, and as may be reasonably necessary to avoid any requirement of applicable laws of any such jurisdiction that the Borrower make any deduction or withholding for taxes from amounts payable to such Lender. Additionally, the Borrower shall promptly deliver to the Administrative Agent or any Lender, as the Administrative Agent or such Lender shall reasonably request, on or prior to the Closing Date, and in a timely fashion thereafter, such documents and forms required by any relevant taxing authorities under the laws of any jurisdiction, duly executed and completed by the Borrower, as are required to be furnished by such Lender or the Administrative Agent under such laws in connection with any payment by the Administrative Agent or any Lender of taxes or otherwise in connection with the Loan Documents, with respect to such jurisdiction.

     4.2. Computations . All computations of interest on the Loans shall be based on a 365/366-day year and paid for the actual number of days elapsed. Whenever a payment hereunder or under any of the other Loan Documents becomes due on a day that is not a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and interest shall accrue during such extension.

     4.3. Additional Costs, etc . If any present or future applicable law, which expression, as used herein, includes statutes, rules and regulations thereunder and interpretations thereof by any competent court or by any governmental or other regulatory body or official charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued to any Lender or Agent by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), shall:

     (a) subject any Lender or Agent to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Credit Agreement, the other Loan Documents, such Lender’s Commitment or the Loans (other than taxes based upon or measured by the income or profits of such Lender or Agent), or

     (b) materially change the basis of taxation (except for changes in taxes on income or profits) of payments to any Lender of the principal of or the interest on any Loans or any other amounts payable to any Lender or Agent under this Credit Agreement or any of the other Loan Documents, or

     (c) impose or increase or render applicable (other than to the extent specifically provided for elsewhere in this Credit Agreement) any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or loans by, or letters of credit issued by, or commitments of an office of any Lender, or

     (d) impose on any Lender or Agent any other conditions or requirements with respect to this Credit Agreement, the other Loan Documents, the Loans, such Lender’s Commitment, or any class of loans, letters of credit or commitments of which any of the Loans or such Lender’s Commitment forms a part,

and the result of any of the foregoing (a) to (d) is:

     (i) to increase the cost to any Lender of making, funding, issuing, renewing, extending or maintaining any of the Loans, or

     (ii) to reduce the amount of principal, interest or other amount payable to such Lender or Agent hereunder on account of such Lender’s Commitment or any of the Loans, or

     (iii) to require such Lender or Agent to make any payment or to forego any interest or other sum payable hereunder, the amount of which payment or foregone interest or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by such Lender or Agent from the Borrower hereunder,

then, and in each such case, the Borrower will, upon demand made by such Lender or any Agent (as the case may be) at any time and from time to time and as often as the occasion therefor may arise, pay to such Lender or Agent such additional amounts as will be sufficient to compensate such Lender or Agent for such additional cost, reduction, payment or foregone interest or other sum.

     4.4. Capital Adequacy . If after the date hereof any Lender or Agent determines that (a) the adoption of or change in any law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) regarding capital requirements for banks or bank holding companies or any change in the interpretation or application thereof by a Governmental Authority with appropriate jurisdiction, or (b) compliance by such Lender or Agent or any corporation controlling such Lender or Agent with any law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) of any such entity regarding capital adequacy, has the effect of reducing the return on such Lender’s or Agent’s commitment with respect to any Loans to a level below that which such Lender or Agent could have achieved but for such adoption, change or compliance (taking into consideration such

Lender’s or Agent’s then existing policies with respect to capital adequacy and assuming full utilization of such entity’s capital) by any amount deemed by such Lender or Agent (as the case may be) to be material, then such Lender or Agent may notify the Borrower of such fact. To the extent that the amount of such reduction in the return on capital is not reflected in the Interest Rate, the Borrower agrees to pay such Lender or Agent (as the case may be) for the amount of such reduction in the return on capital as and when such reduction is determined upon presentation by such Lender or Agent (as the case may be) of a certificate in accordance with Section 4.5 hereof. Each Lender shall allocate such cost increases among its customers in good faith and on an equitable basis.

     4.5. Certificate . A certificate setting forth any additional amounts payable pursuant to Sections 4.3 or 4.4 and a brief explanation of such amounts which are due, submitted by any Lender or Agent to the Borrower, shall be conclusive, absent manifest error, that such amounts are due and owing.

     4.6. Interest After Default .

     4.6.1. Overdue Amounts . Overdue principal and (to the extent permitted by applicable law) interest on the Loans and all other overdue amounts payable hereunder or under any of the other Loan Documents shall bear interest compounded monthly and payable on demand at a rate per annum equal to two percent (2%) above the Interest Rate until such amount shall be paid in full (after as well as before judgment).

     4.6.2. Amounts Not Overdue . During the continuance of a Default or an Event of Default the principal of the Loans not overdue shall, until such Default or Event of Default has been cured or remedied or such Default or Event of Default has been waived by the Required Lenders pursuant to Section 14.12, bear interest at a rate per annum equal to the rate of interest applicable to overdue principal pursuant to Section 4.6.1.

     4.7. Replacement of Lenders. If any Lender (an “Affected Lender”) (a) makes demand upon the Borrower for (or if the Borrower is otherwise required to pay) amounts pursuant to Sections 4.3 or 4.4 or (b) defaults in its obligation to make Loans in accordance with the terms of this Credit Agreement, the Borrower may, so long as no Default or Event of Default has occurred and is then continuing, within ninety (90) days of receipt of such demand or default referred to in clauses (a) or (b), as the case may be, by notice (a “Replacement Notice”) in writing to the Administrative Agent and such Affected Lender (i) request the Affected Lender to cooperate with the Borrower in obtaining a replacement Lender satisfactory to the Administrative Agent and the Borrower (the “Replacement Lender”); (ii) request the non-Affected Lenders to acquire and assume all of the Affected Lender’s Loans, but none of such Lenders shall be under an obligation to do so; or (iii) designate a Replacement Lender approved by the Administrative Agent, such approval not to be unreasonably withheld or delayed. If any satisfactory Replacement Lender shall be obtained, and/or if any one or more of the non-Affected Lenders shall agree to acquire and assume all of the Affected Lender’s Loans and Commitment, then such Affected Lender shall assign, in accordance with Section 13,

all of its Commitment, Loans, Notes and other rights and obligations under this Credit Agreement and all other Loan Documents to such Replacement Lender or non-Affected Lenders, as the case may be, in exchange for payment of the principal amount so assigned and all interest and fees accrued on the amount so assigned, plus all other Obligations then due and payable to the Affected Lender; provided, however, that (A) such assignment shall be without recourse, representation or warranty and shall be on terms and conditions reasonably satisfactory to such Affected Lender and such Replacement Lender and/or non-Affected Lenders, as the case may be, and (B) prior to any such assignment, the Borrower shall have paid to such Affected Lender all amounts properly demanded and unreimbursed under Sections 4.3 and 4.4. Upon the effective date of such assignment, the Borrower shall issue replacement Notes to such Replacement Lender and/or non-Affected Lenders, as the case may be, and such institution shall become a “Lender” for all purposes under this Credit Agreement and the other Loan Documents.

     5.1. Guaranty of Payment and Performance . For value received and hereby acknowledged and as an inducement to the Lenders to make Loans to the Borrower, (a) each Guarantor hereby absolutely, unconditionally and irrevocably guarantees to the Agents and the Lenders, the full and punctual payment when due (whether at stated maturity, by required pre-payment, by acceleration or otherwise), as well as the performance, of all of the Obligations including all such which would become due but for the operation of the automatic stay pursuant to Section 362(a) of the Federal Bankruptcy Code and the operation of Sections 502(b) and 506(b) of the Federal Bankruptcy Code (such obligations collectively being the “Guaranteed Obligations”). This Section 5 is in no way conditioned upon any requirement that any Agent or Lender first attempt to collect any of the Obligations from the Borrower or resort to any collateral security or other means of obtaining payment. Should the Borrower default in the payment or performance of any of its Obligations, the obligations of each Guarantor hereunder to the Guaranteed Obligations shall become immediately due and payable to the Administrative Agent, for the benefit of the Lenders or the Agents, without demand or notice of any nature, all of which are expressly waived by each Guarantor.

     5.2. Guaranty Absolute . Each of the Guarantors guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms hereof, regardless of any law, regulation, order, decree or directive (whether or not having the force of law) or any interpretation thereof, now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Agent or Lender with respect thereto, including, without limitation, any law, regulation, order, decree or directive or interpretation thereof that purports to require or permit the satisfaction of any Guaranteed Obligation, other than strictly in accordance with the terms of this Credit Agreement, or (b) any agreement, whether or not signed by or on behalf of any Agent or the Lenders, in connection with the restructuring or rescheduling of public or private obligations in the Borrower’s country, whether or not such agreement is stated to cause or permit the discharge of the Obligations prior to the final payment in full of the Obligations. The

liability of each Guarantor under this Guaranty with regard to the Guaranteed Obligations of the Borrower shall be absolute and unconditional irrespective of:

     (a) any lack of authorization, execution, validity or enforceability or any illegality of the Borrower to become a Borrower hereunder, this Credit Agreement and any amendment hereof (with regard to such Guaranteed Obligations), or any other obligation, agreement or instrument relating thereto (it being agreed by each Guarantor that the Guaranteed Obligations shall not be discharged prior to the final and complete satisfaction of all of the Obligations of the Borrower) or any failure to obtain any necessary governmental consent or approvals or necessary third party consents or approvals;

     (b) any Agent’s or any Lender’s exercise or enforcement of, or failure or delay in exercising or enforcing, legal proceedings to collect the Obligations or the Guaranteed Obligations, as the case may be, or any power, right or remedy with respect to any of the Obligations or the Guaranteed Obligations, as the case may be, including any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations of the Borrower or any other amendment or waiver of or any consent to departure from this Credit Agreement or the other Loan Documents (with regard to such Guaranteed Obligations) or any other agreement or instrument governing or evidencing any of the Guaranteed Obligations;

     (c) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Guaranteed Obligations of the Borrower;

     (d) any change in ownership of the Borrower;

     (e) any acceptance of any partial payment(s) from the Borrower;

     (f) any insolvency, bankruptcy, reorganization, arrangement, adjustment, composition, assignment for the benefit of creditors, appointment of a receiver, examiner or trustee for all or any part of the Borrower’s assets;

     (g) any assignment, participation or other transfer, in whole or in part, of any Agent’s or any Lender’s interest in and rights under this Credit Agreement or any other Loan Document, or of any Agent’s or any Lender’s interest in the Obligations or the Guaranteed Obligations;

     (h) any cancellation, renunciation or surrender of any pledge, guaranty or any debt instrument evidencing the Obligations or the Guaranteed Obligations;

     (i) any Agent’s or any Lender’s vote, claim, distribution, election, acceptance, action or inaction in any bankruptcy or reorganization case related to the Obligations or the Guaranteed Obligations; or

     (j) any other action or circumstance, other than payment, which might otherwise constitute a defense available to, or a discharge of, the Borrower in respect of its or the Guaranteed Obligations.

     This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by any Agent or any Lender upon the insolvency, bankruptcy or reorganization, examination of the Borrower or otherwise, all as though such payment had not been made.

     5.3. Effectiveness, Enforcement . The Guaranty herein of each Guarantor shall be effective and shall be deemed to be made with respect to each Loan made as of the time it is made. No invalidity, irregularity or unenforceability by reason of any bankruptcy or similar law, or any law or order of any government or agency thereof purporting to reduce, amend or otherwise affect any liability of the Borrower, and no defect in or insufficiency or want of powers of the Borrower or irregular or improperly recorded exercise thereof, shall impair, affect, be a defense to or claim against such Guaranty. This Guaranty is a continuing guaranty and shall (a) survive any termination of this Credit Agreement and (b) remain in full force and effect until payment in full in cash and performance of all Guaranteed Obligations and all other amounts payable under this Guaranty. This Guaranty is made for the benefit of each Agent and each of the Lenders and their respective successors and assigns, and may be enforced from time to time as often as occasion therefor may arise and without requirement on the part of any Agent or any Lender first to exercise any rights against the Borrower or to exhaust any remedies available to it against the Borrower or to resort to any other source or means of obtaining payment of any of the Guaranteed Obligations or to elect any other remedy. In the event that acceleration of the time for payment (or the giving of notice of such acceleration) of the Guaranteed Obligations of the Borrower is stayed upon the insolvency, bankruptcy, examination or reorganization, of the Borrower or for any other reason, all such amounts otherwise subject to acceleration under the terms of this Credit Agreement shall be immediately due and payable by each Guarantor under the Guaranty herein provided.

     5.4. Waiver . Each of the Guarantors hereby waives promptness, diligence, protest, notice of protest, all suretyship defenses, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that any Agent or any Lender secure, perfect or protect any security interest or lien or any property subject thereto or exhaust any right or take any action against the Borrower or any other Person or any collateral. Each of the Guarantors also irrevocably waives, to the fullest extent permitted by law, all defenses which at any time may be available to it in respect of the Guaranteed Obligations by virtue of any statute of limitations, valuation, stay, moratorium law or other similar law now or hereafter in effect.

     5.5. Subordination; Subrogation . Until the termination of the Commitments and final payment and performance in full in cash of all of the Obligations, none of the Guarantors shall exercise and hereby waives any rights against the Borrower as a result of

payment by any Guarantor hereunder, by way of subrogation, reimbursement, restitution, contribution or otherwise, and any Guarantor will not prove any claim in competition with any Agent or any Lender in respect of any payment hereunder in bankruptcy, insolvency or reorganization proceedings of any nature; any Guarantor will not claim any set-off, recoupment or counterclaim against the Borrower in respect of any liability of such Guarantor; and each Guarantor waives any benefit of and any right to participate in any collateral which may be held by any Agent or any Lender. The payment of any amounts due with respect to any Indebtedness of the Borrower now or hereafter held by any Guarantor is hereby subordinated to the prior payment in full of the Guaranteed Obligations. Each Guarantor agrees that after the occurrence of any default in the payment or performance of the Guaranteed Obligations such Guarantor will not demand, sue for, or otherwise attempt to collect any such Indebtedness of the Borrower to such Guarantor until the Guaranteed Obligations then due shall have been paid in full in cash. If, notwithstanding the foregoing sentence, any Guarantor shall collect or receive any amounts in respect of such indebtedness, such amounts shall be collected and received by such Guarantor as trustee for the Agents and the Lenders and be paid over to the Administrative Agent for the respective accounts of the Agents and the Lenders on account of the Guaranteed Obligations without affecting in any manner the liability of any Guarantor under the other provisions of this Section 5. The provisions of this Section 5 shall survive the expiration or termination of the Credit Agreement and the other Loan Documents and the provisions of this Section 5 shall be supplemental to and not in derogation of any rights and remedies of any Agent or any Lender under any separate subordination agreement which any Agent or any Lender may at any time and from time to time entered into with any Guarantor for the benefit of any Agent or any Lender.

     5.6. Payments . Payments by each Guarantor hereunder may be required by the Administrative Agent on any number of occasions. All payments made by each Guarantor under this Section 5 shall be made to the Administrative Agent, in the manner and at the place of payment specified therefor in Section 4.1.1 hereof, for the account of the Lenders and the Agents and in the same currency in which such Obligation was made, unless otherwise agreed to in writing by the Agents or the Lenders.

     5.7. Setoff . Each Guarantor grants to the Agents and the Lenders, as security for the full and punctual payment and performance of all of such Guarantor’s obligations under this Section 5, a continuing lien on, security interest and right of setoff in all securities or other property belonging to such Guarantor, as the case may be, now or hereafter held by any Agent or such Lender and in all deposits (general or special, time or demand, provisional or final) and other sums credited by or due from any Agent or such Lender to such Guarantor or subject to withdrawal by such Guarantor. Regardless of the adequacy of any collateral security or other means of obtaining payment of any of the Guaranteed Obligations, each of the Agents and the Lenders is hereby authorized at any time and from time to time during the continuance of any Event of Default, without notice to any Guarantor (any such notice being expressly waived by the Guarantors) and to the fullest extent permitted by law, to set off and apply such deposits and other sums against the obligations of such Guarantor under this Section 5, whether or not such Agent or such Lender shall have made any demand under this Section 5 and although such obligations may be contingent or unmatured.

     5.8. Further Assurances . Each Guarantor agrees that it will from time to time, at the request of the Administrative Agent, do all such things and execute all such documents as the Administrative Agent may reasonably consider necessary or desirable to give full effect to this Section 5 and to perfect and preserve the rights and powers of the Lenders and the Agents hereunder. Each Guarantor acknowledges and confirms that it has established its own adequate means of obtaining from the Borrower on a continuing basis all information desired by it concerning the financial condition of the Borrower and that it will look to the Borrower and not to any Agent or any Lender in order for it to keep adequately informed of changes of the financial condition of the Borrower.

     5.9. Successors and Assigns . This Section 5 shall be binding upon each Guarantor, its successors and assigns, and shall inure to the benefit of the Agents and the Lenders and their respective successors, and permitted transferees and assigns. Without limiting the generality of the foregoing sentence, each Lender may, in accordance with the provisions of Section 13 and subject to the limitations set forth therein, assign or otherwise transfer this Credit Agreement, the other Loan Documents or any other agreement or note held by it evidencing, securing or otherwise executed in connection with the Obligations, or sell participations in any interest therein, to another Person, and such other Person shall thereupon become vested, to the extent set forth in the agreement evidencing such assignment, transfer or participation, with all the rights in respect thereof granted to such Lender herein. None of the Guarantors may assign any of its obligations hereunder. The Borrower may cause additional Subsidiaries of the Borrower to become Guarantors hereunder by causing such Subsidiary or Subsidiaries to agree to be bound by the provisions of this Section 5, to execute and deliver a Joinder Agreement to the Administrative Agent and to deliver such legal opinions and other documents and instruments as the Administrative Agent may request.

     5.10. Contribution . To the extent any of the Guarantors makes a payment hereunder in excess of the aggregate amount of the benefit received by such Person in respect of the extensions of credit under the Credit Agreement (the “Benefit Amount”), then such Person, after the payment in full in cash of all of the Guaranteed Obligations shall be entitled to recover from each such Person such excess payment, pro rata in accordance with the ratio of the Benefit Amount received by such other Person to the total Benefit Amounts received by each of the Guarantors, and the right to such recovery shall be deemed to be in asset and property of such Person so funding; provided that all such rights to recovery shall be subordinate and junior in right of payment to the final and indefeasible repayment in full in cash of all of the Obligations.

     5.11. Security of Borrower . (a) The Obligations shall be secured by a perfected first priority security interest in 14,724 shares of the Capital Stock of Paperchase and 42,300,000 shares of the Capital Stock of Superstores, each pledged by BGP (UK) (such shares, the “Pledged Shares”), which shall constitute, through such of BGP (UK)’s direct and indirect holdings, approximately 65% of the Capital Stock of Paperchase. The terms and conditions of such first priority security interest are set forth in the Pledge Agreement.

     The Borrower represents and warrants to the Lenders and the Agents as follows:

     6.1. Corporate Authority .

     6.1.1. Incorporation; Good Standing . Each of the Borrower and its Subsidiaries (a) is a corporation (or similar business entity) duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or formation, (b) has all requisite corporate (or the equivalent company) power to own its property and conduct its business as now conducted and as presently contemplated, and (c) is in good standing as a foreign corporation (or similar business entity) and is duly authorized to do business in each jurisdiction where such qualification is necessary except where a failure to be so qualified would not have a Material Adverse Effect.

     6.1.2. Authorization . The execution, delivery and performance of this Credit Agreement and the other Loan Documents to which the Borrower or any of its Subsidiaries is or is to become a party and the transactions contemplated hereby and thereby (a) are within the corporate (or the equivalent company) authority of such Person, (b) have been duly authorized by all necessary corporate (or the equivalent company) proceedings, (c) do not and will not conflict with or result in any breach or contravention of any provision of law, statute, rule or regulation to which the Borrower or any of its Subsidiaries is subject or any judgment, order, writ, injunction, license or permit applicable to the Borrower or any of its Subsidiaries and (d) do not conflict with any provision of the Governing Documents of, or any Contract binding upon, the Borrower or any of its Subsidiaries.

     6.1.3. Enforceability . The execution and delivery of this Credit Agreement and the other Loan Documents to which the Borrower or any of its Subsidiaries is or is to become a party will result in valid and legally binding obligations of such Person enforceable against it in accordance with the respective terms and provisions hereof and thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors’ rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought.

     6.2. Governmental Approvals . The execution, delivery and performance by the Borrower and any of its Subsidiaries of this Credit Agreement and the other Loan Documents to which the Borrower or any of its Subsidiaries is or is to become a party and the transactions contemplated hereby and thereby do not require the approval or consent of, or filing with, any governmental agency or authority other than those already obtained.

     6.3. Title to Properties; Leases . Except as indicated on Schedule 6.3 hereto, the Borrower and its Subsidiaries own all of the Properties reflected in the consolidated balance sheet of the Borrower and its Subsidiaries as at the Balance Sheet Date or acquired since that date (except Property sold or otherwise disposed of in the ordinary course of business since that date), subject to no Liens or other rights of others, except Permitted Liens.

     6.4. Fiscal Year; Financial Statements and Projections .

     6.4.1. Fiscal Year . The Borrower and each of its Subsidiaries has a Fiscal Year which is the 52/53 week period ending on the Saturday closest to the last day in January; provided that the Borrower and its Subsidiaries may change any Fiscal Year end date to a date not more than seven (7) days before or after the then scheduled end date of such Fiscal Year with written notice to the Administrative Agent not less than thirty (30) days prior to the commencement of such Fiscal Year. The Fiscal Quarters and Fiscal Year of the Borrower and its Subsidiaries are accurately described in Section 1.1 hereof (except as otherwise noticed to the Administrative Agent pursuant to the proviso of the preceding sentence).

     6.4.2. Financial Statements . There has been furnished to each of the Lenders (a) a consolidated balance sheet and consolidated statements of income and cash flow of the Borrower and its Subsidiaries as at the Balance Sheet Date, certified by Ernst & Young LLP, and (b) a consolidated balance sheet and consolidated statements of income and cash flow of (i) the Borrower and its Subsidiaries and (ii) the Paperchase Companies for the FQ3 2007. Such balance sheets and statements of income and cash flow have been prepared in accordance with GAAP and fairly present the financial condition of the Borrower and its Subsidiaries and the Paperchase Companies, as applicable, as at the close of business on the date thereof and the results of operations for the fiscal year then ended. There are no contingent liabilities of the Borrower or any of its Subsidiaries or any of the Paperchase Companies as of such date involving material amounts, known to the officers of the Borrower, which were not disclosed in such balance sheets and the notes related thereto.

     6.4.3. Projections . The projections of the annual operating budgets of the Borrower and its Subsidiaries, on a consolidated basis, balance sheets and cash flow statements for the monthly periods until January 2009 and the preliminary monthly projections of the Borrower and its Subsidiaries for the Fiscal Years 2008 and 2009, respectively, copies of which have been delivered to each Lender, disclose all assumptions made with respect to general economic, financial and market conditions used in formulating such projections. To the knowledge of the Borrower or any of its Subsidiaries, no facts exist that (individually or in the aggregate) would result in any material change in any of such projections. The projections are based upon reasonable estimates and assumptions, have been prepared on the basis of the assumptions stated therein and reflect the reasonable estimates of the Borrower and its Subsidiaries and the

Paperchase Companies, as applicable, of the results of operations and other information projected therein.

     6.5. No Material Adverse Effect, Etc . Since the Balance Sheet Date there has been no event or occurrence which has had a Material Adverse Effect as defined in clauses (c) and (d) of the definition of “Material Adverse Effect” in Section 1.1. Since the Balance Sheet Date, the Borrower has not made any Restricted Payment except as set forth in Schedule 6.5 hereto.

     6.6. Intellectual Property.

     6.6.1. Franchises, Patents, Copyrights, Etc. (i) The Borrower and each of its Subsidiaries and (ii) the Paperchase Companies possesses all franchises, patents, copyrights, trademarks, trade names, licenses and permits, and rights in respect of the foregoing, adequate for the conduct of its business as currently conducted without known conflict with any rights of others.

     6.6.2. Paperchase Companies Intellectual Property. Schedule 6.6.2 lists all of the material patents, copyrights, trademarks and trade names (“Intellectual Property”) owned by the Paperchase Companies or used by them (other than relating to “Borders” or “Borders Books” or similar marks, copyrights or names) in the conduct of their business as currently conducted, and identifies the owner of such Intellectual Property and, if the owner is not any of the Paperchase Companies, the license agreement or other arrangement by which any such Paperchase Company have the right to use such Intellectual Property.

     6.7. Litigation . Except as set forth in Schedule 6.7 hereto, there are no claims, actions, suits, arbitrations, proceedings or investigations or orders, judgment, awards, decrees, injunctions, settlements or stipulations of any kind pending or threatened against the Borrower or any of its Subsidiaries before any Governmental Authority, that, (a) might reasonably be expected to, either in any case or in the aggregate, (i) have a Material Adverse Effect or (ii) materially impair the right of the Borrower and its Subsidiaries, considered as a whole, to carry on business as now conducted by them, or result in any liability not adequately covered by insurance, or for which adequate reserves are not maintained on the consolidated balance sheet of the Borrower and its Subsidiaries, or (b) which question the validity of this Credit Agreement or any of the other Loan Documents, or any action taken or to be taken pursuant hereto or thereto.

     6.8. No Materially Adverse Contracts, Etc . Neither the Borrower nor any of its Subsidiaries is subject to any Governing Document or other legal restriction, or any judgment, decree, order, law, statute, rule or regulation that has or is expected in the future to have a Material Adverse Effect. Neither the Borrower nor any of its Subsidiaries is a party to any contract, lease, license, consent, arrangement or other agreement (“Contract”) that has or is expected, in the judgment of the Borrower’s officers, to have any Material Adverse Effect.

     6.9. Compliance With Other Instruments, Laws, etc . (i) Neither the Borrower nor any of its Subsidiaries is in violation of any provision of its Governing Documents, or any Contract to which it may be subject or by which it or any of its Properties may be bound or any decree, order, judgment, statute, permit, rule or regulation, in any of the foregoing cases in a manner that could result in the imposition of substantial penalties or have a Material Adverse Effect and (ii) no Default or Event of Default under the Existing Credit Agreement has occurred or is continuing.

     6.10. Tax Status . Each of the Borrower and its Subsidiaries (a) has made or filed all federal, state and foreign income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (b) has paid in full all taxes and other governmental assessments and charges shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and by appropriate proceedings and (c) has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and none of the officers of the Borrower know of any basis for any such claim.

     6.11. No Event of Default . No Default or Event of Default has occurred and is continuing.

     6.12. Holding Company and Investment Company Acts . Neither the Borrower nor any of their Subsidiaries is a “holding company”, or a “subsidiary company” of a “holding company”, or an “affiliate” of a “holding company”, as such terms are defined in the Public Utility Holding Company Act of 2005; nor is it is subject to regulation as a “public utility” under the Federal Power Act, as amended; nor is it an “investment company”, or an “affiliated company” or a “principal underwriter” of an “investment company&rd