US_ACTIVE:\43444125\19\27258.0004

Stephen KarotkinMartin A. Sosland (pro hac vice admission pending)WEIL, GOTSHAL & MANGES LLP767 Fifth AvenueNew York, New York 10153Telephone: (212) 310-8000Facsimile: (212) 310-8007

Attorneys for Debtors and Debtors in Possession

UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK---------------------------------------------------------------x

:In re : Chapter 11

:BLOCKBUSTER INC., et al.,1 : Case No. 10-_____ (___)

:: (Joint Administration Requested)

Debtors. :---------------------------------------------------------------x

DEBTORS’ MOTION PURSUANT TO 11 U.S.C. §§ 105(a) AND 362(a)(3) REQUESTING APPROVAL OF (I) CERTAIN PROPOSED

NOTIFICATION PROCEDURES AND (II) RESTRICTIONS ON CERTAIN TRANSFERS AND CONVERSIONS OF EQUITY INTERESTS IN THE DEBTORS’

ESTATES EFFECTIVE NUNC PRO TUNC TO THE COMMENCEMENT DATE

TO THE HONORABLE UNITED STATES BANKRUPTCY JUDGE:

Blockbuster Digital Technologies Inc., its parent Blockbuster Inc., and their

debtor affiliates, as debtors and debtors in possession (collectively, “Blockbuster” or the

“Debtors”), submit this motion (the “Motion”) and respectfully represent as follows:

1 The Debtors, together with the last four digits of each Debtor’s federal tax identification number, are:

Blockbuster Inc. (5102); Blockbuster Canada Inc. (1269); Blockbuster Digital Technologies Inc.(9222); Blockbuster Distribution, Inc. (0610); Blockbuster Gift Card, Inc. (1855); Blockbuster Global Services Inc. (3019); Blockbuster International Spain Inc. (7615); Blockbuster Investments LLC (6313); Blockbuster Procurement LP (2546); Blockbuster Video Italy, Inc (5068); Movielink, LLC (5575); Trading Zone Inc. (8588); and B2 LLC (5219).

US_ACTIVE:\43444125\19\27258.0004 2

I.

BACKGROUND

1. On September 23, 2010 (the “Commencement Date”), each of the Debtors

commenced a voluntary case under chapter 11 of title 11 of the United States Code (the

“Bankruptcy Code”). The Debtors are authorized to operate their business and manage their

properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy

Code. Contemporaneously herewith, the Debtors filed a motion seeking joint administration of

their chapter 11 cases pursuant to Rule 1015(b) of the Federal Rules of Bankruptcy Procedure

(the “Bankruptcy Rules”).

II.

BLOCKBUSTER’S BUSINESS

2. More than twenty five years ago, Blockbuster became the first national

retail chain provider of in-home entertainment, with its blue and gold torn-ticket logo

symbolizing the decision by consumers to forego the movie theatre experience and “Make it a

Blockbuster Night”® by staying home to watch the latest in new movie title releases from the

convenience of their living rooms. Since its incorporation in 1982, Blockbuster has expanded its

retail business operations domestically and abroad via a mix of corporate and franchisee-owned

stores, with, as of August 29, 2010, over 5,600 stores in the United States and its territories and

16 other countries. To manage its business and properties, Blockbuster employs approximately

25,500 employees who perform a variety of critical functions, including customer service,

inventory control, management, leasing, accounting, marketing, purchasing and sales, shipping,

tax, technical services, and legal services.

US_ACTIVE:\43444125\19\27258.0004 3

A. Domestic Operations

3. Blockbuster operates its domestic media entertainment business through

three principal channels of distribution: (i) retail; (ii) by-mail; and (iii) digital. As a result of this

multi-channel distribution scheme, Blockbuster offers customers a value-priced entertainment

experience, combining the broad array of products offered by a specialty or online retailer with

the convenience of a local neighborhood retailer.

1. Retail Channel

4. The convenience offered to customers by having Blockbuster stores

located in their cities, towns, and neighborhoods has been instrumental in establishing the

BLOCKBUSTER® brand. As of August 29, 2010, there were 3,306 stores operating under the

BLOCKBUSTER® brand in the United States and its territories. Of these stores, 2,924 are

owned and operated by Blockbuster Inc. and 382 stores are owned and operated by franchisees.

Blockbuster stores offer movies and games (collectively, “Product”) for rent and purchase (both

new and previously-viewed) as well as other entertainment-related consumer electronics and

accessories, game consoles, confection, and movie-related merchandise for purchase.

Additionally, approximately 240 of these locations include store-in-store game locations

operating under the GAME RUSH® brand.

5. In step with its continued commitment to be the premier retailer of new

release movies, Blockbuster has recently focused on promoting its rapidly emerging availability

advantage over certain of its key competitors, who do not have access to key new Product for the

initial 28 days of release (the “28-day Window”). In 2009, the 28-day Window was imposed by

certain movie studios on the rental of newly released titles after the initial distribution date of a

title so as to diminish the effect of rental on the retail sale of such titles. Given that a substantial

portion of Blockbuster’s rental revenues are derived from the rental of such new release Product,

US_ACTIVE:\43444125\19\27258.0004 4

Blockbuster’s advantage with respect to the 28-day Window is expected to maintain and improve

its customer preference and loyalty in comparison to its competitors.

6. To expand its retail reach, in early 2009, Blockbuster entered into an

agreement with NCR Corporation (“NCR”) to launch BLOCKBUSTER Express® branded

vending kiosks. Through this partnership, NCR builds and maintains the kiosks and pays

royalties to Blockbuster on the revenues generated. This agreement allows Blockbuster to

compete in the popular vending kiosk channel without incurring capital expenditures and start-up

costs on its own account, while making Product more convenient and less expensive for its

customers. As of September 19, 2010, there were approximately 6,630 kiosks operating under

the BLOCKBUSTER Express® brand throughout the United States and its territories.

2. By-Mail Channel

7. Blockbuster offers a by-mail subscription program through its retail chain

and through its website, www.blockbuster.com, whereby customers rent Product that is delivered

directly to them by-mail. The by-mail subscription program provides customers access to

substantially more Product than is available in its stores, and allows Blockbuster to compete

directly with certain of its key competitors. In contrast to its competitors, Blockbuster offers: (i)

a wide selection of games and (ii) Blu-ray Product at no additional charge. Through its

BLOCKBUSTER Total Access™ program (“Total Access”), Blockbuster also offers its by-mail

subscribers the ability to exchange up to five online movie rentals for in-store movies at its retail

locations for only a few dollars more per month. The by-mail subscription program allows

Blockbuster to reach customers located in geographic areas where it does not operate store

locations.

US_ACTIVE:\43444125\19\27258.0004 5

8. In order to promote the synergies between its retail and by-mail channels

of distribution and to profitably grow its by-mail customer base, Blockbuster recently launched a

marketing partnership with Comcast Cable Corporation (“Comcast”). This partnership includes

the launch of DVDs by Mail, a co-branded by-mail offer available at www.DVDsbymail.com.

As part of the marketing partnership, Comcast customers are now being offered Blockbuster’s

by-mail services (both by-mail and Total Access-like products) through the new co-branded web

site as an additional service within their Comcast package. On the site, customers can browse

Blockbuster’s vast library of more than 95,000 movie and television titles, create a queue of titles

they want to rent and then get the DVDs through the mail or at a Blockbuster retail store, where

they can also exchange their rentals. In turn, Blockbuster is installing Comcast-dedicated kiosks

in select stores that allow customers to quickly and easily learn about, and sign up for, Comcast

services.

3. Digital Channel

9. As new distribution channels have emerged and as consumer interest in

accessing Product in new ways has grown, Blockbuster has begun to expand its footprint into the

digital realm. To that end, Blockbuster’s digital business currently offers its customers on-

demand access to one of the largest libraries of digital movies for both rental and sale through

multiple formats. Blockbuster began its digital initiatives with the purchase of Movielink from a

consortium of movie studios in 2007.

10. Through Blockbuster’s website, www.blockbuster.com, Blockbuster

customers can download and view movies on their personal computers after downloading

Blockbuster’s personal computer application. In addition, with the convergence of media

entertainment and electronic devices, Blockbuster recently entered into strategic partnerships

US_ACTIVE:\43444125\19\27258.0004 6

with certain global third party consumer electronics device developers – including Samsung,

Philips, TiVo, and Toshiba – to digitally deliver media entertainment to its customers through

consumer electronics such as Internet-connected TVs and Blu-ray players through Blockbuster

applications embedded in these devices. In the mobile space, Blockbuster has partnered with

device makers such as Motorola and HTC, embedding Blockbuster’s digital applications in its

popular new models for Verizon and T-Mobile. Blockbuster is also pursuing partnerships with

Cable TV providers to offer Blockbuster-branded video-on-demand services inside an operator’s

set-top-box infrastructure.

B. International Operations

11. Blockbuster’s international operations, which serve as ambassadors of the

BLOCKBUSTER® brand, are comprised of all store operations outside the United States and its

territories, including: (i) owned retail operations in Canada, the United Kingdom, Denmark,

Italy, Mexico, Argentina, and Uruguay; and (ii) franchised retail operations in Australia, Brazil,

Chile, Columbia, Guatemala, Israel, Italy, Mexico, New Zealand, Panama, Portugal, and Taiwan.

As of August 29, 2010, Blockbuster had 2,333 stores in 16 markets outside of the United States

operating under the BLOCKBUSTER® brand, the GAME RUSH® brand, and other brand names

owned by Blockbuster. During 2008 and 2009, 29% and 30% of Blockbuster’s revenues were

generated outside of the United States, respectively. Blockbuster’s international operations have

historically been more dependent than the domestic operations on retail sales and, in particular,

sales of games, as opposed to revenue generated from rentals.

C. Financials

12. As of July 4, 2010, the Debtors, on a consolidated basis, reported

approximately $1.2 billion in total assets and approximately $1.6 billion in total liabilities. For

US_ACTIVE:\43444125\19\27258.0004 7

2009, Blockbuster reported consolidated revenues of approximately $4.1 billion and net cash

from operating activities of $29.3 million.

13. Additional information regarding Blockbuster’s business, capital structure,

and the circumstances leading to these chapter 11 cases is contained in the Affidavit of Jeffery J.

Stegenga Pursuant to Local Bankruptcy Rule 1007-2 in Support of First Day Motions (the “First

Day Affidavit”) filed contemporaneously herewith.

III.

JURISDICTION

14. This Court has subject matter jurisdiction to consider and determine this

matter pursuant to 28 U.S.C. § 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b).

Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409.

IV.

RELIEF REQUESTED

15. By this Motion, the Debtors request, pursuant to sections 105(a) and

362(a)(3) of the Bankruptcy Code, that the Court establish procedures to protect the potential

value of their net operating tax loss carryforward amounts (“NOLs”), net unrealized built-in

losses in their assets (the “Built-in Losses”), and certain other tax and business credits (the “Tax

Credits,” and together with the NOLs and the Built-in Losses, the “Tax Attributes”). The

proposed procedures are designed to notify holders of each class of Blockbuster stock, including

Series A convertible preferred stock, Class A common stock, and Class B common stock

(collectively, “Blockbuster Stock”), of the injunction described below imposing restrictions and

notification requirements by making available to all holders of Blockbuster Stock (a) a notice

US_ACTIVE:\43444125\19\27258.0004 8

substantially in the form annexed hereto as Exhibit “A” (the “Interim Procedures Notice”), to

be effective nunc pro tunc to the date this Motion was filed (the “Motion Date”) and (b) a notice

substantially in the form annexed hereto as Exhibit “B” (the “Final Procedures Notice”). The

Debtors’ proposed interim order (the “Interim Order”) and final order (the “Final Order”, and

together with the Interim Order, the “Orders”) on the requested relief are annexed hereto as

Exhibit “C” and Exhibit “D”, respectively.

V.

THE TAX ATTRIBUTES

16. The Debtors estimate that, as of the date hereof, they have: (a) NOLs of at

least $580,000,000; (b) consolidated Built-in Losses in excess of $50,000,000; and (c) other

excess carryforwards in excess of $900,000.

17. The Tax Attributes are valuable assets of the Debtors’ estates because the

Internal Revenue Code of 1986, as amended (the “Tax Code”), generally permits corporations to

carry over their losses and tax credits to offset future income, thereby reducing tax liability. See

26 U.S.C. § 172. Depending on future operating results and potential asset dispositions, and

absent any intervening limitations, prior to the effective date of a chapter 11 plan of

reorganization, the Tax Attributes may reduce the Debtors’ future U.S. federal income tax

liability including any gain from a taxable transfer of assets pursuant to the chapter 11 plan of

reorganization. Although NOLs and other excess credit carryforwards remaining as of the

effective date of a chapter 11 plan of reorganization may be reduced pursuant to the cancellation

of debt, the Tax Attributes are substantially in excess of any expected reduction, and may

potentially result in substantial future tax savings over time; provided that, if the chapter 11 plan

of reorganization results in a taxable transfer of the Debtors’ assets to a new entity, such Tax

US_ACTIVE:\43444125\19\27258.0004 9

Attributes would not be available to the new entity but the new entity would have a “stepped-up”

basis in the assets which may also potentially result in substantial future tax savings over time.

These savings would enhance the Debtors’ cash position for the benefit of all parties in interest

and contribute to the Debtors’ efforts to complete a successful reorganization.

18. The ability of the Debtors to use the Tax Attributes to reduce future tax

liability is subject to certain statutory limitations. Sections 382 and 383 of the Tax Code limit a

corporation’s use of its NOLs, tax credits, and certain other tax attributes to offset future income

or tax after the corporation experiences an “ownership change.” See 26 U.S.C. §§ 382, 383. For

purposes of section 382 of the Tax Code, an ownership change generally occurs when the

percentage of a company’s equity held by one or more persons or entities holding 5% or more of

that company’s shares (and certain groups of less than 5% shareholders) increases by more than

50 percentage points above the lowest percentage of ownership owned by such shareholder(s) at

any time during the relevant testing period (generally three years). A section 382 ownership

change prior to the effective date of a chapter 11 plan of reorganization would effectively

eliminate the Debtors’ ability to use the Tax Attributes, thereby resulting in a significant loss of

value. However, the limitations imposed by section 382 in the context of an ownership change

pursuant to a confirmed plan of reorganization or applicable Bankruptcy Court order are

significantly more relaxed than those applicable outside chapter 11. See, e.g., 26 U.S.C.

§ 382(l)(5)-(6).

19. Contemporaneously with the filing of these chapter 11 cases, the Debtors

have filed a term sheet for a proposed plan of reorganization, with the support of their senior

secured noteholders, that will, among other things, involve the issuance of new common stock in

reorganized Blockbuster and the distribution of such stock to certain creditors in satisfaction of

US_ACTIVE:\43444125\19\27258.0004 10

their claims. In this instance, the Debtors will avail themselves of the special relief afforded by

section 382 of the Tax Code for changes in ownership under a confirmed chapter 11 plan of

reorganization. Such relief, however, would not undo any limitation imposed in connection with

an ownership change occurring prior to the effective date of a chapter 11 plan of reorganization.

20. In furtherance of the automatic stay provisions of section 362 of the

Bankruptcy Code, and pursuant to section 105 of the Bankruptcy Code, the Debtors seek

authority to preclude certain transfers and conversions of, and monitor changes in, the ownership

of Blockbuster Stock to ensure that a 50% ownership change does not occur before the effective

date of a chapter 11 plan of reorganization so as to protect the potential value of the Tax

Attributes following a confirmed chapter 11 plan of reorganization.

A. Notification Requirements And Proposed Trading Restrictions

21. To preserve the potential value of the Tax Attributes and ensure that the

Debtors receive the full benefits of the automatic stay, the Debtors propose the following

restrictions, notification requirements, and/or other procedures during the pendency of these

chapter 11 cases, effective nunc pro tunc to the Motion Date:

a. Blockbuster Stock Ownership, Acquisition, and Disposition

(1) Notice of Substantial Blockbuster Stock Ownership. Any person or Entity (as defined herein) that beneficially owns, at any time on or after the Motion Date, Blockbuster Stock in an amount sufficient to qualify such person or Entity as a Substantial Equityholder (as hereinafter defined) shall file with the Court, andserve upon the Debtors and attorneys for the Debtors, a Notice of Substantial Stock Ownership (a “Substantial Equity Ownership Notice”), in the form annexed hereto as Exhibit “E,” which describes specifically and in detail the Blockbuster Stock ownership of such person or Entity, on or before the date that is the later of: (a) ten (10) business days after the entry of either of the Orders, as applicable, by the Court, and (b) ten (10) business days after that person or Entity qualifies as a Substantial Equityholder. At the holder’s election, the Substantial Equity Ownership Notice to be filed with the Court (but not such notice served upon the

US_ACTIVE:\43444125\19\27258.0004 11

Debtors and the attorneys for the Debtors) may be redacted to exclude such holder’s taxpayer identification number and the number of shares of Blockbuster Stock that such holder beneficially owns.

(2) Acquisition of Blockbuster Stock or Options. At least twenty (20) business days prior to the proposed date of any transfer of equity securities (including Options, as hereinafter defined, to acquire such securities) that would result in an increase in the amount of Blockbuster Stock beneficially owned by any person or Entity that currently is or subsequently becomes a Substantial Equityholder or that would result in a person or Entity becoming a Substantial Equityholder (a “Proposed Equity Acquisition Transaction”), such person, Entity, or Substantial Equityholder (a “Proposed Equity Transferee”) shall file with the Court, and serve upon the Debtors and the attorneys for the Debtors, a Notice of Intent to Purchase, Acquire, or Otherwise Accumulate Blockbuster Stock (an “Equity Acquisition Notice”), in the form annexed hereto as Exhibit “F,” which describes specifically and in detail the proposed transaction in which Blockbuster Stock is to be acquired. At the holder’s election, the Equity Acquisition Notice that is filed with the Court (but not such notice served upon the Debtors andthe attorneys for the Debtors) may be redacted to exclude such holder’s taxpayer identification number and the number of shares of Blockbuster Stock that such holder beneficially owns and proposes to purchase or otherwise acquire.

(3) Disposition of Blockbuster Stock or Options. At least twenty (20)business days prior to the proposed date of any transfer or other disposition of equity securities (including Options to acquire such securities) that would result in a decrease in the amount of Blockbuster Stock beneficially owned by a Substantial Equityholder or that would result in a person or Entity ceasing to be a Substantial Equityholder (a “Proposed Equity Disposition Transaction,” and together with a Proposed Equity Acquisition Transaction, a “Proposed Equity Transaction”), such person, Entity, or Substantial Equityholder (a “Proposed Equity Transferor”) shall file with the Court, and serve upon the Debtors and the attorneys for the Debtors, a Notice of Intent to Sell, Trade, or Otherwise Transfer Blockbuster Stock (an “Equity Disposition Notice,” and together with an Equity Acquisition Notice, an “Equity Trading Notice”), in the form annexed hereto as Exhibit “G,” which describes specifically and in detail the proposed transaction in which Blockbuster Stock would be transferred. At the holder’s election, the Equity Disposition Notice that is filed with the Court (but not such notice served upon the Debtors andthe attorneys for the Debtors) may be redacted to exclude such

US_ACTIVE:\43444125\19\27258.0004 12

holder’s taxpayer identification number and the number of shares of Blockbuster Stock that such holder beneficially owns and proposes to sell or otherwise transfer.

(4) No Conversion of Series A Convertible Preferred Stock. During the pendency of the chapter 11 cases, no person or Entity that beneficially owns or acquires Series A convertible preferred stock in Blockbuster Inc. (“Preferred Stock”) shall be permitted to convert shares of such stock to Class A common stock or any other form of equity or ownership interest in the Debtors.

(5) Objection Procedures. The Debtors shall have fifteen (15) business days after the filing of an Equity Trading Notice (the “Equity Objection Deadline”) to file with the Court and serve on a Proposed Equity Transferee or a Proposed Equity Transferor, as the case may be, an objection to any proposed transfer of equity securities (including Options to acquire such securities) described in such Equity Trading Notice on the grounds that such transfer may adversely affect the Debtors’ ability to utilize the Tax Attributes (an “Equity Objection”) as a result of an ownership change under section 382 or section 383 of the Tax Code.

(i) If the Debtors file an Equity Objection by the Equity Objection Deadline, then the Proposed Equity Transaction shall not be effective unless approved by a final and nonappealable order of this Court.

(ii) If the Debtors do not file an Equity Objection by the Equity Objection Deadline, or if the Debtors provide written authorization to the Proposed Equity Transferee or the Proposed Equity Transferor, as the case may be, approving the Proposed Equity Transaction, prior to the Equity Objection Deadline, then such Proposed Equity Transaction may proceed solely as specifically described in the Equity Trading Notice.

(iii) Any further Proposed Equity Transaction must be the subject of additional notices and the prescribed waiting period as set forth above.

(6) Unauthorized Transactions in Blockbuster Stock or Options. Effective as of the date of the filing of this Motion and until further order of the Court to the contrary, any acquisition, disposition, other transfer, or conversion of equity securities (including Options to acquire such securities) of the Debtors in violation of the procedures set forth herein shall be null and void ab initio as an act

US_ACTIVE:\43444125\19\27258.0004 13

in violation of the automatic stay under sections 105(a) and 362 of the Bankruptcy Code.

(7) Definitions.

(i) Substantial Equityholder. A “Substantial Equityholder” is any person or Entity that beneficially owns (a) 3,420 or more shares of Preferred Stock (representing approximately 4.75% of the number of shares of such stock issued and outstanding), (b) 6,928,414 or more shares of Class A common stock (representing approximately 4.75% of the number of shares of such stock issued and outstanding), or (c) 3,420,000 or more shares of Class B common stock (representing approximately 4.75% of the number of shares of such stock issued and outstanding).

(ii) Beneficial Ownership. “Beneficial ownership” (or any variation thereof) of Blockbuster Stock or Options to acquire Blockbuster Stock shall be determined in accordance with applicable rules under section 382 of the Tax Code, the U.S. Department of Treasury regulations (“Treasury Regulations”) promulgated thereunder and rulings issued by the Internal Revenue Service, and, thus, to the extent provided in those rules, from time to time shall include, without limitation, (a) direct and indirect ownership (e.g., a holding company would be considered to beneficially own all Blockbuster Stock or Options to acquire Blockbuster Stock owned or acquired by its subsidiaries), (b) ownership by a holder’s family members and any group of persons acting pursuant to a formal or informal understanding to make a coordinated acquisition of Blockbuster Stock or Options to acquire Blockbuster Stock, and (c) in certain cases, the creation or issuance of an Option or ownership of an Option to acquire Blockbuster Stock.

(iii) Option. An “Option” to acquire Blockbuster Stock includes any contingent purchase, warrant, convertible debt, put, stock subject to risk of forfeiture, contract to acquire stock, or similar interest regardless of whether it is contingent or otherwise not currently exerciseable. For the avoidance of doubt, by operation of the definition of beneficial ownership, an owner of an Option to acquire Blockbuster Stock may be treated as the owner of such Blockbuster Stock.

US_ACTIVE:\43444125\19\27258.0004 14

(iv) Entity. “Entity” has the meaning given to it in Treasury Regulations section 1.382-3(a) and shall include persons acting pursuant to a formal or informal understanding among themselves to make a coordinated acquisition.

(8) Non-Compliance with the Trading Procedures.

(i) Any purchase, sale, or other transfer of Blockbuster Stockin violation of the procedures set forth herein shall be null and void and shall confer no rights on the transferee.

(9) Debtor’s Right to Waive.

(i) The Debtors may waive, in writing, any and all restrictions, stays, and notification procedures contained in this Motion.

VI.

BASIS FOR RELIEF REQUESTED

A. The Tax Attributes, As Property Of These Debtors’ Estates, Should Be Preserved For Purposes Of The Debtors’ Business Reorganization

22. Section 362(a) of the Bankruptcy Code operates as a stay of, among other

things, “any act to obtain possession of property of the estate or of property from the estate or to

exercise control over property of the estate.” 11 U.S.C. § 362(a)(3). Accordingly, “where a non-

debtor’s action with respect to an interest that is intertwined with that of a bankrupt debtor would

have the legal effect of diminishing or eliminating property of the bankrupt estate, such action is

barred by the automatic stay.” Official Committee of Unsecured Creditors v. PSS Steamship Co.

(In re Prudential Lines Inc.), 982 F.2d 565 (2d Cir. 1991), cert. denied, 502 U.S. 821 (1991).

23. It is well established that a debtor’s NOLs are property of the debtor’s

estate that are protected by section 362 of the Bankruptcy Code. See Nisselson v. Drew Indus.,

Inc. (In re White Metal Rolling & Stamping Corp.), 222 B.R. 417, 424 (Bankr. S.D.N.Y. 1998)

(“It is beyond peradventure that NOL carrybacks and carryovers are property of the estate of the

loss corporation that generated them.”). The United States Court of Appeals for the Second

US_ACTIVE:\43444125\19\27258.0004 15

Circuit, in its seminal Prudential Lines decision, affirmed the application of the automatic stay

and upheld a permanent injunction against a parent corporation from taking a worthless stock

deduction for the stock of its debtor subsidiary because doing so would have adversely affected

the subsidiary’s ability to use its NOLs under the special relief provisions of section 382 of the

Tax Code. Prudential Lines, 928 F.2d 565. In Prudential Lines, the Second Circuit stated:

Including NOL carryforwards as property of a corporate debtor’s estate is consistent with Congress’ intention to bring anything of value that the debtors have into the estate. Moreover, [a] paramount and important goal of Chapter 11 is the rehabilitation of the debtor by offering breathing space and an opportunity to rehabilitate its business and eventually generate revenue. Including the right to a NOL carryforward as property of [the debtor’s] bankruptcy estate furthers the purpose of facilitating the reorganization of [the debtor].

Id. at 573 (internal citations and quotations omitted); see also In re Fruehauf Trailer Corp., 444

F.3d 203, 211 (3d Cir. 2006) (“Property of the estate ‘includes all interests, such as . . .

contingent interests and future interests, whether or not transferable by the debtor.’”) (quoting

Prudential Lines, 928 F.2d at 572); Gibson v. United States (In re Russell), 927 F.2d 413, 417

(8th Cir. 1991) (concluding the “right to carry forward the [debtor’s] NOLs” was a “property

interest” of the estate); In re Delta Air Lines, Inc., Ch. 11 Case No. 05-17923 (PCB) (Bankr.

S.D.N.Y. Dec. 20, 2005) [Docket No. 1640] (finding that tax credit carryforwards were property

of the debtors’ estates and approving notification procedures and restrictions on certain transfers

of claims against and interests in the debtors to protect, among other things, $346 million in non-

NOL tax credits); In re Enron Corp., Case No. 01-16034 (AJG) (Bankr. S.D.N.Y. April 24,

2003) [Docket No. 10436] (holding same).

24. In Prudential Lines, the parent corporation’s interest in its worthless stock

deduction was intertwined with the debtor’s NOLs. The Second Circuit determined that if the

parent was permitted to take a worthless stock deduction, it would have an adverse impact on the

US_ACTIVE:\43444125\19\27258.0004 16

debtor subsidiary’s ability to carry forward its NOL. Therefore, the Second Circuit held that,

“despite the fact that the [parent corporation’s] action was not directed specifically at [the debtor

subsidiary], it was barred by the automatic stay as an attempt to exercise control over property of

the estate.” Prudential Lines, 928 F.2d at 574. The Second Circuit also held that the permanent

injunction was supported by the Bankruptcy Court’s equitable powers pursuant to section 105(a)

of the Bankruptcy Code, which authorizes the court to “issue any order, process, or judgment

that is necessary or appropriate to carry out the provisions of” the Bankruptcy Code. Id.; see

also 11 U.S.C. § 105(a). Because the NOLs were valuable assets of the debtor, the Second

Circuit refused to disturb the Bankruptcy Court’s determination that elimination of the right to

apply its NOLs to offset income on future tax returns would impede the debtor’s reorganization.

Prudential Lines, 928 F.2d at 574.

25. Similarly, in In re Phar-Mor, Inc., 152 B.R. 924 (Bankr. N.D. Ohio 1993),

chapter 11 debtors moved to prohibit the transfer of their stock that could have an adverse effect

on their ability to use NOLs. The court held that the NOLs qualified as property of the estate and

issued an injunctive order and enforced the automatic stay, thereby protecting the assets of the

debtors’ estates. Significantly, the court granted the relief requested even though the

stockholders did not state any intent to sell their stock and even though the debtors did not show

that a sale was pending that would trigger the prescribed change in ownership under section 382

of the Tax Code. Id. at 927. Despite the “ethereal” nature of the situation, the court observed

that “[w]hat is certain is that the NOL has a potential value, as yet undetermined, which will be

of benefit to creditors and will assist the Debtor in its reorganization process. This asset is

entitled to protection while the Debtor moves forward toward reorganization.” Id. (emphasis

US_ACTIVE:\43444125\19\27258.0004 17

added). The court also concluded that, because the debtors were seeking to enforce the stay, they

did not have to meet the more stringent requirements for preliminary injunctive relief:

The requirements for enforcing an automatic stay under 11 U.S.C. § 362(a)(3) do not involve such factors as lack of an adequate remedy at law, or irreparable injury, or loss and a likelihood of success on the merits. The key elements for a stay . . . are the existence of property of the estate and the enjoining of all effortsby others to obtain possession or control of property of the estate.

Id. at 926 (quoting In re Golden Distribs., Inc., 122 B.R. 15, 19 (Bankr. S.D.N.Y. 1990)).

26. In summary, it is well established by courts in this Circuit, as well as other

Circuits, that the automatic stay under section 362(a)(3) of the Bankruptcy Code enjoins actions

that would adversely affect a debtor’s NOLs and other tax attributes. These actions, including

the trading of stock in a debtor, may be determined to be null and void ab initio.2 See e.g., In re

Finlay Enters., Inc., et al., Ch. 11 Case No. 09-14873 (JMP) (Bankr. S.D.N.Y. Sept. 3, 2009)

[Docket No. 192]; In re General Motors Corp., et al., Ch. 11 Case No. 09-50026 (REG) (Bankr.

S.D.N.Y. June 2, 2009) [Docket No. 286]; In re BearingPoint, Inc., et al., Ch. 11 Case No. 09-

10691 (REG) (Bankr. S.D.N.Y. May 12, 2009) [Docket No. 670]; In re Northwest Airlines

Corp., Ch. 11, Case No. 05-17930 (ALG) (Bankr. S.D.N.Y. Oct. 28, 2005) [Docket No. 836]; In

re Delta Air Lines, Inc., Ch. 11 Case No. 05-17923 (PCB) (Bankr. S.D.N.Y. Dec. 20, 2005)

[Docket No. 1640].

B. The Proposed Procedures are Necessary and In the Best Interests of the Debtors in These Chapter 11 Cases

27. The proposed procedures are necessary to preserve the Debtors’ ability to

use the Tax Attributes, while providing latitude for trading in interests below specified levels.

The Debtors’ ability to preserve the Tax Attributes may be seriously jeopardized unless

2 Because of the voluminous nature of the unreported orders cited herein, such orders are not annexed

to the Motion. Copies of these orders are available upon request of Debtors’ counsel.

US_ACTIVE:\43444125\19\27258.0004 18

procedures are established to ensure that trading in and conversion of certain interests in

Blockbuster are either precluded or closely monitored and made subject to Court approval.

However, the Debtors recognize that some trading in Blockbuster Stock may not, under certain

circumstances, pose a serious risk to the Debtors’ Tax Attributes, and thus the Debtors preserve

the ability to waive, in writing, in appropriate circumstances, any and all restrictions, stays, and

notification procedures contained in this Motion.

28. Absent an ownership change under section 382 of the Tax Code prior to

the effective date of a chapter 11 plan of reorganization, the Debtors will likely be able to use a

portion of their Tax Attributes that would otherwise be subject to severe limitation upon such a

change to offset future income and eliminate significant income tax liability. Thus, the Tax

Attributes are valuable assets of the Debtors’ estates and are entitled to the protection of the

automatic stay, and the exercise of this Court’s equitable powers under section 105(a) is

appropriate.

29. The proposed restrictions and notice procedures are necessary to preserve

the Debtors’ potential ability to use the Tax Attributes, which may be valuable assets of the

Debtors’ estates. The Debtors’ ability to meet the requirements of the tax laws to preserve the

Tax Attributes may be seriously jeopardized unless procedures and restrictions are established

immediately to ensure that trading in and conversion of Blockbuster Stock is either curtailed or

closely monitored. The Debtors recognize that some trading in Blockbuster Stock may not pose

a serious risk to the Tax Attributes, and thus, they generally seek to impose only an advance

notice and objection procedure and limit the relief sought to transactions implicating a holder of

Blockbuster stock that is or seeks to become, or cease to be, a Substantial Equity Holder.

US_ACTIVE:\43444125\19\27258.0004 19

30. Depending on the circumstances (including asset sales and potential

changes in the value of any retained assets), the Tax Attributes may be valuable assets of the

Debtors’ estates and are entitled to the protection of the automatic stay. The exercise of this

Court’s equitable powers under section 105(a) of the Bankruptcy Code is appropriate.

31. The relief requested is narrowly tailored to permit certain stock trading to

continue, subject to applicable securities, corporate, and other laws. The Debtors are hereby

seeking only to enforce the provisions of the automatic stay in connection with certain types of

stock trading and conversions that pose a serious risk under the ownership change tests and to

monitor (with limited circumspections) other types of trading that potentially pose a serious risk.

The proposed restrictions on trading are crucial because once an interest is acquired, the

acquisition might not be reversible for tax purposes absent such restrictions. Once a transfer acts

to limit the Debtors’ ability to use the Tax Attributes under section 382 or section 383 of the Tax

Code, such ability may be permanently lost. The relief requested is, therefore, necessary to

prevent an irrevocable loss of the Debtors’ use of the Tax Attributes.

32. It is in the best interests of the Debtors to restrict stock trading and

conversions that could result in an ownership change under section 382 of the Tax Code during

the pendency of the bankruptcy case. This permits the use of the Tax Attributes, if needed, to

offset gain or other income recognized in connection with the Debtors’ ownership of their assets

and asset sales. If an ownership change were to occur prior to the recognition of any such gain

or income, the Tax Attributes may be unavailable due to the annual limitation imposed by

section 382 and section 383 of the Tax Code.

C. The Interim Approval Should Be Granted.

33. The granting of interim approval will benefit the Debtors in these chapter

11 cases by preventing the loss of the Tax Attributes pending determination of final approval of

US_ACTIVE:\43444125\19\27258.0004 20

the requested procedures while allowing holders of Blockbuster Stock and other parties in

interest ample time to consider the proposed procedures. Absent granting the interim relief

requested herein, the Debtors may be irreparably harmed by the mere filing of this Motion. If

the Debtors filed this Motion in accordance with the usual notice procedures set forth in the

applicable Bankruptcy Rules and Local Rules, it is possible that a flurry of equity trading and

conversions would immediately follow. Parties holding Blockbuster Stock may rush to transfer

their interests in Blockbuster before any prohibition on trading is approved by this Court. Such

trading would put the Debtors’ Tax Attributes in jeopardy and would thereby be

counterproductive to the Debtors’ objectives in seeking the relief requested herein. Accordingly,

it is requested that the procedures described herein be approved on an interim basis and that a

hearing be scheduled to consider the entry of the Final Order.

34. Within three (3) business days of the entry of the Interim Order, the

Debtors propose to send the Interim Procedures Notice describing the authorized trading

restrictions and notification requirements to: (i) the Office of the United States Trustee for the

Southern District of New York (Attn: Brian Masumoto, Esq.); (ii) those creditors holding the

fifty largest unsecured claims against the Debtors’ estates; (iii) Sheppard, Mullin, Richter &

Hampton LLP, the attorneys for U.S. Bank National Association, as trustee under that certain

indenture agreement, dated as of October 1, 2009, with respect to the 11.75% Senior Secured

Notes due 2014 issued by Blockbuster Inc. (Attn: Kyle J. Mathews, Esq.); (iv) The Bank of New

York Trust Company, N.A., as trustee under that certain indenture agreement, dated as of August

20, 2004, with respect to the 9% Senior Subordinated Notes due 2012 issued by Blockbuster Inc.

(Attn: Corporate Trust); (v) Sidley Austin LLP, attorneys for the lenders under the proposed

Debtor in Possession Revolving Credit Agreement (the “DIP Facility”) (Attn: James Seery,

US_ACTIVE:\43444125\19\27258.0004 21

Esq.); (vi) Wilmington Trust FSB as Agent under the DIP Facility (Attn: Joshua G. James); (vii)

Skadden, Arps, Slate, Meagher & Flom LLP, the attorneys for Wilmington Trust FSB as Agent

under the DIP Facility (Attn: Peter J. Neckles, Esq.); (viii) any person or Entity who has filed

Schedule 13D or Schedule 13G with the SEC since January 1st, 2010 with regard to the

beneficial ownership of Blockbuster Stock; and (ix) any record-holder listed with the transfer

agent for Blockbuster Stock (collectively, the “Notice Parties”). Within three (3) business days

of receipt of the Interim Procedures Notice, any nominee holders shall either provide the

Debtors’ proposed official claims and noticing agent, Kurtzman Carson Consultants LLC, with

the last known names and addresses of their clients who are beneficial owners of Blockbuster

Stock (who will in turn mail the Interim Procedures Notice to the beneficial owners so

identified), or send the Interim Procedures Notice to all beneficial holders of Blockbuster Stock

known to the nominee holder. The Debtors also propose to publish the Interim Procedures

Notice on the Bloomberg newswire service and in the national editions of The Wall Street

Journal, The New York Times, and The Dallas Morning News, and post such Interim Procedures

Notice on the website of the Debtors’ proposed official notice and claims agent, Kurtzman

Carson Consultants LLC, at www.kccllc.net/blockbuster.

35. The Interim Procedures Notice will provide that the deadline to file an

objection (“Objection”) to the Motion shall be 4:00 p.m. (prevailing Eastern Time) seven (7)

business days prior to the date of the hearing to consider, on a final basis, the relief requested in

the Motion. An Objection shall be considered timely if it is (i) filed with the United States

Bankruptcy Court for the Southern District of New York, One Bowling Green, New York, New

York 10004 and (ii) actually received by (a) the Debtors, c/o Blockbuster Inc., 1201 Elm Street,

Dallas, Texas 75270 (Attn: Rod McDonald); (b) Weil, Gotshal & Manges LLP, attorneys for the

US_ACTIVE:\43444125\19\27258.0004 22

Debtors, 767 Fifth Avenue, New York, New York 10153 (Attn: Stephen Karotkin, Esq); and (c)

the Office of the United States Trustee for the Southern District of New York, 33 Whitehall

Street, 21st Floor, New York, New York 10004 (Attn: Brian Masumoto, Esq.).

36. Unless otherwise ordered by the Court, a reply to an Objection may be

filed with the Court and served on or before 4:00 p.m. (prevailing Eastern Time) no later than

three (3) business days before the date of the hearing to consider the Final Order.

37. If no Objections are timely filed and served, as set forth herein, the

Debtors shall, on or after the Objection Deadline, submit to the Court the proposed Final Order,

which Final Order shall be submitted and may be entered with no further notice or opportunity to

be heard afforded to any party. If an Objection is timely filed, a hearing will be held at the U.S.

Bankruptcy Court for the Southern District of New York, One Bowling Green, New York, New

York 10004, at least twenty (21) days after service of the Interim Procedures Notice.

38. Until the Court enters a Final Order, any acquisition, disposition, or

conversion of Blockbuster Stock as of the date of the Motion in violation of the procedures set

forth above shall be null and void ab initio as an act in violation of the automatic stay prescribed

by section 362 of the Bankruptcy Code and pursuant to this Court’s equitable power prescribed

in section 105(a) of the Bankruptcy Code.

39. Following entry of the Final Order, the Final Procedures Notice, as may be

revised pursuant to an order of the Court or otherwise agreed to by the Debtors in settlement of

an objection, describing the authorized trading and conversion restrictions and notification

requirements will be sent to the Notice Parties. Upon receipt of the Final Procedures Notice, any

nominee holders, who have not done so already, shall either provide the Debtors’ proposed

official claims and noticing agent, Kurtzman Carson Consultants LLC, with the last known

US_ACTIVE:\43444125\19\27258.0004 23

names and addresses of their clients who are beneficial owners of Blockbuster Stock (who will,

in turn, mail the Final Procedures Notice to the beneficial owners so identified), or send the Final

Procedures Notice to all beneficial holders of Blockbuster Stock known to the nominee holder.

The Final Procedures Notice will be posted on the Bloomberg newswire service and in the

national editions of The Wall Street Journal, The New York Times, and The Dallas Morning

News, and on the website of the Debtors’ proposed official claims and noticing agent, Kurtzman

Carson Consultants, at www.kccllc.net/blockbuster.

40. The Debtors submit that the foregoing notice constitutes a sufficient and

cost-effective way of providing notice of the interim and final procedures described herein. The

foregoing notice procedures satisfy due process and the strictures of Bankruptcy Rule 9014 by

providing the counterparties with notice and an opportunity to object and be heard at a hearing.

See, e.g., Harada v. DBL Liquidating Trust (In re Drexel Burnham Lambert Group, Inc.), 160

B.R. 729, 733 (S.D.N.Y. 1993) (indicating that opportunity to present objections satisfies due

process); see also Atamian v. U.S. Dep’t of Educ. (In re Atamian), 368 B.R. 375, 378 (Bankr. D.

Del. 2007) (“Rule 9014 does not require a hearing, only an opportunity for a hearing.”), aff’d,

2008 WL 853462 (D. Del. Mar. 31, 2008), aff’d, 2008 WL 5007392 (3d Cir. Nov. 26, 2008).

Furthermore, the proposed notice procedures protect the due process rights of the parties in

interest without unnecessarily exposing the Debtors’ estates to unwarranted administrative

expenses. Similar notice and objection procedures have been approved in many other large

chapter 11 cases in this District. See, e.g., In re Finlay Enters., Inc., et al., Ch. 11 Case No. 09-

14873 (JMP) (Bankr. S.D.N.Y. Sept. 3, 2009) [Docket No. 192]; In re General Motors Corp., et

al., Ch. 11 Case No. 09-50026 (REG) (Bankr. S.D.N.Y. June 2, 2009) [Docket No. 286]; In re

BearingPoint, Inc., et al., Ch. 11 Case No. 09-10691 (REG) (Bankr. S.D.N.Y. May 12, 2009)

US_ACTIVE:\43444125\19\27258.0004 24

[Docket No. 670]; In re Loral Space & Commc’ns Ltd., et al., Case No. 03-41710 (RDD)

(Bankr. S.D.N.Y. Aug. 11, 2003) [Docket No. 129].

VII.

NOTICE

41. No trustee or examiner has been appointed in these chapter 11 cases. The

Debtors have served notice of this Motion on: (i) the Office of the United States Trustee for the

Southern District of New York (Attn: Brian Masumoto, Esq.); (ii) those creditors holding the

fifty largest unsecured claims against the Debtors’ estates; (iii) Sheppard, Mullin, Richter &

Hampton LLP, the attorneys for U.S. Bank National Association, as trustee under that certain

indenture agreement, dated as of October 1, 2009, with respect to the 11.75% Senior Secured

Notes due 2014 issued by Blockbuster Inc. (Attn: Kyle J. Mathews, Esq.); (iv) The Bank of New

York Trust Company, N.A., as trustee under that certain indenture agreement, dated as of August

20, 2004, with respect to the 9% Senior Subordinated Notes due 2012 issued by Blockbuster Inc.

(Attn: Corporate Trust); (v) Sidley Austin LLP, attorneys for the lenders under the proposed

Debtor in Possession Revolving Credit Agreement (the "DIP Facility") (Attn: James Seery,

Esq.); (vi) Wilmington Trust FSB as Agent (the “Agent”) under the DIP Facility (Attn: Joshua

G. James); (vii) Skadden, Arps, Slate, Meagher & Flom LLP, the attorneys for the Agent (Attn:

Peter J. Neckles, Esq.) (collectively, the “Notice Parties”). The Debtors submit that no other or

further notice need be provided.

42. No previous request for the relief sought herein has been made by the

Debtors to this or any other court.

US_ACTIVE:\43444125\19\27258.0004 25

WHEREFORE the Debtors respectfully request that the Court grant the relief

requested herein and such other and further relief as it deems just and proper.

Dated: September 23, 2010New York, New York

/s/ Stephen Karotkin________________________Stephen Karotkin WEIL, GOTSHAL & MANGES LLP767 Fifth AvenueNew York, New York 10153Telephone: (212) 310-8000Facsimile: (212) 310-8007

and

Martin A. Sosland (pro hac vice admission pending)WEIL, GOTSHAL & MANGES LLP200 Crescent Court, Suite 300Dallas, Texas 75201Telephone: (214) 746-7700Facsimile: (214) 746-7700

US_ACTIVE:\43444125\19\27258.0004

Exhibit A

Interim Procedures Notice

US_ACTIVE:\43444125\19\27258.0004

UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK---------------------------------------------------------------x

:In re : Chapter 11

:BLOCKBUSTER INC., et al.,1 : Case No. 10-_____ (_____)

:: (Jointly Administered)

Debtors. :---------------------------------------------------------------x

NOTICE OF INTERIM ORDER ESTABLISHING NOTIFICATION

PROCEDURES AND APPROVING RESTRICTIONS ON CERTAINTRANSFERS AND CONVERSIONS OF INTERESTS IN THE DEBTORS’ ESTATES

TO ALL PERSONS OR ENTITIES WITH EQUITY INTERESTS IN BLOCKBUSTER INC.:2

PLEASE TAKE NOTICE that on September 23, 2010 (the “Commencement Date”), Blockbuster Digital Technologies Inc., its parent, Blockbuster Inc. (“Blockbuster”), and its debtor affiliates, as debtors and debtors in possession (collectively, the “Debtors”)commenced a voluntary case under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”). Section 362(a) of the Bankruptcy Code operates as a stay of any act to obtain possession of property of the Debtors’ estates or to exercise control over property of the Debtors’ estates.

PLEASE TAKE FURTHER NOTICE that on , 2010, the United States Bankruptcy Court for the Southern District of New York (the “Court”), having jurisdiction over these chapter 11 cases, upon motion of the Debtors (the “Motion”), entered an interim order: (i) finding that the Debtors’ net operating loss carryforwards (“NOLs”), net unrealized built-in losses in their assets (the “Built-in Losses”), and certain other tax and business credits (together with the NOLs and Built-in Losses, the “Tax Attributes”) are property of the Debtors’ estates and are protected by section 362(a) of the Bankruptcy Code; (ii) finding that trading in Blockbuster Inc.’s Series A convertible preferred stock, Class A common stock, or Class B common stock (collectively, the “Blockbuster Stock”) and conversions of Blockbuster

1 The Debtors, together with the last four digits of each Debtor’s federal tax identification number, are:

Blockbuster Inc. (5102); Blockbuster Canada Inc. (1269); Blockbuster Digital Technologies Inc.(9222); Blockbuster Distribution, Inc. (0610); Blockbuster Gift Card, Inc. (1855); Blockbuster Global Services Inc. (3019); Blockbuster International Spain Inc. (7615); Blockbuster Investments LLC (6313); Blockbuster Procurement LP (2546); Blockbuster Video Italy, Inc (5068); Movielink, LLC (5575); Trading Zone Inc. (8588); and B2 LLC (5219).

2 All capitalized terms not expressly defined herein shall have the meaning ascribed to them in the Motion.

US_ACTIVE:\43444125\19\27258.0004 2

Inc.’s Series A convertible preferred stock could severely limit the Debtors’ ability to use the Tax Attributes for purposes of title 26 of the United States Code (the “Tax Code”); and (iii) approving the procedures set forth herein to preserve the Tax Attributes pursuant to sections 105(a) and 362(a) of the Bankruptcy Code (the “Interim Order”). ANY ACQUISITION, DISPOSITION, OTHER TRANSFER, OR CONVERSION IN VIOLATION OF THERESTRICTIONS SET FORTH BELOW SHALL BE NULL AND VOID AB INITIO AS AN ACT IN VIOLATION OF THE AUTOMATIC STAY UNDER SECTIONS 105(A) AND 362 OF THE BANKRUPTCY CODE.

PLEASE TAKE FURTHER NOTICE that the following procedures and restrictions have been approved by the Bankruptcy Court and shall apply to holding, trading, and converting BLOCKBUSTER STOCK:

A. Blockbuster Stock Ownership, Acquisition, and Disposition

1. Notice of Substantial Blockbuster Stock Ownership. Any person or Entity (as defined herein) that beneficially owns, at any time on or after the Motion Date, Blockbuster Stock in an amount sufficient to qualify such person or Entity as a Substantial Equityholder (as defined herein) shall file with the Court, and serve upon the Debtors and attorneys for the Debtors, a Notice of Substantial Stock Ownership (a “Substantial Equity Ownership Notice”), in the form annexed to the Motion as Exhibit “E,” which describes specifically and in detail the Blockbuster Stock ownership of such person or Entity, on or before the date that is the later of: (a) ten (10) business days after the entry of the Interim Order by the Court, and (b) ten (10) business days after that person or Entity qualifies as a Substantial Equityholder. At the holder’s election, the Substantial Equity Ownership Notice to be filed with the Court (but not such notice served upon the Debtors and the attorneys for the Debtors) may be redacted to exclude such holder’s taxpayer identification number and the number of shares of Blockbuster Stock that such holder beneficially owns.

2. Acquisition of Blockbuster Stock or Options. At least twenty (20)business days prior to the proposed date of any transfer of equity securities (including Options, as hereinafter defined, to acquire such securities) that would result in an increase in the amount of Blockbuster Stock beneficially owned by any person or Entity that currently is or subsequently becomes a Substantial Equityholder or that would result in a person or Entity becoming a Substantial Equityholder (a “Proposed Equity Acquisition Transaction”), such person, Entity, or Substantial Equityholder (a “Proposed Equity Transferee”) shall file with the Court, and serve upon the Debtors and the attorneys for the Debtors, a Notice of Intent to Purchase, Acquire, or Otherwise Accumulate Blockbuster Stock (an “Equity Acquisition Notice”), in the form annexed to the Motion as Exhibit “F,” which describes specifically and in detail the proposed transaction in which Blockbuster Stock is to be acquired. At the holder’s election, the Equity Acquisition Notice that is filed with the Court (but not such notice served upon the Debtors and the attorneys for the Debtors) may be redacted to exclude such holder’s taxpayer identification number and the number of shares of Blockbuster Stock that such holder beneficially owns and proposes to purchase or otherwise acquire.

3. Disposition of Blockbuster Stock or Options. At least twenty (20) business days prior to the proposed date of any transfer or other disposition of equity securities

US_ACTIVE:\43444125\19\27258.0004 3

(including Options to acquire such securities) that would result in a decrease in the amount of Blockbuster Stock beneficially owned by a Substantial Equityholder or that would result in a person or Entity ceasing to be a Substantial Equityholder (a “Proposed Equity Disposition Transaction,” and together with a Proposed Equity Acquisition Transaction, a “Proposed Equity Transaction”), such person, Entity, or Substantial Equityholder (a “Proposed Equity Transferor”) shall file with the Court, and serve upon the Debtors and the attorneys for the Debtors, a Notice of Intent to Sell, Trade, or Otherwise Transfer Blockbuster Stock (an “Equity Disposition Notice,” and together with an Equity Acquisition Notice, an “Equity Trading Notice”), in the form annexed to the Motion as Exhibit “G,” which describes specifically and in detail the proposed transaction in which Blockbuster Stock would be transferred. At the holder’s election, the Equity Disposition Notice that is filed with the Court (but not such notice served upon the Debtors and the attorneys for the Debtors) may be redacted to exclude such holder’s taxpayer identification number and the number of shares of Blockbuster Stock that such holder beneficially owns and proposes to sell or otherwise transfer.

4. No Conversion of Series A Convertible Preferred Stock. During the pendency of the chapter 11 cases, no person or Entity that beneficially owns or acquires Series A convertible preferred stock in Blockbuster Inc. (“Preferred Stock”) shall be permitted to convert shares of such stock to Class A common stock or any other form of equity or ownership interest in the Debtors.

5. Objection Procedures. The Debtors shall have fifteen (15) business days after the filing of an Equity Trading Notice (the “Equity Objection Deadline”) to file with the Court and serve on a Proposed Equity Transferee or a Proposed Equity Transferor, as the case may be, an objection to any proposed transfer of equity securities (including Options to acquire such securities) described in such Equity Trading Notice on the grounds that such transfer may adversely affect the Debtors’ ability to utilize the Tax Attributes (an “Equity Objection”) as a result of an ownership change under section 382 or section 383 of the Tax Code.

a. If the Debtors file an Equity Objection by the Equity Objection Deadline, then the Proposed Equity Transaction shall not be effective unless approved by a finaland nonappealable order of the Court.

b. If the Debtors do not file an Equity Objection by the Equity Objection Deadline, or if the Debtors provide written authorization to the Proposed Equity Transferee or the Proposed Equity Transferor, as the case may be, approving the Proposed Equity Transaction, prior to the Equity Objection Deadline, then such Proposed Equity Transaction may proceed solely as specifically described in the Equity Trading Notice.

c. Any further Proposed Equity Transaction must be the subject of additional notices and the prescribed waiting period as set forth above.

6. Unauthorized Transactions in Blockbuster Stock or Options. Effective as of the date of the filing of the Motion and until further order of the Court to the contrary, any acquisition, disposition, other transfer, or conversion of equity securities (including Options to acquire such securities) of the Debtors in violation of the procedures set forth herein shall be null

US_ACTIVE:\43444125\19\27258.0004 4

and void ab initio as an act in violation of the automatic stay under sections 105(a) and 362 of the Bankruptcy Code.

7. Definitions.

a. Substantial Equityholder. A “Substantial Equityholder” is any person or Entity that beneficially owns (a) 3,420 or more shares of Preferred Stock (representing approximately 4.75% of the number of shares of such stock issued and outstanding), (b) 6,928,414 or more shares of Class A common stock (representing approximately 4.75% of the number of shares of such stock issued and outstanding), or (c) 3,420,000 or more shares of Class B common stock (representing approximately 4.75% of the number of shares of such stockissued and outstanding).

b. Beneficial Ownership. “Beneficial ownership” (or any variation thereof) of Blockbuster Stock or Options to acquire Blockbuster Stock shall be determined in accordance with applicable rules under section 382 of the Tax Code, the U.S. Department of Treasury regulations (“Treasury Regulations”) promulgated thereunder and rulings issued by the Internal Revenue Service, and, thus, to the extent provided in those rules, from time to time shall include, without limitation, (a) direct and indirect ownership (e.g., a holding company would be considered to beneficially own all Blockbuster Stock or Options to acquire Blockbuster Stock owned or acquired by its subsidiaries), (b) ownership by a holder’s family members and any group of persons acting pursuant to a formal or informal understanding to make a coordinated acquisition of Blockbuster Stock or Options to acquire Blockbuster Stock, and (c) in certain cases, the creation or issuance of an Option or ownership of an Option to acquire Blockbuster Stock.

c. Option. An “Option” to acquire Blockbuster Stock includes any contingent purchase, warrant, convertible debt, put, stock subject to risk of forfeiture, contract to acquire stock, or similar interest regardless of whether it is contingent or otherwise not currently exerciseable. For the avoidance of doubt, by operation of the definition of beneficial ownership, an owner of an Option to acquire Blockbuster Stock may be treated as the owner of such Blockbuster Stock.

d. Entity. “Entity” has the meaning given to it in Treasury Regulations section 1.382-3(a) and shall include persons acting pursuant to a formal or informal understanding among themselves to make a coordinated acquisition.

FAILURE TO FOLLOW THE PROCEDURES SET FORTH IN THIS NOTICE WILL CONSTITUTE A VIOLATION OF THE AUTOMATIC STAY PRESCRIBED BY SECTION 362 OF THE BANKRUPTCY CODE.

ANY PROHIBITED ACQUISITION, DISPOSITION, OTHER TRANSFER,OR CONVERSION OF BLOCKBUSTER STOCK IN VIOLATION OF THE INTERIMORDER WILL BE NULL AND VOID AB INITIO AND MAY LEAD TO CONTEMPT, COMPENSATORY DAMAGES, PUNITIVE DAMAGES, OR SANCTIONS BEING IMPOSED BY THE BANKRUPTCY COURT.

US_ACTIVE:\43444125\19\27258.0004 5

THE DEBTORS MAY WAIVE, IN WRITING, ANY AND ALL RESTRICTIONS, STAYS, AND NOTIFICATION PROCEDURES CONTAINED IN THE INTERIM ORDER.

PLEASE TAKE FURTHER NOTICE that any person or entity desirous of acquiring or disposing of an interest restricted by the Interim Order may request relief for cause at any time and the Debtors may oppose such relief.

PLEASE TAKE FURTHER NOTICE that, if timely objections are received, there shall be a hearing held on __________, 2010 at ______ _.m to consider, on a final basis, the relief requested in the Motion. The hearing may be adjourned without notice by an announcement of the adjourned date at the hearing.

PLEASE TAKE FURTHER NOTICE that RESPONSES OR OBJECTIONS, IF ANY, TO THE RELIEF SOUGHT IN THE MOTION SHALL BE FILED with the United States Bankruptcy Court for the Southern District of New York, One Bowling Green, New York, New York 10004 and served upon: (a) the Debtors, c/o Blockbuster Inc., 1201 Elm Street, Dallas, Texas 75270 (Attn: Rod McDonald, Esq.); Weil, Gotshal & Manges LLP, attorneys for the Debtors, 767 Fifth Avenue, New York, New York 10153 (Attn: Stephen Karotkin, Esq. and Martin A. Sosland, Esq.); and (c) the Office of the United States Trustee for the Southern District of New York, 33 Whitehall Street, 21st Floor, New York, New York 10004(Attn: Brian Masumoto, Esq.), SO AS TO BE RECEIVED NO LATER THAN 5:00 P.M. (PREVAILING EASTERN TIME) SEVEN (7) BUSINESS DAYS PRIOR TO THE DATE OF THE HEARING TO CONSIDER, ON A FINAL BASIS, THE RELIEF REQUESTED IN THE MOTION.

PLEASE TAKE FURTHER NOTICE that the requirements set forth in this Notice are in addition to the requirements of Bankruptcy Rule 3001(e) and applicable securities, corporate, and other laws, and do not excuse compliance therewith.

Dated: , 2010New York, New York

_________________________BY ORDER OF THE COURT

US_ACTIVE:\43444125\19\27258.0004

Exhibit B

Final Procedures Notice

US_ACTIVE:\43444125\19\27258.0004

UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK---------------------------------------------------------------x

:In re : Chapter 11

:BLOCKBUSTER INC., et al.,1 : Case No. 10-_____ (__)

:: (Joint Administration Requested)

Debtors. :---------------------------------------------------------------x

NOTICE OF FINAL ORDER ESTABLISHING NOTIFICATION

PROCEDURES AND APPROVING RESTRICTIONS ON CERTAINTRANSFERS AND CONVERSIONS OF INTERESTS IN THE DEBTORS’ ESTATES’

TO ALL PERSONS OR ENTITIES WITH EQUITY INTERESTS IN BLOCKBUSTER INC.:2

PLEASE TAKE NOTICE that on September 23, 2010 (the “Commencement Date”), Blockbuster Digital Technologies Inc., its parent, Blockbuster Inc. (“Blockbuster”), and its debtor affiliates, as debtors and debtors in possession (collectively, the “Debtors”) commenced a voluntary case under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”). Section 362(a) of the Bankruptcy Code operates as a stay of any act to obtain possession of property of the Debtors’ estates or to exercise control over property of the Debtors’ estates.

PLEASE TAKE FURTHER NOTICE that on , 2010, the United States Bankruptcy Court for the Southern District of New York (the “Court”), having jurisdiction over these chapter 11 cases, upon motion of the Debtors (the “Motion”), entered a final order: (i) finding that the Debtors’ net operating loss carryforwards (“NOLs”), net unrealized built-in losses in their assets (the “Built-in Losses”), and certain other tax and business credits (together with the NOLs and Built-in Losses, the “Tax Attributes”) are property of the Debtors’ estates and are protected by section 362(a) of the Bankruptcy Code; (ii) finding that trading in Blockbuster Inc.’s Series A convertible preferred stock, Class A common stock, or Class B common stock (collectively, the “Blockbuster Stock”) and conversion of Blockbuster

1 The Debtors, together with the last four digits of each Debtor’s federal tax identification number, are:

Blockbuster Inc. (5102); Blockbuster Canada Inc. (1269); Blockbuster Digital Technologies Inc.(9222); Blockbuster Distribution, Inc. (0610); Blockbuster Gift Card, Inc. (1855); Blockbuster Global Services Inc. (3019); Blockbuster International Spain Inc. (7615); Blockbuster Investments LLC (6313); Blockbuster Procurement LP (2546); Blockbuster Video Italy, Inc (5068); Movielink, LLC (5575); Trading Zone Inc. (8588); and B2 LLC (5219).

2 All capitalized terms not expressly defined herein shall have the meaning ascribed to them in the Motion.

US_ACTIVE:\43444125\19\27258.0004 2

Inc.’s Series A convertible preferred stock could severely limit the Debtors’ ability to use the Tax Attributes for purposes of title 26 of the United States Code (the “Tax Code”); and (iii) approving the procedures set forth herein to preserve the Tax Attributes pursuant to sections 105(a) and 362(a) of the Bankruptcy Code (the “Final Order”). ANY ACQUISITION, DISPOSITION, OTHER TRANSFER, OR CONVERSION IN VIOLATION OF THERESTRICTIONS SET FORTH BELOW SHALL BE NULL AND VOID AB INITIO AS AN ACT IN VIOLATION OF THE AUTOMATIC STAY UNDER SECTIONS 105(A) AND 362 OF THE BANKRUPTCY CODE.

PLEASE TAKE FURTHER NOTICE that the following procedures and restrictions have been approved by the Bankruptcy Court and shall apply to holding, trading, and converting BLOCKBUSTER STOCK:

A. Blockbuster Stock Ownership, Acquisition, and Disposition

1. Notice of Substantial Blockbuster Stock Ownership. Any person or Entity (as defined herein) that beneficially owns, at any time on or after the Motion Date, Blockbuster Stock in an amount sufficient to qualify such person or Entity as a Substantial Equityholder (as defined herein) shall file with the Court, and serve upon the Debtors and attorneys for the Debtors, a Notice of Substantial Stock Ownership (a “Substantial Equity Ownership Notice”), in the form annexed to the Motion as Exhibit “E,” which describes specifically and in detail the Blockbuster Stock ownership of such person or Entity, on or before the date that is the later of: (a) ten (10) business days after the entry of the Final Order by the Court, and (b) ten (10) business days after that person or Entity qualifies as a Substantial Equityholder. At the holder’s election, the Substantial Equity Ownership Notice to be filed with the Court (but not such notice served upon the Debtors and the attorneys for the Debtors) may be redacted to exclude such holder’s taxpayer identification number and the number of shares of Blockbuster Stock that such holder beneficially owns.

2. Acquisition of Blockbuster Stock or Options. At least twenty (20) business days prior to the proposed date of any transfer of equity securities (including Options, as hereinafter defined, to acquire such securities) that would result in an increase in the amount of Blockbuster Stock beneficially owned by any person or Entity that currently is or subsequently becomes a Substantial Equityholder or that would result in a person or Entity becoming a Substantial Equityholder (a “Proposed Equity Acquisition Transaction”), such person, Entity, or Substantial Equityholder (a “Proposed Equity Transferee”) shall file with the Court, and serve upon the Debtors and the attorneys for the Debtors, a Notice of Intent to Purchase, Acquire, or Otherwise Accumulate Blockbuster Stock (an “Equity Acquisition Notice”), in the form annexed to the Motion as Exhibit “F,” which describes specifically and in detail the proposed transaction in which Blockbuster Stock is to be acquired. At the holder’s election, the Equity Acquisition Notice that is filed with the Court (but not such notice served upon the Debtors and the attorneys for the Debtors) may be redacted to exclude such holder’s taxpayer identification number and the number of shares of Blockbuster Stock that such holder beneficially owns and proposes to purchase or otherwise acquire.

3. Disposition of Blockbuster Stock or Options. At least twenty (20) business days prior to the proposed date of any transfer or other disposition of equity securities

US_ACTIVE:\43444125\19\27258.0004 3

(including Options to acquire such securities) that would result in a decrease in the amount of Blockbuster Stock beneficially owned by a Substantial Equityholder or that would result in a person or Entity ceasing to be a Substantial Equityholder (a “Proposed Equity Disposition Transaction,” and together with a Proposed Equity Acquisition Transaction, a “Proposed Equity Transaction”), such person, Entity, or Substantial Equityholder (a “Proposed Equity Transferor”) shall file with the Court, and serve upon the Debtors and the attorneys for the Debtors, a Notice of Intent to Sell, Trade, or Otherwise Transfer Blockbuster Stock (an “Equity Disposition Notice,” and together with an Equity Acquisition Notice, an “Equity Trading Notice”), in the form annexed to the Motion as Exhibit “G,” which describes specifically and in detail the proposed transaction in which Blockbuster Stock would be transferred. At the holder’s election, the Equity Disposition Notice that is filed with the Court (but not such notice served upon the Debtors and the attorneys for the Debtors) may be redacted to exclude such holder’s taxpayer identification number and the number of shares of Blockbuster Stock that such holder beneficially owns and proposes to sell or otherwise transfer.

4. No Conversion of Series A Convertible Preferred Stock. During the pendency of the chapter 11 cases, no person or Entity that beneficially owns or acquires Series A convertible preferred stock in Blockbuster Inc. (“Preferred Stock”) shall be permitted to convert shares of such stock to Class A common stock or any other form of equity or ownership interest in the Debtors.

5. Objection Procedures. The Debtors shall have fifteen (15) business days after the filing of an Equity Trading Notice (the “Equity Objection Deadline”) to file with the Court and serve on a Proposed Equity Transferee or a Proposed Equity Transferor, as the case may be, an objection to any proposed transfer of equity securities (including Options to acquire such securities) described in such Equity Trading Notice on the grounds that such transfer may adversely affect the Debtors’ ability to utilize the Tax Attributes (an “Equity Objection”) as a result of an ownership change under section 382 or section 383 of the Tax Code.

a. If the Debtors file an Equity Objection by the Equity Objection Deadline, then the Proposed Equity Transaction shall not be effective unless approved by a final and nonappealable order of the Court.

b. If the Debtors do not file an Equity Objection by the Equity Objection Deadline, or if the Debtors provide written authorization to the Proposed Equity Transferee or the Proposed Equity Transferor, as the case may be, approving the Proposed Equity Transaction, prior to the Equity Objection Deadline, then such Proposed Equity Transaction may proceed solely as specifically described in the Equity Trading Notice.

c. Any further Proposed Equity Transaction must be the subject of additional notices and the prescribed waiting period as set forth above.

6. Unauthorized Transactions in Blockbuster Stock or Options. Effective as of the date of the filing of the Motion and until further order of the Court to the contrary, any acquisition, disposition, other transfer, or conversion of equity securities (including Options to acquire such securities) of the Debtors in violation of the procedures set forth herein shall be null

US_ACTIVE:\43444125\19\27258.0004 4

and void ab initio as an act in violation of the automatic stay under sections 105(a) and 362 of the Bankruptcy Code.

7. Definitions.

a. Substantial Equityholder. A “Substantial Equityholder” is any person or Entity that beneficially owns (a) 3,420 or more shares of Preferred Stock (representing approximately 4.75% of the number of shares of such stock issued and outstanding), (b) 6,928,414 or more shares of Class A common stock (representing approximately 4.75% of the number of shares of such stock issued and outstanding), or (c) 3,420,000 or more shares of Class B common stock (representing approximately 4.75% of the number of shares of such stock issued and outstanding).

b. Beneficial Ownership. “Beneficial ownership” (or any variation thereof) of Blockbuster Stock or Options to acquire Blockbuster Stock shall be determined in accordance with applicable rules under section 382 of the Tax Code, the U.S. Department of Treasury regulations (“Treasury Regulations”) promulgated thereunder and rulings issued by the Internal Revenue Service, and, thus, to the extent provided in those rules, from time to time shall include, without limitation, (a) direct and indirect ownership (e.g., a holding company would be considered to beneficially own all Blockbuster Stock or Options to acquire Blockbuster Stock owned or acquired by its subsidiaries), (b) ownership by a holder’s family members and any group of persons acting pursuant to a formal or informal understanding to make a coordinated acquisition of Blockbuster Stock or Options to acquire Blockbuster Stock, and (c) in certain cases, the creation or issuance of an Option, or ownership of an Option to acquire Blockbuster Stock.

c. Option. An “Option” to acquire Blockbuster Stock includes any contingent purchase, warrant, convertible debt, put, stock subject to risk of forfeiture, contract to acquire stock, or similar interest regardless of whether it is contingent or otherwise not currently exerciseable. For the avoidance of doubt, by operation of the definition of beneficial ownership, an owner of an Option to acquire Blockbuster Stock may be treated as the owner of such Blockbuster Stock.

d. Entity. “Entity” has the meaning given to it in Treasury Regulations section 1.382-3(a) and shall include persons acting pursuant to a formal or informal understanding among themselves to make a coordinated acquisition.

FAILURE TO FOLLOW THE PROCEDURES SET FORTH IN THIS NOTICE WILL CONSTITUTE A VIOLATION OF THE AUTOMATIC STAY PRESCRIBED BY SECTION 362 OF THE BANKRUPTCY CODE.

ANY PROHIBITED ACQUISITION, DISPOSITION, OTHER TRANSFER, OR CONVERSION OF BLOCKBUSTER STOCK IN VIOLATION OF THE FINAL ORDER WILL BE NULL AND VOID AB INITIO AND MAY LEAD TO CONTEMPT, COMPENSATORY DAMAGES, PUNITIVE DAMAGES, OR SANCTIONS BEING IMPOSED BY THE BANKRUPTCY COURT.

US_ACTIVE:\43444125\19\27258.0004 5

THE DEBTORS MAY WAIVE, IN WRITING, ANY AND ALL RESTRICTIONS, STAYS, AND NOTIFICATION PROCEDURES CONTAINED IN THE FINAL ORDER.

PLEASE TAKE FURTHER NOTICE that any person or entity desirous of acquiring or disposing of an interest restricted by the proposed Final Order may request relief for cause at any time and the Debtors may oppose such relief.

PLEASE TAKE FURTHER NOTICE that the requirements set forth in this Notice are in addition to the requirements of Bankruptcy Rule 3001(e) and applicable securities, corporate, and other laws, and do not excuse compliance therewith.

Dated: , 2010New York, New York

______________________________________BY ORDER OF THE COURT

US_ACTIVE:\43444125\19\27258.0004

Exhibit C

Proposed Interim Order

US_ACTIVE:\43444125\19\27258.0004

UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK---------------------------------------------------------------x

:In re : Chapter 11

:BLOCKBUSTER INC., et al.,1 : Case No. 10-_____ (__)

:: (Joint Administration Requested)

Debtors. :---------------------------------------------------------------x

INTERIM ORDER PURSUANT TO 11 U.S.C. §§ 105(a)AND 362 (I) ESTABLISHING NOTIFICATION PROCEDURES, AND(II) APPROVING RESTRICTIONS ON CERTAIN TRANSFERS AND

CONVERSIONS OF EQUITY INTERESTS IN THE DEBTORS’ ESTATESEFFECTIVE NUNC PRO TUNC TO THE COMMENCEMENT DATE

Upon the Motion,2 dated September 23, 2010 (the “Motion Date”) of Blockbuster

Digital Technologies Inc., its parent Blockbuster Inc. (“Blockbuster”), and its debtor affiliates,

as debtors and debtors in possession (collectively, the “Debtors”), pursuant to sections 105(a)

and 362 of The Bankruptcy Code, seeking (a) the establishment of notification procedures and

(b) the approval of restrictions on certain transfers or conversions of certain equity interests in

the Debtors’ estates; and this Court having jurisdiction to consider the Motion and the relief

requested therein pursuant to 28 U.S.C. §§ 157 and 1334; and consideration of the Motion and

the relief requested being a core proceeding pursuant to 28 U.S.C. § 157(b); and venue being

proper before this Court pursuant to 28 U.S.C. §§ 1408 and 1409; and the Debtors having

1 The Debtors, together with the last four digits of each Debtor’s federal tax identification number, are:

Blockbuster Inc. (5102); Blockbuster Canada Inc. (1269); Blockbuster Digital Technologies Inc.(9222); Blockbuster Distribution, Inc. (0610); Blockbuster Gift Card, Inc. (1855); Blockbuster Global Services Inc. (3019); Blockbuster International Spain Inc. (7615); Blockbuster Investments LLC (6313); Blockbuster Procurement LP (2546); Blockbuster Video Italy, Inc (5068); Movielink, LLC (5575); Trading Zone Inc. (8588); and B2 LLC (5219).

2 All capitalized terms not expressly defined herein shall have the meaning ascribed to them in the Motion.

US_ACTIVE:\43444125\19\27258.0004 2

provided notice of the Motion to the Notice Parties; and all of the proceedings before this Court,

this Court finds and determines that the requested relief is in the best interests of the Debtors, the

Debtors’ estates, creditors, and all parties in interest; the Debtors have provided due and proper

notice of the Motion and no further notice is necessary; the legal and factual bases set forth in the

Motion establish just and sufficient cause to grant the requested relief herein; IT IS HEREBY

FOUND THAT:

1. The Debtors’ net operating tax loss carryforwards, net unrealized built-in

losses in their assets, and certain other tax and business credits (collectively, the “Tax

Attributes”) are property of the Debtors’ estates and are protected by the automatic stay

prescribed in section 362 of the Bankruptcy Code.

2. Unrestricted trading and conversion of certain equity interests in the

Debtors before the Debtors’ emergence from chapter 11 could severely limit the Debtors’ ability

to utilize their Tax Attributes for purposes of title 26 of the United States Code (the “Tax

Code”).

3. The notification procedures and restrictions on certain transfers and

conversions of Series A convertible preferred stock, Class A common stock, and Class B

common stock of Blockbuster Inc. (collectively, “Blockbuster Stock”) are necessary and proper

to preserve the Tax Attributes and are therefore in the best interests of the Debtors, their estates,

and all parties in interest.

4. The relief requested in the Motion is authorized under sections 105(a) and

362 of the Bankruptcy Code.

THEREFORE, IT IS ORDERED THAT:

1. The Motion is granted on an interim basis.

US_ACTIVE:\43444125\19\27258.0004 3

2. Until further order of this Court to the contrary, any acquisitions,

dispositions, trading, or conversions in violation of the restrictions set forth herein shall be null

and void ab initio as an act in violation of the automatic stay prescribed in section 362 of the

Bankruptcy Code and pursuant to this Court’s equitable power prescribed in section 105(a) of the

Bankruptcy Code.

3. The following procedures and restrictions shall apply to trading in, and

conversions of, Blockbuster Stock and are approved:

Blockbuster Stock Ownership, Acquisition, and Disposition

a. Notice of Substantial Blockbuster Stock Ownership. Any person or Entity (as defined herein) that beneficially owns, at any time on or after the Motion Date, Blockbuster Stock in an amount sufficient to qualify such person or Entity as a Substantial Equityholder (as defined herein) shall file with the Court, and serve upon the Debtors and attorneys for the Debtors, a Notice of Substantial Stock Ownership (a “Substantial Equity Ownership Notice”), in the form annexed hereto as Exhibit “A”, which describes specifically and in detail the Blockbuster Stock ownership of such person or Entity, on or before the date that is the later of: (a) ten (10) business days after the entry of the Interim Order by the Court, and (b) ten (10) business days after that person or Entity qualifies as a Substantial Equityholder. At the holder’s election, the Substantial Equity Ownership Notice to be filed with the Court (but not such notice served upon the Debtors and the attorneys for the Debtors) may be redacted to exclude such holder’s taxpayer identification number and the number of shares of Blockbuster Stock that such holder beneficially owns.

b. Acquisition of Blockbuster Stock or Options. At least twenty (20) business days prior to the proposed date of any transfer of equity securities (including Options, as hereinafter defined, to acquire such securities) that would result in an increase in the amount of Blockbuster Stock beneficially owned by any person or Entity that currently is or subsequently becomes a Substantial Equityholder or that would result in a person or Entity becoming a Substantial Equityholder (a “Proposed Equity Acquisition Transaction”), such person, Entity, or Substantial Equityholder (a “Proposed Equity Transferee”) shall file with the Court, and serve upon the Debtors and the attorneys for the Debtors, a Notice of Intent to Purchase, Acquire, or Otherwise Accumulate Blockbuster Stock (an “Equity Acquisition Notice”), in the form annexed hereto as Exhibit “B”, which describes specifically and in detail the proposed transaction in which Blockbuster Stock is to be acquired. At the holder’s election, the Equity Acquisition Notice that is filed with the Court (but not such notice served upon the Debtors and the attorneys for the Debtors) may be redacted to exclude such holder’s taxpayer identification number and the number of shares of Blockbuster Stock that such holder beneficially owns and proposes to purchase or otherwise acquire.

US_ACTIVE:\43444125\19\27258.0004 4

c. Disposition of Blockbuster Stock or Options. At least twenty (20) business days prior to the proposed date of any transfer or other disposition of equity securities (including Options to acquire such securities) that would result in a decrease in the amount of Blockbuster Stock beneficially owned by a Substantial Equityholder or that would result in a person or Entity ceasing to be a Substantial Equityholder (a “Proposed Equity Disposition Transaction,” and together with a Proposed Equity Acquisition Transaction, a “Proposed Equity Transaction”), such person, Entity, or Substantial Equityholder (a “Proposed Equity Transferor”) shall file with the Court, and serve upon the Debtors and the attorneys for the Debtors, a Notice of Intent to Sell, Trade, or Otherwise Transfer Blockbuster Stock (an “Equity Disposition Notice,” and together with an Equity Acquisition Notice, an “Equity Trading Notice”), in the form annexed hereto as Exhibit “C”, which describes specifically and in detail the proposed transaction in which Blockbuster Stock would be transferred. At the holder’s election, the Equity Disposition Notice that is filed with the Court (but not such notice served upon the Debtors and the attorneys for the Debtors) may be redacted to exclude such holder’s taxpayer identification number and the number of shares of Blockbuster Stock that such holder beneficially owns and proposes to sell or otherwise transfer.

d. No Conversion of Series A Convertible Preferred Stock. During the pendency of the chapter 11 cases, no person or Entity that beneficially owns or acquires Series A convertible preferred stock in Blockbuster Inc. (“Preferred Stock”) shall be permitted to convert shares of such stock to Class A common stock or any other form of equity or ownership interest in the Debtors.

e. Objection Procedures. The Debtors shall have fifteen (15) business days after the filing of an Equity Trading Notice (the “Equity Objection Deadline”) to file with the Court and serve on a Proposed Equity Transferee or a Proposed Equity Transferor, as the case may be, an objection to any proposed transfer of equity securities (including Options to acquire such securities) described in such Equity Trading Notice on the grounds that such transfer may adversely affect the Debtors’ ability to utilize the Tax Attributes (an “Equity Objection”) as a result of an ownership change under section 382 or section 383 of the Tax Code.

i. If the Debtors file an Equity Objection by the Equity Objection Deadline, then the Proposed Equity Transaction shall not be effective unless approved by a final and nonappealable order of this Court.

ii. If the Debtors do not file an Equity Objection by the Equity Objection Deadline, or if the Debtors provide written authorization to the Proposed Equity Transferee or the Proposed Equity Transferor, as the case may be, approving the Proposed Equity Transaction, prior to the Equity Objection Deadline, then such Proposed Equity Transaction may proceed solely as specifically described in the Equity Trading Notice.

iii. Any further Proposed Equity Transaction must be the subject of additional notices and the prescribed waiting period as set forth above.

f. Unauthorized Transactions in Blockbuster Stock or Options. Effective as of the Motion Date and until further order of the Court to the contrary, any acquisition, disposition, other transfer, or conversion of equity securities (including Options to acquire such

US_ACTIVE:\43444125\19\27258.0004 5

securities) of the Debtors in violation of the procedures set forth herein shall be null and void ab initio as an act in violation of the automatic stay under sections 105(a) and 362 of the Bankruptcy Code.

g. Definitions.

i. Substantial Equityholder. A “Substantial Equityholder” is any person or Entity that beneficially owns (a) 3,420 or more shares of Preferred Stock (representing approximately 4.75% of the number of shares of such stock issued and outstanding), (b) 6,928,414 or more shares of Class A common stock (representing approximately 4.75% of the number of shares of such stock issued and outstanding), or (c) 3,420,000 or more shares of Class B common stock (representing approximately 4.75% of the number of shares of such stockissued and outstanding).

ii. Beneficial Ownership. “Beneficial ownership” (or any variation thereof) of Blockbuster Stock or Options to acquire Blockbuster Stock shall be determined in accordance with applicable rules under section 382 of the Tax Code, the U.S. Department of Treasury regulations (“Treasury Regulations”) promulgated thereunder and rulings issued by the Internal Revenue Service, and, thus, to the extent provided in those rules, from time to time shall include, without limitation, (a) direct and indirect ownership (e.g., a holding company would be considered to beneficially own all Blockbuster Stock or Options to acquire Blockbuster Stock owned or acquired by its subsidiaries), (b) ownership by a holder’s family members and any group of persons acting pursuant to a formal or informal understanding to make a coordinated acquisition of Blockbuster Stock or Options to acquire Blockbuster Stock, and (c) in certain cases, the creation or issuance of an Option or ownership of an Option to acquire Blockbuster Stock.

iii. Option. An “Option” to acquire Blockbuster Stock includes any contingent purchase, warrant, convertible debt, put, stock subject to risk of forfeiture, contract to acquire stock, or similar interest regardless of whether it is contingent or otherwise not currently exerciseable. For the avoidance of doubt, by operation of the definition of beneficial ownership, an owner of an Option to acquire Blockbuster Stock may be treated as the owner of such Blockbuster Stock.

iv. Entity. “Entity” has the meaning given to it in Treasury Regulations section 1.382-3(a) and shall include persons acting pursuant to a formal or informal understanding among themselves to make a coordinated acquisition.

4. Any person or Entity acquiring, disposing of, and/or converting

Blockbuster Stock in violation of the restrictions set forth herein, or failing to comply with the

“Substantial Equity Ownership Notice,” “Equity Acquisition Notice,” or “Equity Disposition

Notice” requirements, as may be the case, shall be subject to such sanctions as this Court may

US_ACTIVE:\43444125\19\27258.0004 6

consider appropriate pursuant to this Court’s equitable power prescribed in section 105(a) of the

Bankruptcy Code.

5. The notices substantially in the form annexed to the Motion as Exhibits E,

F, and G are approved.

6. The Debtors shall serve notice of the entry of this Interim Order

substantially in the form annexed to the Motion as Exhibit B describing the authorized trading

and converting restrictions and notification requirements to: (i) the Office of the United States

Trustee for the Southern District of New York (Attn: Brian Masumoto, Esq.); (ii) those creditors

holding the fifty largest unsecured claims against the Debtors’ estates; (iii) Sheppard, Mullin,

Richter & Hampton LLP, the attorneys for U.S. Bank National Association, as trustee under that

certain indenture agreement, dated as of October 1, 2009, with respect to the 11.75% Senior

Secured Notes due 2014 issued by Blockbuster Inc. (Attn: Kyle J. Mathews, Esq.); (iv) The Bank

of New York Trust Company, N.A., as trustee under that certain indenture agreement, dated as of

August 20, 2004, with respect to the 9% Senior Subordinated Notes due 2012 issued by

Blockbuster Inc. (Attn: Corporate Trust); (v) Sidley Austin LLP, attorneys for the lenders under

the proposed Debtor in Possession Revolving Credit Agreement (the “DIP Facility”) (Attn:

James Seery, Esq.); (vi) Wilmington Trust FSB as Agent under the DIP Facility (Attn: Joshua G.

James); (vii) Skadden, Arps, Slate, Meagher & Flom LLP, the attorneys for Wilmington Trust

FSB as Agent under the DIP Facility (Attn: Peter J. Neckles, Esq.); (viii) any person who has

filed Schedule 13D or Schedule 13G with the SEC since January 1, 2010 with regard to the

beneficial ownership of Blockbuster Stock; and (ix) any transfer agent(s) for Blockbuster Stock

(collectively, the “Notice Parties”). Upon receipt of the Interim Procedures Notice, any transfer

agents shall send the Interim Procedures Notice to all holders of Blockbuster Stock registered

US_ACTIVE:\43444125\19\27258.0004 7

with the transfer agent. Any registered holder shall, in turn, provide the Interim Procedures

Notice to any holder for whose account the registered holder holds Blockbuster Stock. Any

holder shall, in turn, provide the Interim Procedures Notice to any person or entity for whom the

holder holds Blockbuster Stock.

7. The Debtors shall post the Interim Procedures Notice on the website of

their claims and noticing agent, Kurtzman Carson Consultants at www.kccllc.net/blockbuster.

Additionally, the Debtors shall submit a notice of the entry of this Interim Order for publication

on the Bloomberg newswire service and arrange for publication of such notice in national

editions of The Wall Street Journal, The New York Times, and the Dallas Morning News.

8. Nothing herein shall preclude any person or Entity desirous of acquiring

or disposing of any interest from requesting relief from this Interim Order in this Court subject to

the Debtors’ rights to oppose such relief.

9. Notice of the Motion as provided therein shall be deemed good and

sufficient notice of the Motion.

10. Within three (3) business days of the entry of this Interim Order, the

Debtors shall serve a copy of this Interim Order and the Motion on the Notice Parties.

11. Any objection to the relief requested in the Motion must be filed, by _:00

_.m. (prevailing Eastern Time) on __________ (the “Objection Deadline”) with the Court, One

Bowling Green, New York, New York 10004 and (a) actually received by: (i) the Debtors, c/o

Blockbuster Inc., 1201 Elm Street, Dallas, Texas 75270 (Attn: Rod McDonald); (ii) Weil,

Gotshal & Manges LLP, attorneys for the Debtors, 767 Fifth Avenue, New York, New York

10153 (Attn: Stephen Karotkin, Esq.); and (iii) the Office of the United States Trustee for the

US_ACTIVE:\43444125\19\27258.0004 8

Southern District of New York, 33 Whitehall Street, 21st Floor, New York, New York 10004

(Attn: Brian Masumoto, Esq.).

12. If timely Objections are received there shall be a hearing held on _____ at

______ .m. to consider, on a final basis, the relief requested in the Motion.

13. If no Objections are timely filed, served, and received in accordance with

this Interim Order, the Debtors shall submit to this Court a final order granting the relief

requested in the Motion.

14. The requirements set forth in this Interim Order are in addition to the

requirements of Bankruptcy Rule 3001(e), applicable securities, corporate, and other laws, and

do not excuse compliance therewith.

15. The Debtors may waive, in writing, any and all restrictions, stays, and

notification procedures contained in this Interim Order.

16. The relief granted in this Interim Order is intended solely to permit the

Debtors to protect, preserve, and maximize the value of their Tax Attributes. Accordingly,

except to the extent the Interim Order expressly conditions or restricts trading in or conversions

of certain interests in Blockbuster, nothing in this Interim Order or in the Motion shall, or shall

be deemed, to prejudice, impair or otherwise alter or affect the rights of any holders of interests

in Blockbuster, including in connection with the treatment of any such interests under any

chapter 11 plan.

17. This Court shall retain jurisdiction with respect to any matters, claims,

rights or disputes arising from or related to the implementation of this Interim Order.

Dated: ___________, 2010New York, New York

____________________________________UNITED STATES BANKRUPTCY JUDGE

US_ACTIVE:\43444125\19\27258.0004

Exhibit D

Proposed Final Order

US_ACTIVE:\43444125\19\27258.0004

UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK---------------------------------------------------------------x

:In re : Chapter 11

:BLOCKBUSTER INC., et al.,1 : Case No. 10-_____ (__)

:: (Joint Administration Requested)

Debtors. :---------------------------------------------------------------x

FINAL ORDER PURSUANT TO 11 U.S.C. §§ 105(a)AND 362 (I) ESTABLISHING NOTIFICATION PROCEDURES

AND (II) APPROVING RESTRICTIONS ON CERTAIN TRANSFERS ANDCONVERSIONS OF EQUITY INTERESTS IN THE DEBTORS’ ESTATES

Upon the Motion,2 dated September 23, 2010 (the “Motion Date”) of Blockbuster

Digital Technologies Inc., its parent, Blockbuster Inc. (“Blockbuster”), and its debtor affiliates,

as debtors and debtors in possession (collectively, the “Debtors”), pursuant to sections 105(a)

and 362 of the Bankruptcy Code, seeking entry of a final order (the “Final Order”) to establish

notification procedures and approve restrictions on certain transfers and conversions of certain

interests in the Debtors’ estates, as more fully described in the Motion; and this Court having

jurisdiction to consider the Motion and the relief requested therein pursuant to 28 U.S.C. §§ 157

and 1334; and consideration of the Motion and the relief requested being a core proceeding

pursuant to 28 U.S.C. § 157(b); and venue being proper before this Court pursuant to 28 U.S.C.

§§ 1408 and 1409; and the Debtors having provided notice of the Motion to the Notice Parties;

1 The Debtors, together with the last four digits of each Debtor’s federal tax identification number, are:

Blockbuster Inc. (5102); Blockbuster Canada Inc. (1269); Blockbuster Digital Technologies Inc.(9222); Blockbuster Distribution, Inc. (0610); Blockbuster Gift Card, Inc. (1855); Blockbuster Global Services Inc. (3019); Blockbuster International Spain Inc. (7615); Blockbuster Investments LLC (6313); Blockbuster Procurement LP (2546); Blockbuster Video Italy, Inc (5068); Movielink, LLC (5575); Trading Zone Inc. (8588); and B2 LLC (5219).

2 All capitalized terms not expressly defined herein shall have the meaning ascribed to them in the Motion.

US_ACTIVE:\43444125\19\27258.0004 2

and the Court having entered an interim order granting the relief requested in the Motion on

____________, 2010 (the “Interim Order”); and the Court having held a hearing to consider the

requested relief (the “Hearing”); and upon the record of the Hearing, and all of the proceedings

before this Court, this Court finds and determines that the requested relief is in the best interests

of the Debtors, their estates, creditors, and all other parties in interest the Debtors have provided

due and proper notice of the Motion and no further notice is necessary; the legal and factual

bases set forth in the Motion establish just and sufficient cause to grant the requested relief

herein; IT IS HEREBY FOUND THAT:

1. The Debtors’ net operating tax loss carryforwards, net unrealized built-in

losses in their assets, and certain other tax and business credits (the “Tax Attributes”) are

property of the Debtors’ estates and are protected by the automatic stay prescribed in section 362

of the Bankruptcy Code.

2. Unrestricted trading and conversion of certain interests in Blockbuster

before the Debtors’ emergence from chapter 11 could severely limit the Debtors’ ability to utilize

their Tax Attributes for purposes of title 26 of the United States Code (the “Tax Code”), as set

forth in the Motion.

3. The notification procedures and restrictions on certain transfers and

conversions of Blockbuster Inc.’s Series A convertible preferred stock, Class A common stock,

or Class B common stock (collectively, the “Blockbuster Stock”) are necessary and proper to

preserve the Debtors’ Tax Attributes and are therefore in the best interests of the Debtors, the

Debtors’ estates, and creditors of the Debtors.

4. The relief requested in the Motion is authorized under sections 105(a) and

362 of the Bankruptcy Code.

US_ACTIVE:\43444125\19\27258.0004 3

5. On __________, 2010, the Court signed an Interim Order pursuant to

sections 362 and 105(a) of the Bankruptcy Code establishing notification procedures and

approving restrictions on certain transfers and conversions of equity interests in the Debtors’

estates. This Final Order will supersede the Interim Order.

THEREFORE, IT IS ORDERED THAT:

1. The Motion is granted on a final basis.

2. The provisions of this Final Order shall be effective, nunc pro tunc, to the

date of the Motion.

3. All objections to the Motion not previously withdrawn are overruled.

4. Any acquisition, disposition, other transfer, or conversion in violation of

the restrictions set forth herein shall be null and void ab initio as an act in violation of the

automatic stay prescribed in section 362 of the Bankruptcy Code and pursuant to this Court’s

equitable power prescribed in section 105(a) of the Bankruptcy Code. For purposes of this Final

Order, any trades or conversions made before the entry of the Interim Order shall not be subject

to this Final Order; and it is further

5. The following procedures and restrictions shall apply to trading in and

conversions of Blockbuster Stock and are approved:

Blockbuster Stock Ownership, Acquisition, and Disposition

a. Notice of Substantial Blockbuster Stock Ownership. Any person or Entity (as defined herein) that beneficially owns, at any time on or after the Motion Date, Blockbuster Stock in an amount sufficient to qualify such person or Entity as a Substantial Equityholder (as defined herein) shall file with the Court, and serve upon the Debtors and attorneys for the Debtors, a Notice of Substantial Stock Ownership (a “Substantial Equity Ownership Notice”), in the form annexed hereto as Exhibit “A”, which describes specifically and in detail the Blockbuster Stock ownership of such person or Entity, on or before the date that is the later of: (a) ten (10) business days after the entry of this Order, and (b) ten (10) business days after that person or Entity qualifies as a Substantial Equityholder. At the holder’s election, the Substantial Equity Ownership Notice to be filed with the Court (but not such notice served upon the Debtors and the attorneys for the Debtors) may be redacted to exclude such holder’s taxpayer

US_ACTIVE:\43444125\19\27258.0004 4

identification number and the number of shares of Blockbuster Stock that such holder beneficially owns.

b. Acquisition of Blockbuster Stock or Options. At least twenty (20) business days prior to the proposed date of any transfer of equity securities (including Options, as hereinafter defined, to acquire such securities) that would result in an increase in the amount of Blockbuster Stock beneficially owned by any person or Entity that currently is or subsequently becomes a Substantial Equityholder or that would result in a person or Entity becoming a Substantial Equityholder (a “Proposed Equity Acquisition Transaction”), such person, Entity, or Substantial Equityholder (a “Proposed Equity Transferee”) shall file with the Court, and serve upon the Debtors and the attorneys for the Debtors, a Notice of Intent to Purchase, Acquire, or Otherwise Accumulate Blockbuster Stock (an “Equity Acquisition Notice”), in the form annexed hereto as Exhibit “B”, which describes specifically and in detail the proposed transaction in which Blockbuster Stock is to be acquired. At the holder’s election, the Equity Acquisition Notice that is filed with the Court (but not such notice served upon the Debtors and the attorneys for the Debtors) may be redacted to exclude such holder’s taxpayer identification number and the number of shares of Blockbuster Stock that such holder beneficially owns and proposes to purchase or otherwise acquire.

c. Disposition of Blockbuster Stock or Options. At least twenty (20) business days prior to the proposed date of any transfer or other disposition of equity securities (including Options to acquire such securities) that would result in a decrease in the amount of Blockbuster Stock beneficially owned by a Substantial Equityholder or that would result in a person or Entity ceasing to be a Substantial Equityholder (a “Proposed Equity Disposition Transaction,” and together with a Proposed Equity Acquisition Transaction, a “Proposed Equity Transaction”), such person, Entity, or Substantial Equityholder (a “Proposed Equity Transferor”) shall file with the Court, and serve upon the Debtors and the attorneys for the Debtors, a Notice of Intent to Sell, Trade, or Otherwise Transfer Blockbuster Stock (an “Equity Disposition Notice,” and together with an Equity Acquisition Notice, an “Equity Trading Notice”), in the form annexed hereto as Exhibit “C”, which describes specifically and in detail the proposed transaction in which Blockbuster Stock would be transferred. At the holder’s election, the Equity Disposition Notice that is filed with the Court (but not such notice served upon the Debtors and the attorneys for the Debtors) may be redacted to exclude such holder’s taxpayer identification number and the number of shares of Blockbuster Stock that such holder beneficially owns and proposes to sell or otherwise transfer.

d. No Conversion of Series A Convertible Preferred Stock. During the pendency of the chapter 11 cases, no person or Entity that beneficially owns or acquires Series A convertible preferred stock in Blockbuster Inc. (“Preferred Stock”) shall be permitted to convert shares of such stock to Class A common stock or any other form of equity or ownership interest in the Debtors.

e. Objection Procedures. The Debtors shall have fifteen (15) business days after the filing of an Equity Trading Notice (the “Equity Objection Deadline”) to file with the Court and serve on a Proposed Equity Transferee or a Proposed Equity Transferor, as the case may be, an objection to any proposed transfer of equity securities (including Options to acquire such securities) described in such Equity Trading Notice on the grounds that such transfer may

US_ACTIVE:\43444125\19\27258.0004 5

adversely affect the Debtors’ ability to utilize the Tax Attributes (an “Equity Objection”) as a result of an ownership change under section 382 or section 383 of the Tax Code.

i. If the Debtors file an Equity Objection by the Equity Objection Deadline, then the Proposed Equity Transaction shall not be effective unless approved by a final and nonappealable order of this Court.

ii. If the Debtors do not file an Equity Objection by the Equity Objection Deadline, or if the Debtors provide written authorization to the Proposed Equity Transferee or the Proposed Equity Transferor, as the case may be, approving the Proposed Equity Transaction, prior to the Equity Objection Deadline, then such Proposed Equity Transaction may proceed solely as specifically described in the Equity Trading Notice.

iii. Any further Proposed Equity Transaction must be the subject of additional notices and the prescribed waiting period as set forth above.

f. Unauthorized Transactions in Blockbuster Stock or Options. Effective as of the date of the filing of the Motion and until further order of the Court to the contrary, any acquisition, disposition or other transfer of equity securities (including Options to acquire such securities) of the Debtors in violation of the procedures set forth herein shall be null and void ab initio as an act in violation of the automatic stay under sections 105(a) and 362 of the Bankruptcy Code.

g. Definitions.

i. Substantial Equityholder. A “Substantial Equityholder” is any person or Entity that beneficially owns (a) 3,420 or more shares of Preferred Stock (representing approximately 4.75% of the number of shares of such stock issued and outstanding), (b) 6,928,414 or more shares of Class A common stock (representing approximately 4.75% of the number of shares of such stock issued and outstanding), or (c) 3,420,000 or more shares of Class B common stock (representing approximately 4.75% of the number of shares of such stock issued and outstanding).

ii. Beneficial Ownership. “Beneficial ownership” (or any variation thereof) of Blockbuster Stock or Options to acquire Blockbuster Stock shall be determined in accordance with applicable rules under section 382 of the Tax Code, the U.S. Department of Treasury regulations (“Treasury Regulations”) promulgated thereunder and rulings issued by the Internal Revenue Service, and, thus, to the extent provided in those rules, from time to time shall include, without limitation, (a) direct and indirect ownership (e.g., a holding company would be considered to beneficially own all Blockbuster Stock or Options to acquire Blockbuster Stock owned or acquired by its subsidiaries), (b) ownership by a holder’s family members and any group of persons acting pursuant to a formal or informal understanding to make a coordinated acquisition of Blockbuster Stock or Options to acquire Blockbuster Stock, and (c) in certain cases, the creation or issuance of an Option or ownership of an Option to acquire Blockbuster Stock.

iii. Option. An “Option” to acquire Blockbuster Stock includes any contingent purchase, warrant, convertible debt, put, stock subject to risk of forfeiture, contract to

US_ACTIVE:\43444125\19\27258.0004 6

acquire stock, or similar interest regardless of whether it is contingent or otherwise not currently exerciseable. For the avoidance of doubt, by operation of the definition of beneficial ownership, an owner of an Option to acquire Blockbuster Stock may be treated as the owner of such Blockbuster Stock.

iv. Entity. “Entity” has the meaning given to it in Treasury Regulations section 1.382-3(a) and shall include persons acting pursuant to a formal or informal understanding among themselves to make a coordinated acquisition.

6. Any person or Entity acquiring, disposing of, and/or converting

Blockbuster Stock in violation of the restrictions set forth herein, or failing to comply with the

“Substantial Equity Ownership Notice,” “Equity Acquisition Notice,” or “Equity Disposition

Notice” requirements, as may be the case, shall be subject to such sanctions as this Court may

consider appropriate pursuant to this Court’s equitable power prescribed in section 105(a) of the

Bankruptcy Code.

7. The notices substantially in the form annexed to the Motion as Exhibits E,

F, and G are approved on a final basis.

8. The Debtors may waive, in writing, any and all restrictions, stays, and

notification procedures contained in this Final Order; and it is further

9. The Debtors shall serve notice of the entry of this Final Order substantially

in the form annexed hereto as Exhibit B describing the authorized trading and converting

restrictions and notification requirements to: (i) the Office of the United States Trustee for the

Southern District of New York (Attn: Brian Masumoto, Esq.); (ii) those creditors holding the

fifty largest unsecured claims against the Debtors’ estates; (iii) Sheppard, Mullin, Richter &

Hampton LLP, the attorneys for U.S. Bank National Association, as trustee under that certain

indenture agreement, dated as of October 1, 2009, with respect to the 11.75% Senior Secured

Notes due 2014 issued by Blockbuster Inc. (Attn: Kyle J. Mathews, Esq.); (iv) The Bank of New

York Trust Company, N.A., as trustee under that certain indenture agreement, dated as of August

US_ACTIVE:\43444125\19\27258.0004 7

20, 2004, with respect to the 9% Senior Subordinated Notes due 2012 issued by Blockbuster Inc.

(Attn: Corporate Trust); (v) Sidley Austin LLP, attorneys for the lenders under the proposed

Debtor in Possession Credit Agreement (the “DIP Facility”) (Attn: James Seery, Esq.); (vi)

Wilmington Trust FSB as Agent under the DIP Facility (Attn: Joshua G. James); and (vii)

Skadden, Arps, Slate, Meagher & Flom LLP, the attorneys for Wilmington Trust FSB as Agent

under the DIP Facility (Attn: Peter J. Neckles, Esq.); (viii) any person who has filed Schedule

13D or Schedule 13G with the SEC since January 1st, 2010 with regard to the beneficial

ownership of Blockbuster Stock; and (ix) any transfer agent(s) for Blockbuster Stock

(collectively, the “Notice Parties”). Upon receipt of the Final Procedures Notice, any transfer

agent shall send the Final Procedures Notice to all holders of Blockbuster Stock registered with

the transfer agent. Any registered holder shall, in turn, provide the Final Procedures Notice to

any holder for whose account the registered holder holds Blockbuster Stock. Any holder shall,

in turn, provide the Final Procedures Notice to any person or entity for whom the holder holds

Blockbuster Stock.

10. The Debtors shall post the Final Procedures Notice on the website of their

claims and noticing agent, Kurtzman Carson Consultants LLC at www.kccllc.net/blockbuster.

Additionally, the Debtors shall submit a notice of the entry of this Final Order for publication on

the Bloomberg newswire service and arrange for publication of such notice in national editions

of The Wall Street Journal, The New York Times, and the Dallas Morning News.

11. Nothing herein shall preclude any person or Entity desirous of purchasing

or transferring any interest from requesting relief from this Final Order in this Court subject to

the Debtors rights to oppose such relief.

US_ACTIVE:\43444125\19\27258.0004 8

12. Notice of the Motion as provided therein shall be deemed good and

sufficient notice of the Motion.

13. Within three (3) business days of the entry of this Final Order, the Debtors

shall serve a copy of this Final Order and the Motion on the Notice Parties.

14. The requirements set forth in this Final Order are in addition to the

requirements of Bankruptcy Rule 3001(e), applicable securities, corporate, and other laws, and

do not excuse compliance therewith.

15. The relief granted in this Final Order is intended solely to permit the

Debtors to protect, preserve and maximize the value of the Debtors’ Tax Attributes.

Accordingly, except to the extent the Final Order expressly conditions or restricts trading in or

conversion of interests in Blockbuster, nothing in this Final Order or in the Motion shall or shall

be deemed to prejudice, impair or otherwise alter or affect the rights of any holders of interests in

Blockbuster, including in connection with the treatment of any such interests under any plan of

reorganization.

16. The Court shall retain jurisdiction with respect to any matters, claims,

rights or disputes arising from or related to the implementation of this Final Order.

Dated: ___________, 2010New York, New York

________________________________________UNITED STATES BANKRUPTCY JUDGE

US_ACTIVE:\43444125\19\27258.0004

Exhibit E

Substantial Equity Ownership Notice

US_ACTIVE:\43444125\19\27258.0004

UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK---------------------------------------------------------------x

:In re : Chapter 11

:BLOCKBUSTER INC., et al.,1 : Case No. 10-_____ (__)

:: (Joint Administration Requested)

Debtors. :---------------------------------------------------------------x

NOTICE OF SUBSTANTIAL STOCK OWNERSHIP

PLEASE TAKE NOTICE that, as of [Date], [Name of Shareholder] Owns:

(i) _______________ shares of Blockbuster Inc.’s Series A convertible preferred stock and/or options to acquire ____________ shares of Blockbuster Inc.’s Series A convertible preferred stock,

(ii) _______________ shares of Blockbuster Inc.’s Class A Common Stock and/or options to acquire ____________ shares of Blockbuster Class A Common Stock,

(iii) _______________ shares of Blockbuster Inc.’s Class B Common Stock and/or options to acquire ____________ shares of Blockbuster Class B Common Stock.

The following table sets forth the date(s) on which [Name of Shareholder]

acquired or otherwise became the Owner of such equity securities:

Number of Shares Type of Shares Date Acquired

(Attach additional page if necessary)

1 The Debtors, together with the last four digits of each Debtor’s federal tax identification number, are

Blockbuster Inc. (5102); Blockbuster Canada Inc. (1269); Blockbuster Digital Technologies Inc.(9222); Blockbuster Distribution, Inc. (0610); Blockbuster Gift Card, Inc. (1855); Blockbuster Global Services Inc. (3019); Blockbuster International Spain Inc. (7615); Blockbuster Investments LLC (6313); Blockbuster Procurement LP (2546); Blockbuster Video Italy, Inc (5068); Movielink, LLC (5575); Trading Zone Inc. (8588); and B2 LLC (5219).

US_ACTIVE:\43444125\19\27258.0004 2

PLEASE TAKE FURTHER NOTICE that the taxpayer identification number of

[Name of Shareholder] is __________________.

PLEASE TAKE FURTHER NOTICE that, under penalties of perjury, [Name of

Shareholder] hereby declares that it has examined this Notice and accompanying attachments (if

any), and, to the best of its knowledge and belief, this Notice and any attachments which purport

to be part of this Notice are true, correct and complete.

PLEASE TAKE FURTHER NOTICE that, pursuant to that certain Interim Order,

and that certain Final Order, when issued, under 11 U.S.C. §§ 105(a) and 362 Establishing

Notification Procedures and Approving Restrictions on Certain Transfers of Interests in the

Debtors’ Estates, this Notice is being (a) filed with the United States Bankruptcy Court for the

Southern District of New York, One Bowling Green, New York, New York 10004 and (b)

served upon: (i) Blockbuster Inc., 1201 Elm Street, Dallas, Texas 75270 (Attn: Rod McDonald);

(ii) Weil, Gotshal & Manges LLP, attorneys for the Debtors, 767 Fifth Avenue, New York, New

York 10153 (Attn: Stephen Karotkin, Esq. and Martin A. Sosland, Esq.); and (iii) the Office of

the United States Trustee for the Southern District of New York, 33 Whitehall Street, 21st Floor,

New York, New York 10004 (Attn: Brian Masumoto, Esq.).

For purposes of this Notice, (i) “Ownership” of stock shall be determined in

accordance with applicable rules under section 382 of title 26 of the United States Code (the

“Tax Code”) and, thus, to the extent provided in those rules from time to time, shall include, but

not be limited to, direct and indirect ownership (e.g., a holding company would be considered to

beneficially own all shares owned or acquired by its subsidiaries), ownership by members of a

person’s family and persons acting in concert, and in certain cases, the creation or issuance of an

option (in any form); (ii) any variation of the term “Ownership” (e.g., Own) shall have the same

US_ACTIVE:\43444125\19\27258.0004 3

meaning; and (iii) an “option” to acquire stock includes any contingent purchase, warrant,

convertible debt, put, stock subject to risk of forfeiture, contract to acquire stock or similar

interest, regardless of whether it is contingent or otherwise not currently exercisable.

Respectfully submitted,

_____________________________[Name of Stockholder][Address of Stockholder][Telephone of Stockholder][Facsimile of Stockholder]

Dated: [city, state] _____________, 200_

US_ACTIVE:\43444125\19\27258.0004

Exhibit F

Equity Acquisition Notice

US_ACTIVE:\43444125\19\27258.0004

UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK---------------------------------------------------------------x

:In re : Chapter 11

:BLOCKBUSTER INC., et al.,1 : Case No. 10-_____ (__)

:: (Joint Administration Requested)

Debtors. :---------------------------------------------------------------x

NOTICE OF INTENT TO PURCHASE, ACQUIRE OR OTHERWISE ACCUMULATE BLOCKBUSTER STOCK

PLEASE TAKE NOTICE THAT [Name of Prospective Purchaser] hereby

provides notice of its intention to purchase, acquire, or otherwise accumulate one or more shares

of Blockbuster Inc.’s (“Blockbuster”) Series A convertible preferred stock (“Blockbuster

Preferred Stock”), Blockbuster’s Class A common stock (“Blockbuster Class A Common

Stock”), or Blockbuster’s Class B common stock (“Blockbuster Class B Common Stock,” and

together with the Blockbuster Preferred Stock and Blockbuster Class A Common Stock,

“Blockbuster Stock”) or an option with respect to any of the foregoing (the “Proposed

Transfer”).

PLEASE TAKE FURTHER NOTICE THAT, if applicable, on [Prior Date(s)],

[Name of Prospective Purchaser] filed a Notice of Substantial Stock Ownership with the Court

and served copies thereof on the Debtors and the attorneys for the Debtors.

1 The Debtors, together with the last four digits of each Debtor’s federal tax identification number, are

Blockbuster Inc. (5102); Blockbuster Canada Inc. (1269); Blockbuster Digital Technologies Inc.(9222); Blockbuster Distribution, Inc. (0610); Blockbuster Gift Card, Inc. (1855); Blockbuster Global Services Inc. (3019); Blockbuster International Spain Inc. (7615); Blockbuster Investments LLC (6313); Blockbuster Procurement LP (2546); Blockbuster Video Italy, Inc (5068); Movielink, LLC (5575); Trading Zone Inc. (8588); and B2 LLC (5219).

US_ACTIVE:\43444125\19\27258.0004 2

PLEASE TAKE FURTHER NOTICE THAT [Name of Prospective Purchaser]

currently Owns:

(i) _______________ shares of Blockbuster Preferred Stock and/or options to acquire ____________ shares of Blockbuster Preferred Stock,

(ii) _______________ shares of Blockbuster Class A Common Stock and/or optionsto acquire ____________ shares of Blockbuster Class A Common Stock,

(iii) _______________ shares of Blockbuster Class B Common Stock and/or options to acquire ____________ shares of Blockbuster Class B Common Stock.

PLEASE TAKE FURTHER NOTICE THAT, pursuant to the Proposed Transfer,

[Name of Prospective Purchaser] proposes to purchase, acquire, or otherwise transfer:

(i) _______________ shares of Blockbuster Preferred Stock and/or options to acquire ____________ shares of Blockbuster Preferred Stock,

(ii) _______________ shares of Blockbuster Class A Common Stock and/or options to acquire ____________ shares of Blockbuster Class A Common Stock,

(iii) _______________ shares of Blockbuster Class B Common Stock and/or options to acquire ____________ shares of Blockbuster Class B Common Stock.

If the Proposed Transfer is permitted to occur, [Name of Prospective Purchaser]

will Own:

(i) _______________ shares of Blockbuster Preferred Stock and/or options to acquire ____________ shares of Blockbuster Preferred Stock,

(ii) _______________ shares of Blockbuster Class A Common Stock and/or options to acquire ____________ shares of Blockbuster Class A Common Stock,

(iii) _______________ shares of Blockbuster Class B Common Stock and/or options dto acquire ____________ shares of Blockbuster Class B Common Stock.

PLEASE TAKE FURTHER NOTICE THAT the taxpayer identification number

of [Name of Prospective Purchaser] is ______________.

US_ACTIVE:\43444125\19\27258.0004 3

PLEASE TAKE FURTHER NOTICE that, under penalties of perjury, [Name of

Prospective Purchaser] hereby declares that it has examined this Notice and accompanying

attachments (if any), and, to the best of its knowledge and belief, this Notice and any attachments

which purport to be part of this Notice are true, correct and complete.

PLEASE TAKE FURTHER NOTICE that, pursuant to that certain Interim Order,

and that certain Final Order, when issued, under 11 U.S.C. §§ 105(a) and 362 Establishing

Notification Procedures and Approving Restrictions on Certain Transfers of Interests in the

Debtors’ Estates, this Notice is being (a) filed with the United States Bankruptcy Court for the

Southern District of New York, One Bowling Green, New York, New York 10004 and (b)

actually served upon: (i) Blockbuster Inc., 1201 Elm Street, Dallas, Texas 75270 (Attn: Rod

McDonald); (ii) Weil, Gotshal & Manges LLP, attorneys for the Debtors, 767 Fifth Avenue,

New York, New York 10153 (Attn: Stephen Karotkin, Esq. and Martin A. Sosland, Esq.); and

(iii) the Office of the United States Trustee for the Southern District of New York, 33 Whitehall

Street, 21st Floor, New York, New York 10004 (Attn: Brian Masumoto, Esq.).

PLEASE TAKE FURTHER NOTICE that the Debtors have fifteen (15) business

days after the filing of this Notice to object to the Proposed Transfer described herein. If the

Debtors file an objection, such Proposed Transfer will not be effective unless approved by a final

and nonappealable order of the Court. If the Debtors do not object within such fifteen (15)

business day period, or if the Debtors provide written authorization approving the Proposed

Transfer prior to the end of such fifteen (15) business day period, then such Proposed Transfer

may proceed solely as specifically described in this Notice.

PLEASE TAKE FURTHER NOTICE that any further transactions contemplated

by [Name of Prospective Purchaser] that may result in [Name of Prospective Purchaser]

US_ACTIVE:\43444125\19\27258.0004 4

purchasing, acquiring, or otherwise accumulating shares of Blockbuster Stock (or an option with

respect thereto) will each require an additional notice filed with the Court to be served in the

same manner as this Notice. For purposes of this Notice, (i) “Ownership” of stock shall be

determined in accordance with applicable rules under section 382 of title 26 of the United States

Code (the “Tax Code”) and, thus, to the extent provided in those rules from time to time, shall

include, but not be limited to, direct and indirect ownership (e.g., a holding company would be

considered to beneficially own all shares owned or acquired by its subsidiaries), ownership by

members of a person’s family and persons acting in concert, and in certain cases, the creation or

issuance of an option (in any form); (ii) any variation of the term “Ownership” (e.g., Own) shall

have the same meaning; and (iii) an “option” to acquire stock includes any contingent purchase,

warrant, convertible debt, put, stock subject to risk of forfeiture, contract to acquire stock or

similar interest, regardless of whether it is contingent or otherwise not currently exercisable.

Respectfully submitted,

______________________________(Name of Prospective Purchaser)

By:___________________________Name:_________________________Title:__________________________Address:_______________________

________________________________________________

Telephone:_____________________Facsimile:______________________

Date: _______________________

US_ACTIVE:\43444125\19\27258.0004

Exhibit G

Equity Disposition Notice

US_ACTIVE:\43444125\19\27258.0004

UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK---------------------------------------------------------------x

:In re : Chapter 11

:BLOCKBUSTER INC., et al.,1 : Case No. 10-_____ (__)

:: (Joint Administration Requested)

Debtors. :---------------------------------------------------------------x

NOTICE OF INTENT TO DISPOSE OF BLOCKBUSTER STOCK

PLEASE TAKE NOTICE THAT [Name of Prospective Seller] hereby provides

notice of its intention to sell, trade or otherwise transfer one or more shares of Blockbuster Inc.’s

(“Blockbuster”) Series A convertible preferred stock (“Blockbuster Preferred Stock”),

Blockbuster’s Class A common stock (“Blockbuster Class A Common Stock”) or Blockbuster’s

Class B common stock (“Blockbuster Class B Common Stock,” and together with the

Blockbuster Preferred Stock and Blockbuster Class A Common Stock, “Blockbuster Stock”) or

an option with respect to any of the foregoing (the “Proposed Transfer”).

PLEASE TAKE FURTHER NOTICE THAT, if applicable, on [Prior Date(s)],

[Name of Prospective Seller] filed a Notice of Substantial Stock Ownership with the Court and

served copies thereof on the Debtors and Debtors’ counsel.

PLEASE TAKE FURTHER NOTICE THAT [Name of Prospective Seller]

currently Owns:

1 The Debtors, together with the last four digits of each Debtor’s federal tax identification number, are

Blockbuster Inc. (5102); Blockbuster Canada Inc. (1269); Blockbuster Digital Technologies Inc.(9222); Blockbuster Distribution, Inc. (0610); Blockbuster Gift Card, Inc. (1855); Blockbuster Global Services Inc. (3019); Blockbuster International Spain Inc. (7615); Blockbuster Investments LLC (6313); Blockbuster Procurement LP (2546); Blockbuster Video Italy, Inc (5068); Movielink, LLC (5575); Trading Zone Inc. (8588); and B2 LLC (5219).

US_ACTIVE:\43444125\19\27258.0004 2

(i) _______________ shares of Blockbuster Preferred Stock and/or options to acquire ____________ shares of Blockbuster Preferred Stock,

(ii) _______________ shares of Blockbuster Class A Common Stock and/or options to acquire ____________ shares of Blockbuster Class A Common Stock,

(iii) _______________ shares of Blockbuster Class B Common Stock and/or options to acquire ____________ shares of Blockbuster Class B Common Stock.

PLEASE TAKE FURTHER NOTICE THAT, pursuant to the Proposed Transfer,

[Name of Prospective Seller] proposes to sell, trade or otherwise transfer:

(i) _______________ shares of Blockbuster Preferred Stock and/or options to acquire ____________ shares of Blockbuster Preferred Stock,

(ii) _______________ shares of Blockbuster Class A Common Stock and/or options to acquire ____________ shares of Blockbuster Class A Common Stock,

(iii) _______________ shares of Blockbuster Class B Common Stock and/or options to acquire ____________ shares of Blockbuster Class B Common Stock.

If the Proposed Transfer is permitted to occur, [Name of Prospective Seller] will Own:

(i) _______________ shares of Blockbuster Preferred Stock and/or options to acquire ____________ shares of Blockbuster Preferred Stock,

(ii) _______________ shares of Blockbuster Class A Common Stock and/or options to acquire ____________ shares of Blockbuster Class A Common Stock,

(iii) _______________ shares of Blockbuster Class B Common Stock and/or options to acquire ____________ shares of Blockbuster Class B Common Stock.

PLEASE TAKE FURTHER NOTICE THAT the taxpayer identification number

of [Name of Prospective Seller] is ______________.

PLEASE TAKE FURTHER NOTICE that, under penalties of perjury, [Name of

Prospective Seller] hereby declares that it has examined this Notice and accompanying

attachments (if any), and, to the best of its knowledge and belief, this Notice and any attachments

which purport to be part of this Notice are true, correct and complete.

US_ACTIVE:\43444125\19\27258.0004 3

PLEASE TAKE FURTHER NOTICE that, pursuant to that certain Interim Order,

and that certain Final Order, when issued, under 11 U.S.C. §§ 105(a) and 362 Establishing

Notification Procedures and Approving Restrictions on Certain Transfers of Interests in the

Debtors’ Estates, this Notice is being (a) filed with the United States Bankruptcy Court for the

Southern District of New York, One Bowling Green, New York, New York 10004 and (b)

actually served upon: (i) Blockbuster Inc., 1201 Elm Street, Dallas, Texas 75270 (Attn: Rod

McDonald); (ii) Weil, Gotshal & Manges LLP, attorneys for the Debtors, 767 Fifth Avenue,

New York, New York 10153 (Attn: Stephen Karotkin, Esq. and Martin A. Sosland, Esq.); and

(iii) the Office of the United States Trustee for the Southern District of New York, 33 Whitehall

Street, 21st Floor, New York, New York 10004 (Attn: Brian Masumoto, Esq.).

PLEASE TAKE FURTHER NOTICE that the Debtors have fifteen (15) business

days after the filing of this Notice to object to the Proposed Transfer described herein. If the

Debtors file an objection, such Proposed Transfer will not be effective unless approved by a final

and nonappealable order of the Court. If the Debtors do not object within such fifteen (15)

business day period, or if the Debtors provide written authorization approving the Proposed

Transfer prior to the end of such fifteen (15) business day period, then such Proposed Transfer

may proceed solely as specifically described in this Notice.

PLEASE TAKE FURTHER NOTICE that any further transactions contemplated

by [Name of Prospective Seller] that may result in [Name of Prospective Seller] selling, trading

or otherwise transferring shares of Blockbuster Stock (or an option with respect thereto) will

each require an additional notice filed with the Court to be served in the same manner as this

Notice.

US_ACTIVE:\43444125\19\27258.0004 4

For purposes of this Notice, (i) “Ownership” of stock shall be determined in

accordance with applicable rules under section 382 of title 26 of the United States Code (the

“Tax Code”) and, thus, to the extent provided in those rules from time to time, shall include, but

not be limited to, direct and indirect ownership (e.g., a holding company would be considered to

beneficially own all shares owned or acquired by its subsidiaries), ownership by members of a

person’s family and persons acting in concert, and in certain cases, the creation or issuance of an

option (in any form); (ii) any variation of the term “Ownership” (e.g., Own) shall have the same

meaning; and (iii) an “option” to acquire stock includes any contingent purchase, warrant,

convertible debt, put, stock subject to risk of forfeiture, contract to acquire stock or similar

interest, regardless of whether it is contingent or otherwise not currently exercisable.

Respectfully submitted,

(Name of Prospective Seller)

By:Name:Title:

Address:

Telephone:Facsimile:

Date: _______________________