FORM OF PERFORMANCE-BASED RESTRICTED SHARE AWARD AGREEMENT

Exhibit 10.1

FORM OF

PERFORMANCE-BASED RESTRICTED SHARE AWARD AGREEMENT

PURSUANT TO THE BLOCKBUSTER INC.

AMENDED AND RESTATED 1999 LONG-TERM MANAGEMENT INCENTIVE PLAN

(AS AMENDED THROUGH OCTOBER 6, 2004)

OR

2004 LONG-TERM MANAGEMENT INCENTIVE PLAN

(AS AMENDED THROUGH OCTOBER 6, 2004)

This Performance-Based Restricted Share Award Agreement (this “Agreement”) is entered into by and between Blockbuster Inc., a Delaware corporation (the “Company”), and the individual (the “Participant”) accepting a Performance Award hereunder. The Company and the Participant agree as follows:

1. Grant of Performance-Based Restricted Shares . Pursuant to the Blockbuster Inc. Amended and Restated 1999 Long-Term Management Incentive Plan (as amended through October 6, 2004) or 2004 Long-Term Management Incentive Plan (as amended through October 6, 2004) (either of which is referred to as the “Plan”) and a duly adopted resolution of the Board of Directors (the “Board”) of the Company, the Company hereby agrees to grant to the Participant a Performance Award of Restricted Shares (the “Performance-Based Restricted Shares”), subject to the terms and conditions set forth in this Agreement and in the Plan. The target number of Restricted Shares that may be granted to the Participant is identified in the Participant’s personalized grant letter prepared and delivered to the Participant in connection with the Performance Award (the “Target Grant”). If and when the performance goals described below are met, the actual number of Performance-Based Restricted Shares granted to the Participant may be [Description of Range] of the Target Grant. This Agreement and the Grant hereunder are subject to the Participant’s valid acceptance of his or her Performance Award and the terms of this Agreement in accordance with the procedures provided by the Company. The Date of Grant, if any, of the Performance-Based Restricted Shares will be [Date of Grant].

2. Performance Period . The performance period (the “Performance Period”) is [Performance Period].

3. Performance Goals . The Participant’s actual receipt of a grant of any Performance-Based Restricted Shares is conditioned upon:

[Description of Performance Goals]

[Definition of Performance Goals]

4. Adjustment of Target Grant . The number of Performance-Based Restricted Shares actually granted, if any, will be based upon the Company’s actual level of [Performance Goals]

for the Performance Period, as shown in the chart in Section 3 above. The chart in Section 3 of this Agreement reflects only certain milestones, and interpolated achievements of performance will be used for any final grant calculation. In no event will the Participant be entitled to receive a total number of Performance-Based Restricted Shares greater than [Percentage] of the Target Grant. In addition, for the avoidance of doubt, in no event will the Participant be entitled to receive a grant of Performance-Based Restricted Shares if he or she is not employed with the Company or any Subsidiary on the Date of Grant of the Performance-Based Restricted Shares.

5. Vesting of Performance Based Restricted Shares . Except as specifically provided in this Agreement and subject to certain restrictions and conditions set forth in Section 7 below and in the Plan, any Performance-Based Restricted Shares granted will vest, and the restrictions with respect to the Performance-Based Restricted Shares will lapse, in accordance with the following schedule:

6. Interpretation . Capitalized terms used and not otherwise defined herein have the meanings assigned to them in the Plan. The Performance Award and the Performance-Based Restricted Shares are subject to the terms and conditions of the Plan, which terms and conditions are incorporated herein by reference; however, unless specifically permitted by the Board or the Committee, the terms of the Plan shall not be considered an enlargement of any benefits under this Agreement. The Performance Award and the Performance-Based Restricted Shares are subject to any rules promulgated pursuant to the Plan by the Board or the Committee and communicated to the Participant in writing.

7. Rights and Restrictions Governing Performance-Based Restricted Shares . Following the Date of Grant of the Performance-Based Restricted Shares, the appropriate number of Performance-Based Restricted Shares granted to a Participant shall be registered in the Participant’s name or otherwise credited to the Participant, but shall be held by or on behalf of the Company for the account of the Participant. The Participant shall have, with respect to his or her Performance-Based Restricted Shares that have been granted, all rights of a stockholder as to such Performance-Based Restricted Shares (including, to the extent applicable, the right to vote and to receive dividends or other distributions made or paid with respect to such shares), subject to the following restrictions: (i) the Participant is not entitled to delivery of such Performance-Based Restricted Shares until such Performance-Based Restricted Shares have vested and the Participant’s Tax Obligations (as defined below) with respect to such vested shares have been satisfied; (ii) none of the Performance-Based Restricted Shares may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of until such Performance-Based Restricted Shares have vested and any such purported sale, transfer, assignment, pledge or other encumbrance or disposition will be void and unenforceable against the Company or any Subsidiary; and (iii) all unvested Performance-Based Restricted Shares will be immediately forfeited upon a Participant’s termination of service with the Company or any Subsidiary for any reason, including voluntary termination, Termination for Cause or without Cause, death or Permanent Disability. Any dividends that are paid in shares or other distributions that are paid in shares shall be subject to the same restrictions as the Performance-Based Restricted Shares with

2

respect to which such dividends or other distributions are made. For the avoidance of doubt, the Participant will not have, until any Performance-Based Restricted Shares have been granted, any rights of a stockholder with respect to such Performance-Based Restricted Shares (including the right to vote and to receive dividends or other distributions made or paid with respect to such shares).

8. Delivery of Performance-Based Restricted Shares . Subject to the terms and conditions of the Plan and this Agreement, the Performance-Based Restricted Shares will vest in accordance with the vesting schedule set forth in Section 5 of this Agreement. On the date on which Performance-Based Restricted Shares vest and upon satisfaction of all other applicable conditions set forth in the Plan and this Agreement, all restrictions contained in this Agreement covering such Performance-Based Restricted Shares and in the Plan shall lapse as to such Performance-Based Restricted Shares. All vested Performance-Based Restricted Shares will be held by the transfer or other agent of the Company, or any successor thereto (the “Transfer Agent”), unless the Participant makes other arrangements with the Transfer Agent; provided , however , that the obligation of the Company to deliver the vested Performance-Based Restricted Shares shall be subject to (i) the condition that, if at any time the Board or the Committee shall determine in their discretion that the listing, registration, or qualification of the vested Performance-Based Restricted Shares is required under any federal, state or other law or by the rules of any securities exchange, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the issuance of the vested Performance-Based Restricted Shares, then the Performance Award will not vest in whole or in part unless and until such listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not acceptable to the Board or the Committee; and (ii) the Participant’s satisfaction of any Tax Obligations as specified under Section 9 of this Agreement.