Exhibit 10.2(k)

 

January 28, 2003

 

Frank Paci

1201 Elm Street

Dallas, TX 75270

 

Dear Frank:

 

Blockbuster Inc (“Blockbuster”), 1201 Elm Street, Dallas, Texas 75270, agrees to
employ you and you agree to accept employment with Blockbuster upon the
following terms and conditions (the “Agreement”):

 

1. Term. The term of this Agreement shall be three (3) years and shall commence
on January 28, 2003, but will be automatically renewed on March 1 of each year
for a three (3) year term commencing on the date of automatic renewal, unless
terminated by Blockbuster pursuant to Paragraph 8(a) or (b) or otherwise. As
used in this Agreement, the “Term” refers to the period beginning on the initial
Commencement Date of this Agreement and for three (3) years thereafter or, if
the term of your employment has been automatically renewed pursuant to this
Paragraph 1, the period beginning on the date of automatic renewal and ending on
the third anniversary of the date of the automatic renewal, notwithstanding any
earlier termination pursuant to Paragraph 8(a) or (b) or otherwise.

 

2. Duties. You agree to devote your entire business time, attention and energies
to the business of Blockbuster and its subsidiaries during your employment. You
will be Executive Vice President Finance, Strategic Planning & Development of
Blockbuster, and you agree to perform all duties reasonable and consistent with
that or such comparable office as the Executive Vice President Chief Financial
Officer and Chief Administrative Officer of Blockbuster or other individual
designated by the Chief Executive Officer (the “CEO”) of Blockbuster may assign
to you from time to time.

 

3. Compensation.

 

(a) Salary. For all the services rendered by you in any capacity under this
Agreement, Blockbuster agrees to pay you thirty two thousand five hundred
Dollars ($32,500) a month in base salary (“Salary”), less applicable deductions
and withholding taxes, in accordance with Blockbuster’s payroll practices as
they may exist from time to time.

 

(b) Bonus Compensation. You also will receive bonus compensation (“Bonus”) in
accordance with Blockbuster’s Short-Term Incentive Plan or, if applicable,
Blockbuster’s Senior Executive Short-Term Incentive Plan, each as may be amended
from time to time (either of such plans, as applicable, to be hereinafter
referred to as the “STIP”) and as follows:

 

  (i) Your target bonus (“Target Bonus”) for each calendar year will be 50% of
your Salary on November 1st of the calendar year; provided that, for any years
in which you are a participant in Blockbuster’s Senior Executive Short-Term
Incentive Plan, for purposes of this Section 3(b)(i), your Target Bonus will be
based on your Salary as defined in such plan. Your Bonus may be prorated for any
portion of the calendar year that you were employed under this Agreement.

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Frank Paci

January 28, 2003

Page 2

 

  (ii) Your Bonus for any calendar year will be payable, less applicable
deductions and withholding taxes, by the end of the first quarter of the
following year.

 

4. Benefits. You will participate in such vacation, medical, dental, life
insurance, long-term disability insurance, 401(k), long-term incentive and other
plans as Blockbuster may have or establish from time to time and in which you
would be entitled to participate under the terms of the plan. This provision,
however, will not be construed to either require Blockbuster to establish any
welfare, compensation or long-term incentive plans, or to prevent the
modification or termination of any plan once established, and no action or
inaction with respect to any plan will affect this Agreement.

 

5. Business Expenses; Car Allowance and Insurance. During your employment under
this Agreement, Blockbuster will reimburse you for such reasonable travel and
other expenses incurred in the performance of your duties consistent with
Blockbuster’s then applicable expense reimbursement policies for Blockbuster
executives at comparable position levels. You will receive a car allowance and
car insurance for one (1) vehicle in accordance with Blockbuster’s policies, as
same may be amended from time to time.

 

6. Non-Competition, Confidential Information, Etc.

 

(a) Non-Competition. You agree that your employment with Blockbuster is on an
exclusive basis and that, while you are employed by Blockbuster, you will not
engage in any other business activity which is in conflict with your duties and
obligations (including your commitment of time) under this Agreement. You agree
that, during the Non-Compete Period (as defined below), you will not directly or
indirectly engage in or participate as an owner, partner, stockholder, officer,
employee, director, agent of or consultant for any Blockbuster Competitor (as
defined below) and will perform no services for a Blockbuster Competitor similar
to any services performed for Blockbuster; provided, however, that this
provision will not prevent you from investing as less than a one (1%) percent
stockholder in the securities of any company listed on a national securities
exchange or quoted on an automated quotation system. The Non-Compete Period will
cover the entire Term plus any period after the Term for which you receive
payments pursuant to Paragraph 8(c)(i). A Blockbuster Competitor is any business
entity which engages in the acquisition, aggregation, or delivery of audio or
video entertainment, including but not limited to the rental, sale, or trading
of video, DVD, or other movie product, equipment, or video games, either (i) in
electronic, digital, or internet commerce, or (ii) in one or more geographic
areas where Blockbuster has its operations (or is engaged in real estate site
selection or has taken other steps toward the commencement of operations),
either alone or in association with another entity. In every case, the good
faith judgment of Blockbuster will be conclusive as to whether a business entity
constitutes a Blockbuster Competitor. You agree that this non-compete covenant
is ancillary to an otherwise enforceable agreement, including but not limited to
the confidentiality covenant and the payment provisions in Paragraph 3.

 

(b) Confidential Information. You agree that, during the Term and at any time
thereafter, (i) you will not (a) use for any purpose other than the duly
authorized business of Blockbuster conducted in the course of your employment at
Blockbuster or, (b) disclose to any third party, any business information,
technological information, intellectual property, trade secrets and other
information belonging to Blockbuster or any of its affiliated companies or
relating to Blockbuster’s business, technology, or customers (“Confidential
Information”), including, without limitation, any written (including in any
electronic form) or oral communication incorporating Confidential Information in
any way; and (ii) you will comply with any and all confidentiality obligations
of Blockbuster to a third party, whether arising under a written agreement or
otherwise. Information will not be deemed Confidential Information which (x) is
or becomes generally available to the public other than as a result of a
disclosure by you or at your direction or by any other person who directly or
indirectly receives such information from you, or (y) is or becomes available to
you on a non-confidential basis from a source which is entitled to disclose it
to you.

 

(c) No Employee Solicitation. You agree that, during the Term and for one
(1) year thereafter, you will not, directly or indirectly, engage, employ or
solicit the employment or consulting

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Frank Paci

January 28, 2003

Page 3

 

services of any person who is then or has been within six (6) months prior to
the time of such action, an employee of Blockbuster or any of its affiliated
companies

 

(d) Blockbuster Ownership. Any inventions, discoveries, ideas, processes,
programs, systems, improvements or contributions (whether or not patentable),
including but not limited to any useful process, method, formula or, technique
that is conceived, developed or discovered by you during your employment by
Blockbuster shall be the sole property of Blockbuster. Any works of authorship
or other materials created by you, in any form (including in any electronic
form), created by you in the course of employment with Blockbuster and/or any of
its affiliated companies and any works in progress resulting from such
employment will be works-made-for hire pursuant to 17 U.S.C., Section 201 (the
Copyright Act) and Blockbuster will be deemed the sole owner throughout the
universe of any and all rights of every nature in and to such works (including,
without limitation, any copyrights, patents, trade secrets and trademarks),
whether such rights are now known or hereafter defined or discovered, with the
right to use the works in perpetuity in any manner Blockbuster determines in its
sole discretion without any further payment to you. If, for any reason, any of
such results and proceeds are not legally deemed a work-made-for-hire and/or
there are any rights in such results and proceeds which do not accrue to
Blockbuster under the preceding sentence, then you hereby irrevocably assign and
agree to assign any and all of your rights, title and interest thereto,
including, without limitation, any and all copyrights, patents, trade secrets,
trademarks, and/or other rights of every nature in the work, whether known or
hereafter defined or discovered, and Blockbuster will have the right to use the
work in perpetuity throughout the universe in any manner Blockbuster determines
in its sole discretion without any further payment to you. You will, as may be
requested by Blockbuster from time to time, do any and all things which
Blockbuster may deem useful or desirable to establish or document Blockbuster’s
rights in any such results and proceeds, including, without limitation, the
execution of appropriate copyright, trademark and/or patent applications,
assignments or similar documents and, if you are unavailable or unwilling to
execute such documents, you hereby irrevocably designate the CEO or his designee
as your attorney-in-fact with the power to execute such documents on your
behalf. To the extent you have any rights in the results and proceeds of your
services under this Agreement that cannot be assigned as described above, you
unconditionally and irrevocably waive the enforcement of such rights. This
Paragraph 6(d) is subject to, and does not limit, restrict, or constitute a
waiver by Blockbuster or any of its affiliated companies of any ownership rights
to which Blockbuster or any of its affiliated companies may be entitled by
operation of law by virtue of being your employer.

 

(e) Litigation. You agree that, during the Term and the pendancy of any
litigation or other proceeding, and at any time thereafter, (i) you will not
communicate with anyone (other than your own attorneys or tax advisors), except
to the extent necessary in the performance of your duties under this Agreement,
with respect to the facts or subject matter of any pending or potential
litigation, or regulatory or administrative proceeding involving Blockbuster or
any of Blockbuster’s affiliated companies, other than any litigation or other
proceeding in which you are a party-in-opposition, without giving prior notice
to Blockbuster or Blockbuster’s counsel; and (ii) in the event that any other
party attempts to obtain information or documents from you with respect to
matters possibly related to such litigation or other proceeding, you will
promptly notify Blockbuster’s counsel before providing such information or
documents.

 

(f) No Right to Give Interviews, Write Books, or Articles. During the Term and
at any time thereafter, except as authorized by Blockbuster, you will not
(i) give any interviews or speeches, or (ii) prepare or assist any person or
entity in the preparation of any books, articles, television or motion picture
productions or other creations, in either case, concerning Blockbuster or any of
its affiliated companies or any of their respective officers, directors, agents,
employees, suppliers or customers.

 

(g) Return of Property. All documents, data, recordings, or other property,
whether tangible or intangible, including all information stored in electronic
form, obtained or prepared by or for you and utilized by you in the course of
your employment with Blockbuster or any of its affiliated companies, will remain
the exclusive property of Blockbuster. In the event of the termination of your

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Frank Paci

January 28, 2003

Page 4

 

employment for any reason, Blockbuster reserves the right, to the extent
permitted by law and in addition to any other remedy Blockbuster may have, to
deduct from any monies otherwise payable to you the following: (i) all amounts
you may owe to Blockbuster or any of its affiliated companies at the time of or
subsequent to the termination of your employment with Blockbuster, and (ii) the
value of the Blockbuster property which you retain in your possession after the
termination of your employment with Blockbuster. In the event that the law of
any state or other jurisdiction requires the consent of any employee for such
deductions, this Agreement will serve as such consent.

 

(h) Non-Disparagement. You agree that, during the Term and at any time
thereafter, you will not, in any communications with the press or other media or
any customer, client or supplier of Blockbuster or any of its affiliated
companies, criticize, ridicule or make any statement which disparages or is
derogatory of Blockbuster or any of its affiliated companies or any of their
respective directors or officers.

 

(i) Injunctive Relief. Blockbuster has entered into this Agreement in order to
obtain the benefit of your unique skills, talent, and experience. You
acknowledge and agree that any violation of paragraphs 6(a) through (h) of this
Agreement will result in irreparable damage to Blockbuster, and, accordingly,
Blockbuster shall be entitled to obtain injunctive and other equitable relief
for any breach or threatened breach of such paragraphs, in addition to any other
remedies available to Blockbuster.

 

(j) Survival; Modification of Terms. Your obligations under Paragraph 6(a)
through (i) will remain in full force and effect for the entire period provided
therein notwithstanding the termination of your employment for any reason or the
expiration of the Term. You and Blockbuster agree that the restrictions and
remedies contained in paragraphs 6(a) through (i) are reasonable and that it is
your intention and the intention of Blockbuster that such restrictions and
remedies will be enforceable to the fullest extent permissible by law. If a
court of competent jurisdiction will find that any such restriction or remedy is
unenforceable but would be enforceable if some part were deleted or the period
or area of application reduced, then such restriction or remedy will apply with
the modification necessary to make it enforceable.

 

7. Disability. If you become “disabled” within the meaning of such term under
Blockbuster’s Short-Term Disability (“STD”) program and its Long-Term Disability
(“LTD”) program during the Term (such condition is referred to as a
“Disability”), you will receive compensation under the STD program for the first
twenty-six (26) weeks of consecutive absence in accordance with its terms.
Thereafter, you will be eligible to receive benefits under the LTD program in
accordance with its terms. If you have not returned to work by December 31st of
a calendar year during the Term, you will receive bonus compensation for the
calendar year(s) during the Term in which you receive compensation under the STD
program, determined as follows:

 

  (i) for the portion of the calendar year from January 1st until the date on
which you first receive compensation under the STD program, bonus compensation
will be determined in accordance with the STIP (i.e., based upon Blockbuster’s
achievement of specified goals and Blockbuster’s good faith estimate of your
achievement of your personal goals, if applicable) and prorated for such period;
and

 

  (ii) for any subsequent portion of the calendar year and any portion of the
following calendar year in which you receive compensation under the STD program,
bonus compensation will be in an amount based on Blockbuster’s achievement of
specified goals and prorated for such period(s).

 

Bonus compensation under this Paragraph 7 will be paid, less applicable
deductions and withholding taxes, by the end of the first quarter of the year(s)
following the year as to which such bonus compensation is payable. You will not
receive bonus compensation for any portion of the calendar

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Frank Paci

January 28, 2003

Page 5

 

year(s) during the Term while you receive benefits under the LTD program. For
the periods that you receive compensation and benefits under the STD and LTD
programs, such compensation and benefits and the bonus compensation provided
under this Paragraph 7 are in lieu of Salary and Bonus under paragraphs 3(a) and
(b). Notwithstanding anything to the contrary in this Agreement, the Term will
not automatically extend in the event you are receiving benefits under the STD
or LTD programs.

 

8. Termination.

 

(a) Termination for Cause. Blockbuster may, at its option, terminate your
employment under this Agreement forthwith for Cause and thereafter will have no
further obligations under this Agreement, including, without limitation, any
obligation to pay Salary or Bonus or provide benefits. Cause will mean:
(i) dishonesty; (ii) embezzlement, fraud, or other conduct which would
constitute a felony; (iii) unauthorized disclosure of Confidential Information;
(iv) your failure to obey a material lawful directive that is appropriate to
your position from an executive(s) in your reporting line; (v) your material
breach of this Agreement; or (vi) your failure (except in the event of your
disability) or refusal to substantially perform your material obligations under
this Agreement.

 

(b) Termination Without Cause. Blockbuster may terminate your employment under
this Agreement without Cause at any time during the Term by written notice to
you.

 

(c) Termination Payments/Benefits. If your employment terminates under Paragraph
8(b), you will thereafter receive, less applicable withholding taxes, and
conditioned on your execution of a General Release and Waiver of Claims
substantially in the form attached hereto as an Addendum:

 

  (i) your Salary, as in effect on the date on which your employment terminates,
for twenty-four (24) months after the date of such termination, paid in
accordance with Blockbuster’s then effective payroll practices;

 

  (ii) bonus compensation for the calendar year in which such termination
occurs, payable by the end of the first quarter of the following year,
determined as follows:

 

  (x) for the portion of the calendar year from January 1st until the date of
the termination, bonus compensation will be determined in accordance with the
STIP (i.e., based on Blockbuster’s achievement of specified goals and
Blockbuster’s good faith estimate of your achievement of your personal goals, if
applicable) and prorated for such period; and

 

  (y) for the remaining portion of such calendar year during the Term, bonus
compensation will be determined based on Blockbuster’s achievement of specified
goals and will be prorated for such period;

 

  (iii) bonus compensation for each subsequent calendar year or portion thereof
during the Term, determined based on Blockbuster’s achievement of specified
goals, prorated for any partial calendar year, and payable by the end of the
first quarter of the following year;

 

  (iv)

medical and dental insurance coverage provided under COBRA at no cost to you
(except as hereafter described) pursuant to Blockbuster’s then-current benefit
plans until the end of the Term or, if earlier, the date on which you become
eligible for medical and dental coverage from a third party; provided, that,
during the period that Blockbuster provides you with this coverage, an amount
equal to the applicable COBRA premiums (or such other amount as may be required
by law) will be included in your income for tax purposes to the extent required
by law

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Frank Paci

January 28, 2003

Page 6

 

 

and Blockbuster may withhold taxes from your compensation for this purpose; and
provided, further, that you may elect to continue your medical and dental
insurance under COBRA at your own expense for the balance, if any, of the period
required by law;

 

  (v) your car allowance until the end of the Term, paid in accordance with
Blockbuster’s then effective payroll practices;

 

  (vi) life insurance coverage until the end of the Term, pursuant to
Blockbuster’s then-current policy in the amount then furnished to Blockbuster
employees at no cost (the amount of such coverage will be reduced by the amount
of life insurance coverage furnished to you at no cost by a third party
employer); and

 

  (vii) stock options granted to you under Blockbuster’s Long-Term Management
Incentive Plan (“LTMIP”) which are exercisable on or prior to the date of
termination of your employment under Paragraph 8(b) hereof and that would have
vested and become exercisable on or before the last date of the Term will be
exercisable until six (6) months after the date of such termination or, if
earlier, the expiration date of the stock options.

 

You will be required to mitigate the amount of any payment provided for in (i),
(ii), (iii) and (v) of this Paragraph 8(c) by seeking other employment, and the
amount of such payments will be reduced by any compensation earned by you from
any source, including, without limitation, salary, sign-on or annual bonus
compensation, consulting fees, commission payments, car allowance and, in the
event you receive significantly more long-term compensation than you received
from Blockbuster, Blockbuster’s good faith estimate of the present value of the
portion of such long-term compensation in excess of the long-term compensation
from Blockbuster; provided, that mitigation will not be required, and no
reduction for other compensation will be made, for twelve (12) months after the
termination of your employment. You agree to notify Blockbuster with respect to
any such compensation earned by you during the period when such mitigation is
required and to promptly respond to any inquiries from Blockbuster with respect
to such compensation or your efforts to fulfill your mitigation obligations
under this provision.

 

(d) Termination of Benefits. Notwithstanding anything in this Agreement to the
contrary (except as otherwise provided in Paragraph 8(c) with respect to medical
and dental benefits and life insurance), participation in all Blockbuster
benefit plans and programs (including, without limitation, vacation accrual, the
401(k) plan, excess plans, LTD and accidental death and dismemberment and
business travel and accident insurance) will terminate upon the termination of
your employment except to the extent otherwise expressly provided in such plans
or programs and subject to any vested rights you may have under the terms of
such plans or programs. The foregoing will not apply to the LTMIP and, after the
termination of your employment, your rights under the LTMIP will be governed by
the terms of the LTMIP option agreements and the applicable LTMIP plans together
with Paragraph 8(c)(vii).

 

(e) Resignation from Official Positions. If your employment with Blockbuster
terminates for any reason, you will be deemed to have resigned at that time from
any and all officer or director positions that you may have held with
Blockbuster or any of its then-current or previously affiliated companies and
all board seats or other positions in other entities you held on behalf of
Blockbuster. If, for any reason, this Paragraph 8(e) is deemed insufficient to
effectuate such resignation, you agree to execute, upon the request of
Blockbuster, any documents or instruments which Blockbuster may deem necessary
or desirable to effectuate such resignation or resignations, and you hereby
authorize the Secretary and any Assistant Secretary of Blockbuster to execute
any such documents or instruments as your attorney-in-fact.

 

9. Death. In the event of your death prior to the end of the Term while actively
employed, your beneficiary or estate will receive (i) your Salary up to the date
on which the death occurs; (ii) any

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Frank Paci

January 28, 2003

Page 7

 

Bonus earned in the prior year but not yet paid; and (iii) bonus compensation
for the calendar year in which the death occurs, determined in accordance with
the STIP (i.e., based upon Blockbuster’s achievement of specified goals and
Blockbuster’s good faith estimate of your achievement of your personal goals, if
applicable) and pro-rated for the portion of the year through the date of death,
payable, less applicable deductions and withholding taxes, by the end of first
quarter of the following year. In the event of your death after the termination
of your employment while you are entitled to receive compensation under
Paragraph 8(c)(i) your beneficiary or estate will receive (x) any Salary payable
under Paragraph 8(c)(i) up to the date on which the death occurs; (y) any bonus
compensation earned under Paragraph 8(c)(ii) with respect to the prior year but
not yet paid; and (z) any bonus compensation for the calendar year in which the
death occurs, determined in accordance with Paragraph 8(c)(ii) and pro-rated for
the portion of the year through the date of death, payable, less applicable
deductions and withholding taxes, by the end of the first quarter of the
following year. Notwithstanding anything to the contrary in this Agreement, the
Term will terminate as of the date of your death.

 

10. No Acceptance of Payments. You represent that you have not accepted or given
nor will you accept or give, directly or indirectly, any money, services or
other valuable consideration from or to anyone other than Blockbuster for the
inclusion of any matter as part of any film, television program or other
production produced, distributed and/or developed by Blockbuster and/or any of
its affiliated companies.

 

11. Equal Opportunity Employer. You recognize that Blockbuster is an equal
opportunity employer. You agree that you will comply with Blockbuster policies
regarding employment practices and with applicable federal, state and local laws
prohibiting discrimination on the basis of race, color, sex, religion, national
origin, citizenship, age, marital status, sexual orientation, disability or
veteran status.

 

12. Employee Statement of Business Conduct. You acknowledge you have read and
agree that you will comply with the Blockbuster Employee Statement of Business
Conduct as it may be amended from time to time.

 

13. Notices. All notices under this Agreement must be given in writing, by
personal delivery or by mail, at the parties’ respective addresses shown on this
Agreement (or any other address designated in writing by either party), with a
copy, in the case of Blockbuster, to the attention of the General Counsel of
Blockbuster. Any notice given by mail will be deemed to have been given three
(3) days following such mailing.

 

14. Assignment. This is an Agreement for the performance of personal services by
you and may not be assigned by you or Blockbuster except that Blockbuster may
assign this Agreement to any affiliated company of or any successor in interest
to Blockbuster.

 

15. TEXAS LAW AND JURISDICTION. YOU ACKNOWLEDGE THAT THIS AGREEMENT HAS BEEN
EXECUTED, IN WHOLE OR IN PART, IN TEXAS, AND YOUR EMPLOYMENT DUTIES ARE
PRIMARILY PERFORMED IN TEXAS. ACCORDINGLY, YOU AGREE THAT THIS AGREEMENT AND ALL
MATTERS OR ISSUES ARISING OUT OF OR RELATING TO YOUR BLOCKBUSTER EMPLOYMENT WILL
BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS APPLICABLE TO CONTRACTS ENTERED
INTO AND PERFORMED ENTIRELY THEREIN. ANY ACTION TO ENFORCE THIS AGREEMENT WILL
BE BROUGHT SOLELY IN THE STATE OR FEDERAL COURTS LOCATED IN THE CITY OF DALLAS.

 

16. No Implied Contract. The parties intend to be bound only upon execution of a
written agreement and no negotiation, exchange of draft or partial performance
will be deemed to imply an agreement. Neither the continuation of employment nor
any other conduct will be deemed to imply a continuing agreement upon the
expiration of the Term.

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Frank Paci

January 28, 2003

Page 8

 

17. Entire Understanding. This Agreement contains the entire understanding of
the parties hereto relating to the subject matter contained in this Agreement,
and can be changed only by a writing signed by both parties.

 

18. Void Provisions. If any provision of this Agreement, as applied to either
party or to any circumstances, will be found by a court of competent
jurisdiction to be unenforceable but would be enforceable if some part were
deleted or the period or area of application were reduced, then such provision
will apply with the modification necessary to make it enforceable, and will in
no way affect any other provision of this Agreement or the validity or
enforceability of this Agreement.

 

19. Effect of Viacom Agreement. If the terms of your employment are currently
governed by an agreement entered into between you and Blockbuster Entertainment
Group, a business unit of Viacom Inc (“Viacom”) (“Viacom Agreement”), the Viacom
Agreement, along with the applicable Viacom stock option agreement(s), will
continue to govern your rights with respect to stock options granted to you
under Viacom’s 1994 and 1997 Long Term Management Incentive Plans and any
successor or other plans until such time as Viacom distributes all or
substantially all of its shares of Blockbuster common stock to stockholders of
Viacom (a “Split-Off”). In addition to any rights set forth in the applicable
Viacom stock option agreement(s), Viacom has indicated to Blockbuster that, in
the event of a Split-Off, any options to purchase Viacom common stock (“Viacom
Stock Options”) that are held by you (i) that are exercisable at the date you
cease to be a Viacom employee as a result of the Split-Off (the “Termination
Date”) and (ii) to the extent the terms of your employment are subject to a
Viacom Agreement, that would have become exercisable during the employment term
of the Viacom Agreement will remain outstanding and will be exercisable by you
for a period of six (6) months after the Termination Date or, if earlier, the
expiration date of the stock options. By executing this Agreement, you hereby
acknowledge and agree that, in the event of the foregoing, your only remaining
right with respect to the Viacom Agreement will be your right to exercise your
Viacom Stock Options and Viacom will be released from any and all other
obligations and liabilities under the Viacom Agreement.

 

20. Supersedes Prior Agreement. Subject to Paragraph 19, this Agreement
supersedes and cancels all prior agreements relating to your employment by
Blockbuster or any of its affiliated companies with respect to the period
covered by the Term.

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Frank Paci

January 28, 2003

Page 9

 

If the foregoing correctly sets forth our understanding, please sign, date and
return all three (3) copies of this Agreement to the undersigned for execution
on behalf of Blockbuster; after this Agreement has been executed by Blockbuster
and a fully-executed copy returned to you, it will constitute a binding
agreement between us.

 

Very truly yours,

BLOCKBUSTER INC.

By:

 

/s/ Larry J. Zine

   

Larry J. Zine

   

Executive Vice President and

   

Chief Financial Officer

 

ACCEPTED AND AGREED:

/s/ Frank Paci

Frank Paci

Date:

 

5/23/2003

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Frank Paci

January 28, 2003

Page 10

 

GENERAL RELEASE AND WAIVER OF CLAIMS

 

a. Release of Claims. As consideration by you, you agree on behalf of yourself,
successors and assigns, to release and forever discharge Blockbuster and its
subsidiaries, parent and affiliated companies, employees, officers and
directors, and their respective assigns, from any and all manner of claims,
debts, demands, damages, liabilities and causes of action, whether known or
unknown, from the beginning of time, which you, or your successors and assigns,
may have had or may presently have, relating to or arising out of the employment
relationship or the termination of said relationship including, but not limited
to, causes of action for libel, slander, breach of contract, impairment of
economic opportunity, intentional infliction of emotional distress or any other
tort, or claims under federal, state, or local constitutions, statutes,
regulations, ordinances or common law, including, but not limited to, the
Employee Retirement Income Security Act of 1974; the Civil Rights Acts of 1866,
1871, 1964 and 1991; the Age Discrimination in Employment Act, as amended by the
Older Workers Benefit Protection Act of 1990; the Rehabilitation Act of 1973;
the Equal Pay Act of 1963; and the Americans with Disabilities Act of 1990. You
acknowledge and agree that you have been paid all wages owed to you and that you
have received all leave to which you are entitled. You understand that you are
not waiving any right under the Older Workers Benefit Protection Act to test the
knowing and voluntary nature of this General Release and Waiver of Claims in
court.

 

b. Post-Release Claims. You do not waive any rights or claims that may arise
after the date this Release is executed.

 

c. No Admission. Nothing contained in this Release constitutes an admission of
liability by Blockbuster concerning any aspect of your employment with or
separation from Blockbuster.

 

d. Confidentiality. You acknowledge that, during the course of the employment
relationship, you were privy to confidential and proprietary business
information belonging to Blockbuster, the unauthorized disclosure of which could
cause serious and irreparable injury to Blockbuster and its affiliates. The
information includes, but is not limited to, information concerning existing and
prospective expansion plans; existing and potential financing sources and
arrangements; existing and prospective marketing plans and activities;
proprietary computer software programs and applications; business plans and
strategies and other non-public information. You agree to hold and safeguard the
confidential information in trust for Blockbuster, its successors and assigns,
and agree that you will not, at any time, misappropriate, use for your own
advantage, disclose or otherwise make available to anyone who is not an officer
of Blockbuster, for any reason, any of the confidential information, regardless
of whether the confidential information was developed or prepared by you or
others. You agree not to remove any writings containing confidential information
from Blockbuster’s premises or possession without Blockbuster’s express consent.
You agree to promptly return to Blockbuster all confidential information in your
possession or under your control (whether in original, copy, or disk form).
Before disclosing any confidential information under compulsion of legal
process, you agree to promptly give notice to Blockbuster of the fact that you
have been served with legal process pursuant to which the disclosure of
confidential information may be requested. Such notice will be given within
sufficient time to permit Blockbuster to intervene in the matter or to take such
other actions as may be necessary or appropriate to protect its interest in its
confidential business information. The scope of this Release is not limited to
information that is patented, patentable, copyrighted or technically
classifiable as a trade secret. These restrictions will not apply to
confidential information which is or becomes generally available to the public
other than as a result of a disclosure by you or any other person who directly
or indirectly receives such information from you, or is or becomes available to
you on a non-confidential basis from a source which is entitled to disclose it
to you.

 

e. Cooperation. Subject to reimbursement by Blockbuster of reasonable
out-of-pocket costs and expenses, you agree to cooperate fully with Blockbuster
and its counsel with respect to any matter (including litigation, investigation
or governmental proceeding) which relates to matters with which you were
involved during the term of your employment with Blockbuster. Such cooperation
will include appearing from time to time at the offices of Blockbuster or
Blockbuster’s counsel for conferences and interviews and in general providing
the officers of Blockbuster and its counsel with the full benefit of your
knowledge with respect to any such matter. You agree to render such cooperation
in a timely fashion and at such times as may be mutually agreeable to the
parties concerned.

--------------------------------------------------------------------------------

Frank Paci

January 28, 2003

Page 11

 

f. Litigation. You agree that, during the pendency of any litigation or other
proceeding, and anytime thereafter, (x) you will not communicate with anyone
(other than your attorneys and tax advisors) with respect to the facts or
subject matter of any pending or potential litigation, or regulatory or
administrative proceeding involving Blockbuster or any of its officers,
directors, agents, employees, suppliers or customers, other than any litigation
or other proceeding in which you are a party-in-opposition, without giving prior
notice to Blockbuster’s General Counsel, and (y) in the event that any other
party attempts to obtain information or documents from you with respect to
matters possibly related to such litigation or other proceeding, you will
promptly so notify Blockbuster’s General Counsel.

 

g. Confidentiality of Release. This Release and the terms hereof are
confidential. You agree not to disclose this Release or its provisions to any
person except to your attorney or tax advisor.

 

h. Rights upon Breach. For breach of any provision of this Release, the parties
will have such remedies and rights as are customarily available at law or in
equity, except that, in any action or proceeding brought to enforce this Release
or to recover damages for its breach, the prevailing party will be entitled to
recover, should it substantially prevail in the matter, reasonable attorneys’
fees and litigation expenses (other than in a proceeding brought by you
challenging the validity of this General Release under the Older Workers Benefit
Protection Act). In the event you, or any party acting on your behalf, breach
this Release (other than through a challenge to its validity under the Older
Workers Benefit Protection Act), Blockbuster’s obligations imposed herein will
be extinguished and Blockbuster will not be obligated to continue performance
under this Release. In such a case, you will be required to re-pay Blockbuster
all consideration received pursuant to this Release and this Release will act as
a complete and total bar to any recovery.

 

i. Injunctive Relief. The legal remedies for the breach of this Release would
not be adequate and, in addition to any other remedies available at law, these
provisions may be specifically enforced by temporary or permanent injunctive or
other equitable relief.

 

j. Texas Law and Jurisdiction. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, IRRESPECTIVE OF THE CONFLICT
OF LAWS RULES. FURTHERMORE, BECAUSE YOU AND BLOCKBUSTER AGREE THAT THE TEXAS
COURTS ARE THE EXCLUSIVE FORUM FOR RESOLVING ANY DISPUTES ARISING OUT OF THIS
AGREEMENT OR YOUR EMPLOYMENT, THE PARTIES SUBMIT THEMSELVES TO THE PERSONAL
JURISDICTION OF THE TEXAS COURTS.

 

k. Advice of Counsel. You are herein advised to discuss this Release with an
attorney of your choice before signing it.

 

l. No Parol Evidence. This Release represents the full understanding between you
and Blockbuster, other than any Employment Agreement signed by you and an
officer of Blockbuster and still in effect, and no parol evidence other than the
Employment Agreement will be relevant to supplement or explain this Release.

 

m. Void Provisions. Should any provision of this Release be found unenforceable,
the remainder of the Release, in its modified form, will nonetheless be fully
enforceable.

 

n. Headings. The headings of the sections are included solely for convenience.
If the headings and the text of the Release conflict, the text shall control.
All references to sections are to the Release unless otherwise indicated.

 

o. Review and Revocation. You acknowledge that you have been given at least
twenty-one (21) days to review and consider this Release, and may revoke
acceptance within seven (7) days of the execution of this Release. This Release
will become effective and enforceable immediately upon the expiration of the
revocation period.