Sample Business Contracts

Stock Option Agreement - THQ Inc. and Brian J. Farrell

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                             STOCK OPTION AGREEMENT
                          DATED AS OF AUGUST 28, 1996
                           BY AND BETWEEN T-HQ, INC.,
                    A NEW YORK CORPORATION (THE "COMPANY"),
                     AND BRIAN J. FARRELL (THE "OPTIONEE")

         This AGREEMENT, dated as of August 28, 1996 is made between T-HQ,
INC., a New York corporation, having its principal offices at 5016 North
Parkway Calabasas, Calabasas, California 91302, as the Company, and Brian J.
Farrell, as Optionee, having an address at 5016 North Parkway Calabasas,
Calabasas, California 91302.

                               W I T N E S S E T H

         1.      Grant of Option. In consideration for and recognition of
Optionee's past services to the Company and Optionee's contribution to the
improved financial performance and success of the Company, the Company hereby
grants to the Optionee, subject to the terms and conditions herein set forth,
the right and option (the "Option") to purchase from the Company, all or any
part of an aggregate of two hundred thousand (200,000) shares of common stock of
the Company, par value $.0001 per share (the "Common Stock"), at the exercise
price of $5.00 per share (equaling the market price per share of the Common
Stock on the date of this Agreement), such Option to be exercisable as
hereinafter provided.

         2.      Limitation on Exercisability of Option.  This Option shall be
exercisable by the Optionee, in whole or in part, to the extent of the
following number of shares of Common Stock on the dates set forth below:

                                                Date After Which Shares
           Number of Shares                     Can Be Purchased         
           ----------------                     ----------------         

              66,667 Shares                     August 28, 1996

              an additional
              66,667 Shares                     August 28, 1997

              an additional
              66,666 Shares                     August 28, 1998

         Notwithstanding anything to the contrary contained herein, this Option
shall automatically vest for the entire number of shares subject to the Option,
upon a "Change of Control," as such term is defined in the Optionee's
Employment Agreement with the Company, as the same may be amended and restated
from time to time.

         3.      Expiration of Option.  This Option shall not be exercisable
after 5:00 p.m. (P.D.T.) on August 28, 2006.

<PAGE>   2

         4.      Non-Assignability of Option.  Except as specified below, this
Option shall not be given, granted, sold, exchanged, transferred, pledged,
assigned or otherwise encumbered or disposed of by the Optionee, otherwise than
by will or the laws of descent and distribution, and, during the lifetime of
the Optionee, shall not be exercisable by any other person, but only by the
Optionee.  Optionee may designate an individual who shall have the ability and
authority to exercise this Option on Optionee's behalf in the event of
Optionee's permanent and total disability within the meaning of Section
22(e)(3) of the Internal Revenue Code of 1986, as amended (the "Code").

         5.      Method of Exercise of Option.  The Option granted hereunder
shall be exercised by the delivery by the Optionee to the Company at its
principal office (attention of the Secretary) of written notice of the number
of shares of Common Stock with respect to which the Option is being exercised,
and such notice shall be accompanied by payment of the full option price of
such shares.  Payment of such option price shall be made by the Optionee's
delivery of his check payable to the order of the Company; provided, however,
that notwithstanding the foregoing provisions of this Section 5,  at the
written request of the Optionee, shares acquired pursuant to the exercise of
the Option may be paid for in full at the time of exercise by the surrender of
shares of Common Stock (with a fair market value on the date of exercise
equaling the option price of the shares of Common Stock for which such Option
is exercised) held by or for the account of the Optionee at the time of
exercise to the extent permitted by subsection (c) (5) of Section 422 of the
Code and Section 16(b) of the Exchange Act of 1934, as amended, and the Rules
of the Securities and Exchange Commission, without liability to the Company.

         6.      Death or Termination of Employment or Services.  If the
employment of the Optionee as an employee with, or the services of the Optionee
as a non-employee director for, the Company shall be terminated for any reason,
this Option shall continue until its expiration set forth in Section 3 hereof.

         7.      Investment Representation.  The Optionee represents that at
the time of any exercise of this Option, to the extent that the offer and sale
by the Company of the shares of Common Stock are not registered under the
Securities Act of 1933, as amended (the "Securities Act"), such Common Stock
will be acquired for investment and not for resale or with a view to the
distribution thereof.  Upon exercise of the Option and the issuance of any
shares thereunder, all certificates representing shares of Common Stock shall
bear on the face thereof substantially the following legend:

<PAGE>   3

                 UNDER THE SECURITIES ACT OF 1933, AS

         7.      Registration Rights.

                 (a)      If at any time the Company proposes to register
         equity securities under the Securities Act in connection with the
         public offering solely for cash on Form S-1, S-2 or S-3, the Company
         shall promptly give the Optionee written notice of such registration
         (a "Piggyback Registration").  Upon the written request of the
         Optionee given within fifteen (15) days following the date of such
         notice, the Company shall cause to be included in such registration
         statement and use its best efforts to be registered under the
         Securities Act all the shares of Common Stock that the Optionee shall
         have requested to be registered.  The Company shall have the absolute
         right to withdraw or cease to prepare or file any registration
         statement for any offering referred to in this Section without any
         obligation or liability to the Optionee.

                 (b)      If the underwriters' representative or agent with
         respect to such registration shall advise the Company in writing that,
         in its opinion, the amount of shares of Common Stock requested to be
         included in such registration would materially adversely affect such
         offering, or the timing thereof, then the Company will include in such
         registration, to the extent of the amount and class which the Company
         is so advised can be sold without such material adverse effect in such
         offering:  First, all securities proposed to be sold by the Company
         for its own account; second, the shares of Common Stock requested to
         be included in such registration by the Optionee and all other
         securities being registered pursuant to the exercise of contractual
         rights comparable to the rights granted in this Agreement pro rata
         based on the estimated gross proceeds from the sale thereof; and
         third, all other securities requested to be included in such

                 (c)      The Optionee shall be entitled to have his shares of
         Common Stock included in an unlimited number of Piggyback
         Registrations pursuant to this Agreement.

<PAGE>   4

                 (d)      Whenever required to effect a Piggyback Registration,
the Company shall, as expeditiously as practicable:

                          i)      Prepare and file with the Commission a
                 registration statement with respect to such shares of Common
                 Stock and use the Company's reasonable efforts to cause such
                 registration statement to become effective.

                          ii)     Prepare and file with the Commission such
                 amendments and supplements to such registration statement and
                 the prospectus used in connection with such registration
                 statement as may be necessary to comply with the provisions of
                 the Securities Act and rules thereunder with respect to the
                 disposition of all securities covered by such registration
                 statement.  Pending such amendment or supplement the Optionee
                 shall cease making offers or sales of shares pursuant to the
                 prior prospectus.  In the event that any shares of Common
                 Stock included in a registration statement subject to, or
                 required by, this Agreement remain unsold at the end of the
                 period during which the Company maintains the effectiveness of
                 such registration statement, the Company may file a
                 post-effective amendment to the registration statement for the
                 purpose of removing such shares from registered status.

                          iii)    Furnish to the Optionee, without charge, such
                 numbers of copies of the registration statement, any pre-
                 effective or post-effective amendment thereto, the prospectus,
                 including each preliminary prospectus and any amendments or
                 supplements thereto, in each case in conformity with the
                 requirements of the Securities Act and the rules thereunder,
                 and such other related documents as any the Optionee may
                 reasonably request in order to facilitate the disposition of
                 shares owned by the Optionee.

                          iv)     Use its reasonable efforts to register and
                 qualify the securities covered by such registration statement
                 under such other securities or Blue Sky laws of such states or
                 jurisdictions as shall be reasonably requested by any
                 underwriters' representative or agent and the Optionee.

                          v)      Cooperate with the Optionee, and the
                 underwriters' representative or agent for such offering in the
                 marketing of the shares of Common Stock, including making
                 available the Company's officers, accountants, counsel,
                 premises, books and records for such purpose, but the Company
                 shall not be required to incur any material out-of-pocket
                 expense pursuant to this sentence.  Such obligation shall
                 include making available for inspection by the Optionee,  and
                 any of his representatives, all financial and other
                 information as shall be reasonably requested by them, and
                 provide the Optionee the reasonable opportunity to discuss the
                 business affairs of the Company with its principal executives
                 and independent public accountants who have certified the

<PAGE>   5

                 financial statements included in such registration statement,
                 in each case all as necessary to enable them to exercise their
                 due diligence responsibility under the Securities Act;
                 provided, however, that information that the Company
                 determines, in good faith, to be confidential and which the
                 Company advises such person in writing, is confidential shall
                 not be disclosed unless such person signs a confidentiality
                 agreement reasonably satisfactory to the Company.

                          vi)     Promptly notify the Optionee of any stop
                 order issued or threatened to be issued by the Securities and
                 Exchange Commission in connection therewith and take all
                 reasonable actions required to prevent the entry of such stop
                 order or to remove it if entered.

                 (e)      It shall be a condition precedent to the obligations
         of the Company to take any action pursuant to this Agreement with
         respect to the shares of Common Stock that the Optionee requests to

                          i)      Furnish to the Company such information
                 regarding the Optionee, the number and nature of the
                 securities of the Company owned by it, and the intended method
                 of disposition of such securities as shall be required to
                 effect the registration of his shares of Common Stock, and to
                 cooperate with the Company in preparing such registration;

                          ii)     Agree to sell his shares to the underwriters
                 at the same price and on substantially the same terms and
                 conditions as the Company or the other persons on whose behalf
                 the registration statement was being filed have agreed to sell
                 their securities, and to execute the underwriting agreement
                 agreed to by the Company.

                 (f)      The Optionee, if so requested by the Company or the
         underwriters' representative or agent in connection with an offering
         of any securities covered by a registration statement filed by
         Company, shall not effect any public sale or distribution of shares of
         Common Stock or any securities convertible into or exchangeable or
         exercisable for shares of Common Stock, including a sale pursuant to
         Rule 144 under the Securities Act during the 15-day period prior to,
         and during the 180-day period beginning on, the date such registration
         statement is declared effective under the Securities Act by the

<PAGE>   6

         9.      Adjustments Upon Changes in Capitalization.

                 (a)  Except as may be otherwise provided in Section 2 of this
         Agreement, in the event that the outstanding Common Stock is hereafter
         changed by reason of reorganization, merger, consolidation,
         recapitalization, reclassification, stock split-up, combination of
         shares, stock dividends or the like, an appropriate adjustment shall
         be made by the Stock Option Committee of the Company's Board of
         Directors in the aggregate number of shares of Common Stock available
         under this Agreement and in the number of shares and option price per
         share subject to the outstanding Option.  If the Company shall be
         reorganized, consolidated or merged with another corporation, or if
         all or substantially all of the assets of the Company shall be sold or
         exchanged, the Optionee shall, at the time of issuance of the Common
         Stock under such a corporate event, be entitled to receive upon the
         exercise of his Option the same number and kind of shares of Common
         Stock or the same amount of property, cash or securities as he would
         have been entitled to receive upon the happening of such corporate
         event as if he had been, immediately prior to such event, the holder
         of the number of shares of Common Stock covered by this Option;

                 (b)  Any adjustment in the number of shares of Common Stock
         apply proportionate to only the unexercised portion of the Option
         granted hereunder.  If fractions of a share would result from any such
         adjustment, the adjustment shall be revised to the next lower whole
         number of shares.

        10.      No Rights as Stockholder.  The Optionee shall have no rights
as a shareholder in respect to the shares of Common Stock as to which this
Option shall not have been exercised nor any payment made with respect to such
exercise as herein provided.

        11.     NonStatutory Option.  This Option is not intended to be an
incentive stock option within the meaning of Section 422 of the Code.

        12.     Binding Effect.  Except as herein otherwise expressly
provided, this Agreement shall be binding upon and inure to the benefit of the
parties hereto, their legal representatives, successors and assigns.

        13.     Governing Law.  This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York without
reference to conflict of laws, principals or rules.

        14.     Notices.  Any notice hereunder shall be delivered by hand or
by registered or certified mail, return receipt requested to a party at its
address set forth above, subject to the right of either party to designate at
any time hereafter, in writing, some other address.

        15.     Waiver.  The waiver by either party of a breach of any
provision of this Agreement shall not operate or be construed as a Agreement
shall be held to be invalid or


<PAGE>   7

unenforceable, such invalidity or unenforceability shall attach only to such
provision and not in any way affect or render invalid or unenforceable any other
provisions of this Agreement, and this Agreement shall be carried out as if such
invalid or unenforceable provisions were not embodied therein.

        16.     Counterparts.  This Agreement may be exercised in
counterparts, each of which shall constitute one and the same instrument.

<PAGE>   8

         IN WITNESS WHEREOF, T-HQ, INC. has caused this Agreement to be
executed by an appropriate executive officer and the Optionee has executed this
Agreement, both as of the day and year first written.

                                             THE COMPANY:
                                             T-HQ, INC.
                                             /s/Deborah A. Lake
                                             Name: Deborah A. Lake
                                             Title: Vice President - Finance
                                             and Administration

                                             /s/Brian J. Farrell
                                             Brian J. Farrell