Stock Option Agreement - THQ Inc. and Brian J. Farrell
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.
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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:
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"THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS.
THEY MAY NOT BE SOLD OR OFFERED FOR SALE
EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES
UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAW OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO T-HQ, INC. THAT
SUCH REGISTRATION IS NOT REQUIRED."
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
registration.
(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.
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(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
audited
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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
register:
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
Commission.
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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
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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.
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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
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Name: Deborah A. Lake
Title: Vice President - Finance
and Administration
OPTIONEE:
/s/Brian J. Farrell
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Brian J. Farrell
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