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Sample Business Contracts

Stock Option Agreement - THQ Inc. and Jeffrey C. Lapin

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                             STOCK OPTION AGREEMENT


        Grantee:                                    Jeffrey C. Lapin
                                              --------------------------------

        Number of Shares of Company
        Common Stock Underlying Option:             200,000
                                              --------------------------------

        Purchase Price Per Share:                   $16.75
                                              --------------------------------

        Date of Grant:                              October 21, 1998
                                              --------------------------------


         This Stock Option Agreement is entered into as of the 21st day of
October 1998 by and between THQ Inc., a Delaware corporation, currently having
its executive office at 5016 North Parkway Calabasas, California 91302 (the
"Company"), and Jeffrey C. Lapin (the "Grantee").

RECITAL

         WHEREAS, the Company desires that Grantee become an employee and
officer of the Company and has determined that in order to induce Grantee to
become an employee and officer of the Company, the Company will grant to Grantee
an option to purchase shares of common stock of the Company.

         1. STOCK OPTION

            1.1 GRANT OF STOCK OPTION. The Company hereby grants to Grantee, and
Grantee hereby accepts, the right and option to purchase from the Company all or
any part of the Number of Shares of Company Common Stock Underlying Options set
forth above (the "Shares") at the Purchase Price Per Share set forth above on
the terms and conditions stated herein (the "Option"). The Option granted
hereunder is issued as a non-qualified option and is not intended to be an
"Incentive Stock Option," as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), and is not issued under the THQ Inc. Amended
and Restated 1997 Stock Option Plan or any other Company plan. Grantee expressly
acknowledges that the Option creates certain tax liabilities upon exercise and
in certain other events.

            1.2 TERMS OF STOCK OPTION. The Option shall be subject to the
following terms and conditions:

                (a) Option Period. The Option shall not be exercisable after
5:00 p.m., Los Angeles time, on October 21, 2003 (the "Expiration Date"). The
Option, or portion thereof, may be exercised only with respect to whole shares
of common stock, par value $0.01 per share of the Company (the "Common Stock").
Notwithstanding Section 1.3 hereof or the provisions of any Agreement, the Board
of Directors of the Company (the "Board") or a committee (the "Committee")
designated by the Board consisting of two or more members of the Board each of
whom shall be a "Non-Employee Director" within the meaning of Rule 16b-3 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and (if
the Board wishes to qualify under Section 162(m) of the Code) the Committee may
in its sole and absolute discretion extend the time for the exercise of the
Option.



<PAGE>   2

                (b) Vesting. Subject to the limits set forth herein relating to
the termination of Grantee's employment by the Company, this Option shall be
deemed vested and thus exercisable by Grantee only to the extent of the
following number of Shares commencing on the following dates:

<TABLE>
<CAPTION>
                                       First Date After Which
           Number of Shares            Shares May Be Purchased
           ----------------            -----------------------
<S>                                      <C>
                 66,667                   October 21, 1998
                133,334                   October 21, 1999
                200,000                   October 21, 2000
</TABLE>

                (c) Method of Exercise. The Option may be exercised (i) by
giving written notice to the Company specifying the number of whole shares of
Common Stock to be purchased and accompanied by payment therefor in full (or
arrangement made for such payment to the Company's satisfaction) either (A) in
cash, (B) by delivery of previously owned whole shares of Common Stock (which
Grantee has held for at least six months prior to the delivery of such shares or
which Grantee purchased on the open market and in each case for which Grantee
has good title, free and clear of all liens and encumbrances) having an
aggregate Fair Market Value, determined as of the date of exercise, equal to the
aggregate purchase price payable by reason of such exercise, (C) in cash by a
broker-dealer acceptable to the Company to whom Grantee has submitted an
irrevocable notice of exercise, or (D) a combination of (A), (B) and (C), in
each case to the extent not prohibited herein and (ii) by executing such
documents as the Company may reasonably request; provided, however, that
notwithstanding the foregoing or anything herein to the contrary, the Company
shall have sole discretion to disapprove of an election pursuant to clauses
(B)-(D). "Fair Market Value" shall mean the closing transaction price of a share
of Common Stock as reported in the NASDAQ National Market System, or other
exchange where the Common Stock is listed, on the date as of which such value is
being determined or, if there shall be no reported transactions on such date, on
the next preceding date for which transactions were reported; provided that if
Fair Market Value for any date cannot be determined as above provided, Fair
Market Value shall be determined by the Committee by whatever means or method as
the Committee, in the good faith exercise of its discretion, shall at such time
deem appropriate. Any fraction of a share of Common Stock which would be
required to pay such purchase price shall be disregarded and the remaining
amount due shall be paid in cash by Grantee. No certificate representing Common
Stock shall be delivered until the full purchase price therefor has been paid
(or arrangement made for such payment to the Company's satisfaction).

         1.3 TERMINATION OF EMPLOYMENT.

             (a) Total Disability. If Grantee's employment with the Company
terminates by reason of Total Disability, the Option shall be exercisable only
to the extent that the Option is exercisable on the effective date of such
Grantee's termination of employment and may thereafter be exercised by Grantee
(or Grantee's legal representative or similar person) until and including the
earliest to occur of (i) the date which is one year after the effective date of
Grantee's termination of employment, and (ii) the Expiration Date. "Total
Disability" shall mean the permanent and total disability of Grantee as
described in the written employment agreement, if any, between the Company and
Grantee (an "Employment Agreement"); and otherwise shall mean the inability of
Grantee substantially to perform Grantee's duties and responsibilities for a
continuous period of six months.


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<PAGE>   3

             (b) Death. If Grantee's employment with the Company terminates by
reason of death, the Option shall be exercisable only to the extent that the
Option is exercisable on the date of Grantee's death and may thereafter be
exercised by Grantee's executor, administrator, legal representative,
beneficiary or similar person until and including the earliest to occur of (i)
the date which is one year after the date of death, and (ii) the Expiration
Date.

             (c) Termination for Cause. If the employment of Grantee is
terminated by the Company for Cause, the Option shall terminate automatically on
the date of such termination. "Cause" shall have the meaning ascribed in an
Employment Agreement and (i) shall also include Grantee's termination of his
employment for any reason, but (ii) shall not include termination by reason of
Grantee's Total Disability notwithstanding any language to the contrary in an
Employment Agreement; and otherwise shall mean the willful and continued failure
to substantially perform the duties with the Company (other than a failure
resulting from Grantee's Total Disability), the willful engaging in conduct
which is demonstrably injurious to the Company or any subsidiary of the Company
(a "Subsidiary"), monetarily or otherwise, including conduct that, in the
reasonable judgment of the Company, does not conform to the standard of the
Company's executives, any act of dishonesty, commission of a felony or a
significant violation of any statutory or common law duty of loyalty to the
Company, or Grantee's termination of his employment for any reason. If Grantee
is removed from the Board of Directors for cause as permitted under Delaware
law, the Option shall terminate automatically on the date of such termination.

             (d) Other Termination. If Grantee's employment with the Company is
terminated by the Company for any reason other than Total Disability, death or
for Cause, the Option shall be exercisable only to the extent that the Option is
exercisable on the effective date of Grantee's termination of employment and may
thereafter be exercised by Grantee (or Grantee's legal representative or similar
person) until and including the earliest to occur of (i) the date which is three
months after the effective date of Grantee's termination of employment, and (ii)
the Expiration Date; provided, however, that if Grantee's employment with the
Company is terminated by the Company within the nine-month period following the
consummation of a Transaction (as defined in Section 6.1) for any reason other
than Total Disability, death or for Cause, the Option shall become fully
exercisable, and may thereafter be exercised by Grantee (or Grantee's legal
representative or similar person) until and including the earliest to occur of
(i) the date which is three months after the effective date of Grantee's
termination of employment and (ii) the Expiration Date; provided further, that
if Grantee's employment with the Company is terminated by the Company at any
other time for any reason other than Total Disability, death or for Cause, the
Committee may, in its sole and absolute discretion, provide that the Option
shall become fully exercisable and may thereafter be exercised by Grantee (or
Grantee's legal representative or similar person) until and including the
earliest to occur of (i) the date which is three months after the effective date
of Grantee's termination of employment and (ii) the Expiration Date.


             (e) Death Following Termination of Employment. If Grantee dies
during the period set forth in Section 1.3(a) following termination of
employment by reason of Total Disability, or if Grantee dies during the period
set forth in Section 1.3(d) following termination of employment by the Company
for any other reason other than Total Disability, death or for Cause, the Option
shall be exercisable only to the extent that the Option is exercisable on the
date of Grantee's death and may thereafter be exercised by Grantee's executor,
administrator, legal representative, beneficiary or similar person, as the case
may be, until and including the earliest to occur of (i) the date which is one
year after the date of death and (ii) the Expiration Date.




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<PAGE>   4

         2. TRANSFERABILITY

            2.1 NON-TRANSFERABILITY. The Option may not be given, granted, sold,
exchanged, pledged, assigned, hypothecated or otherwise encumbered or disposed
of by Grantee, other than by will or the laws of descent and distribution or
pursuant to beneficiary designation procedures set forth in Section 2.2. Upon
any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or
otherwise dispose of the Option hereunder, the Option and all rights thereunder
shall immediately become null and void. Except to the extent permitted by the
foregoing sentence, the Option may be exercised during Grantee's lifetime only
by Grantee or Grantee's legal representative or similar person.

            2.2 DESIGNATION OF BENEFICIARY. (a) Grantee may file with the
Committee a written designation of one or more persons as Grantee's beneficiary
or beneficiaries (both primary and contingent) in the event of Grantee's death.
To the extent an outstanding option granted hereunder is exercisable, such
beneficiary or beneficiaries shall be entitled to exercise such option.

                (b) Each beneficiary designation shall become effective only
when filed in writing with the Committee during Grantee's lifetime on a form
prescribed by the Committee. The spouse of a married Grantee domiciled in a
community property jurisdiction shall join in any designation of a beneficiary
other than such spouse. The filing with the Committee of a new beneficiary
designation shall cancel all previously filed beneficiary designations.

                (c) If an Grantee fails to designate a beneficiary, or if all
designated beneficiaries of an Grantee predecease Grantee, then each outstanding
option hereunder held by such Grantee, to the extent exercisable, may be
exercised by such Grantee's executor, administrator, legal representative or
similar person.

         3. WITHHOLDING TAXES

            3.1 TAX WITHHOLDING. The Company shall have the right to require,
prior to the issuance or delivery of any shares of Common Stock, payment by
Grantee of any Federal, state, local or other taxes which may be required to be
withheld or paid in connection with the Option hereunder. Grantee may elect that
(i) the Company shall withhold whole shares of Common Stock which would
otherwise be delivered upon exercise of the option having an aggregate Fair
Market Value determined as of the date the obligation to withhold or pay taxes
arises in connection with the option (the "Tax Date") in the amount necessary to
satisfy any such obligation or (ii) Grantee satisfy any such obligation by any
of the following means: (A) a cash payment to the Company, (B) delivery to the
Company of previously owned whole shares of Common Stock (which Grantee has held
for at least six months prior to the delivery of such shares or which Grantee
purchased on the open market and in each case for which Grantee has good title,
free and clear of all liens and encumbrances) having an aggregate Fair Market
Value determined as of the Tax Date, equal to the amount necessary to satisfy
any such obligation, (C) a cash payment by a broker-dealer acceptable to the
Company to whom Grantee has submitted an irrevocable notice of exercise, or (D)
any combination of (A), (B) and (C), in each case to the extent not prohibited
by the Agreement relating to the option. Any fraction of a share of Common Stock
which would be required to satisfy such an obligation shall be disregarded and
the remaining amount due shall be paid in cash by Grantee; provided, however,
that the Committee shall have sole discretion to disapprove of an election
pursuant to any of clauses (B)-(D) and that if Grantee is subject to Section 16
of the Exchange Act, the Company may require that the method of satisfying any
such obligation be in compliance with Section 16 and the rules and regulations
thereunder. Any fraction of a share of Common


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<PAGE>   5

Stock which would be required to satisfy such an obligation shall be disregarded
and the remaining amount due shall be paid in cash by Grantee.

         4. SALE OR DISPOSITION OF SHARES

            4.1 RESTRICTIONS ON SHARES. The Option shall be subject to the
requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of Common Stock subject to the
Option upon any securities exchange or under any law, or the consent or approval
of any governmental body, or the taking of any other action is necessary or
desirable as a condition of, or in connection with, the delivery of shares
thereunder, such shares shall not be delivered unless such listing,
registration, qualification, consent, approval or other action shall have been
effected or obtained, free of any conditions not acceptable to the Company. The
Company may require that certificates evidencing shares of Common Stock
delivered pursuant to the Option bear a legend indicating that the sale,
transfer or other disposition thereof by the holder is prohibited except in
compliance with the Securities Act of 1933, as amended, and the rules and
regulations thereunder.

         5. ADJUSTMENTS

            5.1 ADJUSTMENT. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Common Stock other than a regular cash
dividend, the number and class of securities subject to the Option and the
purchase price per security shall be appropriately adjusted by the Committee,
without an increase in the aggregate purchase price. The decision of the
Committee regarding any such adjustment shall be final and binding. If any
adjustment would result in a fractional security being subject to the Option,
the Company shall pay Grantee, in connection with the first exercise of the
Option in whole or in part occurring after such adjustment, an amount in cash
determined by multiplying (A) the fraction of such security (rounded to the
nearest hundredth) by (B) the excess, if any, of (x) the Fair Market Value on
the exercise date over (y) the exercise price of the option.

         6. EFFECT OF CERTAIN TRANSACTIONS.

            6.1 REORGANIZATION; MERGER; SALE OF ASSETS. In the event that the
Company enters into an agreement (a) to dispose of all or substantially all of
its assets, in contemplation of the distribution of the net proceeds of such
sale to the Company's shareholders, or (b) to consummate a merger or
consolidation in which the Company is not the surviving or resulting
corporation, or in the event the persons who, as of the date hereof, hold 60% or
more of the outstanding capital stock of the Company enter into an agreement to
sell all of such stock (such distribution, merger, consolidation or sale being
hereinafter referred to as a "Transaction"), then the Committee shall provide,
at its election made in its sole and absolute discretion, for one or more of the
following: (i) for the Option, whether or not then exercisable, to be replaced
with a comparable option to purchase shares of capital stock of a successor or
purchasing corporation or parent thereof, or (ii) for the Option, whether or not
then exercisable, to be assumed by a successor or purchasing corporation or
parent thereof (and, in the event of such assumption, the Option shall continue
to be exercisable, on the terms and subject to the conditions set forth herein,
and in cumulative amounts at the times provided herein, but shall, from and
after the consummation of such Transaction, be exercisable for the capital
stock, cash and/or other property received by the common stockholders of the
Company in such Transaction in an amount equal to what the holder of the Option
would have received had he exercised the Option immediately prior to the
consummation of such Transaction), or (iii) for the Option, whether or not then
exercisable, to


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<PAGE>   6


become exercisable during such period prior to the scheduled consummation of
such Transaction as may be specified by the Committee. In the event the
Committee elects to cause the portion of the Option not then exercisable to
become exercisable prior to such Transaction (such portion the "Accelerated
Portion"), any exercise of the Accelerated Portion shall be conditioned upon,
and shall be effective only concurrently with, the consummation of such
Transaction; and if such Transaction is not consummated, the exercise of the
Accelerated Portion shall be of no further force or effect (and Grantee may
elect, with respect to the exercise during such period of the Option that was
otherwise exercisable, to so condition such exercise upon the consummation of
the Transaction). If the Option or Accelerated Portion is not exercised prior to
the consummation of such Transaction (and which is not being assumed by a
successor or purchasing corporation or parent thereof), the Option or
Accelerated Portion shall terminate and be of no further force or effect as of
the consummation of such Transaction.

            6.2 POOLING TRANSACTION. If Grantee is subject to Section 16 of the
Exchange Act, (i) notwithstanding the exercise periods set forth in Sections 1.2
and 1.3, and (ii) notwithstanding the Expiration Date, in the event the Company
is involved in a business combination that is intended to be treated as a
pooling of interests for financial accounting purposes (a "Pooling Transaction")
or pursuant to which Grantee receives a substitute option to purchase securities
of any entity, including an entity directly or indirectly acquiring the Company,
then the Option (or option in substitution thereof) shall be exercisable to the
extent set forth herein until and including the latest of (x) the date set forth
pursuant to the then applicable paragraph of Section 1.2, 1.3 or the Expiration
Date, (y) the date which is six months and one day after the consummation of
such business combination and (z) the date which is ten business days after the
date of expiration of any period during which Grantee may not dispose of a
security issued in the Pooling Transaction in order for the Pooling Transaction
to be accounted for as a pooling of interests.

         7. MISCELLANEOUS

            7.1 NO RIGHT OF EMPLOYMENT. The Option granted hereunder shall not
confer upon Grantee any right to continued employment by the Company, any
Subsidiary or any affiliate of the Company or affect in any manner the right of
the Company, any Subsidiary or any affiliate of the Company to terminate the
employment of Grantee at any time without liability hereunder.

            7.2 RIGHTS AS STOCKHOLDER. Grantee shall not have any rights as a
stockholder of the Company with respect to any shares of Common Stock which are
subject to the Option until Grantee becomes a stockholder of record with respect
to such shares of Common Stock.

            7.3 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware.


                                      * * *




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<PAGE>   7

         IN WITNESS WHEREOF, the Company and Grantee have executed this
Agreement as of the date first set forth above.


                                          THQ INC.


                                          By: /s/ Brian J. Farrell
                                              ---------------------------------
                                              Brian J. Farrell, President


                                          GRANTEE:


                                          /s/ Jeffrey C. Lapin
                                          -------------------------------------
                                          Jeffrey C. Lapin




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