EXHIBIT 10.3

 

THQ INC.

 

PERFORMANCE ACCELERATED

RESTRICTED STOCK UNIT

DEFERRED COMPENSATION PLAN

 

1.                                       Definitions.

 

(a)                                  “Account” means the separate account
maintained on the books of the Company for each Participant pursuant to
Section 4.

 

(b)                                 “Board means the Board of Directors of the
Company.

 

(c)                                  “Company” means THQ Inc., a Delaware
corporation.

 

(d)                                 “Common Stock” means the common stock, par
value $0.01 per share, of the Company.

 

(e)                                  “Director” means any member of the Board
who is not an employee of the Company or any of its subsidiaries.

 

(f)                                    “Disability” means that the Participant
(i) is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less
than 12 months, or (ii) is, by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to
last for a continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than 3 months under an accident
and health plan covering employees of the Company.

 

(g)                                 “Dividend Equivalent Stock Units” means the
additions to the Participant’s Account described in Section 4.

 

(h)                                 “Effective Date” means August 18, 2005.

 

(i)                                     “Participant” means a Director who
elects to participate in this Plan as provided in Section 3.

 

(j)                                     “Performance Accelerated Restricted
Stock Units” means Performance Accelerated Restricted Stock Units granted to the
Participant under the Stock Option Plan.

 

(k)                                  “Plan” means the THQ Inc. Performance
Accelerated Restricted Stock Unit Deferred Compensation Plan.  The Plan is a
sub-plan under the Stock Option Plan.

 

(l)                                     “Section 409A” means Section 409A of the
Internal Revenue Code of 1986, as amended.

 

(m)                               “Stock Option Plan” means the THQ Inc. Amended
and Restated 1997 Stock Option Plan.

 

2.                                       Administration.

 

(a)                                  The Plan shall be administered by the
Board.  The Board shall also have the authority to make, amend, interpret, and
enforce all appropriate rules and regulations for the administration of the Plan
and decide any and all questions as may arise in connection with the
interpretation or application of the Plan.  The Board may delegate some or all
of its powers and authority hereunder to the Compensation Committee of the
Board, as the Board deems appropriate.

 

(b)                                 The decision or action of the Board (or the
Compensation Committee) in respect to any question arising out of or in
connection with the administration, interpretation and application of the Plan
and the rules and regulations promulgated hereunder shall be final, conclusive
and binding upon Participants and all other persons having or claiming any
interest in the Plan.

 

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3.                                       Participation.

 

(a)                                  A Director may elect to participate in the
Plan by filing a written election with the Company, on such form as may be
prescribed by the Board, to defer 50% or 100% of Director’s grant of Performance
Accelerated Restricted Stock Units made in any calendar year.

 

(b)                                 Except as provided below, a deferral
election shall become effective on the first day of the calendar year following
the date the election is made.  A new deferral election must be made by a
Participant for each calendar year.

 

(c)                                  Notwithstanding anything contained herein
to the contrary, each person who is a Director on the Effective Date, may make a
deferral election that will be effective for Performance Accelerated Restricted
Stock Units granted after the election and in the year the Effective Date
occurs, provided it is made within 30 days after the Effective Date.  A person
who becomes a Director after the Effective Date may make a deferral election
within 30 days after becoming a Director; such election, however, shall be
effective only with respect to Performance Accelerated Restricted Stock Units
granted after the date such election is made.

 

4.                                       Account.

 

The Performance Accelerated Restricted Stock Units that are deferred pursuant to
a Participant’s deferral election shall be credited to the Participant’s
Account.  Whenever any cash dividends are declared on the Common Stock, on the
date such dividend is paid the Company will credit the Account of the
Participant with a number of Dividend Equivalent Units equal to the result of
dividing (i) the product of (x) the total number of Performance Accelerated
Restricted Stock Units and Dividend Equivalent Units credited to the
Participant’s Account on the record date for such dividend and (y) the per share
amount of such dividend by (ii) the Fair Market Value (as such term is defined
in the Stock Option Plan) of one share of Common Stock on the date such dividend
is paid by the Company to the holders of Common Stock.

 

5.                                       Payment of Accounts.

 

(a)                                  Payment of the Participant’s Account shall
be made in a lump sum in accordance with the Participant’s election filed with
the Company, on such form as may be prescribed by the Board: (i) within 30 days
after the Participant’s termination of service as a Director for any reason
(including Disability), (ii) on the date specified in the election or (iii) the
earlier of the date specified in the election or within 30 days after the
Participant’s termination of service as a Director for any reason (including
Disability).  The Participant may change the time of payment of the Account by
filing a new election form with the Company, provided that (i) the new form is
filed at least 12 months prior to the date of Account would otherwise have been
paid and (ii) the new election specifies a payment date that is not less than 5
years from the date the Account would otherwise have been paid.

 

The Participant’s Account shall also be paid in a lump sum within 30 days after
a Change in Control.

 

(b)                                 In the event of a Participant’s death prior
to payment of the Account, the lump sum payment shall be made to the
Participant’s beneficiary as provided in Section 6.

 

(c)                                  Notwithstanding anything contained herein
the contrary, in the event payment of the Account is to be made by reason of the
Participant’s termination of service as a Director, other than by reason of
death or Disability, no payment shall be made until six months after such
termination of service if the Participant is a specified employee as defined in
Internal Revenue Code Section 409A.

 

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(d)                                 Payment of the Account shall be made in
shares of Common Stock, with one share payable for each Performance Accelerated
Restricted Stock Unit and each Dividend Equivalent Unit credited to the
Participant’s Account.

 

(e)                                  A “Change of Control” shall be deemed to
occur if (i) any one person, or more than one person acting as a group, acquires
ownership of stock of the Company that, together with stock held by such person
or group, constitutes 50% or more of the total fair market value or the total
voting power of the Company’s then outstanding stock; or (ii) any one person, or
more than one person acting as a group, acquires (or has acquired during the
12-month period ending on the date of the most recent acquisition by such person
or persons), ownership of stock of the Company possessing 35% or more of the
total voting power of the Company’s then outstanding stock or (iii) during any
period of not more than 12 months, a majority of the members of the Board are
replaced by directors whose appointment or election is not endorsed by a
majority of the members of the Board prior to the date of appointment or
election; or (iv) any one person, or more than one person acting as a group,
other than the entity that is controlled by the shareholders of the Corporation
as provided in paragraph (b) of Q&A 14 of IRS Notice 2005-1, acquires (or has
acquired during the 12-month period ending on the date of the most recent
acquisition by such person or persons) assets from the Company that have a total
gross fair market value equal to or more than 40% of the total gross fair market
value of all of the assets of the Company immediately prior to such acquisition
or acquisitions.  For purposes of this paragraph, “person” and “group” shall
have the meanings ascribed to such terms in IRS Notice 2005-1 Q&A 12, 13 and 14
and this paragraph shall otherwise be interpreted in a manner consistent with
Q&A 12, 13 and 14 of Notice 2005-1 and any subsequent guidance or regulations
relating to Section 409A.

 

6.                                       Beneficiary Designation.

 

Each Participant shall have the right, at any time, to designate any person or
persons as his beneficiary or beneficiaries to whom payment under the Plan shall
be paid in the event of his death prior to payment to the Participant of his or
her Account.  Any beneficiary designation may be made or changed by a
Participant by a written instrument, in such form prescribed by the Board, which
is filed with the Company prior to the Participant’s death. If a Participant
fails to designate a beneficiary, or if all designated beneficiaries predecease
the Participant, then the Account shall be paid to the Participant’s estate.

 

7.                                       Amendment; Cessation of Deferrals.

 

(a)                                  The Board may amend the Plan at any time in
whole or in part; provided that no amendment may adversely affect the rights of
a Participant to receive amounts properly credited to the Participant’s Account
in accordance with the Plan prior to such amendment.

 

(b)                                 The Board may, in its sole discretion, cease
future deferrals under the Plan at any time.  In such event, payment of the
Accounts of Participants will continue to be made as provided in Section 5.

 

8.                                       Miscellaneous.

 

(a)                                  The Company’s obligation to make payment
under the Plan shall be contractual only and all payments hereunder shall be
made by the Company from its general assets at the time and in the manner
provided for in the Plan.

 

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(b)                                 Neither a Participant nor any other person
shall have any right to sell, assign, transfer, pledge, anticipate, or otherwise
encumber, the amounts, if any, payable hereunder, to the Participant or such
other person.  No part of the amounts payable under the Plan shall be subject to
seizure or sequestration for the payment of any debts, judgments, alimony or
separate maintenance owed by a Participant or any other person, nor be
transferable by operation of law in the event of a Participant’s or any other
person’s bankruptcy or insolvency.

 

(c)                                  The provisions of Section 5.7 of the Stock
Option Plan shall apply in the event of a stock split, stock dividend,
recapitalization or other event described therein, except that the determination
of adjustments shall be made by the Board.

 

(d)                                 Neither the Participant nor any other person
shall have any rights as a stockholder of the Company under the Plan with
respect to the Performance Accelerated Restricted Stock Units or Dividend
Equivalent Stock Units credited to the Participant’s Account until the shares of
Common Stock are issued to the Participant or the beneficiary of the
Participant.

 

(e)                                  This Plan shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware,
without reference to principles of conflict of laws.

 

(f)                                    This Plan in intended to comply, and
shall be administered in a manner that is intended to comply, with Section 409A
and shall be construed and interpreted in accordance with such intent.  Any
provision of this Plan that would cause the Plan to fail to satisfy Section 409A
shall be amended to comply with Section 409A on a timely basis, which may be
made retroactively, in accordance with regulations and other guidance issued
under Section 409A.

 

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