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.


 





















 


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.


 





















 


(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.


 





















 


(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.