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                                                                    EXHIBIT 10.1

                              AMENDED AND RESTATED

                              EMPLOYMENT AGREEMENT
                 DATED AS OF JANUARY 1, 2001 ("THIS AGREEMENT")
                            BY AND BETWEEN THQ INC.,
                     A DELAWARE CORPORATION (THE "COMPANY"),
                     AND BRIAN J. FARRELL (THE "EXECUTIVE")

                                    RECITALS

            WHEREAS, the Company and the Executive are parties to an Amended and
Restated Employment Agreement dated as of June 30, 1999, under which the term of
Executive's "Employment Period" thereunder will expire December 31, 2001; and

            WHEREAS the Board of Directors of the Company (the "Board") deems it
to be in the best interests of the Company and its shareholders to assure the
continued employment of Executive, and Executive desires to continue such
employment,

            NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained therein, the parties agree as follows:

      1.    EMPLOYMENT: TERM.

            The Company will continue to employ the Executive and the Executive
will continue to be employed by the Company as the Company's President and Chief
Executive Officer ("CEO") during the term ("the Employment Term") which
commences on January 1, 2001 and which shall, unless sooner terminated by the
Company or Executive pursuant to Section 7, continue through December 31, 2006.

      2.    DUTIES, RESPONSIBILITIES.

            (a) During the Employment Term, Executive agrees to devote his
entire business time, attention and energies to the business of the Company and
its subsidiaries; provided however that Executive may engage in other activities
that do not conflict with or interfere with the performance of his duties and
responsibilities hereunder including without limitation (i) investing his assets
or funds, so long as the business of any such entity in which he shall make his
investments shall not be in direct competition with that of the Company, except
that Executive may invest in an entity in competition with the Company if its
stock is listed for trading on a national stock exchange or traded in the
over-the-counter market and Executive's holdings represent less than 5% of its
outstanding stock; or (ii) acting as a director, trustee, officer or upon a
committee of any other firm, trust or corporation if such positions do not
unreasonably interfere with the services to be rendered by Executive hereunder;
or (iii) being involved in educational, civic or charitable activities which do
not unreasonably interfere with the services to be rendered by Executive
hereunder. During the Employment Term, the Executive shall, if elected or
appointed, serve as a director of the Company.

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            (b) As CEO, Executive shall report solely and directly to the Board.
The Executive shall at all times be the most senior executive of the Company. He
shall have such senior executive powers, duties, authorities and
responsibilities as are consistent with Executive's position and title and as
have been historically performed by Executive, including acting as chairman of
any meeting of the Board, supervising financing, acquisitions and similar
transactions and strategic planning for the Company consistent with his title
and position, supervising the chief operating officer of the Company and
directly or indirectly all other employees of the Company, and managing all
activities of the Company, including without limitation, corporate governance,
organizational structure, and compensation. Without limitation on the foregoing,
Executive shall have (i) complete senior management authority and responsibility
with respect to the management and operations of the Company and its business,
including implementation of the business strategy of the Company consistent with
long-term strategy and policies approved by the Board, (ii) authority on behalf
of the Company to employ and terminate employment of all Company personnel, and
(iii) authority to execute contracts on behalf of the Company in the discharge
of his duties and responsibilities.

      3.    COMPENSATION.

            As compensation for Executive's services to be rendered hereunder
during the Employment Term, the Company will pay to Executive the following:

            3.1 Base Salary. An annual base salary ("Base Salary") (payable in
substantially equal installments at the Company's normal pay periods) during the
Employment Term of $460,000. The Base Salary shall be subject to annual review
commencing at the end of the first fiscal year of the Company ending during the
Employment Term and at the end of each fiscal year thereafter, and may be
increased (but not decreased) for subsequent fiscal years.

            3.2 Bonus.

            (a) In addition to the Base Salary, the Executive is also entitled
to a bonus (the "Bonus") for each fiscal year of the Company commencing during
the Employment Term, equal to the lesser of (i) 100% of his annual Base Salary
for that year, or (ii) 4.5% of the Company's net income before taxes for such
year (pro rated for partial years). Net income before taxes shall be determined
by the independent public accountants for the Company in accordance with
generally accepted accounting principles consistently applied.

            (b) The Board in its sole discretion may also award to Executive a
performance bonus at any time in such amount and in such form as the Board may
determine (the "Performance Bonus") after taking into consideration other
compensation paid or payable to Executive under this Agreement, as well as the
financial and non-financial progress of the business of the Company and the
contributions of the Executive toward that progress.

            (c) Any Bonus and Performance Bonus shall be payable within 60 days
of the end of the fiscal year for which it is payable.

            (d) The Executive shall also be eligible for awards of stock options
and any other stock or equity based awards that may be available to executives
of the Company.

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            3.3 Grant. Executive will be awarded a grant (the "Grant") under the
Company's 1997 Stock Option Plan as amended (the "LTIP") of stock options to
purchase 125,000 shares of the Company's Common Stock, with an exercise price
per share equal to the fair-market value per share of the Company's Common Stock
on the date of the Grant. Except as provided herein, the Grant shall be made in
accordance with the standard terms of stock options awarded under the LTIP and
shall vest in three equal installments on the first, second and third
anniversaries of the date of this Agreement.

      4.    LOCATION; EXPENSES; ADDITIONAL BENEFITS; INDEMNIFICATION.

            4.1 Location. Executive's principal place of business shall be at
the Company's headquarters in the Los Angeles Metropolitan area, and Executive
shall not be required to relocate outside of the Los Angeles Metropolitan area.

            4.2 Expenses. The Company shall pay directly, or reimburse the
Executive for, all reasonable and necessary expenses and disbursements incurred
by him for and on behalf of the Company in the performance of his duties under
this Agreement. For such purpose, the Executive shall submit to the Company
itemized reports of such expenses in accordance with the Company's policies.

            4.3 Vacation. The Executive shall be entitled to paid vacations
during the Employment Term in accordance with the Company's then prevalent
practices for senior executive employees; provided, however, that Executive
shall be entitled to such paid vacations for not less than four (4) weeks per
annum.

            4.4 Employee Benefit Plans. The Executive shall be entitled to
participate in, and to receive benefits under, any employee benefit plans of the
Company (including, without limitation, pension, profit sharing, group life
insurance and group medical insurance plans) as may exist from time to time for
its executive employees. Subject to the limitation contained in Section 4.7
below, the Company shall make the maximum pension and profit sharing
contribution for the Executive legally permitted to be made by an employer and
shall permit the Executive to contribute the maximum pension and profit sharing
contribution legally permitted to be made by an employee each year during the
Employment Period.

            4.5 Life and Disability Insurance. The Company shall provide to
Executive, and pay the premiums on, insurance on Executive's life in the amount
of $3 million as well as, on an after-tax basis, long-term disability insurance
for the Executive covering at least 80% of his Base Salary during the Employment
Term and for a period of twenty-four (24) months thereafter, each of which shall
have the coverage reasonably requested by Executive; provided, however, that the
foregoing coverage shall be subject to any insurance examinations of Executive
required by the insurer. Executive shall designate the beneficiaries under the
disability and life insurance policies.

            4.6 Perquisites. Executive shall be eligible for all perquisites
made available by the Company from time to time during the Employment Term to
other senior executives of the Company. Without limiting the generality of the
foregoing, Executive shall be entitled to a

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secretary, a car allowance and insurance in accordance with the Company's
policy, or, if more beneficial to Executive, as provided by the Company to any
of its senior executives.

            4.7 Indemnification. As a director and officer of the Company, the
Executive shall be entitled to the benefits of all provisions of the Certificate
of Incorporation of the Company, as amended, and the Bylaws of the Company, as
amended, that provide for indemnification of officers and directors of the
Company. No such provisions shall be amended in any way to limit or reduce the
extent of the indemnification available to Executive as an officer or director
of the Company.

            In addition, and without limitation on the foregoing:

                  (i) to the fullest extent permitted by law, the Company shall
indemnify and save and hold harmless the Executive from and against any and all
claims, demands, liabilities, costs and expenses, including judgments, fines or
amounts paid on account thereof (whether in settlement or otherwise), and
reasonable expenses, including attorneys' fees actually and reasonably incurred
(except only if and to the extent that such amounts shall be finally adjudged to
have been caused by Executive's willful breach of the express provisions of this
Agreement) to the extent that the Executive is made a party to or witness in any
action, suit or proceeding, or if a claim or liability is asserted against
Executive (whether or not in the right of the Company), by reason of the fact
that he was or is a director or officer, or acted in such capacity on behalf of
the Company, or by reason of or arising out of or resulting from entering into
this Agreement or the rendering of services by the Executive pursuant to this
Agreement, whether or not the same shall proceed to judgment or be settled or
otherwise brought to a conclusion. The Company shall advance to Executive on
demand all reasonable expenses incurred by Executive in connection with the
defense or settlement of any such claim, action, suit or proceeding, and
Executive hereby undertakes to repay such amounts if and to the extent that it
shall be finally adjudged that the Executive is not entitled to be indemnified
by the Company under this Agreement or under the provisions of the Certificate
of Incorporation or Bylaws of the Company as of the date hereof that govern
indemnification of officers or directors of the Company (but giving effect to
future amendments that broaden or expand any such indemnification and
obligations or right more favorably to Executive). Executive shall also be
entitled to recover any costs of enforcing his rights under this Section
(including, without limitation, reasonable attorneys' fees and disbursements) in
the event any amount payable hereunder is not paid within thirty (30) days of
written request therefore by Executive. The rights of Executive under this
Section shall survive the termination of this Agreement and shall be applicable
for so long as Executive may be subject to any claim, demand, liability, cost or
expense against which this paragraph 4.7 is intended to protect and indemnify
him; and

                  (ii) the Company shall, at no cost to the Executive, use its
best efforts to at all times include the Executive during the Employment Term
and for a period of not less than seven (7) years thereafter, as an insured
under any directors and officers liability insurance policy maintained by the
Company, which policy shall provide such coverage in such amounts as the Board
of Directors shall deem appropriate for coverage of all directors and officers
of the Company.

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            4.8 The Company's share of the pension and profit sharing
contribution referenced in Section 4.4 and insurance premiums referenced in
Section 4.5 shall not exceed in any calendar year an aggregate of $30,000.

      5.    CERTAIN ADDITIONAL PAYMENTS

            (a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the Company
or its affiliated companies to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 5) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code, or any interest or penalties are incurred
by the Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.

            (b) Subject to the provisions of paragraph 5(c), all determinations
required to be made under this paragraph 5(b), including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made by
the Company's public accounting firm (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting any Change in Control which may give rise to the
Excise Tax, the Executive shall appoint another nationally recognized public
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this paragraph 5(b), shall be paid
by the Company to the Executive within five days of the receipt of the
Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Executive, it shall furnish the Executive with a
written opinion that failure to report the Excise Tax on the Executive's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
paragraph 5(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.

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            (c) The Executive shall as soon as practicable notify the Company in
writing of any claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-Up Payment. Such notification
shall apprise the Company of the nature of such claim and the date on which such
claim is requested to be paid. The Executive shall not pay such claim prior to
the expiration of the 30-day period following the date on which the Executive
gives such notice to the Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company notifies
the Executive in writing prior to the expiration of such period that it desires
to contest such claim, the Executive shall:

            (1) give the Company any information reasonably requested by the
Company relating to such claim,

            (2) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,

            (3) cooperate with the Company in good faith in order effectively to
contest such claim, and

            (4) permit the Company to participate in any proceedings relating to
such claim; provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this paragraph 5(c) the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided further, that if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and provided further, that any extension of the statute
of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.

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            (d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to paragraph 5(c), the Executive becomes entitled to
receive, and receives, any refund with respect to such claim, the Executive
shall (subject to the Company's complying with the requirements of paragraph
5(c)) promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Executive of an amount advanced by the Company pursuant to
paragraph 5(c), a determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid.

      6.    EXCLUSIVE EMPLOYMENT, CONFIDENTIAL INFORMATION, ETC.

            6.1 Non-Competition. Executive's employment hereunder is on an
exclusive basis, and during the period of Executive's employment hereunder and
thereafter, in the event of termination of employment by the Company for "Cause"
or in the event of Executive's voluntary resignation without "Good Reason," for
a period of 12 months following the date of such termination or resignation, as
the case may be (the "Non-Compete Period"), Executive will not (x) directly or
indirectly, engage, employ or solicit the employment of any person who is then
or has been within six (6) months prior thereto, an employee of the Company or
any of the Company's affiliates or predecessors, or (y) directly or indirectly
engage in or participate as an officer, employee, director, agent of or
consultant for any person, firm or corporation whose primary business is
directly competitive with that of the Company.

            6.2 Confidential Information. Executive shall not during the
Employment Term or at any time thereafter use for Executive's own purposes, or
disclose to or for the benefit of any third party, any trade secret or other
confidential information of the Company or any of its affiliates or predecessors
(except as may be required by law or in the performance of Executive's duties
hereunder), and Executive will comply with any confidentiality obligations of
the Company to third parties. Notwithstanding the foregoing, confidential
information shall be deemed not to include information which (i) is or becomes
generally available to the public other than as a result of a disclosure by
Executive or any other person who directly or indirectly receives such
information from Executive or at Executive's direction or (ii) is or becomes
available to Executive on a non-confidential basis from a source which is
entitled to disclose it to Executive.

            6.3 Company Ownership. The results and proceeds of Executive's
services hereunder, including, without limitation, any works of authorship
resulting from Executive's services during Executive's employment with the
Company or any of its affiliates or predecessors and any works in progress,
shall be works-made-for-hire and the Company shall be deemed the sole owner
throughout the universe of any and all rights of whatsoever nature therein,
whether or not now or hereafter known, existing, contemplated, recognized or
developed, with the right to use the same in perpetuity in any manner the
Company determines in its sole discretion without any further payment to
Executive whatsoever. If for any reason any of such results and proceeds shall
not legally be a work-for-hire or there are any rights which do not accrue to
the Company under the preceding sentence, then Executive hereby irrevocably
assigns

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and agrees to assigns any and all of Executive's right, title and interest
thereto, including, without limitation, any and all copyrights, patents, trade
secrets, trademarks and/or other rights of whatsoever nature therein, whether or
not now or hereafter known, existing, contemplated, recognized or developed to
the Company, and the Company shall have the right to use the same in perpetuity
throughout the universe in any manner the Company determines without any further
payment to Executive whatsoever. Executive shall, from time to time as may be
requested by the Company, do any and all things which the Company may deem
useful or desirable to establish or document the Company's exclusive ownership
of any and all rights in any such results and proceeds, including, without
limitation, the execution of appropriate copyright and/or patent applications or
assignments. To the extent Executive has any rights in the results and proceeds
of Executive's services that cannot be assigned in the manner described above,
Executive unconditionally and irrevocably waive the enforcement of such rights.
This paragraph 6.3 is subject to, and shall not be deemed to limit, restrict, or
constitute any waiver by the Company of any rights of ownership to which the
Company may be entitled by operation of law by virtue of the Company or any of
its affiliates or predecessors being Executive's employer.

            6.4 Return of Property. All documents, data, recordings, or other
property, whether tangible or intangible, including all information stored in
electronic form, obtained or prepared by or for Executive and utilized by
Executive in the course of Executive's employment with the Company or any of its
affiliates or predecessors shall remain the exclusive property of the Company;
provided however that Executive may remove all such property which was prepared
by or for Executive's personal use.

            6.5 Injunctive Relief. The Company has entered into this Agreement
in order to obtain the benefit of Executive's unique skills, talent, and
experience. Executive acknowledges and agrees that any violation of paragraphs
6.1 through 6.4 hereof will result in irreparable damage to the Company, and
accordingly, the Company may obtain injunctive and other equitable relief for
any breach or threatened breach of such paragraphs, in addition to any other
remedies available to the Company.

            6.6 Survival; Modification of Terms. Executive's obligations under
paragraphs 6.1 through 6.4 hereof shall remain in full force and effect for the
entire period provided therein notwithstanding the termination of the Employment
Term pursuant to Section 7 hereof or otherwise. Executive and the Company agree
that the restrictions and remedies contained in paragraphs 6.1 through 6.4 are
reasonable and that it is Executive's intention and the intention of the Company
that such restrictions and remedies shall be enforceable to the fullest extent
permissible by law. If it shall be found by a court of competent jurisdiction
that any such restriction or remedy is unenforceable but would be enforceable if
some part thereof were deleted or the period or area of application reduced,
then such restriction or remedy shall apply with such modification as shall be
necessary to make it enforceable.

      7.    TERMINATION

            7.1 Disability or Death. In the event Executive becomes totally
medically disabled at any time during the Employment Term and is not expected to
be substantially able to perform Executive's duties for a six (6) consecutive
month period, the Board at any time after such disability has in fact continued
for 60 consecutive days, may determine ("the Disability

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Determination") that the Company requires such duties and responsibilities be
performed by another executive. The Executive's employment hereunder shall
automatically terminate upon his death.

            7.2 Voluntary Resignation. The Executive's employment hereunder
shall automatically be terminated upon the Executive's voluntary resignation
from the Company.

            7.3 Termination for Cause. The Company may, at its option, terminate
Executive's employment under this Agreement for "Cause" in the manner herein set
forth, and the Company shall thereafter have no further obligations under this
Agreement, including, without limitation, any obligation to pay Salary or Bonus
or provide benefits under this Agreement for any period subsequent to
termination. For purposes of this Agreement, "Cause" shall mean embezzlement,
fraud or other conduct related to the Company which would constitute a felony,
conviction of a felony, or if Executive materially breaches this Agreement
(including, without limitation, Executive's continued failure (to the extent
which would constitute "gross negligence") or refusal substantially to perform
Executive's lawful obligations under Sections 2 or 6 hereof, except in the event
of Executive's disability as set forth in paragraph 7.1).

            Notwithstanding the foregoing, termination by the Company for Cause
shall not be effective until and unless (i) in the event of any act or
circumstance alleged to be a basis for termination for "Cause", the Executive is
given written notice by the Board of such alleged act or circumstance, and such
alleged act or circumstance shall not have been cured by the Executive within 20
days of receipt of such notice, to the satisfaction of the Board in the exercise
of its reasonable judgment (or, if within such 20-day period the Executive
commences and proceeds to take all reasonable actions to effect such cure,
within such reasonable additional time period (no longer than 60 days) as may be
necessary), and (ii) notice of intention to terminate for Cause has been given
by the Company within sixty (60) days after the Board learns of the act, failure
or event constituting "Cause," and (iii) the Board has voted (at an in-person
meeting of the Board duly called and held as to which termination of Executive
is an agenda item) by a vote of at least 80% of the members of the Board to
terminate Executive for Cause after Executive has been given notice of the
particular acts or circumstances which are the basis for the alleged termination
for Cause and has been afforded at least 20 days notice of the meeting and an
opportunity to present his position in writing and to be present with his
counsel at such meeting and to present his case thereat, and (iv) the Board has
given notice of termination to Executive within three days after such meeting,
and (v) if Executive has commenced an expedited arbitration in the manner
prescribed below within 15 days after such notice of termination, disputing the
Company's right under this Agreement to terminate for Cause, the Arbitrator
shall have determined that the Executive is terminable for Cause. Upon the
giving of such notice of termination, (x) Executive shall be deemed suspended
with pay until he shall be deemed to have been terminated for Cause hereunder or
until the Arbitrator shall have determined that Executive is not terminable for
Cause and (y) while suspended, Executive shall cease to act as an executive of
the Company and shall depart the premises of the Company. If Executive or his
representative fails to file a demand for arbitration with the American
Arbitration Association ("AAA") and pay the requisite fees pursuant to the
national Rules of the AAA within 15 days of receipt of notice of termination
from the Board, and diligently pursue such proceeding in accordance with the
procedures set forth in Section 14 hereof, such termination shall be
conclusively presumed to have been for Cause.

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            7.4 "Good Reason" Termination.

            (a) Executive may resign and terminate Executive's employment
hereunder for "Good Reason" at any time during the Employment Term by written
notice to the Company not more than sixty (60) days after the occurrence of the
event constituting "Good Reason". Such notice shall state an effective date no
earlier than 20 days after the date it is given. The Company shall have 15 days
from the giving of such notice within which to cure. Good Reason shall mean any
of the following, without Executive's prior written consent (other than in
connection with the termination of Executive's employment for "Cause" (as
defined above) or in connection with Executive's Disability):

                  (i) the assignment to Executive by the Company of duties
inconsistent with Executive's positions, duties, responsibilities, titles or
offices, or the withdrawal of a material part of Executive's responsibilities or
a change in Executive's reporting relationship, as set forth in Section 2;

                  (ii) a reduction by the Company in Executive's Base Salary or
Bonus set forth in Section 3 hereof (or other benefits set forth in Section 4
hereof) as in effect at the date hereof as the same may be increased from time
to time during the Employment Term;

                  (iii) the Company's requiring Executive to be based anywhere
other than the Los Angeles metropolitan area, except for required travel on the
Company's business to an extent substantially consistent with business travel
obligations of other senior executives of the Company;

                  (iv) the failure or delay of the Company to provide to the
Executive any of the payments or benefits contemplated in Sections 3 and 4
hereof or any other material breach by the Company of its obligations hereunder;

                  (v) the failure of the Company and Executive prior to July 1,
2006 to agree on a renewal or extension of this Agreement for a term of no less
than three additional years; or

                  (vi) the failure of the Board or its nominating committee at
any time to nominate Executive for election or re-election by the shareholders
of the Company to the Company's Board.

            (b) Termination Without Cause. The Company may terminate Executive's
employment under this Agreement without "Cause" (as defined above in paragraph
7.3) at any time during the Employment Term by written notice to Executive;
provided, however, that the Company may terminate Executive's employment
pursuant to this paragraph only with the affirmative vote of eighty percent of
the members of the Board.

            7.5 Termination Payments, Etc.

            (a) In the event that Executive's employment terminates pursuant to
paragraph 7.4(a) or 7.4(b) hereof, Executive shall be entitled to receive from
the Company (at the Company's expense), subject to applicable withholding taxes:

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                  (i) a lump sum payment, payable within 30 days of termination,
equal to (x) Executive's annual Base Salary as provided in paragraph 3.1 on the
date of termination, for the greater of three years or the entire balance of the
Employment Term, and (y) bonus compensation at the annual rate of the highest
Bonus and Performance Bonus amounts received by Executive during any prior
fiscal year (but no less than $460,000), for the greater of 3 years or the
entire balance of the Employment Term;

                  (ii) medical and dental insurance coverage until the end of
the Employment Term or, if earlier, the date on which Executive becomes eligible
for substantially equivalent medical and dental coverage from a third party
employer provided without cost to Executive;

                  (iii) life and disability insurance coverage as set forth in
paragraph 4.5 until the end of the Employment Term (the amount of such insurance
to be reduced by the amount of any insurance provided by a new employer without
cost to Executive);

                  (iv) Executive's perquisites as provided in paragraph 4.6
until the end of the Employment Term, payable in accordance with the Company's
then effective payroll practices;

                  (v) all stock options, stock appreciation rights and
restricted stock to the extent not yet fully vested and whether or not included
in the Grant referred to in paragraph 3.3 shall become fully vested on the date
of termination of Executive's employment; and all such stock options and stock
appreciation rights shall be exercisable for their full stated term;

                  (vi) immediate vesting of Executive's rights in all other
employee benefit and compensation plans;

                  (vii) fees and disbursements of Executive's counsel incurred
as a result of the termination of Executive's employment; and

                  (viii) provision of an appropriate office and secretarial
assistance for at least six (6) months after the termination of Executive's
employment.

            (b) The Executive shall be under no obligation to mitigate the
amount of any payment or benefit provided for above under paragraph 7.5(a) by
seeking other employment or otherwise, nor shall such payments be offset or
reduced by any compensation which the Executive may receive from future
employment or otherwise.

            (c) The payments and benefits provided for above in paragraph 7.5(a)
are in lieu of any severance or income continuation or income protection under
any Company plan that may now or hereafter exist and shall be deemed to satisfy
and be in full and final settlement of all obligations of the Company for
severance or income continuation or income protection to Executive under this
Agreement.

            (d) Except as otherwise provided in paragraph 7.5(a)(ii) through
7.5(a)(vi) coverage under all the Company benefit plans and programs will
terminate upon the termination

                                       11
<PAGE>   12

of Executive's employment except to the extent otherwise expressly provided in
such plans or programs.

            7.6 Death or Disability. If Executive dies prior to the end of the
Employment Term or if the Board makes a Disability Determination, Executive or
his beneficiary or estate shall be entitled to receive (in addition to amounts
and benefits under any life insurance policy or disability program or policy)
Executive's Salary up to the date on which the death or Disability Determination
occurs and a pro-rated Bonus for the fiscal year in which the death or
Disability Determination occurs. In addition, the vesting of all stock options,
stock appreciation rights and restricted stock granted to Executive that are not
exercisable as of the date on which the death or Disability Determination occurs
shall be accelerated, and Executive or his beneficiary or estate shall be
entitled to exercise such stock options and stock appreciation rights, together
with all stock options and stock appreciation rights that are exercisable as of
the date of death or Disability Determination, through the stated expiration
date of such stock options and stock appreciation rights.

            In addition, in the event of such a termination the Company shall
within 20 days of such termination pay to the Executive or his personal
representative, as the case may be, severance pay in a lump sum equal to his
then annual Base Salary for one year as set forth in paragraph 3.1 hereof.

            7.7 Change of Control. Notwithstanding any other provision herein,
in order to protect the Executive against the possible consequences and
uncertainties of a Change of Control (as hereinafter defined) of the Company and
thereby induce the Executive to remain in the employ of the Company, the Company
agrees that in the event of a Change of Control this Agreement shall continue to
be operative according to its terms except that:

            (a) If the Executive's employment is terminated by the Company other
than for "Cause" (as defined in paragraph 7.3 hereof) within one year subsequent
to a Change of Control or if the Executive voluntarily terminates such
employment within one year subsequent to a Change of Control (the "Evaluation
Period"), then in either such event, the Executive shall be entitled to the
payments and benefits of paragraph 7.5 as if the termination had occurred under
paragraphs 7.4(a) or 7.4(b).

            (b) In lieu of exercising or retaining his right to exercise any
outstanding stock options then held by the Executive, the Executive may elect to
surrender to the Company his rights in such outstanding options (whether or not
then exercisable) then held by the Executive, and, upon such surrender the
Company shall pay to the Executive an amount in cash per share equal to the
aggregate of the difference between (i) the aggregate of the difference between
the option prices of the shares of the Company's Common Stock subject to such
surrendered options and (ii) the greater of (A) the average price per share paid
in connection with such acquisition of control if such control was acquired by
the payment of cash or the then fair market value per option share of the
consideration paid for such shares if such control was acquired for
consideration other than cash, (B) the price per share paid in connection with
any tender offer of securities leading to control, or (C) the mean between the
high and low bid price of shares of the Company's Common Stock on NASDAQ or any
other national securities exchange upon which such securities shall then be
listed on the date of termination of the Executive's employment.

                                       12
<PAGE>   13

            (c) The Company shall pay or reimburse the Executive for all fees
and disbursements of counsel, if any, incurred by the Executive as a result of
the termination of his employment by the Company or his voluntary termination of
such employment during the Evaluation Period following a Change of Control
(including, without limitation, those which may be incurred by the Executive in
seeking to obtain or enforce any right or benefit provided by this Agreement).

            (d) The Executive shall be under no obligation to mitigate the
amount of any payment provided for under this paragraph 7.7 by seeking other
employment or otherwise nor shall such amount be offset by any compensation
which the Executive may receive from future employment or otherwise.

            (e) For purposes of this Agreement, a "Change in Control" with
respect to the Company shall be deemed to have taken place if, at any time
during the Employment Term, any of the following events occur:

                  (i) Any person, as that term is used in Section 13(d) and
Section 14(d)(2) of the securities Exchange Act of 1934, as amended (the
"Exchange Act"), becomes, is discovered to be, or files a report on Schedule 13D
or 14D-1 (or any successor schedule, form or report) disclosing that such person
is, a beneficial owner (as defined in Rule 13d-3 under the Exchange Act or any
successor rule or regulation), directly or indirectly, of securities of the
Company representing 15% or more of the combined voting power of the Company's
then outstanding securities entitled to vote generally in the election of
directors;

                  (ii) Individuals who, as of January 1, 2001, constitute the
Board of Directors of the Company cease for any reason to constitute at least a
majority of the Board of Directors of the Company, unless any such change is
approved by a vote of at least 80% of the members of the Board of Directors of
the Company (including Executive) in office immediately prior to such cessation;

                  (iii) The Company is merged, consolidated or reorganized into
or with another corporation or other legal person, or securities of the Company
are exchanged for securities of another corporation or other legal person, and
immediately after such merger, consolidation, reorganization or exchange less
than a majority of the combined voting power of the then outstanding securities
of such corporation or person immediately after such transaction are held,
directly or indirectly, in the aggregate by the holders of securities entitled
to vote generally in the election of directors of the Company immediately prior
to such transaction;

                  (iv) The Company in any transaction or series of related
transactions, sells all or substantially all of its assets to any other
corporation or other legal person and less than a majority of the combined
voting power of the then-outstanding securities of such corporation or person
immediately after such sale or sales are held, directly or indirectly, in the
aggregate by the holders of securities entitled to vote generally in the
election of directors of the Company immediately prior to such sale;

                  (v) The Company and its affiliates shall sell or dispose of
(in a single transaction or series of related transactions) business operations
that generated two-thirds of the

                                       13
<PAGE>   14

consolidated revenues (determined on the basis of the Company's four most
recently completed fiscal quarters for which reports have been filed under the
Exchange Act) of the Company and its subsidiaries immediately prior thereto;

                  (vi) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934 disclosing in response to Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) that a change in control of the
Company has or may have occurred or will or may occur in the future pursuant to
any then existing contract or transaction;

                  (vii) Any other transaction or series of related transactions
occur that have substantially the effect of the transaction specified in any of
the preceding clauses in this paragraph 7.7(e).

            (f) Notwithstanding the provisions of Section 7.7(e)(i) through
7.7(e)(vi) hereof, unless otherwise determined in a specific case by majority
vote of the Board of Directors of the Company, a Change in Control shall not be
deemed to have occurred for purposes of this Agreement solely because (i) the
Company, (ii) an entity in which the Company directly or indirectly beneficially
owns 50% or more of the voting securities or (iii) any Company-sponsored
employee stock ownership plan, or any other employee benefit plan of the
Company, either files or becomes obligated to file a report or a proxy statement
under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A
(or any successor schedule, form or report or item thereon) under the Exchange
Act, disclosing beneficial ownership by it of shares of stock of the Company, or
because of the Company reports that a Change in Control of the Company has or
may have occurred or will or may occur in the future by reason of such
beneficial ownership.

      8.    RABBI TRUST.

      As soon as practicable after commencement of the Employment Term, the
Company shall establish a "grantor trust" within the meaning of sections 671,
et. seq. of the Internal Revenue Code with terms reasonably acceptable to the
Executive, for the purpose of protecting the payment, in the event of a Change
in Control of the Company, of any unfunded obligations of the Company to the
Executive.

      9.    SUCCESSORS; BINDING AGREEMENT.

      Neither of the parties hereto shall have the right to assign this
agreement or any rights or obligations hereunder without the prior written
consent of the other party. Subject to the foregoing, this Agreement shall inure
to the benefit of and be binding upon the parties and their successors and
assigns.

      10.   COUNTERPARTS.

      This Agreement may be executed in several counterparts, each of which
shall be an original but together shall constitute one in the same instrument.

      11.   NOTICES.

                                       14
<PAGE>   15

      Any notice required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given when (i) delivered
personally; (ii) sent by facsimile or other similar electronic device and
confirm; (iii) delivered by courier or overnight express; or (iv) three business
days after being sent by registered or certified mail, postage prepaid,
addressed as follows:

     If to the Company:                 THQ Inc.
                                        27001 Agoura Road, Suite 325
                                        Calabasas Hill, California 91301
                                        Attention: Secretary

     If to Executive:                   Brian J. Farrell
                                        768 Ravensburg Street
                                        Lake Sherwood, CA 91361

or to such other address as a party may furnish to the other party in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.

      12.   GOVERNING LAW.

      This Agreement shall be governed by and construed and enforced in
accordance with the internal laws of California without reference to conflicts
of laws, principles or rules.

      13.   WAIVER.

      No waiver by either party hereto of any provision of this Agreement shall
be deemed a waiver of any preceding or succeeding breach of such provision or as
a waiver of any other provision hereof.

      14.   ARBITRATION.

      In the event of any controversy, dispute or claim arising out of or
related to this Agreement or the Executive's employment by the Company, the
parties shall negotiate in good faith in an attempt to reach a mutually
acceptable settlement of such dispute. If negotiations in good faith do not
result in a settlement of any such controversy, dispute or claim, it shall be
finally settled by expedited arbitration in accordance with the National Rules
of the American Arbitration Association governing employment disputes, subject
to the following:

            (a) The Arbitrator shall be determined from a list of names of five
impartial arbitrators each of whom shall be an attorney experienced in
arbitration matters concerning executive employment disputes, supplied by the
American Arbitration Association (the "Association") and chosen by Executive and
the Company each in turn striking a name from the list until one name remains.

            (b) The Arbitrator shall determine whether and to what extent any
party shall be entitled to damages under this Agreement.

                                       15
<PAGE>   16

            (c) The Arbitrator shall not have the power to add to nor modify any
of the terms or conditions of this Agreement. The Arbitrator's decision shall
not go beyond what is necessary for the interpretation and application of the
provision of this Agreement in respect of the issue before the Arbitrator. The
Arbitrator shall not substitute his or her judgment for that of the parties in
the exercise of rights granted or retained by this Agreement. The Arbitrator's
award or other permitted remedy, if any, and the decision shall be based upon
the issue as drafted and submitted by the respective parties and the relevant
and competent evidence adduced at the hearing.

            (d) The Arbitrator shall have the authority to award any remedy or
relief provided for in this Agreement, in addition to any other remedy or relief
(including provisional remedies and relief) that a court of competent
jurisdiction could order or grant. In addition, the Arbitrator shall have the
authority to decide issues relating to the interpretation, meaning or
performance of this Agreement even if such decision would constitute an advisory
opinion in a court proceeding or if the issues would otherwise not be ripe for
resolution in a court proceeding, and any such decision shall bind the parties
in their continuing performance of this Agreement. The Arbitrator's written
decision shall be rendered within sixty days of the hearing. The decision
reached by the Arbitrator shall be final and binding upon the parties as to the
matter in dispute. To the extent that the relief or remedy granted by the
Arbitrator is relief or remedy on which a court could enter judgment, a judgment
upon the award rendered by the Arbitrator shall be entered in any court having
jurisdiction thereof (unless in the case of an award of damages, the full amount
of the award is paid within 10 days of its determination by the Arbitrator).
Otherwise, the award shall be binding on the parties in connection with their
continuing performance of this Agreement and in any subsequent arbitral or
judicial proceedings between the parties.

            (e) The arbitration shall take place in Los Angeles, California.

            (f) The arbitration proceeding and all filing, testimony, documents
and information relating to or presented during the arbitration proceeding shall
be disclosed exclusively for the purpose of facilitating the arbitration process
and for no other purpose and shall be deemed to be information subject to the
confidentiality provisions of this Agreement.

            (g) The parties shall continue performing their respective
obligations under this Agreement notwithstanding the existence of a dispute
while the dispute is being resolved unless and until such obligations are
terminated or expire in accordance with the provisions hereof.

            (h) The Arbitrator may order a pre-hearing exchange of information
including depositions, interrogatories, production of documents, exchange of
summaries of testimony or exchange of statements of position, and the Arbitrator
shall limit such disclosure to avoid unnecessary burden to the parties and shall
schedule promptly all discovery and other procedural steps and otherwise assume
case management initiative and control to effect an efficient and expeditious
resolution of the dispute. At any oral hearing of evidence in connection with an
arbitration proceeding, each party and its counsel shall have the right to
examine its witness and to cross-examine the witnesses of the other party. No
testimony of any witness shall be

                                       16
<PAGE>   17

presented in written form unless the opposing party or parties shall have the
opportunity to cross-examine such witness, except as the parties otherwise agree
in writing.

            (i) Notwithstanding the dispute resolution procedures contained in
this Section 14, either party may apply to any court having jurisdiction (i) to
enforce this Agreement to arbitrate, (ii) to seek provisional injunctive relief
so as to maintain the status quo until the arbitration award is rendered or the
Dispute is otherwise resolved, or (iii) to challenge or vacate any final
judgment, award or decision of the Arbitrator that does not comport with the
express provisions of this Section 14.

      15.   ATTORNEYS' FEES

      The Company shall pay or reimburse the Executive for all reasonable fees
and disbursements of the Executive's counsel in connection with the negotiation
and execution of this Agreement. In addition, in the event of any arbitration or
judicial proceeding hereunder, the prevailing party shall be entitled to recover
his or its reasonable attorneys fees and costs.

      16.   HEADINGS.

      The Article, Section, paragraph and subparagraph headings are for
convenience of reference only and shall not define or limit the provisions
hereof.

      17.   ENTIRE AGREEMENT.

      This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof and there are no representations,
warranties or commitments except as set forth herein. This Agreement supersedes
any other prior and contemporaneous agreements, understandings, negotiations and
discussions, whether written or oral, of the parties hereto relating to the
subject matter of this Agreement. This Agreement may be amended only in a
writing executed by the parties hereto.

      18.   SEVERABILITY.

      If any provision of this Agreement, as applied to either party or to any
circumstances, shall be adjudged by a court to be void or unenforceable, the
same shall be deemed stricken from this Agreement and shall in no way affect any
other provision of this Agreement or the validity or enforceability of this
Agreement.

      19.   SUPERSEDES PREVIOUS AGREEMENT.

      Effective as of the date of this Agreement, this Agreement shall supersede
and cancel all prior agreements relating to Executive's employment by the
Company or any of its affiliates and predecessors, including, without
limitation, the employment agreement between Executive and THQ Inc. dated as of
June 30, 1999, and any amendments thereto. Notwithstanding the preceding
sentence, this Agreement is not intended, and shall not be construed, to affect
Executive's rights in any compensation or benefits that have been granted or
accrued prior to the Effective Date.

                                       17
<PAGE>   18

      IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date and year first above written.

                                        Company:

                                        THQ Inc., a Delaware Corporation

                                        By:
                                           -------------------------------------

                                        Its:
                                            ------------------------------------

                                        Executive:

                                        ----------------------------------------
                                        Brian J. Farrell

                                       18<PAGE>   1
                                                                    EXHIBIT 10.2

                              AMENDED AND RESTATED

                              EMPLOYMENT AGREEMENT
                 DATED AS OF JANUARY 1, 2001 ("THIS AGREEMENT")
                            BY AND BETWEEN THQ INC.,
                     A DELAWARE CORPORATION (THE "COMPANY"),
                     AND JEFFREY C. LAPIN (THE "EXECUTIVE")

                                    RECITALS

            WHEREAS, the Company and the Executive are parties to an Employment
Agreement dated as of January 1, 1999, under which the term of Executive's
"Employment Period" thereunder will expire December 31, 2001; and

            WHEREAS the Board of Directors of the Company (the "Board") deems it
to be in the best interests of the Company and its shareholders to assure the
continued employment of Executive, and Executive desires to continue such
employment,

            NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained therein, the parties agree as follows:

      1.    EMPLOYMENT: TERM.

            The Company will continue to employ the Executive and the Executive
will continue to be employed by the Company as the Company's Vice Chairman and
Chief Operating Officer ("COO") during the term ("the Employment Term") which
commences on January 1, 2001 and which shall, unless sooner terminated by the
Company or Executive pursuant to Section 7, continue through December 31, 2006.

      2.    DUTIES, RESPONSIBILITIES.

            (a) During the Employment Term, Executive agrees to devote his
entire business time, attention and energies to the business of the Company and
its subsidiaries; provided however that Executive may engage in other activities
that do not conflict with or interfere with the performance of his duties and
responsibilities hereunder including without limitation (i) investing his assets
or funds, so long as the business of any such entity in which he shall make his
investments shall not be in direct competition with that of the Company, except
that Executive may invest in an entity in competition with the Company if its
stock is listed for trading on a national stock exchange or traded in the
over-the-counter market and Executive's holdings represent less than 5% of its
outstanding stock; or (ii) acting as a director, trustee, officer or upon a
committee of any other firm, trust or corporation if such positions do not
unreasonably interfere with the services to be rendered by Executive hereunder;
or (iii) being involved in educational, civic or charitable activities which do
not unreasonably interfere with the services to be rendered by Executive
hereunder. During the Employment Term, the Executive shall, if elected or
appointed, serve as a director of the Company.

                                       19
<PAGE>   2

            (b) As COO, Executive shall report solely and directly to the Chief
Executive Officer. The Executive shall at all times be the most senior executive
of the Company. He shall have such senior executive powers, duties, authorities
and responsibilities as are consistent with Executive's position and title and
as have been historically performed by Executive.

      3.    COMPENSATION.

            As compensation for Executive's services to be rendered hereunder
during the Employment Term, the Company will pay to Executive the following:

            3.1 Base Salary. An annual base salary ("Base Salary") (payable in
substantially equal installments at the Company's normal pay periods) during the
Employment Term of $325,000. The Base Salary shall be subject to annual review
commencing at the end of the first fiscal year of the Company ending during the
Employment Term and at the end of each fiscal year thereafter, and may be
increased (but not decreased) for subsequent fiscal years.

            3.2 Bonus.

            (a) In addition to the Base Salary, the Executive is also entitled
to a bonus (the "Bonus") for each fiscal year of the Company commencing during
the Employment Term, equal to the lesser of (i) 100% of his annual Base Salary
for that year, or (ii) 4.5% of the Company's net income before taxes for such
year (pro rated for partial years). Net income before taxes shall be determined
by the independent public accountants for the Company in accordance with
generally accepted accounting principles consistently applied.

            (b) The Board in its sole discretion may also award to Executive a
performance bonus at any time in such amount and in such form as the Board may
determine (the "Performance Bonus") after taking into consideration other
compensation paid or payable to Executive under this Agreement, as well as the
financial and non-financial progress of the business of the Company and the
contributions of the Executive toward that progress.

            (c) Any Bonus and Performance Bonus shall be payable within 60 days
of the end of the fiscal year for which it is payable.

            (d) The Executive shall also be eligible for awards of stock options
and any other stock or equity based awards that may be available to executives
of the Company.

            3.3 Grant. Executive will be awarded a grant (the "Grant") under the
Company's 1997 Stock Option Plan as amended (the "LTIP") of stock options to
purchase 100,000 shares of the Company's Common Stock, with an exercise price
per share equal to the fair-market value per share of the Company's Common Stock
on the date of the Grant. Except as provided herein, the Grant shall be made in
accordance with the standard terms of stock options awarded under the LTIP and
shall vest in three equal installments on the first, second and third
anniversaries of the date of this Agreement.

                                       2
<PAGE>   3

      4.    LOCATION; EXPENSES; ADDITIONAL BENEFITS; INDEMNIFICATION.

            4.1 Location. Executive's principal place of business shall be at
the Company's headquarters in the Los Angeles Metropolitan area, and Executive
shall not be required to relocate outside of the Los Angeles Metropolitan area.

            4.2 Expenses. The Company shall pay directly, or reimburse the
Executive for, all reasonable and necessary expenses and disbursements incurred
by him for and on behalf of the Company in the performance of his duties under
this Agreement. For such purpose, the Executive shall submit to the Company
itemized reports of such expenses in accordance with the Company's policies.

            4.3 Vacation. The Executive shall be entitled to paid vacations
during the Employment Term in accordance with the Company's then prevalent
practices for senior executive employees; provided, however, that Executive
shall be entitled to such paid vacations for not less than four (4) weeks per
annum.

            4.4 Employee Benefit Plans. The Executive shall be entitled to
participate in, and to receive benefits under, any employee benefit plans of the
Company (including, without limitation, pension, profit sharing, group life
insurance and group medical insurance plans) as may exist from time to time for
its executive employees. Subject to the limitation contained in Section 4.7
below, the Company shall make the maximum pension and profit sharing
contribution for the Executive legally permitted to be made by an employer and
shall permit the Executive to contribute the maximum pension and profit sharing
contribution legally permitted to be made by an employee each year during the
Employment Period.

            4.5 Life and Disability Insurance. The Company shall provide to
Executive, and pay the premiums on, insurance on Executive's life in the amount
of $3 million as well as, on an after-tax basis, long-term disability insurance
for the Executive covering at least 80% of his Base Salary during the Employment
Term and for a period of twenty-four (24) months thereafter, each of which shall
have the coverage reasonably requested by Executive; provided, however, that the
foregoing coverage shall be subject to any insurance examinations of Executive
required by the insurer. Executive shall designate the beneficiaries under the
disability and life insurance policies.

            4.6 Perquisites. Executive shall be eligible for all perquisites
made available by the Company from time to time during the Employment Term to
other senior executives of the Company. Without limiting the generality of the
foregoing, Executive shall be entitled to a secretary, a car allowance and
insurance in accordance with the Company's policy, or, if more beneficial to
Executive, as provided by the Company to any of its senior executives.

            4.7 Indemnification. As a director and officer of the Company, the
Executive shall be entitled to the benefits of all provisions of the Certificate
of Incorporation of the Company, as amended, and the Bylaws of the Company, as
amended, that provide for indemnification of officers and directors of the
Company. No such provisions shall be amended

                                       3
<PAGE>   4

in any way to limit or reduce the extent of the indemnification available to
Executive as an officer or director of the Company.

            In addition, and without limitation on the foregoing:

                  (i) to the fullest extent permitted by law, the Company shall
indemnify and save and hold harmless the Executive from and against any and all
claims, demands, liabilities, costs and expenses, including judgments, fines or
amounts paid on account thereof (whether in settlement or otherwise), and
reasonable expenses, including attorneys' fees actually and reasonably incurred
(except only if and to the extent that such amounts shall be finally adjudged to
have been caused by Executive's willful breach of the express provisions of this
Agreement) to the extent that the Executive is made a party to or witness in any
action, suit or proceeding, or if a claim or liability is asserted against
Executive (whether or not in the right of the Company), by reason of the fact
that he was or is a director or officer, or acted in such capacity on behalf of
the Company, or by reason of or arising out of or resulting from entering into
this Agreement or the rendering of services by the Executive pursuant to this
Agreement, whether or not the same shall proceed to judgment or be settled or
otherwise brought to a conclusion. The Company shall advance to Executive on
demand all reasonable expenses incurred by Executive in connection with the
defense or settlement of any such claim, action, suit or proceeding, and
Executive hereby undertakes to repay such amounts if and to the extent that it
shall be finally adjudged that the Executive is not entitled to be indemnified
by the Company under this Agreement or under the provisions of the Certificate
of Incorporation or Bylaws of the Company as of the date hereof that govern
indemnification of officers or directors of the Company (but giving effect to
future amendments that broaden or expand any such indemnification and
obligations or right more favorably to Executive). Executive shall also be
entitled to recover any costs of enforcing his rights under this Section
(including, without limitation, reasonable attorneys' fees and disbursements) in
the event any amount payable hereunder is not paid within thirty (30) days of
written request therefore by Executive. The rights of Executive under this
Section shall survive the termination of this Agreement and shall be applicable
for so long as Executive may be subject to any claim, demand, liability, cost or
expense against which this paragraph 4.7 is intended to protect and indemnify
him; and

                  (ii) the Company shall, at no cost to the Executive, use its
best efforts to at all times include the Executive during the Employment Term
and for a period of not less than seven (7) years thereafter, as an insured
under any directors and officers liability insurance policy maintained by the
Company, which policy shall provide such coverage in such amounts as the Board
of Directors shall deem appropriate for coverage of all directors and officers
of the Company.

            4.8 The Company's share of the pension and profit sharing
contribution referenced in Section 4.4 and insurance premiums referenced in
Section 4.5 shall not exceed in any calendar year an aggregate of $30,000.

      5.    CERTAIN ADDITIONAL PAYMENTS

            (a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the Company
or its affiliated companies

                                       4
<PAGE>   5

to or for the benefit of the Executive (whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
5) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code, or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.

            (b) Subject to the provisions of paragraph 5(c), all determinations
required to be made under this paragraph 5(b), including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made by
the Company's public accounting firm (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting any Change in Control which may give rise to the
Excise Tax, the Executive shall appoint another nationally recognized public
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this paragraph 5(b), shall be paid
by the Company to the Executive within five days of the receipt of the
Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Executive, it shall furnish the Executive with a
written opinion that failure to report the Excise Tax on the Executive's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
paragraph 5(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.

            (c) The Executive shall as soon as practicable notify the Company in
writing of any claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-Up Payment. Such notification
shall apprise the Company of the nature of such claim and the date on which such
claim is requested to be paid. The Executive shall not pay such claim prior to
the expiration of the 30-day period following the date on which the Executive
gives such notice to the Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company notifies
the Executive

                                       5
<PAGE>   6

in writing prior to the expiration of such period that it desires to contest
such claim, the Executive shall:

            (1) give the Company any information reasonably requested by the
Company relating to such claim,

            (2) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,

            (3) cooperate with the Company in good faith in order effectively to
contest such claim, and

            (4) permit the Company to participate in any proceedings relating to
such claim; provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this paragraph 5(c) the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided further, that if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and provided further, that any extension of the statute
of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.

            (d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to paragraph 5(c), the Executive becomes entitled to
receive, and receives, any refund with respect to such claim, the Executive
shall (subject to the Company's complying with the requirements of paragraph
5(c)) promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Executive of an amount advanced by the Company pursuant to
paragraph 5(c), a determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such

                                       6
<PAGE>   7

denial of refund prior to the expiration of 30 days after such determination,
then such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.

      6.    EXCLUSIVE EMPLOYMENT, CONFIDENTIAL INFORMATION, ETC.

            6.1 Non-Competition. Executive's employment hereunder is on an
exclusive basis, and during the period of Executive's employment hereunder and
thereafter, in the event of termination of employment by the Company for "Cause"
or in the event of Executive's voluntary resignation without "Good Reason," for
a period of 12 months following the date of such termination or resignation, as
the case may be (the "Non-Compete Period"), Executive will not (x) directly or
indirectly, engage, employ or solicit the employment of any person who is then
or has been within six (6) months prior thereto, an employee of the Company or
any of the Company's affiliates or predecessors, or (y) directly or indirectly
engage in or participate as an officer, employee, director, agent of or
consultant for any person, firm or corporation whose primary business is
directly competitive with that of the Company.

            6.2 Confidential Information. Executive shall not during the
Employment Term or at any time thereafter use for Executive's own purposes, or
disclose to or for the benefit of any third party, any trade secret or other
confidential information of the Company or any of its affiliates or predecessors
(except as may be required by law or in the performance of Executive's duties
hereunder), and Executive will comply with any confidentiality obligations of
the Company to third parties. Notwithstanding the foregoing, confidential
information shall be deemed not to include information which (i) is or becomes
generally available to the public other than as a result of a disclosure by
Executive or any other person who directly or indirectly receives such
information from Executive or at Executive's direction or (ii) is or becomes
available to Executive on a non-confidential basis from a source which is
entitled to disclose it to Executive.

            6.3 Company Ownership. The results and proceeds of Executive's
services hereunder, including, without limitation, any works of authorship
resulting from Executive's services during Executive's employment with the
Company or any of its affiliates or predecessors and any works in progress,
shall be works-made-for-hire and the Company shall be deemed the sole owner
throughout the universe of any and all rights of whatsoever nature therein,
whether or not now or hereafter known, existing, contemplated, recognized or
developed, with the right to use the same in perpetuity in any manner the
Company determines in its sole discretion without any further payment to
Executive whatsoever. If for any reason any of such results and proceeds shall
not legally be a work-for-hire or there are any rights which do not accrue to
the Company under the preceding sentence, then Executive hereby irrevocably
assigns and agrees to assigns any and all of Executive's right, title and
interest thereto, including, without limitation, any and all copyrights,
patents, trade secrets, trademarks and/or other rights of whatsoever nature
therein, whether or not now or hereafter known, existing, contemplated,
recognized or developed to the Company, and the Company shall have the right to
use the same in perpetuity throughout the universe in any manner the Company
determines without any further payment to Executive whatsoever. Executive shall,
from time to time as may be requested by the Company, do any and all things
which the Company may deem useful or desirable to establish or document the
Company's exclusive ownership of any and all rights in

                                       7
<PAGE>   8

any such results and proceeds, including, without limitation, the execution of
appropriate copyright and/or patent applications or assignments. To the extent
Executive has any rights in the results and proceeds of Executive's services
that cannot be assigned in the manner described above, Executive unconditionally
and irrevocably waive the enforcement of such rights. This paragraph 6.3 is
subject to, and shall not be deemed to limit, restrict, or constitute any waiver
by the Company of any rights of ownership to which the Company may be entitled
by operation of law by virtue of the Company or any of its affiliates or
predecessors being Executive's employer.

            6.4 Return of Property. All documents, data, recordings, or other
property, whether tangible or intangible, including all information stored in
electronic form, obtained or prepared by or for Executive and utilized by
Executive in the course of Executive's employment with the Company or any of its
affiliates or predecessors shall remain the exclusive property of the Company;
provided however that Executive may remove all such property which was prepared
by or for Executive's personal use.

            6.5 Injunctive Relief. The Company has entered into this Agreement
in order to obtain the benefit of Executive's unique skills, talent, and
experience. Executive acknowledges and agrees that any violation of paragraphs
6.1 through 6.4 hereof will result in irreparable damage to the Company, and
accordingly, the Company may obtain injunctive and other equitable relief for
any breach or threatened breach of such paragraphs, in addition to any other
remedies available to the Company.

            6.6 Survival; Modification of Terms. Executive's obligations under
paragraphs 6.1 through 6.4 hereof shall remain in full force and effect for the
entire period provided therein notwithstanding the termination of the Employment
Term pursuant to Section 7 hereof or otherwise. Executive and the Company agree
that the restrictions and remedies contained in paragraphs 6.1 through 6.4 are
reasonable and that it is Executive's intention and the intention of the Company
that such restrictions and remedies shall be enforceable to the fullest extent
permissible by law. If it shall be found by a court of competent jurisdiction
that any such restriction or remedy is unenforceable but would be enforceable if
some part thereof were deleted or the period or area of application reduced,
then such restriction or remedy shall apply with such modification as shall be
necessary to make it enforceable.

      7.    TERMINATION

            7.1 Disability or Death. In the event Executive becomes totally
medically disabled at any time during the Employment Term and is not expected to
be substantially able to perform Executive's duties for a six (6) consecutive
month period, the Board at any time after such disability has in fact continued
for 60 consecutive days, may determine ("the Disability Determination") that the
Company requires such duties and responsibilities be performed by another
executive. The Executive's employment hereunder shall automatically terminate
upon his death.

            7.2 Voluntary Resignation. The Executive's employment hereunder
shall automatically be terminated upon the Executive's voluntary resignation
from the Company.

                                       8
<PAGE>   9

            7.3 Termination for Cause. The Company may, at its option, terminate
Executive's employment under this Agreement for "Cause" in the manner herein set
forth, and the Company shall thereafter have no further obligations under this
Agreement, including, without limitation, any obligation to pay Salary or Bonus
or provide benefits under this Agreement for any period subsequent to
termination. For purposes of this Agreement, "Cause" shall mean embezzlement,
fraud or other conduct related to the Company which would constitute a felony,
conviction of a felony, or if Executive materially breaches this Agreement
(including, without limitation, Executive's continued failure (to the extent
which would constitute "gross negligence") or refusal substantially to perform
Executive's lawful obligations under Sections 2 or 6 hereof, except in the event
of Executive's disability as set forth in paragraph 7.1).

            Notwithstanding the foregoing, termination by the Company for Cause
shall not be effective until and unless (i) in the event of any act or
circumstance alleged to be a basis for termination for "Cause", the Executive is
given written notice by the Board of such alleged act or circumstance, and such
alleged act or circumstance shall not have been cured by the Executive within 20
days of receipt of such notice, to the satisfaction of the Board in the exercise
of its reasonable judgment (or, if within such 20-day period the Executive
commences and proceeds to take all reasonable actions to effect such cure,
within such reasonable additional time period (no longer than 60 days) as may be
necessary), and (ii) notice of intention to terminate for Cause has been given
by the Company within sixty (60) days after the Board learns of the act, failure
or event constituting "Cause," and (iii) the Board has voted (at an in-person
meeting of the Board duly called and held as to which termination of Executive
is an agenda item) by a vote of at least 80% of the members of the Board to
terminate Executive for Cause after Executive has been given notice of the
particular acts or circumstances which are the basis for the alleged termination
for Cause and has been afforded at least 20 days notice of the meeting and an
opportunity to present his position in writing and to be present with his
counsel at such meeting and to present his case thereat, and (iv) the Board has
given notice of termination to Executive within three days after such meeting,
and (v) if Executive has commenced an expedited arbitration in the manner
prescribed below within 15 days after such notice of termination, disputing the
Company's right under this Agreement to terminate for Cause, the Arbitrator
shall have determined that the Executive is terminable for Cause. Upon the
giving of such notice of termination, (x) Executive shall be deemed suspended
with pay until he shall be deemed to have been terminated for Cause hereunder or
until the Arbitrator shall have determined that Executive is not terminable for
Cause and (y) while suspended, Executive shall cease to act as an executive of
the Company and shall depart the premises of the Company. If Executive or his
representative fails to file a demand for arbitration with the American
Arbitration Association ("AAA") and pay the requisite fees pursuant to the
national Rules of the AAA within 15 days of receipt of notice of termination
from the Board, and diligently pursue such proceeding in accordance with the
procedures set forth in Section 14 hereof, such termination shall be
conclusively presumed to have been for Cause.

            7.4 "Good Reason" Termination.

            (a) Executive may resign and terminate Executive's employment
hereunder for "Good Reason" at any time during the Employment Term by written
notice to the Company not more than sixty (60) days after the occurrence of the
event constituting "Good Reason". Such notice shall state an effective date no
earlier than 20 days after the date it is given. The

                                       9
<PAGE>   10

Company shall have 15 days from the giving of such notice within which to cure.
Good Reason shall mean any of the following, without Executive's prior written
consent (other than in connection with the termination of Executive's employment
for "Cause" (as defined above) or in connection with Executive's Disability):

                  (i) the assignment to Executive by the Company of duties
inconsistent with Executive's positions, duties, responsibilities, titles or
offices, or the withdrawal of a material part of Executive's responsibilities or
a change in Executive's reporting relationship, as set forth in Section 2;

                  (ii) a reduction by the Company in Executive's Base Salary or
Bonus set forth in Section 3 hereof (or other benefits set forth in Section 4
hereof) as in effect at the date hereof as the same may be increased from time
to time during the Employment Term;

                  (iii) the Company's requiring Executive to be based anywhere
other than the Los Angeles metropolitan area, except for required travel on the
Company's business to an extent substantially consistent with business travel
obligations of other senior executives of the Company;

                  (iv) the failure or delay of the Company to provide to the
Executive any of the payments or benefits contemplated in Sections 3 and 4
hereof or any other material breach by the Company of its obligations hereunder;

                  (v) the failure of the Company and Executive prior to July 1,
2006 to agree on a renewal or extension of this Agreement for a term of no less
than three additional years; or

                  (vi) the failure of the Board or its nominating committee at
any time to nominate Executive for election or re-election by the shareholders
of the Company to the Company's Board.

            (b) Termination Without Cause. The Company may terminate Executive's
employment under this Agreement without "Cause" (as defined above in paragraph
7.3) at any time during the Employment Term by written notice to Executive;
provided, however, that the Company may terminate Executive's employment
pursuant to this paragraph only with the affirmative vote of eighty percent of
the members of the Board.

            7.5 Termination Payments, Etc.

            (a) In the event that Executive's employment terminates pursuant to
paragraph 7.4(a) or 7.4(b) hereof, Executive shall be entitled to receive from
the Company (at the Company's expense), subject to applicable withholding taxes:

                  (i) a lump sum payment, payable within 30 days of termination,
equal to (x) Executive's annual Base Salary as provided in paragraph 3.1 on the
date of termination, for the greater of three years or the entire balance of the
Employment Term, and (y) bonus compensation at the annual rate of the highest
Bonus and Performance Bonus amounts received

                                       10
<PAGE>   11

by Executive during any prior fiscal year (but no less than $325,000), for the
greater of 3 years or the entire balance of the Employment Term;

                  (ii) medical and dental insurance coverage until the end of
the Employment Term or, if earlier, the date on which Executive becomes eligible
for substantially equivalent medical and dental coverage from a third party
employer provided without cost to Executive;

                  (iii) life and disability insurance coverage as set forth in
paragraph 4.5 until the end of the Employment Term (the amount of such insurance
to be reduced by the amount of any insurance provided by a new employer without
cost to Executive);

                  (iv) Executive's perquisites as provided in paragraph 4.6
until the end of the Employment Term, payable in accordance with the Company's
then effective payroll practices;

                  (v) all stock options, stock appreciation rights and
restricted stock to the extent not yet fully vested and whether or not included
in the Grant referred to in paragraph 3.3 shall become fully vested on the date
of termination of Executive's employment; and all such stock options and stock
appreciation rights shall be exercisable for their full stated term;

                  (vi) immediate vesting of Executive's rights in all other
employee benefit and compensation plans;

                  (vii) fees and disbursements of Executive's counsel incurred
as a result of the termination of Executive's employment; and

                  (viii) provision of an appropriate office and secretarial
assistance for at least six (6) months after the termination of Executive's
employment.

            (b) The Executive shall be under no obligation to mitigate the
amount of any payment or benefit provided for above under paragraph 7.5(a) by
seeking other employment or otherwise, nor shall such payments be offset or
reduced by any compensation which the Executive may receive from future
employment or otherwise.

            (c) The payments and benefits provided for above in paragraph 7.5(a)
are in lieu of any severance or income continuation or income protection under
any Company plan that may now or hereafter exist and shall be deemed to satisfy
and be in full and final settlement of all obligations of the Company for
severance or income continuation or income protection to Executive under this
Agreement.

            (d) Except as otherwise provided in paragraph 7.5(a)(ii) through
7.5(a)(vi) coverage under all the Company benefit plans and programs will
terminate upon the termination of Executive's employment except to the extent
otherwise expressly provided in such plans or programs.

            7.6 Death or Disability. If Executive dies prior to the end of the
Employment Term or if the Board makes a Disability Determination, Executive or
his beneficiary or estate

                                       11
<PAGE>   12

shall be entitled to receive (in addition to amounts and benefits under any life
insurance policy or disability program or policy) Executive's Salary up to the
date on which the death or Disability Determination occurs and a pro-rated Bonus
for the fiscal year in which the death or Disability Determination occurs. In
addition, the vesting of all stock options, stock appreciation rights and
restricted stock granted to Executive that are not exercisable as of the date on
which the death or Disability Determination occurs shall be accelerated, and
Executive or his beneficiary or estate shall be entitled to exercise such stock
options and stock appreciation rights, together with all stock options and stock
appreciation rights that are exercisable as of the date of death or Disability
Determination, through the stated expiration date of such stock options and
stock appreciation rights.

            In addition, in the event of such a termination the Company shall
within 20 days of such termination pay to the Executive or his personal
representative, as the case may be, severance pay in a lump sum equal to his
then annual Base Salary for one year as set forth in paragraph 3.1 hereof.

            7.7 Change of Control. Notwithstanding any other provision herein,
in order to protect the Executive against the possible consequences and
uncertainties of a Change of Control (as hereinafter defined) of the Company and
thereby induce the Executive to remain in the employ of the Company, the Company
agrees that in the event of a Change of Control this Agreement shall continue to
be operative according to its terms except that:

            (a) If the Executive's employment is terminated by the Company other
than for "Cause" (as defined in paragraph 7.3 hereof) within one year subsequent
to a Change of Control or if the Executive voluntarily terminates such
employment within one year subsequent to a Change of Control (the "Evaluation
Period"), then in either such event, the Executive shall be entitled to the
payments and benefits of paragraph 7.5 as if the termination had occurred under
paragraphs 7.4(a) or 7.4(b).

            (b) In lieu of exercising or retaining his right to exercise any
outstanding stock options then held by the Executive, the Executive may elect to
surrender to the Company his rights in such outstanding options (whether or not
then exercisable) then held by the Executive, and, upon such surrender the
Company shall pay to the Executive an amount in cash per share equal to the
aggregate of the difference between (i) the aggregate of the difference between
the option prices of the shares of the Company's Common Stock subject to such
surrendered options and (ii) the greater of (A) the average price per share paid
in connection with such acquisition of control if such control was acquired by
the payment of cash or the then fair market value per option share of the
consideration paid for such shares if such control was acquired for
consideration other than cash, (B) the price per share paid in connection with
any tender offer of securities leading to control, or (C) the mean between the
high and low bid price of shares of the Company's Common Stock on NASDAQ or any
other national securities exchange upon which such securities shall then be
listed on the date of termination of the Executive's employment.

            (c) The Company shall pay or reimburse the Executive for all fees
and disbursements of counsel, if any, incurred by the Executive as a result of
the termination of his employment by the Company or his voluntary termination of
such employment during the Evaluation Period following a Change of Control
(including, without limitation, those which

                                       12
<PAGE>   13

may be incurred by the Executive in seeking to obtain or enforce any right or
benefit provided by this Agreement).

            (d) The Executive shall be under no obligation to mitigate the
amount of any payment provided for under this paragraph 7.7 by seeking other
employment or otherwise nor shall such amount be offset by any compensation
which the Executive may receive from future employment or otherwise.

            (e) For purposes of this Agreement, a "Change in Control" with
respect to the Company shall be deemed to have taken place if, at any time
during the Employment Term, any of the following events occur:

                  (i) Any person, as that term is used in Section 13(d) and
Section 14(d)(2) of the securities Exchange Act of 1934, as amended (the
"Exchange Act"), becomes, is discovered to be, or files a report on Schedule 13D
or 14D-1 (or any successor schedule, form or report) disclosing that such person
is, a beneficial owner (as defined in Rule 13d-3 under the Exchange Act or any
successor rule or regulation), directly or indirectly, of securities of the
Company representing 15% or more of the combined voting power of the Company's
then outstanding securities entitled to vote generally in the election of
directors;

                  (ii) Individuals who, as of January 1, 2001, constitute the
Board of Directors of the Company cease for any reason to constitute at least a
majority of the Board of Directors of the Company, unless any such change is
approved by a vote of at least 80% of the members of the Board of Directors of
the Company (including Executive) in office immediately prior to such cessation;

                  (iii) The Company is merged, consolidated or reorganized into
or with another corporation or other legal person, or securities of the Company
are exchanged for securities of another corporation or other legal person, and
immediately after such merger, consolidation, reorganization or exchange less
than a majority of the combined voting power of the then outstanding securities
of such corporation or person immediately after such transaction are held,
directly or indirectly, in the aggregate by the holders of securities entitled
to vote generally in the election of directors of the Company immediately prior
to such transaction;

                  (iv) The Company in any transaction or series of related
transactions, sells all or substantially all of its assets to any other
corporation or other legal person and less than a majority of the combined
voting power of the then-outstanding securities of such corporation or person
immediately after such sale or sales are held, directly or indirectly, in the
aggregate by the holders of securities entitled to vote generally in the
election of directors of the Company immediately prior to such sale;

                  (v) The Company and its affiliates shall sell or dispose of
(in a single transaction or series of related transactions) business operations
that generated two-thirds of the consolidated revenues (determined on the basis
of the Company's four most recently completed fiscal quarters for which reports
have been filed under the Exchange Act) of the Company and its subsidiaries
immediately prior thereto;

                                       13
<PAGE>   14

                  (vi) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934 disclosing in response to Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) that a change in control of the
Company has or may have occurred or will or may occur in the future pursuant to
any then existing contract or transaction;

                  (vii) Any other transaction or series of related transactions
occur that have substantially the effect of the transaction specified in any of
the preceding clauses in this paragraph 7.7(e).

            (f) Notwithstanding the provisions of Section 7.7(e)(i) through
7.7(e)(vi) hereof, unless otherwise determined in a specific case by majority
vote of the Board of Directors of the Company, a Change in Control shall not be
deemed to have occurred for purposes of this Agreement solely because (i) the
Company, (ii) an entity in which the Company directly or indirectly beneficially
owns 50% or more of the voting securities or (iii) any Company-sponsored
employee stock ownership plan, or any other employee benefit plan of the
Company, either files or becomes obligated to file a report or a proxy statement
under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A
(or any successor schedule, form or report or item thereon) under the Exchange
Act, disclosing beneficial ownership by it of shares of stock of the Company, or
because of the Company reports that a Change in Control of the Company has or
may have occurred or will or may occur in the future by reason of such
beneficial ownership.

      8.    RABBI TRUST.

      As soon as practicable after commencement of the Employment Term, the
Company shall establish a "grantor trust" within the meaning of sections 671,
et. seq. of the Internal Revenue Code with terms reasonably acceptable to the
Executive, for the purpose of protecting the payment, in the event of a Change
in Control of the Company, of any unfunded obligations of the Company to the
Executive.

      9.    SUCCESSORS; BINDING AGREEMENT.

      Neither of the parties hereto shall have the right to assign this
agreement or any rights or obligations hereunder without the prior written
consent of the other party. Subject to the foregoing, this Agreement shall inure
to the benefit of and be binding upon the parties and their successors and
assigns.

      10.   COUNTERPARTS.

      This Agreement may be executed in several counterparts, each of which
shall be an original but together shall constitute one in the same instrument.

      11.   NOTICES.

      Any notice required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given when (i) delivered
personally; (ii) sent by facsimile or other similar electronic device and
confirm; (iii) delivered by courier or overnight express; or

                                       14
<PAGE>   15

(iv) three business days after being sent by registered or certified mail,
postage prepaid, addressed as follows:

     If to the Company:                 THQ Inc.
                                        27001 Agoura Road, Suite 325
                                        Calabasas Hill, California 91301
                                        Attention:  Secretary

     If to Executive:                   Jeffrey C. Lapin
                                        2501 Cardigan Court
                                        Los Angeles, CA  90077

or to such other address as a party may furnish to the other party in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.

      12.   GOVERNING LAW.

      This Agreement shall be governed by and construed and enforced in
accordance with the internal laws of California without reference to conflicts
of laws, principles or rules.

      13.   WAIVER.

      No waiver by either party hereto of any provision of this Agreement shall
be deemed a waiver of any preceding or succeeding breach of such provision or as
a waiver of any other provision hereof.

      14.   ARBITRATION.

      In the event of any controversy, dispute or claim arising out of or
related to this Agreement or the Executive's employment by the Company, the
parties shall negotiate in good faith in an attempt to reach a mutually
acceptable settlement of such dispute. If negotiations in good faith do not
result in a settlement of any such controversy, dispute or claim, it shall be
finally settled by expedited arbitration in accordance with the National Rules
of the American Arbitration Association governing employment disputes, subject
to the following:

            (a) The Arbitrator shall be determined from a list of names of five
impartial arbitrators each of whom shall be an attorney experienced in
arbitration matters concerning executive employment disputes, supplied by the
American Arbitration Association (the "Association") and chosen by Executive and
the Company each in turn striking a name from the list until one name remains.

            (b) The Arbitrator shall determine whether and to what extent any
party shall be entitled to damages under this Agreement.

            (c) The Arbitrator shall not have the power to add to nor modify any
of the terms or conditions of this Agreement. The Arbitrator's decision shall
not go beyond what is necessary for the interpretation and application of the
provision of this Agreement in respect of the issue before the Arbitrator. The
Arbitrator shall not substitute his or her judgment for that of

                                       15
<PAGE>   16

the parties in the exercise of rights granted or retained by this Agreement. The
Arbitrator's award or other permitted remedy, if any, and the decision shall be
based upon the issue as drafted and submitted by the respective parties and the
relevant and competent evidence adduced at the hearing.

            (d) The Arbitrator shall have the authority to award any remedy or
relief provided for in this Agreement, in addition to any other remedy or relief
(including provisional remedies and relief) that a court of competent
jurisdiction could order or grant. In addition, the Arbitrator shall have the
authority to decide issues relating to the interpretation, meaning or
performance of this Agreement even if such decision would constitute an advisory
opinion in a court proceeding or if the issues would otherwise not be ripe for
resolution in a court proceeding, and any such decision shall bind the parties
in their continuing performance of this Agreement. The Arbitrator's written
decision shall be rendered within sixty days of the hearing. The decision
reached by the Arbitrator shall be final and binding upon the parties as to the
matter in dispute. To the extent that the relief or remedy granted by the
Arbitrator is relief or remedy on which a court could enter judgment, a judgment
upon the award rendered by the Arbitrator shall be entered in any court having
jurisdiction thereof (unless in the case of an award of damages, the full amount
of the award is paid within 10 days of its determination by the Arbitrator).
Otherwise, the award shall be binding on the parties in connection with their
continuing performance of this Agreement and in any subsequent arbitral or
judicial proceedings between the parties.

            (e) The arbitration shall take place in Los Angeles, California.

            (f) The arbitration proceeding and all filing, testimony, documents
and information relating to or presented during the arbitration proceeding shall
be disclosed exclusively for the purpose of facilitating the arbitration process
and for no other purpose and shall be deemed to be information subject to the
confidentiality provisions of this Agreement.

            (g) The parties shall continue performing their respective
obligations under this Agreement notwithstanding the existence of a dispute
while the dispute is being resolved unless and until such obligations are
terminated or expire in accordance with the provisions hereof.

            (h) The Arbitrator may order a pre-hearing exchange of information
including depositions, interrogatories, production of documents, exchange of
summaries of testimony or exchange of statements of position, and the Arbitrator
shall limit such disclosure to avoid unnecessary burden to the parties and shall
schedule promptly all discovery and other procedural steps and otherwise assume
case management initiative and control to effect an efficient and expeditious
resolution of the dispute. At any oral hearing of evidence in connection with an
arbitration proceeding, each party and its counsel shall have the right to
examine its witness and to cross-examine the witnesses of the other party. No
testimony of any witness shall be presented in written form unless the opposing
party or parties shall have the opportunity to cross-examine such witness,
except as the parties otherwise agree in writing.

            (i) Notwithstanding the dispute resolution procedures contained in
this Section 14, either party may apply to any court having jurisdiction (i) to
enforce this Agreement

                                       16
<PAGE>   17

to arbitrate, (ii) to seek provisional injunctive relief so as to maintain the
status quo until the arbitration award is rendered or the Dispute is otherwise
resolved, or (iii) to challenge or vacate any final judgment, award or decision
of the Arbitrator that does not comport with the express provisions of this
Section 14.

      15.   ATTORNEYS' FEES

      The Company shall pay or reimburse the Executive for all reasonable fees
and disbursements of the Executive's counsel in connection with the negotiation
and execution of this Agreement. In addition, in the event of any arbitration or
judicial proceeding hereunder, the prevailing party shall be entitled to recover
his or its reasonable attorneys fees and costs.

      16.   HEADINGS.

      The Article, Section, paragraph and subparagraph headings are for
convenience of reference only and shall not define or limit the provisions
hereof.

      17.   ENTIRE AGREEMENT.

      This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof and there are no representations,
warranties or commitments except as set forth herein. This Agreement supersedes
any other prior and contemporaneous agreements, understandings, negotiations and
discussions, whether written or oral, of the parties hereto relating to the
subject matter of this Agreement. This Agreement may be amended only in a
writing executed by the parties hereto.

      18.   SEVERABILITY.

      If any provision of this Agreement, as applied to either party or to any
circumstances, shall be adjudged by a court to be void or unenforceable, the
same shall be deemed stricken from this Agreement and shall in no way affect any
other provision of this Agreement or the validity or enforceability of this
Agreement.

      19.   SUPERSEDES PREVIOUS AGREEMENT.

      Effective as of the date of this Agreement, this Agreement shall supersede
and cancel all prior agreements relating to Executive's employment by the
Company or any of its affiliates and predecessors, including, without
limitation, the employment agreement between Executive and THQ Inc. dated as of
January 1, 1999, and any amendments thereto. Notwithstanding the preceding
sentence, this Agreement is not intended, and shall not be construed, to affect

                                       17
<PAGE>   18

      Executive's rights in any compensation or benefits that have been granted
or accrued prior to the Effective Date.

      IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date and year first above written.

                                        Company:

                                        THQ Inc., a Delaware Corporation

                                        By:
                                           -------------------------------------

                                        Its:
                                            ------------------------------------

                                        Executive:

                                        ----------------------------------------
                                        Jeffrey C. Lapin

                                       18

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