Exhibit 10.1

HOT TOPIC, INC.

STOCK OPTION CANCELLATION AGREEMENT

THIS STOCK OPTION CANCELLATION AGREEMENT (this “Agreement”) is made and entered into as of July 7, 2008, by and between HOT TOPIC, INC., a California corporation (the “Company”), and Elizabeth McLaughlin (“Optionholder”).

RECITALS

WHEREAS, the Company previously granted to Optionholder the following stock option to purchase shares (the “Shares”) of the Company’s Common Stock (the “Option”) pursuant to the Company’s 2006 Equity Incentive Plan:

Date of Grant	Number of Shares	Exercise Price
June 2, 2008	100,000	$5.07

WHEREAS, as of the date of this Agreement, the entire Option remains unexercised.

WHEREAS, the Company’s Board of Directors has determined that it is in the best interests of the Company and its stockholders to cancel the Option in exchange for paying $1.00 in the aggregate to Optionholder (the “Consideration”).

WHEREAS, other than the Consideration, the Optionholder has not received, and will not receive any additional consideration in exchange for the cancellation of the Option.

WHEREAS, Optionholder has decided to voluntarily consent to this Agreement and the cancellation of the Option subject to the terms described herein.

AGREEMENT

In consideration of the mutual promises and covenants herein, the parties hereto, each intending to be legally bound, agree as follows:

1. Cancellation of Option. The Option is hereby canceled in exchange for the Company’s payment to Optionholder of the sum of $1.00 in the aggregate, less applicable deductions and tax withholdings, the receipt of which payment is hereby acknowledged. Optionholder hereby irrevocably relinquishes any right or interest that Optionholder may have had, may have or may acquire in the future with respect to the Option and to the Shares.

2. Return of Outstanding Option Documents. Immediately upon execution of this Agreement, Optionholder shall deliver to the Company all copies of the stock option grant notice and stock option agreement previously delivered to Optionholder by the Company in connection with the grant of the Option.

3. Further Assurances. Optionholder agrees to execute and/or cause to be delivered to the Company such instruments and other documents, and shall take such other actions, as the Company may reasonably request for the purpose of carrying out or evidencing the cancellation of the Option.

4. Legal Advice. Optionholder acknowledges and represents that Optionholder has had the opportunity to consult with a legal advisor in connection with this Agreement and that Optionholder is not relying upon the Company for any legal advice.

5. Governing Law. This Agreement shall be governed in all respects by the laws of the State of California, without regard to that State’s conflicts of laws principles.

6. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

2.

IN WITNESS WHEREOF, this Stock Option Cancellation Agreement has been executed by the parties hereto as of the date first above written.

HOT TOPIC, INC.
By:	/s/ James McGinty
Name:	James McGinty
Title:	CFO
OPTIONHOLDER:
	/s/ Elizabeth McLaughlin
	ELIZABETH MCLAUGHLIN