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EXHIBIT 10(rr)
POST-EMPLOYMENT AGREEMENT
AGREEMENT made as of the 10th day of March,
2004, by and between Hasbro, Inc., a
Rhode Island corporation, ("Hasbro" or the
"Company") and Alfred J. Verrecchia
(the "Executive").
WHEREAS, the
Executive is currently employed by the Company as Chief
Executive Officer and President;
WHEREAS, the
Compensation and Stock Option Committee of the Board of
Directors of the Company has determined
that it is in the best interest of the
Company and its shareholders to assure that
the Executive enter into certain
post-employment obligations that will
protect the Company;
WHEREAS, the
Executive and the Company wish to enter into certain financial
undertakings that are competitive with
other companies;
NOW, THEREFORE,
in consideration of the promises and conditions set forth
herein, the sufficiency of which is hereby
acknowledged, the Company and the
Executive agree as follows:
1. SEVERANCE BENEFITS.
1.1 SEVERANCE
PAY UPON TERMINATION BY THE COMPANY WITHOUT CAUSE OR
BY THE EXECUTIVE FOR GOOD REASON. Subject
to Section 1.10, in the event that the
Executive's employment is terminated by the
Company Without Cause or by the
Executive for Good Reason, as defined
herein, and provided that the Executive
executes a Severance and Settlement
Agreement (including a release of claims)
drafted by the Company, substantially in
the form attached hereto as Attachment
A, the Company shall pay the Executive
Severance Pay of up to three (3) years
Annual Base Salary and Annual Bonus as
follows: (a) if the Executive's
employment is terminated by the Company
Without Cause or by the Executive with
Good
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Reason on or before September 1, 2006, the
Executive shall be eligible for
Severance Pay of thirty-six (36) months
Monthly Base Salary and Monthly Bonus;
(b) if the Executive's employment is
terminated by the Company Without Cause or
by the Executive with Good Reason after
September 1, 2006, but before March 1,
2008, the Executive shall be eligible for
Severance Pay of Monthly Base Salary
and Monthly Bonus for the number of months
equal to thirty-six (36) months, less
the number of whole months after September
1, 2006 during which the Executive is
employed prior to the termination of his
employment by the Company; and (c) if
the Executive's employment is terminated by
the Company Without Cause or by the
Executive with Good Reason on or after
March 1, 2008, the Executive shall be
eligible for Severance Pay in an amount
equal to eighteen (18) months of Monthly
Base Salary and Monthly Bonus. If the
Executive is terminated by the Company
Without Cause and, at the time the
Executive initially becomes entitled to
Severance Pay pursuant to this Section 1.1
there is in effect a Company
severance plan of general applicability for
which the Executive is eligible, the
Executive shall be entitled to the greater
of (a) the Severance Pay to which he
would be entitled under this Section 1.1 or
(b) the severance pay to which he
would otherwise be entitled under the
applicable Company severance plan. Except
as provided above, the Executive shall not
be entitled to severance benefits
beyond that provided for this Agreement,
regardless of any Company policy,
practice or plan.
1.2 BASE SALARY
AND BONUS. For the purpose of this Agreement, the
following definitions shall apply: "Annual
Base Salary" shall mean the annual
salary paid or due to the Executive for the
fifty-two weeks immediately
preceding the week in which the Executive's
employment is terminated. Salary
shall not include any bonuses, incentive
compensation of any kind, any profit
sharing, or any Company contributions to
any benefit plan. "Monthly Base
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Salary" shall be an amount equivalent to
the Annual Base Salary divided by
twelve. "Annual Bonus" shall mean the
target bonus provided by the 2003 Senior
Management Annual Performance Plan (100% of
Annual Base Salary) or any successor
or replacement plan (in an amount of 100%
Annual Base Salary unless otherwise
agreed in writing by the parties);
provided, however, that if the target bonus
for the year in which the Executive's
employment is terminated is eliminated by
the Company or has not been established,
the Annual Bonus shall be equal to the
bonus received by the Executive in the most
recent year for which the bonus was
paid. "Monthly Bonus" shall be an amount
equivalent to the Annual Bonus divided
by twelve.
1.3 MEDICAL,
DENTAL AND LIFE INSURANCE. As set forth herein, during
the period of time during which the
Executive is receiving Severance Pay under
Section 1.1, 1.8 or 1.9, whichever is
applicable (the "Severance Period"), the
Executive shall be eligible to participate
in the Company's group medical,
dental and life insurance plans then in
effect, or as may be amended, for
employees of the Company (provided that the
Executive is otherwise eligible for
such insurance) and the Company shall pay,
during that period, that portion of
the premium for group medical, dental and
life insurance coverage which it
otherwise would have paid if the Executive
were an active employee. Following
the Severance Period, if the Executive
timely elects and is eligible for medical
and dental insurance coverage pursuant to
the Federal "COBRA" law, 29 U.S.C.
Section 1161 ET SEQ., all premium costs for
such coverage shall be paid by the
Executive on a monthly basis for as long
as, and to the extent that, the
Executive remains eligible for and elects
to continue receiving such coverage.
1.4 SEVERANCE
PAYMENTS. The Severance Pay set forth in Sections 1.1,
1.8 and 1.9 shall be paid in accordance
with the Company's regular payroll
practices; provided, however, that in no
event shall the payment of such
Severance Pay commence until after the
Severance
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and Settlement Agreement becomes final and
binding. Any and all applicable
federal, state and local taxes and
withholdings shall be withheld from any
severance payments.
1.5 COORDINATION
WITH CHANGE IN CONTROL AGREEMENT. The benefits
payable hereunder shall be reduced by any
termination benefits payable under
that certain Change in Control Agreement by
and between the Company and the
Executive dated as of July 5, 1989 and
amended as of March 10, 2000 (the "Change
of Control Agreement"); provided, however,
that, in the event a dispute arises
regarding the Executive's entitlement to
termination benefits under the Change
of Control Agreement, and provided further
that such dispute does not raise an
issue regarding the Executive's entitlement
to Severance Pay under Section 1.1,
the Company shall provide the Executive
with unreduced Severance Pay while such
dispute is being resolved. If it is
determined at any time that the Executive's
Severance Pay should have been reduced by
termination benefits under the Change
of Control Agreement, the amount of any
reduction shall be deducted from any
payments to the Executive under the Change
of Control Agreement, or shall be
immediately repaid by the Executive.
1.6 TERMINATION
BY THE COMPANY FOR CAUSE AND WITHOUT CAUSE. For
purposes of this Agreement, the following
definitions shall apply: Termination
by the Company for "Cause" shall mean
termination of the Executive's employment
by the Company for any of the following
reasons: (a) material failure by the
Executive to perform his duties for the
Company which is not remedied within a
reasonable period not to exceed 30 days, as
specified in a written notice; (b)
misconduct materially and demonstrably
injurious to the Company; (c) a
conviction of a felony; or (d) fraud or
embezzlement of Company assets. The
Company's financial performance shall not
constitute a basis for the Company to
terminate the Executive for Cause or refuse
to provide the Severance Pay or
Enhanced Retirement Benefits under this
Agreement.
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Termination by the Company "Without Cause"
shall mean termination of the
Executive's employment by the Company for
any reason other than termination for
Cause. Notwithstanding the provisions of
this Section, during the three-year
period following the occurrence of a Change
of Control (as defined in the Change
of Control Agreement), the term "Cause"
shall have the meaning assigned to that
term under the Change of Control
Agreement.
1.7 TERMINATION
BY THE EXECUTIVE FOR GOOD REASON. For purposes of
this Agreement, the following definition
shall apply: Termination by the
Executive for "Good Reason" shall mean
termination of the Executive's employment
by the Executive, upon thirty (30) days
written notice, for either of the
following reasons: (a) a material demotion
of the Executive, without the
Executive's consent; or (b) a material
reduction in the Executive's base salary
or target bonus, without his consent,
unless such reduction is due to a
generally applicable reduction in the
compensation of senior executives;
provided, however, that the Executive may
not terminate his employment for "Good
Reason" unless (i) he gives notice of his
intent to terminate his employment
under this provision, which notice
specifies the basis(es) for invoking this
provision and (ii) the Company fails to
cure any material demotion (as set forth
in subsection (a) above) or material
reduction (as set forth in subsection (b)
above) so specified within thirty (30) days
of the Company's receipt of the
written notice.
1.8 SEVERANCE
PAY UPON TERMINATION BY MUTUAL AGREEMENT. Subject to
Section 1.10, if the Executive's employment
is terminated by the parties' mutual
written agreement as a result of a family
medical emergency or for such other
reason beyond the control of the Executive
that results in him being unable to
work as may be mutually determined by the
Company's Board of Directors and the
Executive, the Executive will not be
entitled to Severance Pay under Section
1.1, but instead will be eligible for
Severance Pay of eighteen (18) months
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Monthly Base Salary and Monthly Bonus,
provided that the Executive executes a
Severance and Settlement Agreement
(including a release of claims) drafted by
the Company, substantially in the form
attached hereto as Attachment A.
1.9 SEVERANCE
PAY UPON TERMINATION BECAUSE OF DISABILITY. Subject to
Section 1.10, if the Executive's employment
is terminated because of disability,
the Executive will not be entitled to
Severance Pay under Section 1.1, but
instead will be eligible for Severance Pay
of eighteen (18) months Monthly Base
Salary and Monthly Bonus, provided that the
Executive or his estate, as
applicable, executes a Severance and
Settlement Agreement (including a release
of claims) drafted by the Company,
substantially in the form attached hereto as
Attachment A. As used in this Agreement,
the term "disability" shall mean the
inability of the Employee to perform the
essential functions of his job, with or
without reasonable accommodation as may be
required by State or Federal law, due
to a physical or mental disability, for a
period of 120 days, whether or not
consecutive, during a rolling one-year
period of the Executive's employment. A
determination of disability shall be made
by a physician satisfactory to both
the Executive and the Company, PROVIDED
THAT if the Executive and the Company do
not agree on a physician, the Executive and
the Company shall each select a
physician and these two together shall
select a third physician, whose
determination as to disability shall be
binding on all parties. Any severance
payments under this Section 1.9 shall be
reduced by any payments made under any
Short Term Disability or Long Term
Disability policies.
1.10 CESSATION OF
BENEFITS. The Company shall have no further
obligation to provide the Executive with
the severance benefits set forth in
Sections 1.1, 1.3, 1.5, 1.8 and/or 1.9
("Severance Benefits") if the Executive
violates any provision set forth in
Sections 3 and/or 4
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of this Agreement and all Severance
Benefits shall cease as of the date of the
violation of any provision in such
Sections. Similarly, the Company shall have
no further obligation to provide the
Executive with the Severance Benefits if
the Executive engages in Regular Full-Time
Work during the Severance Period, of
a similar or comparable nature, whether as
an employee, consultant or otherwise,
unless such activities are expressly agreed
to in writing by the Company. During
the Severance Period, the following
activities shall not subject the Executive
to cessation of Severance Benefits based
upon his engaging in Regular Full-Time
Work: (a) service on corporate boards or
committees, (b) service for civic,
charitable, or non-profit organizations,
(c) lectures, speaking engagements or
teaching at educational institutions, or
(d) management of personal investments.
The amount or cost of Severance Benefits,
if any, provided to the Executive
after any violation of Sections 3 and/or 4
or the commencement of Regular
Full-Time Work shall be repaid to the
Company immediately upon the Company's
demand for such repayment.
2. ENHANCED RETIREMENT
BENEFITS.
2.1 Subject to
Sections 2.5 and 2.6 herein, the Executive shall
receive an annuity payable in monthly
installments, the first such installment
being paid on the first day of the month
following the month in which the
Executive's employment terminates, and the
last such installment being paid on
the first day of the month in which the
Executive dies, in which the annual
amount is 1.5% of the Executive's Final
Average Pay (as defined herein) times
his year of Benefit Service (as defined in
the Hasbro, Inc. Pension Plan), but
not to exceed 60% of Final Average Pay;
PROVIDED, however that if the Executive
retires or his employment is terminated
before February 1, 2005 the annual
amount of such benefits shall be reduced by
one third of one-percent for each
full month remaining between the month that
the Executive's
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employment ends and March 1, 2005 (E.G., if
the Executive's employment ends
twelve (12) months prior to March 1, 2005,
the Executive shall be eligible for
96% of the otherwise due annual annuity)
(such benefits, reduced as set forth in
the following sentence, shall be referred
to hereafter as the "Enhanced
Retirement Benefits"). The amount payable
under the preceding sentence shall be
reduced by (a) the lifetime benefits
(straight life annuity) payable under the
Hasbro, Inc. Pension Plan (the "Pension
Plan") and (b) the excess pension
benefits payable under the Hasbro, Inc.
Supplemental Benefit Retirement Plan
(the "Supplemental Benefit Plan"). For
purposes of this Section 2.1, the
Executive's Final Average Pay per year is
equal to: his Five Year Average
Compensation as such term is defined in the
Pension Plan, determined without
regard to any limitations imposed by
Section 401(a)(17) or Section 415(b) of the
Internal Revenue Code, but including as
compensation any of the Executive's
elective deferrals under Hasbro's Deferred
Compensation Plan.
2.2 At the
Executive's option, the benefit described in Section 2.1
shall be payable in any actuarially
equivalent form of benefit provided under
the Supplemental Benefit Plan, determined
using the actuarial conversion factors
used for the Supplemental Benefit Plan.
Alternatively, the Executive may elect
to receive this benefit as an actuarially
equivalent single lump sum using the
actuarial conversion factors used for the
Supplemental Benefit Plan for this
purpose; provided, however, that the
Executive must have affirmatively made such
election at least twelve (12) months in
advance of the date benefits are
otherwise payable under Section 2.1.
2.3 If the
Executive's employment terminates due to the Executive's
death, the Executive's spouse shall be
entitled to the actuarial equivalent of a
survivor benefit equal to 100% of the
Enhanced Retirement Benefits set forth in
Section 2.1 that the Executive would have
received if he had begun to receive
benefits on the first day of the month
following his date
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of death. The amount payable under the
preceding sentence shall be reduced by
the Executive's spouse's lifetime benefits
payable under the Pension Plan and
Supplemental Benefit Plan as of the date
benefits are payable under this Section
2.3.
2.4 The benefits
provided under Sections 2.1, 2.2 and 2.3 shall be
unfunded and shall be paid from the general
assets of the Company. The
Executive's and/or his spouse's right to
such benefits shall be no greater than
the rights of an unsecured general creditor
of the Company. The benefits are not
assignable by the Executive prior to
receipt. In the event that the Company
shall adopt a policy of funding severance
or non-qualified retirement benefits
that is generally applicable to senior
executives, the benefits to the Executive
will be funded in accordance with such
policy.
2.5 In the event
that the Executive's employment is terminated by
the Company for Cause, the Executive will
not be entitled to any Enhanced
Retirement Benefits set forth in this
Agreement.
2.6 If the
Executive violates any provision set forth in Sections 3
and/or 4 of this Agreement, the Company
shall have no further obligation to
provide the Executive with Enhanced
Retirement Benefits and all such benefits
shall cease as of the date of the first
such violation. The amount of Enhanced
Retirement Benefits, if any, paid to the
Executive after the date of the
violation of any provision in Sections 3
and/or 4 shall be repaid to the Company
immediately upon the Company's demand for
such repayment.
3. NON-COMPETITION AND
NON-SOLICITATION.
3.1
While employed
by the Company, the Executive shall devote all of
his business time, attention, skill and
effort to the faithful performance of
his duties for the Company. However, it
shall not be a violation of this
Agreement if the Executive engages in
any
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of the actions permissible under Section
4(a)(ii) of the Change in Control
Agreement. For a period of eighteen (18)
months after the termination or
cessation of the Executive's employment for
any reason, or during the Severance
Period, whichever is greater (the
"Non-Competition Period"), the Executive will
not, in the geographical areas that the
Company or any of its subsidiaries does
business or has done business at the time
of the Executive's departure, directly
or indirectly:
(a) Engage in any business or enterprise (whether as owner,
partner, officer, director, employee,
consultant, investor, lender or otherwise,
except as the holder of not more than 1% of
the outstanding stock of a
publicly-held company) that is competitive
with the Company's business,
including but not limited to any business
or enterprise that develops,
manufactures, markets, or sells any product
or service that competes with any
product or service developed, manufactured,
marketed or sold, or planned to be
developed, manufactured, marketed or sold,
by the Company or any of its
subsidiaries while the Executive was
employed by the Company; provided, that,
for the purposes of this Section 3.1(a),
products or services that are "planned
to be developed" shall not include
preliminary development plans not reduced to
writing or communicated to the Executive;
or
(b) Either alone or in a
