EXHIBIT 10.1
CHAIRMANSHIP AGREEMENT
This AGREEMENT (the
“Agreement”) is made as of the 30th day of August, 2005
(the “Effective Date”), by and between Hasbro, Inc., a
Rhode Island corporation, (“Hasbro” or the
“Company”) and Alan G. Hassenfeld (the
“Chairman”).
WHEREAS, the Chairman has rendered
exemplary service as an employee and an officer of the Company for
over thirty-five years, including serving as the Company’s
Chairman since 1989; and
WHEREAS, the Company recognizes the
Chairman’s comprehensive knowledge of the Company and the toy
industry and, as such, wishes to establish the terms of the
Chairman’s continued relationship with the Company after the
end of his employment; and
WHEREAS, the Company’s Board of
Directors (the “Board”) and the Chairman have mutually
determined that it is in the best interest of the Company that the
Chairman transition into the role of non-executive Chairman
beginning on January 1, 2006; and
WHEREAS, the Board has determined that it
is in the best interest of the Company and its shareholders to
assure that the Chairman enter into this Agreement;
NOW, THEREFORE, in consideration of the
mutual promises and conditions set forth in this Agreement, the
sufficiency of which is hereby acknowledged, the Company and the
Chairman agree as follows:
1.
Transition . From the Effective Date through and
including December 31, 2005 (the “Transition
Date”)(collectively, the “Transition Period”),
the Chairman will continue to serve as the Company’s
employee, officer, and Chairman of the Board and shall continue to
receive his current base salary ($1,000,000 annualized) through the
Transition Period. The Chairman is also eligible to receive a
bonus under the 2005 Senior Management Annual Performance Plan (the
“Plan”) for the Company’s 2005 fiscal year, or
any successor plan or replacement to the Plan, at the same time and
in the same manner that Plan bonus payments are provided to other
Plan participants; provided, however, that the Board’s
Compensation Committee retains full discretion over the actual
amount of the Chairman’s bonus award under the Plan, if any.
In addition, during the Transition Period, the Chairman shall
continue to participate in the employee and fringe benefit plans,
programs, and arrangements maintained by the Company from time to
time, to the extent the Chairman was participating in, and remains
eligible to participate in, such benefit plans, programs, and
arrangements from the Effective Date to the Transition Date.
2.
Retirement . On the Transition Date, the Chairman will
tender and the Board, on behalf of the Company, will accept the
Chairman’s immediate retirement as an employee of the Company
and his resignation from any and all other positions that he may
hold with the Company (including those with any or all of the
Company’s affiliates), except as a director and as Chairman
of the Board. The Chairman agrees to execute all documents
which may reasonably be required to effectuate his retirement as an
employee and his resignation from any other positions which he may
hold with the Company except as a director and as Chairman of the
Board. The Chairman and the Company agree that, as of the
Transition Date, all salary, bonus, and any other employee
compensation otherwise payable to the Chairman will cease, and any
benefits the Chairman has or might have under any Company-provided
employee benefit plans, programs, or practices (including, but not
limited to participation in group medical, dental and vision plans;
short-term and long-term disability insurance; basic and executive
life insurance; basic accidental death and dismemberment insurance;
and participation in the employee assistance plan) will terminate,
except as required by federal or state law, by the terms of the
respective benefit plan, or as otherwise described in this
Agreement. Notwithstanding anything in this Section to the
contrary, nothing herein shall terminate the Chairman’s
vested rights to retirement benefits provided by Hasbro’s
retirement plans or to other retirement benefits generally made
available to former Hasbro employees under other plans, programs,
or arrangements.
3.
Continuation of Group Health
Insurance . If the
Chairman is eligible for and elects continuation of coverage for
retiree medical benefits under the Hasbro, Inc. Employee Benefits
Plan, he shall be solely responsible for the full costs of his
monthly medical insurance premium payments and any associated
administrative fees. The Chairman’s entitlement to
retiree medical benefits under the Company’s retiree medical
plan shall be governed exclusively by the terms of that plan, as
may be amended from time to time, and nothing in this Agreement
creates any rights which supersede the terms of that plan. As
of the Transition Date, the Chairman’s eligibility for dental
benefits under the Hasbro, Inc. Employee Benefits Plan ceases.
If the Chairman is eligible for continuation of dental
benefits and timely elects coverage under the Consolidated Omnibus
Budget Reconciliation Act of 1985 ("COBRA"), the Chairman may
continue his dental benefits for a period not to exceed that
prescribed under COBRA, as applied to all retirees of the
Company.
4.
Appointment as Non-Employee
Chairman . Contingent
upon the Chairman being reelected to the Board as a non-employee
director annually by shareholders, the Board shall appoint the
Chairman as its non-employee Chairman for an initial three
(3) year term commencing on January 1, 2006 (the
“Commencement Date”) and ending on December 31, 2008,
which term shall be renewed automatically for periods of one (1)
year commencing on the third anniversary of the Commencement Date
and on each subsequent anniversary thereafter, unless either the
Chairman or the Board gives written notice to the other not less
than six (6) months prior to the end of the then-current term, and
unless such term is terminated earlier pursuant to Section 8 below
(such time period is hereinafter referred to as the
“Chairmanship Period”). During the Chairmanship
Period, the Chairman shall provide leadership to the Board by,
among other things, working with the Chief Executive Officer, the
Presiding Director and the Corporate Secretary to set Board
calendars, prepare agendas for Board meetings, ensure proper flow
of information to Board members, facilitate effective operation of
Board and Committee work, help promote Board succession planning
and the recruitment and orientation of new directors, address
issues of director performance, assist in consideration and Board
adoption of the Company’s strategic plan and annual operating
plans, and help promote senior management succession planning.
In addition, the Chairman will assist the Company’s
Chief Executive Officer by advising on Board-related issues,
helping to develop programs and actions to reinforce Hasbro’s
core values, providing leadership in the development of the
Company’s corporate social responsibility strategy, acting as
a Company spokesperson on issues of corporate social
responsibility, and representing the Company at industry
conferences, as appropriate. The Chairman will also assist in
such other duties and responsibilities inherent in the position of
non-executive Chairman as may reasonably be assigned to him by the
Company’s Board of Directors. Subject to the
restrictions on competition, solicitation, and disclosure of
proprietary information set forth in Sections 10 and 11 below, the
Chairman may work as an employee, director, or as a consultant for
any person or entity during the Chairmanship Period, provided that
such employment does not interfere with the performance of his
duties as Chairman or constitute a conflict of interest. Such
employment or consulting arrangement shall not in any way violate
the provisions of this Agreement, nor in any way limit the
Chairman’s right to receive the payments and benefits set
forth in this Agreement.
5.
Compensation . In consideration for the services to be
provided during the Chairmanship Period, the Company shall provide
the Chairman with a stipend of Twenty-Five Thousand Dollars
($25,000) per month ($300,000 annually) (the “Chairmanship
Retainer”). In addition, during the Chairmanship
Period, the Chairman shall be eligible for all applicable meeting
fees, equity grants, and other benefits available to non-employee
directors (other than the annual $45,000 Board retainer, which the
Chairman shall not receive). During the Chairmanship Period,
the Chairman shall be provided with use of an office similar in
size to that of other senior executives of the Company. In
addition, prior to the commencement of each fiscal year during the
Chairmanship Period, the Chairman and the Chief Executive Officer
shall agree on an annual budget, including the cost of
administrative support, utilities, telephone, travel and
entertainment, and the Chairman shall be reimbursed for all
reasonable and necessary expenses incurred in connection with
discharging his duties as Chairman, provided they are within the
scope of the agreed annual budget. The Chairman shall be
solely responsible for all state and federal income taxes,
unemployment insurance and Social Security taxes on the
compensation payable pursuant to this Agreement. The Company
shall issue to the Chairman Form 1099 – MISC for the
compensation provided to him under this Section annually, in
accordance with its regular business practice. It is the
express intention of the parties to this Agreement that during the
Chairmanship Period, the Chairman shall not be an employee of the
Company for any purposes whatsoever and, therefore, shall not be
eligible for or otherwise entitled to (a) any salary, bonuses, or
long-term incentive payments; or (b) any benefit programs that the
Company may make available to its employees from time to
time.
6.
Retirement Benefits
.
a.
As of the date of termination of the
Chairman’s employment as described in Section 2 above, the
Chairman shall be eligible for a retirement pension benefit payable
in regular monthly installments under the Company’s qualified
and non-qualified pension arrangements, with the first such
installment being paid in the month following the Transition Date
(subject to the Chairman’s timely submission of the
retirement pension benefits documentation required by the Company)
and the last such installment being paid in the month in which the
Chairman dies. The annual pension benefit payable to the
Chairman in a single-life annuity (the “Retirement
Benefits”) will equal Eight Hundred and Fourteen Thousand
Five Hundred Dollars ($814,500) per year from the first month
following the Transition Date through the month in which the
Chairman turns age sixty-five (65), and Seven Hundred and
Ninety-Six Thousand Eight Hundred Dollars ($796,800) thereafter.
The amounts payable under the preceding sentence shall be
reduced by (a) the annual lifetime benefits (straight life annuity)
payable under the Hasbro, Inc. Pension Plan (the “Pension
Plan”) and (b) the annual excess pension benefits payable
under the Hasbro, Inc. Supplemental Benefit Retirement Plan (the
“Supplemental Benefit Plan”) both of which shall be
payable by the Company pursuant to the respective terms of those
plans.
b.
Any benefits pursuant to this Section
will be payable in an actuarially equivalent 100% Joint and
Survivor form of pension benefit, with the Chairman’s legal
spouse as of the Transition Date as beneficiary, determined using
the actuarial conversion factors used for the Supplemental Benefit
Plan. In the event that the commencement of any portion
of the Chairman’s benefit under this section is delayed
pursuant to Section 409A(a)(2)(B) of the Internal Revenue Code, the
amount of such benefit that is not permitted to be paid during the
six (6)month delay period shall be paid on the first date on which
it may be paid, in a single lump sum cash payment, with interest
credited on the unpaid amounts at the same rate, if any, as is
provided in the Supplemental Benefit Plan for such
purpose.
c.
In the event of the Chairman’s
death following the Effective Date but before the Transition Date,
an actuarially equivalent 100% Joint and Survivor pension benefit
shall be paid to the Chairman’s legal spouse commencing on
the first day of the month following the Chairman’s death.
The amount payable under the preceding sentence shall be
reduced by the Chairman’s spouse’s lifetime benefits
payable under the Pension Plan and/or the Supplemental Benefit Plan
as of the date benefits are payable under this Section.
d.
Certain of the benefits provided under
this Section shall be unfunded and shall be paid from the general
assets of the Company. The Chairman’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 under this Section are not assignable by the Chairman
prior to receipt. In the event that the Company shall adopt a
policy of funding severance or non-qualified retirement benefits
that is applicable to senior executives, the benefits to the
Chairman will be funded in accordance with such policy.
7.
Outstanding Stock Options
. By virtue of the Chairman’s
continued service to the Company as a non-employee director, the
currently outstanding options previously granted to him pursuant to
the Company’s 1992 Stock Incentive Performance Plan, the 1995
Stock Incentive Performance Plan, and the 2003 Stock Incentive
Performance Plan will continue to vest in accordance with their
terms during the Chairmanship Period. Nothing in the
preceding sentence is intended to extend the expiration date for
any of the outstanding options, and to the extent the stated
expiration date for any such outstanding options occurs while the
Chairman is still a non-employee director, such applicable options
would expire in the same manner that they would expire if their
expiration date occurred during the Chairman’s service as an
employee of the Company. While clarifying that the
Chairman’s service as a non-employee director has been
interpreted by the Company’s Compensation and Stock Option
Committee to result in continued vesting of the Chairman’s
outstanding stock options during the term of such service, and that
the date the Chairman ceases to be a non-employee director of the
Company will constitute his retirement date under the outstanding
stock option plans, this Agreement is not intended to change in any
way the terms of any options previously granted to the Chairman.
The Chairman understands that the provisions of this Section
may adversely affect the tax treatment of the options referred to
herein under Section 422 of the Internal Revenue Code of 1986, as
amended.
8.
Termination .
a.
Termination Due to Death
. The Transition Period and the
Chairmanship Period shall terminate immediately upon the death of
the Chairman. In the event termination due to the
Chairman’s death occurs, the Chairman’s estate shall
not be entitled to any further payments under Section 5 of this
Agreement, but his legal spouse shall be entitled to the pension
benefits described in Section 6 above.
b.
Termination Due to
Disability . The
Transition Period and the Chairmanship Period shall terminate
immediately upon the Disability of the Chairman. In the event
termination due to the Chairman’s Disability occurs, the
Chairman shall not be entitled to any further payments under
Section 5 of this Agreement, but shall receive the retiree pension
benefits described in Section 6 above. As used in this
Agreement, the term “Disability” shall mean the
inability of the Chairman to perform the functions of his position
due to a physical or mental disability, with or without reasonable
accommodation as may be required by state or federal law for a
period of 120 days, whether or not consecutive, during a rolling
one-year period of the Chairman’s retention by the Company.
A determination of Disability shall be made by a physician
chosen by both the Chairman and the Company, provided
that if the Chairman and the Company cannot agree on a
physician, the Chairman 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.
c.
Termination Due To Failure to Be
Reelected . The
Transition Period and the Chairmanship Period shall terminate
immediately upon the failure of the Chairman to secure reelection
to the Board by shareholders as a non-employee director. In
the event termination under this Section occurs, the Chairman shall
not be entitled to any further payments under Section 5 of this
Agreement, but shall receive the retiree pension benefits described
in Section 6 above.
d.
Termination by the Board for
Cause . For purposes of
this Agreement, termination by the Board for “Cause”
shall mean termination of the Chairman’s position by the
Board for any of the following r
