def14a
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed By The
Registrant x
Filed By A Party Other Than
The
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Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to sec.240.14a-12 |
HASBRO, INC.
(Name of Registrant as Specified In Its Charter)
Payment Of Filing Fee (Check The Appropriate Box):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Aggregate number of securities to which transaction applies: |
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Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined): |
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Proposed maximum aggregate value of transaction: |
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Total fee paid: |
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing. |
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Amount Previously Paid: |
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Form, Schedule or Registration Statement No.: |
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TABLE OF CONTENTS
HASBRO,
INC.
NOTICE OF 2006 ANNUAL MEETING OF SHAREHOLDERS
Time:
11:00 a.m. local time
Date:
Thursday, May 25, 2006
Place:
Hasbro, Inc. Corporate Offices
1027 Newport Avenue
Pawtucket, Rhode Island 02862
Purpose:
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Elect twelve directors.
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Ratify the selection of KPMG LLP as the Companys
independent registered public accounting firm for the 2006
fiscal year.
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Consider and vote upon a shareholder proposal entitled
Hasbro, Inc.-Global Human Rights Standards.
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Transact such other business as may properly come before the
meeting and any adjournment or postponement of the meeting.
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Other
Important Information:
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Hasbros Board of Directors recommends that you vote your
shares FOR each of the nominees for director
and FOR the ratification of KPMG LLP as the
Companys independent registered public accounting firm for
fiscal 2006.
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Hasbros Board of Directors recommends that you vote your
shares AGAINST the Hasbro, Inc.-Global
Human Rights Standards proposal.
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Shareholders of record of Hasbro common stock at the close of
business on April 3, 2006 may vote at the meeting.
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You are cordially invited to attend the meeting to vote your
shares in person. If you are not able to do so, you may vote by
Internet, by telephone or by mail. See the enclosed proxy card
and proxy statement for specific instructions. Please vote
your shares.
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By Order of the Board of Directors
Barry Nagler
Secretary
Dated: April 18, 2006
HASBRO,
INC.
1027 Newport Avenue
Pawtucket, Rhode Island 02862
PROXY
STATEMENT
2006 ANNUAL MEETING OF SHAREHOLDERS
To be held on May 25, 2006
QUESTIONS
AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL
MEETING
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Why am I receiving these materials? |
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The Board of Directors (the Board) of Hasbro, Inc.
(the Company or Hasbro) is sending these
proxy materials to you on or about April 18, 2006 in
connection with Hasbros 2006 Annual Meeting of
Shareholders (the Meeting), and the Boards
solicitation of proxies in connection with the Meeting. The
Meeting will take place at 11:00 a.m. local time on
Thursday, May 25, 2006 at Hasbros corporate offices,
1027 Newport Avenue, Pawtucket, Rhode Island 02862. The
information included in this proxy statement relates to the
proposals to be voted on at the Meeting, the voting process, the
compensation of Hasbros directors and most highly paid
executive officers, and certain other required information.
Hasbros 2005 Annual Report to Shareholders is also
enclosed with this mailing. |
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What proposals will be voted on at the Meeting? |
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There are three proposals scheduled to be voted on at the
Meeting: |
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Election of twelve directors.
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Ratification of KPMG LLP as the Companys
independent registered public accounting firm for fiscal 2006.
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A shareholder proposal entitled Hasbro,
Inc.-Global Human Rights Standards.
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What shares owned by me can be voted? |
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All shares of the Companys common stock, par value
$.50 per share (Common Stock) owned by you as
of April 3, 2006, the record date, may be voted by
you. These shares include those (1) held directly in your
name as the shareholder of record, including shares
purchased through Hasbros Dividend Reinvestment and Cash
Stock Purchase Program and (2) held for you as the
beneficial owner through a broker, bank or other nominee. |
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What is the difference between holding shares as a
shareholder of record and as a beneficial owner? |
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Most Hasbro shareholders hold their shares through a broker,
bank or other nominee rather than directly in their own name as
the shareholder of record. As summarized below, there are some
distinctions between shares held of record and those owned
beneficially. |
Shareholder
of Record
If your shares are registered directly in your name with
Hasbros Transfer Agent, Computershare Trust Company, N.A.
(Computershare), you are considered, with respect to
those shares, the shareholder of record, and these proxy
materials are being sent directly to you by Computershare on
behalf of Hasbro. As the shareholder of record, you have
the right to grant your voting proxy directly to Hasbro or to
vote in person at the Meeting. Hasbro has enclosed a proxy card
for you to use.
Beneficial
Owner
If your shares are held in a stock brokerage account or by a
bank or other nominee, you are considered the beneficial owner
of shares held in street name and the proxy materials are
being sent to you by your broker or nominee who is considered,
with respect to those shares, the shareholder of record.
As the beneficial owner, you have the right to direct your
broker or nominee on how to vote and are also invited to attend
the Meeting. However, since you are not the shareholder of
record, you may not vote these shares in person at the
Meeting unless you
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receive a proxy from your broker or nominee. Your broker or
nominee has enclosed a voting instruction card for you to use.
If you wish to attend the Meeting and vote in person, please
mark the box on the voting instruction card received from your
broker or nominee and return it to them so that you can receive
a legal proxy to present at the Meeting.
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How can I attend the Meeting? |
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You may attend the Meeting if you are listed as a shareholder of
record as of April 3, 2006 and bring proof of your
identification. If you hold your shares through a broker or
other nominee, you will need to provide proof of your share
ownership by bringing either a copy of a brokerage statement
showing your share ownership as of April 3, 2006, or a
legal proxy if you wish to vote your shares in person at the
Meeting. In addition to the items mentioned above, you should
bring proof of your identification. |
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How can I vote my shares in person at the Meeting? |
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Shares held directly in your name as the shareholder of
record may be voted in person at the Meeting. If you choose
to do so, please bring the enclosed proxy card and proof of
identification. Shares beneficially owned may be voted by you if
you receive and present at the Meeting a proxy from your broker
or nominee, together with proof of identification. Even if you
plan to attend the Meeting, we recommend that you also submit
your proxy as described below so that your vote will be counted
if you later decide not to attend the Meeting or are otherwise
unable to attend. |
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How can I vote my shares without attending the Meeting? |
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Whether you hold shares directly as the shareholder of record or
beneficially in street name, you may direct your vote without
attending the Meeting. You may vote by granting a proxy or, for
shares held in street name, by submitting voting instructions to
your broker or nominee. In most instances, you will be able to
do this over the Internet, by telephone or by mail. Please refer
to the summary instructions below and those included on your
proxy card or, for shares held in street name, the voting
instruction card included by your broker or nominee. |
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By Internet If you have Internet access,
you may submit your proxy from any location in the world by
following the To vote using the Internet
instructions on the proxy card. |
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By Telephone You may submit your proxy
by following the To vote using the Telephone
instructions on the proxy card. |
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By Mail You may do this by marking,
dating and signing your proxy card or, for shares held in street
name, the voting instruction card provided by your broker or
nominee, and mailing it in the enclosed, self-addressed, postage
prepaid envelope. No postage is required if mailed in the United
States. |
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How are votes counted? |
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Each share of Common Stock entitles its holder to one vote on
all matters to come before the Meeting, including the election
of directors. In the election of directors, for each of the
nominees you may vote FOR such nominee or your vote
may be WITHHELD with respect to such nominee. For
the other proposals, you may vote FOR,
AGAINST or ABSTAIN. If you
ABSTAIN, it has the same effect as a vote
AGAINST the proposal. |
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If you sign your proxy card with no instructions, your shares
will be voted in accordance with the recommendations of the
Board with respect to the election of directors, the
ratification of the selection of KPMG as the independent
registered public accounting firm for 2006 and any other matters
which may be considered at the Meeting for which discretionary
voting is permitted. Please note that, as is described below,
this does not apply to any units of the Hasbro Stock Fund which
you hold in Hasbros Retirement Savings Plan. |
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With respect to the Hasbro, Inc. Global
Human Rights Standards shareholder proposal, discretionary
voting authority is not permitted. For this proposal proxy cards
which are signed without instructions will not be voted. |
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Can I change my vote or revoke my proxy? |
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You may change your proxy instructions at any time prior to the
vote at the Meeting. For shares held directly in your name, you
may accomplish this by granting another proxy that is properly
signed and bears a later date, by sending a properly signed
written notice to the Secretary of the Company or by attending
the Meeting and voting in person. To revoke a proxy previously
submitted by telephone or through the Internet, you may simply
vote again at a later date, using the same procedures, in which
case your later submitted vote will be recorded and your earlier
vote revoked. Attendance at the Meeting will not cause your
previously granted proxy to be revoked unless you specifically
so request. For shares held beneficially by you, you may change
your vote by submitting new voting instructions to your broker
or nominee. |
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What does it mean if I receive more than one proxy or voting
instruction card? |
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It means your shares are registered differently or are held in
more than one account. Please provide voting instructions for
all proxy and voting instruction cards you receive. |
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Where can I find the voting results of the Meeting? |
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We will announce preliminary voting results at the Meeting and
publish final results in our quarterly report on
Form 10-Q
for the second quarter of fiscal 2006. We also plan to issue a
current report on
Form 8-K
within a few days of the Meeting with the final voting results. |
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What is the quorum for the Meeting? |
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Holders of record (the Shareholders) of the Common
Stock on April 3, 2006 are entitled to vote at the Meeting
or any adjournments thereof. As of that date there were
174,450,518 shares of Common Stock outstanding and entitled
to vote and a majority of the outstanding shares will constitute
a quorum for the transaction of business at the Meeting.
Abstentions and broker non-votes are counted as present at the
Meeting for purposes of determining whether there is a quorum at
the Meeting. A broker non-vote occurs when a broker holding
shares for a customer does not vote on a particular proposal
because the broker has not received voting instructions on the
matter from its customer and is barred by stock exchange rules
from exercising discretionary authority to vote on the matter. |
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How do participants in the Hasbro Retirement Savings Plan
vote their shares? |
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If your account in the Hasbro Retirement Savings Plan has units
of the Hasbro Stock Fund, the accompanying proxy card indicates
the number of shares of Common Stock beneficially owned by you
under the Retirement Savings Plan. When a participant proxy card
is returned properly signed and completed, Fidelity Management
Trust Company (the Trustee) will vote the
participants shares in the manner directed by the
participant. If the participant makes no directions, the Trustee
will not vote the shares. |
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What happens if I have consented to electronic delivery of
the proxy statement and other annual meeting materials? |
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If you have consented to electronic delivery of the annual
meeting materials you will receive an email notice with
instructions on how to access the proxy statement and annual
report on the Companys website, and in the case of the
proxy card, on Computershares website. The notice will
also inform you how to vote your proxy over the Internet. You
will receive this email notice at approximately the same time
paper copies of the annual meeting materials are mailed to
shareholders who have not consented to receive materials
electronically. Even if you have consented to electronic
delivery of the annual meeting materials, you may still receive
a paper copy of the notice of the annual meeting. Your consent
to receive the annual meeting materials electronically will
remain in effect until you specify otherwise. |
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If I am a shareholder of record how do I consent to receive
my annual meeting materials electronically? |
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Shareholders of record that choose to vote their shares via the
Internet will be asked to choose a delivery preference prior to
voting their shares. After entering the access information
requested by the electronic voting site, click Login
and then respond as to whether you would like to receive proxy
material via electronic delivery. If you would like to
receive future proxy materials electronically click
Yes and then |
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enter and verify your current
e-mail
address. If you do not wish to choose the electronic delivery
option, make sure the Yes box consenting to
electronic delivery is not clicked, and then click the
Continue button to begin the voting process. During
the year, shareholders of record may sign up to receive their
annual meeting materials electronically over the Internet. To
sign up registered shareholders can go to the website
http://www.econsent.com/has.
Shareholders of record with multiple Hasbro accounts will need
to consent to electronic delivery for each account separately. |
ELECTION
OF DIRECTORS
(Proposal No. 1)
Twelve directors are to be elected at the Meeting. All of the
directors elected at the Meeting will serve until the 2007
Annual Meeting of Shareholders (the 2007 Meeting),
and until their successors are duly elected and qualified, or
until their earlier death, resignation or removal.
The Board has recommended as nominees for election as directors
to serve until the 2007 Meeting the persons named in the table
below. All of the nominees are currently directors of the
Company. The Company is saddened to report that Eli J. Segal, a
valued member of the Board and trusted advisor to the Company,
passed away in early 2006. The shareholders are not being asked
to elect a thirteenth director at the Meeting and the proxies
cannot be voted for more than twelve directors at the Meeting.
Unless otherwise specified in the accompanying proxy card, the
shares voted pursuant thereto will be cast for the persons named
below as nominees for election as directors. If, for any reason,
any of the nominees named below should be unable to serve as a
director, it is intended that such proxy will be voted for the
election, in his or her place, of a substituted nominee who
would be recommended by management. Management, however, has no
reason to believe that any nominee named below will be unable to
serve as a director.
The following tables set forth as to each nominee for election
at the Meeting: (i) his or her age; (ii) all positions
and offices with the Company; (iii) principal occupation or
employment during the past five years; (iv) other
directorships of publicly held companies or investment
companies; and (v) period of service as a director of the
Company. Except as otherwise indicated, each person has had the
same principal occupation or employment during the past five
years.
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Positions with Company,
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Has Been
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Principal Occupation and
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A Director
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Name
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Other Directorships
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Since
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Nominees for Terms Expiring in
2007
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Basil L. Anderson
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Vice Chairman, Staples, Inc.
(office supply company) from 2001 until March 2006. Prior
thereto, Executive Vice President Finance and
Chief Financial Officer of Campbell Soup Company (consumer
products company) since 1996. Director of Becton, Dickinson and
Company, CRA International, Inc., Moodys Investors
Service, Inc. and Staples, Inc.
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2002
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Alan R. Batkin
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Vice Chairman, Kissinger
Associates, Inc. (strategic consulting firm) since 1990.
Director of Diamond Offshore Drilling, Inc., Overseas
Shipholding Group, Inc. and Cantel Medical Corp. Mr. Batkin also
serves on the boards of funds within the Merrill Lynch IQ
Investment Advisors Fund family.
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1992
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Frank J. Biondi, Jr.
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Senior Managing Director,
WaterView Advisors LLC (private equity fund specializing in
media) since 1999. Director of Amgen, Inc., Cablevision Systems
Corp., Harrahs Entertainment, Inc., The Bank of New York
and Seagate Technology.
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2002
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Positions with Company,
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Has Been
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Principal Occupation and
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John M. Connors, Jr.
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Chairman of Hill, Holliday,
Connors, Cosmopulos, Inc. (full-service advertising agency)
since 1995, during which time Mr. Connors also served as
President and Chief Executive Officer until 2003.
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2004
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Michael W.O. Garrett
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Served in a number of positions
with Nestlé S.A. (international food and beverage company),
most recently as Executive Vice President of Nestlé S.A.
responsible for Asia, Africa, the Middle East and Oceania until
2005. Board member of the Nestlé companies in India and
Japan and non-executive director on the boards of Prudential
PLC, UK and the Bobst Group in Switzerland.
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2005
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E. Gordon Gee
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Chancellor, Vanderbilt University
since 2000. Prior thereto, President, Brown University from 1997
to 2000. Director of Dollar General Corporation, Gaylord
Entertainment Company, The Limited, Inc. and Massey Energy
Company.
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1999
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Jack M. Greenberg
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Chief Executive Officer of
McDonalds Corporation (restaurant franchiser) from August
1998 to December 2002. Chairman of the Board of McDonalds
Corporation from May 1999 until December 2002. Director of
Abbott Laboratories, The Allstate Corporation, First Data
Corporation and Manpower, Inc.
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2003
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Alan G. Hassenfeld
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Chairman of the Board since 1999.
Prior to May 2003, Chairman of the Board and Chief Executive
Officer since 1999. Prior thereto, Chairman of the Board,
President and Chief Executive Officer. Director of
salesforce.com, inc.
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1978
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Claudine B. Malone
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President and Chief Executive
Officer, Financial and Management Consulting, Inc. (consulting
firm) since 1984. Director of LaFarge North America, Novell Inc.
and Science Applications International Corporation.
Ms. Malone previously served as a Director of Hasbro from
1992 to 1999.
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2001
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Edward M. Philip
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President and Chief Executive
Officer of Decision Matrix Group, Inc. (research and consulting
firm) from May 2004 to November 2005. Prior thereto Senior Vice
President of Terra Networks, S.A. (global internet company) from
October 2000 to January 2004.
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2002
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Paula Stern
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Chairwoman, The Stern Group, Inc.
(international advisory firm in the areas of business and
government strategy) since 1988. Alkire Chair in International
Business, Hamline University, from 1994 to 2000. Director of
Avaya, Inc. and Avon Products, Inc.
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2002
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Positions with Company,
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Has Been
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Principal Occupation and
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A Director
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Name
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Other Directorships
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Since
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Alfred J. Verrecchia
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President and Chief Executive
Officer since May 2003. Prior thereto, President and Chief
Operating Officer from 2001 to May 2003. Prior thereto,
President, Chief Operating Officer and Chief Financial Officer
from 2000 to 2001. Director of CVS Corporation and FM Global.
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1992
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Mr. Verrecchia also serves as an officer and director of a
number of the Companys subsidiaries at the request and
convenience of the Company.
Vote Required. The affirmative vote of a
majority of those shares of Common Stock present (in person or
by proxy) and entitled to vote at the Meeting on the election of
directors is required to elect directors. Broker non-votes are
not counted as present and entitled to vote for the election of
directors for purposes of determining if a director receives an
affirmative vote of the majority of the shares present and
entitled to vote.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE FOR THE ELECTION OF THE TWELVE NOMINEES
NAMED ABOVE.
6
GOVERNANCE
OF THE COMPANY
Code
of Conduct
Hasbro has a Code of Conduct which is applicable to all of the
Companys employees, officers and directors, including the
Companys Chief Executive Officer, Chief Financial Officer
and Controller. The Code of Conduct addresses such issues as
conflicts of interest, protection of confidential Company
information, financial integrity, compliance with laws, rules
and regulations, insider trading and proper public disclosure.
Compliance with the Code of Conduct is mandatory for all Company
employees, officers and directors. Any violation of the Code of
Conduct can subject the person at issue to a range of sanctions,
including dismissal.
The Code of Conduct is available on Hasbros website at
www.hasbro.com, under Corporate
Information Investors Corporate
Governance. Although the Company generally does not intend
to provide waivers of, or amendments to, the Code of Conduct for
its Chief Executive Officer, Chief Financial Officer,
Controller, or any other officers, directors or employees,
information concerning any waiver of, or amendment to, the Code
of Conduct for the Chief Executive Officer, Chief Financial
Officer, Controller, or any other executive officer or director
of the Company, will be promptly disclosed on the Companys
website in the location where the Code of Conduct is posted.
Corporate
Governance Principles
Hasbro has adopted a set of Corporate Governance Principles
which address qualifications for members of the Board of
Directors, director responsibilities, director access to
management and independent advisors, director compensation and
many other matters related to the governance of the Company. The
Corporate Governance Principles are available on Hasbros
website at www.hasbro.com, under Corporate
Information Investors Corporate
Governance.
Director
Independence
Hasbros Board has adopted Standards for Director
Independence (the Independence Standards) in
accordance with the New York Stock Exchanges corporate
governance listing standards. The Independence Standards specify
criteria used by the Board in making determinations with respect
to the independence of its members and include strict guidelines
for directors and their immediate family members with respect to
past employment or affiliation with the Company or its
independent auditor.
The Independence Standards restrict commercial relationships
between directors and the Company and include the consideration
of other relationships with the Company, including charitable
relationships, in making independence determinations. Using the
Independence Standards, the Board has determined that each of
the following directors are independent and have no
relationships which impact an independence determination under
the Companys Independence Standards: Basil L. Anderson,
Alan R. Batkin, Frank J. Biondi, Jr., John M.
Connors, Jr., Michael W.O. Garrett, E. Gordon Gee, Jack M.
Greenberg, Claudine B. Malone, Edward M. Philip and Paula Stern.
The only two members of the Companys Board who were
determined not to be independent were Alan G. Hassenfeld
and Alfred J. Verrecchia. The Independence Standards are
available on Hasbros website at www.hasbro.com, under
Corporate
Information Investors Corporate
Governance and are attached as Appendix A to this
proxy statement.
Board
Meetings and Director Attendance at the Annual
Meeting
During 2005, the Board held eight meetings. All directors
attended at least 75% of the aggregate of (i) the Board
meetings held during their tenure as directors during 2005 and
(ii) the meetings of any committees held during their
tenure as members of such committees during 2005. Although the
Company does not have a formal policy requiring attendance of
directors at the annual meeting of shareholders, the expectation
of the Company and the Board is that all directors will attend
the annual meeting of shareholders unless conflicts prevent them
from attending. All of the members of the Board attended the
2005 Annual Meeting of Shareholders.
7
Presiding
Non-Management Director and Communicating with the
Board
Executive sessions of the independent members of the
Companys Board of Directors are presided over by the
presiding director (the Presiding Director), who is
also currently the Chair of the Nominating, Governance and
Social Responsibility Committee. Jack M. Greenberg currently
serves as the Presiding Director. Interested parties may contact
the Presiding Director confidentially by sending correspondence
to c/o Presiding Director, Hasbro, Inc., P.O. Box 495,
Pawtucket, Rhode Island 02860. Persons may also contact the
Board of Directors as a whole through the Presiding Director in
the manner set forth in the preceding sentence.
Board
Committees
Audit Committee. The Audit Committee of
the Board, which currently consists of Basil L. Anderson
(Chair), Michael W.O. Garrett, Claudine B. Malone and Edward M.
Philip, held eleven meetings in 2005. The Audit Committee is
responsible for the appointment, compensation and oversight of
the Companys independent auditor and assists the Board in
fulfilling its responsibility to oversee managements
conduct of the Companys financial reporting process, the
financial reports provided by the Company, the Companys
systems of internal accounting and financial controls, and the
quarterly review and annual independent audit of the
Companys financial statements. The current Audit Committee
Charter adopted by the Board is available on the Companys
website at www.hasbro.com, under Corporate
Information Investors Corporate
Governance.
The Board has determined that each member of the Audit Committee
meets both the Companys Independence Standards and the
requirements for independence under the New York Stock
Exchanges corporate governance listing standards. The
Board has determined that three of the four current Audit
Committee members (Basil L. Anderson, Claudine B. Malone and
Edward M. Philip) qualify as Audit Committee Financial Experts,
as such term is defined in the rules and regulations promulgated
by the Securities and Exchange Commission.
The Board does not have a policy setting rigid limits on the
number of audit committees on which a member of the
Companys Audit Committee can serve. Instead, in cases
where an Audit Committee member serves on more than three public
company audit committees, the Board evaluates whether such
simultaneous service would impair the service of such member on
the Companys Audit Committee. Two members of the
Companys Audit Committee, namely Mr. Anderson and
Ms. Malone, serve on more than three public company audit
committees. In both of these cases, the Board has made a
determination that such simultaneous service does not impair
such persons service on the Companys Audit Committee.
Compensation and Stock Option
Committee. The Compensation and Stock Option
Committee of the Board, which currently consists of Frank J.
Biondi, Jr. (Chair), Jack M. Connors, Jr. and E.
Gordon Gee, held six meetings in 2005. The Compensation and
Stock Option Committee is responsible for establishing and
overseeing the compensation and benefits for the Companys
senior management, including all of the Companys executive
officers, is authorized to make grants and awards under the
Companys employee stock equity plans and shares
responsibility for evaluation of the Companys Chief
Executive Officer with the Nominating, Governance and Social
Responsibility Committee.
The current Compensation and Stock Option Committee Charter
adopted by the Board is available on the Companys website
at www.hasbro.com, under Corporate
Information Investors Corporate
Governance. The Board has determined that each member of
the Compensation and Stock Option Committee meets both the
Companys Independence Standards and the requirements for
independence under the New York Stock Exchanges corporate
governance listing standards.
Executive Committee. The Executive
Committee of the Board, which currently consists of Basil L.
Anderson, Frank J. Biondi, Jr., Alan G. Hassenfeld (Chair),
Edward M. Philip and Alfred J. Verrecchia, did not meet in 2005.
The Executive Committee acts on such matters as are specifically
assigned to it from time to time by the Board and is vested with
all of the powers that are held by the Board, except that by law
the Executive Committee may not exercise any power of the Board
relating to amendment of the Articles of Incorporation or
By-laws of the Company, adoption of a plan of merger or
consolidation, the sale, lease or exchange of all or
substantially all the property or assets of the Company or the
voluntary dissolution of the Company. The current
8
Executive Committee Charter adopted by the Board is available on
the Companys website at www.hasbro.com, under
Corporate
Information Investors Corporate
Governance.
Finance Committee. The Finance
Committee of the Board, which currently consists of Edward M.
Philip (Chair), Jack M. Greenberg and Claudine B. Malone, was
established in the fall of 2005 and met once during 2005. The
Finance Committee assists the Board in overseeing the
Companys annual and long-term financial plans, capital
structure, use of funds, investments, financial and risk
management and proposed significant transactions. The current
Finance Committee Charter adopted by the Board is available on
the Companys website at www.hasbro.com, under
Corporate
Information Investors Corporate
Governance. The Board has determined that each member of
the Finance Committee meets both the Companys Independence
Standards and the requirements for independence under the New
York Stock Exchanges corporate governance listing
standards.
Nominating, Governance and Social Responsibility
Committee. The Nominating, Governance and
Social Responsibility Committee of the Board (the
Nominating Committee), which currently consists of
Alan R. Batkin, Jack M. Greenberg (Chair) and Paula Stern, met
four times in 2005. The Nominating Committee identifies and
evaluates individuals qualified to become Board members and
makes recommendations to the full Board for possible additions
to the Board and on the director nominees for election at the
Companys annual meeting. The Nominating Committee also
oversees and makes recommendations regarding the governance of
the Board and the committees thereof, including the
Companys governance principles, Board and Board committee
evaluations and the compensation of non-employee directors, and
shares with the Compensation and Stock Option Committee
responsibility for evaluation of the Chief Executive Officer.
Further, the Nominating Committee oversees the Companys
codes of business conduct and ethics, and analyzes issues of
social responsibility and related corporate conduct. The current
Nominating, Governance and Social Responsibility Committee
Charter adopted by the Board is available on the Companys
website at www.hasbro.com, under Corporate
Information Investors Corporate
Governance. The Board has determined that each member of
the Nominating Committee meets both the Companys
Independence Standards and the requirements for independence
under the New York Stock Exchanges corporate governance
listing standards.
In making its nominations for election to the Board the
Nominating Committee seeks candidates who meet the current
challenges and needs of the Board. As part of this process the
committee considers a number of factors, including, among
others, a candidates employment and other professional
experience, past expertise and involvement in areas which are
relevant to the Companys business, business ethics and
professional reputation, independence, other Board experience,
and the Companys desire to have a Board that represents a
diverse mix of backgrounds, perspectives and expertise. The
Nominating Committee will consider nominees recommended by
shareholders for election to the Board if such nominations are
made in accordance with the process set forth below under
Shareholder Proposals and Director Nominations.
The Nominating Committee uses multiple sources for identifying
and evaluating nominees for directors, including referrals from
current directors, recommendations by shareholders and input
from third party executive search firms. Third party executive
search firms assist the Board by identifying candidates with
expertise and experience relevant to the Companys business
who are interested in serving on the Companys Board. The
Nominating Committee will consider and evaluate candidates
recommended by shareholders on the same basis as candidates
recommended by other sources.
Mr. Garrett is being nominated for election to the Board by
the Companys shareholders for the first time at the
Meeting. Mr. Garrett was appointed to the Board effective
July 26, 2005. Mr. Garretts appointment followed
a search conducted with the assistance of a third party
executive search firm. The third party search firm assisted the
Board by identifying candidates with expertise and experience
relevant to the Companys business who were interested in
serving on the Companys Board. Existing members of the
Board also recommended potential candidates for evaluation whom
they felt possessed relevant expertise and experience.
Mr. Garrett was initially identified as a potential Board
candidate by the Companys Chairman of the Board, Alan G.
Hassenfeld. The Nominating Committee evaluated Mr. Garrett,
as well as other potential Board candidates, including
candidates identified by the third party search firm. Upon
completion of its evaluation, the Nominating Committee
recommended Mr. Garrett to the Board and the Board
unanimously voted to appoint Mr. Garrett as a director.
9
As of December 9, 2005 (the date that is 120 calendar days
before the release date of the proxy statement for the
Companys 2005 Annual Meeting of Shareholders) the
Nominating Committee had not received a recommended nominee for
election to the Board in 2006 from an individual shareholder, or
group of shareholders, who beneficially owned more than 5% of
the Companys Common Stock.
Additional
Availability of Corporate Governance Materials
In addition to being accessible on the Companys website,
copies of the Companys Code of Conduct, Corporate
Governance Principles and the charters of the five
Committees of the Board of Directors are all available
free of charge to any shareholder upon request to the
Companys General Counsel and Secretary, c/o Hasbro,
Inc., 1011 Newport Avenue, P.O. Box 1059, Pawtucket, Rhode
Island, 02862.
Shareholder
Proposals and Director Nominations
General
Shareholder Proposals
Any proposal which a shareholder of the Company wishes to have
considered for inclusion in the proxy statement and proxy
relating to the Companys 2007 annual meeting must be
received by the Secretary of the Company at the Companys
executive offices no later than December 18, 2006 (the date
that is 120 calendar days before the release date of the proxy
statement relating to the 2006 Annual Meeting of Shareholders).
The address of the Companys executive offices is 1011
Newport Avenue, Pawtucket, Rhode Island 02862. Such proposals
must also comply with the other requirements of the rules of the
Securities and Exchange Commission relating to shareholder
proposals.
With the exception of the submission of director nominations for
consideration by the Nominating Committee, which must be
submitted to the Company in the manner described below, any new
business proposed by any shareholder to be taken up at the 2007
annual meeting, but not included in the proxy statement or proxy
relating to that meeting, must be stated in writing and filed
with the Secretary of the Company no later than 150 days
prior to the date of the 2007 annual meeting. Except for
shareholder proposals made pursuant to the preceding paragraph,
the Company will retain discretion to vote proxies at the 2007
annual meeting with respect to proposals received prior to the
date that is 150 days before the date of such meeting,
provided (i) the Company includes in its 2007 annual
meeting proxy statement advice on the nature of the proposal and
how it intends to exercise its voting discretion and
(ii) the proponent does not issue a proxy statement.
Director
Nominations
The Companys By-laws provide that shareholders may
themselves nominate directors for consideration at an annual
meeting provided they give notice to the Secretary of the
Company not less than 60 days nor more than 90 days
prior to the one-year anniversary date of the immediately
preceding annual meeting and provide specified information
regarding the proposed nominee and each shareholder proposing
such nomination. Nominations made by shareholders in this manner
are eligible to be presented by the shareholder to the meeting,
but such nominees will not have been considered by the
Nominating Committee as a nominee to be potentially supported by
the Company.
To be considered by the Nominating Committee, director
nominations must be submitted to the General Counsel and
Secretary of the Company at the Companys executive
offices, 1011 Newport Avenue, Pawtucket, Rhode Island 02862 at
least 120 days prior to the one-year anniversary of the
release to the Companys shareholders of the proxy
statement for the preceding years annual meeting. As such,
director nominations to be considered for the Companys
2007 Annual Meeting of Shareholders must be submitted no later
than December 18, 2006. The Nominating Committee is only
required to consider recommendations made by shareholders, or
groups of shareholders, that have beneficially owned at least 1%
of the Companys Common Stock for at least one year prior
to the date the shareholder(s) submit such candidate to the
Nominating Committee and who undertake to continue to hold at
least 1% of the Companys Common Stock through the date of
the next annual meeting. In addition, a nominating
shareholder(s) may only submit one candidate to the Nominating
Committee for consideration.
10
Submissions to the Nominating Committee should include
(a) as to each person whom the shareholder proposes to
nominate for election or re-election as a director (i) the
name, age, business address and residence address of the person,
(ii) the principal occupation or employment of the person,
(iii) the class or series and number of shares of capital
stock of the Company that are owned beneficially or of record by
the person, (iv) any other information relating to the
person that would be required to be disclosed in a proxy
statement or other filings required to be made in connection
with solicitations of proxies for election of directors pursuant
to Section 14 of the Securities Exchange Act of 1934, as
amended (the Exchange Act), and the rules and
regulations promulgated thereunder, and (v) confirmation
that the candidate is independent under the Companys
Independence Standards and the rules of the New York Stock
Exchange, or if the candidate is not independent under all such
criteria, a description of the reasons why the candidate is not
independent; and (b) as to the shareholder(s) giving the
notice (i) the name and record address of such
shareholder(s) and each participant in any group of which such
shareholder is a member, (ii) the class or series and
number of shares of capital stock of the Company that are owned
beneficially or of record by such shareholder(s) and each
participant in any group of which such shareholder is a member,
(iii) if the nominating shareholder is not a record holder
of the shares of capital stock of the Company, evidence of
ownership as provided in
Rule 14a-8(b)(2)
under the Exchange Act, (iv) a description of all
arrangements or understandings between such shareholder(s) and
each proposed nominee and any other person or persons (including
their names) pursuant to which the nomination(s) are to be made
by such shareholder(s), and (v) any other information
relating to such shareholder(s) that would be required to be
disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Exchange Act and
the rules and regulations promulgated thereunder.
The Nominating Committee may require that any proposed nominee
for election to the Board furnish such other information as may
reasonably be required by the Nominating Committee to determine
the eligibility of such proposed nominee to serve as director of
the Company. The written notice from the nominating shareholder
specifying a candidate to be considered as a nominee for
election as a director must be accompanied by a written consent
of each proposed nominee for director. In this written consent
the nominee must consent to (i) being named as a nominee
for director, (ii) serve as a director and represent all
shareholders of the Company in accordance with applicable laws
and the Companys articles of incorporation, by-laws and
other policies if such nominee is elected, (iii) comply
with all rules, policies or requirements generally applicable to
non-employee directors of the Company, and (iv) complete
and sign customary information requests upon the request of the
Company.
COMPENSATION
OF DIRECTORS
Current
Director Compensation Arrangements
With the exception of Mr. Hassenfeld, whose Chairmanship
Agreement is described later in this proxy statement, all
members of the Board of Directors who are not otherwise employed
by the Company (Non-employee Directors) receive a
retainer of $55,000 per year. The Chairs of the Audit
Committee, the Compensation and Stock Option Committee, the
Finance Committee and the Nominating, Governance and Social
Responsibility Committee each receive an additional retainer of
$10,000 per year for their service as Chairs of these
committees.
The Companys Presiding Director currently receives an
additional retainer of $40,000 per year for serving as
Presiding Director, but this retainer is being reduced as of the
date of the 2006 Annual Meeting of Shareholders to
$25,000 per year.
No meeting fees are paid for attendance at meetings of the full
Board. However, non-employee Directors receive a fee of $1,500
for each committee meeting attended in person, and $1,000 for
telephonic participation in committee meetings. Action by
written consent is not considered attendance at a committee
meeting for purposes of fees to directors.
Beginning in 2006, the Company plans to employ stock awards,
instead of stock options, to provide equity compensation to its
Non-employee Directors. As part of the implementation of this
policy, the Company terminated the 2003 Stock Option Plan for
Non-Employee Directors (which is described below) effective as
of December 31, 2005. Going forward, the Company
anticipates issuing to each Non-employee Director, in May of
every year (beginning with May of 2006), that number of shares
of Common Stock which have a fair market value equal to
11
$90,000 (based on the fair market value of the Common Stock on
the date of grant). These shares will be immediately vested, but
the Board has adopted stock ownership guidelines which mandate
that Board members may not sell any shares of the Companys
Common Stock which they hold, including shares which are
obtained as part of this yearly stock grant, until they own
shares of Common Stock with an aggregate market value equal to
at least $275,000 (which is equivalent to five times the annual
Board retainer). Board members are permitted to sell shares of
Common Stock they hold with a value in excess of $275,000, as
long as they continue to hold at least $275,000 worth of Common
Stock.
Pursuant to the Deferred Compensation Plan for Non-employee
Directors (the Deferred Plan), which is unfunded,
Non-employee Directors may defer some or all of the annual Board
retainer and meeting fees into a stock unit account, the value
of each unit initially being equal to the fair market value of
one share of Common Stock as of the end of the quarter in which
the compensation being deferred would otherwise be payable.
Stock units increase or decrease in value based on the fair
market value of the Common Stock. In addition, an amount equal
to the dividends paid on an equivalent number of shares of
Common Stock is credited to each Non-employee Directors
stock unit account as of the end of the quarter in which the
dividend was paid. Non-employee Directors may also defer any
portion of their retainer
and/or
meeting fees into an interest account under the Deferred Plan,
which bears interest at the five-year Treasury rate.
The Company makes a deemed matching contribution to a
directors stock unit account under the Deferred Plan equal
to 10% of the amount deferred by the director into the stock
unit account, with one-half of such Company contribution vesting
on December 31st of the calendar year in which the deferred
compensation otherwise would have been paid and one-half on the
next December 31st, provided that the participant is a
director on such vesting date. Unvested Company contributions
will automatically vest on death, total disability or retirement
by the director at or after age seventy-two. Compensation
deferred under the Deferred Plan, whether in the stock unit
account or the interest account, will be paid out in cash after
termination of service as a director. Directors may elect that
compensation so deferred be paid out in a lump sum or in up to
ten annual installments, commencing either in the quarter
following, or in the January following, the quarter in which
service as a director terminates.
Former
Director Compensation Arrangements In Which Certain Directors
Participate or Under Which Directors Previously Received
Awards
Under the Hasbro, Inc. Retirement Plan for Directors (the
Retirement Plan), which is unfunded, each
Non-employee Director who was serving on the Board prior to
May 13, 2003 (and who was not otherwise eligible for
benefits under the Companys Pension Plan), has attained
the age of sixty-five and completed five years of service on the
Board is entitled to receive, beginning at age seventy-two, an
annual benefit equal to the annual retainer payable to directors
during the year in which the director retires (which does not
include the fees paid to directors for attendance at meetings).
If a director retires on or after the directors
seventy-second birthday, the annual benefit continues for the
life of the director. If a director retires between the ages of
sixty-five and seventy-two, the number of annual payments will
not exceed the retired directors years of service. Upon a
Change of Control, as defined in the Retirement Plan,
participating directors and retired directors are entitled to
lump-sum payments equal to the present value of their benefits
under the Retirement Plan.
Directors appointed to the Board on or after May 14, 2003,
the date that the Companys shareholders approved the
Companys former 2003 Stock Option Plan for Non-Employee
Directors (the 2003 Director Plan) which is
described below, were not eligible to participate in the
Retirement Plan, and automatically participated in the
2003 Director Plan prior to its termination on
December 31, 2005. The benefits of the 2003 Director
Plan replaced the benefits of both the Retirement Plan and the
1994 Director Plan (described below). Non-employee
Directors who were serving on the Board prior to May 13,
2003, and thus were participating in the Retirement Plan, and
who were not scheduled to retire at the end of their current
term in office as of the time of approval by shareholders of the
2003 Director Plan, were given the opportunity to elect to
participate in the 2003 Director Plan effective on either
May 14, 2003, May 1, 2004, May 1, 2005 or
May 1, 2006. Directors who were serving on the Board prior
to May 13, 2003 and who did not elect to participate in
2003 Director Plan on one of these dates continued to
participate in the Retirement Plan in accordance with its terms.
Directors serving as of May 13, 2003 who elected to
participate in the 2003 Director Plan stopped accruing
further years of service under the Retirement Plan and did not
have their
12
benefits under the Retirement Plan adjusted for changes in the
annual retainer following the effective date of their
participation in the 2003 Director Plan.
Under the Companys former Stock Option Plan for
Non-employee Directors (the 1994 Director
Plan), approved by shareholders on May 11, 1994, each
Non-employee Director then in office received on May 11,
1994 and each Non-employee Director who joined the Board after
May 11, 1994 received upon becoming a director, a one-time
grant of a nonqualified, nontransferable ten-year option to
purchase 11,250 shares of Common Stock at 110% of the fair
market value per share of Common Stock on the date of grant. The
options became exercisable at a rate of 20% per year
commencing on the first anniversary of the date of grant, except
that exercisability was to be accelerated upon a participant
ceasing to be a member of the Board because of permanent
disability, death, retirement at or after age seventy-two or
after a Change of Control, as defined in the 1994 Director
Plan. The 1994 Director Plan was cancelled effective upon
the date of shareholder approval of the 2003 Director Plan
and no further grants are being made under the
1994 Director Plan, provided, however, that options
previously granted under the 1994 Director Plan continue in
effect in accordance with their terms.
The Companys 2003 Director Plan, which was approved
by the Companys shareholders at the 2003 Annual Meeting of
Shareholders (the 2003 Meeting), replaced the
benefits of the Retirement Plan and the 1994 Director Plan
described in the immediately preceding paragraphs. The
2003 Director Plan was cancelled effective
December 31, 2005 and no further grants are being made
under the 2003 Director Plan, provided, however, that
options previously granted under the 2003 Director Plan
continue in effect in accordance with their terms. Under the
2003 Director Plan each Non-employee Director who was
serving as a director immediately following the 2003 Meeting and
whose effective date for participation in the 2003 Director
Plan was May 14, 2003, received a one-time grant of a
nonqualified, nontransferable ten-year option to purchase
6,000 shares of the Companys Common Stock at the fair
market value of the Common Stock on the date of grant (the
First Annual Options). The First Annual Options
become exercisable at a rate of
331/3% per
year commencing on the May 1st next following the date
of grant, except that exercisability will be accelerated upon a
participant ceasing to be a member of the Board because of
permanent disability, death, retirement at or after age
seventy-two or after a Change of Control, as defined in the
2003 Director Plan. On each subsequent May 1st, all
Non-employee Directors then serving on the Board, with certain
exceptions, whose effective date for participation in the
2003 Director Plan was on or prior to such May 1st,
received an additional option to purchase 6,000 shares of
the Companys Common Stock. These additional annual options
otherwise have the same terms of the First Annual Options,
except that the exercise price is based on the fair market value
of the Common Stock on the date of grant of such additional
annual options. Non-employee Directors initially joining the
Board after May 14, 2003 received, under the
2003 Director Plan, an initial option to purchase
12,000 shares of Common Stock upon their election to the
Board (the Initial Options). The Initial Options had
the same terms as annual options under the 2003 Director
Plan except that they become exercisable at a rate of
20% per year commencing of the first anniversary of the
date of grant.
13
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
The Companys wholly-owned subsidiary, Hasbro Canada
Corporation (Hasbro Canada), leases an office and
warehouse facility from Central Toy Manufacturing Inc.
(CTM), a real estate corporation which is 25% owned
by the estate of Merrill Hassenfeld, a former Chief Executive
Officer and director of the Company. Sylvia K. Hassenfeld, a
former director of the Company and mother of the Companys
Chairman, Alan G. Hassenfeld, is executrix and a beneficiary of
the estate of Merrill Hassenfeld. During 2000, the CTM lease was
renewed for a three-year term ending on January 31, 2004 at
rentals of approximately $579,000, $589,000 and $599,000
Canadian for the three years, respectively. During 2003 a new
lease was signed for a six-year term ending on January 31,
2010, with one three-year renewal option that Hasbro Canada can
exercise at the end of the term. The new lease also provides
Hasbro Canada with a right to terminate the lease on
January 31, 2007, or at any time thereafter, upon six
months written notice. The rent provided for in this
six-year lease is $525,000 Canadian per year (approximately
$450,000 U.S. at exchange rates in effect at the end of
2005). In accordance with this new lease, total rent paid by
Hasbro Canada to CTM for the lease of the office and warehouse
facility in 2005 was approximately $450,000 U.S. at
exchange rates in effect at the end of 2005. In
managements opinion, this lease is on terms at least as
favorable as would otherwise presently be obtainable from
unrelated parties.
Lucas Licensing Ltd. (Licensing) and Lucasfilm Ltd.
(Film and together with Licensing,
Lucas) own in the aggregate exercisable warrants to
purchase 15,750,000 shares of Common Stock which were
obtained in arms-length negotiations with the Company in
connection with the Companys obtaining certain rights
related to the STAR WARS properties. The Common Stock subject to
such warrants would, if all warrants were fully exercised,
constitute approximately 8.2% of the Companys outstanding
shares. Accordingly, under SEC
Rule 13d-3,
George W. Lucas, Jr., as owner, director and an
officer of Film and Licensing, may be deemed to own
approximately 8.2% of the Companys outstanding shares. See
Voting Securities and Principal Holders Thereof. In
fiscal 2005, the Company paid an aggregate of approximately
$40.8 million in royalties to Licensing pursuant to license
agreements entered into at arms length in the ordinary course of
business.
In January 2003, the Company amended its license with Licensing
for the manufacture and distribution of STAR WARS toys and
games. Under the amended agreement the term was extended by ten
years and is expected to run through 2018. In addition, the
minimum guaranteed royalties due to Licensing were reduced by
$85 million. In a separate agreement, the warrants
previously granted to Lucas were also amended. Under this
warrant amendment, the terms of each of the warrants issued to
Lucas were extended by ten years. The warrant amendment
agreement provides the Company with an option through October
2016 to purchase all of these warrants from Lucas for a price to
be paid at the Companys election of either
$200 million in cash or $220 million in Common Stock,
such stock being valued at the time of the exercise of the
option. Also, the warrant amendment agreement provides Lucas
with an option through January 2008 to sell all of these
warrants to the Company for a price to be paid at the
Companys election of either $100 million in cash or
$110 million in Common Stock, such stock being valued at
the time of the exercise of the option.
In December 2005 the Company entered into a three-year
arrangement with Recruitmax Software, Inc.
(Recruitmax) pursuit to which Recruitmax supplies
the Company with applicant tracking and recruitment software and
services. Under this agreement the Company expects to pay
Recruitmax approximately $292,000 over the course of the
three-year term. In fiscal 2005 the Company paid Recruitmax
$137,600 of the total estimated fee of $292,000. The President
of Recruitmax, Jim Philip, is the brother of Edward M. Philip,
one of the Companys directors.
Alfred J. Verrecchia, the Companys President and Chief
Executive Officer, is Chairman of Lifespan, a hospital holding
company. Two of Lifespans member hospitals are the Hasbro
Childrens Hospital and the Miriam Hospital. In fiscal
2005, the Company donated approximately $500,000 in aggregate to
the Hasbro Childrens Hospital and the Miriam Hospital.
Andrea Patterson-Girard, daughter of E. David Wilson, is
employed by the Company as a Director of Human Resources. For
fiscal 2005, Ms. Patterson-Girard was paid an aggregate
salary and bonus of $133,016, and was granted stock options to
purchase 1,250 shares of the Common Stock at an exercise
price equal to the fair market value of the Common Stock on the
date of grant. Michael Verrecchia, son of Alfred J. Verrecchia,
is employed by the Company as a Director of Marketing. For
fiscal 2005, Mr. Verrecchia was paid an aggregate salary
and bonus of $129,846, and was granted stock options to purchase
1,000 shares of Common Stock at an exercise price equal to
the fair market value of the Common Stock on the date of grant.
14
COMPARISON
OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN
AMONG HASBRO, S&P 500 AND RUSSELL 1000
CONSUMER DISCRETIONARY ECONOMIC SECTOR(1)
The following graph tracks an assumed investment of $100 on the
start dates indicated below in the Companys Common Stock,
the S&P 500 Index and the Russell 1000 Consumer
Discretionary Economic Sector, assuming full reinvestment of
dividends and no payment of brokerage or other commissions or
fees. Past performance of the Companys Common Stock is not
necessarily indicative of future performance.
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187
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|
|
|
$
|
202
|
|
S&P 500 Index
|
|
|
$
|
100
|
|
|
|
$
|
89
|
|
|
|
$
|
68
|
|
|
|
$
|
87
|
|
|
|
$
|
98
|
|
|
|
$
|
104
|
|
Russell 1000 Consumer
Discretionary Economic Sector
|
|
|
$
|
100
|
|
|
|
$
|
105
|
|
|
|
$
|
80
|
|
|
|
$
|
106
|
|
|
|
$
|
121
|
|
|
|
$
|
119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
While the information for Hasbros Common Stock and the
S&P 500 Index is as of the last trading day in Hasbros
fiscal year, the data for the Russell 1000 Consumer
Discretionary Economic Sector is as of the last trading day in
the calendar year. |
15
REPORT OF
THE
COMPENSATION AND STOCK OPTION COMMITTEE
OF THE BOARD OF DIRECTORS
Hasbro
Compensation and Stock Option Committee
The Compensation and Stock Option Committee (the
Committee) of the Companys Board of Directors
is responsible for establishing and overseeing the compensation
and benefits for the Companys senior management, including
all of the Companys executive officers, and is authorized
to make grants and awards under the Companys employee
stock equity plans. The Committee operates under a written
charter which has been established by the Companys Board
of Directors. The current Compensation and Stock Option
Committee charter is available on the Companys website at
www.hasbro.com, under Corporate
Information Investors Corporate
Governance.
In establishing the cash compensation, equity awards and
benefits for the Companys Chief Executive Officer, the
Committee reviews benchmarking information provided by outside
compensation consultants. In authorizing and approving cash
compensation, equity awards and benefits for executive officers
other than the Chief Executive Officer, the Committee reviews
the recommendations of the Chief Executive Officer in addition
to benchmarking information provided by outside compensation
consultants.
The Committee is composed solely of persons who are both
Non-Employee Directors, as defined in
Rule 16b-3
of the rules and regulations of the Securities and Exchange
Commission, and outside directors, as defined in
Section 162(m) of the Internal Revenue Code of 1986, as
amended (the Code). The Board of Directors has
determined that each member of the Committee is independent
under the Companys Independence Standards and the
requirements of the New York Stock Exchanges corporate
governance listing standards.
2005
Compensation Policies With Respect to Executive
Officers
Executive
Compensation Philosophy
In structuring the compensation of the Companys executive
officers (including those five named executive officers
appearing in the Summary Compensation Table that immediately
follows this report) the Committees fundamental objectives
are to attract and retain talented executives, align the
interests of the Companys executives with the long-term
goals of the Companys shareholders, and reward achievement
of the Companys goals and increases in long-term
shareholder value by the executives. To achieve these objectives
the Committee structures the Companys executive
compensation and benefits so as to:
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attract and retain talented executives who can make important
contributions to the success of the Company,
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provide the Companys executives with a strong incentive to
increase the Companys performance and the long-term value
of the Company to its shareholders by tying a significant
portion of the compensation for executives to the achievement of
the Companys financial objectives,
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reward executives for superior performance, and
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|
achieve these objectives in as cost-effective a manner as
possible from the Companys perspective.
|
The Committee employed the assistance of an outside executive
compensation consultant to provide benchmarking information and
other assistance to the Committee in structuring the
Companys 2005 executive compensation program. Although
this outside consultant has performed other services for the
Company, in the case of providing this assistance to the
Committee the consultant was retained by, and reported directly
to, the members of the Committee. The outside consultant
provided additional information as to whether the Companys
executive compensation programs are reasonable and effective in
promoting and rewarding the performance of the Companys
executives, achievement of the Companys financial goals
and increases in the long-term value of the Company to its
shareholders.
The Committee considers the requirements of Code
Section 162(m) in determining the various elements of its
executive compensation program and, to the extent it is
consistent with meeting the objectives of the Companys
16
executive compensation program, structures such compensation to
maximize the ability of the Company to deduct such compensation.
However, the Committee reserves the right to award compensation
that would not be deductible under Section 162(m) where the
Committee believes this is in the best interests of the Company
and its shareholders.
Primary
Elements of 2005 Executive Compensation
Executive compensation for fiscal year 2005 was composed of four
primary elements:
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base salary,
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management incentive bonus awards,
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equity awards, and
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employee benefits.
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The Committee uses these four elements in the combination it
believes appropriately divides the compensation of its
executives among guaranteed and variable components, with some
variable compensation tied to achievement of yearly financial
objectives and other compensation, such as option grants vesting
over multiple years, tied to the creation of even longer-term
shareholder value. Each of these elements is described in detail
below.
Base
Salary
Base salaries for new executive officers are initially
determined by evaluating the responsibilities of the position
being filled, the experience of the individual being hired and
the competitive marketplace for comparable executive talent.
Subsequent yearly adjustments in base salaries are made only in
the event of changes in duties and responsibilities for the
executive, or lack of competitiveness of the base salary with
market compensation offered to executives with similar
responsibilities, expertise and experience in other consumer
products, leisure, lifestyle and other companies the Committee
considers to be comparable with the Company,
and/or
competitive with the Company in recruiting executives.
The Committee generally sets executive base salaries and target
bonus awards to be competitive with comparable consumer
products, leisure, lifestyle and other competitive companies as
surveyed in Hewitt Executive Total Compensation Measurement,
prepared by Hewitt Associates, LLP, and Towers Perrins
Executive Compensation Databank. The Committee believes that
this positions the Companys salaries and target bonus
awards at a level that allows the Company to hire, retain and
motivate talented executives while also keeping the cost of the
Companys executive compensation at a reasonable level as
compared to other similar
and/or
competitive companies.
The salaries for all five of the Companys most highly
compensated executive officers in fiscal 2005 are included in
the Summary Compensation Table that follows this report. There
were no salary increases for any of the five named executive
officers for fiscal 2005. On January 20, 2006, Mr. Goldner
was promoted to Chief Operating Officer of the Company. In
connection with this promotion Mr. Goldners
annualized base salary was increased from $700,000 to $800,000.
As with the Companys five named executive officers, there
were no increases in base salaries for any of the Companys
other executive officers for fiscal 2005.
Management
Incentive Bonus Awards
Approximately 1,200, or 20%, of the Companys employees,
including all of the Companys executive officers, were
awarded management incentive bonuses with respect to fiscal
2005. Management incentive bonus awards for the Companys
executive officers were determined under two programs for fiscal
2005.
The management incentive bonus eligibility of Alfred J.
Verrecchia, Frank P. Bifulco, Jr., Brian Goldner,
Alan G. Hassenfeld and E. David Wilson was determined
pursuant to the Companys 2004 Senior Management Annual
Performance Plan (the Annual Performance Plan).
Under the Annual Performance Plan, the Committee designated
fiscal 2005 corporate and business unit performance goals for
the Company at the beginning of the fiscal year. These
performance goals were based on the 2005 operating plan and
budgets approved by the Companys
17
Board of Directors and were the same performance criteria used
for the Companys other bonus eligible employees as well.
The setting of performance goals involved both selecting the
performance metrics that would be used to evaluate bonus
eligibility and establishing the performance targets for each of
those metrics. The Committee used four performance metrics to
measure corporate performance in 2005. The four corporate
performance criteria were total net revenues, net revenues
attributable to identified core brand drivers, operating margin
and free cash flow.
The Committee selected these four performance metrics to capture
the most important aspects of the top and bottom line
performance of the Company, in the form of sales, profitability
and cash generation.
Business unit performance objectives were based on the first
three of these criteria, namely total net revenues, net revenues
attributable to identified core brand drivers and operating
margin. Free cash flow is not used as a business unit
performance objective because its computation can only occur for
the Company at the corporate level.
In addition to establishing the performance criteria and target
performance objectives for each such criteria, at the beginning
of 2005 the Committee also established target bonus awards and
maximum awards for each participant in the Annual Performance
Plan corresponding with various levels of performance against
the designated corporate and business unit objectives.
For Mr. Verrecchia and Mr. Hassenfeld, management
incentive bonuses for 2005 were weighted 100% for corporate
performance against the four corporate performance targets
listed above. For Mr. Bifulco, Mr. Goldner and
Mr. Wilson, who had business unit responsibility, bonuses
were weighted 40% for corporate performance against the four
corporate targets, and 60% for business unit performance, which
consisted not only of the performance of the Companys U.S.
Toys and Games segments as applicable to the individual
executive, but also of the performance of other business units
being overseen by Mr. Goldner and Mr. Wilson, against the
three business unit objectives.
The ultimate management incentive bonus paid with respect to
2005 was a function of the percentage of the performance goals
achieved, with the Committee reserving the right to lower the
bonus paid in its sole discretion in each case. The Summary
Compensation Table that follows this report includes the
management incentive bonus awarded to each of the Companys
named executive officers for fiscal 2005.
For fiscal 2005, Mr. Goldner, Mr. Hassenfeld and
Mr. Wilson were awarded management incentive bonuses in the
amount of $800,000, $107,200 and $290,000, respectively. The
Companys performance in 2005 represented approximately
107% achievement of the corporate performance goals under the
Annual Performance Plan. The weighted achievement of all target
corporate objectives, U.S. Toy segment objectives and
objectives of the other areas of the Companys business
overseen by Mr. Goldner in 2005 was approximately 128%. The
weighted achievement of all target corporate objectives, Games
segment objectives and objectives of the other areas of the
Companys business overseen by Mr. Wilson was
approximately 66%.
With respect to executive officers other than
Mr. Verrecchia, Mr. Bifulco, Mr. Goldner,
Mr. Hassenfeld and Mr. Wilson, target bonuses in
fiscal 2005 were determined pursuant to the Companys 2005
Management Incentive Plan (MIP). The same corporate performance
criteria and targets that were used under the Annual Performance
Plan were used under the MIP for fiscal 2005. The bonuses under
the MIP for the remaining executive officers, all of whom are
deemed to have corporate-wide responsibility, were based 100% on
corporate performance, with such corporate performance
representing approximately 107% achievement of the performance
targets. In all cases, the bonuses earned under the MIP could be
subject to adjustment downward to as low as 0% and upward by a
factor of up to an additional 50%, based on individual
performance against specified individual management objectives
under the MIP. In all cases, the bonuses for performance under
the MIP were reviewed by the Committee and adjusted to reflect
the individual performance of the executive in question.
Long-Term
Incentive Strategy and Equity Awards
In fiscal 2005, and in the years prior to 2005, the Company has
employed stock options as its primary form of long-term equity
compensation for executive officers and other eligible
employees. The Company has only infrequently used restricted
stock and deferred restricted stock units as a reward and
retention mechanism. No
18
restricted stock or deferred restricted stock unit grants were
made to the Companys executive officers in fiscal 2005.
In fiscal 2005, non-qualified stock options were granted to all
of the Companys executive officers pursuant to the
Companys employee stock option plans. The grants to the
Companys named executive officers in 2005 are reflected in
the Option Grants in Last Fiscal Year table that follows this
report. The Committee granted individual options to executive
officers in order to provide an incentive to motivate and retain
those individuals over a period of years who are important to
the Companys future success. Stock options are designed to
align the interests of executives with those of shareholders by
providing executives with a benefit from price appreciation in
the Common Stock after the date of grant. In establishing the
number of shares covered by the option grants made to the
Companys individual executive officers, the Committee
reviewed market data with respect to equity compensation levels
at comparable and competitive companies and determined grant
levels which it believed compensated these individuals for stock
price appreciation in a manner commensurate with their duties
and potential contributions to the performance of the Company
and its stock. Stock options granted under this program
generally vest annually over the three-year period following the
date of grant. All options granted in fiscal 2005 were granted
with an exercise price equal to the fair market value of the
Common Stock on the date of grant.
The Committee is currently in the process of determining its
equity compensation program for fiscal 2006 and as part of that
process is considering whether the Company will begin to employ
other vehicles as a more significant component of overall
long-term compensation, with a corresponding reduction in the
use of stock options. The Committee is reevaluating the
Companys current long-term compensation strategy in light
of a number of developments, including the mandatory expensing
of stock options which is effective for the Company beginning in
fiscal 2006, and the increasing use of restricted stock and
performance awards in executive compensation.
Employee
Benefits
In addition to receipt of salary, management incentive bonuses
and equity compensation, the Companys officers also
participate in certain employee benefit programs provided by the
Company. Executive officers participate in the Companys
Pension Plan, which is described on pages 24 through 26 of
this proxy statement, and can participate in the Companys
401(k) Retirement Savings Plan (Retirement Plan) and
the Supplemental Benefit Plan (Supplemental Plan).
To the extent that the Companys matching contribution
exceeds certain limits applicable to the Retirement Plan, which
are determined pursuant to the Code, the excess is allocated to
the executive officers account under the Supplemental
Plan. The Supplemental Plan is intended to provide a competitive
benefit for executive officers whose employer-provided
retirement contributions would otherwise be limited. The amount
of the Companys matching contribution to the named
executive officers under both the Retirement Plan and the
Supplemental Plan is included in the All Other
Compensation column of the Summary Compensation Table that
follows this report.
The executive officers of the Company are eligible for life
insurance benefits on the terms applicable to the Companys
other employees. In addition, Mr. Verrecchia and
Mr. Hassenfeld are provided with executive life insurance.
The cost of the Companys premiums for executive life
insurance programs for the named executive officers is included
in the All Other Compensation column of the Summary
Compensation Table.
The executive officers participate in the same medical and
dental benefit plans as are provided to the Companys other
employees.
Executive officers are also eligible to participate in the
Companys Nonqualified Deferred Compensation Plan, which is
available to all of the Companys employees who are in band
40 (director level) or above. The Nonqualified Deferred
Compensation Plan allows participants to defer compensation into
various hypothetical investment vehicles, the performance of
which determines the return on compensation deferred under the
plan. Potential investment choices include the Companys
Common Stock, as well as other equity indices. Earnings on
compensation deferred by the executive officers do not exceed
the market returns on the relevant investments and are the same
as the returns earned by other non-executive officer employees
deferring compensation into the applicable investment vehicles.
19
The Company reimburses designated executive officers for the
cost of certain tax and financial planning services they obtain
from third parties provided that such costs are within the
limits established by the Company. The cost to the Company for
this reimbursement to the named executive officers is included
in the Other Annual Compensation column of the
Summary Compensation Table.
2005
Compensation of the Chief Executive Officer
Mr. Verrecchia served as the Companys Chief Executive
Officer throughout fiscal 2005. Mr. Verrecchias
annualized base salary was increased from $776,240 to $1,000,000
effective upon his promotion to Chief Executive Officer of the
Company in May 2003. Mr. Verrecchias base salary has
not been increased since that time. Mr. Verrecchia received
a management incentive bonus for fiscal 2005 amounting to
$1,500,000. The Companys performance in 2005 represented
approximately 107% achievement of the corporate performance
goals set under the Annual Performance Plan, which is the plan
under which Mr. Verrecchias management incentive bonus is
determined. The Committee set Mr. Verrecchias base salary
and management incentive bonus award for 2005 at a level it
believed appropriately and competitively compensated
Mr. Verrecchia in respect to his responsibilities,
experience, performance and contributions to the Company and its
shareholders.
In fiscal 2005, Mr. Verrecchia was granted an option to
purchase 280,000 shares of Common Stock. This option was
granted with an exercise price equal to the market price of the
Common Stock on the date of grant and vests in three equal
installments over the three-year period following the date of
grant. The Committee believes that the option granted in fiscal
2005 provides an appropriate incentive to Mr. Verrecchia to
improve the Companys future performance, further aligns
Mr. Verrecchias interests with those of the Companys
shareholders and fairly compensates Mr. Verrecchia for his
work for the Company and its shareholders and his contributions
to the long-term value of the Company to its shareholders.
All compensation decisions regarding Mr. Verrecchia were
made by the Committee, without the participation of
Mr. Verrecchia or any other executive officers of the
Company, and were reviewed and approved by the Companys
Board of Directors.
Change of
Control and Employment Agreements
Certain of the Companys executive officers, including all
five of the Companys named executive officers for fiscal
2005, are party to Change in Control Agreements with the
Company. However, now that they have retired as employees of the
Company, the agreements entered into by Mr. Hassenfeld and
Mr. Wilson are no longer operative. In addition,
Mr. Verrecchia and Mr. Goldner are party to additional
agreements with the Company governing their employment and
providing certain post-termination benefits and payments. Mr.
Hassenfeld entered into an agreement with the Company in 2005
which governed his transition to non-employee Chairman of the
Board beginning in 2006. All of these agreements are described
under the caption Change of Control and Employment
Agreements that follows this report. The Committee
authorizes the Company to enter into Change of Control or other
employment related agreements in situations where the Committee
feels doing so is necessary to recruit
and/or
retain the most talented executives and to provide optimal
incentive to the executive in question to work to maximize the
performance of the Company and the creation of long-term value
for the Companys shareholders.
Report issued by Frank J. Biondi, Jr. (Chair), Jack M.
Connors, Jr. and E. Gordon Gee as the members of the
Compensation and Stock Option Committee of the Board of
Directors as of the 2005 fiscal year end.
20
EXECUTIVE
COMPENSATION
The following table summarizes compensation paid by the Company
for services rendered during fiscal 2005, 2004 and 2003 by the
Chief Executive Officer of the Company and the four most highly
compensated executive officers of the Company in fiscal 2005
other than the Chief Executive Officer.
Summary
Compensation Table
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Annual Compensation
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Long-term Compensation
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Other
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Restricted
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Securities
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Annual
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Stock
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Underlying
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All Other
|
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Name and Principal
Position
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Year
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Salary(a)
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Bonus(a)
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Compensation(b)
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Awards(c)
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Options
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Compensation(d)
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Alan G. Hassenfeld
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2005
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$
|
1,000,000
|
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$
|
107,200
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$
|
52,506
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0
|
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70,000
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$
|
112,127
|
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Chairman
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2004
|
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1,038,462
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815,000
|
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3,902
|
|
|
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0
|
|
|
|
225,000
|
|
|
|
179,333
|
|
|
|
|
2003
|
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1,003,971
|
|
|
|
1,896,631
|
|
|
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16,465
|
|
|
|
0
|
|
|
|
200,000
|
|
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118,365
|
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Alfred J. Verrecchia
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2005
|
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1,000,000
|
|
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1,500,000
|
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0
|
|
|
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0
|
|
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|
280,000
|
|
|
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111,436
|
|
President and Chief
|
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2004
|
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1,038,462
|
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815,000
|
|
|
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0
|
|
|
|
0
|
|
|
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450,000
|
|
|
|
178,614
|
|
Executive Officer(e)
|
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2003
|
|
|
|
907,886
|
|
|
|
1,996,170
|
|
|
|
10,296
|
|
|
|
0
|
|
|
|
425,000
|
|
|
|
99,309
|
|
Brian Goldner
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2005
|
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700,000
|
|
|
|
800,000
|
|
|
|
2,195
|
|
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0
|
|
|
|
90,000
|
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65,913
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Chief Operating Officer(f)
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2004
|
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722,308
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|
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300,000
|
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0
|
|
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0
|
|
|
|
225,000
|
|
|
|
69,775
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2003
|
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|
550,000
|
|
|
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736,260
|
|
|
|
1,350
|
|
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0
|
|
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75,000
|
|
|
|
60,000
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E. David Wilson
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2005
|
|
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585,000
|
|
|
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290,000
|
|
|
|
1,055
|
|
|
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0
|
|
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75,000
|
|
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57,000
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Formerly President, Games
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2004
|
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607,500
|
|
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365,000
|
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|
1,045
|
|
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0
|
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225,000
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78,378
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Segment and Executive
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2003
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585,000
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|
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698,792
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|
|
945
|
|
|
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0
|
|
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|
75,000
|
|
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56,100
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Vice President Global Business
Integration(g)
|
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David D.R. Hargreaves
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2005
|
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475,000
|
|
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|
350,000
|
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5,000
|
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0
|
|
|
|
45,000
|
|
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43,800
|
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Senior Vice President
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2004
|
|
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493,269
|
|
|
|
255,000
|
|
|
|
6,000
|
|
|
|
0
|
|
|
|
165,000
|
|
|
|
61,096
|
|
and Chief Financial Officer
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2003
|
|
|
|
457,586
|
|
|
|
575,000
|
|
|
|
5,000
|
|
|
|
0
|
|
|
|
50,000
|
|
|
|
45,665
|
|
|
|
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(a) |
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Includes amounts deferred pursuant to the Companys
Retirement Savings Plan (the Retirement Plan) and
Nonqualified Deferred Compensation Plan (the Deferred
Compensation Plan). |
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(b) |
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Fiscal 2003 was the last year in which the Company provided an
automobile allowance to its executive officers. No officers
received an automobile allowance in fiscal 2004 or 2005.
Includes the following amounts which were included in 2003
taxable income, respectively, for each named individual in
connection with a program whereby a leased automobile, or an
automobile allowance, was provided to the executive by the
Company: $3,965 for Mr. Hassenfeld and $4,796 for
Mr. Verrecchia. |
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Includes the amounts set forth in the following table paid by
the Company and included in 2005, 2004 and 2003 taxable income,
respectively, for each named executive officer in connection
with a program whereby certain financial planning and tax
preparation services provided to the individual are paid for by
the Company.
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2005
|
|
|
2004
|
|
|
2003
|
|
|
Alan G. Hassenfeld
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$
|
46,098
|
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|
$
|
3,902
|
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|
$
|
12,500
|
|
Alfred J. Verrecchia
|
|
|
0
|
|
|
|
0
|
|
|
|
5,500
|
|
Brian Goldner
|
|
|
2,195
|
|
|
|
0
|
|
|
|
1,350
|
|
E. David Wilson
|
|
|
1,055
|
|
|
|
1,045
|
|
|
|
945
|
|
David D.R. Hargreaves
|
|
|
5,000
|
|
|
|
6,000
|
|
|
|
5,000
|
|
|
|
|
|
|
Mr. Hassenfeld receives certain limited assistance from the
Companys finance, treasury and payroll departments related
to personal matters. That assistance is provided at no
incremental cost to the Company.
|
|
|
|
(c) |
|
No restricted stock or deferred restricted stock units were
granted to any of the named executive officers during fiscal
2003, 2004 or 2005. |
|
|
|
|
|
The number and market value of deferred restricted stock units
held by Mr. Verrecchia at December 25, 2005 (based
upon the closing stock price of $20.36 on December 23,
2005) were: 30,829 and $627,678. Under these restricted
stock units restricted shares are deemed to be held in a
deferred compensation account under the Companys 1997
Employee Non-Qualified Stock Plan. The equivalent of cash
dividends on said units are
|
21
|
|
|
|
|
deemed to be paid to Mr. Verrecchias account under
the Deferred Compensation Plan. To the extent that delivery of
the actual shares to Mr. Verrecchia after vesting would
constitute income as to which the Company would be denied a
deduction under Section 162(m) of the Internal Revenue
Code, as amended (the Code) the affected number of
units will continue to be deemed to be held in Mr.
Verrecchias deferred compensation account.
Mr. Verrecchia does not have any voting rights with respect
to these restricted stock units.
|
|
|
|
|
|
None of the other named executive officers held any restricted
stock or deferred restricted stock units as of the end of fiscal
2005.
|
|
|
|
(d) |
|
Includes the individuals pro-rata share of the
Companys matching contribution to the savings account of
each individual under the Retirement Plan and the Companys
Supplemental Benefit Retirement Plan (the Supplemental
Plan), such amounts being set forth in the following table. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
Alan G. Hassenfeld
|
|
$
|
108,900
|
|
|
$
|
176,106
|
|
|
$
|
115,138
|
|
Alfred J. Verrecchia
|
|
$
|
108,900
|
|
|
|
176,078
|
|
|
|
96,773
|
|
Brian Goldner
|
|
$
|
65,913
|
|
|
|
69,775
|
|
|
|
60,000
|
|
E. David Wilson
|
|
$
|
57,000
|
|
|
|
78,378
|
|
|
|
56,100
|
|
David D.R. Hargreaves
|
|
$
|
43,800
|
|
|
|
61,096
|
|
|
|
45,665
|
|
|
|
|
|
|
These amounts are in part contributed to the individuals
account in the Retirement Plan and, to the extent in excess of
certain Code maximums, deemed allocated to the individuals
account in the Supplemental Plan.
|
|
|
|
Also includes the following premiums paid by the Company for
individual life insurance policies for Messrs. Hassenfeld
and Verrecchia in fiscal 2005, 2004 and 2003 respectively, for
Mr. Hassenfeld $3,227, $3,227 and $3,227, and for
Mr. Verrecchia $2,536, $2,536 and $2,536.
|
|
|
|
Does not include the amounts set forth in the following table
which were earned by the executives on compensation previously
deferred by them under the Deferred Compensation Plan. Earnings
on compensation deferred by the executive officers do not exceed
the market returns on the relevant investments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
Alan G. Hassenfeld
|
|
$
|
17,556
|
|
|
$
|
16,066
|
|
|
$
|
1,384
|
|
Alfred J. Verrecchia
|
|
|
94,730
|
|
|
|
106,234
|
|
|
|
233,671
|
|
Brian Goldner
|
|
|
28,923
|
|
|
|
44,798
|
|
|
|
81,154
|
|
E. David Wilson
|
|
|
9,434
|
|
|
|
12,307
|
|
|
|
1,997
|
|
David D.R. Hargreaves
|
|
|
114,479
|
|
|
|
155,238
|
|
|
|
249,219
|
|
|
|
|
(e) |
|
Mr. Verrecchia, formerly President, Chief Operating Officer
and Chief Financial Officer, was appointed President and Chief
Operating Officer in 2001 and President and Chief Executive
Officer in 2003. |
|
(f) |
|
Mr. Goldner, formerly Senior Vice President and General
Manager, U.S. Toys, was appointed President, U.S. Toys
in 2001, President, U.S. Toy Segment in 2003 and Chief
Operating Officer in 2006. |
|
(g) |
|
Mr. Wilson, formerly Senior Vice President and Sector Head,
Games, was elected President, Games in 2001 and President, Games
Segment and Executive Vice President Global Business Integration
in 2004. Mr. Wilson retired from the Company effective
January 31, 2006. |
|
(h) |
|
Mr. Hargreaves, formerly Senior Vice President and Deputy
Chief Financial Officer, was elected Senior Vice President and
Chief Financial Officer in 2001. |
* * *
22
The following table sets forth certain information regarding
stock option grants in fiscal 2005 to the individuals named
above.
Option
Grants in Last Fiscal Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant Date
|
|
|
|
Individual Grants
|
|
|
Value(a)
|
|
|
|
|
|
|
% of Total
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Granted to
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Employees
|
|
|
Exercise
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
In Fiscal
|
|
|
Price Per
|
|
|
Expiration
|
|
|
Grant Date
|
|
Name
|
|
Granted
|
|
|
Year
|
|
|
Share
|
|
|
Date
|
|
|
Present Value
|
|
|
Alan G. Hassenfeld
|
|
|
50,000
|
(b)
|
|
|
1.7
|
|
|
$
|
20.57
|
|
|
|
5/18/2012
|
|
|
$
|
296,000
|
|
|
|
|
20,000
|
(b)
|
|
|
0.7
|
|
|
$
|
20.355
|
|
|
|
6/14/2012
|
|
|
$
|
118,200
|
|
Alfred J. Verrecchia
|
|
|
280,000
|
(b)
|
|
|
9.5
|
|
|
$
|
20.57
|
|
|
|
5/18/2012
|
|
|
$
|
1,657,600
|
|
Brian Goldner
|
|
|
90,000
|
(b)
|
|
|
3.1
|
|
|
$
|
20.57
|
|
|
|
5/18/2012
|
|
|
$
|
532,800
|
|
E. David Wilson
|
|
|
75,000
|
(b)
|
|
|
2.5
|
|
|
$
|
20.57
|
|
|
|
5/18/2012
|
|
|
$
|
444,000
|
|
David D.R. Hargreaves
|
|
|
45,000
|
(b)
|
|
|
1.5
|
|
|
$
|
20.57
|
|
|
|
5/18/2012
|
|
|
$
|
266,400
|
|
|
|
|
(a) |
|
The Grant Date Present Values were determined using the standard
application of the Black-Scholes option pricing methodology
using the following weighted average assumptions: volatility
30.11%, dividend yield 1.75% and a risk free interest rate of
3.84% based on the options being outstanding for approximately
five years. The Grant Date Present Values do not take into
account risk factors such as non-transferability and limits on
exercisability. In assessing the Grant Date Present Values
indicated in the above table, it should be kept in mind that no
matter what theoretical value is placed on an option on the date
of grant, the ultimate value of the option is dependent on the
market value of the Common Stock at a future date, and the
extent if any, by which such market value exceeds the exercise
price on the date of exercise. |
|
(b) |
|
These options are non-qualified, were granted at fair market
value on the date of grant, and vest in equal annual
installments over three years (with the vesting dates being
December 25, 2005, May 19, 2007 and May 19,
2008). All options become fully vested in the event of death,
disability or retirement at the optionees normal
retirement date and are exercisable for a period of one year
from the date of such disability or retirement, or in the case
of death, from the appointment and qualification of the
executor, administrator or trustee for the optionees
estate. An optionee taking early retirement may, under certain
circumstances, exercise all or a portion of the options unvested
at his or her early retirement date and may exercise such
options for three months or such longer period as the
Compensation and Stock Option Committee may approve. Unless
otherwise approved by the Compensation Committee in its
discretion, upon termination of employment for any other reason,
only options vested at the date of the termination may be
exercised, and are exercisable for a period of three months
following termination. |
|
|
|
|
|
All of these awards were granted pursuant to the 2003 Stock
Incentive Performance Plan (the 2003 Plan). Upon a
Change of Control, as defined in the 2003 Plan, all options
become immediately exercisable and will be canceled in exchange
for payment in the amount of the difference between the highest
price paid for a share of Common Stock in the transaction or
series of transactions pursuant to which the Change of Control
shall have occurred or, if higher, the highest reported sales
price of a share of Common Stock during the sixty-day period
immediately preceding the date of the Change of Control, and the
exercise price of such options. This payment will be made in
cash or shares of Common Stock, or a combination thereof, in the
discretion of the Compensation Committee. Participants may
exercise options and satisfy tax withholding liabilities by
payments in cash or by delivery of Common Stock with a value
equal to the exercise price and the tax withholding liability.
In addition, participants may instruct the Company to withhold
shares issuable upon exercise in satisfaction of tax withholding
liability.
|
***
23
The following table sets forth as to each of the named
individuals: (a) information with respect to option
exercises during the fiscal year ended December 25, 2005,
(b) the number of exercisable and unexercisable options
held on December 25, 2005, the last day of the
Companys 2005 fiscal year; and (c) the value of such
options at December 25, 2005 (based on the closing price of
the Common Stock of $20.36 on December 23, 2005). The
number of options set forth below correspond to the number of
shares to which the options relate.
Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
Underlying Unexercised
|
|
|
Value of Unexercised
In-the-
|
|
|
|
Shares
|
|
|
|
|
|
Options at
|
|
|
Money Options
|
|
|
|
Acquired on
|
|
|
|
|
|
December 25, 2005
|
|
|
at December 25,
2005
|
|
Name
|
|
Exercise
|
|
|
Value Realized
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Alan G. Hassenfeld
|
|
|
225,000
|
|
|
$
|
1,084,778
|
|
|
|
1,586,668
|
|
|
|
363,332
|
|
|
$
|
4,844,066
|
|
|
$
|
971,552
|
|
Alfred J. Verrecchia
|
|
|
157,500
|
|
|
$
|
752,409
|
|
|
|
1,586,169
|
|
|
|
708,331
|
|
|
$
|
5,039,569
|
|
|
$
|
1,339,732
|
|
Brian Goldner
|
|
|
0
|
|
|
$
|
0
|
|
|
|
574,000
|
|
|
|
295,000
|
|
|
$
|
2,390,360
|
|
|
$
|
462,740
|
|
E. David Wilson
|
|
|
193,333
|
|
|
$
|
1,264,137
|
|
|
|
451,250
|
|
|
|
285,000
|
|
|
$
|
197,175
|
|
|
$
|
462,740
|
|
David D.R. Hargreaves
|
|
|
0
|
|
|
$
|
0
|
|
|
|
423,209
|
|
|
|
206,666
|
|
|
$
|
1,609,918
|
|
|
$
|
320,510
|
|
* * *
Pension
Plan Benefits Prior to January 1, 2000 Amendment
The following table shows the estimated annual benefits payable
upon retirement in specified remuneration and years of service
classifications under the Companys Pension Plan (the
Pension Plan) and under the Supplemental Plan, as
such plans were in effect prior to a January 1, 2000
amendment to the Pension Plan.
Pension
Plan Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
Estimated Annual Retirement
Benefit by Years of Service Classification(2)
|
|
Compensation(1)
|
|
5
|
|
|
10
|
|
|
15
|
|
|
20
|
|
|
25
|
|
|
30(3)
|
|
|
$ 800,000
|
|
$
|
66,667
|
|
|
$
|
133,333
|
|
|
$
|
200,000
|
|
|
$
|
266,667
|
|
|
$
|
333,333
|
|
|
$
|
400,000
|
|
1,200,000
|
|
|
100,000
|
|
|
|
200,000
|
|
|
|
300,000
|
|
|
|
400,000
|
|
|
|
500,000
|
|
|
|
600,000
|
|
1,600,000
|
|
|
133,333
|
|
|
|
266,667
|
|
|
|
400,000
|
|
|
|
533,333
|
|
|
|
666,667
|
|
|
|
800,000
|
|
2,000,000
|
|
|
166,667
|
|
|
|
333,333
|
|
|
|
500,000
|
|
|
|
666,667
|
|
|
|
833,333
|
|
|
|
1,000,000
|
|
2,400,000
|
|
|
200,000
|
|
|
|
400,000
|
|
|
|
600,000
|
|
|
|
800,000
|
|
|
|
1,000,000
|
|
|
|
1,200,000
|
|
2,800,000
|
|
|
233,333
|
|
|
|
466,667
|
|
|
|
700,000
|
|
|
|
933,333
|
|
|
|
1,166,667
|
|
|
|
1,400,000
|
|
3,200,000
|
|
|
266,667
|
|
|
|
533,333
|
|
|
|
800,000
|
|
|
|
1,066,667
|
|
|
|
1,333,333
|
|
|
|
1,600,000
|
|
3,600,000
|
|
|
300,000
|
|
|
|
600,000
|
|
|
|
900,000
|
|
|
|
1,200,000
|
|
|
|
1,500,000
|
|
|
|
1,800,000
|
|
|
|
|
(1) |
|
Covered compensation under the Pension Plan and the Supplemental
Plan includes the average of salaries and bonuses paid for the
five highest consecutive years during the ten years preceding
retirement (Average Compensation). The salary and
bonus information reflected in the preceding Summary
Compensation Table shows salaries and bonuses for the years in
which they are earned, not paid. For example, under the
Companys bonus plans bonuses earned for performance in one
year are generally paid in the beginning of the following year.
As such, a bonus earned for performance in fiscal 2005 is
reflected in the 2005 bonus column in the Summary Compensation
Table. However, that bonus would generally be paid in the
beginning of 2006 and thus is reflected in 2006 compensation for
purposes of computing benefits under the Pension Plan and the
Supplemental Plan. In addition, to the extent compensation
earned for a given year is deferred, its payment to the
individual will occur in future years. The aggregate salary and
bonus paid to each of the individuals included in the Summary
Compensation Table in fiscal 2005 were as follows: $1,815,000
for Mr. Hassenfeld; $1,815,000 for Mr. Verrecchia;
$1,098,550 for Mr. Goldner; $950,000 for Mr. Wilson;
and $730,000 for Mr. Hargreaves. |
24
|
|
|
(2) |
|
Estimated retirement benefit amounts shown are prior to
reduction by an Internal Revenue Service designated amount keyed
to a participants Social Security entitlement. Amounts
shown are computed on the single straight-life annuity option.
Commencement of benefits prior to age 65
and/or
election of other payment options will reduce the annual benefit
amount shown. Payments from the Supplemental Plan, which is
unfunded, are not subject to provisions of the Code that limit
benefits under the Pension Plan. As set forth in the above table
and subject to the foregoing, the retirement benefit after
thirty years of credited service is generally 50% of Average
Compensation. |
|
(3) |
|
For purposes of determining annual benefits under the Pension
Plan and the Supplemental Plan in the table above credited years
of service cannot exceed 30. |
Pension
Plan Benefits, As Amended January 1, 2000
Effective January 1, 2000, the Company amended the Pension
Plan as part of an overall redesign of its retirement programs.
The January 1, 2000 amendments to the Pension Plan
implemented a number of changes. Among the significant changes,
the amendments to the Pension Plan provided for a lump sum
benefit or an annual benefit, both determined primarily on the
basis of Average Compensation and actual years of service
(including years of service in excess of 30 years). Another
aspect of the amendments made the benefits under the Pension
Plan, as amended, portable after five years of service (defined
for vesting purposes) with the Company.
Until January 1, 2007, employees who were working for the
Company at the time of the January 1, 2000 amendment to the
Pension Plan and who remain continuously employed by the Company
will receive, upon retirement, the higher of the benefits
provided to them by the Pension Plan as so amended, and the
benefits described in the table above for the Pension Plan
before it was amended. For such employees retiring on or after
January 1, 2007, to compute their benefits the Company
determines what the employees benefits would have been
under the unamended Pension Plan as of December 31, 2006.
If the benefits under the unamended Pension Plan are higher than
the benefits provided for such employee under the Pension Plan
as amended, the employees pension benefits are computed by
adding the benefits accrued under the old Pension Plan as of
December 31, 2006 to the benefits accrued under the Pension
Plan, as amended, for periods of service after January 1,
2007.
For employees joining the Company after January 1, 2000,
benefits will only be computed with respect to the Pension Plan
as amended.
The following table shows the estimated annual benefits payable
upon retirement in specified remuneration and years of service
classifications under the Companys Pension Plan and under
the Supplemental Plan, taking into account the January 1,
2000 amendment to the Pension Plan. While both the table above
and the table below reflect retirement benefits payable at
age 65, benefits shown in the table above will be reduced
for commencement of benefits prior to age 65. Benefits in
the table below are unreduced for commencement of benefits on or
after age 55.
Pension
Plan Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
Estimated Annual Retirement
Benefit by Years of Service Classification(5)
|
|
Compensation(4)
|
|
5
|
|
|
10
|
|
|
15
|
|
|
20
|
|
|
25
|
|
|
30
|
|
|
35
|
|
|
40
|
|
|
$ 800,000
|
|
$
|
38,500
|
|
|
$
|
77,000
|
|
|
$
|
115,500
|
|
|
$
|
154,000
|
|
|
$
|
192,500
|
|
|
$
|
231,000
|
|
|
$
|
269,500
|
|
|
$
|
308,000
|
|
1,200,000
|
|
|
58,500
|
|
|
|
117,000
|
|
|
|
175,500
|
|
|
|
234,000
|
|
|
|
292,500
|
|
|
|
351,000
|
|
|
|
409,500
|
|
|
|
468,000
|
|
1,600,000
|
|
|
78,500
|
|
|
|
157,000
|
|
|
|
235,500
|
|
|
|
314,000
|
|
|
|
392,500
|
|
|
|
471,000
|
|
|
|
549,500
|
|
|
|
628,000
|
|
2,000,000
|
|
|
98,500
|
|
|
|
197,000
|
|
|
|
295,500
|
|
|
|
394,000
|
|
|
|
492,500
|
|
|
|
591,000
|
|
|
|
689,500
|
|
|
|
788,000
|
|
2,400,000
|
|
|
118,500
|
|
|
|
237,000
|
|
|
|
355,500
|
|
|
|
474,000
|
|
|
|
592,500
|
|
|
|
711,000
|
|
|
|
829,500
|
|
|
|
948,000
|
|
2,800,000
|
|
|
138,500
|
|
|
|
277,000
|
|
|
|
415,500
|
|
|
|
554,000
|
|
|
|
692,500
|
|
|
|
831,000
|
|
|
|
969,500
|
|
|
|
1,108,000
|
|
3,200,000
|
|
|
158,500
|
|
|
|
317,000
|
|
|
|
475,500
|
|
|
|
634,000
|
|
|
|
792,500
|
|
|
|
951,000
|
|
|
|
1,109,500
|
|
|
|
1,268,000
|
|
3,600,000
|
|
|
178,500
|
|
|
|
357,000
|
|
|
|
535,500
|
|
|
|
714,000
|
|
|
|
892,500
|
|
|
|
1,071,000
|
|
|
|
1,249,500
|
|
|
|
1,428,000
|
|
|
|
|
(4) |
|
Covered compensation under the Pension Plan and the Supplemental
Plan includes the average of total salaries and bonuses paid for
the five highest consecutive years during the ten years
preceding retirement (Average Compensation). See
footnote (1) to the preceding table for an explanation of
how salaries and bonuses paid relate to the salaries and bonuses
reflected in the Summary Compensation Table. |
25
|
|
|
(5) |
|
Amounts shown are computed on the single-life annuity option.
Commencement of benefits prior to age 55
and/or
election of other payment options will reduce the annual benefit
amount shown. Payments from the Supplemental Plan, which is
unfunded, are not subject to the provisions of the Code that
limit benefits under the Pension Plan. |
The following table sets forth, as to the five named
individuals, their years of credited service under the Pension
Plan and the Supplemental Plan:
|
|
|
|
|
|
|
Credited Years
|
|
|
|
of Service
|
|
|
Alan G. Hassenfeld
|
|
|
37
|
|
Alfred J. Verrecchia
|
|
|
40
|
|
Brian Goldner(1)
|
|
|
6
|
|
E. David Wilson
|
|
|
25
|
|
David D.R. Hargreaves
|
|
|
13
|
|
|
|
|
(1) |
|
Mr. Goldner was hired after January 1, 2000 and is
therefore only covered by the amended Pension Plan. |
Mr. Hargreaves is also entitled to a defined benefit from
the Hasbro U.K. Employee Benefits Plan (the U.K.
Plan) for his services while in the U.K., and the Hasbro
International Expatriate Pension Plan (the Expatriate
Plan). The single straight-life annuity benefit under the
Expatriate Plan is 2% of Average Compensation for each year of
service, reduced by benefits payable from the U.K. Plan, the
Pension Plan, the Supplemental Plan, and the annuity equivalent
of benefits attributable to the prior qualified and nonqualified
(a) Profit Sharing Plans and (b), for periods after 2000,
the Retirement Plan. Expatriate Plan benefits are also reduced
by the Social Security entitlement described above. Commencement
of benefits prior to normal retirement at age 65 and other
payment options will reduce benefits under both the U.K. Plan
and the Expatriate Plan. After 2006, accruals under the
Expatriate Plan are calculated based on the post-2000 Pension
Plan and Supplemental Plan provisions. The annual single
straight-life annuity benefit earned by Mr. Hargreaves
under the U.K. Plan as of July 24, 1992, the date his
participation in the U.K. Plan ceased, is 9,617 pounds. This
amount is adjusted each year for inflation.
Change of
Control and Employment Agreements
The following are summaries of the Companys change of
control and employment agreements with the named executive
officers included in the preceding tables and are therefore not
complete. We have filed, or in the case of
Mr. Goldners Employment Agreement we will file,
copies of the forms of the agreements with the Securities and
Exchange Commission.
Change of Control Agreements. Certain of the
Companys executive officers, including each of Alfred J.
Verrecchia, Brian Goldner and David D.R. Hargreaves, are parties
to employment agreements, as amended (the Change of
Control Agreements) with the Company. The Change of
Control Agreements come into effect only upon a Change of
Control, as defined therein, and continue for three years
after such date (the Employment Period). If, during
the Employment Period, an executives employment with the
Company is involuntarily terminated other than for
Cause, the executive is entitled to the
executives (a) average annual salary for the five
years preceding the Change of Control (or such lesser number of
actual years employed) plus (b) the greater of (x) the
target bonus during the year of termination and (y) the
average annual bonus for the five years preceding the Change of
Control (or such lesser number of actual years employed), in
each case multiplied by three (or multiplied by two if the
special bonus described in the following sentence has already
been paid). In addition, if the executive remains employed
through the first anniversary of the Change in Control the
executive will receive a special bonus equal to one years
salary and bonus, computed using the five-year look back period
described in the prior sentence.
If the executives employment is involuntarily terminated
other than for Cause during the Employment Period,
the executive would also be entitled to an amount equal to the
shortfall between the actuarial benefit payable to the executive
under the Companys retirement plans as a result of the
early termination and the amount the executive would have
received if the executive had continued in the employ of the
Company for the remainder of the Employment Period. In addition,
the executive and the executives family would be entitled
to the continuation of medical, welfare, life insurance,
disability and other benefits for at least the remainder of the
Employment Period. If
26
the executive is subject to the payment of excise tax under
Section 4999 of the Code, the Company will pay such
executive an additional amount so as to place the executive in
the same after-tax position such executive would have been in
had such excise tax not applied.
In addition, the Change of Control Agreements permit an
executive to terminate the executives employment for
Good Reason at any time or for any reason during a
30-day
period immediately following the first anniversary of the Change
of Control and receive the above-described severance benefits.
Good Reason includes diminution of the
executives responsibilities or compensation, relocation or
purported termination otherwise than as expressly permitted by
the Change of Control Agreements. Under certain circumstances,
certain payments by the Company pursuant to the Change of
Control Agreements may not be deductible for federal income tax
purposes pursuant to Section 280G of the Code.
A Change of Control is defined as the occurrence of
certain events, including acquisition by a third party of 20% or
more of the Companys outstanding voting securities, a
change in the majority of the Board, consummation of a
reorganization, merger, consolidation, substantial asset sale
involving, or shareholder approval of a liquidation or
dissolution of, the Company subject, in each case, to certain
exceptions. Cause is defined, for purposes of the
Agreements, as demonstrably willful or deliberate violations of
the executives responsibilities which are committed in bad
faith or without reasonable belief that such violations are in
the best interests of the Company, which are unremedied after
notice, or conviction of the executive of a felony involving
moral turpitude.
Employment
Agreements and Arrangements.
Post-Employment Agreement with Alfred J.
Verrecchia. The Company and Mr. Verrecchia
entered into a Post-Employment Agreement, effective as of
March 10, 2004 (the Post-Employment Agreement).
Under the Post-Employment Agreement, if
Mr. Verrecchias employment is terminated by the
Company without Cause or by Mr. Verrecchia for
Good Reason, then the Company shall pay
Mr. Verrecchia severance pay of up to three years
annual base salary and bonus, contingent on Mr. Verrecchia
executing a severance and settlement agreement. If Mr.
Verrecchias employment is terminated by the Company
without Cause or by Mr. Verrecchia with Good Reason: (i) on
or before September 1, 2006, Mr. Verrecchia is
eligible to receive severance pay equal to thirty-six
(36) months base salary and monthly bonus,
(ii) after September 1, 2006, but before March 1,
2008, Mr. Verrecchia is eligible to receive severance pay
of monthly base salary and monthly bonus for the number of
months which is equal to thirty-six (36) less the number of
whole months for which Mr. Verrecchia is employed by the
Company after September 1, 2006 and (iii) after
March 1, 2008, Mr. Verrecchia is eligible to receive
severance pay of monthly base salary and monthly bonus for
eighteen (18) months. If Mr. Verrecchias
employment is terminated by the Company without Cause and at the
time of such termination the Company has in place a severance
plan of general applicability for which Mr. Verrecchia is
eligible, Mr. Verrecchia will be entitled to the greater of
the benefits offered under this general severance plan and those
offered under the Post-Employment Agreement. Finally, if
Mr. Verrecchias employment is terminated by mutual
agreement of the Company and Mr. Verrecchia because of a
family medical emergency or other reason beyond
Mr. Verrecchias control which results in him being
unable to work or because of a disability (as defined), then in
each case Mr. Verrecchia is entitled to eighteen
(18) months of monthly base salary and bonus.
For purposes of the Post-Employment Agreement, monthly base
salary is equal to the annual base salary paid to
Mr. Verrecchia for the fifty-two (52) weeks
immediately preceding the week of his termination, divided by
twelve (12). The monthly bonus shall equal the annual target
bonus for Mr. Verrecchia for the year in which his
employment is terminated, divided by twelve (12). Mr. Verrecchia
is also entitled to continuation of medical, dental and certain
other benefits during the period in which he is receiving
severance pay under the Post-Employment Agreement. However, in
the event of a Change in Control, the benefits payable under the
Post-Employment Agreement are reduced by the amount of any
benefits received by Mr. Verrecchia under the Change of
Control Agreements described above.
The Post-Employment Agreement also provides Mr. Verrecchia
with certain enhanced retirement benefits. Unless
Mr. Verrecchias employment is terminated by the
Company for Cause, he shall receive annuity payments in monthly
installments following the termination of his employment for the
remainder of his life in an annual amount equal to 1.5% of his
Final Average Pay (as defined) multiplied by
Mr. Verrecchias years of service with the
27
Company, but not to exceed 60% of Final Average Pay. The
enhanced retirement benefit is also reduced by the benefits
provided to Mr. Verrecchia by the Pension Plan and
Supplemental Benefit Plan. If Mr. Verrecchias
employment terminates due to his death, his spouse is entitled
to the actuarial equivalent of the enhanced retirement benefits
described above.
For purposes of the Post-Employment Agreement Good
Reason means a material demotion of Mr. Verrecchia or
a material reduction in Mr. Verrecchias base salary
or target bonus, unless such reduction is due to a generally
applicable reduction in the compensation of the Companys
senior executives. Cause means material failure by
Mr. Verrecchia to perform his duties which is unremedied
after notice, misconduct materially and demonstrably injurious
to the Company, conviction of a felony or fraud or embezzlement
of Company assets. Notwithstanding the foregoing, during the
three-year period following a Change of Control, as defined in
the Change of Control Agreements, Cause shall have the meaning
set forth in the Change in Control Agreements.
The Post-Employment Agreement contains certain post-employment
restrictions on Mr. Verrecchia, including an eighteen
(18) month non-competition agreement and provisions
protecting the Companys confidential information.
Employment Agreement with Brian Goldner. On
January 20, 2006, the Company entered into an Employment
Agreement (the Employment Agreement) with Brian
Goldner, the Companys then newly-appointed Chief Operating
Officer. Under the Employment Agreement, Mr. Goldner agreed
to serve as the Companys Chief Operating Officer,
reporting to the Companys President and Chief Executive
Officer. The Employment Agreement has an initial three-year term
expiring January 19, 2009. Thereafter the Employment
Agreement is automatically extended for additional one-year
terms unless either the Company or Mr. Goldner provide
notice of the intent not to renew at least 180 days prior
to the expiration of the then current term.
Under the Employment Agreement, for that portion of 2006
occurring after the date of the Employment Agreement,
Mr. Goldner will receive an annualized base salary of
$800,000 and will be eligible to receive a management incentive
plan bonus based on a target of eighty-five percent (85%) of his
earned base salary. Beginning in 2007 and thereafter, the
Employment Agreement provides that Mr. Goldners base
salary and target bonus will be reviewed in accordance with the
Companys compensation policies for senior executives and
will be adjusted to the extent, if any, deemed appropriate by
the Compensation and Stock Option Committee of the
Companys Board of Directors.
Pursuant to the Employment Agreement, Mr. Goldner was
granted 20,000 shares of restricted stock on
January 20, 2006. These shares will vest in one installment
on January 20, 2009, provided that Mr. Goldner remains
employed with the Company through that date. The shares are
subject to earlier vesting in certain situations, such as a
change in control of the Company or upon the death of
Mr. Goldner.
The Employment Agreement provides that Mr. Goldner will
participate in the Companys long-term incentive program in
the same manner as other senior executives, provided that his
target award shall be second only to that of the Chief Executive
Officer. Mr. Goldner will also participate in the
Companys other benefit programs under the terms which are
extended to senior executives.
In the event that Mr. Goldners employment is
terminated: (A) by the Company for Cause, or at
his election for other than Good Reason, the Company
will pay Mr. Goldner the compensation and benefits
otherwise payable to him through the last day of his actual
employment; (B) due to Mr. Goldners death or
Disability (as defined in the Employment Agreement) the Company
will pay to Mr. Goldner or his estate the compensation
which would otherwise have been payable to him up to the end of
the month in which the termination occurs and (C) by the
Company without Cause, or by Mr. Goldner for Good Reason,
and provided that Mr. Goldner complies with the terms of
the Companys severance policy, then Mr. Goldner will
be entitled to severance benefits for two years pursuant to the
Companys severance plan, payment of a target bonus for
each of the two fiscal years following the year of termination,
and all of his unvested stock options, restricted stock and
other equity awards will fully vest. The Companys
severance plan includes the payment of base salary and
continuation of benefits during the severance period. If
Mr. Goldner begins permissible alternate employment during
the severance period and notifies the Company of such
employment, he will receive in a lump sum 50% of any remaining
salary payments due as severance under the Employment Agreement.
28
For purposes of the Employment Agreement Cause shall
be deemed to exist upon (a) Mr. Goldners
material failure to perform: (i) Mr. Goldners
assigned duties for the Company; or
(ii) Mr. Goldners obligations under the
Employment Agreement; (b) conduct of Mr. Goldner
involving fraud, gross negligence or willful misconduct or other
action which damages the reputation of the Company;
(c) Mr. Goldners indictment for or conviction
of, or the entry of a pleading of guilty or nolo contendere by
Mr. Goldner to, any crime involving moral turpitude or any
felony; (d) Mr. Goldners fraud, embezzlement or
other intentional misappropriation from the Company; or
(e) Mr. Goldners material breach of any material
policies, rules or regulations of employment which may be
adopted or amended from time to time by the Company. Good
Reason means: (a) a material reduction in
Mr. Goldners base salary or target bonus, without his
consent, unless such reduction is due to a generally applicable
reduction in the compensation of senior executives in 2007 or
later, or (b) an organizational change in which
Mr. Goldner no longer reports directly to Alfred J.
Verrecchia as Chief Executive Officer.
The Employment Agreement contains certain post-employment
restrictions on Mr. Goldner, including a two-year
non-competition agreement. The Agreement does not modify
Mr. Goldners existing Change in Control Agreement
with the Company, dated March 18, 2000. In the event of a
Change in Control (as defined in the Change in Control
Agreement) the benefits payable pursuant to the Employment
Agreement will be reduced by any severance benefits payable
under the Change in Control Agreement.
Chairmanship Agreement with Alan G.
Hassenfeld. Effective on August 30, 2005 the
Company entered into a Chairmanship Agreement (the
Chairmanship Agreement) with Alan G. Hassenfeld. The
Chairmanship Agreement provided for Mr. Hassenfelds
transition from an employee Chairman of the Board to a
non-employee Chairman of the Board. Pursuant to the Chairmanship
Agreement, Mr. Hassenfeld continued to serve as an employee
Chairman of the Company until December 31, 2005 (the
Transition Date). During this period,
Mr. Hassenfeld continued to receive his current salary
($1,000,000 annualized) and other employee benefits.
Mr. Hassenfeld also remained eligible to receive a
management bonus for 2005, any such bonus award being made in
accordance with the applicable bonus plan and subject to the
negative discretion of the Companys Compensation and Stock
Option Committee.
On the Transition Date, Mr. Hassenfeld ceased to be an
employee of the Company and his employee salary, bonus and other
employee benefits ceased as well, provided that
Mr. Hassenfeld retained all of his vested retirement
benefits provided under the Companys retirement plans, as
well as all other retirement benefits generally made available
to retired employees under other plans and programs of the
Company. Following the Transition Date, Mr. Hassenfeld will
serve as the non-employee Chairman of the Board for an initial
three-year term beginning January 1, 2006 and ending on
December 31, 2008 (the Chairmanship Period).
Thereafter, Mr. Hassenfelds Chairmanship Agreement is
subject to renewal for additional one-year periods unless he or
the Board provide notice of the intent not to renew at least six
months prior to the end of the then current term.
Mr. Hassenfelds continued service as the non-employee
Chairman of the Board will be contingent upon his annual
reelection to the Board of Directors by the Companys
shareholders.
During the Chairmanship Period, Mr. Hassenfeld 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, determine agendas
for Board meetings, ensure proper flow of information to Board
members, facilitate effective operation of the Board and its
Committees, 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 Companys strategic plan and annual operating plans,
and help promote senior management succession planning. In
addition, the Chairman will assist the Companys Chief
Executive Officer by advising on Board-related issues, helping
to develop programs and actions to reinforce the Companys
core values, providing leadership in the development of the
Companys corporate social responsibility strategy, acting
as a Company spokesperson on issues of corporate social
responsibility, and representing the Company at industry
conferences, as appropriate.
Mr. Hassenfeld will receive a retainer during the
Chairmanship Period of $300,000 per year (the
Chairmanship Retainer) and will be eligible to
receive Board meeting fees, equity grants and such other
benefits (excluding the general non-employee Board retainer,
which Mr. Hassenfeld will not receive) as may be provided
from time to time to the other non-employee members of the
Companys Board of Directors. During the
29
Chairmanship Period, Mr. Hassenfeld will also be provided
with an office, support services and expense reimbursement
pursuant to an agreed budget.
As of the Transition Date, Mr. Hassenfeld became eligible
to begin receiving a retirement pension benefit payable in
regular monthly installments during his remaining lifetime. This
annual pension benefit, expressed as a single-life annuity, is
$814,500 a year until Mr. Hassenfeld reaches the age of 65.
Thereafter, the annual pension benefit is $796,800. These
pension benefit payments include all pension benefits previously
accrued by Mr. Hassenfeld as an employee of the Company. In the
event of Mr. Hassenfelds death, the pension benefits
described in the preceding sentences would be payable in an
actuarially equivalent joint and survivor form to
Mr. Hassenfelds spouse. In addition, by virtue of his
ongoing service as Chairman of the Board,
Mr. Hassenfelds outstanding stock options will
continue to vest, in accordance with their terms, during the
time that Mr. Hassenfeld serves as a non-employee Chairman.
In the event that Mr. Hassenfelds service as a
non-employee Chairman ends due to his resignation, death,
disability, or failure to be reelected to the Board by the
Companys shareholders, or in the event that the Company
terminates Mr. Hassenfelds service as Chairman for
Cause (as defined in the Chairmanship Agreement),
Mr. Hassenfelds compensation as a non-employee
Chairman, including the Chairmanship Retainer and any additional
compensation provided to non-employee directors, would cease
immediately. If Mr. Hassenfelds service as Chairman is
terminated by the Company without Cause during the Chairmanship
Period, Mr. Hassenfeld would be entitled to receive the
Chairmanship Retainer payable for the remaining time of the
Chairmanship Period. In the case of termination resulting from
disability, failure to be reelected, or without Cause by the
Company, Mr. Hassenfeld would continue to receive his
retirement benefits described above as well.
The Chairmanship Agreement contains certain post-Chairmanship
restrictions on Mr. Hassenfeld, including a two-year
non-competition agreement and provisions protecting the
Companys confidential information.
Retirement of E. David Wilson. In connection
with Mr. Wilsons retirement effective on
January 31, 2006, the Company vested all of
Mr. Wilsons unvested stock options and provided that
Mr. Wilsons stock options with an exercise price of
$20.57 per share or higher will remain exercisable through
the original expiration dates for such options. Mr. Wilson
executed a two-year non-competition agreement with the Company
in connection with these actions.
Compensation
Committee Interlocks and Insider Participation
The members of the Compensation and Stock Option Committee of
the Board as of the 2005 fiscal year end were Frank J.
Biondi, Jr. (Chair), Jack M. Connors, Jr. and E.
Gordon Gee. None of the members of the Compensation and Stock
Option Committee during fiscal 2005 had at any time been an
officer or employee of the Company or of any of its
subsidiaries. No executive officer of the Company served as a
member of the compensation committee or board of directors of
any other entity which had an executive officer serving as a
member of the Companys Board or Compensation and Stock
Option Committee during fiscal 2005.
30
EQUITY
COMPENSATION PLANS
The following table summarizes information, as of
December 25, 2005, relating to equity compensation plans of
the Company pursuant to which grants of options, restricted
stock, restricted stock units or other rights to acquire shares
may be granted from time to time.
Equity
Compensation Plan Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Remaining Available For
|
|
|
|
Number of Securities
|
|
|
|
|
|
Future Issuance Under
|
|
|
|
to be Issued Upon
|
|
|
Weighted-Average
|
|
|
Equity Compensation
|
|
|
|
Exercise of Outstanding
|
|
|
Exercise Price of
|
|
|
Plans (Excluding
|
|
|
|
Options, Warrants
|
|
|
Outstanding Options,
|
|
|
Securities Reflected
|
|
|
|
and Rights
|
|
|
Warrants and Rights
|
|
|
in Column(a))
|
|
Plan Category
|
|
(a)
|
|
|
(b)(3)
|
|
|
(c)
|
|
|
Equity compensation plans approved
by shareholders(1)
|
|
|
12,779,824
|
(4)
|
|
$
|
19.31
|
|
|
|
5,204,980
|
(5)
|
Equity compensation plans not
approved by shareholders(2)
|
|
|
7,703,658
|
(6)
|
|
|
18.61
|
|
|
|
0
|
(7)
|
Total
|
|
|
20,483,482
|
|
|
|
19.04
|
|
|
|
5,204,980
|
(5)
|
|
|
|
(1) |
|
The shareholder approved plans which were in effect as of
December 25, 2005 were the Companys 2003 Stock
Incentive Performance Plan (the 2003 Equity Plan),
1995 Stock Incentive Performance Plan (the 1995
Plan) and 2003 Stock Option Plan for Non-Employee
Directors (2003 Director Plan). However, the
1995 Plan expired on December 31, 2005 and the
2003 Director Plan was terminated effective as of
December 31, 2005. As such, as of January 1, 2006, the
only equity compensation plan which remains in effect for the
Company is the 2003 Equity Plan. The Companys 1994 Stock
Option Plan for Non-Employee Directors (the 1994
Plan), which was also approved by the Companys
shareholders, was terminated effective May 14, 2003.
Although no further awards may be made under the 1995 Plan,
2003 Director Plan or the 1994 Plan, awards outstanding
under those plans as of the dates of their termination continue
in effect in accordance with the terms of the applicable plan. |
|
(2) |
|
The Companys last non-shareholder approved plan, namely
the 1997 Employee Non-Qualified Stock Plan (the 1997
Plan), expired on December 31, 2002 and no further
awards may be made pursuant to the 1997 Plan, provided, however,
that all awards outstanding under the 1997 Plan as of the date
of its termination continued in effect in accordance with the
terms of the plan. |
|
(3) |
|
The weighted average exercise price of outstanding options,
warrants and rights excludes restricted stock units and
performance-based stock units. |
|
(4) |
|
Includes 10,000 shares issuable pursuant to deferred
restricted stock units. |
|
(5) |
|
Of these available shares, up to 196,499 shares and
3,500,000 shares, respectively, could be issued as
restricted stock or deferred restricted stock under the 1995
Plan and the 2003 Plan. |
|
(6) |
|
Includes 30,829 shares issuable pursuant to deferred
restricted stock units. |
|
(7) |
|
The 1997 Plan expired on December 31, 2002 and no shares
remain available for future grant under plans not approved by
the shareholders. See Note (2) above. |
1997
Employee Non-Qualified Stock Plan
Number of Shares Subject to 1997
Plan. The 1997 Plan, prior to its termination on
December 31, 2002, provided for the issuance of up to
18,000,000 shares of Common Stock pursuant to awards
granted under the 1997 Plan.
Eligibility for Participation. Any
Employee of the Company, as the term Employee is
defined in General Instruction A to
Form S-8
promulgated by the Securities and Exchange Commission, was
eligible to participate in the 1997 Plan.
31
Awards. The 1997 Plan provided for the grant
of: (1) non-qualified stock options; (2) stock
appreciation rights (SARs); (3) stock awards,
including restricted and unrestricted stock and deferred stock,
and (4) cash awards that would constitute a
derivative security for purposes of
Rule 16b-6,
as promulgated under the Securities Exchange Act of 1934, as
amended (the 1934 Act), if not awarded pursuant to a
plan satisfying the provisions of
Rule 16b-3.
Terms of Options. The exercise price of stock
options granted under the 1997 Plan could not be less than the
fair market value of the Common Stock on the date of grant.
Options granted under the 1997 Plan were generally made
exercisable in yearly installments over three years. The terms
of options granted under the 1997 Plan were ten years.
Change in Control. The 1997 Plan provided that
immediately upon certain events constituting a Change in Control
all awards become 100% vested and payable in cash or shares of
the Companys Common Stock as soon as practicable after the
Change in Control.
32
VOTING
SECURITIES AND PRINCIPAL HOLDERS THEREOF
Security
Ownership of Certain Beneficial Owners
The following table sets forth information, as of March 1,
2006 (except as noted), with respect to the ownership of the
Common Stock (the only class of outstanding equity securities of
the Company) by certain persons known by the Company to be the
beneficial owners of more than 5% of such stock. Unless
otherwise indicated, to the Companys knowledge each person
has sole voting and dispositive power with respect to such
shares.
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature
|
|
|
|
|
|
|
of Beneficial
|
|
|
Percent
|
|
Name and Address of Beneficial
Owner
|
|
Ownership(1)
|
|
|
of Class
|
|
|
Alan G. Hassenfeld
|
|
|
17,331,617
|
(2)
|
|
|
9.7
|
|
1027 Newport Avenue
|
|
|
|
|
|
|
|
|
Pawtucket, RI 02862
|
|
|
|
|
|
|
|
|
Southeastern Asset Management, Inc
|
|
|
16,831,200
|
(3)
|
|
|
9.5
|
|
6410 Poplar Avenue
|
|
|
|
|
|
|
|
|
Suite 900
|
|
|
|
|
|
|
|
|
Memphis, TN 38119
|
|
|
|
|
|
|
|
|
George W. Lucas, Jr.
|
|
|
15,750,000
|
(4)
|
|
|
8.2
|
|
c/o Lucasfilm Ltd.
|
|
|
|
|
|
|
|
|
5858 Lucas Valley Road
|
|
|
|
|
|
|
|
|
Nicasio, CA 94946
|
|
|
|
|
|
|
|
|
Ariel Capital Management, LLC
|
|
|
15,693,386
|
(5)
|
|
|
8.9
|
|
200 E. Randolph Drive
|
|
|
|
|
|
|
|
|
Suite 2900
|
|
|
|
|
|
|
|
|
Chicago, IL 60601
|
|
|
|
|
|
|
|
|
CAM North America, LLC
|
|
|
14,929,465
|
(6)
|
|
|
8.4
|
|
Salomon Brothers Asset Management
Inc.
|
|
|
|
|
|
|
|
|
Smith Barney Fund Management LLC
|
|
|
|
|
|
|
|
|
TIMCO Asset Management Inc.
|
|
|
|
|
|
|
|
|
399 Park Avenue
|
|
|
|
|
|
|
|
|
New York, NY 10022
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Based upon information furnished by each shareholder or
contained in filings made with the Securities and Exchange
Commission. There were 177,290,799 shares of Common Stock
outstanding on March 1, 2006. |
|
(2) |
|
Includes 7,890,921 shares held as sole trustee for the
benefit of his mother, 829,347 shares held as sole trustee
of a trust for Mr. Hassenfelds benefit and currently
exercisable options or options exercisable within 60 days
of March 1, 2006 to purchase 1,647,085 shares.
Mr. Hassenfeld has sole voting and investment authority
with respect to all shares except those described in the
following sentence, as to which he shares voting and investment
authority. Also includes 699,478 shares owned by The
Hassenfeld Foundation, of which Mr. Hassenfeld is an
officer and director, 314,892 shares held as one of the
trustees of a charitable lead trust for the benefit of The
Hassenfeld Foundation and 154,216 shares held as one of the
trustees of a trust for the benefit of his mother and her
grandchildren. Mr. Hassenfeld disclaims beneficial
ownership of all shares except to the extent of his
proportionate pecuniary interest therein. |
|
(3) |
|
Southeastern Asset Management, Inc., an investment advisor, has
sole dispositive authority over 10,104,200 shares and sole
voting power over 8,410,600 shares as a result of acting as
an investment advisor to various investment advisory clients.
Share ownership information is as of December 31, 2005 as
reported in a Schedule 13G filed February 10, 2006. |
|
(4) |
|
Represents exercisable warrants to purchase
6,300,000 shares owned by LucasFilm Ltd. (Film)
and exercisable warrants to purchase 9,450,000 shares owned
by its wholly-owned subsidiary, Lucas Licensing Ltd.
(Licensing). Mr. Lucas, as founder, controlling
person and a director of Film and Licensing, may be deemed to
beneficially own the shares of Common Stock which may be
purchased upon exercise of these warrants. Share ownership
information is as of January 30, 2003 as reported in a
Schedule 13D/A filed February 10, 2003. See
Certain Relationships and Related Transactions. |
33
|
|
|
(5) |
|
Ariel Capital Management, LLC an investment advisor, has sole
dispositive authority over 15,685,921 shares and sole
voting power over 13,080,116 shares as a result of acting
as an investment advisor to various investment advisory clients.
Share ownership information is as of December 31, 2005 as
reported in a Schedule 13G filed February 14, 2006. |
|
(6) |
|
Collectively these four entities have shared dispositive power
over 14,929,465 shares and shared voting power over
12,862,090 shares. Share ownership information is as of
December 31, 2005 as reported in a Schedule 13G filed
February 14, 2006. |
Security
Ownership of Management
The following table sets forth information, as of March 1,
2006, with respect to the ownership of the Common Stock (the
only class of outstanding equity securities of the Company) by
each current director of the Company or nominee for election to
the Board, each named executive officer and by all directors and
executive officers as a group. Unless otherwise indicated, each
person has sole voting and dispositive power with respect to
such shares.
|
|
|
|
|
|
|
|
|
|
|
Amount and
|
|
|
|
|
|
|
Nature of
|
|
|
|
|
|
|
Beneficial
|
|
|
Percent
|
|
Name of Director, Nominee or
Executive Officer(1)
|
|
Ownership
|
|
|
of Class
|
|
|
Basil L. Anderson(2)
|
|
|
35,888
|
|
|
|
*
|
|
Alan R. Batkin(3)
|
|
|
40,724
|
|
|
|
*
|
|
Frank J. Biondi, Jr.(4)
|
|
|
24,601
|
|
|
|
*
|
|
Jack M. Connors(5)
|
|
|
13,262
|
|
|
|
*
|
|
Michael W.O. Garrett(6)
|
|
|
11,385
|
|
|
|
*
|
|
E. Gordon Gee(7)
|
|
|
32,707
|
|
|
|
*
|
|
Brian Goldner(8)
|
|
|
686,607
|
|
|
|
*
|
|
Jack M. Greenberg(9)
|
|
|
15,311
|
|
|
|
*
|
|
David D.R. Hargreaves(10)
|
|
|
511,385
|
|
|
|
*
|
|
Alan G. Hassenfeld(11)
|
|
|
17,331,617
|
|
|
|
9.7
|
|
Claudine B. Malone(12)
|
|
|
26,453
|
|
|
|
*
|
|
Edward M. Philip(13)
|
|
|
30,583
|
|
|
|
*
|
|
Paula Stern(14)
|
|
|
30,688
|
|
|
|
*
|
|
Alfred J. Verrecchia(15)
|
|
|
1,887,703
|
|
|
|
1.1
|
|
E. David Wilson(16)
|
|
|
743,212
|
|
|
|
*
|
|
All Directors and Executive
Officers as a Group
(includes 19 persons)(17)
|
|
|
22,157,592
|
|
|
|
12.1
|
|
|
|
|
(1) |
|
Information in this table is based upon information furnished by
each director and executive officer. There were
177,290,799 shares of Common Stock outstanding on
March 1, 2006. |
|
(2) |
|
Includes currently exercisable options and options exercisable
within sixty days of March 1, 2006 to purchase an aggregate
of 18,750 shares as well as 16,138 shares deemed to be
held in Mr. Andersons stock unit account under the
Deferred Plan. |
|
(3) |
|
Includes 39,037 shares deemed to be held in
Mr. Batkins stock unit account under the Deferred
Plan. |
|
(4) |
|
Represents currently exercisable options and options exercisable
within sixty days of March 1, 2006 to purchase an aggregate
of 21,000 shares as well as 3,601 shares deemed to be
held in Mr. Biondis stock unit account under the
Deferred Plan. |
|
(5) |
|
Represents currently exercisable options and options exercisable
within sixty days of March 1, 2006 to purchase an aggregate
of 6,800 shares as well as 6,462 shares deemed to be
held in Mr. Connors account under the Deferred Plan. |
|
(6) |
|
Includes 1,485 shares deemed to be held in
Mr. Garretts stock unit account under the Deferred
Plan. |
34
|
|
|
(7) |
|
Represents currently exercisable options and options exercisable
within sixty days of March 1, 2006 to purchase an aggregate
of 23,250 shares as well as 9,457 shares deemed to be
held in Mr. Gees account under the Deferred Plan. |
|
(8) |
|
Includes currently exercisable options and options exercisable
within sixty days of March 1, 2006 to purchase an aggregate
of 629,000 shares. |
|
(9) |
|
Represents currently exercisable options and options exercisable
within sixty days of March 1, 2006 to purchase
6,800 shares as well as 8,511 shares deemed to be held
in Mr. Greenbergs stock unit account under the
Deferred Plan. |
|
(10) |
|
Includes currently exercisable options and options exercisable
within sixty days of March 1, 2006 to purchase an aggregate
of 448,001 shares. |
|
(11) |
|
See note (2) to the immediately preceding table. |
|
(12) |
|
Includes currently exercisable options and options exercisable
within sixty days of March 1, 2006 to purchase an aggregate
of 11,250 shares as well as 3,503 shares deemed to be
held in Ms. Malones stock unit account under the
Deferred Plan. |
|
(13) |
|
Represents currently exercisable options and options exercisable
within sixty days of March 1, 2006 to purchase an aggregate
of 18,750 shares as well as 11,833 shares deemed to be
held in Mr. Philips stock unit account under the
Deferred Plan. |
|
(14) |
|
Represents currently exercisable options and options exercisable
within sixty days of March 1, 2006 to purchase an aggregate
of 21,000 shares as well as 9,688 shares deemed to be
held in Ms. Sterns stock unit account under the
Deferred Plan. |
|
(15) |
|
Includes currently exercisable options and options exercisable
within sixty days of March 1, 2006 to purchase an aggregate
of 1,628,252 shares as well as 30,829 deferred restricted
stock units granted under the Companys employee stock
option plans. Does not include 151,875 shares owned by
Mr. Verrecchias wife, as to which Mr. Verrecchia
disclaims beneficial ownership. |
|
(16) |
|
Includes currently exercisable options and options exercisable
within sixty days of March 1, 2006 to purchase
711,250 shares as well as 234 shares (excluding
fractional shares) deemed to be held in Mr. Wilsons
account under the Deferred Compensation Plan. |
|
(17) |
|
Mr. Wilson retired from the Company on January 31,
2006 and as such his shares are not included in this total. Of
these shares, all directors and executive officers as a group
have sole voting and dispositive power with respect to
20,989,006 shares and have shared voting
and/or
dispositive power with respect to 1,168,586 shares.
Includes 5,752,842 shares purchasable by directors and
executive officers upon exercise of currently exercisable
options, or options exercisable within sixty days of
March 1, 2006; 109,715 shares deemed to be held in
stock unit accounts under the Deferred Plan and the Deferred
Compensation Plan; and 30,829 shares deemed to be held in
deferred restricted stock unit accounts under the Companys
1997 Employee Non-Qualified Stock Plan. |
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Companys directors and executive
officers, and persons who own more than ten percent of a
registered class of the Companys equity securities, to
file with the Securities and Exchange Commission and the New
York Stock Exchange initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities
of the Company. Executive officers, directors and greater than
ten-percent shareholders are required by regulation promulgated
by the Securities and Exchange Commission to furnish the Company
with copies of all Section 16(a) forms they file.
To the Companys knowledge, based solely on review of the
copies of such reports furnished to the Company and certain
written representations made by directors and executive officers
that no other reports were required during the last fiscal year
ended December 25, 2005, all Section 16(a) filing
requirements applicable to its officers, directors and greater
than ten-percent beneficial owners were complied with during
fiscal 2005.
35
PROPOSAL TO
RATIFY THE SELECTION OF KPMG LLP AS THE COMPANYS
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR THE 2006 FISCAL
YEAR
(Proposal No. 2)
The Audit Committee has selected KPMG LLP, independent
registered public accounting firm (KPMG), to perform
the integrated audit of the consolidated financial statements
and effectiveness of internal control over financial reporting
of the Company for the fiscal year ending December 31, 2006
(Fiscal 2006), and the Companys Board of
Directors has ratified this selection. A representative of KPMG
is expected to be present at the Meeting, will have the
opportunity to make a statement if so desired, and will be
available to respond to appropriate questions.
The Board is submitting the selection of KPMG as the
Companys independent registered public accounting firm for
Fiscal 2006 to the shareholders for their ratification. The
Audit Committee of the Board bears the ultimate responsibility
for selecting the Companys independent registered public
accounting firm and will make the selection it deems best for
the Company and the Companys shareholders. As such, the
failure by the shareholders to ratify the selection of
independent registered public accounting firm made by the Audit
Committee will not require the Audit Committee to alter its
decision. Similarly, ratification of the selection of KPMG as
the independent registered public accounting firm does not limit
the Committees ability to change this selection in the
future if it deems appropriate.
Approval
The affirmative vote of a majority of the shares of Common Stock
present (in person or by proxy) and entitled to vote at the
Meeting on the ratification of the selection of KPMG is required
for approval. Abstentions are considered shares entitled to vote
on the proposal and as such abstentions are the equivalent of a
vote against the proposal. In contrast, broker non-votes are not
counted as present and entitled to vote on the proposal and
therefore have no effect on the vote.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR RATIFICATION OF THE SELECTION OF KPMG AS INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM.
36
REPORT OF
THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors (the
Committee) is comprised solely of non-employee
directors, each of whom has been determined by the Board of
Directors to be independent under the Companys Standards
for Director Independence and the requirements of the New York
Stock Exchanges listing standards.
The Committee operates under a written charter, which is
available on the Companys website (www.hasbro.com) under
Corporate
Information Investors Corporate
Governance. Under the charter, the Committees primary
purpose is to:
|
|
|
|
|
Appoint the independent registered public accounting firm
(hereafter referred to as the independent auditor) and oversee
the independent auditors work; and
|
|
|
|
Assist the Board of Directors in its oversight of the:
|
|
|
|
|
|
Integrity of the Companys financial statements;
|
|
|
|
Companys compliance with legal and regulatory requirements;
|
|
|
|
Independent auditors qualifications and
independence; and
|
|
|
|
Performance of the Companys internal audit function and
independent auditor.
|
In conducting its oversight function, the Committee discusses
with the Companys internal auditors and independent
auditors, with and without management present, the overall scope
and plans for their respective audits. The Committee also
reviews the Companys programs and key initiatives to
implement and maintain effective internal controls over
financial reporting and disclosure controls.
The Committee meets with the Companys head of internal
audit, and with the independent auditors, with and without
management present, to discuss the results of their
examinations, the evaluations of the Companys internal
controls and the overall quality of the Companys financial
reporting. The Committee discusses with management and the
independent auditors all annual and quarterly financial
statements and Managements Discussion and Analysis of
Financial Condition and Results of Operations prior to their
filing with the Securities and Exchange Commission.
The independent auditors are responsible for performing an
independent integrated audit of the Companys financial
statements and effectiveness of internal control over financial
reporting and issuing an opinion as to whether the financial
statements conform with accounting principles generally accepted
in the United States of America.
The Committee has reviewed and discussed with management the
audited financial statements for the fiscal year ended
December 25, 2005. The Committee has also reviewed with the
independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communications with
Audit Committees). In addition, the Committee discussed with the
independent auditors their independence from management and the
Committee has received from the independent auditors the written
disclosures required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees).
Based on its review and discussions with management and the
independent auditors referred to in the preceding paragraph, the
Committee recommended to the Board and the Board has approved
the inclusion of the audited financial statements for the fiscal
year ended December 25, 2005 in the Companys Annual
Report on
Form 10-K
for filing with the Securities and Exchange Commission. The
Committee has also selected and the Board has approved the
selection of KPMG LLP as the independent auditor for Fiscal 2006.
Report issued by Basil L. Anderson (Chair), Michael W.O.
Garrett, Claudine B. Malone and Edward M. Philip, as the members
of the Audit Committee as of the 2005 fiscal year end.
37
ADDITIONAL
INFORMATION REGARDING
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The following table presents fees for professional audit
services rendered by KPMG LLP for the audit of the
Companys annual financial statements for fiscal 2005 and
2004, as well as fees for other services rendered by KPMG to the
Company during fiscal 2005 and 2004.
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
Audit Fees(1)
|
|
$
|
4,372,000
|
|
|
$
|
4,728,000
|
|
Audit-Related Fees(2)
|
|
$
|
101,000
|
|
|
$
|
80,000
|
|
Tax Fees(3)
|
|
$
|
1,464,000
|
|
|
$
|
1,325,000
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
5,937,000
|
|
|
$
|
6,133,000
|
|
|
|
|
(1) |
|
Audit fees consist of work related to the integrated audit of
the Companys consolidated financial statements and
effectiveness of internal control over financial reporting.
Audit fees also include consultations on accounting and
reporting matters, as well as work generally only the
independent auditor can reasonably be expected to provide, such
as statutory audits and work in connection with filings with the
Securities and Exchange Commission. |
|
(2) |
|
Audit-Related Fees consist of fees for audits of financial
statements of employee benefit plans and agreed upon procedures
reports. |
|
(3) |
|
Tax Fees consist of fees for tax consultation and tax compliance
services rendered to the Company and certain current and former
employees. |
The Audit Committee has considered whether the provision of the
approved non-audit services by KPMG is compatible with
maintaining KPMGs independence and has concluded that the
provision of such services is compatible with maintaining
KPMGs independence.
Policy on
Audit Committee Pre-Approval of Audit Services and Permissible
Non-Audit Services of the Independent Registered Public
Accounting Firm
Consistent with the rules and regulations of the Securities and
Exchange Commission regarding auditor independence, the Audit
Committee has responsibility for appointing, setting
compensation for and overseeing the work of the independent
registered public accounting firm (hereafter referred to as the
independent auditor). In fulfilling this responsibility the
Audit Committee has established a policy to pre-approve all
audit and permissible non-audit services to be provided by the
independent auditor.
Prior to engagement of the independent auditor for the fiscal
year, management of the Company submits to the Audit Committee
for the Committees pre-approval:
|
|
|
|
|
A description of, and estimated costs for, the proposed audit
services to be provided by the independent auditor for that
fiscal year.
|
|
|
|
A description of, and estimated costs for, the proposed
non-audit services to be provided by the independent auditor for
that fiscal year. These non-audit services are comprised of
permissible audit-related, tax and other services, and
descriptions and estimated costs are proposed for these
permissible non-audit services.
|
Audit and permissible non-audit services which are pre-approved
by the Audit Committee pursuant to this review may be performed
by KPMG during the fiscal year. During the course of the year
management periodically reports to the Audit Committee on the
audit and non-audit services which are being provided to the
Company pursuant to these pre-approvals.
In addition to pre-approving all audit and permissible non-audit
services at the beginning of the fiscal year, the Audit
Committee has also instituted a procedure for the consideration
of additional services that arise during the course of the year
for which the Company desires to retain KPMG. For individual
projects with estimated fees of $75,000 or less which have not
previously been pre-approved by the Audit Committee, the Chair
of the Audit Committee is authorized to pre-approve such
services. The Chair of the Committee reports any services which
are pre-approved in this manner to the full Audit Committee at
its next meeting. Any proposed additional projects with an
estimated cost of more than $75,000 must be pre-approved by the
full Audit Committee prior to the engagement of KPMG.
38
SHAREHOLDER
PROPOSAL
(Proposal No. 3)
Introduction
The following proposal, which is opposed by the Board,
would require the affirmative vote of a majority of all
shares present (in person or by proxy) and entitled to vote at
the Meeting to be approved. Abstentions and broker non-votes are
each counted as present for purposes of establishing a quorum at
the Meeting. Abstentions are also considered shares entitled to
vote on the proposal and as such abstentions are the equivalent
of a vote against the proposal. In contrast, broker non-votes
are not counted as present and entitled to vote on the proposal
for purposes of determining if the proposal receives an
affirmative vote of a majority of the shares present and
entitled to vote.
One of the Companys shareholders has submitted the
following resolution and supporting statement for inclusion in
this Proxy Statement. Upon a written or oral request made to the
Secretary of the Company, the Company will provide the address
and shareholdings (as they have been represented to the Company)
of the proponent of this resolution to any shareholder of the
Company.
HASBRO,
INC.
GLOBAL HUMAN RIGHTS STANDARDS
Submitted by William C. Thompson, Jr., Comptroller, City
of New York,
on behalf of the Boards of Trustees of the New York City Pension
Funds
Whereas, Hasbro, Inc. currently has overseas
operations, and
Whereas, reports of human rights abuses in the overseas
subsidiaries and suppliers of
U.S.-based
corporations has led to an increased public awareness of the
problems of child labor, sweatshop conditions, and
the denial of labor rights in U.S. corporate overseas
operations, and
Whereas, corporate violations of human rights in these
overseas operations can lead to negative publicity, public
protests, and the loss of consumer confidence which can have a
negative impact on shareholder value, and
Whereas, a number of corporations have implemented
independent monitoring programs with respected human rights and
religious organizations to strengthen compliance with
international human rights norms in subsidiary and supplier
factories, and
Whereas, many of these programs incorporate the
conventions of the International Labor Organization (ILO) on
workplace human rights, and the United Nations Norms on
the Responsibilities of Transnational Corporations with Regard
to Human Rights (UN Norms), which include the
following principles:
|
|
|
|
1.
|
All workers have the right to form and join trade unions and to
bargain collectively. (ILO Conventions 87 and 98; UN Norms,
section D9).
|
|
|
2.
|
Workers representatives shall not be the subject of
discrimination and shall have access to all workplaces necessary
to enable them to carry out their representation functions. (ILO
Convention 135; UN Norms, section D9).
|
|
|
3.
|
There shall be no discrimination or intimidation in employment.
Equality of opportunity and treatment shall be provided
regardless of race, color, sex, religion, political opinion,
age, nationality, social origin or other distinguishing
characteristics. (ILO Conventions 100 and 111; UN Norms,
section B2).
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4.
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Employment shall be freely chosen. There shall be no use of
force, including bonded or prison labor. (ILO Conventions 29 and
105; UN Norms, section D5).
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5.
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There shall be no use of child labor. (ILO Convention 138; UN
Norms, section D6), and,
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Whereas, independent monitoring of corporate adherence to
these internationally recognized principles is essential if
consumer and investor confidence in our companys
commitment to human rights is to be maintained,
39
Therefore, be it resolved that the shareholders request
that the company commit itself to the implementation of a code
of corporate conduct based on the aforementioned ILO human
rights standards and United Nations Norms on the
Responsibilities of Transnational Corporations with Regard to
Human Rights, by its international suppliers and in its own
international production facilities, and commit to a program of
outside, independent monitoring of compliance with these
standards.
RESPONSE
OF THE HASBRO, INC. BOARD OF DIRECTORS
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
AGAINST PROPOSAL NO. 3 FOR THE FOLLOWING
REASONS:
A substantially similar proposal was submitted to Hasbros
shareholders for their consideration at each of the
Companys last four annual meetings. The proposal was
rejected by Hasbros shareholders at all four of these
meetings. At the 2005 Annual Meeting the proposal was rejected
by Hasbros shareholders with 123,142,123 shares
voting against the proposal, and 14,058,714 shares voting
in favor.
The Board of Directors and Hasbros management carefully
reviewed the proposals submitted for consideration at the last
four annual meetings and have similarly reviewed the current
proposal in preparation for the 2006 Annual Meeting of
Shareholders. The Board of Directors and management continue to
believe that any changes to Hasbros current Code of
Conduct and compliance procedures would neither help Hasbro
fulfill its well-established and continuing commitment to humane
global working conditions nor add value to the shareholders of
the Company. Hasbros existing policies and practices,
which are comprehensive and progressive, already address the
concerns expressed in the above proposal and ensure compliance
with business ethics principles, as described in more detail
below.
In 1993 Hasbro established its Global Business Ethics Principles
(Code of Conduct) to ensure that products
manufactured by or for Hasbro are not produced under inhumane or
exploitative conditions. Participation in the Hasbro program is
mandatory for all suppliers and vendors worldwide who do
business with Hasbro. Among many important areas, the Code of
Conduct governs:
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child labor (no person younger than sixteen or younger
than the age for completing compulsory education in the country
of manufacture (where such age is higher than sixteen) may be
employed to produce Hasbro products);
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working hours and compensation (employers must comply
with all applicable wage and hour laws or, if prevailing
industry wage standards are higher, then employers must comply
with or exceed these standards);
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forced, prison, or indentured labor (any person employed
to produce Hasbro products must be voluntarily employed, except
that rehabilitative programs which provide for employment may be
assessed by Hasbro on a case by case basis);
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health and safety (facilities must operate in a healthy
and safe manner, including, but not limited to, providing fire
prevention, first aid, and hazardous waste disposal);
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abuse and discrimination (facilities must treat employees
with dignity and respect and shall not subject employees to
abuse, cruel or unusual disciplinary practice, or
discrimination);
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freedom of association (facility employees have the right
to choose (or not) to affiliate with legally sanctioned
organizations without unlawful interference); and
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monitoring by Hasbro (Hasbro conducts periodic
on-site
inspections of working and living conditions, including
unannounced visits, audits the production records and practices
of the facilities and requires facilities to promptly address
compliance issues or face termination by Hasbro).
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Hasbros Code of Conduct sets forth workplace standards
with which all vendors manufacturing Hasbro products must
comply. Hasbro also reserves auditing and monitoring rights with
respect to all manufacturing facilities producing Hasbro
products. To date, all factories located in the Far East which
manufacture products for Hasbro have been audited by Hasbro
inspectors and by outside firms hired by Hasbro. Hasbro engages
two outside
40
auditing firms to audit manufacturers compliance with the
Code of Conduct and local law. Since 1994, Hasbro and its
monitors have conducted over 1,955 manufacturing facility
inspections, including over 505 inspections in 2005. Over the
years, Hasbro has successfully worked with its manufacturers to
correct any unacceptable practices discovered during the course
of these inspections. Although serious violations are rarely
found, Hasbro has, after unsuccessful attempts to have the
vendor remedy them, terminated vendors for failure to remedy
violations. In addition, on a number of occasions Hasbro
management has met with shareholders to discuss its Code of
Conduct and compliance procedures, including findings of third
party audits engaged by Hasbro.
In addition to corporate efforts, Hasbro has been and continues
to be a leader in the toy industry (nationally and
internationally) on the issue of workplace standards and
compliance. Hasbro is a member of the Toy Industries of America
(TIA) and Juvenile Products Manufacturers
Association (JPMA) and sits on committees and forums
worldwide to strengthen workplace standards and compliance. For
example, Hasbro was at the forefront of developing industry-wide
standards for fire prevention and emergency preparedness through
the International Council of Toy Industries (ICTI).
Additionally, Hasbro was a principal drafter of the factory
audit checklists for the ICTI Code of Business Practices and
took a leadership role in the 2001 revisions to the ICTI factory
audit checklists and guidance manual. Hasbro, as a member of TIA
and ICTI, is at the forefront of industry efforts to improve
factory working conditions.
In the last few years, as part of an effort to bring consistency
to the oversight of working conditions and the industrys
workplace initiatives, Hasbro has taken a leading role in
promoting the industrys adoption of ICTIs
comprehensive workplace standards, which include a comprehensive
factory audit checklist, guidance and corrective action
documents. Hasbro is using the ICTI program as a basis for
monitoring factories and is requiring all of its Far East
manufacturing vendors to become ICTI-certified. Hasbro expects
facilities manufacturing Hasbro products to apply for and
achieve ICTI certification by an approved, independent auditing
company. As of December 31, 2005, approximately 95% of the
vendors Hasbro uses to produce products in the Far East have
received ICTI certification. Hasbro currently expects that its
remaining vendors in the Far East will be ICTI certified in the
first half of 2006. In addition, however, Hasbro will retain the
right to conduct its own audits. Hasbro is pleased with the
continued growth and maturing of the ICTI/CARE program,
including the appointment of the ICTI Governance Board, which
provides greater transparency to industry efforts by combining
leaders with industry experience with leaders from civil society
The ICTI checklist, guidance and corrective action documents can
be found at: http://www.toy-icti.org/info/code.htm.
To conclude, Hasbro is an industry leader in the area of global
working conditions and is proud of its efforts both on behalf of
the Company and the toy industry in general. Given Hasbros
strong commitment to the Global Business Ethics Principles, its
extensive outside monitoring program, and its industry activism,
the Board of Directors believes that the Companys current
program is best suited to ensure compliance and leadership on
this important issue.
For the reasons outlined above, the Board has concluded that the
Companys current Code of Conduct and compliance programs
and procedures are in the best interests of the Company and its
shareholders and thus is opposed to the shareholder proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
AGAINST PROPOSAL NO. 3.
41
OTHER
BUSINESS
Management knows of no other matters that may be presented to
the Meeting. However, if any other matter properly comes before
the Meeting, or any adjournment thereof, it is intended that
proxies in the accompanying form will be voted in accordance
with the judgment of the persons named therein.
IMPORTANT
NOTICE REGARDING DELIVERY OF SHAREHOLDER DOCUMENTS
In accordance with a notice sent to certain street name
shareholders of our Common Stock who share a single address,
only one copy of this proxy statement and our Annual Report on
Form 10-K
for the year ended December 25, 2005 is being sent to that
address unless we received contrary instructions from any
shareholder at that address. This practice, known as
householding, is designed to reduce our printing and
postage costs. However, if any shareholder residing at such an
address wishes to receive a separate copy of this proxy
statement or our Annual Report on
Form 10-K
for the year ended December 25, 2005, he or she may contact
Karen Warren, Investor Relations, Hasbro, Inc., 1027 Newport
Avenue, Pawtucket, Rhode Island 02862, phone
(401) 431-8697,
and we will deliver those documents to such shareholder promptly
upon receiving the request. Any such shareholder may also
contact Investor Relations using the above contact information
if he or she would like to receive separate proxy statements and
annual reports in the future. If you are receiving multiple
copies of our annual report and proxy statement, you may request
householding in the future by contacting Investor Relations at
the address set forth above.
COST OF
SOLICITATION
The cost of soliciting proxies in the accompanying form has been
or will be borne by the Company. In addition to solicitation by
mail, arrangements will be made with brokerage houses and other
custodians, nominees and fiduciaries to send proxies and proxy
material to their principals and the Company will reimburse them
for any reasonable expenses incurred in connection therewith.
The Company has also retained Morrow & Co., Inc. to aid
in the solicitation of proxies at an estimated cost of $4,000
plus reimbursement of reasonable
out-of-pocket
expenses. In addition to use of mail, proxies may be solicited
by officers and employees of the Company or of Morrow &
Co., Inc. in person or by telephone.
It is important that your shares be represented at the Meeting.
If you are unable to be present in person, you are respectfully
requested to vote by Internet, by telephone or by marking,
signing and dating the enclosed proxy and returning it in the
pre-addressed envelope as promptly as possible. No postage is
required if mailed in the United States.
By Order of the Board of Directors
Barry Nagler
Secretary
Dated: April 18, 2006
Pawtucket, Rhode Island
42
Appendix A
HASBRO,
INC. STANDARDS FOR DIRECTOR INDEPENDENCE
MARCH 4, 2004
The following are the standards that will be employed by the
Hasbro, Inc. (the Company) Board of Directors in
determining issues of director independence pursuant to the
Sarbanes-Oxley Act of 2002 and applicable rules of the New York
Stock Exchange. For purposes of these standards (i) the
Company is meant to include not only Hasbro, Inc., but all of
its subsidiaries and divisions, and (ii) a directors
immediate family is deemed to include the directors
spouse, parents, children, siblings, mothers and
fathers-in-law,
sons and
daughters-in-law
and brothers and
sisters-in-law,
and anyone else (other than employees) who resides in the
directors home.
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The Board of Directors (the Board) must
affirmatively determine that the director has no material
relationship with the Company (either directly or as a partner,
shareholder or officer of an organization which has a
relationship with the Company). The Company will disclose this
determination in compliance with all applicable rules and
regulations.
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No director who is an employee (or whose immediate family member
is an employee) of the Company can be independent until at least
three years after such employment has ended.
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No director who is affiliated with or employed by (or whose
immediate family member is affiliated or employed in a
professional capacity by) a present or former internal or
external auditor of the Company can be independent until at
least three years after the end of either the affiliation or the
employment or auditing relationship.
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No director can be independent if he or she directly or
indirectly receives from the Company any fees or compensation
other than that which is related solely to his or her service as
a member of the Board or one of its committees. A director who
accepts any consulting, advisory or other compensatory fees from
the Company other than in this connection will not be considered
independent. The same prohibition applies with respect to
members of a directors immediate family.
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No director who (or whose immediate family member) is employed
as an executive officer of another entity where any of the
Companys present executives serve on that entitys
compensation committee can be independent until at least three
years after the end of such service or employment relationship.
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No director who is an executive officer or an employee (or whose
immediate family member is an executive officer) of an entity
that makes payments to or receives payments from the Company for
property or services in amount which, in any single fiscal year,
exceeds the greater of $1 million or 2% of such
entitys consolidated gross revenues, can be independent
until three years after falling below such threshold.
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No director who is performing, or is a partner, member, officer,
director or employee of any entity performing, paid consulting,
legal, investment banking, commercial banking, accounting,
financial advisory or other professional services work
(professional services) for the Company can be
independent until three years after such services have ended.
Similarly, there can be no independence if a directors
immediate family member is performing, or is an executive
officer or other senior executive of an entity performing,
professional services for the Company, until three years after
such services have ended.
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Additional
Relationships to Consider in Determining Director
Independence
The following are suggested parameters that the Board has agreed
to consider in determining whether a director has a material
relationship or affiliation with the Company that would impact a
finding of independence. If a director satisfies all of the
criteria set forth below it would suggest that the director,
absent other contrary considerations, does not have a material
relationship with the Company and is independent. If a director
fails to satisfy one or more of the criteria set forth below,
further Board inquiry and discussion is needed to determine if
the director has a material relationship with the Company or may
be found independent.
A-1
Business
and Professional Relationships of Directors and Their Family
Members
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The director is not currently providing personally, and has not
provided personally within the past three years, property, goods
or services (other than services as a member of the Board or any
committees thereof) to the Company or any of its executive
officers.
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No member of the directors immediate family is currently
providing personally, or has provided personally within the past
three years, property, goods or services (other than services as
an unpaid intern of the Company) to the Company or any of its
executive officers.
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The director is not currently receiving personally, and has not
received personally within the past three years, property, goods
or services from the Company. The foregoing requirements do not
apply to compensation, services or goods paid or provided to the
director solely in connection with the directors service
on the Board or any committees thereof, including $1,000 or less
a year in the Companys products which may be given to the
director or one or more of the directors family members as
a director benefit.
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No member of the directors immediate family is currently
receiving personally, or has received personally within the past
three years, property, goods or services from the Company,
excluding the de minimus Company product benefit mentioned
above. The foregoing requirements do not apply to unpaid
internships provided to a member of the directors
immediate family.
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The director is not an executive officer or employee of any
entity to which the Company was indebted at any time within the
past three years or which was indebted to the Company at any
time within the past three years in an amount that exceeded at
the end of any such year the greater of (i) 2% of such
entitys consolidated assets or (ii) $1,000,000.
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Compensation
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Notwithstanding the restriction described above with respect to
direct or indirect receipt of consulting, advisory or other
compensatory fees other than in connection with Board or
committee service, arrangements between the Company and
(i) entities affiliated with the director or
(ii) immediate family members of the director, which may be
deemed to provide a form of indirect compensation to the
director, will not result in a loss of status as an independent
director provided such relationships do not violate the
requirements set forth above.
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Charitable
Relationships
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The director is not an executive officer or an employee of an
entity that has received charitable contributions from the
Company in excess of $100,000 in any of the past three fiscal
years.
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No member of the directors immediate family is an
executive officer of an entity that has received charitable
contributions from the Company in excess of $100,000 in any of
the past three fiscal years.
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Stock
Ownership
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The directors stock ownership, as determined in accordance
with the rules of the SEC as applied to preparation of proxy
statements, does not exceed 5% of the Companys outstanding
stock.
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Other
Family Relationships
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The director is not related to any other member of the
Companys board of directors or any officer of the Company.
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A-2
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Mark this box with an X if you have made changes to your name
or address details above. |
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Annual Meeting Proxy Card
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A |
Election of Directors
PLEASE REFER TO THE REVERSE SIDE FOR
TELEPHONE AND INTERNET VOTING INSTRUCTIONS.
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The Board of Directors recommends a vote FOR the listed nominees.
1. Election of Directors For Terms Expiring in 2007:
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01 - Basil L. Anderson
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05 - Michael W.O. Garrett
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09 - Claudine B. Malone
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02 - Alan R. Batkin
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06 - E. Gordon Gee
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10 - Edward M. Philip
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03 - Frank J. Biondi, Jr.
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07 - Jack M. Greenberg
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11 - Paula Stern
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04 - John M. Connors, Jr.
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08 - Alan G. Hassenfeld
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12 - Alfred J. Verrecchia
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The Board of Directors recommends a vote FOR
Proposal 2 and AGAINST
Proposal 3.
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For
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Abstain
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2. |
Ratification of KPMG LLP as the Companys independent auditor for the 2006 fiscal year. |
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3. |
Shareholder Proposal
Hasbro, Inc. - Global Human Rights Standards.
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4. |
To transact such other business as may properly come before the Annual Meeting and any
adjournment or postponement thereof.
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Authorized Signatures - Sign Here - This section must be completed for your instructions to be executed. |
Sign exactly as your name(s) appear(s) hereon. When signing in a representative
capacity, please give full title as such. If more than one name is shown,
including the case of joint tenants, each person should sign.
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Signature 1 - Please keep signature within the box
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Signature 2 - Please keep signature within the box
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Date (mm/dd/yyyy) |
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0 0 8 6 2 8 1 |
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1 U P X
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C O Y
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Dear Fellow Shareowner:
You are cordially invited to attend the 2006 Annual Meeting of Shareholders of Hasbro, Inc. to be held
at 11:00 a.m. on Thursday, May 25, 2006, at 1027 Newport Avenue, Pawtucket, Rhode Island. The accompanying
Notice of Annual Meeting and Proxy Statement contain detailed information as to the formal business to be
transacted at the meeting.
Your Vote Matters. Whether or not you plan to attend the 2006 Annual Meeting, it is important that your
shares be voted. Please follow the instructions on the other side of this proxy card. You may, of course,
attend the 2006 Annual Meeting and vote in person, even if you have previously voted. I am looking forward
to seeing you there.
Sincerely,
Alan G. Hassenfeld
Chairman of the Board
HASBRO, INC.
1027 Newport Avenue
Pawtucket, RI 02862
Annual
Meeting of Shareholders - May 25, 2006
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned acknowledges receipt of the Notice of Annual Meeting
of Shareholders and Proxy Statement of Hasbro, Inc. (the Company) and
hereby appoints ALAN G. HASSENFELD and ALFRED J. VERRECCHIA and each of
them, with full power of substitution to each of them, as attorneys and
proxies to appear and vote all of the shares of Common Stock standing in
the name of the undersigned at the Annual Meeting of Shareholders of the
Company to be held on May 25, 2006 at 11:00 a.m. at 1027 Newport Avenue,
Pawtucket, Rhode Island, and at any adjournment thereof.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE NOMINEES
LISTED IN PROPOSAL 1, FOR PROPOSAL 2 AND AGAINST PROPOSAL 3 AND IN
SUPPORT OF MANAGEMENT ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE
THE MEETING OR ANY ADJOURNMENTS THEREOF.
If any of your shares represented by this Proxy are held under the Hasbro
Retirement Savings Plan, you must indicate your vote on the proposals on
the other side of this proxy card. If no box in Proposal 1, 2, or 3 above
is marked, your shares held under the Retirement Savings Plan will not be voted
with respect to that Proposal.
PLEASE MARK, SIGN AND DATE ON REVERSE SIDE AND PROMPTLY MAIL IN THE ENCLOSED ENVELOPE.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
YOUR VOTE IS IMPORTANT
Telephone and Internet Voting Instructions
You can vote by telephone OR Internet! Available 24 hours a day 7 days a week!
Instead of mailing your proxy, you may choose one of the two voting methods
outlined below to vote your proxy.
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![(TELEPHONE LOGO)](b58827hib5882706.gif) |
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Call toll free 1-800-652-VOTE (8683) in the United States or Canada any
time on a touch tone telephone. There is NO CHARGE to you for the call.
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Go to the following web site:
WWW.COMPUTERSHARE.COM/EXPRESSVOTE
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Follow the simple instructions provided by the recorded message. |
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Enter the information requested on your computer screen and follow the simple instructions.
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VALIDATION DETAILS ARE LOCATED ON THE FRONT OF THIS FORM IN THE COLORED BAR.
If you vote by telephone or the Internet, please DO NOT mail back this proxy card.
Proxies submitted by telephone or the Internet must be received by 1:00 a.m., Central Time, on May 25, 2006.
THANK YOU FOR VOTING