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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Hasbro, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) 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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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] 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.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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HASBRO, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
- --------------------------------------------------------------------------------
TIME:
10:00 a.m. local time
DATE:
Wednesday, May 17, 2000
PLACE:
Hasbro's New York Office
32 West 23rd Street
New York, NY 10010
PURPOSE:
- Elect four directors to terms expiring in 2003.
- Act on a proposal to approve an amendment to the Stock Incentive
Performance Plan.
- Act on a proposal to amend the Restated Articles of Incorporation of the
Company to increase the total number of shares of common stock which
Hasbro is authorized to issue from 300,000,000 to 600,000,000.
- Transact such other business as may properly come before the meeting and
any adjournment or postponement of the meeting.
OTHER IMPORTANT INFORMATION:
- Hasbro's Board recommends that you vote your shares "FOR" each of the
nominees and "FOR" approval of the proposed amendments to the Plan and
our Articles.
- Shareholders of record of Hasbro common stock at the close of business on
April 6, 2000 may vote at the meeting.
- 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.
By Order of the Board of Directors
Phillip H. Waldoks
Secretary
Dated: April 10, 2000
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HASBRO, INC.
1027 NEWPORT AVENUE
PAWTUCKET, RHODE ISLAND 02862
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PROXY STATEMENT
2000 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 17, 2000
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QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING
Q: WHY AM I RECEIVING THESE MATERIALS?
A: The Board of Directors (the "Board") of Hasbro, Inc. (sometimes referred to
as the "Company" or "Hasbro") is sending these proxy materials to you on or
about April 10, 2000 in connection with Hasbro's annual meeting of shareholders
which will take place on May 17, 2000 at Hasbro's New York office, 32 West 23rd
Street, New York, New York 10010. The information included in this proxy
statement relates to the proposals to be voted on at the meeting, the voting
process, the compensation of directors and our most highly paid executive
officers, and certain other required information. Our 1999 Annual Report is also
enclosed.
Q: WHAT PROPOSALS WILL BE VOTED ON AT THE MEETING?
A: There are three proposals scheduled to be voted on at the meeting:
- The election of directors
- The approval of a proposed amendment to the Stock Incentive Performance
Plan (the "Plan")
- The approval of a proposed amendment to our Restated Articles of
Incorporation (the "Articles") to increase authorized common stock, par
value $.50 per share (the "Common Stock"), from 300,000,000 to
600,000,000 shares.
Q: WHAT SHARES OWNED BY ME CAN BE VOTED?
A: All shares owned by you as of April 6, 2000, 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 Hasbro's Dividend
Reinvestment and Cash Stock Purchase Program and (2) held for you as the
beneficial owner through a stockbroker, bank or other nominee.
Q: WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A SHAREHOLDER OF RECORD AND
AS A BENEFICIAL OWNER?
A: Most Hasbro shareholders hold their shares through a stockbroker, bank or
other nominee rather than directly in their own name. 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 Hasbro's Transfer
Agent, Fleet National Bank, c/o Equiserve Limited Partnership, you are
considered, with respect to those shares, the shareholder of record, and these
proxy materials are being sent directly to you by 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.
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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 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 receive a proxy from your broker or nominee. Your broker or nominee
has enclosed a voting instruction card for you to use.
Q: HOW CAN I VOTE MY SHARES IN PERSON AT THE MEETING?
A: Shares held directly in your name as the shareholder of record may be voted
in person at the annual meeting. If you choose to do so, please bring the
enclosed proxy card or 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. Even if you plan to attend the annual 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.
Q: HOW CAN I VOTE MY SHARES WITHOUT ATTENDING THE MEETING?
A: 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.
BY INTERNET -- If you have Internet access, you may submit your proxy from any
location in the world by following the "Vote by Internet" instructions on the
proxy card.
BY TELEPHONE -- You may submit your proxy by following the "Vote by Telephone"
instructions on the proxy card.
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 included by your
broker or nominee and mailing it in the enclosed, postage prepaid and addressed
envelope. No postage is required if mailed in the United States.
Q: HOW ARE VOTES COUNTED?
A: 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, you may vote "FOR" all of the nominees or your vote may be "WITHHELD"
with respect to one or more of the nominees. For the other proposals, you may
vote "FOR", "AGAINST" or "ABSTAIN". If you "ABSTAIN", it has the same effect as
a vote "AGAINST". If you sign your proxy card or broker voting instruction card
with no instructions, your shares will be voted in accordance with the
recommendations of the Board.
Q: CAN I CHANGE MY VOTE?
A: 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
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granted proxy to be revoked unless you specifically so request. For shares held
beneficially by you, you may accomplish this by submitting new voting
instructions to your broker or nominee.
Q: WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY OR VOTING INSTRUCTION
CARD?
A: It means your shares are registered differently or are in more than one
account. Please provide voting instructions for all proxy and voting instruction
cards you receive.
Q: HOW CAN I ATTEND THE MEETING?
A: You may attend the meeting if you are listed as a shareholder of record as
of April 6, 2000 and bring proof of identification. If you hold your shares
through a broker or other nominee, you will need to provide proof of ownership
by bringing either a copy of the voting instruction card provided by your broker
or a copy of a brokerage statement showing your share ownership as of April 6,
2000.
Q: WHERE CAN I FIND THE VOTING RESULTS OF THE MEETING?
A: We will announce preliminary voting results at the meeting, issue a press
release regarding shareholder action taken on the proposals and publish final
results in our quarterly report on Form 10-Q for the second quarter of fiscal
2000.
Q: WHAT IS THE QUORUM FOR THE MEETING?
A: Holders of record (the "Shareholders") of the Common Stock on April 6, 2000
are entitled to vote at the meeting or any adjournments thereof. As of that date
there were 172,363,696 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.
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ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
Four directors are to be elected at the annual meeting to terms expiring in
2003. The Board has recommended as nominees for election as directors the first
four persons named in the table below. All of the nominees are currently
directors of the Company. The Board is divided into three classes. The terms of
the nine remaining directors expire in 2001 and 2002. Unless otherwise specified
in the accompanying Proxy, 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 table sets forth as to each nominee and as to each incumbent
director whose term of office extends to 2001 and 2002 and who is, therefore,
not a nominee for election as a director at this Annual 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.
POSITIONS WITH COMPANY, HAS BEEN
PRINCIPAL OCCUPATION AND A DIRECTOR TERM
NAME AGE OTHER DIRECTORSHIPS SINCE EXPIRES
- ---- --- ------------------------ ---------- -------
Nominees for Terms Expiring in 2003
Alan G. Hassenfeld................... 51 Chairman of the Board and Chief 1978 *
Executive Officer since 1999.
Prior thereto, Chairman of the
Board, President and Chief
Executive Officer.
Harold P. Gordon..................... 62 Vice Chairman. Director, Alliance 1988 *
Atlantis Communications
Corporation and G.T.C.
Transcontinental Group, Ltd.
Marie Josee Kravis................... 50 Senior Fellow, Hudson Institute 1995 *
(public policy analysis). Visiting
Fellow, Council on Foreign
Relations. Director, Canadian
Imperial Bank of Commerce, Ford
Motor Company, Hollinger
International, Inc., The Seagram
Company Ltd., StarMedia Network,
Inc. and Unimedia Inc.
Preston Robert Tisch................. 73 Co-Chairman of the Board, Loews 1988 *
Corporation since 1999. Prior
thereto, Co-Chairman and Co-Chief
Executive Officer, Loews
Corporation. Director, Bulova
Watch Company, Inc., CNA Financial
Corporation, Loews Corporation and
Rite Aid Corporation.
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POSITIONS WITH COMPANY, HAS BEEN
PRINCIPAL OCCUPATION AND A DIRECTOR TERM
NAME AGE OTHER DIRECTORSHIPS SINCE EXPIRES
- ---- --- ------------------------ ---------- -------
Directors Whose Terms Expire in 2001 and 2002
Alan R. Batkin....................... 55 Vice Chairman, Kissinger 1992 2001
Associates, Inc. (geopolitical
strategic consulting firm).
Director, Diamond Offshore
Drilling, Inc., Overseas
Shipholding Group, Inc. and
Schweitzer-Mauduit International,
Inc.
Herbert M. Baum...................... 63 President and Chief Operating 1999 2002
Officer since 1999. Prior thereto,
Chairman and Chief Executive
Officer, Quaker State Corporation.
Director, Action Performance
Companies, Inc., Dial Corp.,
Fleming Companies Inc., Meredith
Corp., Midas, Inc. and Whitman
Corp.
E. Gordon Gee........................ 56 Chancellor-Elect, Vanderbilt 1999 2002
University. President, Brown
University since 1998. Prior
thereto, President, The Ohio State
University. Director, Allmerica
Financial Group, Asarco Inc.,
Glimcher Realty Trust, Intimate
Brands Inc. and The Limited Inc.
Sylvia K. Hassenfeld................. 79 Former Chairman since 1996 and, 1983 2002
prior thereto, Chairman of the
Board, American Jewish Joint
Distribution Committee, Inc.
Norma T. Pace........................ 78 President, Paper Analytics 1984 2002
Associates (economic consulting).
Senior Economic Advisor WEFA Group
(economic consulting and
planning). Director, Englehard
Corp.
E. John Rosenwald, Jr. .............. 70 Vice Chairman, Bear, Stearns & Co. 1983 2002
Inc. (investment bankers) since
1997. Prior thereto, Vice
Chairman, The Bear Stearns
Companies, Inc. Director, Bear,
Stearns & Co. Inc.
Carl Spielvogel...................... 71 Chairman and Chief Executive 1992 2001
Officer, Carl Spielvogel
Associates, Inc. (international
investments) since 1997. Prior
thereto, Chairman of the Board and
Chief Executive Officer, United
Auto Group, Inc. (operator of
multiple-franchise auto
dealerships). Director, Barney's
Dept. Stores, Inc., Data
Broadcasting Inc. and Market
Watch.com
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POSITIONS WITH COMPANY, HAS BEEN
PRINCIPAL OCCUPATION AND A DIRECTOR TERM
NAME AGE OTHER DIRECTORSHIPS SINCE EXPIRES
- ---- --- ------------------------ ---------- -------
Alfred J. Verrecchia................. 57 Executive Vice President, Global 1992 2001
Operations and Chief Financial
Officer since 1999. Prior thereto,
Executive Vice President, Global
Operations and Development during
1999. Prior thereto, Executive
Vice President and
President -- Global Operations
from 1996 to 1999. Prior thereto,
Chief Operating
Officer -- Domestic Toy
Operations. Director, Old Stone
Corp. and Bacou, Inc. USA.
Paul Wolfowitz....................... 56 Dean, Paul H. Nitze School of 1995 2001
Advanced International Studies,
The Johns Hopkins University.
Former Undersecretary of Defense
for Policy, U.S. Department of
Defense. Former U.S. Ambassador to
the Republic of Indonesia. Former
U.S. Assistant Secretary of State
for East Asian and Pacific
Affairs. Director of eleven mutual
funds of the Dreyfus Corporation.
* * *
Sylvia K. Hassenfeld is the mother of Alan G. Hassenfeld.
Alex Grass, who has served as a director of the Company since 1981, is
retiring from the Board and, therefore, is not standing for reelection at the
2000 Annual Meeting of Shareholders.
Those directors who are also executive officers of the Company serve as
officers and directors of the Company's various subsidiaries at the request and
convenience of the Company.
During 1999, the Board held seven meetings. Morris W. Offit, who was a
director during 1999, attended fewer than 75% of the aggregate number of
meetings of the Board and the committee on which he served during 1999.
The Executive Committee of the Board, which currently consists of Alan R.
Batkin, Alan G. Hassenfeld, Norma T. Pace and E. John Rosenwald, Jr., met twice
in 1999. The Executive Committee 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 Executive Committee
also performs such functions as are assigned to it by the Board from time to
time.
The Nominating and Governance Committee of the Board, which currently
consists of Sylvia K. Hassenfeld, Preston Robert Tisch and Paul Wolfowitz, did
not meet in 1999. The Nominating and Governance Committee makes recommendations
for possible additions to the Board and at the request of the Board is
authorized to make recommendations regarding the governance of the Board and the
committees thereof. The Nominating and Governance Committee has neither the
authority nor the procedures to consider nominees recommended by shareholders.
The By-laws provide that shareholders may nominate directors at an annual
meeting by giving 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 providing specified information regarding the
proposed nominee and each shareholder proposing such nomination.
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The Audit Committee of the Board, which currently consists of E. Gordon
Gee, Alex Grass and Norma T. Pace (Chair), held three meetings in 1999. The
function of the Audit Committee is to recommend to the Board the accounting firm
to serve as the Company's independent auditors and to review with such firm, and
with the Company's internal auditors and officers, matters relating to corporate
financial reporting procedures and policies, adequacy of financial, accounting
and operating controls and the scope of the respective audits performed by the
Company's independent auditors and internal auditors.
The Compensation and Stock Option Committee of the Board, which currently
consists of Alan R. Batkin, Alex Grass, Marie Josee Kravis and Carl Spielvogel
(Chair), held four meetings in 1999. The Compensation and Stock Option Committee
has been delegated responsibility for all employee compensation and benefit
plans, is authorized to make grants and awards under the Company's employee
stock option plans and administers the non-employee director compensation plans.
COMPENSATION OF DIRECTORS
Effective October 1, 1999, members of the Board who are not otherwise
employed by the Company ("Non-employee Directors") receive a retainer of $35,000
per year and the Chair of the Audit Committee and the Chair of the Compensation
and Stock Option Committee each receive an additional retainer of $4,000 per
year. Non-employee Directors receive a fee of $1,000 per Board or committee
meeting attended. Action by written consent is not considered attendance at a
meeting for purposes of fees to directors.
Pursuant to the Deferred Compensation Plan for Non-employee Directors (the
"Deferred Plan"), which is unfunded, Non-employee Directors must defer a minimum
of 20% of the annual Board retainer fee 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 Director's stock unit account as of the end of the quarter in
which the dividend was paid. Non-employee Directors may defer the remainder of
their retainer and/or meeting fees into the stock unit account or an interest
account, which bears interest at the five-year Treasury rate. The Company makes
a deemed matching contribution to the stock unit account equal to 10% of the
amount deferred, with one-half of such Company contribution vesting on December
31 of the calendar year in which the deferred compensation otherwise would have
been paid and one-half on the next December 31, provided 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.
Under the Hasbro, Inc. Retirement Plan for Directors (the "Retirement
Plan"), which is unfunded, each director (who is not otherwise eligible for
benefits under the Company's Pension Plan) who 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 director's seventy-second birthday, the
annual benefit will continue 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 director's years of service. Upon a Change of
Control, as defined in the Retirement Plan, directors and retired directors are
entitled to lump-sum payments equal to the present value of their benefits under
the Retirement Plan.
Under the Stock Option Plan for Non-employee Directors (the "Director
Plan"), approved by shareholders on May 11, 1994, each Non-employee Director
then in office received on May 11, 1994, each Non-employee Director who joined
the Board after May 11, 1994 received upon becoming a director, and any new
Non-employee Director will receive upon becoming a director, a one-time grant of
a nonqualified,
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nontransferable ten year option to purchase 11,250 shares (as adjusted to
reflect the two 3 for 2 stock splits, each paid in the form of a 50% stock
dividend on March 21, 1997 and March 15, 1999, respectively) of Common Stock at
110% of the fair market value per share of Common Stock on the date of grant.
The options become exercisable at a rate of 20% per year commencing on the first
anniversary of 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 Director Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's wholly owned subsidiary, Hasbro Canada Corporation ("Hasbro
Canada"), leases its manufacturing and warehouse facilities 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 director of the Company, is executrix and a
beneficiary of the estate of Merrill Hassenfeld. Total rent paid by Hasbro
Canada to CTM for the leases of offices and warehouse facilities in 1999 was
approximately $579,000 Canadian (approximately $390,000 U.S.). In management's
opinion, these leases are on terms at least as favorable as would otherwise
presently be obtainable. The leases expire on January 31, 2001, with Hasbro
Canada having options to renew for three additional three year terms at fair
market rental. If the parties cannot agree, the fair market rental would be
determined by appraisal. Hasbro Canada has a right of first refusal to purchase
the premises unless it indicates its intention not to renew the leases. The
premises are subject to a first mortgage securing a loan with a balance of
approximately $933,000 Canadian with a due date of February 1, 2001. The leases
provide that, until January 31, 2003, should such loan not be renewed, extended
or replaced beyond February 1, 2001, Hasbro Canada would advance on behalf of
the shareholders of CTM, other than the estate of Merrill Hassenfeld, the amount
necessary to pay off 75% of the loan and 75% of all operating expenses until
sale or lease of the premises or refinancing of the loan. CTM would be obligated
to repay the advance no later than January 31, 2003, which would be secured by a
first mortgage on the premises but would be nonrecourse individually to such
shareholders. CTM agreed that all cash flow from the premises (including sale,
lease and refinancing) will be used to pay the then existing loan and any Hasbro
Canada advances. It is anticipated that the balance of the existing CTM loan at
February 1, 2001 will be approximately $625,000 Canadian.
Bear, Stearns & Co. Inc. provides investment banking and related services
to the Company. E. John Rosenwald, Jr., a director of the Company, is a director
and Vice Chairman of Bear, Stearns & Co., Inc.
Lucas Licensing Ltd. ("Licensing") and Lucasfilm Ltd. ("Film") own in the
aggregate 15,750,000 exercisable warrants to purchase Common Stock which were
obtained in arms-length negotiations with the Company in connection with the
Company's obtaining of certain rights. The Common Stock subject to such warrants
would, if all warrants were fully exercised, constitute approximately 8.4% of
the Company's outstanding shares. Accordingly, under SEC rule 13d-3, George W.
Lucas, Jr., as owner, director and officer of Film and Licensing, may be deemed
to own approximately 8.4% of the Company's outstanding shares. See "Voting
Securities and Principal Holders Thereof" below. Since the beginning of fiscal
1999, the Company paid an aggregate of approximately $250 million in royalty
advances and $13.8 million in bonus payments to Licensing pursuant to license
agreements entered into at arms length in the ordinary course of business. In
addition, in 1999 the Company filed a registration statement with the Securities
and Exchange Commission covering the Common Stock underlying the warrants
pursuant to the Company's obligations under its warrant agreements with Film and
Licensing.
Vote Required. The vote of a majority of those shares of Common Stock
present or represented by proxy at the annual meeting is required to elect
directors. Accordingly, an abstention or broker non-vote will in effect
constitute a vote against a nominee.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
ELECTION OF THE FOUR NOMINEES NAMED ABOVE (PROPOSAL NO. 1).
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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 Company's 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 is not necessarily indicative of future performance.
HASBRO S&P 500 RUSSELL 1000 CONSUMER
------ ------- DISCRETIONARY ECONOMIC
SECTOR
----------------------
1994 100.00 100.00 100.00
1995 109.00 136.00 120.00
1996 135.00 173.00 137.00
1997 165.00 213.00 180.00
1998 181.00 279.00 240.00
1999 149.00 332.00 312.00
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(1) While the information for Hasbro and S&P 500 is as of the last trading day
in Hasbro's fiscal year, the data for the Russell Sector is as of the last
trading day in the calendar year.
REPORT OF THE
COMPENSATION AND STOCK OPTION COMMITTEE
OF THE BOARD OF DIRECTORS
1999 COMPENSATION POLICIES WITH RESPECT TO EXECUTIVE OFFICERS
The general goal of the Compensation and Stock Option Committee (the
"Committee") with respect to the compensation of executive officers (including
those named in the summary compensation table below) is that the Company provide
competitive compensation and benefits that
- attract and retain capable executives who are important to the success of
the Company,
- reward them for performance,
- provide them with a strong incentive to increase shareholder value, and
- accomplish the foregoing in as fair, understandable and cost-effective
manner as possible.
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").
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Executive compensation during 1999 consisted of salary, a management
incentive bonus and stock options. In authorizing and approving compensation
increases and awards for executive officers (other than the Chief Executive
Officer), the Committee relies principally upon the recommendations of the Chief
Executive Officer.
Base salaries for new executive officers are initially determined by
evaluating the responsibilities of the position held, the experience of the
individual and the competitive marketplace for comparable executive talent.
Subsequent yearly adjustments are made by reference to changes in duties and
responsibilities, competitive market conditions and personal performance. In
approving the increases to base salaries for 1999, the Committee generally
targeted the Company's pay levels to correspond with approximately the 75th
percentile of salaries paid by other consumer non-durable products companies
surveyed in Hewitt, Executive, Total Compensation Measurement, prepared by
Hewitt Associates, LLP, whose participants partially overlap with the companies
included in the Russell 1000 Consumer Discretionary Economic Sector (the
"Russell Sector") set forth in the above graph. The Frank Russell Company does
not publish compensation data for the companies included in the Russell Sector.
During 1999, the Committee froze the salaries of its senior management,
including its executive officers, for two years and eliminated the
non-performance-related seniority-based year-end holiday bonus for executives
eligible to participate in the management incentive plan. The Committee also
increased the target bonuses for senior management (other than the Chief
Executive Officer), including executive officers, by 10% of base salary which,
together with the salary freeze, would increase the proportion of the annual
cash compensation opportunity that is performance-related.
Approximately 1365 employees, including executive officers, were awarded
annual management incentive bonuses with respect to fiscal 1999. Individual and
corporate performance objectives were established at the beginning of the year.
Corporate and business unit pre-tax earnings performance objectives were
determined on the basis of a budget review carried out by senior management with
respect to each business unit which forms the basis for the operating plan
prepared by senior management and approved by the Board in February of each
year. The remainder of this paragraph will outline the bonus programs applicable
to executive officers other than the Chief Executive Officer, whose bonus is
discussed below. See "1999 Compensation of the Chief Executive Officer". Target
bonuses in 1999 for executive officers ranged from 40% to 55% of base salary.
Performance in excess of targeted performance would yield higher bonuses, except
that bonuses in excess of 100% of base salary require special Committee review
and approval. The management incentive bonus for executive officers who are
deemed to have corporate-wide responsibility (which include the individuals
named in the summary compensation table below other than Mr. Wilson) was
generally based 75% on corporate performance and 25% on individual performance.
The management incentive bonuses for those individuals deemed to have business
unit responsibility, including Mr. Wilson, were generally weighted 25% for
corporate performance, 50% for business unit performance and 25% for individual
performance. In fiscal 1999, corporate performance, and that of most of the
business units, exceeded their pre-tax earnings targets. The 1999 management
bonuses for executive officers were based in part on the applicable corporate
and business unit performance and in part on the contribution of the individual.
In 1999, non-qualified stock options were granted to approximately 790
employees, including executive officers, pursuant to the Company's employee
stock option plans. The Committee granted individual options to executive
officers in order to provide an incentive to motivate and retain those
individuals who are important to the Company's future success. Stock options are
designed to align the interests of executives with those of shareholders, since
the executives can only benefit from the options if there is price appreciation
in the Common Stock after the date of grant. All stock options granted in 1999
had an exercise price equal to at least the fair market value of the Common
Stock on the date of grant and most vested over three years. Certain options
granted in 1999 were granted pursuant to the Company's long term incentive
program established in 1993. Pursuant to the program, which is designed to
supplement the Company's regular stock option program, nonqualified options are
granted every other year to key executives at 110% of market value on date of
grant, vesting over five years. Under the program, value is provided to the
executive only if share appreciation exceeds the premium. In 1999, the overall
size of the regular stock option pool was set at 1.5% of the issued shares
pursuant to a policy established by the Committee that keys the overall size of
the pool to the Company's relative performance vis a vis the Russell Sector. The
number of stock options previously awarded
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and outstanding for each executive officer is reviewed by the Committee but is
not considered a critical factor in determining the size of any executive's
stock option award in any year. Options granted were allocated on the basis of
individual compensation level, responsibility and performance.
1999 COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
As set forth in the accompanying tables, Mr. Hassenfeld's salary of
$1,005,900 for 1999 represented a decrease from his 1998 salary, reflecting the
elimination of the holiday bonus, which was non-performance-related and
therefore included as part of his salary. His management incentive bonus with
respect to 1999 was $452,990, which represented 45% of his 1999 salary, and in
1999 he was granted options to purchase 90,000 shares of Common Stock under the
regular stock option program and options to purchase 225,000 shares of Common
Stock under the premium-priced stock option long term incentive program. These
options in the aggregate represented approximately 4.4% of all options granted
to employees during 1999. All compensation decisions regarding Mr. Hassenfeld
were made by the Committee, without the participation of Mr. Hassenfeld or other
executive officers of the Company. In setting Mr. Hassenfeld's 1999 salary, the
Committee took into account comparative data with respect to chief executive
officer compensation provided to the Committee with a view towards setting Mr.
Hassenfeld's compensation levels at approximately the 75th percentile of other
consumer non-durable products companies surveyed. The Committee determined Mr.
Hassenfeld's management bonus pursuant to the Company's 1999 Senior Management
Annual Performance Plan (the "Annual Performance Plan") which was approved by
shareholders in 1999. Mr. Hassenfeld was the only 1999 participant in the Annual
Performance Plan. Under the Annual Performance Plan, the Committee designated a
"Net Earnings" (as defined in the Annual Performance Plan) performance goal for
the Company for 1999, which was based on the 1999 operating plan approved by the
Board in February 1999. The target bonus for Mr. Hassenfeld under the Annual
Performance Plan is 75% of salary, if 100% of the performance goal is achieved,
with a maximum bonus of 150% of salary, if 127% or more of the performance goal
is attained. No bonus is payable under the Annual Performance Plan unless at
least 80% of the performance goal is attained. More than 80% of the targeted
"Net Earnings" performance goal under the Annual Performance Plan was achieved
by the Company resulting in the bonus paid to Mr. Hassenfeld. The options
granted to Mr. Hassenfeld in 1999 reflected individual compensation level,
responsibility and performance.
SECTION 162(m) OF THE INTERNAL REVENUE CODE
The Committee believes that the Company's compensation plans preserve the
ability of the Company to obtain tax deductions for annual remuneration in
excess of $1,000,000 to any of the executive officers named in the table below
(the "named executives"). With respect to the current payment of annual cash
management incentive bonuses which would otherwise exceed the limits on
deductibility established by Section 162(m), the Committee has utilized the
Annual Performance Plan, which was approved by shareholders in 1999. In
addition, the Non-Qualified Deferred Compensation Plan adopted in 1997 permits
executives to defer all or a portion of their salaries and bonuses and with
respect to the named executives permits the Company to defer remuneration that
would not be deductible under Section 162(m). The Committee believes that, under
ordinary circumstances and subject to shareholder approval of the proposed
amendment to the Stock Incentive Performance Plan (see Proposal 2 below), the
Company's compensation programs should comply with the requirements of Section
162(m) so as to permit the deductibility of all amounts paid to the named
executives. The Committee recognizes, however, that there may be instances where
it would be in the best interests of the Company and its shareholders to make
compensation payments that would not be deductible.
STOCK OWNERSHIP GUIDELINES
During 1999, the Committee established Company-wide stock ownership
guidelines for executives (including executive officers), requiring them to own
a number of shares of Common Stock with a value ranging from one times salary to
five times salary. Beginning in the year 2000, executives will have five years
to reach their applicable guideline but they must achieve a minimum of 20% of
their ownership goal annually. Stock ownership for purposes of these guidelines
does not include stock options. The Committee believes that significant stock
ownership by senior management more closely aligns their interests with those of
the shareholders.
Alan R. Batkin, Alex Grass, Marie Josee Kravis and Carl Spielvogel
(Chairman) as members of the Compensation and Stock Option Committee of the
Board of Directors as of 1999 fiscal year end.
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EXECUTIVE COMPENSATION
The following table summarizes compensation paid by the Company for
services rendered during 1999, 1998 and 1997 by the Chief Executive Officer of
the Company, the four most highly compensated executive officers of the Company
in 1999 other than the Chief Executive Officer and a former executive officer
who served during the period presented.
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------------- ----------------------------
OTHER
ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(A) BONUS(A) COMPENSATION(B) OPTIONS(C) COMPENSATION(D)
- --------------------------- ---- ---------- -------- --------------- ---------- ---------------
Alan G. Hassenfeld........... 1999 $1,005,900 $452,990 $33,488 315,000 $62,115
Chairman of the Board 1998 1,014,816 422,400 32,784 60,000 70,724
and Chief Executive Officer 1997 957,900 718,425 36,834 303,750 58,398
Herbert M. Baum.............. 1999 735,577 500,000 26,059 482,500 --
President and Chief Operating
Officer
Alfred J. Verrecchia......... 1999 665,201 662,000 14,613 217,500 41,552
Executive Vice-President, 1998 671,089 510,000 12,963 42,000 52,702
Global Operations and 1997 633,450 350,000 14,034 213,750 34,665
Chief Financial Officer(e)
Harold P. Gordon............. 1999 583,100 320,000 27,272 200,000 38,244
Vice Chairman 1998 576,672 210,000 26,256 40,000 37,820
1997 544,286 268,000 62,140 198,750 33,645
E. David Wilson.............. 1999 519,200 280,500 3,218 152,500 27,124
Sector Head and General 1998 508,800 105,000 1,741 30,000 29,417
Manager, U.S. Games 1997 493,532 209,000 2,207 168,750 28,119
John T. O'Neill.............. 1999 527,300 290,015 12,815 202,500 31,992
Former Executive 1998 526,114 210,000 8,472 40,000 31,604
Vice-President and Chief 1997 476,525 250,000 8,248 198,750 26,807
Financial Officer(f)
- ---------------
(a) Includes amounts deferred pursuant to the Company's Retirement Savings Plan
and Nonqualified Deferred Compensation Plan (the "Deferred Compensation
Plan"). Also includes, in the case of the bonuses to Mr. Verrecchia for each
of 1999 and 1998, a special award by the Committee of $250,000 that was paid
directly into Mr. Verrecchia's account in the Deferred Compensation Plan. As
a result of a change in the Company's payroll method in 1999, in the case of
Messrs. Hassenfeld, Verrecchia and Wilson, a portion of salary earned in
1999 was paid in 2000.
(b) Includes the following amounts which were included in 1999 taxable income
for each named individual in connection with a program whereby a leased
automobile, or an automobile allowance, is provided to the executive by the
Company: $8,488 for Mr. Hassenfeld, $7,822 for Mr. Baum, $11,363 for Mr.
Verrecchia, $6,372 for Mr. Gordon, $2,253 for Mr. Wilson and $11,965 for Mr.
O'Neill. Includes the following amounts paid by the Company and included in
1999 taxable income for each named individual in connection with a program
whereby certain financial planning and tax preparation services are provided
to the individual and paid for by the Company: $25,000 for Mr. Hassenfeld,
$7,937 for Mr. Baum, $3,250 for Mr. Verrecchia, $20,900 for Mr. Gordon,
$1,015 for Mr. Wilson and $850 for Mr. O'Neill. Also includes $10,300 of
moving expenses for Mr. Baum. Does not include other personal benefits that
do not in the aggregate exceed $50,000 in any year for any individual.
(c) All share amounts are adjusted to reflect the two 3 for 2 stock splits, each
paid in the form of a 50% stock dividend, on March 21, 1997 and March 15,
1999, respectively.
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(d) Includes the individual's pro-rata share of the Company's contribution to
the profit-sharing account under the Company's Retirement Savings Plan which
is in part contributed to the individual's account in the Retirement Savings
Plan and, to the extent in excess of certain Internal Revenue Code of 1986,
as amended (the "Code") maximums, deemed allocated to the individual's
account in the Company's unfunded Supplemental Benefit Retirement Plan (the
"Supplemental Plan"), which for 1999 amounted to $56,388 for Mr. Hassenfeld,
$36,516 for Mr. Verrecchia, $31,724 for Mr. Gordon, $24,625 for Mr. Wilson
and $29,492 for Mr. O'Neill. Mr. Baum was not yet eligible to participate in
the Retirement Savings Plan in 1999. Includes for each individual (other
than Mr. Baum), the sum of $2,500 which represents the Company's 25% match
of sums saved in 1999 by each named individual in his applicable savings
account under the Retirement Savings Plan and Deferred Compensation Plan.
Also includes $3,227, $2,536 and $4,020 in premiums paid by the Company in
1999 for individual life insurance policies for Messrs. Hassenfeld,
Verrecchia and Gordon, respectively.
(e) Mr. Verrecchia, Executive Vice President, Global Operations and Development,
and Mr. O'Neill's predecessor as Chief Financial Officer of the Company,
became Executive Vice President, Global Operations and Chief Financial
Officer on August 27, 1999.
(f) Mr. O'Neill, who took early retirement and left the employ of the Company in
December 1999, served as Executive Vice President and Chief Financial
Officer until August 27, 1999. Amounts shown in table include all
compensation paid to Mr. O'Neill in all capacities during 1999, but do not
include early retirement payments made and to be made to Mr. O'Neill
pursuant to his early retirement agreement. See "Change of Control,
Employment, Severance and Early Retirement Agreements" below.
* * *
The following table sets forth certain information regarding stock option
grants in 1999 to the individuals named above. Where applicable, amounts have
been adjusted to reflect the 3 for 2 stock split paid in the form of a 50% stock
dividend on March 15, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
GRANT DATE
INDIVIDUAL GRANTS VALUE(A)
------------------------------------------------------- -------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE PER EXPIRATION GRANT DATE
NAME GRANTED(D) IN FISCAL YEAR SHARE DATE PRESENT VALUE
- ---- ---------- -------------- --------- ---------- -------------
Alan G. Hassenfeld.............. 90,000(b) $32.1875 5/10/09 $1,209,303
225,000(c) 4.4 35.4063 5/10/09 2,818,125
Herbert M. Baum................. 262,500(b) 24.0417 1/04/09 2,418,150
70,000(b) 6.7 32.1875 5/10/09 940,569
150,000(c) 35.4063 5/10/09 1,878,750
Alfred J. Verrecchia............ 75,000(b) 32.1875 5/10/09 1,007,752
142,500(c) 3.0 35.4063 5/10/09 1,784,812
Harold P. Gordon................ 60,000(b) 32.1875 5/10/09 806,202
140,000(c) 2.8 35.4063 5/10/09 1,753,500
E. David Wilson................. 40,000(b) 32.1875 5/10/09 537,468
112,500(c) 2.1 35.4063 5/10/09 1,409,062
John T. O'Neill................. 60,000(b) 32.1875 5/10/09 806,202
142,500(c) 2.8 35.4063 5/10/09 1,784,812
- ---------------
(a) The Grant Date Present Value was determined using the standard application
of the Black-Scholes option pricing methodology using the following weighted
average assumptions: volatility 34%, dividend yield 0.76% and a risk free
interest rate of 5.48% based on the options being outstanding for
approximately six years. The Grant Date Present Values do not take into
account risk factors such as non-transferability
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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 and were granted at fair market value on the
date of grant. Thirty-three and one-third percent of each option becomes
exercisable on the first anniversary of the date of grant and thirty-three
and one-third percent becomes exercisable on each anniversary thereafter
until fully exercisable. All options become fully vested in the event of
death, disability or retirement at the optionee's normal retirement date and
are exercisable for a period of one year thereafter. 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 Committee may
approve. Unless otherwise approved by the 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.
(c) These options were granted pursuant to the Company's long term incentive
program and were granted at 110% of fair market value on the date of grant.
See "Report of the Compensation and Stock Option Committee of the Board of
Directors" above. Twenty percent of these options become exercisable on the
first anniversary of the date of grant and twenty percent become exercisable
on each anniversary thereafter until fully exercisable. Options become fully
vested in the event of death, disability and retirement at the optionee's
normal retirement date and are exercisable for three years thereafter.
Unless otherwise approved by the Committee in its discretion, upon
termination of employment for any other reason (including early retirement),
an optionee may exercise only options vested at the date of termination for
a period of six months following termination.
(d) All of these shares were granted pursuant to the Stock Incentive Performance
Plan (the "Plan"). Upon a Change of Control, as defined in the Plan, all
options become immediately exercisable and, except as provided in the
following sentence, will be canceled in exchange for a cash 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 (the "CIC Price").
In 1999, the Committee amended the Plan to give the Committee discretion, in
connection with certain Change of Control transactions, to take alternative
action such as converting the stock options into those of the resulting
corporation or settling them in shares of the stock of the Company or the
resulting corporation. Participants may exercise options and satisfy tax
withholding liabilities by payments in cash or by delivery of Common Stock
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.
* * *
The following table sets forth as to each of the named individuals: (a) the
number of shares acquired upon exercise of options during fiscal 1999; (b) the
value realized (market value on date of exercise less exercise price) upon the
exercise of such options during fiscal 1999; (c) the number of exercisable and
unexercisable options held on December 26, 1999, the last day of the 1999 fiscal
year; and (d) the value of such options at December 26, 1999. Where applicable,
the number of options set forth below correspond to the number of shares to
which they relate and have been adjusted to reflect the 3 for 2 stock split paid
in the form of a 50% stock dividend on March 15, 1999.
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AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT DECEMBER 26, 1999 AT DECEMBER 26, 1999
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ---------- ----------- ------------- ----------- -------------
Alan G. Hassenfeld.......... -- -- 1,127,750 561,250 $4,074,702 $115,749
Herbert M. Baum............. -- -- -0- 482,500 -0- -0-
Alfred J. Verrecchia........ -- -- 882,250 389,750 3,943,759 96,457
Harold P. Gordon............ 54,000 $1,009,658 374,983 353,417 1,286,118 57,874
E. David Wilson............. 162,000 2,216,793 210,625 276,750 239,292 46,300
John T. O'Neill............. 168,750 2,580,454 310,333 355,917 451,807 57,874
* * *
The following table shows the estimated annual benefits payable upon
retirement in specified remuneration and years of service classifications under
the Company's Pension Plan (the "Pension Plan") and under the Supplemental Plan:
PENSION PLAN TABLE
ESTIMATED ANNUAL RETIREMENT BENEFIT BY YEARS OF SERVICE CLASSIFICATION(2)
AVERAGE ---------------------------------------------------------------------------
COMPENSATION(1) 10 15 20 25 30 35(3)
- --------------- ---------- ---------- ---------- ---------- ---------- ----------
20$0,000..... $ 33,333 $ 50,000 $ 66,667 $ 83,333 $100,000 $100,000
400,000..... 66,667 100,000 133,333 166,667 200,000 200,000
800,000..... 133,333 200,000 266,667 333,333 400,000 400,000
1,200,000... 200,000 300,000 400,000 500,000 600,000 600,000
1,600,000... 266,666 400,000 533,333 666,667 800,000 800,000
1,800,000... 400,000 450,000 600,000 750,000 900,000 900,000
- ---------------
(1) Covered compensation under the Pension Plan and the Supplemental Plan
includes total salaries and bonuses (as set forth in the Summary
Compensation Table) for the five highest consecutive years during the ten
years preceding retirement ("Average Compensation").
(2) Estimated retirement benefit amounts shown are prior to reduction by an
Internal Revenue Service designated amount keyed to a participant's latest
three-year average Social Security entitlement. Amounts shown are computed
on the single straight-life annuity option. Early retirement, which is
permitted up to 10 years prior to the normal retirement date, and 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 during 1999, credited years of service cannot exceed 30.
Effective January 1, 2000, the Company amended the Pension Plan to provide
for a lump sum benefit determined primarily on the basis of Average
Compensation and actual years of service (including years of service in
excess of 30 years). The lump-sum benefit is reduced if payment is made
before age 55. Until 2007, employees will receive the higher of the benefits
provided by such amendment and as described in the above table.
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The following table sets forth, as to the six named individuals, their
years of credited service under the Pension Plan and the Supplemental Plan:
CREDITED YEARS
OF SERVICE
--------------
Alan G. Hassenfeld.......................................... 30(a)
Herbert M. Baum............................................. 1
Alfred J. Verrecchia........................................ 30(a)
Harold P. Gordon............................................ 5
John T. O'Neill............................................. 13
E. David Wilson............................................. 19
- ---------------
(a) Messrs. Hassenfeld's and Verrecchia's actual years of service are 32 and 35
years, respectively.
CHANGE OF CONTROL, EMPLOYMENT, SEVERANCE AND EARLY RETIREMENT AGREEMENTS
The agreements summarized below (or the form thereof) have been filed with
the Securities and Exchange Commission as exhibits to the Company's periodic
filings and such summaries do not purport to be complete and are qualified in
their entirety by reference to such agreements.
Change of Control Agreements. Eleven senior executives, including five of
the six above-named individuals (other than Mr. O'Neill), 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 executive's
employment with the Company is involuntarily terminated other than for "Cause,"
the executive is entitled to the executive's (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.
The executive would also be entitled to an amount equal to the shortfall
between the actuarial benefit payable to the executive under the Company's
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 executive's 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 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 executive's 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 executive's 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 Company's
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 and the Employment Agreements with Messrs. Baum and
Gordon described below) as demonstrably willful or deliberate violations of the
executive's responsibilities which are committed in bad faith or without
reasonable belief that such violations are in the best interests of the
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Company, which are unremedied after notice, or conviction of the executive of a
felony involving moral turpitude. The Change of Control Agreements were amended
as of March 10, 2000 to provide that the executive's target bonus be taken into
account in computing benefits, to change the definition of a "Change of Control"
to be "consummation" of a reorganization, merger, consolidation or sale of
substantially all of the assets of the Company rather than "shareholder
approval" thereof and to make other conforming and clarifying changes in the
Change of Control Agreements, the forms of which were originally approved in
1989.
Employment Agreements. Mr. Gordon (the "Employee") has an additional
employment agreement, dated as of January 1, 1996 (the "Agreement"). The
Employee is eligible to participate in the Company's management incentive bonus
arrangements as well as other benefit plans and programs available to senior
executives and employees generally. The Company agrees to use its best efforts
to cause Employee to be nominated for re-election as a director upon expiration
of his current or any future term and to recommend such re-election. The
Agreement also amended the Employee's Change of Control Agreement to make
certain clarifying and conforming changes.
If the Employee's employment terminates for any reason, he will be entitled
to a life annuity payment from the Company equal to 3.33% of his "Final Average
Pay" multiplied by the number of full years employed, payable at age 65, less
any amounts payable under the Company's Pension Plan, Supplemental Plan or U.S.
Social Security. In addition, the Company will maintain a key executive life
insurance policy in an amount sufficient to pay a life annuity benefit
commencing at age 65 (or termination of employment, if later) of $225,000 per
year. If the Employee dies before the commencement of the life insurance annuity
payments, his beneficiary would receive a lump sum death benefit of $1,500,000
and none of the other life insurance annuity payments would be payable. If he
dies after the life insurance annuity payments begin but before the receipt of
240 months of payments, the balance of said 240 months of payments will be made
to his beneficiary. If the insurance policy value is insufficient to make the
foregoing payments, the Company will make these payments from its general
assets.
The Employee is entitled to relocation benefits under existing policies
except that such benefits are provided for both of Employee's Canadian
residences. Further, if Employee is terminated (other than for "Cause") within
the first seven years of employment, the Company will provide relocation
assistance for Employee's primary residence in the United States including a
guarantee of the original purchase price thereof plus the fair market value of
any capital improvements. In addition, the Employee shall receive such
additional relocation benefits as may be agreed between the chief executive
officer and the Employee. The Employee may terminate his employment and collect
benefits under the Agreement within one year after any diminution of his
responsibilities, removal from or failure to be re-elected to the Board,
relocation or any breach by the Company of any of its obligations described
above or any other material breach of the Agreement by the Company. "Final
Average Pay" is defined in the Agreement as one-fifth of total salaries and
bonuses received by the Employee in the five highest consecutive years of
employment.
The Company and Herbert M. Baum (the "Executive") are parties to an
Employment Agreement, dated as of January 5, 1999 (the "Employment Agreement")
as well as a Change of Control Agreement. Pursuant to the Employment Agreement,
the Executive has been elected President and Chief Operating Officer of the
Company and a member of the Board. The Employment Agreement has a three year
term, subject to extension by mutual agreement of the Company and the Executive
(the "employment term"). The Executive's 1999 base salary is $750,000 subject to
increases approved by the Committee.
The Executive is eligible to participate in the Company's management
incentive bonus arrangements as well as other benefit plans and programs
available to senior executives and employees generally. The Company agrees to
use its best efforts to cause Employee to be nominated for re-election as a
director upon expiration of his term and to recommend such re-election during
his employment term. If the Executive's employment terminates for any reason, he
will be entitled to a life annuity payment from the Company equal to 3.3% of his
average annual cash compensation multiplied by the number of full years
employed, payable at age 65, less any amounts payable under the Company's
Pension and Supplemental Plans, except that the maximum annual compensation
taken into account for purposes of the calculation shall not exceed $909,091. In
the
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event of a Change of Control as defined above, the Company will make these
payments from a fully funded corporate rabbi trust.
If the Executive's employment is terminated without "Cause", by the
Executive for "good reason," as defined below, or by mutual agreement, the
Executive would receive his base salary as severance pay for the lesser of
eighteen months and the remainder of his employment term. If the Executive
terminates his employment without "good reason", he shall be entitled to receive
his base salary as severance pay for the lesser of twelve months and the
remainder of his employment period. In the event of a Change of Control (as
defined above), the Executive would be entitled to receive the greater of the
severance benefits set forth above and the amounts payable under the Change of
Control Agreement.
Unless the Executive's employment is terminated for "Cause", Executive will
have three years from the date his employment terminates to exercise any options
granted to the Executive. If Executive is terminated prior to expiration of his
employment term, his options will continue to vest during the period that
severance pay is paid. If Executive's employment terminates at or after January
5, 2002 (the "Retirement Date"), any unvested options may become exercisable
upon the execution and delivery by the Executive of a covenant not to compete
until the later of (a) the first anniversary of the Retirement Date and (b) the
period that any of Executive's options are outstanding. See "Option Grants in
Last Fiscal Year" above for the options to purchase Common Stock granted to the
Executive during 1999.
The Executive is entitled to relocation benefits under existing policies
except that the Company will provide relocation assistance for Executive's Rhode
Island residence including a guarantee of the original purchase price thereof
plus the fair market value of any capital improvements. In addition, the
Executive shall receive such additional relocation benefits as may be agreed
between the chief executive officer and the Executive. The Executive may
terminate his employment and collect benefits under the Employment Agreement
within one year after any diminution of his responsibilities, removal from or
failure to be re-elected to the Board, failure of any successor to the Company
to assume and agree to perform the Employment Agreement, relocation or any
breach by the Company of any of its obligations described above or any other
material breach of the Agreement by the Company (collectively, "good reason").
The Company agreed to reimburse the Executive for reasonable legal and
consulting fees incurred in connection with the negotiation, acceptance and
execution of the Employment Agreement.
Severance Agreement. On March 19, 1999, Adam Klein resigned as an
executive officer of the Company. On March 23, 1999, the Company and Mr. Klein
entered into a letter agreement, pursuant to which Mr. Klein terminated his
employment with the Company effective April 1, 1999 (the "Termination Date").
Pursuant to the letter agreement, the Company paid Mr. Klein $63,333 during the
first week of April 1999 and $9,167 per week through March 31, 2000 (the
"Severance Period"), $15,000 for his legal expenses in documenting the letter
agreement and related documents, and in the first quarter of 2000, $170,000 as a
1999 management bonus. Pursuant to the letter agreement, the Company permitted
all options that would vest between the Termination Date and April 23, 2000 to
be deemed vested on the Termination Date and exercisable during the Severance
Period. During the Severance Period, Mr. Klein's Company-provided life, medical
and dental insurance continued and he had continued use of his leased
automobile, cell phone, personal computer and fax machine except that he was
responsible for all operating and maintenance costs (other than automobile
insurance and lease payments). The Company and Mr. Klein exchanged certain
releases, subject to any rights to indemnification, contribution or protection
under the Company's directors' and officers' liability insurance.
Early Retirement Agreement. John T. O'Neill served as an executive officer
in the capacity of Executive Vice President and Chief Financial Officer until
August 27, 1999. Mr. O'Neill terminated his employment with the Company by
taking early retirement on December 31, 1999. The Company entered into an early
retirement agreement with Mr. O'Neill which provided for early retirement
payments of $135,000 on February 28, 2000, three quarterly payments of $200,000
each at the end of the first three calendar quarters of 2000 and a final payment
of $225,000 in January 2001. In addition, Mr. O'Neill will receive early
retirement pay at a base rate of $20,281 bi-weekly for 43 pay periods beginning
January 21, 2000 and ending August 31, 2001 (the "Early Retirement Period").
Forty percent of these bi-weekly amounts has been deferred into a
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separate deferred compensation program. The Company agreed to pay Mr. O'Neill
$290,015, which represented his target 1999 management bonus, and his reasonable
legal expenses (not to exceed $15,000), accelerate the vesting of all unvested
options to December 31, 1999, extend the exercise period for all of Mr.
O'Neill's premium priced stock options to 36 months after the end of the Early
Retirement Period, extend the exercise period for 22,500 regular stock options
granted on December 21, 1993 and all regular stock options granted in and after
1997 for 12 months after the end of the Early Retirement Period and cancel his
remaining regular stock options. Mr. O'Neill's Company-provided computer, as
well as life, medical and dental insurance will continue to be available during
the Early Retirement Period. His leased automobile will be available until
January 2002, the end of the current lease, and Mr. O'Neill will continue to be
reimbursed for financial planning and tax preparation services for tax years
1999 and 2000. The Company agreed to pay, outside the Pension and Supplemental
Plans, the additional benefit provided by multiplying Mr. O'Neill's actual years
of service by 1.30435. The Company and Mr. O'Neill exchanged certain releases,
subject to any rights to indemnification under applicable by-laws and Company
policies. Mr. O'Neill agreed not to compete with or interfere with any
relationship of the Company during the Early Retirement Period and for two years
thereafter.
PROPOSAL TO APPROVE AN AMENDMENT
TO THE STOCK INCENTIVE PERFORMANCE PLAN
(PROPOSAL NO. 2)
The Compensation and Stock Option Committee (the "Committee") of the Board
unanimously approved the adoption of an amendment (the "Amendment") to the Stock
Incentive Performance Plan of the Company (the "Plan") in February 2000 and the
Board directed that the Amendment be submitted to the Shareholders at the 2000
Annual Meeting for their approval, which the Board unanimously recommends.
PRINCIPAL PURPOSES OF THE AMENDMENT
The principal purposes of the amendment are to introduce additional
business criteria that can be utilized by the Committee in setting performance
goals so as to preserve the deductibility to the Company of remuneration paid to
certain key executives under Section 162(m) of the Code, to extend the date
under which awards can be granted under the Plan from December 31, 2000 to
December 31, 2005, to clarify, for purposes of Section 162(m) of the Code, that
the existing limitation on the aggregate number of shares that may be subject to
awards granted to any individual under the Plan will remain at 2,250,000 for the
period May 10, 1995 through December 31, 2005, and to clarify that the Committee
does not have the authority, without shareholder approval, to reprice options
issued pursuant to the Plan.
The Amendment was approved by the Committee in February 2000, subject to
shareholder approval, and in March 2000, the Committee established a long term
incentive program (the "LTIP") under the Plan, which replaces the previous long
term incentive program in the form of premium priced options. Pursuant to the
LTIP, the Committee set performance goals, using some of the additional business
criteria introduced by the Amendment. Depending on the level of achievement of
such goals measured at the end of the three-year performance period, stock
awards may be made at the end of such three year period in the form of
restricted stock that would vest over two years. Inasmuch as the performance
goals are dependent on shareholder approval of the Amendment, the awards
themselves are subject to shareholder approval. See "New Plan Benefits" below.
The Amendment also provides that where the performance period for earning a cash
or stock award is not completed at the time that a Change in Control, as defined
in the Plan, occurs, the greater of the targeted or actual performance to date
shall be the basis for the award as opposed to the maximum value, as currently
set forth in the Plan with respect to cash awards, and such award shall be
prorated based on the number of fiscal years then completed in the three-year
performance period.
The Amendment does not seek to increase the number of shares authorized to
be issued pursuant to the Plan or to increase the maximum of 1,125,000 shares
under the Plan that may be the subject of stock awards such as restricted stock.
As of March 30, 2000, there were 2,567,213 shares available for grant under the
Plan, not including the shares to be reserved pursuant to the LTIP award. See
"New Plan Benefits" below.
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The Company believes that if the Amendment is approved by the Shareholders,
the LTIP awards will qualify as performance-based compensation under Section
162(m) the Code. Since the Plan permits the Committee to set the performance
goal and was approved by shareholders in 1995, Section 162(m) of the Code
requires that such plans be approved by shareholders every five years.
SUMMARY DESCRIPTION OF THE PLAN AND THE PROPOSED AMENDMENT
The following summary is qualified in its entirety by reference to the full
text of the Plan and the First Amendment thereto (collectively, the "Plan")
which have been filed with the Securities and Exchange Commission as exhibits to
the Company's periodic filings and the full text of the Amendment set forth as
Appendix A hereto and such summary does not purport to be complete and is
qualified in its entirety by reference to such documents.
The Plan permits granting awards for: (1) stock options, including
incentive stock options ("ISOs") meeting the requirements of Section 422 of the
Code; (2) stock appreciation rights ("SARs"); (3) stock awards and (4) cash
awards that would constitute a "derivative security" for purposes of Rule 16b-3
("Rule 16b-3"), as promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), if not awarded pursuant to a plan satisfying the
provisions of Rule 16b-3. The Plan is administered by the Committee which is
comprised of at least two of the Company's directors, each of whom is a "Non-
Employee Director" as such term is defined in Rule 16b-3 and an "outside
director" as defined in Section 162(m) of the Code and the rules and regulations
(including any then current proposed and/or transitional rules and regulations)
promulgated thereunder.
Performance Goals. The Plan was designed to enable the Company to receive
federal income tax deductions for awards made under the Plan to its Chief
Executive Officer and the four other most highly compensated executive officers
(collectively, the "Covered Employees"), even if any Covered Employee's
compensation exceeds $1,000,000 in any year. Under Section 162(m) of the Code,
corporations whose stock is publicly traded generally are not entitled to deduct
remuneration paid to Covered Employees to the extent that remuneration for any
year to any Covered Employee exceeds $1 million, unless the remuneration is paid
under qualifying performance-based compensation plans. The Plan currently has
one performance goal, with respect to the grant of stock or cash awards to
Covered Employees, "Net Earnings" for the period of time designated by the
Committee at the time of grant of the award. The Amendment would add the
following additional business criteria as performance goals that may be utilized
by the Committee, separately or in combination, in making such awards pursuant
to the Plan: Net Earnings per Share; Stock Price; Net Revenues; Gross Profit;
Operating Profit; Earnings Before: (i) Income Taxes, (ii) Interest and Taxes,
(iii) Interest, Taxes and Depreciation; and/or (iv) Interest, Taxes,
Depreciation and Amortization; Cost Control; Cash Net Earnings; Returns on:
Assets, Capital, Investment, Shareholders' Equity, and/or Net Revenues; Net Cash
Provided by Operating Activities; Working Capital; Economic Value Added; Total
Shareholder Return on Common Stock relative to the S&P 500, the Russell 1000
Consumer Discretionary Economic Sector or such other appropriate index selected
by the Committee. These business criteria may be measured on a consolidated or
segment, divisional, sector or other business unit (hereinafter collectively
"business unit") basis, all as selected by the Committee in each individual
case. Performance goals utilizing the foregoing business criteria may also be
based upon the achievement of specified levels of consolidated or other business
unit performance under one or more of the measures described above relative to
internal targets, the past performance of the Company or relevant business unit,
or the past, present or future performance of other corporations or their
relevant business units. Performance goals will be determined in accordance with
generally accepted accounting principles applied on a consistent basis exclusive
of (a) changes in accounting principles, (b) extraordinary items, (c) material
restructurings, (d) material nonrecurring items and (e) material non-budgeted
items authorized by the Committee. The Committee has utilized three of these new
business criteria as performance goals, i.e. Net Earnings Per Share, Net
Revenues and Stock Price, in making the initial awards and setting performance
goals under the LTIP.
The percentage vesting of any stock award and/or cash award, and any
related payments for tax liability in connection therewith, shall in each case
be based on the percentage of the performance goal achieved, as determined and
certified by the Committee, although the Committee has the discretion to reduce,
or refuse to
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make (but with respect to Covered Employees, not to increase), any vesting of
stock awards or payments of cash awards payable as a result of the achievement
of a designated percentage of a performance goal.
To satisfy the requirements that apply to performance-based compensation by
Section 162(m) of the Code, these goals must be approved by the Shareholders,
and approval of the Amendment will also constitute approval of the foregoing
goals.
Eligibility. Employees of the Company and of any other entity that is
directly or indirectly controlled by the Company are eligible to receive awards
under the Plan. The term "Employee" as used in the Plan has the same definition
as that used in General Instruction A to Form S-8 promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), except that no
director who is not employed by the Company shall be eligible to receive any
awards under the Plan. General Instruction A currently provides, in pertinent
part, that the term "Employee" means "any employee, director, general partner,
trustee (where the registrant is a business trust), officer or consultant or
advisor". The consultant or advisor must be a natural person who provides bona
fide services to the Company and such services are not in connection with the
offer or sale of securities in a capital raising transaction and do not directly
or indirectly promote or maintain a market for the Company's securities. There
are currently approximately 315 employees holding options granted under the
Plan. During the past several years, the Committee has generally made awards
under the Plan to persons whose remuneration may be impacted by Section 162(m)
of the Code. No individual may be granted more than 2,250,000 shares during the
life of the Plan.
NUMBER OF OPTIONS GRANTED UNDER THE PLAN
The following table shows the number of options granted under the Plan to
the named individuals, all current executive officers as a group and all
employees, excluding executive officers, from May 10, 1995 to March 30, 2000.
Except as set forth in the following table, no directors, nominees for election
as a director, associates of any directors, executive officers or nominees have
received any options under the Plan. Except as set forth in the following table,
no person has received more than five percent of such options.
NUMBER OF OPTIONS
NAME GRANTED UNDER THE PLAN
---- ----------------------
Alan G. Hassenfeld.......................................... 670,000
Chairman of the Board and Chief Executive Officer
Herbert M. Baum............................................. 552,500
President and Chief Operating Officer
Alfred J. Verrecchia........................................ 477,000
Executive Vice-President, Global Operations and Chief
Financial Officer
Harold P. Gordon............................................ 432,500
Vice Chairman
E. David Wilson............................................. 232,500
Sector Head and General Manager, U.S. Games
John T. O'Neill............................................. 385,000
Former Executive Vice-President and Chief Financial Officer
All current executive officers as a group................... 3,323,155
All employees, excluding current executive officers, as a 4,957,950
group.....................................................
TYPES OF AWARDS
The Plan permits granting awards for: (1) stock options, including ISOs;
(2) SARs; (3) stock awards and (4) cash awards that would constitute a
"derivative security" for purposes of Rule 16b-3, if not awarded pursuant to a
plan satisfying the requirements of Rule 16b-3. The Committee, which administers
the Plan, has the authority to establish rules for the administration of the
Plan; to select the Employees to whom awards are granted; to determine the types
of awards to be granted and the number of shares covered by such awards; and to
set the terms and conditions of such awards (including without limitation the
power to accelerate any vesting restrictions, waive, in whole or in part, any
forfeiture provisions or extend the term of any award and to
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make any shares subject to a right of first refusal in favor of the Company).
The Committee may also determine whether the payment of any proceeds of any
award shall or may be deferred and may authorize payments representing dividends
or interest or their equivalents in connection with any deferred award. The
Committee may provide that awards denominated in stock earn dividends or
dividend equivalents. If the Committee deems it advisable, the Company may
provide financial assistance to persons granted awards under the Plan in order
to accomplish the purposes of the Plan. Determinations and interpretations of
the Committee will be binding on all parties. The Committee may delegate to any
one or more directors of the Company who are also officers of the Company the
authority to grant awards to individuals who are not subject to Section 16 of
the Exchange Act.
The Amendment clarifies that the Committee's discretion under the Plan does
not include the repricing of options granted pursuant to the Plan, without
shareholder approval.
Awards may be granted for no cash consideration or for such minimal cash
consideration as may be required by applicable law. Awards may provide that upon
their exercise or vesting, the holder will receive cash, Common Stock or any
combination thereof, as the Committee shall determine. Any shares of stock
deliverable under the Plan may consist in whole or in part of authorized and
unissued shares or treasury shares. Subject to certain limited exceptions and
the authority of the Committee to determine otherwise, consistent if applicable
with Rule 16b-3 and Section 422 of the Code, awards under the Plan may not be
transferred. The Plan originally provided that immediately upon certain events
constituting a Change in Control all awards become 100% vested and payable in
cash as soon as practicable after the Change in Control. The First Amendment,
adopted by the Committee in 1999, gave the Committee the discretion to take
alternative action with respect to outstanding awards in connection with certain
Change of Control transactions (including, but not limited to conversion of such
awards to an award of the corporation resulting from such transaction or the
settlement of such awards in shares of the stock of the Company or such
resulting corporation). The Plan originally provided that in the case of cash
awards where the performance period has not been completed upon the occurrence
of a Change of Control, the maximum value of such awards would be paid. The
Amendment provides that upon a Change of Control occurring before the completion
of a performance period applicable to a cash or stock award, the higher of the
actual performance and targeted performance will be applicable and shall be
prorated for the number of fiscal years then completed during the performance
period.
Stock Options. The Committee establishes the exercise price per share for
options, the term of options, the time at which they may be exercised and such
other terms as the Committee deems appropriate, except that the exercise price
of each option shall be not less than the fair market value of the Common Stock
on the date of grant. Unless the Committee determines otherwise, payment of the
purchase price in full in cash is required upon option exercise. If the exercise
price of an option granted under the Plan is paid in Common Stock, the Committee
may grant the exercising optionee an option covering a number of shares equal to
the number of shares delivered upon such exercise.
SARS. The holder of an SAR will be entitled to receive the excess of the
fair market value, calculated as of the exercise date, of a specified number of
shares over the grant price of the SAR. SARs need not be granted in tandem with
stock options.
Stock Awards. A stock award may provide the recipient with all of the
rights of a shareholder of the Company, including the right to vote the shares
and to receive any dividends. Stock and cash awards generally will be subject to
such terms and conditions as may be established by the Committee, including
continuous service with the Company, achievement of specific business
objectives, and other measurements of individual, business unit or Company
performance. See "Performance Goals" above.
NO CHANGES IN MAXIMUM NUMBER OF SHARES, LIMITATION ON GRANTS TO ANY INDIVIDUAL
OR LIMITATION ON STOCK AWARDS
There were 9,675,000 shares of Common Stock initially available for
issuance under the Plan (after adjustment to reflect the two three-for-two stock
splits paid in the form of 50% stock dividends in 1997 and 1999). As of March
30, 2000, 2,567,213 shares are available for grant, not including the shares to
be reserved pursuant to the LTIP awards, and 6,010,459 shares were reserved with
respect to outstanding options granted
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under the Plan. The Plan provides that the number of shares that may be the
subject of awards granted to any one individual may not exceed 2,250,000 shares
and that the number of shares that may be the subject of stock awards may not
exceed 1,125,000 shares (in each case, after adjustment for the stock splits).
The Amendment would not change the maximum number of shares available under the
Plan or any of the other limitations described above. Accordingly, the same
limitations would apply from the period beginning on May 10, 1995, the date of
shareholder approval of the Plan and ending on December 31, 2005, the extended
term of the Plan provided for in the Amendment. Setting a limit on the number of
shares that may be the subject of awards to any individual under the Plan is a
requirement of Section 162(m) of the Code and shareholder approval of the
Amendment will constitute the approval of the foregoing limitation for the
extended term of the Plan.
If any shares subject to an option or award under the Plan are forfeited or
if any such option or award terminates (without the participant having received
any economic benefits of ownership thereof), the shares previously covered by
such option or award will be available for future grant or award under the Plan.
A total of 1,278,953 shares have been cancelled under the Plan and made
available for grant under the Plan pursuant to this provision. If another
corporation is acquired by the Company or an affiliate in the future, any grants
or awards made and any of the Company's shares delivered upon the assumption of
or in substitution for outstanding grants made by the acquired corporation may
be deemed to be granted or awarded under the Plan but will not decrease the
number of shares available for grant or award under the Plan.
Adjustments. In the event of any stock dividend, stock split, combination
or exchange of shares, merger, consolidation, spin-off or other distribution
(other than normal cash dividends) of Company assets to shareholders, or any
other change affecting shares, such adjustments, if any, as the Committee in its
discretion may deem appropriate to reflect such change shall be made with
respect to (i) the aggregate number of shares that may be issued under the Plan;
(ii) the number of shares subject to awards under the Plan; (iii) the price per
share for any outstanding stock options, SARs and other awards under the Plan;
(iv) the limitations on awards that can be granted to any individual under the
Plan and (v) the limitation on the number of stock awards.
Miscellaneous. Nothing contained in the Plan affects the awards made or to
be made under the Company's other or additional stock and compensation plans or
arrangements.
The composite closing price as of 4:00 p.m. of the Common Stock on April 6,
2000, as reported in the Wall Street Journal for New York Stock Exchange
Composite Transactions, was $17 3/8.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal United States federal income
tax consequences generally applicable to awards under the Plan. The grant of a
stock option or SAR will generally create no immediate tax consequences for the
recipient, or the Company or its affiliate employing such individual
("employer"). The holder of an ISO generally will have no taxable income upon
exercising the ISO (except that the alternative minimum tax may apply), and the
employer will receive no tax deduction when an ISO is exercised. Upon exercising
a stock option other than ISO, the optionee must recognize ordinary income equal
to the excess of the fair market value of the shares acquired on the date of
exercise over the option exercise price, and the employer will then be entitled
to a tax deduction for the same amount. Upon exercising an SAR, the amount of
any cash received and the fair market value on the exercise date of any shares
or other property received are taxable to the recipient as ordinary income and
that amount is also deductible by the employer.
The tax consequence to an optionee of a disposition of shares acquired
through the exercise of an SAR or a stock option will depend on how long the
shares have been held and upon whether such shares were acquired by exercising
an ISO or by exercising an SAR or stock option other than an ISO. Generally,
there will be no tax consequence to the employer in connection with a
disposition of shares acquired under an SAR or stock option except that the
employer may be entitled to a tax deduction in the case of disposition of shares
acquired under an ISO before the applicable ISO holding periods have been
satisfied.
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With respect to other awards granted under the Plan that are settled either
in cash or in shares or other property that is either transferable or not
subject to substantial risk of forfeiture, the holder of such an award must
recognize ordinary income equal to the excess of (a) the cash or the fair market
value of the shares or other property received (determined as of the first time
the shares or other property received become transferable or not subject to
substantial risk of forfeiture, whichever occurs earlier, or, if the holder
elects, within 30 days after the initial transfer of shares or other property
which is both nontransferable and subject to a substantial risk of forfeiture)
over (b) the amount (if any) paid for such shares or other property by the
participant, and the employer will then be entitled to a deduction for the same
amount.
The Plan is intended to comply with the provisions of Section 162(m) of the
Code so as to permit the Company to claim an income tax deduction for total
remuneration in excess of $1,000,00 in any one year to the Chief Executive
Officer or the other four highest compensated executive officers.
Estimate of Benefits. On March 10, 2000, the Committee set targets and
performance goals under a long term incentive program pursuant to the Plan for
certain senior executives, including all of the Covered Employees. Such
performance goals are based on the Company's revenue growth and growth in
earnings per share, as modified by the price of the Common Stock at the end of
2002, for the years 2000-2002. If the performance goals are met, the targeted
awards will be made in the form of restricted stock to be granted in 2003,
vesting in two equal installments in 2003 and 2004. The following table sets
forth the minimum, targeted and maximum share awards under the March 10 grant:
NEW PLAN BENEFITS
STOCK INCENTIVE PERFORMANCE PLAN
MINIMUM TARGETED MAXIMUM
NAME AND POSITION SHARE AWARD SHARE AWARD SHARE AWARD
- ----------------- ----------- ----------- -----------
Alan G. Hassenfeld..................................... 0 35,000 70,000
Chairman of the Board and Chief Executive Officer
Herbert M. Baum........................................ 0 30,000 60,000
President and Chief Operating Officer
Alfred J. Verrecchia................................... 0 25,000 50,000
Executive Vice-President, Global Operations and Chief
Financial Officer
Harold P. Gordon....................................... 0 25,000 50,000
Vice Chairman
E. David Wilson........................................ 0 20,000 40,000
Sector Head and General Manager, U.S. Games
Executive Group (including the Covered Employees named
above)............................................... 0 215,000 430,000
Non-Employee Director Group............................ 0 0 0
Non-Executive Officer Employee Group................... 0 40,000(a) 80,000(a)
- ---------------
(a) Does not include awards made to an executive officer and several
non-executive officers under the Company's Non Qualified Stock Plan (the
"Stock Plan") totaling 115,000 shares at target and a maximum of 230,000
shares. There is no minimum pay-out under said grant.
Amendment and Termination of the Plan. The Committee may further amend,
terminate or suspend the Plan in whole or in part at any time except that no
amendment for which shareholder approval is required either by the Code in order
to assure the deductibility by the Company of payments payable under the Plan or
by other applicable law shall be effective without such shareholder approval
having been obtained.
Vote required. The affirmative vote of a majority of the shares of Common
Stock present or represented by proxy at the annual meeting is required for
approval of the Amendment. Accordingly, both an abstention and a broker non-vote
will in effect constitute a vote against the Amendment.
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THE BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
PROPOSAL TO APPROVE THE PROPOSED AMENDMENT TO THE STOCK INCENTIVE PERFORMANCE
PLAN. (PROPOSAL NO. 2)
PROPOSED AMENDMENT OF RESTATED
ARTICLES OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK
(PROPOSAL NO. 3)
Of the currently authorized 300,000,000 shares of Common Stock, at April 6,
2000, an aggregate of 220,443,975 shares were issued and outstanding or reserved
for issuance, consisting of 172,363,696 shares which were issued and
outstanding, 30,817,779 shares which were reserved in the aggregate for issuance
pursuant to the Plan, the Stock Plan and the Director Plan (collectively the
"Plans") and 17,262,500 shares which were reserved for issuance upon exercise of
outstanding warrants.
The Board believes it is desirable to increase the total number of shares
of Common Stock that the Company is authorized to issue to 600,000,000 in order
to have an adequate number of authorized shares available for issuance from time
to time without further shareholder approval (except as described below) in
connection with future distributions to shareholders (including stock splits),
acquisitions, financing, awards under the Plans or other employee benefits and
other corporate opportunities that may present themselves in the future. Having
such additional authorized shares available for issuance in the future would
give the Company greater flexibility and allow shares of Common Stock to be
issued without the expense and delay of shareholder action at a special meeting
of shareholders unless such action is required by applicable law or the rules of
the New York Stock Exchange or any stock exchange on which the Common Stock may
be listed.
In this connection, it should be noted that since 1993, when the authorized
Common Stock was last increased from 150,000,000 to 300,000,000, two
three-for-two stock splits paid in the form of 50% stock dividends were declared
by the Board in 1997 and 1999 without a special meeting of shareholders. Prior
to 1993, the Board declared four three-for-two stock splits, a five-for-two
stock split and a two-for-one stock split, all in the form of stock dividends,
in each case without a special meeting of shareholders.
The authorization of additional shares of Common Stock will not, by itself,
have any effect on the rights of holders of outstanding shares. Depending on the
circumstances, the issuance of additional shares of Common Stock could affect
the existing holders of shares by diluting the voting power of the outstanding
shares. The Company's shareholders do not have pre-emptive rights with respect
to the future issuance of securities by the Company. The Company has no current
plans, understandings, agreements or arrangements concerning the issuance of
additional shares of Common Stock not previously reserved for issuance as set
forth above.
Under Rhode Island law and the Company's Articles and By-laws, adoption of
the proposed amendment requires the affirmative vote of a majority of all shares
entitled to vote at the annual meeting. Accordingly, both an abstention and a
broker non-vote will in effect constitute a vote against the proposed amendment.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSED
AMENDMENT TO THE COMPANY'S RESTATED ARTICLES OF INCORPORATION. (PROPOSAL NO. 3)
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information, as of March 30, 2000 (except as
noted), with respect to the ownership of the Common Stock (the only class of
outstanding voting securities of the Company) by certain persons known by the
Company to be the beneficial owners of more than 5% of such stock:
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP(1) CLASS
- ---------------- ----------------- ----------
Alan G. Hassenfeld.......................................... 18,505,882(2) 10.7
1027 Newport Avenue
Pawtucket, RI 02862
George W. Lucas, Jr......................................... 15,750,000(3) 8.4
c/o Lucasfilm Ltd.
5858 Lucas Valley Road
Nicasio, CA 94946
Capital Group International, Inc............................ 18,525,336(4) 10.7
11100 Santa Monica Blvd.
Los Angeles, CA 90025
Capital Research and Management Company..................... 11,120,000(5) 6.5
333 South Hope Street
Los Angeles, CA 90071
- ---------------
(1) Based upon information furnished by each shareholder or contained in filings
made with the Securities and Exchange Commission.
(2) Includes 8,890,921 shares held as sole trustee for the benefit of his
mother, 829,347 shares held as sole trustee of a trust for Mr. Hassenfeld's
benefit and currently exercisable options or options exercisable within 60
days hereof to purchase 1,364,000 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 1,081,850 shares owned by The Hassenfeld
Foundation, of which Mr. Hassenfeld is an officer and director, as to which
shares Mr. Hassenfeld disclaims beneficial ownership, 585,470 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.
(3) Represents 6,300,000 warrants owned by LucasFilm Ltd. ("Film") and 9,450,000
warrants owned by its wholly-owned subsidiary, Lucas Licensing Ltd.
("Licensing") which became exercisable on the U.S. theatrical release of
"The Phantom Menace" on May 19, 1999. Mr. Lucas, as founder, controlling
person and sole 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. See "Certain Relationships and Related
Transactions".
(4) Capital Group International, Inc. as the parent of Capital Guardian Trust
Company and certain investment management affiliates (collectively the
"Capital Group") have sole dispositive power over 18,525,330 shares of
Common Stock and sole voting power over 16,176,080 of such shares which are
owned by accounts under discretionary investment management by one or more
members of the Capital Group. Share ownership information is as of December
31, 1999.
(5) Capital Research and Management Company, an investment advisor, has sole
dispositive authority over 11,120,000 shares as a result of acting as an
investment advisor to various investment companies. Share ownership
information is as of December 31, 1999.
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SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information, as of March 30, 2000, with
respect to the ownership of the Common Stock (the only class of outstanding
equity securities of the Company) by each director of the Company, 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.
PERCENT
COMMON OF
NAME OF DIRECTOR OR EXECUTIVE OFFICER(1) STOCK CLASS
- ---------------------------------------- ---------- -------
Alan R. Batkin(2)........................................... 27,170 *
Herbert M. Baum(3).......................................... 248,833 *
E. Gordon Gee(4)............................................ 2,422 *
Harold P. Gordon(5)......................................... 561,069 *
Alex Grass(6)............................................... 59,063 *
Alan G. Hassenfeld(7)....................................... 18,505,882 10.7
Sylvia K. Hassenfeld(8)..................................... 1,181,014 *
Marie Josee Kravis(9)....................................... 12,031 *
Norma T. Pace(10)........................................... 21,216 *
E. John Rosenwald, Jr.(11).................................. 228,370 *
Carl Spielvogel(12)......................................... 54,920 *
Preston Robert Tisch(13).................................... 16,598 *
Alfred J. Verrecchia(14).................................... 1,396,627 *
E. David Wilson(15)......................................... 358,208 *
Paul Wolfowitz(16).......................................... 20,574 *
All Directors and Executive Officers as a Group (includes 23
persons)(17).............................................. 23,025,349 13.0
- ---------------
* Less than one percent.
(1) Information in this table is based upon information furnished by each
director and executive officer.
(2) Includes currently exercisable options granted under the Director Plan to
purchase an aggregate of 11,250 shares as well as 14,233 shares deemed to
be held in Mr. Batkin's stock unit account under the Deferred Plan.
(3) Includes currently exercisable options and options exercisable within sixty
days hereof to purchase 210,835 shares and 20,000 deferred restricted stock
units granted under the Company's employee stock option plans.
(4) Represents options exercisable within sixty days hereof granted under the
Director Plan as well as 192 shares deemed to be held in Mr. Gee's account
under the Deferred Plan.
(5) Includes currently exercisable options and options exercisable within sixty
days hereof granted under the Company's stock option plans to purchase an
aggregate of 527,566 shares as well as 3,438 shares deemed to be held in
Mr. Gordon's stock unit account under the Deferred Plan. Excludes
fractional shares held in Mr. Gordon's account under the Company's Dividend
Reinvestment and Cash Stock Purchase Program.
(6) Includes currently exercisable options granted under the Director Plan to
purchase an aggregate of 11,250 shares as well as 13,389 shares deemed to
be held in Mr. Grass' stock unit account under the Deferred Plan. Does not
include 16,875 shares owned by the spouse of Mr. Grass, as to which Mr.
Grass disclaims beneficial ownership.
(7) See note (2) to the immediately preceding table.
(8) Includes currently exercisable options granted under the Director Plan to
purchase an aggregate of 11,250 shares, 1,081,850 shares owned by The
Hassenfeld Foundation, of which Mrs. Hassenfeld is an officer and director,
and as to the shares of which she disclaims beneficial ownership, and 1,973
shares deemed to be held in Mrs. Hassenfeld's stock unit account under the
Deferred Plan. Does not include
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the shares of Common Stock held in trust for Mrs. Hassenfeld's benefit
referred to in note (2) to the immediately preceding table.
(9) Represents currently exercisable options granted under the Director Plan to
purchase 9,000 shares as well as 3,031 shares deemed to be held in Mrs.
Kravis' stock unit account under the Deferred Plan.
(10) Includes currently exercisable options granted under the Director Plan to
purchase an aggregate of 11,250 shares as well as 8,414 shares deemed to be
held in Mrs. Pace's stock unit account under the Deferred Plan.
(11) Includes currently exercisable options granted under the Director Plan to
purchase an aggregate of 11,250 shares as well as 14,620 shares deemed to
be held in Mr. Rosenwald's stock unit account under the Deferred Plan. Does
not include shares held by Bear, Stearns & Co. Inc. in an investment
account. Mr. Rosenwald is Vice Chairman of Bear, Stearns & Co. Inc.
(12) Includes currently exercisable options granted under the Director Plan to
purchase an aggregate of 11,250 shares as well as 5,164 shares deemed to be
held in Mr. Spielvogel's stock unit account under the Deferred Plan.
(13) Includes currently exercisable options granted under the Director Plan to
purchase an aggregate of 11,250 shares as well as 1,973 shares deemed to be
held in Mr. Tisch's stock unit account under the Deferred Plan.
(14) Includes currently exercisable options and options exercisable within sixty
days hereof to purchase an aggregate of 1,059,500 shares as well as 20,000
deferred restricted stock units granted under the Company's employee stock
option plans. Does not include 151,875 shares owned by Mr. Verrecchia's
spouse, as to which Mr. Verrecchia disclaims beneficial ownership.
(15) Includes currently exercisable options and options exercisable within sixty
days hereby to purchase 333,208 shares granted under the Company's employee
stock option plans.
(16) Represents options currently exercisable and exercisable within sixty days
hereof granted under the Director Plan to purchase an aggregate of 11,250
shares as well as 9,324 shares deemed to be held in Mr. Wolfowitz's stock
unit account under the Deferred Plan.
(17) Of these shares, all directors and executive officers as a group have sole
voting and dispositive power with respect to 20,856,646 shares and have
shared voting and/or investment power with respect to 2,168,703 shares.
Includes 4,548,257 shares purchasable by directors and executive officers
upon exercise of currently exercisable options, or options exercisable
within sixty days hereof, and 17,000 shares of restricted stock granted
under the Company's stock option plans; 77,417 shares deemed to be held in
stock unit accounts under the Deferred Plan and the Deferred Compensation
Plan; and 84,000 shares deemed to be held in deferred restricted stock unit
accounts under the Stock Plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Act, as amended, requires the Company's directors
and executive officers, and persons who own more than ten percent of a
registered class of the Company's 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 Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during the last fiscal year ended December 26, 1999, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were complied with.
28
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INDEPENDENT PUBLIC ACCOUNTANTS
The Board, upon recommendation of the Audit Committee of the Board, has
selected KPMG LLP, independent certified public accountants, to audit the
consolidated financial statements of the Company for the fiscal year ending
December 31, 2000. A representative of KPMG LLP is expected to be present at the
Annual Meeting, will have the opportunity to make a statement, if so desired,
and will be available to respond to appropriate questions.
OTHER BUSINESS
Management knows of no other matters that may be presented to the Annual
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.
PROPOSALS BY HOLDERS OF COMMON STOCK
Any proposal which a shareholder of the Company wishes to have considered
for inclusion in the proxy statement and proxy relating to the Company's 2001
Annual Meeting must be received by the Company at its executive offices no later
than December 10, 2000. The address of the Company's executive offices is 1027
Newport Avenue, Pawtucket, Rhode Island 02862.
In accordance with the By-Laws of the Company, which the Company believes
are consistent with the Articles, any new business proposed by any shareholder
to be taken up at the 2001 annual meeting must be stated in writing and filed
with the Secretary of the Company by December 16, 2000. Except for proposals
made pursuant to the preceding paragraph, the Company will retain discretion to
vote proxies with respect to proposals received prior to December 16, 2000,
provided (i) the Company includes in its 2001 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.
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 D.F. King & Co., Inc. to aid in the solicitation of
proxies at an estimated cost of $4,000 plus reimbursement of reasonable
out-of-pocket expenses.
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
Phillip H. Waldoks
Secretary
Dated: April 10, 2000
Pawtucket, Rhode Island
29
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APPENDIX A
SECOND AMENDMENT
TO HASBRO, INC.
STOCK INCENTIVE PERFORMANCE PLAN
WHEREAS, on February 8, 1995, the Compensation and Stock Option Committee
(the "Committee") of the Board of Directors (the "Board") of Hasbro, Inc. (the
"Company") adopted the Stock Incentive Performance Plan, subject to shareholder
approval, which was obtained on May 10, 1995 (the "1995 Plan"); and
WHEREAS, on May 11, 1999, the Committee adopted the First Amendment to the
1995 Plan pursuant to the authority granted to the Committee pursuant to Section
13 thereof (the "1995 Plan" as so amended is referred to hereinafter as the
"Plan); and
WHEREAS, on February 14, 2000 the Committee adopted a Second Amendment to
the Plan, subject to approval by the shareholders of the Company.
NOW THEREFORE, subject to the approval by the shareholders of the Company
of this Second Amendment to the Plan, the Plan is further amended as follows,
effective as of February 14, 2000:
1. The first sentence of Section 2 of the Plan is amended to read in
its entirety as follows:
The Plan shall be effective upon approval thereof by the shareholders
of Hasbro on May 10, 1995 and, subject to shareholder approval of the
Second Amendment to the Plan, shall remain in effect until December 31,
2005 unless sooner terminated by Hasbro's Board of Directors (the "Board"),
subject to Section 13 hereof.
2. Clause (iii) of Section 3 is amended by adding the following words
thereto:
"to the extent not inconsistent with Section 162(m), but nothing
herein or in any other provision of this Plan shall give the Committee,
without shareholder approval, the authority to decrease the exercise
price of an outstanding option granted hereunder, other than pursuant to
Section 6 hereof, or to cancel an option and grant a replacement option
with a lower exercise price, other than pursuant to the last sentence of
Section 5 hereof."
3. The first paragraph of Section 6 is deleted.
4. The last paragraph of Section 7 is deleted and the following two
paragraphs substituted therefor:
"In the case of the grant of stock awards or cash awards to "covered
employees" under Section 162(m), the Committee may designate, within the
time period required by Section 162(m), a performance goal, which shall be
based on any one or a combination of the following business criteria for
the period of time designated by the Committee at the time of grant of the
award: Net Earnings; Net Earnings per Share; Stock Price; Net Revenues;
Gross Profit; Operating Profit; Earnings Before: (i) Income Taxes, (ii)
Interest and Taxes, (iii) Interest, Taxes and Depreciation, and/or (iv)
Interest, Taxes, Depreciation and Amortization; Cost Control; Cash Net
Earnings; Returns on: Assets, Capital Investment; Shareholders' Equity,
and/or Net Revenues; Net Cash Provided by Operating Activities; Working
Capital; Economic Value Added; Total Shareholder Return on Common Stock
relative to the S&P 500, the Russell 1000 Consumer Discretionary Economic
Sector or such other appropriate index selected by the Committee. These
business criteria may be measured on a consolidated or segment, divisional,
sector or other business unit (hereinafter collectively "business unit")
basis, all as selected by the Committee in each individual case.
Performance goals utilizing the foregoing business criteria may also be
based upon the achievement of specified levels of consolidated or other
business unit performance under one or more of the measures described above
relative to internal targets, the past performance of the Company or
relevant business unit, or the past, present or future performance of other
corporations or their relevant business units. Performance goals shall be
determined in accordance with generally accepted accounting principles
applied on a consistent basis exclusive of (a) changes in accounting
A-1
33
principles (b) extraordinary items, (c) material restructurings, (d)
material nonrecurring items; and (e) material non-budgeted items authorized
by the Committee.
The percentage vesting of the stock award and/or cash award, and any
related payments for tax liability in connection therewith, which shall in
each case be based on the percentage of the performance goal achieved,
shall, in the case of "covered employees" be determined and certified by
the Committee and paid by the Company, all in accordance with Section
162(m). The Committee shall have the full power and authority in its sole
discretion to reduce, or to refuse to make (but, in the case of "covered
employees", not to increase), any vesting of stock awards or payments of
cash awards payable as a result of the achievement of a designated
percentage of a performance goal."
5. Section 16(b)(2) is hereby amended to read in its entirety as
follows:
(A) The amount of cash to be paid with respect to stock awards,
stock options and SARS shall be determined by multiplying the number of
such awards, as the case may be, by (i) in the case of stock awards, the
CIC Price, provided, however, that in the case of stock awards where the
performance period, if any, has been completed on or prior to the
occurrence of a Change in Control, the number of stock awards to be
multiplied shall be the number of shares issued or vested pursuant to
the award as determined in accordance with the award agreement and in
the case of stock awards where the performance period, if any, has not
been completed upon the occurrence of a Change in Control, the number of
stock awards to be multiplied shall be the higher of the target number
of such awards as determined by the Committee at the time of grant and
the number of shares issuable based on actual performance to date, in
each case prorated based on the number of fiscal years then completed
during the performance period, (ii) in the case of stock options, the
difference between the exercise price per share and the CIC Price, if
higher, and (iii) in the case of SARs, the difference between the
exercise or designated price per share and the CIC Price, if higher.
(B) In the case of cash awards the amount of cash to be paid shall
be determined, (i) where the performance period, if any, has been
completed on or prior to the occurrence of a Change in Control, the
value of such award as determined in accordance with the award agreement
and (ii) where the performance period, if any, has not been completed
upon the occurrence of Change in Control, the higher of the target value
of such awards as determined by the Committee at the time of grant and
the value of such awards based on actual performance to date, in each
case prorated based on the number of fiscal years then completed during
the performance period.
(C) In addition, all accrued dividends and dividend equivalents or
interest accrued on deferred settlements shall be paid."
IN WITNESS WHEREOF, the Company has caused this Second Amendment to be
executed by its duly authorized officer, as of the 17th day of May 2000 to be
effective as of February 14, 2000.
HASBRO, INC.
By:
--------------------------------------
A-2
34
0537-PS-00
35
HASBRO, INC.
1027 NEWPORT AVENUE
PAWTUCKET, RI 02862
Dear Fellow Shareowner:
You are cordially invited to attend the 2000 Annual Meeting of
Shareholders of Hasbro, Inc. to be held at 10:00 a.m. on Wednesday, May 17,
2000, at the New York offices of the Company, 32 West 23rd Street, New York,
New York. 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 2000 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 2000 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
and Chief Executive Officer
YOUR VOTE IS IMPORTANT
DETACH HERE
PROXY
HASBRO, INC.
ANNUAL MEETING OF SHAREHOLDERS -- MAY 17, 2000
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 HAROLD P. GORDON 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 17, 2000
at 10:00 A.M. at 32 West 23rd Street, New York, New York, and at any
adjournment thereof.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1, 2
AND 3 AND IN SUPPORT OF MANAGEMENT ON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
PLEASE MARK, SIGN AND DATE ON REVERSE SIDE AND PROMPTLY MAIL
IN THE ENCLOSED ENVELOPE.
- ----------------- -----------------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
- ----------------- -----------------
36
[VOTE BY TELEPHONE]
It's fast, convenient, and immediate! Call Toll-Free on a Touch-Tone Phone
1-877-PRX-VOTE (1-877-779-8683).
YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE anytime!
[VOTE BY INTERNET]
It's fast, convenient, and your vote is immediately confirmed and posted.
YOUR VOTE IS IMPORTANT!
Go to http://www.eproxyvote.com/has anytime!
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE.
The Board of Directors recommends a vote "FOR" proposals 1, 2 and 3.
1. Election of Directors
For Terms Expiring 2003; (01) Alan G. Hassenfeld, (02) Harold P. Gordon,
(03) Marie Josee Kravis and (04) Preston Robert Tisch
FOR WITHHELD
ALL / / FROM ALL / /
NOMINEES NOMINEES
/ / _______________________________________
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. Approval of Amendment to the Stock / / / / / /
Incentive Performance Plan.
3. Approval of Amendment to the / / / / / /
Restated Article of Incorporation.
4. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
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.
Signature:________________ Date:_______ Signature:________________ Date:_______
37
VOTE BY TELEPHONE
It's fast, convenient, and immediate! Call Toll-Free on a Touch-Tone Phone
1-877-PRX-VOTE (1-877-779-8683).
FOLLOW THESE FOUR EASY STEPS.
1. READ THE ACCOMPANYING PROXY STATEMENT AND PROXY CARD.
2. CALL THE TOLL-FREE NUMBER 1-877-PRX-VOTE (1-877-779-8683).
3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER LOCATED ON YOUR PROXY CARD
ABOVE YOUR NAME.
4. FOLLOW THE RECORDED INSTRUCTIONS.
YOUR VOTE IS IMPORTANT! Call 1-877-PRX-VOTE anytime!
VOTE BY INTERNET
It's fast, convenient, and your vote is immediately confirmed and posted.
FOLLOW THESE FOUR EASY STEPS.
1. READ THE ACCOMPANYING PROXY STATEMENT AND PROXY CARD.
2. GO TO THE WEBSITE: http://www.eproxyvote.com/has
3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER LOCATED ON YOUR PROXY CARD
ABOVE YOUR NAME.
4. FOLLOW THE INSTRUCTIONS PROVIDED.
YOUR VOTE IS IMPORTANT! GO TO http://www.eproxyvote.com/has anytime!
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
