EXHIBIT 10(aa)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made as of this 1st day of
January, 1996 is entered into by Hasbro, Inc., a corporation with its
principal place of business at Pawtucket, Rhode Island (the "Company"), and
Xxxxxx X. Xxxxxx (the "Employee").
The Company and the Employee desire to set forth the terms and conditions
governing the Company's employment of the Employee. In consideration of
the mutual covenants and promises contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the parties agree as follows:
1. Titles; Capacities. The Employee is serving and continues to serve
as Vice Chairman of the Company and in such senior executive positions with
the Company and with domestic and foreign subsidiaries of the Company as
the Company's Board of Directors (the "Board") and the Chairman and Chief
Executive Officer of the Company may reasonably determine from time to
time. The Employee shall be based at the Company's headquarters in
Pawtucket, Rhode Island and shall undertake such domestic and foreign
business travel as shall be reasonably required to fulfill his duties. The
Employee shall be subject to the supervision of, and shall have such
authority as is delegated to him by, the Chairman and Chief Executive
Officer of the Company and the Board.
The Employee shall continue to serve as a Director of the Company. The
Company agrees to use its best efforts to cause the Employee to be
nominated for re-election as a Director upon the expiration of his current
or any future term as a Director and to recommend his election.
The Employee hereby agrees to undertake the duties and responsibilities
inherent in his positions and such other duties and responsibilities as the
Chairman and Chief Executive Officer of the Company or the Board shall from
time to time reasonably assign to him. It is contemplated that a
significant portion of Executive's duties and responsibilities will involve
the Company's foreign operations. The Employee agrees to devote
substantially his entire business time, attention and energies to the
business and interests of the Company during the Employment Period. The
Employee now is a director of several other corporations and renders
consulting services to various clients. The Employee may serve on the
boards of directors of other businesses, trade associations and charitable
organizations, render consulting services, engage in charitable activities
and community affairs and manage his personal investments and affairs as
long as these activities present no conflict of interest and do not
materially interfere with the performance of his duties hereunder.
The Employee agrees to abide in all material respects with the policies
of the Company applicable to senior executives, officers and members of the
Board and any changes therein which may be adopted from time to time by the
Company.
2. Compensation and Benefits.
2.1 Salary and Bonus. Effective February 1, 1996, the Company shall
pay the Employee, in weekly installments, an annual base salary of
$526,000. Such salary shall be subject to upward adjustment thereafter as
determined by the Chairman and Chief Executive Officer, the Board and/or
the Compensation and Stock Option Committee of the Board. In addition, the
Employee shall be eligible to participate in the Company's management
incentive bonus arrangement with a target bonus of 45% of base salary, a
threshold of 10% and a maximum of 90%.
2.2 Stock Retention. The Company and the Employee confirm that
under the current stock retention guidelines adopted by the Compensation
and Stock Option Committee of the Board of Directors, future grants of
premium priced options to Employee will be conditioned upon the Employee's
ownership of 10,000 shares of the Common Stock of the Company, provided,
that in accordance with such policy, Employee will have until February 17,
2000 to establish said ownership level.
2.3 Change in Control. The Company and the Employee are parties to
an Employment Agreement dated as of May 10, 1995 to provide the Employee
with certain additional benefits upon the occurrence of a Change in Control
of the Company (as defined therein) (the "Change in Control Agreement").
The Change in Control Agreement is hereby amended as follows (and, as so
amended, is hereinafter referred to as the "Amended Change in Control
Agreement"):
(a) The following definition is added to Section 1:
"(c) 'Employment Agreement' shall mean the Employment
Agreement, dated as of January 1, 1996, between the
Executive and the Company."
(b) Section 4(a)(i)(B) is amended by inserting "U.S." before the
first occurrence of the word "location".
(c) Section 4(a)(ii) is amended by inserting the following sentence
before the last sentence thereof:
"In addition, it shall not be a violation of this
Agreement for Executive to engage in any activity
permitted by Section 2 of the Employment Agreement."
(d) Section 4(b) is amended by adding a new paragraph (x) at the end
thereof to read in its entirety as follows:
"(x) For purposes of paragraph (ii), the Recent Average
Bonus shall be determined with reference to the actual
number of fiscal years during which the Employee was
employed, if the Employee had been employed during fewer
than three fiscal years. For purposes of paragraph (iii)
the Average Annual Bonus shall be determined with
reference to the actual number of fiscal years during
which the Employee was employed, if the Employee had been
employed during fewer than five fiscal years. Paragraphs
(iv) through (ix) shall be applied by taking into
consideration any plan, procedure, policy or arrangement
referred to in said paragraphs in effect under the
Employment Agreement or otherwise."
(e) Section 6(i) is hereby amended by inserting the following phrase
after the phrase ("the 'Special Termination Amount')":
"(provided, however, that the Executive may elect to defer
payment of all or any part of the Special Termination
Amount until a date within the first two calendar weeks of
January in the year following the year in which the Date
of Termination occurs)."
(f) Section 6(a)(i)(C) is amended by inserting the phrase,
"excluding the plan described in Section 2.4(b) of the Employment
Agreement" after the first occurrence of the word "Executive".
(g) A new Section 6(a)(i)(D) is added to read in its entirety as
follows:
"D. a separate lump-sum benefit equal to the lump-sum
amount payable pursuant to Section 2.4(b) of the
Employment Agreement which the Executive would receive if
the Executive's employment continued at the compensation
level provided for in Section 4(b)(i) and 4(b)(ii) of this
Agreement for the remainder of the Employment Period; and"
(h) Section 12(f) is amended by deleting the first word of the
second sentence thereof and by capitalizing the first remaining word of the
second sentence.
(i) A new Section 12(g) is hereby added to read in its entirety as
follows:
"Any reference to this Agreement in Sections 8 through 12,
above, shall be deemed to refer to the Employment
Agreement as well unless a specific section reference is
made."
Except as amended hereby, the Change in Control Agreement shall remain
unamended and in full force and effect. Any benefits payable under this
Agreement are not intended to replace or supplant any benefits payable
under the Amended Change in Control Agreement.
2.4 Retirement Benefits.
(a) The Employee shall be a participant in the Hasbro, Inc. Pension
Plan (the "Pension Plan") and the Hasbro, Inc. Supplemental Retirement
Benefit Plan (the "Supplemental Plan") on the same basis as other senior
executives of the Company.
(b) In addition, after the Employee's employment terminates for any
reason, the Employee shall receive an annuity payable in monthly
installments, the first such installment being paid on the first day of the
month following the month in which the employee attains age 65 or his
employment terminates, whichever occurs later (subject to earlier
commencement, as referred to below), and the last such installment being
paid on the first day of the month in which the Employee dies, in which the
annual amount is 3.33% of the Employee's Final Average Pay multiplied by
the number of full years the Employee had been employed by the Company at
termination of employment. The amount payable under the preceding sentence
shall be reduced by the sum of the benefits payable to the Employee in the
form of a life annuity commencing at age 65 (or such later date), under (a)
the Pension Plan, (b) the Supplemental Plan and (c) U.S. Social Security.
For purposes of this supplemental retirement benefit the Employee's Final
Average Pay shall be one-fifth of the total salaries and bonuses received
by the Employee in the five highest consecutive years during the Employees'
period of employment. If the Employee had been employed by the Company for
fewer than five years the Employee's Final Average Pay shall be the
annualized average of the Employee's total salary and bonuses during the
period of employment.
At the Employee's option, the benefit described above shall be payable in
any actuarially equivalent annuity form of benefit provided under the
Pension Plan or an actuarially equivalent lump sum, determined using the
actuarial conversion factors used for the Pension Plan. If the benefit
commences prior to age 65, it shall be reduced by the early retirement
reduction factor set forth in the Pension Plan. Any lump sum payment shall
be made during the first two calendar weeks of January in the year
following termination of employment.
The benefits provided under this Section 2.4 shall be unfunded and shall
be paid from the general assets of the Company. The Employee shall have a
right to the benefit hereunder no greater than the right of an unsecured
general creditor of the Company. The benefits are not assignable by the
Employee prior to receipt.
2.5 Life Insurance. The Company shall maintain a key executive life
insurance policy in an amount sufficient to pay the Employee a life annuity
benefit of $225,000 per year payable in equal monthly installments on the
first day of each calender month, the first such payment to be made on the
first day of the month following the month in which occurs the Employee's
65th birthday (or termination of employment, if later) and the last such
payment to be the payment for the month in which the Employee dies. If the
underlying value of such insurance policy is ever insufficient to pay such
annuity payments, then the Company shall pay such annuity payments from its
general assets. If the Employee had been employed for fewer than seven
years upon termination of employment the amount payable shall be determined
as set forth in the following table:
Annual Benefit
Commencing at Age
Full Years of Employment 65, if Retired
------------------------ -----------------
At least 1 but less than 2 $ 32,143
At least 2 but less than 3 $ 64,286
At least 3 but less than 4 $ 96,429
At least 4 but less than 5 $128,571
At least 5 but less than 6 $160,714
At least 6 but less than 7 $192,857
7 or more $225,000
If the Employee's employment is terminated prior to February 1, 2000 by
mutual consent, by constructive termination (as defined in Section 2.6,
below) or involuntarily by the Company without Cause, the Employee shall be
deemed to have completed 5 years of employment and may acquire additional
years of vested benefits at a cost of $216,480 per year, such cost to be
deducted from the severance pay provided under Section 2.6, below. If the
Employee dies prior to the commencement of the annuity payments under this
Section 2.5, the Employee's beneficiary shall be eligible to receive a lump
sum death benefit of $1,500,000 and none of the other amounts set forth in
this Section 2.5 shall be payable. If Employee dies after the commencement
of the annuity payments under this Section 2.5 and before the receipt of
240 monthly annuity payments, monthly annuity payments shall be paid to the
beneficiary of the Employee on their scheduled due dates until the number
of monthly annuity payments made to the Employee and his beneficiary
reaches 240. For purposes of this Agreement, "Cause" shall mean (i)
repeated violations by the Employee of the Employee's obligations under
Section 1 of this Agreement (other than as a result of incapacity due to
physical or mental illness) which are demonstrably willful and deliberate
on the Employee's part, which are committed in bad faith or without
reasonable belief that such violations are in the best interests of the
Company and which are not remedied in a reasonable period of time after
receipt of written notice from the Board specifying such violations or (ii)
the conviction of the Employee of a felony involving moral turpitude.
2.6 Severance Pay. If the Employee's employment is terminated during
the first five years of employment by mutual consent, by constructive
termination or involuntarily by the Company without Cause, the Employee's
base salary payable at the time of such termination shall be continued for
the period set forth in the following table opposite the employment period
in which such termination of employment occurred. If the Company's
severance policy for senior executives would pay a larger benefit, the
Employee shall receive such larger benefit.
Employment Period Period of
During which Termination Occurs Base Pay Continuation
------------------------------- ---------------------
From To
---- --
January 1, 1996 January 31, 1997 3 years
February 1, 1997 January 31, 1998 3 years
February 1, 1998 April 30, 1998 2 years 9 months
May 1, 1998 July 31, 1998 2 years 6 months
August 1, 1998 October 31, 1998 2 years 3 months
November 1, 1998 January 31, 1999 2 years
February 1, 1999 April 30, 1999 1 year 9 months
May 1, 1999 July 31, 1999 1 year 6 months
August 1, 1999 January 31, 2000 1 year 3 months
For purposes of this agreement a constructive termination of the
Employee's employment shall occur if the Employee terminates employment
pursuant to Section 5(c) of the Amended Change in Control Agreement or
within one year after the occurrence of any of the following without the
explicit written consent of the Employee: (a) diminution of
responsibilities, (b) removal from or failure to be reelected to the Board
of Directors of the Company, (c) a change in work location beyond a 50 mile
radius from the Employee's current location of employment (it being
understood that foreign business travel shall not constitute a "change in
work location" for these purposes unless it averages more than one calendar
week per month outside North America), or (d) any breach of Section 2 of
this Agreement or any other material breach of this Agreement by the
Company. The payment of benefits hereunder upon the occurrence of a
constructive termination shall be in addition to, and not in lieu of, any
benefits pursuant to the Amended Change in Control Agreement.
Notwithstanding the preceding provisions of this Section 2.6, if a
constructive termination occurs after the occurrence of a Change in
Control, the Employee shall only be entitled to the greater of the benefits
provided under this Section 2.6 or under Section 6(a)(i)(B) of the Amended
Change in Control Agreement.
2.7 Additional Benefits and Perquisites.
(a) Financial Planning. The Company shall provide the Employee at
its expense with financial planning assistance, such assistance as may be
reasonably required to prepare any income tax returns that the Employee may
be required to file and such assistance as may be reasonably required to
prepare an appropriate estate plan.
(b) Automobile. The Company shall make available to the Employee a
Company automobile allowance or leased automobile suitable to the
Employee's position in accordance with the Company's automobile policy.
(c) Financing. The Company agrees to provide short term financing
to the Employee at rates equivalent to the Company's cost of money during
the Employee's transition to the Company to enable the Employee to meet
Canadian tax obligations or to take advantage of Canadian tax planning
opportunities. In addition, the Company agrees to pay all costs of the
issuance of any letter of credit that may be required by Canadian tax
authorities for exit purposes. If any other issues arise with respect to
differences between the Canadian and U.S. tax systems which would have a
negative effect on the Employee, the Company shall use its best efforts to
provide the necessary financial and legal assistance to eliminate such
negative effect to the extent reasonably practicable.
(d) Relocation. Employee shall be eligible for relocation benefits
under the Company's policy concerning relocation expenses for senior
executives, except that the real estate assistance provided under such
policy shall be made available for both of the Employee's Canadian
residences when these residences are actually offered for sale.
For purposes of computing any real estate market value shortfall payable
to the employee upon sale of each of the Canadian residences, the Company
shall rely on the objective real estate appraisals conducted upon the
employee's commencement of employment.
If the Employee purchases a primary residence in the U.S. and the
Employee's employment is terminated within the first 7 years of employment
by mutual consent, by retirement, or is constructively terminated or
involuntarily terminated without Cause by the Company, the Company shall
provide relocation assistance as may be required to sell the employee's
primary U.S. residence including a guarantee of the original purchase price
of the primary residence plus the fair market value of any capital
improvements.
In addition, the Employee shall receive such additional relocation
benefits as may be agreed upon by the Chairman & Chief Executive Officer of
the Company and the Employee.
2.8 Fringe Benefits. During the employment period, the Employee shall
be entitled to participate in all bonus and benefit plans and programs that
the Company establishes and makes available to its senior executives or
employees generally, as they may be in effect from time to time, if any, to
the extent that Employee's position, tenure, salary, age, health and other
qualifications make him eligible to participate, including, but not limited
to, the programs indicated in the Hasbro Benefits Summary previously
delivered to Employee. The Employee shall be entitled to paid vacation at
the level made available to senior officers generally.
2.9 Reimbursement of Expenses. The Company shall reimburse the
Employee for business expenses pursuant to the Company's Business Expense
Policy that applies to senior executives of the Company.
2.10 Calculation of Years of Employment. For purposes of determining
the Employee's years or period of employment for this Agreement or the
Amended Change in Control Agreement, the Employee shall be deemed to have
worked full time for the Company, without interruption, from February 1,
1995 through the date of determination.
3. Employment Termination. The employment of the Employee by the
Company pursuant to this Agreement shall terminate upon the occurrence of
any of the following:
3.1 At the election of the Company, with or without Cause, immediately
upon written notice by the Company to the Employee;
3.2 Thirty days after the death or disability of the Employee. As
used in this Agreement, the term "disability" shall mean the inability of
the Employee, due to a physical or mental disability, for a continuous
period of 180 days to substantially perform the services contemplated under
this Agreement. A determination of disability shall be made by a physician
satisfactory to both the Employee and the Company, provided that if the
Employee and the Company do not agree on a physician, the Employee and the
Company shall each select a physician and these two together shall select a
third physician, whose determination as to disability shall be binding on
all parties;
3.3 At the election of the Employee upon constructive termination of
employment or otherwise, upon five business days' prior written notice of
termination; or
3.4 By mutual consent of the Employee and the Company.
4. Effect of Termination. In the event the Employee's employment shall
have terminated pursuant to Section 3, the Company shall pay or provide to
the Employee the compensation and benefits otherwise payable or to be
provided to him under Section 2 and the Employee shall be under no
obligation to seek other employment, and there shall be no offset against
amounts due the Employee under this Agreement or the Amended Change in
Control Agreement on account of any remuneration attributable to any
subsequent employment he may obtain.
5. Proprietary Information and Developments. The Employee agrees to
execute the Company's standard Invention Assignment and Proprietary
Information Agreement.
6. Notices. All notices required or permitted under this Agreement
shall be in writing and shall be deemed effective upon personal delivery or
upon deposit in the United States Post Office, by registered or certified
mail, postage prepaid, addressed to the other party at the address shown
above, or at such other address or addresses as either party shall
designate to the other in accordance with this Section 6.
7. Pronouns. Whenever the context may require, any pronouns used in
this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular forms of nouns and pronouns shall include
the plural, and vice versa.
8. Entire Agreement. This Agreement, together with the agreements
referred to in Sections 2.3 and 4, constitutes the entire agreement between
the parties and supersedes all prior agreements and understandings, whether
written or oral, relating to the subject matter of this Agreement.
9. Amendment. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Employee.
10. Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of Rhode Island.
11. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may
be merged or which may succeed to its assets or business, provided,
however, that the obligations of the Employee are personal and shall not be
assigned by him. Notwithstanding the foregoing, the Company may, with the
Employee's consent, assign an appropriate portion of its obligations
hereunder to one or more of its foreign subsidiaries.
12. Miscellaneous.
12.1 No delay or omission by the Company or the Employee in exercising
any right under this Agreement shall operate as a waiver of that or any
other right. A waiver or consent given by the Company or the Employee on
any one occasion shall be effective only in that instance and shall not be
construed as a bar or waiver of any right on any other occasion.
12.2 The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
12.3 The captions of the sections of this Agreement are for convenience
of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
12.4 In case any provision of this Agreement shall be invalid, illegal
or otherwise unenforceable, the validity, legality and enforceability of
the remaining provisions shall in no way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
HASBRO, INC.
By: /s/ Xxxx X. Xxxxxxxxxx
--------------------------------
Title: Chairman and CEO
-----------------------------
EMPLOYEE
/s/ Xxxxxx X. Xxxxxx
-----------------------------------
Xxxxxx X. Xxxxxx
