HASBRO, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN Effective October 1, 1997 TABLE OF CONTENTS Page Purpose ARTICLE 1 - Definitions ARTICLE 2 - Selection, Enrollment, Eligibility 2.1 Selection by Committee 2.2 Enrollment Requirements 2.3 Eligibility; Commencement of Participation 2.4 Termination of Participation and/or Deferrals ARTICLE 3 - Deferral Commitments/Company Matching/Crediting/Taxes 3.1 Minimum Deferrals 3.2 Maximum Deferral 3.3 Election to Defer; Effect of Election Form 3.4 Withholding of Annual Deferral Amounts 3.5 Annual Company Matching Amount 3.6 Investment of Trust Assets 3.7 Vesting 3.8 Crediting/Debiting of Account Balances 3.9 FICA and Other Taxes 3.10 Distributions 3.11 Employer Deferral ARTICLE 4 - Short-Term Payout; Unforeseeable Financial Emergencies; Withdrawal Election ARTICLE 5 - Retirement Benefit ARTICLE 6 - Pre-Retirement Survivor Benefit ARTICLE 7 - Termination Benefit ARTICLE 8 - Disability Waiver and Benefit 8.1 Disability Waiver 8.2 Continued Eligibility; Disability Benefit ARTICLE 9 - Beneficiary Designation 9.1 Beneficiary 9.2 Beneficiary Designation; Change 9.3 Acknowledgment 9.4 No Beneficiary Designation 9.5 Doubt as to Beneficiary 9.6 Discharge of Obligations ARTICLE 10 - Leave of Absence ARTICLE 11 - Termination, Amendment or Modification 11.1 Termination 11.2 Amendment 11.3 Plan Agreement 11.4 Effect of Payment ARTICLE 12 - Administration 12.1 Committee Duties 12.2 Agents 12.3 Binding Effect of Decisions 12.4 Indemnity of Committee 12.5 Employer Information ARTICLE 13 - Other Benefits and Agreements 13.1 Coordination with Other Benefits ARTICLE 14 - Claims Procedures 14.1 Presentation of Claim 14.2 Notification of Decision 14.3 Review of a Denied Claim 14.4 Decision on Review 14.5 Legal Action ARTICLE 15 - Trust 15.1 Establishment of the Trust 15.2 Interrelationship of the Plan and the Trust 15.3 Distributions From the Trust ARTICLE 16 - Miscellaneous 16.1 Status of Plan 16.2 Unsecured General Creditor 16.3 Employer's Liability 16.4 Nonassignability 16.5 Not a Contract of Employment 16.6 Furnishing Information 16.7 Terms 16.8 Captions 16.9 Governing Law 16.10 Notice 16.11 Successors 16.12 Validity 16.13 Incompetent 16.14 Distribution in the Event of Taxation 16.15 Insurance 16.16 Legal Fees To Enforce Rights After Change in Control HASBRO, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN Effective October 1, 1997 Purpose The purpose of this Plan is to provide specified benefits to a select group of management and highly compensated Employees who contribute materially to the continued growth, development and future business success of Hasbro, Inc., a Rhode Island corporation, and its subsidiaries, if any, that sponsor this Plan. This Plan shall be unfunded for tax purposes and for purposes of Title I of ERISA. ARTICLE 1 Definitions For purposes of this Plan, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings: 1.1 'Account Balance' shall mean, with respect to a Participant, a credit on the records of the Employer equal to the sum of (i) the Deferral Account balance and (ii) the Company Matching Account balance. The Account Balance, and each other specified account balance, shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to a Participant, or his or her designated Beneficiary, pursuant to this Plan. 1.2 'Annual Bonus' shall mean any compensation, in addition to Base Annual Salary relating to services performed during any calendar year, whether or not paid in such calendar year or included on the Federal Income Tax Form W-2 for such calendar year, payable to a Participant as an Employee under any Employer's annual bonus and cash incentive plans, excluding stock options, holiday bonuses, retention bonuses, or any other discretionary or special bonus or awards. 1.3 'Annual Company Matching Amount' for any one Plan Year shall be the amount determined in accordance with Section 3.5. 1.4 'Annual Deferral Amount' shall mean that portion of a Participant's Base Annual Salary and Annual Bonus that a Participant elects to have, and is deferred, in accordance with Article 3, for any one Plan Year. In the event of a Participant's Retirement, Disability (if deferrals cease in accordance with Section 8.1), death or a Termination of Employment prior to the end of a Plan Year, such year's Annual Deferral Amount shall be the actual amount withheld prior to such event. 1.5 'Base Annual Salary' shall mean the annual cash compensation relating to services performed during any calendar year, whether or not paid in such calendar year or included on the Federal Income Tax Form W-2 for such calendar year, excluding bonuses of every type, commissions, overtime, fringe benefits, stock options, relocation expenses, incentive payments, non- monetary awards, directors fees and other fees, automobile and other allowances paid to a Participant for employment services rendered (whether or not such allowances are included in the Employee's gross income). Base Annual Salary shall be calculated before reduction for compensation voluntarily deferred or contributed by the Participant pursuant to all qualified or non-qualified plans of any Employer and shall be calculated to include amounts not otherwise included in the Participant's gross income under Code Sections 125, 402(e)(3), 402(h), or 403(b) pursuant to plans established by any Employer; provided, however, that all such amounts will be included in compensation only to the extent that, had there been no such plan, the amount would have been payable in cash to the Employee. 1.6 'Annual Installment Method' shall be an annual installment payment over the number of years selected by the Participant in accordance with this Plan, calculated as follows: The Account Balance of the Participant shall be calculated as of the close of business three business days prior to the last business day of the year. The annual installment shall be calculated by multiplying this balance by a fraction, the numerator of which is one, and the denominator of which is the remaining number of annual payments due the Participant. By way of example, if the Participant elects a 10 year Annual Installment Method, the first payment shall be 1/10 of the Account Balance, calculated as described in this definition. The following year, the payment shall be 1/9 of the Account Balance, calculated as described in this definition. Each annual installment shall be paid on or as soon as practicable after the last business day of the applicable year. 1.7 'Beneficiary' shall mean one or more persons, trusts, estates or other entities, designated in accordance with Article 9, that are entitled to receive benefits under this Plan upon the death of a Participant. 1.8 'Beneficiary Designation Form' shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to designate one or more Beneficiaries. 1.9 'Board' shall mean the board of directors of the Company. 1.10 'Change in Control' shall mean the first to occur of any of the following events: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the '1934 Act') of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of 20% or more of either (i) the then outstanding shares of Common Stock of Hasbro, Inc. ('Hasbro') (the 'Outstanding Common Stock') or (ii) the combined voting power of the then outstanding voting securities of Hasbro entitled to vote generally in the election of directors (the 'Outstanding voting Securities'); provided, however, that the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from Hasbro or any of its subsidiaries, (ii) any acquisition by Hasbro or any of its subsidiaries, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Hasbro or any of its subsidiaries, (iv) any acquisition by Alan or Sylvia Hassenfeld, members of their respective immediate families, or heirs of Alan or Sylvia Hassenfeld or of any member of their respective immediate families, the Sylvia Hassenfeld Trust, the Merrill Hassenfeld Trust, the Alan Hassenfeld Trust, the Hassenfeld Foundation, any trust or foundation established by or for the primary benefit of any of the foregoing or controlled by one or more of any of the foregoing, or any affiliates or associates (as such terms are defined in Rule 12b-2 promulgated under the 1934 Act) of any of the foregoing or (v) any acquisition by any corporation with respect to which, following such acquisition, more than 60% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Common Stock and the Outstanding Voting Securities immediately prior to such acquisition in substantially the same proportions as their ownership, immediately prior to such acquisition, of the Outstanding Common Stock and Outstanding Voting Securities, as the case may be; or (b) Individuals who, as the effective date of the Plan constitute the Board (the 'Incumbent Board') cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the effective date of the Plan whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the 1934 Act) or other actual or threatened solicitation of proxies or consents; or (c) Approval by the shareholders of Hasbro of a reorganization, merger or consolidation, in each case, with respect to which all or substantially all of the individuals and entities who were the beneficial owners, respectively of the Outstanding Common Stock and Outstanding Voting Securities immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, of the outstanding Common Stock and Outstanding Voting Securities, as the case may be; or (d) Approval by the shareholders of Hasbro of (i) a complete liquidation or dissolution of Hasbro or (ii) the sale or other disposition of all or substantially all of the assets of Hasbro, other than to a corporation, with respect to which following such sale or other disposition, more than 60% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Common Stock and Outstanding Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Common Stock and Outstanding Voting Securities, as the case may be. 1.11 'Claimant' shall have the meaning set forth in Section 14.1. 1.12 'Code' shall mean the Internal Revenue Code of 1986, as it may be amended from time to time. 1.13 'Committee' shall mean the committee described in Article 12. 1.14 'Company' shall mean Hasbro, Inc., a Rhode Island corporation, and any successor to all or substantially all of the Company's assets or business. 1.15 'Company Matching Account' shall mean (i) the sum of all of a Participant's Annual Company Matching Amounts, plus (ii) amounts credited in accordance with all the applicable crediting provisions of this Plan that relate to the Participant's Company Matching Account, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to the Participant's Company Matching Account. 1.16 'Deduction Limitation' shall mean the following described limitation on a benefit that may otherwise be distributable pursuant to the provisions of this Plan. Except as otherwise provided, this limitation shall be applied to all distributions that are 'subject to the Deduction Limitation' under this Plan. If an Employer determines in good faith prior to a Change in Control that there is a reasonable likelihood that any compensation paid to a Participant for a taxable year of the Employer would not be deductible by the Employer solely by reason of the limitation under Code Section 162(m), then to the extent deemed necessary by the Employer to ensure that the entire amount of any distribution to the Participant pursuant to this Plan prior to the Change in Control is deductible, the Employer may defer all or any portion of a distribution under this Plan. Any amounts deferred pursuant to this limitation shall continue to be credited/debited with additional amounts in accordance with Section 3.8 below. The amounts so deferred and amounts credited thereon shall be distributed to the Participant or his or her Beneficiary (in the event of the Participant's death) at the earliest possible date, as determined by the Employer in good faith, on which the deductibility of compensation paid or payable to the Participant for the taxable year of the Employer during which the distribution is made will not be limited by Section 162(m), or if earlier, the effective date of a Change in Control. Notwithstanding anything to the contrary in this Plan, the Deduction Limitation shall not apply to any distributions made after a Change in Control. 1.17 'Deferral Account' shall mean (i) the sum of all of a Participant's Annual Deferral Amounts, plus (ii) amounts credited in accordance with all the applicable crediting provisions of this Plan that relate to the Participant's Deferral Account, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to his or her Deferral Account.
Nonqualified Deferred Compensation Plan - Hasbro Inc.
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