Exhibit 10

Hasbro, Inc.

Management Incentive Plan

2005

 

      

Hasbro, Inc.

Management Incentive Plan

1.0

Background

1.1

The Management Incentive Plan

   

·

Establishes standard criteria to determine plan eligibility, and overall
company, business unit and individual performance objectives.

        

·

Establishes target awards based on worldwide band level.

        

·

Plan pay out is based on a combination of company, individual, and/or business
unit performance.

        

·

Provides a rounded assessment of Hasbro's financial success - using a
combination of sales, core brand growth, operating margin and returns for
company and business unit performance, as well as an individual component.

1.2

Purpose

Hasbro, Inc., herein referred to as “the Company”, has established this

plan for the purpose of providing incentive compensation in the form of a cash
supplement to the base salaries of those officers, managers, and key employees
who contribute significantly to the growth and success of the Company’s
business; to attract and retain, in the employ of the Company, individuals of
outstanding ability; and to align the interests of those who hold positions of
major responsibility in the Company with the interest of the Company’s
shareholders.

1.2.1

General Guideline

Amounts awarded under the plan are discretionary at all times.

1.3

Scope

The Plan is applicable to all subsidiaries and divisions of the Company,
including the Corporate group on a worldwide basis.

1.3.1

Eligibility

Officers, managers, and key employees, as determined by Management, whose duties
and responsibilities contribute significantly to the growth and success of the
Company’s business are eligible to participate in the Plan.  Eligibility will be
determined in accordance with the corporation’s method of job evaluation.
Worldwide employees in positions classified in broad bands 30 and above will be
eligible to participate.

Eligibility to participate in the Plan does not guarantee the receipt of an
award under the Plan.  In addition, the incentive awards for executives
considered part of the Senior Management Team are subject to the discretion and
approval of the Stock Option and Compensation Committee of the Board of
Directors of Hasbro, Inc.

1.3.2

Approval of Incentive Awards
The incentive awards for those employees participating in this plan must be
approved by the Chief Executive Officer & President (hereinafter, the "CEO") of
the Company and the Stock Option and Compensation Committee of the Board of
Directors.

2.0

Incentive Award Levels

2.1

Target Incentive Award

Target awards are expressed as a percentage of earned salary for the plan year.
 For purposes of this Plan, earned salary means all base compensation for the
participant for the year in question, which base compensation shall include all
base compensation amounts deferred into the Company’s retirement savings plan,
the Company’s Non-Qualified Deferred Compensation Plan, and/or any similar
successor plans for the fiscal year and excludes any bonus or other benefits,
other than base compensation, for the plan year.  By design, these are the award
levels that plan participants can expect to earn when they and their applicable
business units perform as expected;  (i.e., achieve their goals and objectives.)

2.2

Maximum Incentive Award

Under this incentive plan the maximum award is 200% of target of the overall
award and/or any component of the award.  Any awards that are in excess of one
times salary must be reviewed and approved by the Division’s senior management
and the CEO.

2.3

The following table outlines the various incentive award levels defined above.
 All percentages refer to percentages of base salary earned for the incentive
award period.

  

WW Band

Target

     

90

75%

     

80

55%

     

70

50%

     

60

45%

     

50

40%

     

40*

40%

     

30

25%

  

*Includes broad band 45 in European markets.

3.0

Measures of  Performance

3.1

Company Performance

Each MIP formula contains a performance component related to overall Hasbro
performance.  This component is measured by Sales, Core Brand Growth, Operating
Margin, and Returns (SCORe).  The weighting and definition of the overall
company measures are:

 

Measure

Definition

% of Company Measure

Sales

Hasbro’s  Net Revenues

20%

Core Brands Growth

Net Revenue Growth over a base period compared to the period being measured for
the Core Brand Drivers identified in Hasbro, Inc.'s Strategic Plan

20%

Operating Margin

Operating Profit divided by Net Revenues

40%

Returns (Free Cash Flow)

Net Earnings + Depreciation & Amortization +/- Changes in working Capital –
Capital Expenditures

20%

3.2

Individual Performance

Individual performance will be determined by the participant’s supervisor and
approved by the Division/Subsidiary president or Corporate functional head where
appropriate.  It will be based upon actual job performance consistent with
goals/objectives outlined during performance reviews for the plan year.

3.3

Business Unit Performance

Each business unit, as determined under this program, will assess performance
based on Sales, Core Brand Growth and Operating Margin specific to the business
unit. The weighting and definition of the overall company measures are:

Measure

Definition

% of Company Measure

Sales

Business unit Net Revenues

25%

Core Brands Growth

Net Revenue Growth over a base period compared to the period being measured for
the Business Unit’s Core Brand Drivers identified in Hasbro, Inc.'s Strategic
Plan

25%

Operating Margin

Operating Profit divided by Net Revenues

50%

Note: Hasbro Far East uses the Balanced Scorecard as approved by the CEO in lieu
of SCOre.

Those jobs, which are corporate in nature, will comprise the “corporate”
business unit and their performance will be based on overall company performance
as described in section 3.1.  

3.3.1

Bonus Formulas

The following is the structure for which all incentive formulas will be derived.
 The formulas are used to assess performance at the overall company level,
business unit level, and individually.  The bonus formula is subject to review
annually by the CEO.  

3.3.2

Bonus Formulas WW 30 - 70

a) Corporate

75% overall company performance

25% individual performance

 

b) Business Unit

25% overall company performance

50% business unit performance

25% individual performance

c) Hasbro International

25% overall company performance

50% international, Europe, region and/or country performance

25% individual performance

3.3.3

Bonus Formulas WW 80 – 90*

a) Corporate

100% overall company performance

Personal performance modifier1

b) Business Unit

40% overall company performance

60% business unit performance

Personal performance modifier1

*Only applies to those WW80’s and 90’s that are also part of the Senior
Management team.

1Definition of the personal performance modifier: Management Business Objectives
(MBOs) are set before the end of Q1 of the plan year. These are established
between the employee and the CEO and/or COO.  Performance is reviewed annually -
if MBO's are exceeded, pay out can be up to 150% of formula bonus; if MBO's are
met, pay out can be up to 100% of formula bonus; if MBO's are not met, pay out
can be reduced to 0% of formula.

4.0

Development of Formula Incentive Award

At the close of the fiscal year, the overall company and each business unit's
actual performance will be calculated and approved by the Chief Financial
Officer, ("CFO").  The actual performance will be applied to the payout
performance schedule below to develop the formula bonus*:

Performance %

Payout %*

< 80%

0%

Minimum performance 80%

80%

60%

For every 1% increase in perf, 2% increase in award

100%

100%

For every 1% increase in perf, 3% increase in award

105%

115%

110%

130%

For every 1% increase in perf, 4% increase in award

115%

150%

120%

170%

125%

190%

*Some countries outside of the US will have a separate performance and payout
scale established annually.  Maximum is 200% of target.

Once the business unit has calculated the formula incentive awards, the
recommended award pools by business unit are developed.  These recommended pools
will equal the aggregate of the formula incentive awards including the budgeted
individual performance component for all eligible employees.  These pools are
subject to approval by the CEO and Stock Option and Compensation Committee of
the Board of Directors.

4.1.1

Formula Award

The formula incentive award is a first pass calculation of an award based on
actual performance achieved by the overall company, business unit, and the
estimated individual performance percentage.

Business unit incentive pool dollars are derived from the aggregated of formula
awards within a business unit.

4.1.2

Recommended Awards

The recommended awards for participants of a specific business unit are
submitted to the CEO and Stock Option and Compensation Committee for approval.
 These recommended awards could be modified from the formula award based on
management’s discretion.

4.2.

The CEO of the Company and the Stock Option and Compensation Committee of the
Board of Directors shall review, modify, and approve all recommended awards, in
their sole discretion.  In addition, any awards recommended in excess of one
times a participant’s base salary must be reviewed and approved by the Chief
Executive Officer & President and the Stock Option and Compensation Committee of
the Board of Directors.

5.0

Removals, Transfers, Terminations, Promotions and Hiring Eligibility

5.1

Participants whose employment with the Company is terminated because

of retirement or disability:

   

·

After the close of the plan year, but prior to the actual distribution of awards
for such year, may be awarded an incentive award for the plan year at the
discretion of the CEO.

        

·

After the beginning, but prior to the close of the plan year, no award shall be
granted unless authorized at the sole discretion of the CEO.

5.2

Participants whose employment with the Company is terminated because

of death:

   

·

After the close of the plan year, but prior to the actual distribution of awards
for such year, shall be awarded an incentive award for the plan year.  Such
payment will be made to the deceased employee’s estate or designated
beneficiary.

        

·

After the beginning, but prior to the close of the plan year, no award shall be
granted unless authorized at the sole discretion of the CEO.  Any such payments
will be made to the deceased employee’s estate or designated beneficiary.

5.3

Participants who resign for any reason after the close of the plan year but

prior to the distribution of awards for such year will not receive an

incentive award.

5.4

Participants who are discharged from the employ of the Company or any

of its subsidiaries for cause or for any offense involving moral turpitude or

an offense involving breach of the fiduciary duty owed by the individual to

the Company will not be entitled to an award for any plan year.

5.5

Participants who are discharged from the employ of the Company or any of its
subsidiaries due to job elimination:

   

·

After the close of the plan year, but prior to the actual distribution of awards
for such year, may be awarded an incentive award for the plan year.  No award
shall be granted unless authorized at the sole discretion of the CEO.

        

·

After the beginning, but prior to the close of the plan year, the participant is
no longer eligible for that year.  However, a discretionary award may be granted
by the CEO.

5.6

Participants under statutory or contractual notice:

   

·

On December 31st of the plan year, may be awarded an incentive award for the
plan year.  No award shall be granted unless authorized at the sole discretion
of the CEO.

        

·

Which ends prior to the close of the plan year shall not be eligible for an
incentive award for that plan year.  However, a discretionary award may be
granted by the CEO.

5.7

Participants transferred during the plan year from one division of the Company
to another will be eligible to receive an award (subject to achievement of the
requisite organizational and individual performance) through the division in
which he or she is employed at the end of the plan year, but the award amount
may be based on the performance made in each division in which the individual
was employed during the year.

5.8

Employees hired during the plan year must be actively employed by July 1st of
the plan year to participate in the bonus for that plan year.  Awards will be
made based upon the employee's earned salary during the period of their
employment with the Company during the plan year.

5.9

The eligibility for an award and plan status of employees who remain employed
with the Company during the plan year but whose change in employment status
through promotion or reclassification affects their level of participation:

   

·

Prior to July 1st of the plan year, will participate at the level consistent
with the promotion or reclassification.

        

·

After July 1st but prior to the close of the plan year, will participate at the
level consistent with their classification prior to the promotion or
reclassification.

5.10

The eligibility for an award and plan status of employees who remain employed
with the Company during the plan year but whose change in employment status
through demotion affects their level of participation will be determined by the
CEO in the CEO’s sole discretion.

6.0

Administration of the Plan

6.1

Amendments to the Plan (Contingency Clause)

The Chief Executive Officer and the Stock Option and Compensation Committee of
the Board of Directors reserves the right to interpret, amend, modify, or
terminate the Plan in accordance with changing conditions.

6.2

Incentive Award Distribution

Incentive awards, when payable, shall be paid as near to the close of the
company’s fiscal year as may be feasible.  Participants in the Plan must be
employed at the time of award distribution in order to receive bonus payments,
except as provided in Section 5.0.

No individual has the rights to an award until it has been approved and
distributed in accordance with the provisions of this plan.

6.3

Non-Assignment of Awards

Participants eligible to receive incentive awards shall not have any right to
pledge, assign, or otherwise dispose of any unpaid or projected awards.

6.4

Deferral of Awards

Participants eligible to defer incentive awards through the Deferred
Compensation Program (DCP) may elect to do so during the annual DCP enrollment.