EXHIBIT 10.10

 

 

Hasbro, Inc.  

 

Performance Rewards Program

  

January 1, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hasbro, Inc.

 

--------------------------------------------------------------------------------

 

Performance Rewards Program

 

1.0              Background 

1.1       Performance Rewards Program (“PRP”) 

 

§  Establishes standard criteria to determine PRP eligibility and overall
Company, business or commercial market objectives. 

 

 

 

§  Provides guidelines for the establishment of target incentive awards as a
percent of annual earned salary based on job level. 

 

 

 

§  Funding for the PRP is based on Company, Commercial Market, Global Brands,
Business Area or Wizards of the Coast (“WotC”) Performance.

 

 

 

§  Performance objectives and goals are established to measure performance
achievement and may be based on one or a combination of the following: Sales
(Net Revenues), Operating Margin and Returns (Free Cash Flow) for Company,
Commercial Market, Global Brands, Business Area or WotC Performance.

 

1.2       Purpose  

Hasbro, Inc. (the “Company”) has established this PRP (the “Plan”) for the
purpose of providing incentive compensation to those 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 employees with the interest of the Company’s
shareholders.

 

1.3       General Guideline

No employee of the Company has any legal entitlement to participate in the PRP
or to receive an incentive award under the PRP.

           
1.4       Scope 

The PRP is applicable to eligible employees of all global subsidiaries and
divisions of the Company.

 

            1.5       Eligibility 

As determined by management, employees whose duties and responsibilities
contribute significantly to the growth and success of the Company’s business,
are eligible to participate in the PRP.  Eligibility will be determined by an
employee’s job level in accordance with the Company’s method of job evaluation
as appropriate.  Eligibility to participate in the PRP does not guarantee the
receipt of an incentive award under the PRP.  Unless otherwise required by law,
if an employee is eligible to participate in the PRP, the Sales Rewards Program
and/or any other annual incentive plan implemented from time to time by the
Company, such employee may only participate in one plan per year, as determined
by the Company in its sole discretion.

 

                                                                         

--------------------------------------------------------------------------------

 

2.0       Incentive Award Levels

 

            2.1       Target Incentive Award

                        Target incentive awards are expressed as a percentage of
earned salary for the PRP year.  For purposes of this PRP, 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, where allowed by law, any bonus or other benefits, other than base
compensation, for the PRP year.  By design, the target incentive awards are the
award levels that PRP participants are eligible to earn when they and their
applicable business units perform as expected (i.e., achieve their goals and
objectives).  target incentive awards are determined by job level and vary by
region. 

             

            2.2       Maximum Incentive Award

Under the PRP, the maximum incentive award for employees below job level 80 is
200% of the target incentive award.  The maximum incentive award for employees
in a job level 80 or above is 300% of the target incentive award.

 

3.0              Measures of Performance for 2019

·         PRP funding for the Commercial Market Plan is based on a combination
of 25% Company performance, 25% Regional Growth Brands and either 50% regional
or country performance as determined by the Company at its sole discretion. 

·         PRP funding for the Global Brands Plan is based on a combination of
25% Consolidated Growth Brands and 75% Company performance against defined
performance targets. 

·         PRP funding for the Business Area Plan is based on a combination of
25% Company performance, 25% Consolidated Growth Brands and 50% business area
performance (where appropriate) against defined performance targets.

·         PRP funding for the WotC Plan is 80% WotC performance and 20% Company
performance. 

·         PRP funding for the Corporate Plan is based on 100% Company
performance.  

·         Employees will be assigned to the Corporate Plan, Commercial Market
Plan, Global Brands Plan, Business Area Plan or the WotC Plan at the Company’s
sole discretion.

 

            3.1       Establishing Company, Commercial Market, Global Brands,
Business Area or WotC Performance Targets

                        In the first quarter of the PRP year, the Company’s
senior management establishes the level of target performance for the year
associated with each of the performance metrics for the Corporate, Commercial
Market, Global Brands, Business Area or WotC plans.  Those target levels are
reviewed and approved by the Company’s Chief Executive Officer (“CEO”) and by
the Compensation Committee of the Company’s Board of Directors (the
“Compensation Committee”).

 

            3.2       Company Performance

For 2019, the Company component is measured by Net Revenue, Operating Margin and
Returns.  Company performance is determined by individually assessing

                                                                         

--------------------------------------------------------------------------------

 

performance against goals for each metric, applying the
acceleration/deceleration scale, weighting each metric and summing the total. 
The weighting and definition of the overall Company measures are:

 

Measure

Definition

% of Company Measure

Net Revenue (Sales)

Third Party Gross Sales (after returns) less Sales Allowances plus Third Party
Royalty Income, Digital Gaming Revenue and TV Programming Revenue

  

40%

Operating Margin

Operating Profit divided by Net Revenues

40%

Returns (Free Cash Flow)

Net cash provided by operating activities -Capital Expenditures

20%

 

 

 

 

 

 

 

 

 

 

 

 

Each metric, before the acceleration/deceleration scale is applied, must achieve
threshold performance or no award is payable under the metric that did not
achieve threshold performance.  The threshold for Net Revenue performance is
85%.  The threshold for Operating Margin and for Returns performance is 80%.

 

For example:

If Net Revenue is achieved at 100% of target (which results in 100% payout based
on the acceleration/deceleration scale) and Operating Margin is achieved at 85%
of target (which results in a 70% payout) but Returns does not reach threshold
performance, then overall Company performance will only pay out on Net Revenue
and Operating Margin.  The aggregate weighted payout would be:

 

(100% x 40%) + (70% x 40%) + (0% x 20%) = 68%

Company payout would be 68%.

 

 

            3.3       Commercial Market, Business Area or WotC Performance

Each Commercial Market, Business Area, or WotC will assess performance based on
Net Revenue and Operating Margin specific to the Commercial Market, Business
Area or WotC.  Unlike the Corporate Plan where an individual metric’s failure to
reach the threshold performance does not impact another individual metric’s
ability to reach the threshold performance and payout, for the Commercial
Market, Business Area or WotC Plans, the individual performance of each metric
must meet a minimum threshold performance before the acceleration/deceleration
scale is applied or no award is payable for the Commercial Market, Business Area
or WotC component of the plan.  The threshold for Net Revenue performance is
85%.  The threshold for Operating Margin performance is 80%.

 

The weighting and definition of the Commercial Market, Business Area, or WotC
Plan are:

 

Measure

Definition

% of Measure

Net Revenue (Sales)

Third Party Gross Sales (after returns) less Sales Allowances plus Third Party
Royalty Income, Digital Gaming Revenue and TV Programming Revenue

 

50%

Operating Margin

Operating Profit divided by Net Revenues

50%

                                                                         

--------------------------------------------------------------------------------

 

 

 

   

 

 

 

 

 

3.4       Growth Brands

For purposes of the PRP, Growth Brands Revenue will be defined as External Net
Revenue excluding Closeouts.  The Growth Brands will include ______________. 
The Commercial Market will be measured on Regional Growth Brands Revenue.  The
Global Brands and Business Area Plan performance will be measured on
Consolidated Growth Brands Revenue.  The performance of the Growth Brands
Revenue must meet a minimum threshold performance before the
acceleration/deceleration scale is applied or no award is payable for the
Commercial Market, Global Brands or Business Area component of the plan.  The
threshold for Growth Brands Revenue performance is 85%.

 

Commercial Market Plan will measure Growth Brand Revenue at the Regional level. 
Global Brands and Business Area Plans will measure Growth Brand Revenue at the
Consolidated level.

Measure

Definition

% of Measure

External Net Revenue excluding Closeouts

Third Party Gross Sales (after returns) less Sales Allowances, excluding
Closeout Gross Sales and related allowances; plus Third Party Royalty Income,
Digital Gaming Revenue and TV Programming Revenue

25%

 

 

 

 

 

 

 

 

 

                        Bonus formula metrics are subject to review annually by
the CEO. 

 

4.0              Development of Funding Pools

At the end of the fiscal year, the overall Company, each Commercial Market,
Global Brands, Business Area, or WotC’s actual performance for each financial
component of the funding pool for the PRP will be calculated (based on the
Company’s and each Commercial Market, Global Brands, Business Area or WotC’s
performance as of year-end) and approved by the Company’s Chief Financial
Officer. 

 

The Net Revenue and Operating Margin for the Commercial Market, Business Area or
WotC metrics must individually achieve a minimum performance against target to
qualify for that component of the funding pool.  An acceleration/deceleration
scale will then be applied to each individual metric as follows to develop the
component funding pool for each metric.  If one Net Revenue metric achieves
threshold or higher, and the corresponding Operating Margin metric does not, the
component funding pool for that metric will be 0%.   

 

Revenue Scale:

                Performance %                 Funding Pool Scale %    

                                                                         

--------------------------------------------------------------------------------

 

                < 85%                                    
0%                        Minimum performance 85%

                85%                                       
60%                      For every 1% below target, 2.6%-2.7% decrease in award

                100%                                    
100%                     Target performance = 100% payout

                101%                                     106.7%              
   For every 1% above 100%, 6.6%-6.8% increase in award

                115%+                                   200%                    
Maximum payout

                               

                Operating Margin and Returns Scale:

                Performance %                 Funding Pool Scale %    

                < 80%                                    
0%                        Minimum performance 80%

                80%                                       
60%                      For every 1% below target, 2% decrease in award

                100%                                    
100%                     Target performance = 100% payout

                101%                                    
104%                     For every 1% above 100%, 4% increase in award

                125%+                                   200%                    
Maximum payout

 

 

In contrast, for the Company component, the threshold is applied to each metric
before the acceleration/deceleration scale is applied.  Each metric must then
achieve a threshold performance, or no award is payable under the metric that
did not achieve the threshold performance.

 

The payout attributable to each metric will then be weighted and added to arrive
at the overall achievement.

 

Illustrative examples of the development of a funding pool for the Commercial
Market, Business Area and WotC component are as follows:

 

If Commercial Market, Business Area or WotC Revenue is achieved at 90% of target
(which results in an 73% funding based on the acceleration/deceleration scale)
and Operating Margin is at 65% (which is below 80% threshold), the Commercial
Market, Business Area or WotC will not fund.   

 

                                                                              
or

 

If Commercial Market, Business Area or WotC Revenue is achieved at 91% target
(which results in an 76% funding), and Operating Margin is achieved at 85%
target (which results in a 70% funding) the aggregate weighted funding is:

 

(76% x 50%) + (70% x 50%) = 73% Commercial Market, Business Area or WotC funding

 

Once all of the Commercial Market, Business Areas or WotC have calculated the
achievement the component funding pools by Commercial Market, Business Areas or
WotC are developed.  These Commercial Market, Business Area or WotC component
funding pools, combined with the Corporate component funding pool, will equal
the aggregate of the PRP funding pool for all eligible employees in the
Company. 

 

4.1       Funding Pools

The Company calculates the component funding pools, based on the Company’s
performance through the end of the year, the performance at the corporate level,
and for each Commercial Market, Global Brands, Business Area or WotC against the
applicable performance targets.  Those component funding pools as established
(composed of the pools for the Company’s performance and the performance of each
of the Company’s Commercial Market, Global Brands, Business Area or WotC) are

                                                                         

--------------------------------------------------------------------------------

 

aggregated.  Collectively these amounts constitute one aggregate funding pool
(the “Funding Pool”), based on performance as of the end of the year, which the
Company will pay out to all participants in the PRP collectively for performance
during the year.

 

Although the CEO and the Compensation Committee reserve the right to alter the
Funding Pool after year end, but prior to the actual payment of awards to
participants in the PRP, it is expected that such discretion will only be
exercised in rare or extreme circumstances, and that generally the entire
Funding Pool, as it has been computed, will be paid (absent any affirmative
exercise of this discretion) out to the participants in the PRP collectively
following the closing of the year in question.

 

4.2       High Performer Pool Funding

            Following the end of the year, but prior to the payment of all
awards under the Plan with respect to the completed fiscal year, management of
the Company may determine to add additional funding to the plan, to cover
individual performance awards for some employees or officers (the “High
Performer Pool”).  To the extent such determinations are made, they are subject
to the approval of the appropriate management of the Company.  Funding of the
High Performer Pool is determined by the achievement to Operating Profit,
overall company performance and affordability.  The aggregate amount of the High
Performer Pool is subject to the approval of both the CEO and the Compensation
Committee. 

 

            4.3       Total Awards Under the PRP

The aggregate of all incentive awards under the PRP shall consist of the sum of
the Funding Pool and the High Performer Pool.  In addition to the procedures set
forth above, any incentive awards recommended under the PRP which exceed one
times a participant’s base salary must be reviewed and approved by the Company’s
CEO.

 

4.4       Management Review

Payment of any incentive award to an employee is subject to management’s review.

 

§  For purposes of the PRP, management has the ability to review the proposed
payout of any incentive award under the PRP to an eligible employee and to
determine whether such proposed incentive award should be adjusted based on the
participant’s performance, contributions to the organization, or any other
factor allowed by law.  In completing this review, management has the option of
providing a zero value incentive award to the employee regardless of Company,
Commercial Market, Global Brands, Business Area or WotC performance.  For
participants that do not receive an incentive award or that receive a reduced
incentive award, the portion of such person’s potential incentive award that
might have been reflected in the Funding Pool will remain in the Funding Pool
and be allocated to other PRP participants in the manner determined by
management.

 

5.0       Removals, Transfers, Terminations, Promotions and Hiring Eligibility

            Except to the extent applicable legal requirements mandate a
different result for a Plan participant, the following scenarios will be dealt
with under the PRP in the manner set forth below.

 

                                                                         

--------------------------------------------------------------------------------

 

            5.1       Participants whose employment with the Company is
terminated because of retirement or disability:

 

 

§  After the close of the PRP year, but prior to the actual distribution of
incentive awards for such year, may be awarded an incentive award for the plan
year at the discretion of the Chief Human Resource Officer.  For any such
participant who is not given an incentive award, the portion of such person’s
potential incentive award that might have been reflected in the Funding Pool
will remain in the Funding Pool and be allocated to other PRP participants in
the manner determined by management.

 

 

 

§  After the beginning, but prior to the close of the PRP year, no award shall
be granted unless authorized at the discretion of the Chief Human Resource
Officer.

 

            5.2       Participants whose employment with the Company is
terminated because

                        of death:

 

 

§  After the close of the PRP year, but prior to the actual distribution of
awards for such year, shall be awarded an incentive award for the PRP 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 PRP year, no award shall
be granted unless authorized at the discretion of the Chief Human Resource
Officer.  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 PRP year but prior to the distribution of incentive awards for such year
will not receive an incentive award.  For any such participant, the portion of
such person’s potential incentive award that might have been reflected in the
Funding Pool will remain in the Funding Pool and be allocated to other plan
participants in the manner determined by management if the planning budgets have
already been established.

 

            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 incentive award for any PRP year.  For any
such participant, the portion of such person’s potential incentive award that
might have been reflected in the Funding Pool will remain in the Funding Pool
and be allocated to other plan participants in the manner determined by
management.

 

            5.5       Participants who are discharged from the employ of the
Company or any of its subsidiaries due to any reason other than the ones
enumerated above, including, without limitation, participants who are discharged
due to job elimination:

                                     

                                                                         

--------------------------------------------------------------------------------

 

 

§  After the close of the PRP year, but prior to the actual distribution of
incentive awards for such year, may be awarded an incentive award for the PRP
year.  No award shall be granted unless authorized at the discretion of the
Chief Human Resource Officer.  For any such participant who is not given an
incentive award, the portion of such person’s potential incentive award that
might have been reflected in the Funding Pool will remain in the Funding Pool
and be allocated to other plan participants in the manner determined by
management.

 

                         

 

§  After the beginning, but prior to the close of the PRP year, the participant
is no longer eligible for that year.  However, a discretionary incentive award
may be granted by the Chief Human Resource Officer. 

 

 

            5.6       Participants under statutory or contractual notices as may
be required by applicable law:

 

 

§  On December 31st of the PRP year, may be awarded an incentive award for the
PRP year.  Except as may be required by applicable laws, no award shall be
granted unless authorized at the discretion of the Chief Human Resource
Officer.  For any such participant who is not given an incentive award, the
portion of such person’s potential incentive award that might have been
reflected in the Funding Pool will remain in the Funding Pool and be allocated
to other plan participants in the manner determined by management.

 

 

 

§  Which ends prior to the close of the PRP year shall not be eligible for an
incentive award for that plan year.  However, a discretionary incentive award
may be granted by the Chief Human Resource Officer.

 

            5.7       Participants transferred during the PRP year from one
division of the Company to another will be eligible to receive an incentive
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 PRP year, but the award amount may be based on the performance made in each
division in which the individual was employed during the PRP year.

 

            5.8       Employees hired during the PRP year must be actively
employed on or before October 1st or another date designated by the Chief Human
Resource Officer or his designee of the PRP year to participate in the PRP for
that PRP year.  incentive awards will be made based upon the employee's earned
salary during the period of their employment with the Company during the PRP
year.

 

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

 

                                                                         

--------------------------------------------------------------------------------

 

 

§  Prior to October 1st or another date designated by the Chief Human Resource
Officer or his designee, of the PRP year, will participate at the level
consistent with the promotion or reclassification.

 

 

§  After October 1st or another date designated by the Chief Human Resource
Officer or his designee, but prior to the close of the PRP year, will
participate at the level consistent with their classification prior to the
promotion or reclassification.

 

                                   5.10     The eligibility for an incentive
award under the PRP for employees who remain employed with the Company during
the PRP year but whose change in employment status through demotion affects
their level of participation will be determined by the Chief Human Resource
Officer.

 

6.0       Administration of the PRP

 

            6.1       Amendments to the PRP (Contingency Clause)

The CEO and the Compensation Committee reserve the right to interpret, amend,
modify, or terminate the PRP in accordance with changing conditions at any time
in their sole discretion.

 

            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.  In furtherance of
the preceding sentence, any incentive awards under the PRP will be paid no later
than the date allowable to insure tax deductibility in the year of accrual,
which in the case of the United States is March 15, 2020.  Participants in the
PRP must be employed at the time of award distribution in order to receive an
incentive award, except as provided in Section 5.0.

 

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

 

            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. 

 

6.5       Clawback of Awards             

By accepting any incentive awards under the Plan, the participant hereby
acknowledges and agrees that (i) any incentive compensation the participant is
awarded is subject to the Company’s Clawback Policy, which was adopted by the
Company’s Board of Directors (the “Board”) in October 2012, and (ii) any
incentive award the participant is awarded will be subject to the terms of such
Clawback Policy, as it may be amended from time to time by the Board in the
future.  Such acknowledgement and agreement is a material condition to receiving
any incentive award under the Plan, which would not have been awarded to the
participant otherwise. 

  

                                                                         

--------------------------------------------------------------------------------

 

6.6       Stock Ownership  

            Additionally, the participant acknowledges and agrees that if the
participant is now, or becomes subject in the future to, the Hasbro, Inc.
Executive Stock Ownership Policy, effective as of March 1, 2014 as it may be
amended from time to time by the Board in the future (the “Stock Ownership
Policy”),  then the receipt of any incentive award under the PRP is contingent
upon the participant’s compliance with the terms of the Stock Ownership Policy,
including without limitation, the requirement to retain an amount equal to at
least 50% of the net shares received as a result of the exercise, vesting or
payment of any equity awards granted until the Participant’s applicable
requirement levels are met.  Failure to comply with the Stock Ownership Policy
may, in the Company’s sole discretion, result in the reduction or total
elimination of any incentive award that otherwise might be payable under the PRP
and/or result in the Company determining to substitute other forms of
compensation, such as equity, for any award the participant otherwise might have
received under the PRP.

 

 

                                                                         

--------------------------------------------------------------------------------