Hasbro (HAS)

 

The Company’s wholly-owned subsidiary, Hasbro Canada Corporation (“Hasbro Canada”), leases an office and warehouse facility 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 former director of the Company and mother of the Company’s Chairman, Alan G. Hassenfeld, is executrix and a beneficiary of the estate of Merrill Hassenfeld. During 2000, the CTM lease was renewed for a three-year term ending on January 31, 2004 at rentals of approximately $579,000, $589,000 and $599,000 Canadian for the three years, respectively. During 2003 a new lease was signed for a six-year term ending on January 31, 2010, with one three-year renewal option that Hasbro Canada can exercise at the end of the term. The new lease also provides Hasbro Canada with a right to terminate the lease on January 31, 2007, or at any time thereafter, upon six months’ written notice. The rent provided for in this six-year lease is $525,000 Canadian per year (approximately $450,000 U.S. at exchange rates in effect at the end of 2005). In accordance with this new lease, total rent paid by Hasbro Canada to CTM for the lease of the office and warehouse facility in 2005 was approximately $450,000 U.S. at exchange rates in effect at the end of 2005. In management’s opinion, this lease is on terms at least as favorable as would otherwise presently be obtainable from unrelated parties.

 

Lucas Licensing Ltd. (“Licensing”) and Lucasfilm Ltd. (“Film” and together with “Licensing”, “Lucas”) own in the aggregate exercisable warrants to purchase 15,750,000 shares of Common Stock which were obtained in arms-length negotiations with the Company in connection with the Company’s obtaining certain rights related to the STAR WARS properties. The Common Stock subject to such warrants would, if all warrants were fully exercised, constitute approximately 8.2% of the Company’s outstanding shares. Accordingly, under SEC Rule 13d-3, George W. Lucas, Jr., as owner, director and an officer of Film and Licensing, may be deemed to own approximately 8.2% of the Company’s outstanding shares. See “Voting Securities and Principal Holders Thereof.” In fiscal 2005, the Company paid an aggregate of approximately $40.8 million in royalties to Licensing pursuant to license agreements entered into at arms length in the ordinary course of business.

 

In January 2003, the Company amended its license with Licensing for the manufacture and distribution of STAR WARS toys and games. Under the amended agreement the term was extended by ten years and is expected to run through 2018. In addition, the minimum guaranteed royalties due to Licensing were reduced by $85 million. In a separate agreement, the warrants previously granted to Lucas were also amended. Under this warrant amendment, the terms of each of the warrants issued to Lucas were extended by ten years. The warrant amendment agreement provides the Company with an option through October 2016 to purchase all of these warrants from Lucas for a price to be paid at the Company’s election of either $200 million in cash or $220 million in Common Stock, such stock being valued at the time of the exercise of the option. Also, the warrant amendment agreement provides Lucas with an option through January 2008 to sell all of these warrants to the Company for a price to be paid at the Company’s election of either $100 million in cash or $110 million in Common Stock, such stock being valued at the time of the exercise of the option.

 

In December 2005 the Company entered into a three-year arrangement with Recruitmax Software, Inc. (“Recruitmax”) pursuit to which Recruitmax supplies the Company with applicant tracking and recruitment software and services. Under this agreement the Company expects to pay Recruitmax approximately $292,000 over the course of the three-year term. In fiscal 2005 the Company paid Recruitmax $137,600 of the total estimated fee of $292,000. The President of Recruitmax, Jim Philip, is the brother of Edward M. Philip, one of the Company’s directors.

 

Alfred J. Verrecchia, the Company’s President and Chief Executive Officer, is Chairman of Lifespan, a hospital holding company. Two of Lifespan’s member hospitals are the Hasbro Children’s Hospital and the Miriam Hospital. In fiscal 2005, the Company donated approximately $500,000 in aggregate to the Hasbro Children’s Hospital and the Miriam Hospital.

 

Andrea Patterson-Girard, daughter of E. David Wilson, is employed by the Company as a Director of Human Resources. For fiscal 2005, Ms. Patterson-Girard was paid an aggregate salary and bonus of $133,016, and was granted stock options to purchase 1,250 shares of the Common Stock at an exercise price equal to the fair market value of the Common Stock on the date of grant. Michael Verrecchia, son of Alfred J. Verrecchia, is employed by the Company as a Director of Marketing. For fiscal 2005, Mr. Verrecchia was paid an aggregate salary and bonus of $129,846, and was granted stock options to purchase 1,000 shares of Common Stock at an exercise price equal to the fair market value of the Common Stock on the date of grant.