SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (x)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary proxy statement
(x ) Definitive proxy statement
( ) Definitive additional materials
( ) Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
HASBRO, INC.
_______________________________________________________________
(Name of Registrant as Specified in Its Charter)
HASBRO, INC.
_______________________________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
(x) $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1),
or 14a-6(j)(2).
( ) $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6
(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
_________________________________________________________________
2) Aggregate number of securities to which transactions
applies:
_________________________________________________________________
3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11:
_________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_________________________________________________________________
(x) Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
(1) Amount previously paid:
$375.
_________________________________________________________________
(2) Form, Schedule or Registration Statement no.:
Annual Report on Form 10-K for fiscal year ended
December 26, 1993
_________________________________________________________________
(3) Filing Party:
Hasbro, Inc.
_________________________________________________________________
(4) Date filed:
March 28, 1994
_________________________________________________________________
<PAGE>
HASBRO, INC.
1027 Newport Avenue
Pawtucket, Rhode Island 02862
Annual Meeting of Shareholders
May 11, 1994
Notice is hereby given that the Annual Meeting of
Shareholders of Hasbro, Inc. (the "Company") will be held at
10:00 o'clock A.M. on May 11, 1994 at the New York showroom of
the Company, 32 West 23rd Street, New York, New York, for the
following purposes:
1. To elect five directors of the Company, all of
whom are proposed to be elected to a term expiring in 1997;
2. To consider and vote upon a proposed Stock
Option Plan for Non-employee Directors of the Company, described
and set forth in full in the accompanying Proxy Statement and
Appendix A thereto, which Plan has been adopted by the Board of
Directors, subject to shareholder approval;
3. To consider and vote upon a proposed Senior
Management Annual Performance Plan for the Company, described and
set forth in full in the accompanying Proxy Statement and
Appendix B thereto, which Plan has been adopted by the
Compensation and Stock Option Committee of the Board of
Directors, subject to shareholder approval;
4. To ratify the selection by the Board of
Directors of KPMG Peat Marwick as independent certified public
accountants for the Company for the fiscal year ending December
25, 1994; and
5. To transact such other business as may
properly come before the meeting.
Only holders of record of the Common Stock (the "Share-
holders") at the close of business on March 18, 1994 are entitled
to notice of, and to vote at, the meeting and any adjournments
thereof. Such Shareholders may vote in person or by proxy. The
stock transfer books of the Company will not be closed.
The Board of Directors recommends that Shareholders
vote FOR the election of the five directors nominated in the
accompanying Proxy Statement, the approval of the proposed Plans
and the ratification of the selection of KPMG Peat Marwick as the
Company's independent certified public accountants for the fiscal
year ending December 25, 1994. Shareholders are urged to attend
the meeting in person. If you are not able to do so and wish
that your stock be voted, you are requested to complete, sign,
date and return the accompanying Proxy in the enclosed envelope.
No postage is required if mailed in the United States.
By Order of the Board of Directors
Donald M. Robbins
Secretary
Dated: April 4, 1994
<PAGE>
HASBRO, INC.
1027 Newport Avenue
Pawtucket, Rhode Island 02862
Mailing Date: April 4, 1994
----------------
PROXY STATEMENT
Annual Meeting of Shareholders
----------------
This Proxy Statement is furnished in connection with
the solicitation by the Board of Directors (the "Board") of
Hasbro, Inc. (the "Company") of Proxies to be used at the Annual
Meeting of Shareholders of the Company, to be held at 10:00 A.M.
on May 11, 1994, at the New York showroom of the Company, 32 West
23rd Street, New York, New York, and at any adjournments thereof.
If Proxies in the accompanying form are properly executed and
returned, the shares of the Company's common stock, par value
$.50 per share (the "Common Stock"), represented thereby will be
voted as instructed on the Proxy. If no instructions are given,
such shares will be voted for the election of the five directors
nominated below, in favor of the proposed Plans described herein
and set forth in full in the Appendices hereto and in favor of
the ratification of the selection of KPMG Peat Marwick as
independent certified public accountants for the Company for the
fiscal year ending December 25, 1994.
VOTING
Holders of record (the "Shareholders") of the Common
Stock on March 18, 1994 are entitled to vote at the Annual
Meeting or any adjournments thereof. As of that date there were
87,977,666 shares of Common Stock outstanding and entitled to
vote and a majority of the outstanding shares will constitute a
quorum for the transaction of business at the Annual Meeting.
Each share of Common Stock entitles the holder thereof to one
vote on all matters to come before the meeting, including the
election of directors. Any Proxy may be revoked by a Shareholder
prior to its exercise upon written notice to the Secretary of the
Company, by submission of a duly executed Proxy bearing a later
date or by the vote of a Shareholder cast in person at the
meeting.
ELECTION OF DIRECTORS
(Proposal No. 1)
Five directors are to be elected at the Annual Meeting,
all of whom are proposed to be elected to a term expiring in
1997. The Board has unanimously recommended as nominees for
election as directors the first five persons named in the table
below. All of the nominees are currently directors of the
Company. The Board is divided into three classes. The terms of
the nine remaining directors expire in 1995 and 1996. Unless
otherwise specified in the accompanying Proxy, the shares voted
pursuant thereto will be cast for the persons named below as
nominees for election as directors. If, for any reason, any of
the nominees named below should be unable to serve as a director,
it is intended that such Proxy will be voted for the election, in
his or her place, of a substituted nominee who would be
recommended by management. Management, however, has no reason to
believe that any nominee named below will be unable to serve as a
director.
The following table sets forth as to each nominee and
as to each incumbent director whose term of office extends to
1995 and 1996 and who is, therefore, not a nominee for election
as a director at this Annual Meeting: (i) his or her age;
(ii) all positions and offices with the Company; (iii) principal
occupation or employment during the past five years; (iv) other
directorships of publicly held companies or investment companies;
and (v) period of service as a director of the Company. Except
as otherwise indicated, each person has had the same principal
occupation or employment during the past five years.
<TABLE>
<CAPTION>
Has Been
Positions with Company, A
Principal Occupation and Director Term
Name Age Other Directorships Since Expires
Nominees for Term Expiring in 1997
<C> <C> <C> <C> <C>
Alan G. Hassenfeld 45 Chairman of the Board, President 1978 *
and Chief Executive Officer since
1989. Prior thereto, President
and Chief Operating Officer.
George R. Ditomassi, Jr. 59 Chief Operating Officer, Games 1992 *
and International since 1990.
Prior thereto, Group Vice
President and President,
Milton Bradley Company
("Milton Bradley").
Harold P. Gordon 56 Partner, Stikeman, Elliott (law 1988 *
firm). Director, Alliance
Communications Corporation,
Fonorola Inc., G.T.C.
Transcontinental Group Ltd.,
and Marleau, Lemire Inc.
Alex Grass 66 Chairman of the Board and Chief 1981 *
Executive Officer, Rite Aid
Corporation (drug store chain).
Chairman of the Board, SuperRite
Foods, Inc.
Preston Robert Tisch 68 President, Co-Chief Executive 1988 *
Officer and Director of Loews
Corporation. Director, Bulova
Watch Company, Inc., CBS Inc.,
CNA Financial Corporation and
Rite Aid Corporation.
Directors whose Terms Expire in 1995 and 1996
Barry J. Alperin 53 Vice Chairman since 1990. 1988 1995
Prior thereto, Co-Chief Operating
Officer from 1989 to 1990. Prior
thereto, Executive Vice President.
Director, Seaman's Furniture Company.
- ----------------------------
* Nominee
Positions With Company, Has Been A
Principal Occupation and Director Term
Name Age Other Directorships Since Expires
Alan R. Batkin 49 Vice Chairman, Kissinger 1992 1995
Associates, Inc. (geopolitical
strategic consulting firm) since
1990. Prior thereto, Managing
Director, Shearson Lehman Brothers,
Inc. (investment bankers). Director,
Infinity Broadcasting Corporation.
Sylvia K. Hassenfeld 73 Chairman of the Board, 1983 1996
American Jewish Joint
Distribution Committee,
Inc. ("JDC") since 1993.
Prior thereto, President
of JDC.
Claudine B. Malone 57 President, Financial and 1992 1995
Management Consulting, Inc.
Director, Dell Computer
Corporation, Hannaford Brothers
Co., Houghton Mifflin Company,
The Limited Inc., Mallinckrodt
Group Inc., Scott Paper Company
and Union Pacific Corporation.
Norma T. Pace 72 Senior Advisor and Director, 1984 1996
WEFA, Inc. (economic
consulting and planning) since
1992. President, Economic
Consulting and Planning
Incorporated from 1988 to 1993.
Director, Georgia Pacific Corp.
and Englehard Corp. Governor,
United States Postal Service.
E. John Rosenwald, Jr. 64 Vice Chairman, The Bear Stearns 1983 1996
Companies Inc. (investment
bankers). Director, The Bear
Stearns Companies Inc. and
Frequency Electronics, Inc.
Carl Spielvogel 65 Chairman of the Board and Chairman1992 1995
of the Executive Committee,
Backer Spielvogel Bates Worldwide, Inc.
(advertising) since 1994. Prior
thereto, Chairman and Chief Executive
Officer, Backer Spielvogel Bates
Worldwide, Inc. Director, Foamex
International Incorporated and The
Medicis Pharmaceutical Corp.
Henry Taub 66 Honorary Chairman of the Board 1986 1995
and Chairman of the Executive
Committee, Automatic Data
Processing Company, Inc.
Director, Rite Aid Corporation
and Bank Leumi Trust Company of
New York.
Positions With Company, Has Been A
Principal Occupation and Director Term
Name Age Other Directorships Since Expires
Alfred J. Verrecchia 51 Chief Operating Officer- 1992 1996
Domestic Toy Operations since
1990. Prior thereto, Co-Chief
Operating Officer from 1989 to
1990. Prior thereto, Executive
Vice President and President,
Hasbro Manufacturing Services
Division. Director, Old
Stone Corp.
</TABLE>
* * *
Sylvia K. Hassenfeld is the mother of Alan G.
Hassenfeld.
James R. Martin, who has served as a director of the
Company since 1984 and prior thereto as a director of Milton
Bradley from 1978, has reached the mandatory retirement age of
75, and therefore is not standing for reelection at the 1994
Annual Meeting of Shareholders.
Those directors who are also executive officers of the
Company serve as officers and directors of the Company's various
subsidiaries at the request and convenience of the Company.
During 1993, the Board held six meetings. Mr. Martin
and Mr. Tisch each attended fewer than 75% of the aggregate
number of meetings of the Board and of the Committee on which
each served.
The Executive Committee of the Board, which currently
consists of Harold P. Gordon, Alan G. Hassenfeld, James R.
Martin, Norma T. Pace and E. John Rosenwald, Jr., did not meet in
1993. The Executive Committee is vested with all of the powers
that are held by the Board, except that by law the Executive
Committee may not exercise any power of the Board relating to
amendment of the Restated Articles of Incorporation or By-Laws of
the Company, adoption of a plan of merger or consolidation, the
sale, lease or exchange of all or substantially all the property
or assets of the Company or the voluntary dissolution of the
Company. The Executive Committee performs such functions as are
assigned to it by the Board from time to time.
The Nominating Committee of the Board, which currently
consists of Alex Grass, Sylvia K. Hassenfeld and Henry Taub, did
not meet in 1993. The Nominating Committee makes recommendations
for possible additions to the Board. The Nominating Committee
has neither the authority nor the procedures to consider nominees
recommended by shareholders.
The Audit Committee of the Board, which currently
consists of Claudine B. Malone, James R. Martin and Norma T.
Pace, held three meetings in 1993. The function of the Audit
Committee is to recommend to the Board the accounting firm to
serve as the Company's independent auditors and to review with
such firm, and with the Company's internal auditors and officers,
matters relating to corporate financial reporting procedures and
policies, adequacy of financial, accounting and operating
controls and the scope of the respective audits performed by the
Company's auditors and internal auditors.
The Compensation and Stock Option Committee of the
Board, which currently consists of Alan R. Batkin, Harold P.
Gordon, E. John Rosenwald, Jr. and Carl Spielvogel, held three
meetings in 1993. The Compensation and Stock Option Committee
has been delegated primary responsibility for establishing and
administering senior executive compensation programs, is
authorized to make grants and awards under the Company's 1992
Stock Incentive Plan and considers and recommends Board actions
relating to employee compensation under certain other employee
compensation plans.
Compensation of Directors
Effective January 1, 1994, members of the Board who are
not otherwise employed by the Company ("Non-employee Directors")
receive a retainer of $25,000 per year for serving as such and a
fee of $1,000 per Board or committee meeting attended, except
that if two or more of such meetings are held on the same day,
the fee for the first meeting is $1,000 and the fee for each
additional meeting is $500. Effective January 1, 1994, the Chair
of the Audit Committee and the Chair of the Compensation
Committee each receive an additional retainer of $3,500 per year.
Action by written consent is not considered attendance at a
meeting for purposes of fees to directors.
Pursuant to a Deferred Compensation Plan for Non-
employee Directors adopted in 1993, Non-employee Directors must
defer a minimum of 20% of the annual Board retainer fee into a
unit account, the value of each unit initially being equal to the
fair market value of one share of Common Stock as of the end of
the quarter in which the compensation being deferred would
otherwise be payable. Units increase or decrease in value based
on the fair market value of the Common Stock. In addition, an
amount equal to the cash dividends paid on an equivalent number
of shares of Common Stock is credited to each Non-employee
Director's unit account as of the end of the quarter in which the
dividend was paid. Non-employee Directors may defer the
remainder of their retainer and/or meeting fees into the unit
account or an interest account, which bears interest at the five
year Treasury rate. The Company makes a deemed matching
contribution to the unit account equal to 10% of the amount
deferred, with one-half of such Company contribution vesting on
December 31 of the calendar year in which the deferred
compensation otherwise would have been paid and one-half on the
next December 31, provided the participant is a director on such
vesting date. Unvested Company contributions will automatically
vest on death, total disability or retirement by the director at
or after the mandatory retirement age then in effect. The
current mandatory retirement age for directors, which was set by
the Board in 1990, is seventy-two, except for certain directors
over the age of sixty-eight in 1990, for whom the mandatory
retirement age is seventy-five. The plan provides that
compensation deferred under the plan, whether in the unit account
or the interest account, will be paid out in cash after
termination of service as a director. Directors may elect that
compensation so deferred be paid out in a lump sum or in up to
ten annual installments, commencing either in the quarter
following, or in the January following, the quarter in which
service as a director terminates.
Under the Hasbro, Inc. Retirement Plan for Directors
(the "Retirement Plan"), which is unfunded, each director (who is
not otherwise eligible for benefits under the Company's Pension
Plan) who has attained the age of sixty-five and completed five
years of service on the Board is entitled to receive, beginning
at age seventy-two, an annual benefit equal to the annual
retainer payable to directors during the year in which the
director retires (which does not include the fees paid to
directors for attendance at meetings). If a director retires on
or after the director's seventy-second birthday, the annual
benefit will continue for the life of the director. If a
director retires between the ages of sixty-five and seventy-two,
the number of annual payments will not exceed the retired
director's years of service. Upon a Change of Control, as
defined in the Retirement Plan, directors and retired directors
are entitled to lump-sum payments equal to the present value of
their benefits under the Retirement Plan.
In addition, the Board has adopted a Stock Option Plan
for Non-employee Directors, subject to shareholder approval. See
Proposal to Approve the Stock Option Plan for Non-Employee
Directors (Proposal No. 2) below.
Certain Relationships and Related Transactions
The Company's wholly owned subsidiary, Hasbro Canada
Inc. ("Hasbro Canada"), leases its manufacturing and warehouse
facilities from Central Toy Manufacturing Co. ("CTMC"), 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 is executrix and a beneficiary of
the estate of Merrill Hassenfeld. Total rent paid by Hasbro
Canada to CTMC for the lease of manufacturing and warehouse
facilities in 1993 was approximately $569,000 Canadian
(approximately $443,000 U.S.). In management's opinion, these
leases are on terms at least as favorable as would otherwise
presently be obtainable.
The Company and its subsidiaries paid an aggregate of
approximately $14,000,000 in royalties to Time Warner Inc. ("Time
Warner") and its subsidiaries for the Company's 1993 fiscal year
pursuant to character license agreements entered into at
arms-length in the ordinary course of business. It is currently
anticipated that royalties to be paid by the Company and its
subsidiaries for the fiscal year ending December 25, 1994 to Time
Warner and its subsidiaries pursuant to character license
agreements will exceed $60,000. See "Voting Securities and
Principal Holders Thereof".
In order to reduce interest expense, the Company in
1993 voluntarily prepaid, without premium or penalty, the
remaining $2,187,500 principal amount of an amortizing 8.658%
note due 1998 to a subsidiary of Time Warner. This note, with an
original principal amount of $3,500,000, was issued by the
Company in 1985 in exchange for 40,000 shares of the Company's 5%
redeemable preference stock originally issued in 1983 as partial
consideration for the acquisition by the Company of certain
assets of the Knickerbocker Toy Company. See "Voting Securities
and Principal Holders Thereof."
The Company is currently proceeding with an
environmental clean-up at its former manufacturing facility in
Lancaster, Pennsylvania. This facility, a portion of which is
being utilized for limited warehousing operations in 1994, was
acquired in 1986 from the CBS Toys Division of CBS Inc. ("CBS")
in conjunction with the purchase of rights to selected products
formerly marketed by CBS. CBS has acknowledged its
responsibility with respect to some areas of contamination and
some of the remedial actions needed to facilitate this clean-up,
but has not yet funded any of these obligations. The Company
believes that CBS has full responsibility and is engaged in legal
action against CBS to recover all of the costs associated with
the environmental clean-up. While it is impossible to assure the
outcome of the court action, the Company believes that it will
prevail. The Consolidated Financial Statements included in the
Company's Annual Report to Shareholders accompanying this proxy
statement, reflect, pursuant to Statement of Financial Accounting
Standards No. 5, Accounting for Contingencies, certain costs that
the Company expects to ultimately recover from CBS. Preston
Robert Tisch, a director of the Company, is also a director of
CBS and President and Co-Chief Executive Officer of Loews
Corporation, a major shareholder of CBS. By virtue of the
foregoing, Mr. Tisch may be deemed to have an interest adverse to
the Company with respect to the above-described action.
The vote of a majority of those shares present or
represented by proxy at the meeting will be required to elect
directors. Accordingly, an abstention or broker non-vote will in
effect constitute a vote against a nominee. The Board recommends
that the Shareholders vote FOR the election of the five nominees
named above.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN AMONG
HASBRO, S&P 500 AND RUSSELL 1000 CONSUMER DISCRETIONARY ECONOMIC
SECTOR*
The following graph tracks an assumed investment of $100 on
the start dates indicated below in the Company's Common Stock,
the S&P 500 Index and the Russell 1000 Consumer Discretionary
Economic Sector, assuming full reinvestment of dividends and no
payment of brokerage or other commissions or fees. Past
performance is not necessarily indicative of future performance.
[GRAPH]
1988 1989 1990 1991 1992 1993
Hasbro $100 $125 $105 $255 $337 $375
S&P 500 $100 $132 $127 $166 $179 $197
Russell 1000 $100 $130 $120 $175 $204 $217
Consumer
Discretionary
Economic Sector
*While the information for Hasbro & the S&P 500 is as of the last
trading day in Hasbro's fiscal year, the data for the Russell index is
as of the last trading day in the calendar year.
REPORT OF THE
COMPENSATION AND STOCK OPTION COMMITTEE
OF THE BOARD OF DIRECTORS
1993 Compensation Policies With Respect to Executive Officers
The general goal of the Compensation and Stock Option
Committee (the "Committee") with respect to the compensation of
executive officers (including those named in the summary compensation
table below) is to assure that the Company provides competitive
compensation and benefits that
*attract and retain capable executives who are important to
the success of the Company,
*reward them for performance,
*provide them with a strong incentive to increase
shareholder value, and
*accomplish the foregoing in as fair, understandable and
cost-effective manner as possible.
During the latter part of 1992, the Company retained
an outside compensation consultant to review the Company's
executive compensation program. The consultant surveyed other
major toy and other non-durable consumer products companies
(substantially all of which are included in the Russell 1000
Consumer Discretionary Economic Sector set forth in the above
graph (the "Consumer Discretionary Sector")). The consultant
found that all of the Company's major toy competitors and most of
the other major non-durable consumer products companies surveyed
had a long term incentive compensation program to supplement
their regular stock option program. The consultant recommended a
program to reward superlative performance by key executives
through the use of premium priced stock options which only
provide value if share appreciation exceeds the premium. On the
basis of the recommendations of the consultant, the Committee in
1993 authorized the establishment of a long-term incentive
program under its 1992 Stock Incentive Plan, pursuant to which
premium-priced stock options were granted at 110% of market value
on date of grant to thirteen selected executives of the Company,
including all those named in the summary compensation table
below.
In addition, the consultant found that all other
major toy companies had three year vesting for their regular
stock option program, and recommended a reduction in the vesting
schedule by the Company from five years to three years. The
Committee in 1993, at the recommendation of the consultant,
authorized the shortening of the vesting period under the
Company's regular stock option program from five years to three
years so as to prevent the Company from suffering a competitive
disadvantage with regard to the retention and recruitment of
capable executive talent within the industry.
Executive compensation during 1993 consisted of
salary, a management incentive bonus and stock options. In
authorizing and approving compensation increases and awards for
executive officers (other than the Chief Executive Officer), the
Committee takes into account the recommendations of the Chief
Executive Officer.
Base salaries for new executive officers are
initially determined by evaluating the responsibilities of the
position held, the experience of the individual and the
competitive marketplace for comparable executive talent.
Subsequent yearly adjustments are made by reference to changes in
duties and responsibilities, competitive market conditions and
personal performance. In approving the increases to base
salaries for 1993, the Committee targeted the Company's pay
levels to correspond with the 75th percentile of salaries paid by
selected major toy and consumer non-durable products companies
surveyed by its consultant (substantially all of which are
included in the Consumer Discretionary Sector set forth in the
above graph).
Approximately 1,350 employees, including executive
officers, were eligible for annual management incentive bonuses
with respect to fiscal 1993. Individual and corporate
performance objectives are established at the beginning of the
year. Target bonuses for executive officers range from 30% to
50% of base salary with maximum bonuses ranging from 60% to 100%
of base salary. The management incentive bonus for executive
officers who are deemed to have corporate-wide responsibility
(which include all the executive officers named in the summary
compensation table below) is based 75% on corporate performance
and 25% on individual performance. The management incentive
bonus for those individuals deemed to have divisional
responsibility is weighted 25% for corporate performance, 50% for
divisional performance and 25% for individual performance. The
corporate performance measure for management incentive bonuses
with respect to 1993 was based on a targeted net earnings
objective, while the divisional performance measure was based
primarily on targeted divisional pre-tax earnings objectives.
The targeted corporate net earnings performance measure for 1993
was exceeded as were most of the divisional pre-tax earnings
targets. The 1993 management bonuses for executive officers were
based in part on the applicable corporate and divisional
performances and in part on the contribution of the individual.
In 1993, stock options were granted to approximately
350 employees, including executive officers, pursuant to the
Company's employee stock option plans, all of which were approved
by shareholders. The Committee, which is composed solely of
disinterested persons in accordance with Rule 16b-3 of the rules
and regulations of the Securities and Exchange Commission,
granted, or recommended the grant of, individual options to
executive officers in order to provide an incentive to motivate
and retain those individuals who are important to the Company's
future success. Stock options are designed to align the
interests of executives with those of shareholders, since the
executives can only benefit from the options if there is price
appreciation in the Common Stock after the date of grant. All
stock options granted in 1993 were non-qualified, had an exercise
price equal to at least the market value of the Common Stock on
the date of grant and generally vest over three years, except for
premium priced options granted under the long term incentive
program discussed above, as to which the vesting period is over
five years. The amount of stock options previously awarded and
outstanding for each executive officer is reviewed by the
Committee but is not considered a critical factor in determining
the size of any executive stock option award in any year.
Stock options in 1993 were awarded under two programs.
The options granted at market value in February 1993 (as part of
the Company's normal program) were allocated on the basis of
individual compensation level, responsibility and performance in
1992. The premium priced options granted in February 1993 were
designed to provide a competitive long term incentive program to
supplement the Company's regular stock option program to selected
individuals deemed crucial to the Company's current and continued
superior performance. The options granted in December 1993 (as
part of the Company's normal program) were allocated on the basis
of individual compensation level, responsibility and performance
in 1993.
1993 Compensation of the Chief Executive Officer
As set forth in the accompanying tables, Mr.
Hassenfeld's salary of $872,807 for 1993 represented an
approximate 2.5% increase over his 1992 salary, his management
incentive bonus with respect to 1993 was $600,000, which
represented approximately 68.7% of his 1993 salary, and he was
granted options to purchase 210,000 shares of Common Stock in
1993, which represented 7.7% of all options granted to employees
during 1993. All compensation decisions regarding Mr. Hassenfeld
were made by the Committee, in all cases without the
participation of Mr. Hassenfeld or other executive officers of
the Company. In making such recommendations with respect to Mr.
Hassenfeld's compensation, the Committee took into account
comparative data with respect to chief executive officer
compensation provided to the Committee by the consultant with a
view towards setting Mr. Hassenfeld's compensation levels at
approximately the 75th percentile of comparable major toy and
other non-durable consumer products companies (substantially all
of which are included in the Consumer Discretionary Sector set
forth in the above graph). In determining Mr. Hassenfeld's
management bonus and 1993 option grants, the Committee took into
account the fact that the Company exceeded its targeted net
earnings goals for 1992 and 1993 and in each year achieved record
net revenues and earnings, despite a lackluster worldwide
economic environment. The Committee noted that under Mr.
Hassenfeld's leadership during the past five years as Chief
Executive Officer, the Company's annual net revenues have almost
doubled, its annual net earnings have more than doubled, and the
value of a share of Common Stock has more than tripled.
The Committee has reviewed the Company's compensation
plans in light of recent changes to the Internal Revenue Code and
certain proposed regulations thereunder relating to the
disallowance of deductions for remuneration in excess of
$1,000,000 to certain executive officers. With respect to annual
cash management incentive bonuses which would otherwise exceed
the limits on deductibility established by the new tax
provisions, the Committee has adopted the Senior Management
Annual Performance Plan (the "Performance Plan") subject to
Shareholder approval (see Proposal No. 3 below). Since only the
Chief Executive Officer is currently affected by the Code
limitations, the sole participant in the Performance Plan for the
1994 fiscal year will be the Chief Executive Officer. The
Committee believes that, under ordinary circumstances and subject
to shareholder approval of the Performance Plan, the Company's
compensation programs should comply with the requirements of the
Internal Revenue Code so as to permit the deductibility of all
amounts paid to the covered executive officers with respect to
1994. The Committee recognizes, however, that there may be
instances in the future where it would be in the best interests
of the Company and its shareholders to make compensation payments
which would not then be deductible.
Alan R. Batkin, Harold P. Gordon, E. John
Rosenwald, Jr. (Chairman) and Carl
Spielvogel as members of the Compensation
and Stock Option Committee of the Board of
Directors as of 1993 fiscal year end.
Compensation Committee Interlocks and Insider Participation
The law firm of Stikeman, Elliott, of which Harold P.
Gordon is a member, provides legal services to the Company in
Canada and Southeast Asia.
EXECUTIVE COMPENSATION
The following table summarizes compensation paid by
the Company for services rendered during 1993, 1992 and 1991 by
the Chief Executive Officer of the Company and the four most
highly compensated executives of the Company other than the Chief
Executive Officer:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term
Annual Compensation Compensation
Other
Name and Principal Annual (a) All Other (b)
Position Year Salary Bonus Compensation Options Compensation
<C> <C> <C> <C> <C> <C> <C>
Alan G. Hassenfeld 1993 $872,807 $600,000 $30,439 210,000 $67,843
Chairman of the Board, 1992 851,810 600,000 31,907 60,000 84,503
President and Chief 1991 811,125 600,000 25,943 -- 55,210
Executive Officer
Alfred J. Verrecchia 1993 474,196 335,000 13,741 135,000 37,474
Chief Operating Officer-1992 453,200 300,000 16,557 52,500 44,192
Domestic Toy Operations 1991 415,269 300,000 17,454 -- 29,285
George R. 1993 468,846 313,000 16,583 135,000 4,555
Ditomassi, Jr. 1992 448,462 300,000 14,772 52,500 4,429
Chief Operating Officer-1991 411,410 $300,000 11,800 -- 4,778
Games and International
Barry J. Alperin 1993 400,926 210,000 10,395 100,000 31,183
Vice Chairman 1992 383,319 235,000 8,424 36,750 37,684
1991 364,912 250,000 7,771 -- 26,007
John T. O'Neill 1993 336,981 200,000 8,294 100,000 27,627
Executive Vice 1992 319,433 220,000 9,036 36,750 34,722
President and Chief 1991 289,958 250,000 7,250 -- 22,186
Financial Officer
<FN>
<fa> (a) Includes the following amounts which were included in
the 1993 taxable income for each named individual in connection
with a program whereby a leased automobile is provided to the
executive by the Company: $5,439 for Mr. Hassenfeld, $8,391 for
Mr. Verrecchia, $10,200 for Mr. Ditomassi, $6,395 for Mr.
Alperin and $7,544 for Mr. O'Neill. Also includes the following
amounts paid by the Company and included in the 1993 taxable
income for each named individual in connection with a program
whereby certain financial planning and tax preparation services
are provided to the individual and paid for by the Company:
$25,000 for Mr. Hassenfeld, $5,350 for Mr. Verrecchia, $6,383 for
Mr. Ditomassi, $4,000 for Mr. Alperin, and $750 for Mr. O'Neill.
Does not include other personal benefits that do not in the
aggregate exceed $50,000 in any year for any individual.
<fb> (b) Includes, except for Mr. Ditomassi, the executive's pro-
rata share of the Company's contribution to the Company's Profit-
Sharing Plan with respect to each year which is in part contributed
to the executive's account in the Profit-Sharing Plan and, to the
extent in excess of certain Internal Revenue Code maximums, deemed
allocated to the executive's account in the Company's unfunded
Excess Benefit Retirement Plan (the "Supplementary Plan"), which in
1993 amounted to $62,594 for Mr. Hassenfeld, $32,903 for Mr.
Verrecchia, $27,027 for Mr. Alperin and $23,672 for Mr. O'Neill.
Includes for each individual the sum of $2,248, which represents
the Company's 25% match of sums saved in 1993 by each named
executive pursuant to the Company's Savings Plan. Also includes
premiums paid by the Company for term life insurance for each
executive, which in 1993 amounted to $3,000 for Mr. Hassenfeld,
$2,322 for Mr. Verrecchia, $2,307 for Mr. Ditomassi, $1,908 for Mr.
Alperin and $1,707 for Mr. O'Neill.
</TABLE>
* * *
The following table sets forth certain information
regarding stock option grants in 1993 to the executive officers
named above:
<TABLE>
Option Grants in Last Fiscal Year
<CAPTION>
Potential
Realizable
Value at
Assumed Annual
Number of % of Total Rates of Stock
Securities Options Price Apprecia-
Underlying Granted to Exercise tion for Option
Options Employees Price Expiration Term (a)
Name Granted(b) In Fiscal Year Per Share Date 0% 5% 10%
<C> <C> <C> <C> <C> <C><C> <C>
Alan G. 45,000 1.7% $31.625 2/11/03 0 $ 894,996 $2,268,095
Hassenfeld 120,000(c) 4.3 34.7875 2/11/03 0 2,007,155 5,668,753
45,000 1.7 37.4375 12/20/03 0 995,353 2,582,829
Alfred J. 35,000 1.3 31.625 2/11/03 0 696,108 1,764,074
Verrecchia 65,000(c) 2.4 34.7875 2/11/03 0 1,087,209 3,070,574
35,000 1.3 37.4375 12/20/03 0 774,164 2,008,867
George R. 35,000 1.3 31.625 2/11/03 0 696,108 1,764,074
Ditomassi, Jr. 65,000(c) 2.4 34.7875 2/11/03 0 1,087,209 3,070,574
35,000 1.3 37.4375 12/20/03 0 774,164 2,008,867
Barry J. 25,000 0.9 31.625 2/11/03 0 497,220 1,260,053
Alperin 50,000(c) 1.8 34.7875 2/11/03 0 836,315 2,361,980
25,000 0.9 37.4375 12/20/03 0 552,974 1,434,905
John T. 25,000 0.9 31.625 2/11/03 0 497,220 1,260,053
O'Neill 50,000(c) 1.8 34.7875 2/11/03 0 836,315 2,361,980
25,000 0.9 37.4375 12/20/03 0 552,974 1,434,905
<FN>
<fa> (a) Potential realizable value is based on an assumption that
the price of the Common Stock appreciates at the annual rate shown
(compounded annually) from the date of grant until the end of the
ten year option term. These numbers are calculated based on the
rules and regulations promulgated by the Securities and Exchange
Commission and do not reflect the Company's estimate of future
stock price growth. Using these assumptions, the price of the
Common Stock would, at February 11, 2003, have risen, at the 5%
compounded annual rate, to $51.51 per share and, at the 10%
compounded annual rate, to $82.03 per share from the $31.625 per
share market value on February 12, 1993, the date of the first two
grants set forth on the above table for each individual. Under
these assumptions, the potential benefit to all shareholders of the
Company, based on the number of shares of Common Stock outstanding
at the end of the 1993 fiscal year, would be $1.75 billion (at the
5% compounded annual rate) and $4.43 billion (at the 10% compounded
annual rate). Similarly, using these assumptions, the price of the
Common Stock would, at December 20, 2003, have risen, at the 5%
compounded annual rate, to $59.56 per share and, at the 10%
compounded annual rate, to $94.83 per share from the $36.5625 per
share market value on December 21, 1993, the date of last grant set
forth in the above table for each individual. Under these
assumptions, the potential benefit to all shareholders of the
Company, based on the number of shares outstanding at the end of
the 1993 fiscal year, would be $2.02 billion (at the 5% compounded
annual rate) and $5.12 billion (at the 10% compounded annual rate).
However, if the price of the Common Stock does not appreciate, the
value of these options to the named executives, and the
corresponding benefit to all shareholders of the Company, would be
zero.
<fb> (b) All options granted are non-qualified and were granted at
not less than fair market value on the date of grant. Except for
the options described in note (c) below, thirty-three and one-third
percent of each option becomes exercisable on the first anniversary
of the date of grant and thirty-three and one-third percent become
exercisable on each anniversary thereafter until fully exercisable.
Upon a Change in Control, as defined below, all options become
immediately exercisable. Participants may exercise options and
satisfy tax withholding liabilities by payments in cash or by
delivery of Common Stock equal to the exercise price and/or tax
withholding liability. In addition, participants may instruct the
Company to withhold shares issuable upon exercise in satisfaction
of tax withholding liability. All options become fully vested in
the event of death, disability or retirement at the optionee's
normal retirement date and except for the options described in note
(c) below, are exercisable for a period of one year thereafter.
With the consent of the Board, upon the recommendation of the
Committee, an optionee taking early retirement may exercise all or
a portion of the options unvested at his or her early retirement
date and may exercise such options for three months or such longer
period as the Board, upon the recommendation of the Committee, may
approve. Upon termination of employment for any other reason, only
options vested at the date of the termination may be exercised,
and, in the case of all options other than those options described
in note (c) below, are exercisable for a period of three months
following termination.
<fc> (c) These options were granted pursuant to the Company's long
term incentive program under the Company's 1992 Stock Incentive
Plan and were granted at 110% of fair market value on the date of
grant. See Report of the Compensation and Stock Option Committee
of the Board of Directors above. Twenty percent of these options
become exercisable on the first anniversary of the date of grant
and twenty percent become exercisable on each anniversary
thereafter until fully exercisable. Options become fully vested in
the event of death, disability and retirement at the optionee's
normal retirement date and are exercisable for three years
thereafter. Upon termination of employment for any other reason
(including early retirement), an optionee may exercise only options
vested at the date of termination for a period of six months
following termination.
</TABLE>
* * *
The following table sets forth as to each of the named
executive officers: (a) the number of shares acquired upon exercise
of options during fiscal 1993; (b) the value realized (market value
on date of exercise less exercise price) upon the exercise of such
options during fiscal 1993; (c) the number of exercisable and
unexercisable options held on December 26, 1993, the last day of
the 1993 fiscal year; and (d) the value of such options at December
26, 1993 ($36.25, the fair market value on December 26, 1993, less
exercise price).
<TABLE>
Aggregated Option Exercises in Last
Fiscal Year and Fiscal Year End Option Values
<CAPTION>
Number of Unexer- Value of Unexercised
cised Options at In-the-Money Options
December 26, 1993 at December 26, 1993
Shares Acquired Value Unexer- Unexer-
Name on Exercise Realized Exercisable cisable Exercisable cisable
<C> <C> <C> <C> <C> <C> <C>
Alan G. Hassenfeld 115,200 $2,808,978 42,750 294,000 $1,061,689 $1,817,625
Alfred J. Verrecchia -- -- 150,450 207,300 3,643,192 1,484,688
George R.
Ditomassi, Jr. 33,000 663,201 43,500 207,300 958,426 1,484,688
Barry J. Alperin 15,450 430,357 78,750 156,700 1,805,888 1,196,750
John T. O'Neill -- -- 51,150 154,900 1,164,488 1,156,250
</TABLE>
* * *
The following table shows the estimated annual benefits
payable upon retirement in specified remuneration and years of
service classifications under the Pension Plan and under the
Supplementary Plan:
<TABLE>
Pension Plan Table
<CAPTION>
Average Estimated Annual Retirement Benefit By
Compensation (1) Years of Service Classification (2)
10 15 20 25 30 35 (3)
<C> <C> <C> <C> <C> <C> <C>
$ 200,000 $ 33,333 $ 50,000 $ 66,667 $ 83,333 $100,000 $100,000
400,000 66,667 100,000 133,333 166,667 200,000 200,000
800,000 133,333 200,000 266,667 333,333 400,000 400,000
1,200,000 200,000 300,000 400,000 500,000 600,000 600,000
1,600,000 266,666 400,000 533,333 666,667 800,000 800,000
_______________________________
<FN>
<F1> (1) Covered compensation under the Pension Plan and the
Supplementary Plan includes total salaries and bonuses (as set
forth in the Summary Compensation Table) for the five highest
consecutive years during the ten years preceding retirement
("Average Compensation").
<F2> (2) Estimated retirement benefit amounts shown are prior to
reduction by an Internal Revenue Service designated amount keyed to
a participant's latest three-year average Social Security
entitlement. Amounts shown are computed on the single
straight-life annuity option. Early retirement, which is permitted
up to 10 years prior to the normal retirement date, and other
payment options will reduce the annual benefit amount shown.
Payments from the Supplementary Plan, which is unfunded, are not
subject to provisions of the Internal Revenue Code that limit
benefits under the Pension Plan. As set forth in the above table
and subject to the foregoing, the retirement benefit after thirty
years of credited service is generally 50% of Average Compensation,
except for certain employees (which include Mr. Ditomassi) who had
substantial credited service with Milton Bradley prior to its
acquisition by the Company, as to which the retirement benefit is
60% of Average Compensation.
<F3> (3) For purposes of determining benefits under the Pension
Plan and the Supplementary Plan, credited years of service cannot
exceed 30.
</TABLE>
The following table sets forth, as to the five named
executive officers, their years of credited service under the
Pension Plan and the Supplementary Plan:
Credited Years
of Service
Alan G. Hassenfeld .................... 20
Alfred J. Verrecchia .................. 24
George R. Ditomassi, Jr. .............. 30
Barry J. Alperin....................... 9
John T. O'Neill ....................... 7
The five named executive officers are also parties to
employment agreements (the "Agreements") with the Company. The
Agreements come into effect only upon a "Change of Control," as
defined, and continue for three years after such date (the
"Employment Period"). If, during the Employment Period, an execu-
tive's employment with the Company is involuntarily terminated
other than for "cause," the executive is entitled to three times
the executive's average annual base salary and bonus for the five
years preceding the Change of Control, plus an amount equal to the
shortfall between the actuarial benefit payable to the executive
under the Company's retirement plans as a result of the early
termination and the amount the executive would have received if the
executive had continued in the employ of the Company for the
remainder of the Employment Period. The executive and the
executive's family would also be entitled to the continuation of
medical, welfare, life insurance, disability and other benefits for
at least the remainder of the Employment Period. If the executive
is subject to the payment of excise tax under Section 280G of the
Internal Revenue Code, the Company will pay such executive an
additional amount so as to place the executive in the same
after-tax position such executive would have been in had such
excise tax not applied. In addition, the Agreements permit an
executive to terminate the executive's employment for "Good Reason"
at any time or for any reason during a 30-day period immediately
following the first anniversary of the Change of Control and
receive the above-described severance benefits. "Good Reason"
includes diminution of the executive's responsibilities or
compensation, relocation or purported termination otherwise than as
expressly permitted by the Agreements. Under certain
circumstances, certain payments by the Company pursuant to the
Agreements may not be deductible for federal income tax purposes.
A "Change of Control" is defined (for purposes of the Agreements,
the Company's employee stock option plans and the Company's
Retirement Plan for Directors) as the occurrence of certain events,
including acquisition by a third party of 20% or more of the
Company's outstanding voting securities, a change in the majority
of the Board or approval by shareholders of a reorganization,
merger, consolidation, liquidation or dissolution of the Company
subject, in each case, to certain exceptions.
PROPOSAL TO APPROVE THE STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
(Proposal No. 2)
On February 18, 1994, the Board adopted the Stock Option
Plan for Non-employee Directors (the "Option Plan"), subject to
shareholder approval. The Option Plan provides for a one-time
grant of an option to purchase 5,000 shares of the Company's Common
Stock to (a) each Non-employee Director of the Company in office
immediately following Shareholder approval of the Option Plan, and
(b) to each future Non-employee Director on the date such person
becomes a director.
Purpose of Option Plan
The purpose of the Option Plan is to enable the Company
to attract and retain persons of exceptional ability to serve as
directors and to solidify the common interests of its directors and
shareholders in enhancing the value of the Common Stock.
The Compensation and Stock Option Committee of the Board
of Directors (the "Committee") will have the authority to
administer, interpret and make determinations under the Option
Plan. Eligibility for and the grant of shares under the Option
Plan is automatic in nature and each Non-employee Director will
receive an option to purchase the same fixed number of shares under
the Plan. Therefore, the Committee will not have any discretion
with respect to the amount of, or the terms of, any individual
grant under the Option Plan.
Description of Option Plan
The following summary description is qualified in its
entirety by reference to the full text of the Option Plan, which is
annexed to this Proxy Statement as Appendix A.
If the Option Plan is approved by the Shareholders at the
1994 Annual Meeting, then (a) on May 11, 1994, each Non-employee
Director then in office (ten in number) will receive a one-time
grant of a nontransferable option expiring May 10, 2004 to purchase
5,000 shares of Common Stock of the Company at 110% of the fair
market value per share of Common Stock on May 11, 1994; and (b)
each new Non-employee Director will automatically receive a one-
time grant of a nontransferable ten year option to purchase 5,000
shares of Common Stock as of the date of commencement of service as
a director at 110% of the fair market value per share of Common
Stock on the date of grant. As of March 28, 1994, the average of
the high and low sales prices of the Common Stock, as reported in
the Wall Street Journal for American Stock Exchange Composite
Transactions, was $35.6875.
An aggregate of 150,000 shares of Common Stock, which
represents less than two-tenths of one-percent of the outstanding
Common Stock as of the record date, will be available for issuance
under the Option Plan, subject to automatic adjustment in the event
of a stock dividend, stock split or similar events. If any options
granted under the Option Plan expire or terminate without exercise,
in whole or in part, the shares reserved therefor will revert to
the option pool to be available under the Option Plan.
The exercise price of an option will be payable by
delivery of cash or a check to the order of the Company or by
delivery of shares of Common Stock owned by the Non-employee
Director which have a fair market value equal to the exercise price
of the option being exercised, or by any combination of these
methods. The Company will receive no payment for the granting of
the options.
Options granted to Non-employee Directors
("Participants") under the Option Plan will become exercisable at
the rate of 20% per year commencing on the first anniversary of the
date of grant, until fully exercisable. If required by applicable
securities laws, options granted under the Option Plan will not be
exercisable for at least six months after the date of grant, and
shares received upon exercise of any such option may not be sold
for at least six months after purchase, except in the event of
disability or death of the Participant. Options granted under the
Option Plan will expire ten years from the date of grant, unless
terminated earlier in accordance with the Option Plan. However,
any option granted to a Participant who ceases to be a director
because of death will expire three years from the date of the
Participant's death.
The Committee has the discretion to permit a Participant
to satisfy any applicable withholding taxes arising as a result of
an exercise of an option, in whole or in part, either by having the
Company withhold from the shares of Common Stock to be issued upon
exercise of the option, or by permitting the Participant to deliver
to the Company, that number of shares of Common Stock whose fair
market value is equal to or less than the withholding taxes due.
If a Participant ceases to be a member of the Board
because of permanent disability, death or retirement at the
mandatory retirement date then in effect, his or her option will
become immediately exercisable in full and remain exercisable for
three years thereafter. If a Participant ceases to be a member of
the Board for any other reason prior to the time his or her option
becomes fully vested, the option will terminate with respect to the
shares as to which the option is not then vested and remain
exercisable only with respect to the then vested options for one
year after the date the Participant ceased to be a director.
The Option Plan generally provides that immediately upon
certain events constituting a "Change in Control" all options
become 100% vested and payable in cash as soon as practicable after
the Change in Control except that options granted less than six
months prior to the Change in Control would not be payable in cash
until after the Participant ceases to be a director. For purposes
of the Option Plan, Change in Control means the occurrence of
certain events, including acquisition by a third party of 20% or
more of the Company's outstanding voting securities, or approval by
shareholders of a reorganization, merger, consolidation,
liquidation or dissolution of the Company subject, in each case, to
certain exceptions.
The Board may amend, modify or terminate the Option Plan
at any time, subject to certain restrictions described in the Plan.
Subject to the provisions of the Plan, prior approval by the
shareholders of the Company must be obtained to (i) increase the
aggregate number of shares available for grant, (ii) change the
eligibility requirements under the Option Plan, (iii) increase the
number of shares subject to any option, (iv) change the purchase
price of the shares subject to any option, (v) extend the period
during which options may be granted, or (vi) materially increase
the benefits to Participants. The Option Plan will terminate on
December 31, 2004, unless terminated earlier by the Board.
Tax Aspects Under the U.S. Internal Revenue Code
The following is a summary of the principal United States
federal income tax consequences generally applicable to options
granted under the Option Plan. No taxable income will be
recognized by a Participant at the time the option is granted.
Generally, at exercise, ordinary income will be recognized by the
Participant in an amount equal to the difference between the option
exercise price and the fair market value of the shares on the date
of exercise, and the Company will receive a tax deduction for the
same amount. At disposition of the shares acquired upon exercise,
appreciation or depreciation will be treated as either short-term
or long-term capital gain or loss depending on how long the shares
have been held.
The affirmative vote of a majority of the shares of
Common Stock present or represented by proxy at the Annual Meeting
is required for approval of the Option Plan. Accordingly, both an
abstention and a broker non-vote will in effect constitute a vote
against the Option Plan.
The Board recommends a vote FOR approval of the Option
Plan.
PROPOSAL TO APPROVE THE
SENIOR MANAGEMENT ANNUAL PERFORMANCE PLAN
(Proposal No. 3)
On February 18, 1994, the Compensation and Stock Option
Committee of the Board of Directors of the Company unanimously
approved the adoption of the Senior Management Annual Performance
Plan of the Company (the "Performance Plan"), and the Board of
Directors directed that the Performance Plan be submitted to the
Shareholders at the 1994 Annual Meeting for their approval. Targets
set in February 1994 for the applicable performance period shall be
null and void and no payments pursuant thereto may be made if the
Performance Plan is not approved by the Shareholders.
The purpose of the Performance Plan is to promote the
interests of the Company and its shareholders by providing
incentive for participating executive officers to contribute to the
improvement of operating results of the Company and to reward
outstanding performance on the part of those individuals whose
decisions and actions most significantly affect the growth,
profitability and efficient operation of the Company.
The Performance Plan has been designed to enable the
Company to receive federal income tax deductions for awards paid
under the Performance Plan to its Chief Executive Officer and the
four other most highly compensated executive officers
(collectively, the "Covered Employees"), even if any such covered
employee's compensation exceeds $1,000,000 in any year. Under
certain 1993 amendments to the Internal Revenue Code and certain
proposed regulations and transitional rules promulgated thereunder
by the Internal Revenue Service (collectively the "Code"),
corporations whose stock is publicly traded generally will not be
entitled to deduct remuneration paid to covered employees to the
extent that payments for any year to any such employee exceed
$1,000,000, unless the payments are made under qualifying
performance-based compensation plans. The Company believes that if
the Performance Plan is approved by the Shareholders, it will
qualify as a performance-based compensation plan under the Code,
although the Company has not requested or received, and does not
expect to receive, a ruling from the Internal Revenue Service to
that effect.
Summary Description of the Performance Plan
The following summary is qualified in its entirety by
reference to the full text of the Performance Plan annexed to this
Proxy Statement as Appendix B.
The Performance Plan will be administered by the
Compensation and Stock Option Committee of the Board of Directors
or a subcommittee of the Compensation Committee consisting solely
of two or more "outside directors" of the Company as defined in the
Code (the "Committee").
The major provisions of the Performance Plan are as
follows:
Eligibility. Eligibility for participation in the
Performance Plan is limited to executive officers of the Company
who are selected in the sole discretion of the Committee. No
person is automatically entitled to participate in the Performance
Plan in any plan year. Because the Performance Plan has been
designed solely to meet the requirements of the Code, it will be
applicable only to annual incentive awards paid to those executive
officers who are Covered Employees for that year and whose salary,
bonus and other annual compensation (as set forth on the summary
compensation table above) may exceed $1,000,000. Accordingly, the
sole participant in the Performance Plan as selected by the
Committee for the 1994 fiscal year, is the Chief Executive Officer.
However, in future years, the Committee may select other Covered
Employees to be eligible for participation under the Performance
Plan if necessary to enable the Company to receive a full tax
deduction for bonuses paid to them. The Company intends in 1994 to
continue to compensate all of its executive officers, other than
the Chief Executive Officer, under the compensation plans and
policies described elsewhere in this Proxy Statement under the
caption "Report of the Compensation and Stock Option Committee of
the Board of Directors."
Determination of Benefits. The Committee has designated
for the Chief Executive Officer for 1994 and will, for each
subsequent fiscal year, designate a performance goal for that
fiscal year, based on the Company's Net Earnings, as defined below,
for the fiscal year. While performance goals will normally consist
of a targeted increase in Net Earnings, depending on the
circumstances, a performance goal may consist of maintaining Net
Earnings or limiting a reduction in Net Earnings, all as determined
by the Committee in its discretion in any particular year. Subject
to the absolute right of the Committee to decrease awards in its
sole discretion, achievement of a performance goal will result in
payment in the case of the Chief Executive Officer of 75% of salary
for each fiscal year (the "target bonus") and if 130% or more of
the performance goal is achieved, up to a maximum bonus equal to
150% of salary for such fiscal year (the "maximum bonus"). If and
when other executive officers are selected to participate in the
Performance Plan in the future, the Committee will designate the
target and maximum bonuses for such participants but in no event
will the target bonus exceed 75% of salary and the maximum bonus
exceed 150% of salary. No bonus will be payable under the
Performance Plan if less than 70% of the performance goal is
achieved. Salaries of participants will not be adjusted during a
fiscal year. Annual increases in salary to participants will not
exceed 15% a year, except for material changes in responsibility of
the participant, in which case the annual increase will not exceed
30%.
For purposes of the Performance Plan, "Net Earnings" for
a fiscal year is defined as the consolidated net earnings of the
Company and its subsidiaries, determined in accordance with
generally accepted accounting principles on a consistent basis,
exclusive of (a) changes in accounting principles, (b) all
extraordinary items of income and expense, (c) all material
restructuring expenses, (d) the results of operations of
acquisitions consummated during the fiscal year and (e) all
material non-recurring and non-budgeted items of income and
expense.
The Committee has the discretion to reduce the amount of
any award or to refuse to pay any award under the Performance Plan.
Payment of Awards. All awards with respect to a fiscal
year shall be paid at any time or from time to time between the
first day and March 15 of the following fiscal year, provided that
the Committee certifies achievement of the performance goals in
accordance with the Performance Plan.
Estimate of Benefits. The amounts that will be paid
pursuant to the Performance Plan are not currently determinable.
Had the Performance Plan been in effect in fiscal 1993 and had all
of the Covered Employees been selected to participate in the
Performance Plan in fiscal 1993, and assuming that the target and
maximum bonuses for each such officer were 75% and 150% of salary,
respectively, and that the Committee did not exercise its
discretion to reduce any award, the amounts that would have been
paid in accordance with the formula established pursuant to the
Performance Plan and the maximum amounts that could have been paid
had the maximum bonuses been paid in 1993 are each set forth below:
Maximum
Name and Position Dollar Value ($) Dollar Value ($)
Alan G. Hassenfeld $ 752,796 $1,309,210
Chairman of the Board and
Chief Executive Officer
Alfred J. Verrecchia 408,994 711,294
Chief Operating Officer-
Domestic Toy Operations
George R. Ditomassi, Jr. 404,380 703,269
Chief Operating Officer-
Games and International
Barry J. Alperin 345,846 601,389
Vice Chairman
John T. O'Neill 290,646 505,471
Executive Vice President and
Chief Financial Officer
Executive Group (constituting the
the Covered Employees named above) 2,202,662 3,830,633
Non-Employee Director Group 0 0
Non-Executive Officer Employee Group 0 0
The Committee believes, that had the Performance Plan
been in effect in fiscal 1993, and had all of the Covered Employees
been participants in the Performance Plan in fiscal 1993, the
Committee would have exercised its discretion to reduce all such
awards to the bonuses actually paid to these individuals as set
forth in the summary compensation table above, although any future
reduction in the amount of any award under the Performance Plan is
solely at the discretion of the Committee and there is no assurance
as to how the Committee will exercise such discretion in the
future.
Amendment and Termination of the Performance Plan. The
Committee may amend, terminate or suspend the Performance Plan in
whole or in part at any time except that no amendment for which
shareholder approval is required either by the Code in order to
assure the deductibility by the Company of payments payable under
the Performance Plan or by other applicable law shall be effective
without such shareholder approval having been obtained.
The affirmative vote of a majority of the shares of
Common Stock present or represented by proxy at the Annual Meeting
is required for approval of the Performance Plan. Accordingly,
both an abstention and a broker non-vote will in effect constitute
a vote against the Performance Plan.
The Board recommends a vote FOR the proposal to approve
the Senior Management Annual Performance Plan.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Security Ownership of Certain Beneficial Owners
The following table sets forth information, as of March
18, 1994, with respect to the ownership of the Common Stock (the
only class of outstanding voting securities of the Company) by
certain persons known by the Company to be the beneficial owners of
more than 5% of such stock:
Amount and Nature
Name and Address of Beneficial Percent of
Beneficial Owner Ownership (1) Class
Alan G. Hassenfeld ................. 8,025,973 (2) 9.1
1027 Newport Avenue
Pawtucket, RI 02862
WARNER COMMUNICATIONS INC........... 12,057,561 (3) 13.7
75 Rockefeller Center
New York, NY 10019
RUANE, CUNIFF & CO., INC............ 6,340,058 (4) 7.2
1370 Avenue of the Americas
New York, NY 10019
_____________________________
(1) Based upon information furnished by each shareholder or
contained in filings made with the Securities and Exchange
Commission.
(2) Includes 3,951,521 shares held as sole trustee for the benefit
of his mother, 686,098 shares held as personal representative of
the Estate of Stephen Hassenfeld, 368,599 shares held as sole
trustee of a trust for Mr. Hassenfeld's benefit, and presently
exercisable options to purchase 93,750 shares. Mr. Hassenfeld has
sole voting and investment authority with respect to all shares
except those described in the following sentence, as to which he
shares voting and investment authority. Also includes 300,000
shares owned by The Hassenfeld Foundation, of which Mr. Hassenfeld
is an officer and director, as to which shares Mr. Hassenfeld
disclaims beneficial ownership, and 68,541 shares held as one of
the trustees of a trust for the benefit of his mother and her
grandchildren.
(3) These shares are owned by a wholly owned subsidiary of Time
Warner Inc. ("Time Warner"). In December 1992, Time Warner sold in
a public offering approximately $1.65 billion (principal amount at
maturity) of Liquid Yield Option Zero Coupon - Senior Notes due
2012 ("LYONS"). Each LYON, whose original issue price was $292.04
and whose principal amount at maturity will be $1,000, is
exchangeable at the option of the Holder for 7.301 shares of the
Common Stock of the Company owned by Time Warner. Time Warner may
elect to deliver cash in lieu of Common Stock to any LYON holder
who elects to exchange a LYON for Common Stock. The LYONS are not
redeemable, and no LYON holder may elect to cause Time Warner to
repurchase any LYON, prior to December 17, 1997. Time Warner
retains sole voting and investment authority over these shares.
(4) Ruane Cuniff & Co., Inc., a broker dealer and investment
advisor, has the sole voting authority and shared investment
authority as to 3,762,600 shares held by the Sequoia Fund, Inc. and
sole investment authority but no voting authority as to 2,577,458
shares.
Security Ownership of Management
The following table sets forth information, as of March
18, 1994, with respect to the ownership of the Common Stock (the
only class of outstanding equity securities of the Company) by each
director of the Company, each named executive officer and by all
directors and executive officers as a group. Unless otherwise
indicated, each person has sole voting and investment authority.
Percent
Name of Director or Executive Officer (1) Common of
Stock Class
Barry J. Alperin(2) .................. 104,433 *
Alan R. Batkin........................ 750 *
George R. Ditomassi, Jr. (3).......... 68,338 *
Harold P. Gordon...................... 750 *
Alex Grass(4) ........................ 21,411 *
Alan G. Hassenfeld(5) ................ 8,025,973 9.1
Sylvia K. Hassenfeld(6) .............. 338,196 *
Claudine B. Malone.................... 200 *
James R. Martin ...................... 6,450 *
John T. O'Neill (7)................... 67,533 *
Norma T. Pace ........................ 690 *
E. John Rosenwald, Jr.(8) ............ 90,000 *
Carl Spielvogel....................... 18,867 *
Henry Taub ........................... 3,000 *
Preston Robert Tisch.................. 1,500 *
Alfred J. Verrecchia(9)............... 263,025 *
All Directors and Executive Officers as a
Group (includes 26 persons)(10)..... 9,219,827 10.4
_____________________________
* Less than one percent.
(1) Information in this table is based upon information furnished
by each director and executive officer.
(2) Represents presently exercisable options granted under the
Company's employee stock option plans.
(3) Includes presently exercisable options granted under the
Company's employee stock option plans to purchase 56,166 shares.
(4) Does not include 7,500 shares owned by the spouse of Mr. Grass,
as to which Mr. Grass disclaims beneficial ownership.
(5) See note (2) to the immediately preceding table.
(6) Includes 300,000 shares owned by The Hassenfeld Foundation, of
which Mrs. Hassenfeld is an officer and director, and as to the
shares of which she disclaims beneficial ownership. Does not
include the shares of Common Stock held in trust for Mrs. Hassen-
feld's benefit referred to in note (2) to the immediately preceding
table.
(7) Includes presently exercisable options granted under the
Company's employee stock option plans to purchase 66,033 shares.
(8) Does not include shares held by The Bear Stearns Companies Inc.
in an investment account. Mr. Rosenwald is Vice Chairman of The
Bear Stearns Companies Inc.
(9) Includes presently exercisable options granted under the
Company's employee stock option plans to purchase 185,616 shares.
Does not include 67,500 shares owned by Mr. Verrecchia's spouse,
1,875 shares owned by one of Mr. Verrecchia's daughters, 1,350
shares owned by Mr. Verrecchia as trustee of a trust for another of
his daughters and 525 shares owned directly by that daughter, and
1,350 shares owned by Mr. Verrecchia as trustee of a trust for a
third daughter and 525 shares owned directly by that daughter, as
to which in each case Mr. Verrecchia disclaims beneficial
ownership.
(10) Includes 8,773,361 shares with respect to which all directors
and executive officers as a group have sole voting and investment
power, 446,466 shares with respect to which they have shared voting
and/or investment power, and 842,848 shares purchasable by
executive officers upon exercise of presently exercisable options
granted under the Company's employee stock option plans.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Company's directors and executive officers,
and persons who own more than ten percent of a registered class of
the Company's equity securities, to file with the Securities and
Exchange Commission and the American Stock Exchange initial reports
of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Executive officers,
directors and greater than ten-percent shareholders are required by
regulation promulgated by the Securities and Exchange Commission to
furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on review of the
copies of such reports furnished to the Company and written
representations that no other reports were required during the last
fiscal year ended December 26, 1993, all Section 16(a) filing
requirements applicable to its officers, directors and greater than
ten-percent beneficial owners were complied with.
RATIFICATION OF SELECTION OF AUDITORS
(Proposal No. 4)
The Board, upon recommendation of the Audit Committee of
the Board, has selected KPMG Peat Marwick, independent certified
public accountants, to audit the consolidated financial statements
of the Company for the fiscal year ending December 25, 1994. KPMG
Peat Marwick has acted as independent certified public accountants
for the Company since 1964 and has advised that neither it nor any
of its members has any direct financial interest or any material
indirect financial interest in the Company or any of its subsi-
diaries, nor any connection with the Company or any of its subsidi-
aries during the past three years other than as an independent
certified public accountant and in furnishing certain related
services. A representative of KPMG Peat Marwick is expected to be
present at the Annual Meeting, will have the opportunity to make a
statement, if so desired, and will be available to respond to
appropriate questions.
Proposal No. 4 is the ratification of such selection and the
Board unanimously recommends that you vote FOR this proposal.
OTHER BUSINESS
Management knows of no other matters that may be
presented to the Annual Meeting. However, if any other matter
properly comes before the meeting, or any adjournment thereof, it
is intended that Proxies in the accompanying form will be voted in
accordance with the judgment of the persons named therein.
PROPOSALS BY HOLDERS OF COMMON STOCK
Any proposal which a shareholder of the Company wishes to
have considered for inclusion in the proxy statement and proxy
relating to the Company's 1995 Annual Meeting must be received by
the Company at its executive offices no later than December 5,
1994. The address of the Company's executive offices is 1027
Newport Avenue, Pawtucket, Rhode Island 02862.
FINANCIAL STATEMENTS
A copy of the Annual Report of the Company for the fiscal
year ended December 26, 1993 accompanies this Proxy Statement.
COST OF SOLICITATION
The cost of soliciting Proxies in the accompanying form
has been or will be borne by the Company. In addition to
solicitation by mail, arrangements may be made with brokerage
houses and other custodians, nominees and fiduciaries to send
proxies and proxy material to their principals and the Company may
reimburse them for any attendant expenses.
It is important that your shares be represented at the
meeting. If you are unable to be present in person, you are
respectfully requested to mark, sign and date the enclosed Proxy
and return it in the pre-addressed envelope as promptly as
possible. No postage is required if mailed in the United States.
By Order of the Board of Directors
Donald M. Robbins
Secretary
Dated: April 4, 1994
Pawtucket, Rhode Island
<PAGE>
Appendix A
HASBRO, INC.
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
SECTION 1 -- PURPOSE
The purpose of the Stock Option Plan for Non-employee
Directors (the "Plan") is to attract and retain persons of
exceptional ability to serve as members of the Board of Directors
of Hasbro, Inc. (the "Company"), and to solidify the common
interests of the Company's non-employee directors and shareholders
in enhancing the value of the Company's common stock, par value
$.50 per share (the "Common Stock").
SECTION 2 -- ADMINISTRATION
The Plan shall be administered by the Compensation and Stock
Option Committee of the Board of Directors of the Company, or any
successor committee thereof (the "Committee"). The Committee shall
have responsibility finally and conclusively to interpret the
provisions of the Plan and to decide all questions of fact arising
in its application. No member of the Committee shall be liable for
any action or determination made in good faith with respect to the
Plan.
SECTION 3 -- TYPE OF OPTIONS
Options granted pursuant to the Plan shall be nonstatutory
options which are not intended to meet the requirements of Section
422A of the Internal Revenue Code of 1986, as amended (the "Code").
SECTION 4 -- ELIGIBILITY
Directors of the Company who are not employees of the Company
or any subsidiary thereof ("Non-employee Directors") shall be
eligible to participate in the Plan. Each Non-employee Director to
whom stock options are granted shall be a participant
("Participant") under the Plan.
SECTION 5 -- SHARES AVAILABLE UNDER THE PLAN
Subject to adjustment as provided in Section 10 below, an
aggregate of 150,000 shares of Common Stock shall be available for
issuance pursuant to the provisions of the Plan. Such shares may
be authorized and unissued shares or may be shares issued and
thereafter acquired by the Company. If an option granted under the
Plan shall expire or terminate for any reason without having been
exercised in whole or in part, the unpurchased shares subject to
such option shall again be available for subsequent option grants
under the Plan.
SECTION 6 -- AUTOMATIC GRANT OF OPTIONS
(a) Each Non-employee Director in office at the Annual
Meeting of Directors following the time the Plan is approved by the
Company's shareholders pursuant to Section 7.7 hereof shall receive
automatically and without further action by the Board of Directors
or the Committee a grant of an option to purchase 5,000 shares of
Common Stock in accordance with the provisions of Section 7,
subject to adjustment as provided in section 10. Such grant shall
be made as of the date of approval of the Plan by the Company's
shareholders.
(b) Each Non-employee Director who commences his or her
service as a director after approval of the Plan by the Company's
shareholders pursuant to Section 7.7 hereof shall receive
automatically and without further action by the Board of Directors
or the Committee a grant of an option to purchase 5,000 shares of
Common Stock of the Company in accordance with the provisions of
Section 7, subject to adjustment as provided in section 10. Such
grant shall be made as of the date of such Non-employee Director's
commencement of service as a director of the Company.
SECTION 7 -- TERMS AND CONDITIONS OF OPTIONS
7.1 EXERCISE OF OPTIONS.
(a) Each option granted under the Plan shall be exercisable
at the rate of 20% per year commencing on the first anniversary of
the date of grant, subject to the provisions of Section 9 hereof.
(b) Notwithstanding the provisions of paragraph (a) above, an
option granted to any Participant shall become immediately
exercisable in full upon the first to occur of:
(1) The death of any Participant, in which case the
option may be exercised by the Participant's executor or
administrator, or if not so exercised, by the legatees or
distributees of his or her estate or by such other person or
persons to whom the Participant's rights under the option shall
pass by will or by the applicable laws of descent and distribution;
(2) Such time as the Participant ceases to be a director
of the Company by reason of his or her permanent disability; or
(3) Such time as the Participant ceases to be a
director of the Company as a result of retirement from the Board of
Directors on or after the Company's mandatory retirement age for
directors then in effect.
(c) In the event that the Participant ceases to be a director
of the Company for any reason other than those specified in
paragraph (b) above prior to the time a Participant's option
becomes fully exercisable, the option will terminate with respect
to the shares as to which the option is not then exercisable and
all rights of the Participant to such shares shall terminate
without further obligation on the part of the Company.
(d) Options granted under the Plan shall expire ten years
from the date on which the option is granted, unless terminated
earlier in accordance with the Plan; provided, however, that in the
event a Participant ceases to be a director of the Company by
reason of death, disability or retirement, any option granted to
such Participant hereunder shall expire three years from the date
of the Participant's death, disability or retirement, but in no
event, other than death, later than the day preceding the tenth
anniversary of the date of the grant of such option.
(e) In the event that the Participant ceases to be a director
of the Company after his or her option has become exercisable in
whole or in part, such option shall remain exercisable in whole or
in part, as the case may be, in accordance with the terms hereof
for a period of six months from the date the Participant ceases to
be a director, but in no event later than the day preceding the
tenth anniversary of the date of grant of such option.
7.2 EXERCISE PRICE.
The exercise price of each share of Common Stock subject to an
option shall be 110% of the "Fair Market Value" of a share of
Common Stock on the date the option is granted. "Fair Market
Value" for purposes of the Plan shall mean the average of the high
and low sales prices of the Common Stock as reported in The Wall
Street Journal for American Stock Exchange Composite Transactions
or similar successor consolidated transactions reports for the
relevant date (or the comparable consolidated transaction reports
for any other national securities exchange or for NASDAQ National
Market Issues, if the Common Stock is admitted for trading or
quotation on said exchange or market), or, if no sales of Common
Stock were made on said exchange or market on that date, the
average of the high and low prices of Common Stock as reported in
said composite transactions report for the preceding day on which
sales of Common Stock were made on said exchange or market. If the
Common Stock is not then trading on an exchange or quoted in NASDAQ
National Market Issues, then Fair Market Value shall be the mean
between the bid and asked prices for the relevant over-the-counter
transaction on such date or the preceding day on which sales of
Common Stock were made over-the-counter. Notwithstanding the
foregoing, for purposes of valuing shares delivered to the Company
by a Participant in payment of the exercise price of an option and
shares delivered or withheld in payment of applicable tax
withholding, if the Participant sells, on a national securities
exchange, or on NASDAQ or over-the-counter, the shares acquired on
the same day as the date of exercise, the "Fair Market Value" of
the shares so delivered or withheld shall be the actual sales price
of the shares so sold. Under no circumstances shall Fair Market
Value be less than the par value of the Common Stock.
7.3 PAYMENT OF EXERCISE PRICE; TAX WITHHOLDING
(a) Subject to the terms and conditions of the Plan and the
documentation of the options pursuant to Section 7.5 hereof, an
option granted hereunder shall, to the extent then exercisable, be
exercisable in whole or in part by giving written notice to the
Company stating the number of shares with respect to which the
option is being exercised, accompanied by payment in full for such
shares; provided, however, that there shall be no such exercise at
any one time as to fewer than one hundred (100) shares or all of
the remaining shares then purchasable by the person or person
exercising the option, if fewer than one hundred (100) shares.
(b) Options granted under the Plan may be paid for by
delivery of cash or a check to the order of the Company in an
amount equal to the exercise price of such options, or by delivery
to the Company of shares of Common Stock already owned by the
Participant having a Fair Market Value equal in amount to the
exercise price of the option being exercised or by any combination
of such methods of payment.
(c) The Participant shall pay the Company an amount
sufficient to cover withholding required by law for any federal,
state, local or foreign taxes in connection with an exercise of
options herewith. The Committee may permit a Participant to
deliver shares of Common Stock or permit the Participant to direct
the Company that shares of Common Stock be withheld to satisfy
required tax withholding and such shares shall be valued at the
Fair Market Value as of the exercise date and the Committee shall
determine the timing and other terms and conditions in which the
use of shares of Common Stock to satisfy tax withholding may take
place.
7.4 RIGHTS AS A SHAREHOLDER.
Except as specifically provided by the Plan, the grant of an
option will not give a Participant rights as a shareholder. The
Participant will obtain such rights, subject to any limitations
imposed by the Plan, upon actual receipt of the certificate or
certificates representing the Common Stock.
7.5 DOCUMENTATION OF OPTION GRANTS.
Option grants shall be evidenced by written instruments
prescribed by the Committee from time to time. The instruments may
be in the form of agreements to be executed by both the Participant
and the Company or certificates, letters or similar instruments,
which need not be executed by the Participant but acceptance of
which will evidence agreement to the terms of the grant.
7.6 NONTRANSFERABILITY OF OPTIONS.
No option granted under the Plan shall be assignable or
transferable by the Participant to whom it is granted, either
voluntarily or by operation of law, except by will or the laws of
descent and distribution. During the life of the Participant, the
option shall be exercisable only by such person (or in the event of
incapacity, by the person or persons properly appointed to act on
his or her behalf).
7.7 APPROVALS.
The effectiveness of the Plan and of the grant of all options
is subject to the approval of the Plan by the affirmative vote of
a majority of the shares of the Common Stock present in person or
by proxy and entitled to vote at a meeting of the shareholders at
which the Plan is presented for approval.
The Company's obligation to sell and deliver shares of Common
Stock under the Plan is subject to the approval of any governmental
authority required in connection with the authorization, issuance
or sale of the Common Stock.
SECTION 8 -- REGULATORY COMPLIANCE AND LISTING
(a) The issuance or delivery of any shares of stock subject
to exercisable options hereunder may be postponed by the Committee
for such period as may be required to comply with any applicable
requirements under Federal securities laws, any applicable listing
requirements of any national securities exchange or any
requirements under any law or regulation applicable to the issuance
or delivery of such shares. The Company shall not be obligated to
issue or deliver any such shares if the issuance or delivery
thereof would constitute a violation of any provision of any law or
of any regulation of any governmental authority or any rule of any
national securities exchange.
(b) No discretion concerning decisions regarding the Plan
shall be afforded to a person who is not a "disinterested person"
within the meaning of Section 16 of, and Rule 16b-3 promulgated
under, the Securities Exchange Act of 1934, as amended (the "1934
Act"). Section 4 and 6 hereof shall not be amended more than once
every six months, other than to comport with changes in the Code,
the Employee Retirement Income Security Act, or the rules
thereunder. Should any provision of this paragraph require
modification or be unnecessary to comply with the requirements of
Section 16 of Rule 16b-3 under, the 1934 Act, the Committee may
waive such provision and/or amend this Plan to add to or modify the
provisions hereof accordingly.
SECTION 9 -- CHANGE IN CONTROL
Notwithstanding anything to the contrary in the Plan, the
following shall apply to all outstanding options granted under the
Plan:
(a) Definitions -- The following definitions shall apply to
this Section:
A "Change in Control" shall mean:
A. The acquisition by any individual entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act) or
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 the Company (the "Outstanding
Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Voting
Securities"); provided, however, that the following acquisitions
shall not constitute a Change of Control: (i) any acquisition
directly from the Company or any of its subsidiaries, (ii) any
acquisition by the Company or any of its subsidiaries, (iii) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company 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;
B. Approval by the shareholders of the Company 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
C. Approval by the shareholders of the Company of (i) a
complete liquidation or dissolution of the Company or (ii) the sale
or other disposition of all or substantially all of the assets of
the Company 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 for 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.
"CIC Price" shall mean the higher of (1) the highest price
paid for a share of Common Stock in the transaction or series of
transactions pursuant to which a Change in Control of the Company
shall have occurred, or (2) the highest reported sales price of a
share of Common Stock during the 60 day period immediately
preceding the date upon which the event constituting a Change in
Control shall have occurred.
(b) Acceleration of Vesting and Payment of Stock Options.
(1) Upon the occurrence of an event constituting a Change in
Control, all stock options outstanding on such date shall become
100% vested and shall be paid in cash to the Participant as soon as
may be practicable. Upon such payment, such stock options shall be
cancelled.
(2) The amount of cash to be paid shall be determined by
multiplying the number of such options by the difference between
the exercise price per share and the CIC Price, if higher.
(3) Notwithstanding the foregoing subsections (1) and (2),
unless the Committee shall determine otherwise, all options which
have been outstanding less than six months (or such other period as
may then be required by Rule 16b-3) upon the occurrence of a Change
in Control shall become 100% vested but shall not be cancelled
until the day following the date that the Participant ceases to be
a director of the Company (the "Post-Termination Date"), and for
purposes of determining payment upon such cancellation, the Fair
Market Value on the Post-Termination Date shall be used in lieu of
the CIC Price.
(4) Notwithstanding the foregoing subsections (1), (2) and
(3), if the exercise price of a stock option exceeds the CIC Price
or the Fair Market Value on the Post-Termination Date, as the case
may be, such stock option shall be 100% vested but shall not be
cancelled.
SECTION 10 -- ADJUSTMENT IN EVENT OF CHANGES IN
CAPITALIZATION
In the event of a stock dividend, stock split or combination
of shares, recapitalization or other change in the Company's
capitalization, or other distribution with respect to holders of
the Common Stock (other than normal cash dividends), automatic
adjustment shall be made in the number and kind of shares as to
which outstanding options or portions thereof then unexercised
shall be exercisable and in the available shares set forth in
Section 5 hereof, to the end that the proportionate interest of the
option holder shall be maintained as before the occurrence of such
event. Such adjustment in outstanding options shall be made
without change in the total price applicable to the unexercised
portion of such options and with a corresponding adjustment in the
option price per share. Automatic adjustment shall also be made in
the number and kind of shares subject to options subsequently
granted under the Plan.
SECTION 11 -- NO RIGHT TO REELECTION
Nothing in the Plan shall be deemed to create any obligation
on the part of the Board of Directors to nominate any Non-employee
Director for reelection by the Company's shareholders, nor confer
upon any Non-employee Director the right to remain a member of the
Board of Directors for any period of time, or at any particular
rate of compensation.
SECTION 12 -- AMENDMENT AND TERMINATION
(a) Except as provided in Section 8(b), the Board of
Directors, upon the recommendation of the Committee, shall have the
right to amend, modify or terminate the Plan at any time and from
time to time; provided, however, that unless required by law, no
such amendment or modification shall (a) affect any right or
obligation with respect to any grant theretofore made; (b) in any
manner affect the requirements set forth in Section 8(b) hereof; or
(c) unless previously approved by the shareholders, increase the
number of shares of Common Stock available for grants as provided
in Section 5 hereof other than an adjustment pursuant to Section 10
hereof. In addition, no such amendment shall, unless previously
approved by the shareholders (where such approval is necessary to
satisfy then applicable requirements of federal securities laws,
the Code or rules of any stock exchange on which the Company's
Common Stock is listed) (i) in any manner affect the eligibility
requirements set forth in Section 4 hereof, (ii) increase the
number of shares of Common Stock subject to any option, (iii)
change the purchase price of the shares of Common Stock subject to
any option, (iv) extend the period during which options may be
granted under the Plan, or (v) materially increase the benefits to
Participants under the Plan.
(b) Unless earlier terminated by the Board of Directors, the
Plan shall terminate on December 31, 2004; provided, however, that
options which are granted on or before this date shall remain
exercisable in accordance with their respective terms after the
termination of the Plan.
SECTION 13 -- SUCCESSORS AND ASSIGNS
The Plan shall be binding on all successors and permitted
assigns of a Participant, including but not limited to, the estate
of such Participant and the executor, administrator or trustee of
such estate, the guardian or legal representative of the
Participant.
SECTION 14 -- GOVERNING LAW
The validity, construction and effect of the Plan and any
action taken or relating to the Plan shall be determined in
accordance with the laws of the State of Rhode Island and
applicable Federal law.
<PAGE>
Appendix B
HASBRO, INC.
Senior Management Annual
Performance Plan
Section 1. Purpose. The purpose of Hasbro, Inc. Senior
Management Annual Performance Plan (the "Plan") is to promote the
interests of Hasbro, Inc. (the "Company") and its shareholders by
providing incentive to participating senior executive officers of
the Company to make significant contributions to the performance of
the Company and to reward outstanding performance on the part of
those individuals whose decisions and actions most significantly
affect the growth, profitability and efficient operation of the
Company.
Section 2. Term. The Plan shall be effective as of the
first day of the Company's 1994 fiscal year (the "Effective Date"),
subject to shareholder approval of the Plan at the Company's 1994
Annual Meeting of Shareholders, and shall also be applicable for
all future fiscal years of the Company unless amended or terminated
by the Company pursuant to Section 10, subject to any future
shareholder reapproval requirements of the Internal Revenue Code of
1986, as amended (including without limitation Section 162(m)
thereof, and the rules and regulations (including any then current
proposed and/or transitional rules or regulations) promulgated
thereunder by the Internal Revenue Service (collectively the
"Code").
Section 3. Coverage. For purposes of the Plan, the term
"Participant" shall mean each executive officer of the Company
selected by the Compensation and Stock Option Committee of the
Board of Directors or a subcommittee thereof, in each case
consisting solely of two or more "outside directors", as defined in
the Code (the "Committee"), with respect to such fiscal year.
Section 4. Performance Goals. The Committee shall
designate, within the time period required by the Code, a
performance goal under the Plan for each fiscal year (the
"Performance Goal"). The Performance Goal shall be based on the
Company's Net Earnings (as defined in Section 6 below) for the
fiscal year. While Performance Goals will usually consist of a
targeted increase in Net Earnings, depending on the circumstances,
a Performance Goal may consist of maintaining Net Earnings or
limiting a reduction in Net Earnings, all as determined by the
Committee in its discretion in any particular year.
Section 5. Performance Award Levels. Subject to Section
7 hereof, achievement of a Performance Goal will result in a
payment of, in the case of the Chief Executive Officer, 75% of
salary (which shall include all amounts deferred by the executive
into the Company's Savings Plan or any successor plan) for the
fiscal year (the "Targeted Performance Award"). In the case of
other executive officers selected by the Committee as eligible to
participate in the Plan, the Committee shall designate the
percentage of salary that shall constitute the Targeted Performance
Award for each such Participant but in no event will such
percentage exceed 75% of salary. No payment under the Plan shall
be made if less than 70% of the Performance Goal is achieved. If
130% or more of the Performance Goal is achieved, the Participant
may receive a maximum payment equal to 200% of the Targeted
Performance Award, i.e. 150% of salary for such fiscal year (the
"Maximum Bonus"). The percent of the Targeted Performance Award
payable for the achievement of between 70% and 130% of the
Performance Goal shall be determined by the Committee within the
time period required by the Code for each fiscal year. In no event
shall the salary of any Participant be increased during a fiscal
year. Annual increases in salary of any Participant shall be
limited to no more than 15% except that in the case of a material
increase in responsibility of such Participant, the annual increase
in salary shall not exceed 30%.
Section 6. Net Earnings. For purposes of this Plan, "Net
Earnings" for a fiscal year shall be the consolidated net earnings
of the Company and its subsidiaries, determined in accordance with
generally accepted accounting principles applied on a consistent
basis, exclusive of (a) changes in accounting principles, (b) all
extraordinary items of income and expense, (c) all material
restructuring expenses, (d) the results of operations of
acquisitions consummated during the fiscal year and (e) all
material non-recurring and non-budgeted items of income and
expense.
Section 7. Administration and Interpretation. The Plan
shall be administered by the Committee, which shall have the sole
authority to select Participants under the Plan and to make rules
and regulations for the administration of the Plan. In making any
determinations under the Plan, the Committee shall be entitled to
rely on reports, opinions or statements of officers or employees of
the Company and its affiliates as well as those of counsel, public
accountants and other professional or expert persons. The
interpretations and decisions of the Committee with regard to the
Plan shall be final and conclusive, and the Committee shall have
the full power and authority in its sole discretion to reduce, or
to refuse to make (but not to increase), any payment payable as a
result of the achievement of at least 70% of a Performance Goal.
No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan.
Section 8. Certification of Achievement of Performance
Goals. Provided that the Code so requires, the Committee shall,
prior to any payment under the Plan, certify in writing the extent,
if any, of achievement of Performance Goals for each Participant.
For purposes of this Section and for so long as the Code permits,
the approved minutes of the Committee meeting in which the
certification is made may be treated as a written certification.
Section 9. Payment of Awards. Payment under the Plan with
respect to a fiscal year may be made at any time or in installments
from time to time between the first day and March 15 of the next
fiscal year at the discretion of the Committee.
Section 10. Amendment or Termination. The Committee may
from time to time amend the Plan in any respect or terminate or
suspend at any time the Plan in whole or in part, provided that no
such amendments that may require shareholder approval (a) to assure
the deductibility by the Company of payments payable under the Plan
under the Code or (b) under any other applicable law, shall be
effective without such shareholder approval having been obtained.
Section 11. No Assignment. The rights hereunder,
including without limitation rights to receive any payment, shall
not be sold, assigned, transferred, encumbered or hypothecated by
a Participant (except by testamentary disposition or intestate
succession), and during the lifetime of any Participant any payment
shall be payable only to such Participant.
Section 12. The Company. For purposes of this Plan, the
"Company" shall include the successors and assigns of the Company,
and this Plan shall be binding on any corporation or other person
with which the Company is merged or consolidated, or which acquires
substantially all of the assets of the Company, or which otherwise
succeeds to its business.
Section 13. No Right to Participation. Nothing in the
Plan shall be deemed to create any obligation on the part of the
Committee to select any executive officer of the Company as a
Participant, nor confer upon any Participant in the Plan the right
to remain a participant in the Plan for any subsequent fiscal year.
Section 14. Governing Law. The validity, construction and
effect of the Plan and any action taken or relating to the Plan
shall be determined in accordance with the laws of the State of
Rhode Island and applicable Federal law.
