HASBRO INC, DEF 14A, 1996-04-05

HASBRO INC
DEF 14A, 1996-04-05
GAMES, TOYS & CHILDREN'S VEHICLES (NO DOLLS & BICYCLES)

Previous: GREAT AMERICAN MANAGEMENT & INVESTMENT INC, SC 14D1/A, 1996-04-05

Next: HOUSEHOLD FINANCE CORP, 424B2, 1996-04-05

<PAGE> 1

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:

<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>

HASBRO, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.

/ / $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 transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

/ / Fee paid previously with preliminary materials.

/ / 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:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:
<PAGE> 2

HASBRO, INC.
1027 NEWPORT AVENUE
PAWTUCKET, RHODE ISLAND 02862

MAILING DATE: APRIL 5, 1996

ANNUAL MEETING OF SHAREHOLDERS
MAY 15, 1996

Notice is hereby given that the Annual Meeting of Shareholders of Hasbro,
Inc. (the "Company") will be held at 10:00 A.M. on May 15, 1996 at the offices
of the Company, 1027 Newport Avenue, Pawtucket, Rhode Island, for the following
purposes:

1. To elect four directors of the Company to terms expiring in 1999;

2. To ratify the selection by the Board of Directors of KPMG Peat
Marwick LLP as independent certified public accountants for the Company for
the fiscal year ending December 29, 1996; and

3. To transact such other business as may properly come before the
meeting.

Only holders of record of the Common Stock (the "Shareholders") at the
close of business on March 29, 1996 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 four persons nominated in the accompanying Proxy Statement and the
ratification of the selection of KPMG Peat Marwick LLP as the Company's
independent certified public accountants for the fiscal year ending December 29,
1996. 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

PHILLIP H. WALDOKS
Secretary

Dated: April 5, 1996
<PAGE> 3

HASBRO, INC.
1027 NEWPORT AVENUE
PAWTUCKET, RHODE ISLAND 02862

Mailing Date: April 5, 1996

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

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 15, 1996, at the offices of the Company, 1027 Newport Avenue,
Pawtucket, Rhode Island, 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 four persons
nominated below and in favor of the ratification of the selection of KPMG Peat
Marwick LLP as independent certified public accountants for the Company for the
fiscal year ending December 29, 1996.

VOTING

Holders of record (the "Shareholders") of the Common Stock on March 29,
1996 are entitled to vote at the Annual Meeting or any adjournments thereof. As
of that date there were 87,125,639 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)

Four directors are to be elected at the Annual Meeting to terms expiring in
1999. The Board has recommended as nominees for election as directors the first
four 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 twelve remaining directors expire in 1997 and 1998. 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.
<PAGE> 4

The following table sets forth as to each nominee and as to each incumbent
director whose term of office extends to 1997 and 1998 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.

Sylvia K. Hassenfeld....... 75 Chairman of the Board, American Jewish 1983 *
Joint Distribution Committee, Inc.
("JDC") since 1993. Prior thereto,
President of JDC.
Norma T. Pace.............. 74 President, Paper Analytics Associates 1984 *
(economic consulting) since 1995. Senior
Economic Advisor, WEFA Group (economic
consulting and planning) since 1992.
Prior thereto, President, Economic
Consulting and Planning Incorporated.
Director, Englehard Corp. Governor,
United States Postal Service.
E. John Rosenwald, Jr. .... 66 Vice Chairman, The Bear Stearns 1983 *
Companies, Inc. (investment bankers).
Director, The Bear Stearns Companies,
Inc. and Frequency Electronics, Inc.
Alfred J. Verrecchia....... 53 Chief Operating Officer -- Domestic Toy 1992 *
Operations. Director, Old Stone Corp.

DIRECTORS WHOSE TERMS EXPIRE IN 1997 AND 1998

Alan R. Batkin............. 51 Vice Chairman, Kissinger Associates, 1992 1998
Inc. (geopolitical strategic consulting
firm). Director, Infinity Broadcasting
Corporation.
George R. Ditomassi, Jr. .. 61 Chief Operating Officer, Games and 1992 1997
International.
Harold P. Gordon........... 58 Vice Chairman since 1995. Prior thereto, 1988 1997
Partner, Stikeman, Elliott (law firm).
Director, Alliance Communications
Corporation, Fonorola Inc. and G.T.C.
Transcontinental Group, Ltd.
Alex Grass................. 68 Chairman of the Executive Committee, 1981 1997
Rite Aid Corporation (drug store chain)
since 1995. Prior thereto, Chairman of
the Board and Chief Executive Officer,
Rite Aid Corporation. Chairman of the
Board, SuperRite Corporation.
Alan G. Hassenfeld......... 47 Chairman of the Board, President and 1978 1997
Chief Executive Officer.
</TABLE>

2
<PAGE> 5

<TABLE>
<CAPTION>
POSITIONS WITH COMPANY, HAS BEEN
PRINCIPAL OCCUPATION AND A DIRECTOR TERM
NAME AGE OTHER DIRECTORSHIPS SINCE EXPIRES
- ------------------------- --- ---------------------------------------- ---------- --------
<S> <C> <C> <C> <C>
Marie Josee Kravis....... 46 Senior Fellow, Hudson Institute (public 1995 1997
policy analysis) since 1994. Prior
thereto, Executive Director, Hudson
Institute of Canada. Visiting Fellow,
Council on Foreign Relations. Director,
Canadian Imperial Bank of Commerce, Ford
Motor Company, Hollinger International,
Inc., The Molson Companies, Ltd., The
Seagram Company Ltd. and Unimedia Inc.
Claudine B. Malone....... 59 President, Financial and Management 1992 1998
Consulting, Inc. Director, Dell Computer
Corporation, Hannaford Brothers Co.,
Houghton Mifflin Company, Lafarge Corp.,
The Limited, Inc., Lowe's Companies,
Inc., Mallinckrodt Group, Inc., Science
Applications International Corporation
and Union Pacific Resources Corporation.
Morris W. Offit.......... 59 Chief Executive Officer, Offitbank 1995 1998
(investment management). Director,
Aegon, USA, Inc., Cantel Industries,
Inc. and Mercantile Bankshares
Corporation.
Carl Spielvogel.......... 67 Chairman of the Board and Chief 1992 1998
Executive Officer, United Auto Group,
Inc. (operator of multiple-franchise
auto dealerships) since 1994. Prior
thereto, Chairman of the Board and
Chairman of the Executive Committee,
Backer Spielvogel Bates Worldwide, Inc.
(advertising) during 1994. Prior
thereto, Chairman and Chief Executive
Officer, Backer Spielvogel Bates
Worldwide, Inc. Director, Data
Broadcasting Inc. and Foamex
International Incorporated.
Henry Taub............... 68 Honorary Chairman of the Board and 1986 1998
Chairman of the Executive Committee,
Automatic Data Processing Company, Inc.
Director, Automatic Data Processing
Company, Inc., Bank Leumi Trust Company
of New York and Rite Aid Corporation.
Preston Robert Tisch..... 70 Co-Chairman and Co-Chief Executive 1988 1997
Officer, Loews Corporation since 1994.
Prior thereto, President and Co-Chief
Executive Officer, Loews Corporation.
Director, Bulova Watch Company, Inc.,
CNA Financial Corporation, Loews
Corporation and Rite Aid Corporation.
</TABLE>

3
<PAGE> 6

* * *

Sylvia K. Hassenfeld is the mother of Alan G. Hassenfeld.

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 1995, the Board held six meetings. Mr. Tisch attended fewer than 75%
of the meetings of the Board during 1995.

The Executive Committee of the Board, which currently consists of Alan R.
Batkin, Alan G. Hassenfeld, Norma T. Pace and E. John Rosenwald, Jr., met once
in 1995. 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 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
also 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 Sylvia
K. Hassenfeld, Henry Taub, Preston Robert Tisch and Paul Wolfowitz, met once in
1995. 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 By-Laws provide that
shareholders may nominate directors at an annual meeting by giving notice to the
Secretary of the Company not less than 60 days nor more than 90 days prior to
the one-year anniversary date of the immediately preceding annual meeting and
providing specified information regarding the proposed nominee and each
shareholder proposing such nomination.

The Audit Committee of the Board, which currently consists of Alex Grass,
Claudine B. Malone, Morris W. Offit and Norma T. Pace (Chair), held three
meetings in 1995. 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, E. John Rosenwald, Jr. (Chair) and Carl Spielvogel,
held two meetings in 1995. The Compensation and Stock Option Committee has been
delegated primary responsibility for establishing and administering senior
executive compensation programs (including the Senior Management Annual
Performance Plan), is authorized to make grants and awards under the Company's
employee stock option plans (including the 1992 Stock Incentive Plan and the
Stock Incentive Performance Plan) and considers and recommends Board actions
relating to compensation under certain other compensation plans.

4
<PAGE> 7

Compensation of Directors

Members of the Board who are not otherwise employed by the Company
("Non-employee Directors") receive a retainer of $25,000 per year 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. The Chair of the Audit
Committee and the Chair of the Compensation and Stock Option 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 the Deferred Compensation Plan for Non-employee Directors (the
"Deferred Compensation Plan"), which is unfunded, Non-employee Directors must
defer a minimum of 20% of the annual Board retainer fee into a stock 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. Stock 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 stock 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 stock unit account or an interest account, which bears interest at
the five year Treasury rate. The Company makes a deemed matching contribution to
the stock 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 is
seventy-two, except that directors currently over the age of seventy need not
retire prior to the age of eighty. The Deferred Compensation Plan provides that
compensation deferred under the Deferred Compensation Plan, whether in the stock
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.

Under the Stock Option Plan for Non-employee Directors, approved by
shareholders on May 11, 1994, each Non-employee Director then in office received
on May 11, 1994, each Non-employee Director who joined the Board after May 11,
1994 received upon becoming a director, and any new Non-employee Director will
receive upon becoming a director, a one-time grant of a nontransferable ten year
option to purchase 5,000 shares of Common Stock at 110% of the fair market value
per share of Common Stock on the date of grant. The options become exercisable
at a rate of 20% per year commencing on the first anniversary of the date of
grant, except that exercisability will be accelerated upon a participant ceasing
to be a member of the Board because of permanent disability, death, retirement
at the mandatory retirement age then in effect or after a Change of Control, as
defined in the Stock Option Plan for Non-employee Directors.

Certain Relationships, Related Transactions and Litigation

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

5
<PAGE> 8

which is 25% owned by the estate of Merrill Hassenfeld, a former Chief Executive
Officer and director of the Company. Sylvia K. Hassenfeld, a director of the
Company, 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 1995 was approximately $579,000 Canadian (approximately
$421,000 U.S.). In management's opinion, these leases are on terms at least as
favorable as would otherwise presently be obtainable.

During 1994 and 1995, George R. Ditomassi, Jr., a director and executive
officer of the Company, reimbursed the Company in the aggregate amount of
approximately $90,000 with respect to certain goods and services received in
previous years. The Company and Mr. Ditomassi are reviewing whether any further
reimbursement is appropriate, and, if so, the amount thereof.

The Company and its subsidiaries paid an aggregate of approximately
$32,000,000 in royalties to Time Warner Inc. ("Time Warner") and its
subsidiaries for the Company's 1995 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 29, 1996 to Time Warner and its
subsidiaries pursuant to character license agreements will exceed $60,000. See
"Voting Securities and Principal Holders Thereof".

In connection with an unsolicited business combination proposal publicly
announced by a third party in January 1996, the Company retained a subsidiary of
The Bear Stearns Companies, Inc. to assist the Company in evaluating the
proposal. E. John Rosenwald, Jr., a director of the Company, is a Director and
Vice Chairman of The Bear Stearns Companies, Inc.

Following the public announcement of the unsolicited business combination
proposal described above, seven purported class actions were filed in state
court in Rhode Island. These actions, each of which is purportedly brought on
behalf of a class consisting of all Company shareholders (other than the
defendants) against the Company and certain of its officers and directors,
allege in substance that the defendants breached their fiduciary duties by
rejecting the unsolicited business combination proposal and/or failing to seek
other business combination proposals from third parties. Pursuant to a
stipulation, dated February 15, 1996, (i) plaintiffs' counsel will have sixty
days to file a consolidated amended complaint in the first-filed action, which
is captioned Cohen v. Hassenfeld, et al. and was filed on January 25, 1996,
including therein all plaintiffs and claims in each of the actions; (ii)
following the filing of the amended complaint, the parties will file
stipulations voluntarily dismissing the actions other than the Cohen action
without prejudice and without costs; and (iii) defendants will have sixty days
from the date of the filing of the amended complaint to answer or otherwise move
with respect thereto and in the interim discovery will be stayed. The Company
believes that there is no merit to the plaintiffs' claims and, accordingly,
intends to contest them vigorously.

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 FOUR NOMINEES
NAMED ABOVE (PROPOSAL NO. 1).

6
<PAGE> 9

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN AMONG
HASBRO, S&P 500 AND RUSSELL 1000 CONSUMER DISCRETIONARY ECONOMIC SECTOR(1)

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.

<TABLE>
<CAPTION>
Russell 1000
Consumer
Discretionary
Measurement Period Economic
(Fiscal Year Covered) Hasbro S&P 500 Sector
<S> <C> <C> <C>
1990 100 100 100
1991 251 128 146
1992 323 142 171
1993 358 155 181
1994 288 157 172
1995 312 216 205
</TABLE>

<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
HASBRO $100 $251 $323 $358 $288 $312
S&P 500 $100 $128 $142 $155 $157 $216
Russell 1000 Consumer Discretionary Economic Sector $100 $146 $171 $181 $172 $205
</TABLE>

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

(1) 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 sector is as of the last
trading day in the calendar year.

7
<PAGE> 10

REPORT OF THE
COMPENSATION AND STOCK OPTION COMMITTEE
OF THE BOARD OF DIRECTORS

1995 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 that the Company provide
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.

Executive compensation during 1995 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 relies principally upon 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 1995, the Committee targeted the
Company's pay levels to correspond with approximately the 75th percentile of
salaries paid by other consumer non-durable products companies surveyed in
Management Compensation Services Project 777 Executive Compensation Study, whose
participants partially overlap with the companies included in the Russell 1000
Consumer Discretionary Economic Sector (the "Russell Sector") set forth in the
above graph. The Frank Russell Company does not publish compensation data for
the companies included in the Russell Sector.

Approximately 1,330 employees, including executive officers, were eligible
for annual management incentive bonuses with respect to fiscal 1995. Individual
and corporate performance objectives are established at the beginning of the
year. Corporate performance objectives are determined on the basis of a budget
review carried out by senior management with respect to each operating unit
which forms the basis for the operating plan prepared by senior management and
approved by the Board in February of each year. The remainder of this paragraph
will outline the bonus programs applicable to executive officers other than the
Chief Executive Officer, whose bonus is discussed below. See "1995 Compensation
of the Chief Executive Officer". 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) was based 75% on
corporate performance and 25% on individual performance. The management
incentive bonus for those individuals deemed to have divisional responsibility
was 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 1995 was based on a targeted net earnings
objective, while the divisional performance measure was based primarily on
targeted divisional pre-tax earnings objectives. The corporate performance for
1995 fell short of targeted corporate net earnings and most of the divisions
fell short of their divisional pre-tax earnings targets. The 1995 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.

Most of the options granted in 1995 were granted to ten senior executives,
including all of those named in the summary compensation table below, pursuant
to the Company's long term incentive program established in 1993. Pursuant to
the program, which is designed to supplement the Company's regular stock option

8
<PAGE> 11

program, nonqualified options are granted every other year to key executives at
110% of market value on date of grant, vesting over five years. Under the
program, value is provided to the executive only if share appreciation exceeds
the premium. The amount of stock options previously awarded and outstanding for
each executive officer who is granted options 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. Options granted were allocated on the basis of
individual compensation level, responsibility and performance.

During 1994, the Committee adopted a policy that all grantees under the
long term incentive program must own Common Stock at certain mandated levels,
provided that the grantee will have until the later of October 19, 1999 and five
years from the date the individual is awarded his or her first grant under the
program to establish his or her share ownership. The level of mandated share
ownership ranges from 7,500 to 25,000 shares of Common Stock.

1995 COMPENSATION OF THE CHIEF EXECUTIVE OFFICER

As set forth in the accompanying tables, Mr. Hassenfeld's salary of
$927,577 for 1995 represented an approximate 2.8% increase over his 1994 salary,
his management incentive bonus with respect to 1995 was $220,000, which
represented approximately 23.7% of his 1995 salary, and in 1995 he was granted
options to purchase 100,000 shares of Common Stock, which represented 13.5% of
all options granted to employees during 1995. Mr. Hassenfeld's percentage of all
options granted to employees in 1995 is unusually high because, except for
certain isolated grants (principally to new hires or to reflect promotions),
there were no grants under the Company's regular stock option program in 1995.
Grants under the Company's regular stock option program resumed in 1996. All
compensation decisions regarding Mr. Hassenfeld were made by the Committee,
which is composed solely of outside directors in accordance with Section 162(m)
of the Internal Revenue Code of 1986, as amended, and distinterested persons in
accordance with Rule 16b-3 of the rules and regulations of the Securities and
Exchange Commission, in all cases without the participation of Mr. Hassenfeld or
other executive officers of the Company. In setting Mr. Hassenfeld's 1995
salary, the Committee took into account comparative data with respect to chief
executive officer compensation provided to the Committee with a view towards
setting Mr. Hassenfeld's compensation levels at approximately the 75th
percentile of other consumer non-durable products companies surveyed. The
Committee determined Mr. Hassenfeld's bonus pursuant to the Company's Senior
Management Annual Performance Plan (the "Annual Performance Plan") which was
approved by shareholders in 1994. Mr. Hassenfeld is the only participant in the
Annual Performance Plan. Under the Annual Performance Plan, the Committee
designated a net earnings performance goal for the Company for 1995, which was
based on the 1995 operating plan approved by the Board in February 1995. The
target bonus for Mr. Hassenfeld under the Annual Performance Plan is 75% of
salary, if 100% of the performance goal is achieved, with a maximum bonus of
150% of salary, if 130% or more of the performance goal is attained. No bonus is
payable under the Annual Performance Plan unless at least 70% of the performance
goal is attained. More than 70% but less than 100% of the targeted performance
goal was achieved by the Company resulting in the bonus paid to Mr. Hassenfeld.
The options granted to Mr. Hassenfeld in 1995 were made pursuant to the
Company's long term incentive program discussed above.

Alan R. Batkin, E. John Rosenwald, Jr. (Chairman) and Carl
Spielvogel as members of the Compensation and Stock Option
Committee of the Board of Directors as of 1995 fiscal year
end.

9
<PAGE> 12

EXECUTIVE COMPENSATION

The following table summarizes compensation paid by the Company for
services rendered during 1995, 1994 and 1993 by the Chief Executive Officer of
the Company and the four most highly compensated executive officers of the
Company other than the Chief Executive Officer:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM
--------------------------------------- COMPENSATION
OTHER ANNUAL ------------ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(a) OPTIONS COMPENSATION(b)
- ---------------------------------- ---- -------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Alan G. Hassenfeld................ 1995 $927,577 $220,000 $35,295 100,000 $43,448
Chairman of the Board, 1994 902,286 221,600 34,301 30,000 40,057
President and Chief 1993 872,807 600,000 30,439 210,000 68,070
Executive Officer
Alfred J. Verrecchia.............. 1995 597,400 130,000 11,974 70,000 30,347
Chief Operating Officer 1994 496,720 131,200 15,794 20,000 26,081
Domestic Toy Operations 1993 474,196 335,000 13,741 135,000 37,688
George R. Ditomassi, Jr. ......... 1995 540,192 165,000 16,945 65,000 2,310
Chief Operating Officer 1994 489,238 172,000 16,000 25,000 2,310
Games and International 1993 468,846 313,000 16,583 135,000 2,248
Harold P. Gordon.................. 1995 455,650(c) 135,000 17,746 150,000 3,938
Vice Chairman
John T. O'Neill................... 1995 436,450 150,000 10,176 50,000 21,786
Executive Vice President and 1994 352,205 120,000 10,096 20,000 16,387
Chief Financial Officer 1993 336,981 200,000 8,294 100,000 25,920
</TABLE>

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

(a) Includes the following amounts which were included in 1995 taxable income
for each named individual in connection with a program whereby a leased
automobile, or an automobile allowance, is provided to the executive by the
Company: $10,295 for Mr. Hassenfeld, $10,474 for Mr. Verrecchia, $10,200 for
Mr. Ditomassi, $4,998 for Mr. Gordon, $9,325 for Mr. O'Neill, and also
includes the following amounts paid by the Company and included in 1995
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,
$1,500 for Mr. Verrecchia, $6,745 for Mr. Ditomassi, $5,300 for Mr. Gordon,
$850 for Mr. O'Neill. Includes for Mr. Gordon $7,448 in relocation expenses
reimbursed by the Company. Does not include other personal benefits that do
not in the aggregate exceed $50,000 in any year for any individual.

(b) Includes, except for Mr. Ditomassi and Mr. Gordon, the executive's pro-rata
share of the Company's contribution to the Company's Profit-Sharing Plan
(the "Profit-Sharing Plan") 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 of 1986, as amended, (the "Code") maximums, deemed
allocated to the executive's account in the Company's unfunded Supplemental
Benefit Retirement Plan (the "Supplemental Plan"), which in 1995 amounted to
$34,971 for Mr. Hassenfeld, $20,251 for Mr. Verrecchia and $14,226 for Mr.
O'Neill. Includes for each individual, other than Mr. Hassenfeld and Mr.
Gordon, the sum of $2,310, which represents the Company's 25% match of sums
saved in 1995 by each named executive pursuant to the Company's Savings Plan
and Supplemental Plan. Also includes premiums paid by the Company in 1995
for individual life insurance policies for Mr. Hassenfeld ($3,227), Mr.
Verrecchia ($2,536) and Mr. Gordon ($3,405) and $533 deemed contributed to
Mr. Gordon's stock unit account by the Company pursuant to the Deferred
Compensation Plan for Non-employee Directors for the period prior to his
becoming an executive officer.

(c) Includes $5,333 in retainer and meeting fees deferred into Mr. Gordon's
stock unit account in the Deferred Compensation Plan for Non-employee
Directors for the period prior to his becoming an executive officer.

* * *

10
<PAGE> 13

The following table sets forth certain information regarding stock option
grants in 1995 to the executive officers named above:

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
% OF
TOTAL
NUMBER OF OPTIONS POTENTIAL REALIZABLE VALUE AT
SECURITIES GRANTED ASSUMED ANNUAL RATES OF STOCK
UNDERLYING TO PRICE APPRECIATION FOR OPTION
OPTIONS EMPLOYEES EXERCISE TERM(a)
GRANTED IN FISCAL PRICE EXPIRATION -------------------------------
NAME (b) (c) YEAR PER SHARE DATE 0% 5% 10%
- --------------------------------------- ------------ --------- ---------- ----------- --- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Alan G. Hassenfeld..................... 100,000 13.5% $34.9938 2/16/05 0 $1,682,540 $4,751,960
Alfred J. Verrecchia................... 70,000 9.5% 34.9938 2/16/05 0 1,177,778 3,326,372
George R. Ditomassi, Jr. .............. 65,000 8.8% 34.9938 2/16/05 0 1,093,651 3,088,774
Harold P. Gordon....................... 50,000 6.8% 34.9938 2/16/05 0 841,270 2,375,980
100,000(d) 13.5% 31.8125 2/16/05 0 2,000,670 5,070,090
John T. O'Neill........................ 50,000 6.8% 34.9938 2/16/05 0 841,270 2,375,980
</TABLE>

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

(a) Potential realizable value is based on an assumption that the price of the
Common Stock appreciates at the annual rates 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. With respect to the options described in
footnote (b) below, if the price of the Common Stock appreciates during the
term of the option by ten percent or less following the grant date, the
value of these options to the executive would be zero.

(b) These options, other than the options described in footnote (d) below, 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.

(c) Upon a Change of Control, as defined below, all options become immediately
exercisable and, with certain exceptions, will be canceled in exchange for a
cash payment in the amount of the difference between the highest price paid
for a share of Common Stock in the transaction or series of transactions
pursuant to which the Change of Control shall have occurred or, if higher,
the highest reported sales price of a share of Common Stock during the
sixty-day period immediately preceding the date of the Change of Control.
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 the tax withholding liability. In addition, participants may instruct
the Company to withhold shares issuable upon exercise in satisfaction of tax
withholding liability.

(d) These options are non-qualified and were granted at fair market value on the
date of grant. 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 becomes exercisable on each anniversary thereafter
until fully exercisable. All options become fully vested in the event of
death, disability or retirement at the optionee's normal retirement date and
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

<PAGE> 14

Committee, may approve. Upon termination of employment for any other reason,
only options vested at the date of the termination may be exercised, and are
exercisable for a period of three months following termination.

* * *

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 1995;
(b) the value realized (market value on date of exercise less exercise price)
upon the exercise of such options during fiscal 1995; (c) the number of
exercisable and unexercisable options held on December 31, 1995, the last day of
the 1995 fiscal year; and (d) the value of such options at December 31, 1995.

AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT DECEMBER 31, 1995 AT DECEMBER 31, 1995
SHARES ACQUIRED VALUE ---------------------------- -----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- --------------- -------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Alan G. Hassenfeld......... -- -- 220,750 246,000 $1,700,626 $172,750
Alfred J. Verrecchia....... -- -- 281,082 166,668 3,585,087 145,168
George R. Ditomassi, Jr. .. -- -- 153,299 165,001 1,015,029 149,959
Harold P. Gordon........... -- -- 1,000 154,000 -- --
John T. O'Neill............ -- -- 122,548 124,702 903,507 107,368
</TABLE>

* * *

The following table shows the estimated annual benefits payable upon
retirement in specified remuneration and years of service classifications under
the Company's Pension Plan (the "Pension Plan") and under the Supplemental Plan:

PENSION PLAN TABLE

<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFIT BY
YEARS OF SERVICE CLASSIFICATION(2)
AVERAGE -------------------------------------------------------------------------
COMPENSATION(1) 10 15 20 25 30 35(3)
- --------------- -------- -------- -------- -------- -------- --------
<S> <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
</TABLE>

- ---------------
(1) Covered compensation under the Pension Plan and the Supplemental 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").

(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 Supplemental Plan, which is unfunded, are not subject to provisions of
the 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 Company prior to its
acquisition by the Company, as to which the retirement benefit is 60% of
Average Compensation.

(3) For purposes of determining benefits under the Pension Plan and the
Supplemental Plan, credited years of service cannot exceed 30.

12
<PAGE> 15

The following table sets forth, as to the five named executive officers,
their years of credited service under the Pension Plan and the Supplemental
Plan:

<TABLE>
<CAPTION>
CREDITED YEARS
OF SERVICE
---------------
<S> <C>
Alan G. Hassenfeld.......................................... 22
George R. Ditomassi, Jr. ................................... 30
Alfred J. Verrecchia........................................ 26
Harold P. Gordon............................................ 1
John T. O'Neill............................................. 9
</TABLE>

EMPLOYMENT AGREEMENTS

The Company is party to employment agreements with certain executive
officers. These agreements (or the form thereof) have been filed with the
Securities and Exchange Commission as exhibits to the Company's periodic
filings.

Eight executive officers, including the five named executive officers, are
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 executive'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 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
Retirement Plan and the Company's stock option plans) 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. "Cause" is defined (for purposes of the Agreements and the Agreement
described in the next succeeding paragraph) as demonstrably willful or
deliberate violations of responsibilities which are committed in bad faith or
without reasonable belief that such violations are in the best interests of the
Company, which are unremedied after notice, or conviction of a felony involving
moral turpitude.

Mr. Gordon (the "Employee") has an additional employment agreement (the
"Agreement"), pursuant to which he is receiving, effective February 1, 1996,
annual salary of $526,000, which salary is subject to upward adjustment
thereafter by the Company. The Employee is eligible to participate in the
Company's management incentive bonus arrangements (with a target bonus of 45%
of base salary, a threshold of 10% and a maximum of 90%), as well as other
benefit plans and programs available to senior executives and employees
generally. The Company agrees to use its best efforts to cause Employee to be
nominated for re-election as a Director upon expiration of his current or any
future term and to recommend such re-election. If the Employee's employment
terminates for any reason, he will be entitled to a life annuity payment from
the Company equal to 3.33% of his "Final Average Pay" multiplied by the number
of full years employed, payable at age 65, less any amounts payable under the
Company's Pension Plan, Supplemental Plan or U.S. Social

13
<PAGE> 16

Security. In addition, the Company will maintain a key executive life insurance
policy in an amount sufficient to pay a life annuity benefit commencing at age
65 (or termination of employment, if later) of $225,000 per year. If the
Employee is terminated by the Company (other than for "cause") prior to February
1, 2000, he would be entitled to an annual life insurance annuity benefit of
$160,714 and may acquire additional years of vested benefits at a cost of
$216,480 per year. If he dies before the commencement of the life insurance
annuity payments, his beneficiary would receive a lump sum death benefit of
$1,500,000 and none of the other life insurance annuity payments would be
payable. If he dies after the life insurance annuity payments begin but before
the receipt of 240 months of payments, the balance of said 240 months of
payments will be made to his beneficiary. If the insurance policy value is
insufficient to make the foregoing payments, the Company will make these
payments from its general assets. The Employee is entitled to severance pay
under the Agreement if Employee is terminated (other than for "cause") prior to
January 31, 2000. If the termination occurs prior to January 31, 1998, the
amount of severance pay is three years of base salary with the amount reduced by
three months for every three months of service thereafter. In the event of a
Change of Control (as defined above), the Employee would be entitled to receive
the greater of the severance benefits set forth in the immediately preceding
sentence and the amounts payable under his Change of Control employment
agreement described in the immediately preceding paragraph. The Agreement also
amended the Employee's Change of Control agreement to make certain clarifying
and conforming changes. The Company agreed to provide short-term financing
during the Employee's transition to the Company at the Company's cost of
borrowing in connection with Employee's Canadian tax obligations or planning
opportunities, to pay for the issuance of any letter of credit that may be
required by Canadian tax authorities for exit purposes and generally to use its
best efforts to provide the necessary financial and legal assistance to
eliminate negative effects on the Employee due to differences in the Canadian
and U.S. tax systems. The Employee is entitled to relocation benefits under
existing policies except that such benefits are provided for both of Employee's
Canadian residences. Further, if Employee purchases a primary residence in the
United States and is terminated (other than for "cause") within the first seven
years of employment, the Company will provide relocation assistance for such
residence including a guarantee of the original purchase price thereof plus the
fair market value of any capital improvements. In addition, the Employee shall
receive such additional relocation benefits as may be agreed between the chief
executive officer and the Employee. The Employee may terminate his employment
and collect benefits under the Agreement within one year after any diminution of
his responsibilities, removal from or failure to be re-elected to the Board,
relocation or any breach by the Company of any of its obligations described
above or any other material breach of the Agreement by the Company. "Final
Average Pay" is defined in the Agreement as one-fifth of total salaries and
bonuses received by the Employee in the five highest consecutive years of
employment or if Employee was employed for less than five years, the annualized
average of salaries and bonuses.

Dan D. Owen, an executive officer of the Company (the "Executive"), who is
party to one of the Agreements described above (the "Change of Control
Agreement") is also party to a Severance and Settlement Agreement and Release
(the "Severance Agreement") pursuant to which the Company would continue to pay
the Executive an amount equal to the equivalent of two years' base salary in
effect on the date of termination, plus applicable bonuses, if the Executive is
involuntarily terminated without cause, is constructively terminated or
terminated due to disability, less applicable withholdings and disability
benefits provided under Company plans. The Executive, as long as he is
unemployed, will also continue to participate in the Company's leased automobile
and health insurance programs for one year. In the event of death, the
Executive's estate would receive four month's salary. The Executive will not
compete with the Company during the period of the Severance Agreement. Upon a
"Change of Control," the Executive's Change of Control Agreement will supersede
the Severance Agreement. "Cause" is defined in the Severance Agreement as a good
faith finding by the Company of a material failure to perform assigned duties,
dishonesty, gross negligence or misconduct. "Constructive Termination" means a
termination by the Executive within one year of a substantial diminution of
responsibilities or compensation or a relocation.

14
<PAGE> 17

VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

Security Ownership of Certain Beneficial Owners

The following table sets forth information, as of March 15, 1996 (except as
noted), 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:

<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP(1) CLASS
---------------------------------------------------- ----------------- ----------
<S> <C> <C>
Alan G. Hassenfeld.................................. 8,234,973(2) 9.4
1027 Newport Avenue
Pawtucket, RI 02862
TIME WARNER INC..................................... 12,057,561(3) 13.8
75 Rockefeller Center
New York, NY 10019
FMR CORP............................................ 10,634,706(4) 12.2
82 Devonshire Street
Boston, MA 02109
RUANE, CUNIFF & CO., INC............................ 6,353,754(5) 7.3
767 Fifth Avenue
New York, NY 10153
THE CAPITAL GROUP COMPANIES, INC.................... 4,502,630(6) 5.2
333 South Hope Street
Los Angeles, CA 90071
</TABLE>

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

(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 291,750
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 240,000 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
OptionTM Zero Coupon -- Senior Notes due 2012 ("LYONS(TM)"). 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. In August 1995, Time Warner Financing
Trust sold in a public offering 12,057,561 $1.24 Preferred Exchangeable
Redemption Cumulative Securities ("PERCS(R)"). Each of the PERCS, whose
original issue price was $31, pays cumulative cash distributions of $1.24
per annum and is mandatorily redeemable for cash on December 23, 1997 at
the lesser of $54.41 and the average of the closing prices of one share of
Common Stock for the five trading day period ending on the trading day
immediately preceding December 17, 1997, plus, in each case, accrued and
unpaid distributions to the mandatory redemption date. Time Warner has the
right to pay the redemption price of the PERCS through a combination of
shares of Common Stock and cash. As a result of the issuance of the PERCS
and the existence of the LYONS described above, Time Warner has stated that
it intends to retain possession of its shares of Common Stock until it
delivers such shares to satisfy its obligations in respect of either the
PERCS or the LYONS. Time Warner retains sole voting and investment
authority over these shares.

15
<PAGE> 18

(4) FMR Corp. has sole voting power over 620,802 shares, no voting power over
10,013,904 shares and sole investment power over 10,634,706 shares. Fidelity
Management & Research Company, a wholly-owned subsidiary of FMR Corp., owns
9,820,504 shares of Common Stock as an investment advisor to various
investment companies. Its holdings include 87,612 and 2,634,500 shares of
Common Stock owned upon the assumed exchange of $12,000,000 principal amount
of LYONS and 2,634,500 PERCS, respectively. Fidelity Management Trust
Company, a bank and another wholly-owned subsidiary of FMR Corp., owns
814,202 shares as investment manager of institutional accounts. Its holdings
include 437,400 shares of Common Stock owned upon the assumed exchange of
437,400 PERCS. Edward C. Johnson 3d and Abigail P. Johnson may, together
with certain Johnson family members and trusts, be deemed to form a
controlling group with respect to FMR Corp. The foregoing information is as
of January 31, 1996.

(5) Ruane Cuniff & Co., Inc., a broker dealer and investment advisor, has the
sole voting authority over 4,932,925 shares and no voting authority over
1,420,829 shares. It shares investment authority as to 3,562,600 shares and
has sole investment authority over 2,791,154 shares. The foregoing
information is as of December 31, 1995.

(6) Certain operating subsidiaries of The Capital Group Companies, Inc. exercise
investment discretion over various institutional accounts which hold
4,502,630 shares. Capital Guardian Trust Company, a bank, and one of such
operating companies, exercises sole investment discretion over 2,585,460 of
said shares. Capital Research and Management Company and Capital
International, Inc., registered investment advisors, have sole investment
discretion with respect to 1,911,930 and 5,220 shares, respectively. These
operating subsidiaries have sole voting power over an aggregate of 1,586,200
shares and have no voting power with respect to 2,916,430 of such shares.
Includes 345,680 shares issuable upon conversion of an aggregate of
$10,140,000 principal amount of the Company's 6% Convertible Subordinated
Notes due 1998 and 733,750 shares owned upon the assumed exchange of
$100,500,000 principal amount of LYONS. The foregoing information is as of
December 29, 1995.

Security Ownership of Management

The following table sets forth information, as of March 15, 1996, 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.

<TABLE>
<CAPTION>
COMMON PERCENT OF
NAME OF DIRECTOR OR EXECUTIVE OFFICER(1) STOCK CLASS
- ------------------------------------------------------------------------ ---------- -----------
<S> <C> <C>
Barry J. Alperin(2)..................................................... 205,432 *
Alan R. Batkin(3)....................................................... 2,750 *
George R. Ditomassi, Jr. (4)............................................ 213,638 *
Harold P. Gordon(5)..................................................... 46,083 *
Alex Grass(6)........................................................... 13,411 *
Alan G. Hassenfeld (7).................................................. 8,234,973 9.4
Sylvia K. Hassenfeld(8)................................................. 280,196 *
Marie Josee Kravis...................................................... -- --
Claudine B. Malone(9)................................................... 2,200 *
Morris W. Offit(10)..................................................... 1,000 *
John T. O'Neill (11).................................................... 159,732 *
Norma T. Pace (12)...................................................... 2,690 *
E. John Rosenwald, Jr.(13).............................................. 92,000 *
Carl Spielvogel(14)..................................................... 20,867 *
Henry Taub(15).......................................................... 5,000 *
Preston Robert Tisch(16)................................................ 3,500 *
</TABLE>

16
<PAGE> 19

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

* 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 and options exercisable within sixty
days hereof granted under the Company's Stock Option Plan for Non-employee
Directors to purchase an aggregate of 2,000 shares. Does not include 2,378
shares deemed to be held in Mr. Batkin's stock unit account under the
Deferred Compensation Plan.

(4) Includes presently exercisable options granted under the Company's employee
stock option plans to purchase 201,466 shares.

(5) Includes presently exercisable options and options exercisable within sixty
days hereof granted under the Company's stock option plans to purchase an
aggregate of 45,333 shares. Does not include 1,468 shares deemed to be held
in Mr. Gordon's stock unit account under the Deferred Compensation Plan.

(6) Includes presently exercisable options and options exercisable within sixty
days hereof granted under the Company's Stock Option Plan for Non-employee
Directors to purchase an aggregate of 2,000 shares. Does not include 7,500
shares owned by the spouse of Mr. Grass, as to which Mr. Grass disclaims
beneficial ownership, and 2,254 shares deemed to be held in Mr. Grass'
stock unit account under the Deferred Compensation Plan.

(7) See note (2) to the immediately preceding table.

(8) Includes presently exercisable options and options exercisable within sixty
days hereof granted under the Company's Stock Option Plan for Non-employee
Directors to purchase an aggregate of 2,000 shares and 240,000 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.
Hassenfeld's benefit referred to in note (2) to the immediately preceding
table or 355 shares deemed to be held in Mrs. Hassenfeld's stock unit
account under the Deferred Compensation Plan.

(9) Includes presently exercisable options and options exercisable within sixty
days hereof granted under the Company's Stock Option Plan for Non-employee
Directors to purchase an aggregate of 2,000 shares. Does not include 355
shares deemed to be held in Ms. Malone's stock unit account under the
Deferred Compensation Plan.

(10) Represents options exercisable within sixty days hereof granted under the
Company's Stock Option Plan for Non-employee Directors to purchase 1,000
shares. Does not include 113 shares deemed to be held in Mr. Offit's stock
unit account under the Deferred Compensation Plan.

(11) Includes presently exercisable options granted under the Company's employee
stock option plans to purchase an aggregate of 158,232 shares.

(12) Includes presently exercisable options and options exercisable within sixty
days hereof granted under the Company's Stock Option Plan for Non-employee
Directors to purchase 2,000 shares. Does not include 1,451 shares deemed to
be held in Mrs. Pace's stock unit account under the Deferred Compensation
Plan.

(13) Includes presently exercisable options and options exercisable within sixty
days hereof granted under the Company's Stock Option Plan for Non-employee
Directors to purchase an aggregate of 2,000 shares. 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. Also does not
include 2,735 shares deemed to be held in Mr. Rosenwald's stock unit
account under the Deferred Compensation Plan.

17
<PAGE> 20

(14) Includes presently exercisable options and options exercisable within sixty
days hereof granted under the Company's Stock Option Plan for Non-employee
Directors to purchase an aggregate of 2,000 shares. Does not include 1,065
shares deemed to be held in Mr. Spielvogel's stock unit account under the
Deferred Compensation Plan.

(15) Includes presently exercisable options and options exercisable within sixty
days hereof granted under the Company's Stock Option Plan for Non-employee
Directors to purchase an aggregate of 2,000 shares. Does not include 2,148
shares deemed to be held in Mr. Taub's stock unit account under the
Deferred Compensation Plan.

(16) Includes presently exercisable options and options exercisable within sixty
days hereof granted under the Company's Stock Option Plan for Non-employee
Directors to purchase an aggregate of 2,000 shares. Does not include 355
shares deemed to be held in Mr. Tisch's stock unit account under the
Deferred Compensation Plan.

(17) Includes presently exercisable options granted under the Company's employee
stock option plans to purchase 330,249 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.

(18) Represents options exercisable within sixty days hereof granted under the
Company's Stock Option Plan for Non-employee directors to purchase 1,000
shares. Does not include 708 shares deemed to be held in Mr. Wolfowitz's
stock unit account under the Deferred Compensation Plan.

(19) Of these shares, all directors and executive officers as a group have sole
voting and investment power with respect to 9,546,269 shares and have
shared voting and/or investment power with respect to 386,466 shares.
Includes 1,702,745 shares purchasable by directors and executive officers
upon exercise of presently exercisable options, or options exercisable
within sixty days hereof, granted under the Company's stock option plans.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the 1934 Act, 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 31, 1995, 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. 2)

The Board, upon recommendation of the Audit Committee of the Board, has
selected KPMG Peat Marwick LLP, independent certified public accountants, to
audit the consolidated financial statements of the Company for the fiscal year
ending December 29, 1996. KPMG Peat Marwick LLP 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 subsidiaries,
nor any connection with the Company or any of its subsidiaries 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 LLP
is expected to be present at the Annual Meeting, will have the opportunity to

18
<PAGE> 21

make a statement, if so desired, and will be available to respond to appropriate
questions. 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 Proposal No. 2. Accordingly, both an abstention and a broker non-vote will in
effect constitute a vote against Proposal No.2.

PROPOSAL NO. 2 IS THE RATIFICATION OF SUCH SELECTION AND THE BOARD
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 or postponement 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 1997
Annual Meeting must be received by the Company at its executive offices no later
than December 6, 1996. 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 31, 1995 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. The Company has retained D.F. King & Co., Inc., at an
estimated cost of $4,000 plus reimbursement of expenses, to assist in its
solicitation of proxies from brokers, nominees, institutions and individuals. In
addition to solicitation by mail, arrangements will be made with brokerage
houses and other custodians, nominees and fiduciaries to send proxies and proxy
material to their principals and the Company will reimburse them for any
reasonable expenses incurred in connection therewith.

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

Phillip H. Waldoks
Secretary

Dated: April 5, 1996
Pawtucket, Rhode Island

19
<PAGE> 22

HASBRO, INC.

<TABLE>
<S> <C>
P ANNUAL MEETING OF SHAREHOLDERS -- MAY 15, 1996
R
O THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
X
Y The undersigned acknowledges receipt of the Notice of Annual Meeting of Shareholders and Proxy Statement of Hasbro,
Inc. (the "Company") and hereby appoints ALAN G. HASSENFELD and HAROLD P. GORDON and each of them, with full power
of substitution to each of them, as attorneys and proxies to appear and vote all of the shares of Common Stock
standing in the name of the undersigned at the Annual Meeting of Shareholders of the Company, to be held on May 15,
1996 at 10:00 A.M. at the offices of the Company, 1027 Newport Avenue, Pawtucket, Rhode Island, and at any
adjournments thereof.

UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1 AND 2 AND IN SUPPORT OF MANAGEMENT ON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.

PLEASE MARK, SIGN AND DATE ON REVERSE SIDE AND PROMPTLY MAIL IN ENCLOSED ENVELOPE
</TABLE>

see reverse side
<PAGE> 23

Please mark votes as in this example /X/
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2.

1. Election of Directors:

For Terms Expiring in 1999 -- Sylvia K. Hassenfeld, Norma T. Pace,
E. John Rosenwald, Jr. and Alfred J. Verrecchia.

FOR / / WITHHELD / /

2. Ratification of the selection of KPMG Peat Marwick LLP as
independent accountants of the Company for the 1996 fiscal year.

FOR / / AGAINST / / ABSTAIN / /

----------------------------------------------------------------------
For all nominees except as noted above
3. To transact such other business as may properly come before the
Annual Meeting and any adjournment or postponement thereof.

MARK HERE
FOR ADDRESS
CHANGE AND
NOTE AT LEFT / /

Sign exactly as name(s) appear(s)
hereon. When signing in a
representative capacity, please give
full title as such. If more than one
name is shown, including the case of
joint tenants, each party should
sign.

Signature: Date
------------------ ---------
Signature: Date
------------------ ---------