<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
HASBRO, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] 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 3, 1998
ANNUAL MEETING OF SHAREHOLDERS
MAY 13, 1998
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 13, 1998 at the 200 Fifth
Avenue Club, 200 Fifth Avenue, New York, New York, for the following purposes:
1. To elect four directors of the Company to terms expiring in 2001
and one director of the Company to a term expiring in 1999; and.
2. To transact such other business as may properly come before the
meeting.
The Board of Directors recommends that Shareholders vote FOR the election
of the five persons nominated in the accompanying Proxy Statement. 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 3, 1998
<PAGE> 3
HASBRO, INC.
1027 NEWPORT AVENUE
PAWTUCKET, RHODE ISLAND 02862
Mailing Date: April 3, 1998
------------------------
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 13, 1998, at the 200 Fifth Avenue Club, 200 Fifth Avenue, New
York, New York, and at any adjournments thereof. If Proxies in the accompanying
form are properly completed 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 persons nominated below.
VOTING
Holders of record (the "Shareholders") of the Common Stock on March 20,
1998 are entitled to vote at the Annual Meeting or any adjournments thereof. As
of that date there were 133,122,242 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
2001 and one director is to be elected to a term expiring in 1999. The Board has
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 1999 and 2000. 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 1999 and 2000 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>
POSITIONS WITH COMPANY,
PRINCIPAL OCCUPATION AND HAS BEEN A TERM
NAME AGE OTHER DIRECTORSHIPS DIRECTOR SINCE EXPIRES
---- --- ------------------------ -------------- -------
<S> <C> <C> <C> <C>
Nominee for Term Expiring in 1999
Claudine B. Malone................ 61 President, Financial and Management 1992 *
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.
Nominees for Terms Expiring in 2001
Alan R. Batkin.................... 53 Vice Chairman, Kissinger Associates, 1992 *
Inc. (geopolitical strategic
consulting firm). Director, PEC Israel
Economic Corporation.
Morris W. Offit................... 61 Chief Executive Officer, Offitbank 1995 *
(investment management). Director,
Cantel Industries, Inc. and Mercantile
Bankshares Corporation.
Carl Spielvogel................... 69 Chairman and Chief Executive Officer, 1992 *
Carl Spielvogel Associates, Inc.
(international investments) since
1997. Prior thereto, Chairman of the
Board and Chief Executive Officer,
United Auto Group, Inc. (operator of
multiple-franchise auto dealerships)
from 1994 to 1997. 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 Culligan Water
Systems, Inc.
Paul Wolfowitz.................... 54 Dean, Paul H. Nitze School of Advanced 1995 *
International Studies, The Johns
Hopkins University, since 1994. Prior
thereto, Distinguished Visiting
Fellow, National Defense University
and George F. Kennan Professor of
National Security Strategy, National
War College during 1993. Prior
thereto, Undersecretary of Defense for
Policy, U.S. Department of Defense.
Prior thereto, U.S. Ambassador to the
Republic of Indonesia. Director of
eleven mutual funds of the Dreyfus
Corporation.
</TABLE>
- ---------------
<TABLE>
<S> <C> <C> <C> <C>
* Nominee
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
POSITIONS WITH COMPANY,
PRINCIPAL OCCUPATION AND HAS BEEN A TERM
NAME AGE OTHER DIRECTORSHIPS DIRECTOR SINCE EXPIRES
---- --- ------------------------ -------------- -------
<S> <C> <C> <C> <C>
Directors Whose Terms Expire in 1999 and 2000
Harold P. Gordon.................. 60 Vice Chairman since 1995. Prior 1988 2000
thereto, Partner, Stikeman, Elliott
(law firm). Director, Alliance
Communications Corporation, Fonorola
Inc. and G.T.C. Transcontinental
Group, Ltd.
Alex Grass........................ 70 Chairman of the Executive Committee, 1981 2000
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................ 49 Chairman of the Board, President and 1978 2000
Chief Executive Officer.
Sylvia K. Hassenfeld.............. 77 Former Chairman since 1996 and prior 1983 1999
thereto Chairman of the Board,
American Jewish Joint Distribution
Committee, Inc. ("JDC") since 1993.
Prior thereto, President of JDC.
Marie Josee Kravis................ 48 Senior Fellow, Hudson Institute 1995 2000
(public 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
Seagram Company Ltd. and Unimedia Inc.
Norma T. Pace..................... 76 President, Paper Analytics Associates 1984 1999
(economic consulting) since 1995.
Senior Economic Advisor, WEFA Group
(economic consulting and planning).
Director, Englehard Corp.
E. John Rosenwald, Jr............. 68 Vice Chairman, The Bear Stearns 1983 1999
Companies, Inc. (investment bankers).
Director, The Bear Stearns Companies,
Inc. and HFS Inc.
Preston Robert Tisch.............. 72 Co-Chairman and Co-Chief Executive 1988 2000
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.
Alfred J. Verrecchia.............. 55 Executive Vice President and 1992 1999
President -- Global Operations since
1996. Prior thereto, Chief Operating
Officer -- Domestic Toy Operations.
Director, Old Stone Corp.
</TABLE>
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 1997, the Board held eight meetings. Messrs. Offit and Spielvogel
attended fewer than 75% of the aggregate number of meetings of the Board and the
Committee on which they respectively served during 1997.
3
<PAGE> 6
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 1997. 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 and Governance Committee of the Board, which currently
consists of Sylvia K. Hassenfeld, Henry Taub, Preston Robert Tisch and Paul
Wolfowitz, did not meet in 1997. The Nominating and Governance Committee makes
recommendations for possible additions to the Board and at the request of the
Board is authorized to make recommendations regarding the governance of the
Board and the Committees thereof. The Nominating and Governance 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 1997. 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, Alex Grass, Marie Josee Kravis and Carl Spielvogel
(Chair), held three meetings in 1997. The Compensation and Stock Option
Committee has been delegated responsibility for all employee compensation and
benefit plans (including the Senior Management Annual Performance Plan), is
authorized to make grants and awards under the Company's employee stock option
plans and administers the non-employee director compensation plans.
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 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 age seventy-two. The
Deferred Compensation
4
<PAGE> 7
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 7,500 shares (as adjusted to reflect the 3 for 2 stock split
paid in the form of a 50% stock dividend on March 21, 1997) 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 or after age 72 or after a Change of Control,
as defined in the Stock Option Plan for Non-employee Directors.
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 Inc. ("CTM"), a real estate corporation which is 25% owned by the
estate of Merrill Hassenfeld, a former Chief Executive Officer and director of
the Company. Sylvia K. Hassenfeld, a director of the Company, is executrix and a
beneficiary of the estate of Merrill Hassenfeld. Total rent paid by Hasbro
Canada to CTM for the leases of manufacturing and warehouse facilities in 1997
was approximately $579,000 Canadian (approximately $418,000 U.S.). In
management's opinion, these leases are on terms at least as favorable as would
otherwise presently be obtainable. In March 1998, Hasbro Canada and CTM entered
into a lease addendum extending the leases to January 31, 2001 at the current
rent, with Hasbro Canada having options to renew for three additional three year
terms at fair market rental. If the parties cannot agree, the fair market rental
would be determined by appraisal. Hasbro Canada has a right of first refusal to
purchase the premises unless it indicates its intention not to renew the leases.
CTM, with the assistance of Hasbro Canada, is in the process of obtaining from a
financial institution a new loan secured by a first mortgage on the premises in
the amount of approximately $1,625,000 Canadian with a due date of February 1,
2001. The lease addendum provides that, until January 31, 2003, should such loan
not be renewed, extended or replaced beyond February 1, 2001, Hasbro Canada
would advance on behalf of the shareholders of CTM, other than the estate of
Merrill Hassenfeld, the amount necessary to pay off 75% of the loan and 75% of
all operating expenses until sale, lease or refinancing of the premises. CTM
would be obligated to repay the advance no later than January 31, 2003, which
would be secured by a first mortgage on the premises but would be nonrecourse
individually to such shareholders. CTM agreed that all cash flow from the
premises (including sale, lease and refinancing) will be used to pay the then
existing loan and any Hasbro Canada advances. It is anticipated that the balance
of the CTM loan at February 1, 2001 will be approximately $625,000 Canadian.
Since the beginning of the 1997 fiscal year, the Company paid an aggregate
amount of approximately $524,000 to Lindsay Associates for architectural
services provided at arms-length in the ordinary course of
5
<PAGE> 8
business principally in connection with the redesign of the Company's
headquarters. Lindsay Boutros-Ghali, an architect, is the principal of Lindsay
Associates and the spouse of Adam Klein, an executive officer of the Company.
Since the beginning of the 1997 fiscal year, the Company has paid an
aggregate amount of approximately $184,000 to Heidrick & Struggles, an executive
recruitment firm, pursuant to an agreement entered into at arms-length in the
ordinary course of business. Mr. Thomas Rosenwald is a principal of Heidrick &
Struggles and a brother of E. John Rosenwald, Jr., a director of the Company.
The Bear Stearns Companies, Inc. provides investment banking and related
services to the Company. E. John Rosenwald, Jr., a director of the Company, is a
director and Vice Chairman of the Bear Stearns Companies, Inc.
The vote of a majority of those shares present or represented by proxy at
the Annual Meeting is 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 (PROPOSAL NO. 1).
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
Measurement Period Discretionary
(Fiscal Year Covered) Hasbro S&P 500 Economic Sector
<S> <C> <C> <C>
1992 100 100 100
1993 111 109 106
1994 89 111 101
1995 97 152 120
1996 120 192 138
1997 146 237 181
</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.
6
<PAGE> 9
REPORT OF THE
COMPENSATION AND STOCK OPTION COMMITTEE
OF THE BOARD OF DIRECTORS
1997 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 1997 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 1997, the Committee generally
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 1,280 employees, including executive officers, were awarded
annual management incentive bonuses with respect to fiscal 1997. During 1997,
corporate and business unit bonus pools were established based on fixed formulae
keyed to corporate and business unit performance. A certain fixed percentage of
a designated base amount of corporate pre-tax profits with respect to certain
corporate participants and differing fixed percentages of differing designated
base amounts of business unit pre-tax profits with respect to all other
participants plus a higher fixed percentage of pre-tax profits above the base
amounts of pre-tax profits were put into a pool to fund individual bonus awards.
The base amounts of pre-tax profits for the corporation and individual business
units were enlarged by a fixed percentage from those designated in 1996 with the
same lower fixed percentage of pre-tax profits applied to such higher base
pre-tax profit amount and the higher fixed percentage applied only if such
higher base pre-tax profit amount was exceeded. In addition, individual awards
to certain corporate participants were conditioned on the Company's achieving a
certain fixed percentage return on equity. Target bonuses for executive officers
(other than the Chief Executive Officer) range from 30% to 45% of base salary.
Maximum bonuses in excess of 100% of base salary require special Committee
review and approval. The management incentive bonus for executive officers who
are deemed to have corporate-wide responsibility (which include all the persons
named in the summary compensation table below) was based 75% on corporate
performance and 25% on individual performance (except for the Chief Executive
Officer, see "1997 Compensation of the Chief Executive Officer" below). The
management incentive bonus for those individuals deemed to have business unit
responsibility was weighted 75% for business unit performance and 25% for
individual performance. The 1997 management bonuses for executive officers were
based in part on the applicable corporate and business unit performance and in
part on the contribution of the individual.
In 1997, stock options were granted to approximately 560 employees,
including executive officers, pursuant to the Company's employee stock option
plans. The Committee, which was composed solely of "Non-Employee Directors", as
defined in accordance with Rule 16b-3 of the rules and regulations of the
7
<PAGE> 10
Securities and Exchange Commission, granted 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
February 1997 were non-qualified, had an exercise price equal to the fair market
value of the Common Stock on the date of grant and vest over three years. The
options granted in September 1997 were granted to twelve senior executives,
including all 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
program, non-qualified 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 is reviewed by the Committee but is not considered a
critical factor in determining the size of any executive stock options award in
any year. Options granted were allocated on the basis of individual compensation
level, responsibility and performance.
1997 COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
As set forth in the accompanying tables, Mr. Hassenfeld's salary of
$957,900 for 1997 represented no increase over his 1996 salary, his management
incentive bonus with respect to 1997 was $718,425, which represented 75% of his
1997 salary, and in 1997 he was granted options to purchase 202,500 (as adjusted
to reflect the 3 for 2 stock split paid in the form of a 50% stock dividend on
March 21, 1997) shares of Common Stock, which represented approximately 6.8% of
all options granted to employees during 1997. All compensation decisions
regarding Mr. Hassenfeld were made by the Committee, which is also composed
solely of outside directors in accordance with Section 162(m) of the Internal
Revenue Code of 1986, as amended, in all cases without the participation of Mr.
Hassenfeld or other executive officers of the Company. In setting Mr.
Hassenfeld's 1997 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 management 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 1997, which was
based on the 1997 operating plan approved by the Board in February 1997. 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. The targeted performance goal was achieved by the Company
resulting in the bonus paid to Mr. Hassenfeld. The options granted to Mr.
Hassenfeld in 1997 reflected individual compensation level, responsibility and
performance.
Alan R. Batkin, Alex Grass, Marie Josee Kravis and Carl Spielvogel
(Chairman) as members of the Compensation and Stock Option Committee of the
Board of Directors as of 1997 fiscal year end.
8
<PAGE> 11
EXECUTIVE COMPENSATION
The following table summarizes compensation paid by the Company for
services rendered during 1997, 1996 and 1995 by the Chief Executive Officer of
the Company and the four most highly compensated executives of the Company other
than the Chief Executive Officer:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------ ------------
OTHER
ANNUAL (b) ALL OTHER (d)
NAME AND PRINCIPAL POSITION YEAR SALARY (a) BONUS(a) COMPENSATION OPTIONS(c) COMPENSATION
--------------------------- ---- ---------- -------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Alan G. Hassenfeld.................... 1997 $957,900 $718,425 $36,834 202,500 $58,398
Chairman of the Board, 1996 957,900 450,000 33,493 37,500 44,171
President and Chief Executive Officer 1995 927,577 220,000 35,295 150,000 43,448
Alfred J. Verrecchia.................. 1997 633,450 350,000 14,034 142,500 34,665
Executive Vice President 1996 618,397 160,000 13,465 37,500 30,440
and President -- Global Operations 1995 597,400 130,000 11,974 105,000 30,347
George R. Ditomassi, Jr............... 1997 582,345 265,000 16,240 117,500 2,375
Executive Vice President 1996 560,577 145,000 15,545 37,500 2,375
and President -- Corporate
Innovation(e) 1995 540,192 165,000 16,945 97,500 2,310
Harold P. Gordon...................... 1997 544,286 268,000 62,140 132,500 33,665
Vice Chairman 1996 528,230 175,000 63,771 37,500 6,215
1995 455,650 135,000 17,746 225,000 3,938
John T. O'Neill....................... 1997 476,525 250,000 8,248 132,500 26,807
Executive Vice President and 1996 462,840 175,000 8,599 37,500 25,357
Chief Financial Officer 1995 436,450 150,000 10,176 75,000 21,786
</TABLE>
- ---------------
(a) Includes amounts deferred by the individual pursuant to the Company's
Retirement Savings Plan and Nonqualified Deferred Compensation Plan.
(b) Includes the following amounts which were included in 1997 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: $7,431 for Mr. Hassenfeld, $11,834 for Mr. Verrecchia, $11,040 for
Mr. Ditomassi, $9,191 for Mr. Gordon and $7,398 for Mr. O'Neill. Also
includes the following amounts paid by the Company and included in 1997
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,
$2,200 for Mr. Verrecchia, $5,200 for Mr. Ditomassi, $29,976 for Mr. Gordon,
and $850 for Mr. O'Neill. Also includes $22,973 of moving expenses for Mr.
Gordon. Does not include other personal benefits that do not in the
aggregate exceed $50,000 in any year for any individual.
(c) All share amounts are adjusted to reflect the 3 for 2 stock split paid in
the form of a 50% stock dividend on March 21, 1997.
(d) Includes, except for Mr. Ditomassi, the executive's pro-rata share of the
Company's contribution to the profit-sharing account under the Company's
Retirement Savings Plan (the "Retirement Savings Plan") which is in part
contributed to the individual's account in the Retirement Savings Plan and,
to the extent in excess of certain Internal Revenue Code of 1986, as amended
(the "Code") maximums, deemed allocated to the individual's account in the
Company's unfunded Supplemental Benefit Retirement Plan (the "Supplemental
Plan"), which in 1997 amounted to $52,796 for Mr. Hassenfeld, $29,754 for
Mr. Verrecchia, $26,985 for Mr. Gordon and $24,432 for Mr. O'Neill. Includes
for each individual, the sum of $2,375, which represents the Company's 25%
match of sums saved in 1997 by each named executive in his savings account
under the Company's Retirement Savings Plan and Supplemental Plan. Also
includes $3,227, $2,536 and $4,305 in premiums paid by the Company in 1997
for individual life insurance policies for Messrs. Hassenfeld, Verrecchia
and Gordon, respectively.
(e) On January 31, 1998, George R. Ditomassi, Jr. resigned as an executive
officer of the Company. See "Employment, Severance and Consulting
Agreements and Related Transactions" below.
9
<PAGE> 12
The following table sets forth certain information regarding stock option
grants in 1997 to the individuals named above. All amounts have been adjusted to
reflect the 3 for 2 stock split paid in the form of a 50% stock dividend on
March 21, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL
SECURITIES OPTIONS RATES OF STOCK
UNDERLYING GRANTED TO PRICE APPRECIATION
OPTIONS EMPLOYEES EXERCISE FOR OPTION TERM(a)
GRANTED IN FISCAL PRICE PER EXPIRATION ------------------------------
NAME (d) YEAR SHARE DATE 0% 5% 10%
---- ---------- ---------- --------- ---------- --- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Alan G. Hassenfeld...... 52,500(b) $28.0833 2/18/07 0 $ 927,223 $2,349,769
150,000(c) 6.8% 29.7344 9/16/07 0 2,144,490 6,056,655
Alfred J. Verrecchia.... 37,500(b) 28.0833 2/18/07 0 662,302 1,678,406
105,000(c) 4.8% 29.7344 9/16/07 0 1,501,143 4,239,658
George R. Ditomassi,
Jr.................... 37,500(b) 28.0833 2/18/07 0 662,302 1,678,406
80,000(c) 4.0% 29.7344 9/16/07 0 1,143,728 3,230,216
Harold P. Gordon........ 37,500(b) 28.0833 2/18/07 0 662,302 1,678,406
95,000(c) 4.5% 29.7344 9/16/07 0 1,358,177 3,835,881
John T. O'Neill......... 37,500(b) 28.0833 2/18/07 0 662,302 1,678,406
95,000(c) 4.5% 29.7344 9/16/07 0 1,358,177 3,835,881
</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.
(b) 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. An optionee taking
early retirement may, under certain circumstances, 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 Committee may
approve. Unless otherwise approved by the Committee in its discretion, 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.
(c) These options were granted pursuant to the Company's long term incentive
program 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.
Unless otherwise approved by the Committee in its discretion, 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.
(d) 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
10
<PAGE> 13
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.
* * *
The following table sets forth as to each of the named individuals: (a) the
number of shares acquired upon exercise of options during fiscal 1997; (b) the
value realized (market value on date of exercise less exercise price) upon the
exercise of such options during fiscal 1997; (c) the number of exercisable and
unexercisable options held on December 28, 1997, the last day of the 1997 fiscal
year; and (d) the value of such options at December 28, 1997. The number of
options set forth below correspond to the number of shares to which they relate
and have been adjusted to reflect the 3 for 2 stock split paid in the form of a
50% stock dividend on March 21, 1997.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 28, 1997 AT DECEMBER 28, 1997
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alan G. Hassenfeld........... -- -- 586,625 353,500 $6,838,080 $1,368,333
Alfred J. Verrecchia......... -- -- 526,625 250,000 7,319,739 970,494
George R. Ditomassi, Jr...... 60,450 $ 983,374 320,000 220,500 2,830,690 915,398
Harold P. Gordon............. 900 6,713 146,100 255,500 1,268,698 1,174,874
John T. O'Neill.............. 60,750 1,227,906 262,625 217,500 2,420,680 796,814
</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 individuals (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.
11
<PAGE> 14
(3) For purposes of determining benefits under the Pension Plan and the
Supplemental Plan, credited years of service cannot exceed 30.
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 (a)
--------------
<S> <C>
Alan G. Hassenfeld......................................... 29
Alfred J. Verrecchia....................................... 30
George R. Ditomassi, Jr.................................... 30
Harold P. Gordon........................................... 3
John T. O'Neill............................................ 11
</TABLE>
- ---------------
(a) The Pension Plan was amended, effective January 1, 1997, to delete a
provision which reduced by five years the number of years of credited
service of certain classes of Company employees employed prior to 1986. As a
result, credited years of service for all named individuals reflect actual
years of service, subject to the 30 year maximum.
EMPLOYMENT, SEVERANCE AND CONSULTING AGREEMENTS AND RELATED TRANSACTIONS
The agreements summarized below (or the form thereof) have been filed with
the Securities and Exchange Commission as exhibits to the Company's periodic
filings and such summaries do not purport to be complete and are qualified in
their entirety by reference to such agreements.
Nine executive officers, including the five above-named individuals (other
than Mr. Ditomassi), 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 the executive's 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
the executive of a felony involving moral turpitude.
12
<PAGE> 15
Mr. Gordon (the "Employee") has an additional employment agreement, dated
as of January 1, 1996 (the "Agreement"). 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 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. If the Employee is
terminated (other than for "Cause") prior to April 30, 1998, he would receive
two years and nine months of base salary as severance pay, with the length of
the severance pay reduced by three months for every additional three months of
service thereafter until January 31, 2000. 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 the Agreement described in the immediately preceding
paragraph (the "Change of Control Agreement"). 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.
On January 31, 1998, George R. Ditomassi resigned as an executive officer
of the Company, terminated his employment with the Company and entered into a
consulting agreement with the Company.
On January 30, 1998, the Company and George R. Ditomassi, Jr., entered into
certain letter agreements, pursuant to which the Company agreed to pay Mr.
Ditomassi severance pay of $41,979 per month through December 31, 1999 (the
"Severance Period"), to continue his participation during the Severance Period
in the executive automobile, tax preparation, basic life, medical and dental
insurance programs, to pay the premiums for $800,000 in supplemental term life
insurance during the Severance Period and to permit his outstanding options to
continue to vest during the Severance Period and to become fully vested and
exercisable at the end of the Severance Period. The Company and Mr. Ditomassi
exchanged certain releases and the Company agreed to pay for his legal expenses
incurred in drafting the letter agreements and related
13
<PAGE> 16
documents. The Company also agreed that if the rights of indemnity of officers
or directors of the Company are enhanced thereafter, he would be entitled to
such enhanced rights as they relate to action taken while an officer, director
or employee of the Company. If Mr. Ditomassi begins full time regular
non-temporary employment with a third party during the Severance Period, his
right to severance pay would end, and to the extent that other benefits being
continued are provided by such new employer, those benefits would also cease.
Mr. Ditomassi agreed not to compete with or interfere in any relationship of the
Company for a period beginning on January 31, 1998 and ending one year from the
date severance benefits cease.
On January 31, 1998, the Company and Mr. Ditomassi entered into a
consulting agreement (the "Consulting Agreement") with a term ending on October
31, 1999 (although Mr. Ditomassi has the right to terminate the Consulting
Agreement at any time after June 30, 1998), pursuant to which Mr. Ditomassi will
work on and/or provide advice with respect to certain matters as well as
additional matters reasonably requested by the Chairman or the Company from time
to time. As basic compensation for consulting services, the Company agreed to
pay Mr. Ditomassi $5,000 per month plus minimum lump sum payments of $150,000 in
March of 1999 and $125,000 in March of 2000 (or a pro rata portion thereof if
the Consulting Agreement is terminated prior to such payments), subject to
increase at the discretion of the Chairman of the Company. Mr. Ditomassi agreed
not to compete with, or interfere with any relationship of, the Company for a
period beginning on January 31, 1998 and ending one year following the term of
the Consulting Agreement.
Since the beginning of the 1997 fiscal year, the Company has paid an
aggregate of approximately $147,000 of legal expenses on behalf of Mr. Ditomassi
pursuant to the Company's bylaws and the indemnification provisions of the Rhode
Island Business Corporation Act. In 1997, Mr. Ditomassi reimbursed the Company
in the aggregate amount of approximately $48,000 with respect to certain goods
and services received in previous years.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information, as of March 20, 1998 (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
BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
---------------- ----------------- --------
<S> <C> <C>
Alan G. Hassenfeld................................... 12,245,733(2) 9.2
1027 Newport Avenue
Pawtucket, RI 02862
The Capital Group Companies, Inc..................... 10,689,000(3) 8.0
333 South Hope Street
Los Angeles, CA 90071
Loomis, Sayles & Company, L.P........................ 7,050,285(4) 5.3
One Financial Center
Boston, MA 02111
Institutional Capital Corporation.................... 6,960,539(5) 5.2
225 West Wacker Drive
Chicago, IL 60606
</TABLE>
- ---------------
(1) Based upon information furnished by each shareholder or contained in filings
made with the Securities and Exchange Commission.
(2) Includes 5,927,281 shares held as sole trustee for the benefit of his
mother, 552,898 shares held as sole trustee of a trust for Mr. Hassenfeld's
benefit and currently exercisable options to purchase 618,500 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
14
<PAGE> 17
includes 695,300 shares owned by The Hassenfeld Foundation, of which Mr.
Hassenfeld is an officer and director, as to which shares Mr. Hassenfeld
disclaims beneficial ownership, 512,747 shares held as one of the trustees
of a charitable lead trust for the benefit of The Hassenfeld Foundation and
102,811 shares held as one of the trustees of a trust for the benefit of his
mother and her grandchildren.
(3) Certain investment management subsidiaries of The Capital Group Companies,
Inc. have sole dispositive power over 10,689,000 shares of Common Stock and
sole voting power over 6,070,000 of such shares. The foregoing information
is as at December 31, 1997.
(4) Loomis, Sayles & Company, L.P., an investment advisor, shares dispositive
power with respect to all 7,050,285 shares of Common Stock, has sole voting
power over 3,423,725 of such shares and shared voting power as to 2,800 of
such shares. The foregoing information is at December 31, 1997.
(5) Institutional Capital Corporation, an investment advisor ("ICAP") has, and
Robert H. Lyon, as President and majority shareholder of ICAP, may be deemed
to have, sole dispositive power over 6,960,539 shares of Common Stock and
sole voting power over 6,520,564 of such shares. The foregoing information
is as at December 31, 1997.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information, as of March 20, 1998, 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 dispositive power with
respect to such shares.
<TABLE>
<CAPTION>
PERCENT
COMMON OF
NAME OF DIRECTOR OR EXECUTIVE OFFICER(1) STOCK CLASS
---------------------------------------- ---------- -------
<S> <C> <C>
Alan R. Batkin(2)........................................... 13,975 *
Harold P. Gordon(3)......................................... 211,358 *
Alex Grass(4)............................................... 29,597 *
Alan G. Hassenfeld(5)....................................... 12,245,733 9.2
Sylvia K. Hassenfeld(6)..................................... 759,555 *
Marie Josee Kravis(7)....................................... 3,928 *
Claudine B. Malone(8)....................................... 7,261 *
Morris W. Offit(9).......................................... 5,091 *
John T. O'Neill(10)......................................... 287,500 *
Norma T. Pace(11)........................................... 11,163 *
E. John Rosenwald, Jr.(12).................................. 148,343 *
Carl Spielvogel(13)......................................... 36,794 *
Henry Taub(14).............................................. 16,542 *
Preston Robert Tisch(15).................................... 9,211 *
Alfred J. Verrecchia(16).................................... 676,363 *
Paul Wolfowitz(17).......................................... 8,380 *
All Directors and Executive Officers as a Group (includes 26
persons)(18).............................................. 14,550,021 10.7
</TABLE>
- ---------------
* Less than one percent.
(1) Information in this table is based upon information furnished by each
director and executive officer. All amounts have been adjusted to reflect
the 3 for 2 stock split paid in the form of a 50% stock dividend on March
21, 1997.
(2) Includes currently 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 6,000 shares as
15
<PAGE> 18
well as 6,850 shares deemed to be held in Mr. Batkin's stock unit account
under the Deferred Compensation Plan.
(3) Includes currently exercisable options and options exercisable within sixty
days hereof granted under the Company's stock option plans to purchase an
aggregate of 197,600 shares as well as 2,248 shares deemed to be held in
Mr. Gordon's stock unit account under the Deferred Compensation Plan.
Excludes fractional shares held in the Company's Dividend Reinvestment and
Cash Stock Purchase Program.
(4) Includes currently 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 6,000 shares as well as 6,481 shares
deemed to be held in Mr. Grass' stock unit account under the Deferred
Compensation Plan. Does not include 11,250 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 currently 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 6,000 shares, 695,300 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,
and 961 shares deemed to be held in Mrs. Hassenfeld's stock unit account
under the Deferred Compensation Plan. 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.
(7) Represents currently exercisable options granted under the Company's Stock
Option Plan for Non-employee Directors to purchase 3,000 shares as well as
928 shares deemed to be held in Mrs. Kravis' stock unit account under the
Deferred Compensation Plan.
(8) Includes currently 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 6,000 shares as well as 961 shares
deemed to be held in Ms. Malone's stock unit account under the Deferred
Compensation Plan.
(9) Represents options currently exercisable and exercisable within sixty days
hereof granted under the Company's Stock Option Plan for Non-employee
Directors to purchase an aggregate of 4,500 shares as well as 591 shares
deemed to be held in Mr. Offit's stock unit account under the Deferred
Compensation Plan.
(10) Includes currently exercisable options granted under the Company's employee
stock option plans to purchase an aggregate of 262,500 shares.
(11) Includes currently 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 6,000 shares as well as 4,128 shares
deemed to be held in Mrs. Pace's stock unit account under the Deferred
Compensation Plan.
(12) Includes currently 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 6,000 shares as well as 7,343 shares
deemed to be held in Mr. Rosenwald's stock unit account under the Deferred
Compensation Plan. 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.
(13) Includes currently 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 6,000 shares as well as 3,004 shares
deemed to be held in Mr. Spielvogel's stock unit account under the Deferred
Compensation Plan.
(14) Includes currently 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 6,000 shares as well as 6,042 shares
deemed to be held in Mr. Taub's stock unit account under the Deferred
Compensation Plan.
16
<PAGE> 19
(15) Includes currently 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 6,000 shares as well as 961 shares
deemed to be held in Mr. Tisch's stock unit account under the Deferred
Compensation Plan.
(16) Includes currently exercisable options granted under the Company's employee
stock option plans to purchase an aggregate of 560,250 shares. Does not
include 101,250 shares owned by Mr. Verrecchia's spouse, as to which Mr.
Verrecchia disclaims beneficial ownership.
(17) Represents options currently exercisable and exercisable within sixty days
hereof granted under the Company's Stock Option Plan for Non-employee
Directors to purchase an aggregate of 4,500 shares as well as 3,880 shares
deemed to be held in Mr. Wolfowitz's stock unit account under the Deferred
Compensation Plan.
(18) Of these shares, all directors and executive officers as a group have sole
voting and dispositive power with respect to 13,126,663 shares and have
shared voting and/or investment power with respect to 1,423,358 shares.
Includes 2,324,634 shares purchasable by directors and executive officers
upon exercise of currently exercisable options, or options exercisable
within sixty days hereof, granted under the Company's stock option plans
and 44,378 shares deemed to be held in stock unit accounts under the
Deferred Compensation Plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 29, 1996, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were complied with.
INDEPENDENT PUBLIC ACCOUNTANTS
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 27, 1998. A representative of KPMG Peat Marwick LLP 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.
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 1999
Annual Meeting must be received by the Company at its executive offices no later
than December 2, 1998. The address of the Company's executive offices is 1027
Newport Avenue, Pawtucket, Rhode Island 02862.
17
<PAGE> 20
FINANCIAL STATEMENTS
A copy of the Annual Report of the Company for the fiscal year ended
December 28, 1997 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 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 3, 1998
Pawtucket, Rhode Island
SKU # 0537 PS 98
18
<PAGE> 21
DETACH HERE
PROXY
HASBRO, INC.
Annual Meeting of Shareholders--May 13, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
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 13,
1998 at 10:00 A.M. at the 200 Fifth Avenue Club, 200 Fifth Avenue, New York,
New York, and at any adjournments thereof.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" PROPOSAL 1
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.
SEE REVERSE SEE REVERSE
SIDE SIDE
<PAGE> 22
HASBRO, INC.
1027 NEWPORT AVENUE
PAWTUCKET, RI 02862
Dear Fellow Shareholder:
You are cordially invited to attend the 1998 Annual Meeting of
Shareholders of Hasbro, Inc. to be held at 10:00 a.m. on Wednesday, May 13,
1998, at the 200 Fifth Avenue Club, 200 Fifth Avenue, New York, New York. The
accompanying Notice of Annual Meeting and Proxy Statement contain detailed
information as to the formal business to be transacted at the meeting.
Your vote matters. Whether or not you plan to attend the 1998 Annual
Meeting, it is important that your shares be voted. Accordingly, please
complete, sign and date the proxy card attached below and return it in the
enclosed postage-paid envelope. You may, of course, attend the 1998 Annual
Meeting and vote in person, even if you have previously returned your proxy
card. I am looking forward to seeing you there.
Sincerely,
Alan G. Hassenfeld
Chairman of the Board
and Chief Executive Officer
YOUR VOTE IS IMPORTANT
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY CARD
<TABLE>
<CAPTION>
DETACH HERE
Please mark
[X] votes as in
this example.
<S> <C>
The Board of Directors recommends a vote "FOR" Proposal 1.
1. Election of Directors 2. To transact such other business as may properly
For Terms Expiring in 2001: Alan R. Batkin, Morris W. come before the Annual Meeting and any
Offit, Carl Spielvogel, Paul Wolfowitz adjournment or postponement thereof.
For Term Expiring in 1999: Claudine B. Malone
FOR WITHHELD
_____ _____
[___] [___]
_____
[___] _______________________________________
For all nominees except as noted above
_____
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 person should sign.
Signature:______________________________ Date:_________________ Signature:________________________________ Date:______________
</TABLE>
