SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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(as permitted by Rule 14a-6 (e) (2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
HASBRO, INC.
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(Name of Registrant as Specified In Its Charter)
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1
HASBRO, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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TIME:
10:00 a.m. local time
DATE:
Wednesday, May 15, 2002
PLACE:
Hasbro's Offices
1027 Newport Avenue
Pawtucket, RI 02862
PURPOSE:
- Elect four directors to terms expiring in 2005.
- Consider and vote upon a shareholder proposal entitled "Repeal Classified
Board".
- Consider and vote upon a shareholder proposal entitled "Hasbro-Global
Human Rights Standards".
- Transact such other business as may properly come before the meeting and
any adjournment or postponement of the meeting.
OTHER IMPORTANT INFORMATION:
- Hasbro's Board of Directors recommends that you vote your shares "FOR"
each of the nominees for director and "AGAINST" the "Repeal Classified
Board" and "Hasbro-Global Human Rights Standards" resolutions.
- Shareholders of record of Hasbro common stock at the close of business on
March 22, 2002 may vote at the meeting.
- You are cordially invited to attend the meeting to vote your shares in
person. If you are not able to do so, you may vote by Internet, by
telephone or by mail. See the enclosed proxy card and proxy statement for
specific instructions. PLEASE VOTE YOUR SHARES.
By Order of the Board of Directors
Barry Nagler
Secretary
Dated: April 4, 2002
HASBRO, INC.
1027 NEWPORT AVENUE
PAWTUCKET, RHODE ISLAND 02862
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PROXY STATEMENT
2002 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 15, 2002
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QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING
Q: WHY AM I RECEIVING THESE MATERIALS?
A: The Board of Directors (the "Board") of Hasbro, Inc. (sometimes referred to
as the "Company" or "Hasbro") is sending these proxy materials to you on or
about April 4, 2002 in connection with Hasbro's annual meeting of shareholders
which will take place on May 15, 2002 at Hasbro's offices, 1027 Newport Avenue,
Pawtucket, RI 02862. The information included in this proxy statement relates to
the proposals to be voted on at the meeting, the voting process, the
compensation of directors and our most highly paid executive officers, and
certain other required information. Our 2001 Annual Report is also enclosed.
Q: WHAT PROPOSALS WILL BE VOTED ON AT THE MEETING?
A: There are three proposals scheduled to be voted on at the meeting:
- The election of directors.
- A shareholder proposal entitled "Repeal Classified Board".
- A shareholder proposal entitled "Hasbro-Global Human Rights Standards".
Q: WHAT SHARES OWNED BY ME CAN BE VOTED?
A: All shares owned by you as of March 22, 2002, the Record Date, may be voted
by you. These shares include those (1) held directly in your name as the
shareholder of record, including shares purchased through Hasbro's Dividend
Reinvestment and Cash Stock Purchase Program and (2) held for you as the
beneficial owner through a stockbroker, bank or other nominee.
Q: WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A SHAREHOLDER OF RECORD AND
AS A BENEFICIAL OWNER?
A: Most Hasbro shareholders hold their shares through a stockbroker, bank or
other nominee rather than directly in their own name. As summarized below, there
are some distinctions between shares held of record and those owned
beneficially.
SHAREHOLDER OF RECORD
If your shares are registered directly in your name with Hasbro's Transfer
Agent, EquiServe Trust Company, N.A. ("EquiServe"), you are considered, with
respect to those shares, the shareholder of record, and these proxy materials
are being sent directly to you by EquiServe on behalf of Hasbro. As the
shareholder of record, you have the right to grant your voting proxy directly to
Hasbro or to vote in person at the meeting. Hasbro has enclosed a proxy card for
you to use.
1
BENEFICIAL OWNER
If your shares are held in a stock brokerage account or by a bank or other
nominee, you are considered the beneficial owner of shares held in street name
and the proxy materials are being sent to you by your broker or nominee who is
considered, with respect to those shares, the shareholder of record. As the
beneficial owner, you have the right to direct your broker or nominee on how to
vote and are also invited to attend the meeting. However, since you are not the
shareholder of record, you may not vote these shares in person at the meeting
unless you receive a proxy from your broker or nominee. Your broker or nominee
has enclosed a voting instruction card for you to use. If you wish to attend the
meeting and vote in person, please mark the box on the voting instruction card
received from your broker or nominee and return it to them so that you receive a
legal proxy to present at the meeting.
Q: HOW CAN I VOTE MY SHARES IN PERSON AT THE MEETING?
A: Shares held directly in your name as the shareholder of record may be voted
in person at the annual meeting. If you choose to do so, please bring the
enclosed proxy card and proof of identification. Shares beneficially owned may
be voted by you if you receive and present at the meeting a proxy from your
broker or nominee, together with proof of identification. Even if you plan to
attend the annual meeting, we recommend that you also submit your proxy as
described below so that your vote will be counted if you later decide not to
attend the meeting.
Q: HOW CAN I VOTE MY SHARES WITHOUT ATTENDING THE MEETING?
A: Whether you hold shares directly as the shareholder of record or
beneficially in street name, you may direct your vote without attending the
meeting. You may vote by granting a proxy or, for shares held in street name, by
submitting voting instructions to your broker or nominee. In most instances, you
will be able to do this over the Internet, by telephone or by mail. Please refer
to the summary instructions below and those included on your proxy card or, for
shares held in street name, the voting instruction card included by your broker
or nominee.
BY INTERNET -- If you have Internet access, you may submit your proxy from
any location in the world by following the "Vote by Internet" instructions on
the proxy card.
BY TELEPHONE -- You may submit your proxy by following the "Vote by
Telephone" instructions on the proxy card.
BY MAIL -- You may do this by marking, dating and signing your proxy card
or, for shares held in street name, the voting instruction card provided by your
broker or nominee and mailing it in the enclosed, self-addressed, postage
prepaid envelope. No postage is required if mailed in the United States.
Q: HOW ARE VOTES COUNTED?
A: Each share of Common Stock entitles its holder to one vote on all matters to
come before the meeting, including the election of directors. In the election of
directors, you may vote "FOR" all of the nominees or your vote may be "WITHHELD"
with respect to one or more of the nominees. For the other proposals, you may
vote "FOR", "AGAINST" or "ABSTAIN". If you "ABSTAIN", it has the same effect as
a vote "AGAINST". If you sign your proxy card or broker voting instruction card
with no instructions, your shares will be voted in accordance with the
recommendations of the Board.
Q: CAN I CHANGE MY VOTE?
A: You may change your proxy instructions at any time prior to the vote at the
meeting. For shares held directly in your name, you may accomplish this by
granting another proxy that is properly signed and bears a later date, by
sending a properly signed written notice to the Secretary of the Company or by
attending the meeting and voting in person. To revoke a proxy previously
submitted by telephone or through the Internet,
2
you may simply vote again at a later date, using the same procedures, in which
case your later submitted vote will be recorded and your earlier vote revoked.
Attendance at the meeting will not cause your previously granted proxy to be
revoked unless you specifically so request. For shares held beneficially by you,
you may accomplish this by submitting new voting instructions to your broker or
nominee.
Q: WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY OR VOTING INSTRUCTION
CARD?
A: It means your shares are registered differently or are in more than one
account. Please provide voting instructions for all proxy and voting instruction
cards you receive.
Q: HOW CAN I ATTEND THE MEETING?
A: You may attend the meeting if you are listed as a shareholder of record as
of March 22, 2002 and bring proof of identification. If you hold your shares
through a broker or other nominee, you will need to provide proof of ownership
by bringing either a copy of a brokerage statement showing your share ownership
as of March 22, 2002 or a legal proxy if you wish to vote your shares in person
at the meeting. In addition to the items mentioned above, you should bring proof
of identification.
Q: WHERE CAN I FIND THE VOTING RESULTS OF THE MEETING?
A: We will announce preliminary voting results at the meeting and publish final
results in our quarterly report on Form 10-Q for the second quarter of fiscal
2002.
Q: WHAT IS THE QUORUM FOR THE MEETING?
A: Holders of record (the "Shareholders") of the common stock, par value $.50
per share, of the Company (the "Common Stock") on March 22, 2002 are entitled to
vote at the meeting or any adjournments thereof. As of that date there were
173,067,819 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 meeting.
Q: HOW DO PARTICIPANTS IN THE RETIREMENT SAVINGS PLAN VOTE THEIR SHARES?
A: If your account in the Retirement Savings Plan has units of the Hasbro Stock
Fund, the accompanying proxy card indicates the number of shares of Common Stock
beneficially owed by you under the symbol "401". When a participant proxy card
is returned properly signed and completed, Fidelity Management Trust Company
(the "Trustee") will vote the participant's shares in the manner directed by the
participant. If the participant makes no directions, the Trustee will not vote
the shares.
Q: WHAT HAPPENS IF I HAVE CONSENTED TO ELECTRONIC DELIVERY OF THE PROXY
STATEMENT AND OTHER ANNUAL MEETING MATERIALS?
A: If you have consented to electronic delivery of the annual meeting materials
you will receive an email notice with instructions on how to access the proxy
statement and annual report on the Company's website, or in the case of the
proxy card, on EquiServe's website. The notice will also inform you how to vote
your proxy over the Internet. You will receive this email notice at the time
paper copies of the annual meeting materials are mailed to nonconsenting
shareholders. Even if you have consented to electronic delivery of the annual
meeting materials, you may still receive a paper copy of the notice of the
annual meeting. Your consent to receive the annual meeting materials
electronically will remain in effect until you specify otherwise.
3
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
Four directors are to be elected at the annual meeting to terms expiring in
2005. The Board has recommended as nominees for election as directors the first
four persons named in the table below. All of the nominees except Basil L.
Anderson are currently directors of the Company. Sylvia K. Hassenfeld and Norma
T. Pace, whose terms as directors expire at this annual meeting, are retiring
and are not standing for re-election. The shareholders are not being asked to
elect a fifth director to the class of directors being elected at the annual
meeting. The proxies cannot be voted for more than four directors at the annual
meeting. Following the annual meeting the Board plans to reduce the total number
of directors from fourteen to thirteen. The Board is divided into three classes.
The terms of the nine remaining directors expire in 2003 and 2004. 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 place, of a substituted nominee who would be recommended by management.
Management, however, has no reason to believe that any nominee named below will
be unable to serve as a director.
The following tables set forth as to each nominee and as to each incumbent
director whose term of office extends to 2003 and 2004 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.
POSITIONS WITH COMPANY, HAS BEEN
PRINCIPAL OCCUPATION AND A DIRECTOR TERM
NAME AGE OTHER DIRECTORSHIPS SINCE EXPIRES
---- --- ------------------------ ---------- -------
Nominees for Terms Expiring in 2005
Basil L. Anderson.................... 57 Vice Chairman, Staples, Inc. Nominee *
(operates a chain of office
supply stores) since 2001. Prior
thereto, Executive Vice
President-Finance and Chief
Financial Officer of Campbell
Soup Company since 1996.
Director, Staples, Inc.
E. Gordon Gee........................ 58 Chancellor, Vanderbilt University 1999 *
since 2000. Prior thereto,
President, Brown University from
1998 to 2000. Prior thereto,
President, The Ohio State
University. Director, Allmerica
Financial Inc., Dollar General,
Inc., Intimate Brands Inc., The
Limited, Inc. and Massey Energy,
Inc.
E. John Rosenwald, Jr................ 71 Vice Chairman, Bear, Stearns & 1983 *
Co. Inc. (investment bankers)
since 1997. Prior thereto, Vice
Chairman, The Bear Stearns
Companies, Inc. Director, Bear,
Stearns & Co. Inc.
---------------
* Nominee
4
POSITIONS WITH COMPANY, HAS BEEN
PRINCIPAL OCCUPATION AND A DIRECTOR TERM
NAME AGE OTHER DIRECTORSHIPS SINCE EXPIRES
---- --- ------------------------ ---------- -------
Eli J. Segal......................... 59 Chairman of the Board, 2001 *
SchoolSports, Inc. (magazine and
internet content provider) since
2000. Prior thereto, President
and Chief Executive Officer, the
Welfare to Work Partnership
(nonpartisan business
organization) from 1997 to 2000.
Prior thereto, Assistant to the
President of the United States.
Director, Hotel Reservations
Network Inc.
Vote Required. The vote of a majority of those shares of Common Stock
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 OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE ELECTION OF THE FOUR NOMINEES NAMED ABOVE (PROPOSAL NO. 1).
POSITIONS WITH COMPANY, HAS BEEN
PRINCIPAL OCCUPATION AND A DIRECTOR TERM
NAME AGE OTHER DIRECTORSHIPS SINCE EXPIRES
---- --- ------------------------ ---------- -------
Directors Whose Terms Expire in 2003 and 2004
Alan R. Batkin....................... 57 Vice Chairman, Kissinger 1992 2004
Associates, Inc. (geopolitical
strategic consulting firm) since
1990. Director, Diamond Offshore
Drilling, Inc., Overseas
Shipholding Group, Inc. and
Schweitzer-Mauduit International,
Inc.
Frank J. Biondi, Jr.................. 58 Senior Managing Director, 2002 2003
WaterView Advisors LLC (private
equity fund specializing in media)
since 1999. Prior thereto,
Chairman and Chief Executive
Officer of Universal Studios (a
major film, TV, and recorded music
company) from 1996 through 1998.
Prior thereto, Chief Executive
Officer of Viacom, Inc.
(diversified entertainment
company) from 1987 to 1996.
Director, Amgen, Inc., The Bank of
New York and Vail Resorts, Inc.
Harold P. Gordon..................... 64 Vice Chairman since 1995. 1988 2003
Director, Alliance Atlantis
Communications Corporation, Dundee
Bancorp Inc., G.T.C.
Transcontinental Group Ltd. and
Sonomax Hearing Healthcare Inc.
Alan G. Hassenfeld................... 53 Chairman of the Board and Chief 1978 2003
Executive Officer since 1999.
Prior thereto, Chairman of the
Board, President and Chief
Executive Officer.
5
POSITIONS WITH COMPANY, HAS BEEN
PRINCIPAL OCCUPATION AND A DIRECTOR TERM
NAME AGE OTHER DIRECTORSHIPS SINCE EXPIRES
---- --- ------------------------ ---------- -------
Claudine B. Malone................... 65 President and Chief Executive 2001 2004
Officer, Financial and Management
Consulting, Inc. (consulting firm)
since 1984. Director, LaFarge
North America, Lowe's Companies,
Inc. and Science Applications
International Corporation. Ms.
Malone previously served as a
Director of Hasbro from 1992 to
1999.
Carl Spielvogel...................... 73 Chairman and Chief Executive 1992 2004
Officer, Carl Spielvogel
Associates, Inc. (international
finance and marketing) since 2001.
Prior thereto, U.S. Ambassador to
the Slovak Republic from late 2000
to 2001, during which time Mr.
Spielvogel took a leave of absence
from the Board, returning to the
Board in April of 2001. Prior
thereto, Chairman and Chief
Executive Officer, Carl Spielvogel
Associates, Inc. from 1997 to
2000. Prior thereto, Chairman of
the Board and Chief Executive
Officer, United Auto Group, Inc.
(operator of multiple-franchise
auto dealerships). Director,
Barney's New York, Inc., Data
Broadcasting Corporation and
Interactive Data, Inc.
Paula Stern.......................... 57 President, The Stern Group, Inc. 2002 2003
(international economic and trade
consulting) since 1988. Alkire
Chair in International Business,
Hamline University, from 1994 to
2000. Former Chairwoman and
Commissioner of U.S. International
Trade Commission from 1978 to
1987. Director, Avon Products,
Inc. and Neiman Marcus Group.
Preston Robert Tisch................. 75 Co-Chairman of the Board, Loews 1988 2003
Corporation (holding company with
interests in areas such as
insurance, hotels and offshore oil
and gas drilling) since 1999.
Prior thereto, Co-Chairman and
Co-Chief Executive Officer, Loews
Corporation. Director, Bulova
Watch Company, Inc., CNA Financial
Corporation and Loews Corporation.
6
POSITIONS WITH COMPANY, HAS BEEN
PRINCIPAL OCCUPATION AND A DIRECTOR TERM
NAME AGE OTHER DIRECTORSHIPS SINCE EXPIRES
---- --- ------------------------ ---------- -------
Alfred J. Verrecchia................. 59 President and Chief Operating 1992 2004
Officer since 2001. Prior thereto,
President, Chief Operating Officer
and Chief Financial Officer from
2000 to 2001. Prior thereto,
Executive Vice President, Global
Operations and Chief Financial
Officer from 1999 to 2000. Prior
thereto, Executive Vice President,
Global Operations and Development
during 1999. Prior thereto,
Executive Vice President and
President, Global Operations from
1996 to 1999. Prior thereto, Chief
Operating Officer, Domestic Toy
Operations. Director, Old Stone
Corporation and Factory Mutual
Insurance Company.
* * *
Sylvia K. Hassenfeld, a retiring director, 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 2001, the Board held six meetings. All directors attended at least
75% of the aggregate of (i) the Board meetings held during their tenure as
directors during 2001 and (ii) the meetings of any committees held during their
tenure as members of such committees during 2001.
The Executive Committee of the Board, which currently consists of Alan R.
Batkin, Alan G. Hassenfeld (Chair), Norma T. Pace, E. John Rosenwald, Jr. and
Carl Spielvogel, met one time in 2001. 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 (Chair), Claudine B. Malone, Eli J. Segal and
Preston Robert Tisch, met three times in 2001. The Nominating and Governance
Committee makes recommendations for possible additions to the Board and
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 Alan R.
Batkin, E. Gordon Gee, Claudine B. Malone (Chair) and Norma T. Pace, held eleven
meetings in 2001. The Audit Committee assists the Board in fulfilling its
responsibility to oversee management's conduct of the Company's financial
reporting process, the financial reports provided by the Company, the Company's
systems of internal accounting and financial controls, and the annual
independent audit of the Company's financial statements. The current Audit
Committee Charter is set forth as Appendix A to this Proxy Statement.
7
The Compensation and Stock Option Committee of the Board, which currently
consists of Alan R. Batkin, Norma T. Pace, Eli J. Segal, and Carl Spielvogel
(Chair), held four meetings in 2001. The Compensation and Stock Option Committee
has been delegated responsibility for all employee compensation and benefit
plans, 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 $35,000 per year and the Chairs
of the Audit Committee, the Compensation and Stock Option Committee and the
Nominating and Governance Committee each receive an additional retainer of
$4,000 per year. Non-employee Directors receive a fee of $1,000 per Board or
committee meeting attended. 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 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. Compensation deferred under the Deferred 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 Non-employee 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 (the "Director
Plan"), 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 nonqualified, nontransferable ten year option to purchase 11,250 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 or after age
seventy-two or after a Change of Control, as defined in the Director Plan.
8
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's wholly owned subsidiary, Hasbro Canada Corporation ("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 offices and warehouse facilities in 2001 was
approximately $589,000 Canadian (approximately $373,000 U.S.). During 2000, the
leases were renewed for a three year term ending on January 31, 2004 at rentals
of approximately $579,000, $589,000 and $599,000 Canadian for the three years,
respectively. In management's opinion, these leases are on terms at least as
favorable as would otherwise presently be obtainable from unrelated parties.
Hasbro Canada has the option to renew for two 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. The
premises are subject to a first mortgage held by a financial institution
securing a loan to CTM with a balance at March 12, 2002 of approximately
$147,590 Canadian, with a due date of July 1, 2002. The leases provide that,
until January 31, 2003, should such loan not be renewed, extended or replaced,
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 or lease of the premises or
refinancing of the loan. 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 existing CTM loan will be fully paid at maturity on July 1,
2002 and therefore that Hasbro Canada will not be called upon to make any
advances.
Bear, Stearns & Co. Inc. provides investment banking and related services
to the Company. In 2001, these services included repurchasing, on behalf of the
Company, approximately $250 million in outstanding principal amount of the
Company's long-term debt using proceeds from the Company's offering of 2.75%
convertible senior debentures and cash on hand. E. John Rosenwald, Jr., a
director of the Company, is a director and Vice Chairman of Bear, Stearns & Co.,
Inc.
Lucas Licensing Ltd. ("Licensing") and Lucasfilm Ltd. ("Film") own in the
aggregate 15,750,000 exercisable warrants to purchase Common Stock which were
obtained in arms-length negotiations with the Company in connection with the
Company's obtaining of certain rights. The Common Stock subject to such warrants
would, if all warrants were fully exercised, constitute approximately 8.3% of
the Company's outstanding shares. Accordingly, under SEC Rule 13d-3, George W.
Lucas, Jr., as owner, director and an officer of Film and Licensing, may be
deemed to own approximately 8.3% of the Company's outstanding shares. See
"Voting Securities and Principal Holders" thereof. Since the beginning of fiscal
2001, the Company paid an aggregate of approximately $6.2 million in royalties
to Licensing pursuant to license agreements entered into at arms length in the
ordinary course of business.
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.
[PERFORMANCE GRAPH]
----------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001
----------------------------------------------------------------------------------------------
Hasbro $100 $122 $134 $110 $ 66 $103
S&P 500 $100 $123 $161 $192 $172 $152
Russell 1000 Consumer
Discretionary Economic
Sector $100 $131 $175 $228 $162 $168
---------------
(1) While the information for Hasbro and S&P 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.
10
REPORT OF THE
COMPENSATION AND STOCK OPTION COMMITTEE
OF THE BOARD OF DIRECTORS
2001 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 that follows) 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 a
manner as possible.
The Committee is composed solely of persons who are both "Non-Employee
Directors," as defined in Rule 16b-3 of the rules and regulations of the
Securities and Exchange Commission, and "outside directors", as defined in
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
Executive compensation during 2001 included base salary, annual management
incentive bonuses and stock options. On occasion, restricted stock is also used
as a reward and retention mechanism, but no restricted stock grants were made to
executive officers in 2001. In authorizing and approving cash compensation and
equity awards for executive officers (other than the Chief Executive Officer),
the Committee relies upon the recommendations of the Chief Executive Officer and
considers available market information.
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 only in the event of changes in duties
and responsibilities or lack of competitiveness with prevailing market
conditions. Base salaries are generally targeted to correspond with
approximately the 75th percentile of salaries paid by other consumer non-durable
products companies surveyed in Hewitt Executive Total Compensation Measurement,
prepared by Hewitt Associates, LLP and Towers Perrin's 2001 Executive
Compensation Databank, whose participants partially overlap with the companies
included in the Russell 1000 Consumer Discretionary Economic Sector (the
"Russell Sector") set forth in the preceding stock performance graph. Except in
cases of changes in responsibility or adjustments to bring salaries in line with
market conditions, there were no increases in base salaries of senior management
in 2001.
Approximately 1,330 employees, including certain executive officers, were
awarded management incentive bonuses with respect to fiscal 2001. Corporate and
business unit performance objectives were established at the beginning of the
year. Except with respect to the Chief Executive Officer and the President and
Chief Operating Officer, corporate performance was measured with a combination
of four performance criteria and targets for each such criterion. The four
corporate performance criteria were earnings per share, net revenues, return on
invested capital and cash as a percentage of net revenue. Business unit
objectives were based on pre-tax profits and revenues for such unit. Corporate
and business unit performance objectives were determined on the basis of a
budget review carried out by senior management with respect to each business
unit which forms the basis for the operating plan prepared by senior management
and approved by the Board in February of each year.
The bonus eligibility of the Company's Chief Executive Officer, Mr.
Hassenfeld, and the Company's President and Chief Operating Officer, Mr.
Verrecchia, was determined pursuant to the Company's 1999 Senior Management
Annual Performance Plan (the "Annual Performance Plan"). Under the Annual
Performance Plan, the Committee designates a "Net Earnings" (as defined in the
Annual Performance Plan) performance goal for the Company for the year, which is
based on the operating plan approved by the Board in February of that year. Mr.
Verrecchia's target bonus under the Annual Performance Plan was 65% of base
salary. Mr. Verrecchia received no bonus pursuant to the Annual Performance Plan
for 2001 because less than 80% of the Net Earnings target was met during the
year. With respect to executive officers below the President
11
and Chief Operating Officer level, target bonuses in 2001 ranged from 45% to 60%
of base salary. The management incentive bonuses for executive officers deemed
to have corporate-wide responsibility were generally based 100% on corporate
performance. The management incentive bonuses for those individuals deemed to
have business unit responsibility (which include Messrs. Goldner and Wilson),
were generally weighted 40% for corporate performance and 60% for business unit
performance. In all cases, the bonuses earned could be subject to adjustment
downward to as low as 0% and upward by a factor of up to an additional 50%,
based on individual performance against specified management objectives. In
fiscal 2001, corporate performance met the percentage of target performance that
would yield a partial, but not full, target bonus. Certain business units
exceeded their performance criteria, while others either partially satisfied
their criteria to generate a partial bonus, or failed to achieve a percentage of
target performance sufficient to earn any bonus for business unit performance.
In all cases, the bonuses for corporate and business unit performance were
reviewed by the Committee and adjusted to reflect the individual performance of
the executive in question.
In 2001, non-qualified stock options were granted to executive officers
pursuant to the Company's employee stock option plans. The Committee 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. Stock
options granted under this program, which included options granted to executive
officers in 2001, generally vest annually over the three-year period following
the date of grant. All stock options granted in 2001 had an exercise price equal
to at least the fair market value of the Common Stock on the date of grant. The
number of stock options previously awarded and outstanding for each executive
officer was reviewed and considered by the Committee in determining the size of
any executive's stock option award, which was allocated on the basis of
individual potential, responsibility and performance.
In March 2000, subject to shareholder approval of required amendments to
the Company's Stock Incentive Performance Plan, which approval was obtained in
May 2000, the Committee established a long term incentive program (the "LTIP")
for selected members of senior management, including certain executive officers,
pursuant to which awards of restricted stock could be made, contingent upon the
achievement of specified financial performance goals. Based on the financial
performance of the Company, no restricted stock awards were made pursuant to the
LTIP during 2001.
2001 COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
As set forth in the accompanying tables, Mr. Hassenfeld's salary of
$1,005,900 for 2001 represented no increase from his 2000 salary. He received no
management incentive bonus with respect to 2001 because less than 80% of the
"Net Earnings" target was met under the Annual Performance Plan. In 2001 he was
granted options (with three year vesting) to purchase 200,000 shares of Common
Stock, 100,000 of which were at the market price as of the date of grant, and
100,000 of which were granted at 120% of that market price. All compensation
decisions regarding Mr. Hassenfeld were made by the Committee, without the
participation of Mr. Hassenfeld or other executive officers of the Company. The
Committee believes that the options granted in 2001 were appropriate incentives
to Mr. Hassenfeld to improve the Company's future performance.
Carl Spielvogel (Chair), Alan R. Batkin, Norma T. Pace and Eli J. Segal as
members of the Compensation and Stock Option Committee of the Board of Directors
as of 2001 fiscal year end.
12
EXECUTIVE COMPENSATION
The following table summarizes compensation paid by the Company for
services rendered during 2001, 2000 and 1999 by the Chief Executive Officer of
the Company and the four most highly compensated executive officers of the
Company in 2001 other than the Chief Executive Officer.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------------------------------- -----------------------------------------
OTHER RESTRICTED SECURITIES
NAME AND ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY(a) BONUS(a) COMPENSATION(b) AWARDS(c) OPTIONS(d) COMPENSATION(e)
------------------ ---- ---------- -------- --------------- ---------- ---------- ---------------
Alan G. Hassenfeld.......... 2001 $1,005,900 $ -- $ 32,945 $ -- 200,000 $63,581
Chairman of the Board 2000 1,005,900 -- 33,635 -- 70,000 90,760
and Chief Executive Officer 1999 1,005,900 452,990 33,488 -- 315,000 62,115
Alfred J. Verrecchia........ 2001 763,277 -- 12,394 -- 175,000 48,333
President and Chief 2000 665,201 -- 12,964 300,000 60,000 82,168
Operating Officer(f) 1999 665,201 662,000 14,613 -- 217,500 41,552
Brian Goldner............... 2001 532,134 400,000 517,618 -- 100,000 46,928
President, U.S. Toys(g) 2000 384,615 500,000 125,626 972,187 150,000 --
Harold P. Gordon............ 2001 583,100 209,916 27,466 -- -- 38,616
Vice Chairman 2000 583,100 250,000 26,879 -- 50,000 12,507
1999 583,100 320,000 27,272 -- 200,000 38,244
E. David Wilson............. 2001 541,828 375,000 3,681 -- 100,000 47,416
President, Games(h) 2000 519,200 248,437 4,698 150,000 50,000 46,381
1999 505,034 255,000 3,268 -- 152,500 27,124
---------------
(a) Includes amounts deferred pursuant to the Company's Retirement Savings Plan
and Nonqualified Deferred Compensation Plan (the "Deferred Compensation
Plan"). Represents, in the case of Mr. Gordon's 2000 bonus, a special award
made during 2000. Represents sign on and guaranteed bonuses paid to Mr.
Goldner as required by his employment agreement. See "Change of Control and
Employment Agreements" below. Mr. Goldner joined the Company during 2000.
(b) Includes the following amounts which were included in 2001 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: $7,945 for Mr. Hassenfeld, $9,794 for Mr. Verrecchia, $860 for Mr.
Goldner, $5,666 for Mr. Gordon, and $2,781 for Mr. Wilson. Includes the
following amounts paid by the Company and included in 2001 taxable income 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, $2,600 for Mr. Verrecchia, $21,800 for
Mr. Gordon and $900 for Mr. Wilson. Also includes $516,758 of relocation
expenses reimbursed by the Company to Mr. Goldner in 2001.
Includes the following amounts which were included in 2000 and 1999 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: $8,635 for Mr. Hassenfeld, $10,464 for Mr. Verrecchia,
$7,740 for Mr. Goldner, $7,879 for Mr. Gordon and $3,798 for Mr. Wilson for
2000; and $8,488 for Mr. Hassenfeld, $11,363 for Mr. Verrecchia, $6,372 for
Mr. Gordon and $2,253 for Mr. Wilson for 1999. Includes the following
amounts paid by the Company and included in 2000 and 1999 taxable income
whereby certain financial planning and tax preparation services are provided
to the individual and paid for by the Company: $25,000 for Mr. Hassenfeld,
$2,500 for Mr. Verrecchia, $19,000 for Mr. Gordon and $900 for Mr. Wilson
for 2000; and $25,000 for Mr. Hassenfeld, $3,250 for Mr. Verrecchia, $20,900
for Mr. Gordon and $1,015 for Mr. Wilson for 1999. Also includes 2000 moving
expenses of $117,886 for Mr. Goldner.
Does not include other personal benefits that do not in the aggregate exceed
$50,000 in any year for any individual.
13
(c) Generally, restricted stock vests three years after grant if the employee is
still employed by the Company on that date. In the case of Messrs.
Verrecchia and Wilson, the restricted stock awards were made in the form of
deferred restricted stock units, whereby the restricted shares are deemed to
be held in a deferred compensation account under the Company's Employee
Non-Qualified Stock Plan. The equivalent of cash dividends on said units are
deemed to be paid to the employee's account under the Deferred Compensation
Plan. To the extent that delivery of the actual shares to the employee after
vesting would constitute income as to which the Company would be denied a
deduction under Section 162(m) of the Internal Revenue Code, as amended (the
"Code") the affected number of units will continue to be deemed to be held
in the employee's deferred compensation account. Actual shares of restricted
stock issued to employees have ordinary dividend and voting rights, while
the holders of deferred restricted stock units have no voting rights with
respect to the shares of Common Stock deemed represented by such units. The
number and market value of restricted stock held by the applicable
individuals named above at December 30, 2001 (based upon the closing stock
price of $16.50 on December 28, 2001) were: Mr. Verrecchia, 20,000 and
$330,000; Mr. Goldner, 61,000 and $1,006,500; and Mr. Wilson, 10,000 and
$165,000.
(d) All share amounts are adjusted to reflect the 3 for 2 stock split, paid in
the form of a 50% stock dividend on March 15, 1999.
(e) Includes the individual's pro-rata share of the Company's matching
contribution to the savings account (or for 1999 the Company's contribution
to the profit sharing account) of each individual, excluding Mr. Goldner in
2000, under the Company's 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 Code maximums, deemed allocated to the
individual's account in the Company's unfunded Supplemental Benefit
Retirement Plan (the "Supplemental Plan"), which for 2001 amounted to
$60,354 for Mr. Hassenfeld, $45,797 for Mr. Verrecchia, $46,928 for Mr.
Goldner, $34,986 for Mr. Gordon, and $47,416 for Mr. Wilson, for 2000
amounted to $87,533 for Mr. Hassenfeld, $79,632 for Mr. Verrecchia, $9,207
for Mr. Gordon and $46,381 for Mr. Wilson, and for 1999 amounted to $56,388
for Mr. Hassenfeld, $36,516 for Mr. Verrecchia, $31,724 for Mr. Gordon and
$24,625 for Mr. Wilson. Effective January 1, 2000, the profit sharing
position of the Retirement Savings Plan was eliminated and the Company match
for contributions made by the employee to his or her savings account was
increased to 200% of the first 2% of compensation saved and 50% of the next
4% saved. The Company match was previously 25% of the first 6% of
compensation saved. Mr. Goldner did not participate in the Retirement
Savings Plan in 2000.
Also includes $3,227, $2,536, and $3,630 in premiums paid by the Company in
2001 for individual life insurance policies for Messrs. Hassenfeld,
Verrecchia and Gordon, respectively, $3,227, $2,536 and $3,300 in premiums
paid by the Company in 2000 for individual life insurance policies for
Messrs. Hassenfeld, Verrecchia and Gordon, respectively, and $3,227, $2,536
and $4,020 in premiums paid by the Company in 1999 for individual life
insurance policies for Messrs. Hassenfeld, Verrecchia and Gordon,
respectively.
(f) Mr. Verrecchia, formerly Executive Vice President, Global Operations and
Chief Financial Officer, was elected President, Chief Operating Officer and
Chief Financial Officer in 2000 and President and Chief Operating Officer in
2001.
(g) Mr. Goldner, formerly Senior Vice President and General Manager, U.S. Toys,
was elected President, U.S. Toys in 2001. Mr. Goldner joined the Company
during 2000.
(h) Mr. Wilson, formerly Senior Vice President and Sector Head, Games, was
elected President, Games in 2001.
* * *
14
The following table sets forth certain information regarding stock option
grants in 2001 to the individuals named above.
OPTION GRANTS IN LAST FISCAL YEAR
GRANT DATE
INDIVIDUAL GRANTS VALUE(a)
------------------------------------------------------- -------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE PER EXPIRATION GRANT DATE
NAME GRANTED(d) IN FISCAL YEAR SHARE DATE PRESENT VALUE
---- ---------- -------------- --------- ---------- -------------
Alan G. Hassenfeld............. 100,000(b) 2.8 $11.59 4/24/2011 $572,610
100,000(c) 2.8 $13.91 4/24/2011 519,530
Alfred J. Verrecchia........... 100,000(b) 2.8 $11.59 4/24/2011 572,610
75,000(c) 2.1 $13.91 4/24/2011 389,648
Brian Goldner.................. 100,000(b) 2.8 $11.59 4/24/2011 572,610
Harold P. Gordon............... -- N/A N/A N/A N/A
E. David Wilson................ 100,000(b) 2.8 $11.59 4/24/2011 572,610
---------------
(a) The Grant Date Present Values were determined using the standard application
of the Black-Scholes option pricing methodology using the following weighted
average assumptions: volatility 49.39%, dividend yield 1.04% and a risk free
interest rate of 5.01% based on the options being outstanding for
approximately six years. The Grant Date Present Values do not take into
account risk factors such as non-transferability and limits on
exercisability. In assessing the Grant Date Present Values indicated in the
above table, it should be kept in mind that no matter what theoretical value
is placed on an option on the date of grant, the ultimate value of the
option is dependent on the market value of the Common Stock at a future
date, and the extent if any, by which such market value exceeds the exercise
price on the date of exercise.
(b) These options are non-qualified, were granted at fair market value on the
date of grant, and vest in equal annual installments over three years. 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 at 120% of fair market value on the date of
grant, and vest in equal annual installments over three years. 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 three
years thereafter. 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 six months following termination.
(d) All of these awards were granted pursuant to the Stock Incentive Performance
Plan. Upon a Change of Control, as defined in the Plan, all options become
immediately exercisable and, except as provided in the following sentence,
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. The Committee has the discretion, in
connection with certain Change of Control transactions, to take alternative
action such as converting the stock options into those of the resulting
corporation or settling them in shares of the stock of the Company or the
resulting corporation. Participants may exercise options and satisfy tax
withholding liabilities by payments in cash or by delivery of Common
15
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 exercisable and unexercisable options held on December 30, 2001, the
last day of the 2001 fiscal year; and (b) the value of such options at December
30, 2001 (based on the closing price of $16.50 on December 28, 2001). The number
of options set forth below correspond to the number of shares to which they
relate. None of the named individuals exercised any options during the 2001
fiscal year.
FISCAL YEAR END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
AT DECEMBER 30, 2001 AT DECEMBER 30, 2001
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
Alan G. Hassenfeld........................... 1,398,000 480,000 $1,595,313 $839,684
Alfred J. Verrecchia......................... 1,011,875 377,000 1,326,750 762,122
Brian Goldner................................ 36,667 213,333 9,375 509,750
Harold P. Gordon............................. 595,900 182,500 413,515 64,060
E. David Wilson.............................. 384,041 253,334 71,421 555,060
* * *
LONG TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR(a)
PERFORMANCE OR
NUMBER OF OTHER PERIOD UNTIL
SHARES, UNITS OR MATURATION OR
NAME OTHER RIGHTS PAY OUT THRESHOLD TARGET MAXIMUM
---- ---------------- ------------------ --------- ------ -------
Alan G. Hassenfeld................ 35,000 2000-2002 0 35,000 70,000
Alfred J. Verrecchia.............. 25,000 2000-2002 0 25,000 50,000
Brian Goldner..................... -- -- -- -- --
Harold P. Gordon.................. 25,000 2000-2002 0 25,000 50,000
E. David Wilson................... 20,000 2000-2002 0 20,000 40,000
---------------
(a) The awards will only deliver a benefit to the employee if certain
performance goals are met. Performance goals are based on the Company's
revenue growth and growth in earnings per share during the three year period
2000-2002, as modified by the price of the Common Stock at the end of 2002
for the years 2000-2002. If the performance goals are met, the targeted
awards will be made in the form of restricted stock to be granted in 2003,
one third of which would vest in one year and the remainder in two years.
The 2000 and 2001 goals were not met.
* * *
16
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
ESTIMATED ANNUAL RETIREMENT BENEFIT BY YEARS OF SERVICE CLASSIFICATION(2)
AVERAGE ---------------------------------------------------------------------------
COMPENSATION(1) 10 15 20 25 30 35(3)
--------------- ---------- ---------- ---------- ---------- ---------- ----------
$ 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
1,800,000 400,000 450,000 600,000 750,000 900,000 900,000
---------------
(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 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.
(3) For purposes of determining annual benefits under the Pension Plan and the
Supplemental Plan prior to 2000, credited years of service cannot exceed 30.
Effective January 1, 2000, the Company amended the Pension Plan to provide
for a lump sum benefit determined primarily on the basis of Average
Compensation and actual years of service (including years of service in
excess of 30 years). The lump-sum benefit is reduced if payment is made
before age 55. Until 2007, employees will receive the higher of the benefits
provided by such amendment and as described in the above table.
The following table sets forth, as to the five named individuals, their
years of credited service under the Pension Plan and the Supplemental Plan:
CREDITED YEARS
OF SERVICE
--------------
Alan G. Hassenfeld.......................................... 33
Alfred J. Verrecchia........................................ 36
Brian Goldner............................................... 2
Harold P. Gordon............................................ 7
E. David Wilson............................................. 21
CHANGE OF CONTROL AND EMPLOYMENT AGREEMENTS
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.
Change of Control Agreements. Ten senior executives, including all of the
above-named individuals, are parties to employment agreements, as amended (the
"Change of Control Agreements") with the Company. The Change of Control
Agreements come into effect only upon a "Change of Control," as defined therein,
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
17
entitled to the executive's (a) average annual salary for the five years
preceding the Change of Control (or such lesser number of actual years employed)
plus (b) the greater of (x) the target bonus during the year of termination and
(y) the average annual bonus for the five years preceding the Change of Control
(or such lesser number of actual years employed), in each case multiplied by
three.
The executive would also be entitled to 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. In addition, the
executive and the executive's family would 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 4999 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 Change of Control 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
Change of Control Agreements. Under certain circumstances, certain payments by
the Company pursuant to the Change of Control Agreements may not be deductible
for federal income tax purposes pursuant to Section 280G of the Code.
A "Change of Control" is defined 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,
consummation of a reorganization, merger, consolidation, substantial asset sale
involving, or shareholder approval of a liquidation or dissolution of, the
Company subject, in each case, to certain exceptions. "Cause" is defined (for
purposes of the Agreements, 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. The Change of Control Agreements were amended as of
March 10, 2000 to provide that the executive's target bonus be taken into
account in computing benefits, to change the definition of a "Change of Control"
to be "consummation" of a reorganization, merger, consolidation or sale of
substantially all of the assets of the Company rather than "shareholder
approval" thereof and to make other conforming and clarifying changes in the
Change of Control Agreements, the forms of which were originally approved in
1989.
Employment Agreements. The Company and Mr. Goldner entered into an Amended
and Restated Employment Agreement, effective as of October 31, 2001 (the
"Agreement"), pursuant to which Mr. Goldner agreed to serve as President, U.S.
Toys of the Company, and to fulfill such other duties and responsibilities as
are assigned to him, for a term expiring on June 30, 2004 (the "Term"). Mr.
Goldner's base salary was set at $525,000 per annum until March 19, 2002, at
which time the base salary would be adjusted to $550,000 per annum. Mr. Goldner
had previously been paid a sign-on bonus of $250,000. Mr. Goldner is also
eligible to participate in the other benefit plans and programs available to
senior executives and employees generally. The Agreement provided that if Mr.
Goldner voluntarily left the employ of the Company, or was terminated by the
Company for Cause (as defined in the Agreement), prior to March 18, 2002, he
would repay to the Company $125,000 of the sign-on bonus.
The Agreement provides that during its term Mr. Goldner will be eligible to
receive a management incentive plan bonus based on a target of 50% of his base
salary for the applicable year. Mr. Goldner received a management incentive plan
bonus of $250,000 for 2000. The Agreement provides that if Mr. Goldner
voluntarily terminates his employment with the Company between March 19, 2002
and March 18, 2003, he will repay to the Company one third of his 2000
management incentive plan bonus.
The options and restricted stock set forth on the "Summary Compensation"
and "Options Grants" tables were granted to Mr. Goldner pursuant to the previous
employment agreement between him and Tiger Electronics, Ltd. ("Tiger"), now a
division of the Company, and both his stock option and restricted stock
agreements provide, pursuant to the Agreement, that if he is involuntarily
terminated other than for Cause and
18
not because of a Change in Control (as defined in the Agreement), all unvested
options and restricted stock would vest and all repayment obligations by Mr.
Goldner discussed above would terminate. The Agreement further provides that if
Mr. Goldner is terminated by the Company without Cause and not because of a
Change in Control, Mr. Goldner shall be entitled to the greater of (a) his base
salary payable at the times that Mr. Goldner's salary would have been paid if he
had remained in the employ of the Company for the remainder of the Term or (b)
twenty-four months of base salary.
Pursuant to the Agreement and his previous employment agreement with Tiger,
Mr. Goldner received relocation assistance, a relocation bonus equal to 40% of
his base salary, mortgage buy-down benefits, and a Change of Control Agreement
in the form described above, and agreed to one-year post-employment non-compete
and non-solicitation obligations. If Mr. Goldner voluntarily leaves the employ
of the Company or is terminated for Cause prior to July 1, 2002, he must repay
the relocation bonus.
The Company and Mr. Gordon entered into an amended and restated employment
agreement, effective October 15, 2001 (the "Agreement"), pursuant to which Mr.
Gordon agreed to serve as Vice Chairman of the Company, and to fulfill such
other duties and responsibilities as are reasonably assigned to him, for a term
expiring on June 30, 2002 (the "Extended Term"). Mr. Gordon's base salary was
set at $584,000 per year during the Extended Term. The Agreement provided that
Mr. Gordon was eligible to receive a management incentive bonus for 2001 based
on a target of 60% of Mr. Gordon's base salary, modified up or down based upon
the 2001 financial performance rating for the Company approved by the
Compensation and Stock Option Committee. The Agreement also provides that during
the Extended Term Mr. Gordon will be eligible to participate in the other
benefit plans and programs available to senior executives and employees
generally.
The Agreement provides that effective July 1, 2002 (or upon an earlier
termination date, if applicable) Mr. Gordon will receive retirement benefits
under the Company's Pension Plan and Supplemental Plan on the same basis as
other senior executives of the Company. During his lifetime, Mr. Gordon will
also receive a monthly annuity beginning upon the later of the date of his
termination of employment with the Company or reaching age 65. The annual amount
of the annuity is set at 3.33% of Mr. Gordon's Final Average Pay (as defined in
the Agreement) multiplied by the number of full years Mr. Gordon has been
employed by the Company upon the termination of his employment. The foregoing
annuity amount will be reduced by the sum of benefits payable to Mr. Gordon
under the Pension Plan, the Supplemental Plan and U.S. Social Security.
Pursuant to the Agreement, the Company will maintain a key executive life
insurance policy on Mr. Gordon in an amount sufficient to pay Mr. Gordon a life
annuity benefit of $225,000 per year beginning upon the later of the termination
of Mr. Gordon's employment or Mr. Gordon reaching age 65. If Mr. Gordon 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
underlying value of such insurance policy is insufficient to pay such annuity
payments, the Company shall pay such amounts from its general assets.
Provided Mr. Gordon is not terminated for Cause (as defined in the
Agreement) prior to the end of the Extended Term, all of Mr. Gordon's previously
unvested stock options are accelerated to July 1, 2002 and Mr. Gordon is granted
an extended period following termination of his employment to exercise his stock
options.
Pursuant to the Agreement Mr. Gordon agreed to one-year post-employment
non-compete and non-solicitation obligations.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation and Stock Option Committee of the Board as
of the 2001 fiscal year end were Carl Spielvogel (Chair), Alan R. Batkin, Norma
T. Pace and Eli J. Segal. Marie Josee Kravis also served on the Compensation and
Stock Option Committee for part of 2001. None of the members of the Compensation
and Stock Option Committee during 2001 had at any time been an officer or
employee of the Company or of any of its subsidiaries. No executive officer of
the Company served as a member of the
19
compensation committee or board of directors of any other entity which had an
executive officer serving as a member of the Company's Board or Compensation and
Stock Option Committee during 2001.
SHAREHOLDER PROPOSAL
(PROPOSAL NO. 2)
INTRODUCTION
The following proposal, WHICH IS OPPOSED BY THE BOARD, would require the
affirmative vote of a majority of all shares present (in person or by proxy) and
entitled to vote at the meeting to be approved. Accordingly, an abstention or a
broker non-vote would be the equivalent of a vote against the shareholder
proposal.
The New York City Teachers' Retirement System, which represents that it is
the beneficial owner of shares of Common Stock with a market value of at least
$2,000 and has held such shares continuously for at least one year, has
submitted the following resolution and supporting statement for inclusion in
this Proxy Statement. Upon a written or oral request made to the Secretary of
the Company, the Company will provide the address of the New York City Teachers'
Retirement System to any shareholder of the Company.
REPEAL CLASSIFIED BOARD
Submitted on behalf of the New York City Teachers' Retirement System by
Alan G. Hevesi, Comptroller of the City of New York.
BE IT RESOLVED, that the stockholders of Hasbro request that the Board of
Directors take the necessary steps to declassify the Board of Directors and
establish annual elections of directors, whereby directors would be elected
annually and not by classes. This policy would take effect immediately, and be
applicable to the re-election of any incumbent director whose term, under the
current classified system, subsequently expires.
SUPPORTING STATEMENT
We believe that the ability to elect directors is the single most important
use of the shareholder franchise. Accordingly, directors should be accountable
to shareholders on an annual basis. The election of directors by classes, for
three-year terms, in our opinion, minimizes accountability and precludes the
full exercise of the rights of shareholders to approve or disapprove annually
the performance of a director or directors.
In addition, since only one-third of the Board of Directors is elected
annually, we believe that classified boards could frustrate, to the detriment of
long-term shareholder interest, the efforts of a bidder to acquire control or a
challenger to engage successfully in a proxy contest.
We urge your support for the proposal to repeal the classified board and
establish that all directors be elected annually.
* * *
RESPONSE OF THE HASBRO, INC. BOARD OF DIRECTORS
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST PROPOSAL NO.
2 FOR THE FOLLOWING REASONS:
Under the Company's Restated Articles of Incorporation, the Board is
divided into three classes with directors elected to staggered three-year terms.
The Board of Directors believes that a classified board offers important
advantages to shareholders, is in the best interests of the Company and its
shareholders and should not be changed.
20
The Board believes that a classified board enhances continuity and
stability in the Company's management and policies since a majority of the
directors at any given time will have had prior experience and familiarity with
the business of the Company. This continuity and stability, which allows
directors to build on their past experience, develop the industry knowledge and
perspective necessary for the development of sound strategic planning and plan
for a reasonable period of time in the future, facilitates more effective
long-term corporate strategies and allows the Board to provide informed
oversight of the Company's policies. As such, the Board believes that a
classified structure is integral to increasing the Company's value to
shareholders. Moreover, such continuity helps the Company attract and retain
qualified individuals willing to commit the time and dedication necessary to
understand the Company, its operations and competitive environment.
A classified board protects shareholders against potentially coercive
takeover tactics, whereby a party attempts to acquire control of the Company on
terms that do not offer the greatest value to all shareholders. Because a
classified board prevents the immediate removal of directors, any person seeking
to acquire control of the Company is encouraged to negotiate with the
experienced directors and management of the Company. This helps ensure that the
Board has sufficient time to develop and consider appropriate strategies and
alternatives and thereby enhances its ability to negotiate the best result for
all shareholders of the Company. The Board believes that a classified board
enhances the ability to negotiate favorable terms with proponents of unfriendly
or unsolicited proposals and does not preclude takeover offers.
The Board is committed to corporate accountability and does not accept the
proposition that a classified board insulates directors from responsibility. All
directors are required to uphold their fiduciary duties to the Company and its
shareholders and the same standards of performance apply to directors regardless
of the length of their term of office. In addition, directors of the Company are
compensated, in part, with stock options and are further required to defer a
minimum of 20% of their outside directors' annual retainer into a Company
phantom stock account. Stock-based compensation aligns the interests of
directors with those of the Company and its shareholders by providing directors
with an ownership stake in the Company and its performance.
A classified board permits shareholders to annually change one-third of the
directors and thereby substantially change the Board's composition and
character. Corporate accountability depends on the selection of responsible and
experienced individuals, not on whether they serve terms of one year or three.
The Board understands that it should be responsive to shareholders and has taken
steps to assure corporate accountability through such measures as maintaining a
majority of non-employee directors, and having only non-employee directors on
the Audit Committee, the Compensation and Stock Option Committee, and the
Nominating and Governance Committee.
Finally, shareholders should be aware that adoption of this shareholder
proposal would not eliminate board classification and institute the annual
election of directors, but would constitute merely a recommendation by the
shareholders that the Board consider enacting such a change. Further action by
the Board and shareholders would be required to amend the By-Laws and Restated
Articles of Incorporation of the Company.
For the reasons outlined above, the Board has concluded that a classified
board remains in the best interests of the Company and its shareholders and thus
is opposed to the shareholder proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST PROPOSAL NO.
2.
21
SHAREHOLDER PROPOSAL
(PROPOSAL NO. 3)
INTRODUCTION
The following proposal, WHICH IS OPPOSED BY THE BOARD, would require the
affirmative vote of a majority of all shares present (in person or by proxy) and
entitled to vote at the meeting to be approved. Accordingly, an abstention or a
broker non-vote would be the equivalent of a vote against the shareholder
proposal.
A group of the Company's shareholders have submitted the following
resolution and supporting statement for inclusion in this Proxy Statement. Upon
a written or oral request made to the Secretary of the Company, the Company will
provide the names, addresses and shareholdings of the proponents of this
resolution to any shareholder of the Company.
HASBRO-GLOBAL HUMAN RIGHTS STANDARDS
WHEREAS, Hasbro currently has extensive overseas operations,
WHEREAS, reports of human rights abuses in the overseas subsidiaries and
suppliers of some U.S.-based corporations has led to an increased public
awareness of the problems of child labor, "sweatshop" conditions, and the denial
of labor rights in U.S. corporate overseas operations,
WHEREAS, corporate violations of human rights in these overseas operations can
lead to negative publicity, public protests, and the loss of consumer confidence
which can have a negative impact on shareholder value. The toy industry is
especially vulnerable to negative publicity of this sort,
WHEREAS, a number of corporations have implemented independent monitoring
programs with respected human rights and religious organizations to strengthen
compliance with international human rights norms in subsidiary and supplier
factories. The toy industry is increasingly under scrutiny just as the apparel
industry and footwear industry has been.
- Dozens of companies have worked diligently to improve their vendors'
compliance with their codes. For example, Mattel has created an
Independent Monitoring Council, composed of outsiders with full access to
vendors operations. This council publishes public reports that highlight
problems as well as positive leadership demonstrated by vendors. This
allows management to review the situation and take corrective action as
needed.
- Hasbro has had a Code in place since 1993, but does not report to
investors or consumers on the effectiveness of its Code nor does Hasbro
use independent outside monitors to review compliance.
WHEREAS, these standards incorporate the conventions of the United Nations'
International Labor Organization (ILO) on workplace human rights which include
the following principles:
- All workers have the right to form and join trade unions and to bargain
collectively. (ILO Conventions 87 and 98)
- Workers representatives shall not be the subject of discrimination and
shall have access to all workplaces necessary to enable them to carry out
their representation functions. (ILO Convention 135)
- There shall be no discrimination or intimidation in employment. Equality
of opportunity and treatment shall be provided regardless of race, color,
sex, religion, political opinion, age, nationality, social origin, or
other distinguishing characteristics. (ILO Convention 100 and 111)
- Employment shall be freely chosen. There shall be no use of force,
including bonded or prison labor. (ILO Conventions 29 and 105)
- There shall be no use of child labor. (ILO Convention 138)
WHEREAS, we believe independent monitoring of corporate adherence to these
standards is essential if consumer and investor confidence in our company's
commitment to human rights is to be maintained. Thus
22
we believe this shareholder request is appropriate to encourage Hasbro to move
ahead more aggressively on this important issue.
RESOLVED that shareholders request that Hasbro commit itself to the
implementation of a code of corporate conduct based on the aforementioned ILO
human rights standards by its international suppliers and in its own
international production facilities and commit to a program of outside,
independent monitoring of compliance with these standards, with annual reporting
to shareholders (excluding proprietary information).
RESPONSE OF THE HASBRO, INC. BOARD OF DIRECTORS
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST PROPOSAL NO.
3 FOR THE FOLLOWING REASONS:
The Board of Directors and Hasbro's management have carefully reviewed the
proposal set forth above and believe that any changes to Hasbro's current Code
of Conduct and compliance procedures would neither help Hasbro better fulfill
its well-established and continuing commitment to humane global working
conditions nor add value to the shareholders of the Company. Hasbro's existing
policies and practices, which are comprehensive and progressive, already address
the concerns expressed in the above proposal and ensure compliance with business
ethics principles, as described in more detail below.
In 1993, Hasbro established its Global Business Ethics Principles ("Code of
Conduct") to ensure that products manufactured by Hasbro are not produced under
inhumane or exploitative conditions. Participation in the Hasbro program is
mandatory for all suppliers and vendors who do business with Hasbro. Among many
important areas, the Code of Conduct governs:
- child labor (no person younger than fifteen or younger than the age for
completing compulsory education in the country of manufacture (where such
age is higher than fifteen) may be employed to produce Hasbro products);
- working hours and compensation (employers must comply with all applicable
wage and hour laws or, if prevailing industry wage standards are higher,
then employers must comply with or exceed these standards);
- forced, prison, or indentured labor (any person employed to produce
Hasbro products must be voluntarily employed, except that rehabilitative
programs which provide for employment may be assessed by Hasbro on a case
by case basis);
- health and safety (employers must operate facilities in a healthy and
safe manner, including, but not limited to, providing fire prevention,
first aid, and hazardous waste disposal);
- abuse and discrimination (employers must treat employees with dignity and
respect and shall not subject employees to abuse, cruel or unusual
disciplinary practice, or discrimination);
- freedom of association (employees have the right to choose (or not) to
affiliate with legally sanctioned organizations without unlawful
interference); and
- monitoring by Hasbro (Hasbro has the right to conduct periodic on-site
inspections of working and living conditions, including unannounced
visits, audit the production records and practices of the employers and
require employers to promptly address compliance issues or face
termination by Hasbro).
As indicated above, Hasbro's Code of Conduct clearly sets forth the
standards under which vendors may manufacture Hasbro products, with auditing and
monitoring rights for Hasbro. To date, all factories located in the Far East
which manufacture products for Hasbro have been audited by Hasbro inspectors and
by independent firms hired by Hasbro. Hasbro engages two independent auditing
firms to audit manufacturers' compliance with the Code of Conduct and local law.
Since 1994, these independent monitors have conducted 624 supplier facility
inspections for Hasbro, including 134 inspections in 2001. Over the years,
Hasbro has successfully worked with its manufacturers to correct any
unacceptable practices discovered during the course of these inspections.
Although serious violations are rarely found, Hasbro has in fact terminated
vendors for
23
failure to comply. In addition, on a number of occasions Hasbro has met with
shareholders to discuss its Code of Conduct and compliance procedures, including
findings of third party audits engaged by Hasbro.
In addition to corporate efforts, Hasbro has been a leader in the toy
industry (nationally and internationally) on the issue of workplace standards
and compliance. Hasbro is a member of the Toy Industry Association, Inc. ("TIA")
and Juvenile Products Manufacturers Association ("JPMA") and sits on committees
and forums worldwide to strengthen workplace standards and compliance. For
example, Hasbro was at the forefront of developing industry-wide standards for
fire prevention and emergency preparedness through the International Council of
Toy Industries ("ICTI"). Hasbro was a principal drafter of the factory audit
checklists for the ICTI Code of Business Practices. More recently, Hasbro has
again taken a leadership role in current revisions to the ICTI factory audit
checklists and guidance manual.
To conclude, Hasbro is a leader in the area of global working conditions
and is proud of its efforts both on behalf of the Company and the toy industry
in general. Given Hasbro's strong commitment to the Global Business Ethics
Principles, its extensive independent monitoring program, and its industry
activism, the Board of Directors believes that the Company's current program is
best suited to ensure compliance and leadership on this important issue.
Furthermore, Hasbro believes that annual reporting to shareholders would be
duplicative of existing compliance efforts as well as costly, with no added
benefit to the shareholders or the Company.
For the reasons outlined above, the Board has concluded that the Company's
current Code of Conduct and compliance programs and procedures are in the best
interests of the Company and its shareholders and thus is opposed to the
shareholder proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST PROPOSAL NO.
3.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information, as of March 25, 2002 (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:
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP(1) CLASS
------------------- ----------------- ----------
Capital Group International, Inc. .......................... 20,698,610(2) 12.0
11100 Santa Monica Blvd
Los Angeles, CA 90025
Alan G. Hassenfeld.......................................... 18,689,148(3) 10.7
1027 Newport Avenue
Pawtucket, RI 02862
George W. Lucas, Jr. ....................................... 15,750,000(4) 8.3
c/o Lucasfilm Ltd.
5858 Lucas Valley Road
Nicasio, CA 94946
Ariel Capital Management, Inc. ............................. 14,228,924(5) 8.2
200 E. Randolph Drive
Suite 2900
Chicago, IL 60601
FMR Corp. .................................................. 10,806,113(6) 6.2
82 Devonshire Street
Boston, MA 02109
T. Rowe Price Associates, Inc. ............................. 9,787,813(7) 5.7
100 E. Pratt Street
Suite 2900
Baltimore, MD 21202
---------------
(1) Based upon information furnished by each shareholder or contained in filings
made with the Securities and Exchange Commission.
24
(2) Capital Group International, Inc. as the parent of Capital Guardian Trust
Company (which owns 10,059,060 shares or 5.8% of the outstanding shares) and
certain investment management affiliates (collectively the "Capital Group")
may be deemed to have sole dispositive power over 20,698,610 shares of
Common Stock and sole voting power over 18,476,910 of such shares which are
owned by accounts under discretionary investment management by one or more
members of the Capital Group. Share ownership information is as at December
31, 2001 as reported in a Schedule 13G dated January 11, 2002. The Capital
Group disclaims beneficial ownership of these shares.
(3) Includes 8,890,921 shares held as sole trustee for the benefit of his
mother, 829,347 shares held as sole trustee of a trust for Mr. Hassenfeld's
benefit and currently exercisable options or options exercisable within 60
days hereof to purchase 1,431,666 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 1,101,750 shares owned by The Hassenfeld
Foundation, of which Mr. Hassenfeld is an officer and director, 485,570
shares held as one of the trustees of a charitable lead trust for the
benefit of The Hassenfeld Foundation and 154,216 shares held as one of the
trustees of a trust for the benefit of his mother and her grandchildren. Mr.
Hassenfeld disclaims beneficial ownership of all shares except to the extent
of his proportionate pecuniary interest therein.
(4) Represents exercisable warrants to purchase 6,300,000 shares owned by
LucasFilm Ltd. ("Film") and exercisable warrants to purchase 9,450,000
shares owned by its wholly-owned subsidiary, Lucas Licensing Ltd.
("Licensing"). Mr. Lucas, as founder, controlling person and a director of
Film and Licensing, may be deemed to beneficially own the shares of Common
Stock which may be purchased upon exercise of these warrants. See "Certain
Relationships and Related Transactions".
(5) Ariel Capital Management, Inc. an investment advisor, has sole dispositive
authority over 14,213,749 shares and sole voting power over 12,514,534
shares as a result of acting as an investment advisor to various investment
advisory clients. Share ownership information is as of December 31, 2001 as
reported in a Schedule 13G dated December 31, 2001.
(6) FMR Corp. has sole dispositive power over 10,806,113 shares and sole voting
power over 549,164 shares. Fidelity Management & Research Company, a
wholly-owned subsidiary of FMR Corp., is the beneficial owner of 10,256,949
shares of the Company's Common Stock. Includes 1,092,269 shares which could
be acquired if certain convertible senior debentures became convertible.
Share ownership information is as of December 31, 2001 as reported in a
Schedule 13G dated February 14, 2002.
(7) These shares are owned by various individual and institutional investors to
which T. Rowe Price Associates, Inc. (Price Associates) serves as investment
adviser with power to direct investments and/or sole power to vote the
securities. Price Associates has sole dispositive power over 9,787,813
shares and sole voting power over 2,430,157 shares. For purposes of the
reporting requirements of the Securities Exchange Act of 1934, Price
Associates is deemed to be a beneficial owner of such securities; however,
Price Associates expressly disclaims that it is, in fact, the beneficial
owner of such securities. Share ownership information is as of December 31,
2001 as reported in a Schedule 13G dated February 14, 2002.
25
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information, as of March 25, 2002, with
respect to the ownership of the Common Stock (the only class of outstanding
equity securities of the Company) by each current director of the Company or
nominee for election to the Board, 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.
NAME OF DIRECTOR, NOMINEE COMMON PERCENT
OR EXECUTIVE OFFICER(1) STOCK OF CLASS
------------------------- ---------- --------
Basil L. Anderson........................................... 1,000 *
Alan R. Batkin(2)........................................... 36,079 *
Frank J. Biondi, Jr......................................... -- *
E. Gordon Gee(3)............................................ 8,088 *
Brian Goldner(4)............................................ 167,667 *
Harold P. Gordon(5)......................................... 667,792 *
Alan G. Hassenfeld(6)....................................... 18,689,148 10.7
Sylvia K. Hassenfeld(7)..................................... 1,202,137 *
Claudine B. Malone(8)....................................... 14,467 *
Norma T. Pace(9)............................................ 26,013 *
E. John Rosenwald, Jr.(10).................................. 235,712 *
Eli J. Segal(11)............................................ 2,716 *
Carl Spielvogel(12)......................................... 56,164 *
Paula Stern................................................. -- *
Preston Robert Tisch(13).................................... 17,792 *
Alfred J. Verrecchia(14).................................... 1,268,551 *
E. David Wilson(15)......................................... 488,286 *
All Directors and Executive Officers as a Group (includes 21
persons)(16).............................................. 22,591,239 12.7
---------------
* Less than one percent.
(1) Information in this table is based upon information furnished by each
director and executive officer.
(2) Includes currently exercisable options granted under the Director Plan to
purchase an aggregate of 11,250 shares as well as 23,142 shares deemed to
be held in Mr. Batkin's stock unit account under the Deferred Plan.
(3) Represents currently exercisable options and options exercisable within
sixty days hereof granted under the Director Plan to purchase 6,750 shares
as well as 1,338 shares deemed to be held in Mr. Gee's account under the
Deferred Plan.
(4) Represents currently exercisable options to purchase 106,667 shares and
61,000 shares of restricted stock granted to Mr. Goldner under the
Company's employee stock option plans.
(5) Includes currently exercisable options and options exercisable within sixty
days hereof granted under the Company's stock option plans to purchase an
aggregate of 643,900 shares as well as 3,531 shares deemed to be held in
Mr. Gordon's stock unit account under the Deferred Plan. Excludes
fractional shares held in Mr. Gordon's account under the Company's Dividend
Reinvestment and Cash Stock Purchase Program.
(6) See note (3) to the immediately preceding table.
(7) Includes currently exercisable options granted under the Director Plan to
purchase an aggregate of 11,250 shares, 1,101,750 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 3,196
shares deemed to be held in Mrs. Hassenfeld's stock unit account under the
Deferred Plan. Does not include
26
the shares of Common Stock held in trust for Mrs. Hassenfeld's benefit
referred to in note (3) to the immediately preceding table.
(8) Includes 2,250 currently exercisable options granted under the Director
Plan as well as 517 shares deemed to be held in Mrs. Malone's stock unit
account under the Deferred Plan.
(9) Includes currently exercisable options granted under the Director Plan to
purchase an aggregate of 11,250 shares as well as 13,211 shares deemed to
be held in Mrs. Pace's stock unit account under the Deferred Plan.
(10) Includes currently exercisable options granted under the Director Plan to
purchase an aggregate of 11,250 shares as well as 21,962 shares deemed to
be held in Mr. Rosenwald's stock unit account under the Deferred Plan. Does
not include shares held by Bear, Stearns & Co. Inc. in an investment
account. Mr. Rosenwald is Vice Chairman of Bear, Stearns & Co. Inc.
(11) Consists of 2,250 currently exercisable options granted under the Director
Plan and 466 shares deemed to be held in Mr. Segal's stock unit account
under the Deferred Plan.
(12) Includes currently exercisable options granted under the Director Plan to
purchase an aggregate of 11,250 shares as well as 6,408 shares deemed to be
held in Mr. Spielvogel's stock unit account under the Deferred Plan.
(13) Includes currently exercisable options granted under the Director Plan to
purchase an aggregate of 11,250 shares as well as 3,167 shares deemed to be
held in Mr. Tisch's stock unit account under the Deferred Plan.
(14) Includes currently exercisable options and options exercisable within sixty
days hereof to purchase an aggregate of 1,005,583 shares as well as 40,000
deferred restricted stock units granted under the Company's employee stock
option plans. Does not include 151,875 shares owned by Mr. Verrecchia's
wife, as to which Mr. Verrecchia disclaims beneficial ownership.
(15) Includes currently exercisable options and options exercisable within sixty
days hereof to purchase 453,207 shares as well as 10,000 deferred
restricted stock units granted under the Company's employee stock option
plans. Also includes 79 shares (excluding fractional shares) deemed to be
held in Mr. Wilson's account under the Deferred Compensation Plan.
(16) Of these shares, all directors and executive officers as a group have sole
voting and dispositive power with respect to 20,849,703 shares and have
shared voting and/or investment power with respect to 1,741,536 shares.
Includes 4,412,463 shares purchasable by directors and executive officers
upon exercise of currently exercisable options, or options exercisable
within sixty days hereof, and 61,000 shares of restricted stock granted
under the Company's stock option plans; 78,261 shares deemed to be held in
stock unit accounts under the Deferred Plan and the Deferred Compensation
Plan; and 84,000 shares deemed to be held in deferred restricted stock unit
accounts under the Company's Employee Non-Qualified Stock Plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
ten percent of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission and the New York 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 certain written representations made by
directors and executive officers that no other reports were required during the
last fiscal year ended December 30, 2001, all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten-percent beneficial
owners were complied with.
27
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors (the "Committee") is
comprised solely of outside non-employee directors, each of whom is independent
under the New York Stock Exchange's listing standards.
The Committee operates under a written charter, which is attached to this
Proxy Statement as Appendix A. Under the charter, the Committee's primary
purpose is to assist the Board of Directors in fulfilling its responsibility to
oversee management's conduct of the Company's financial reporting process,
including the preparation of the Company's financial statements and the systems
of internal accounting and financial controls. The independent auditors are
responsible for performing an independent audit of the Company's financial
statements and issuing an opinion that the financial statements conform with
generally accepted accounting principles.
In conducting its oversight function, the Committee discusses with the
Company's internal and independent auditors, with and without management
present, the overall scope and plans for their respective audits. The Committee
meets with the internal and independent auditors, with and without management
present, to discuss the results of their examinations, the evaluations of the
Company's internal controls and the overall quality of the Company's financial
reporting.
The Committee has reviewed and discussed with management the audited
financial statements for the fiscal year ended December 30, 2001. The Committee
has also reviewed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61 (Communications with Audit
Committees). In addition, the Committee discussed with the independent auditors
their independence from management and the Company has received from the
auditors the written disclosures and letter required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees).
Based on its review and discussions with management and the independent
auditors referred to in the preceding paragraph, the Committee recommended to
the Board and the Board has approved the inclusion of the audited financial
statements for the fiscal year ended December 30, 2001 in the Company's Annual
Report on Form 10-K for filing with the Securities and Exchange Commission. The
Committee has also recommended and the Board has approved the selection of KPMG
LLP as the independent auditor for fiscal 2002.
Alan R. Batkin, E. Gordon Gee, Claudine B. Malone (Chair) and Norma T.
Pace, as the members of the Audit Committee as of the 2001 fiscal year end.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board, upon recommendation of the Audit Committee of the Board, has
selected KPMG LLP, independent certified public accountants ("KPMG"), to audit
the consolidated financial statements of the Company for the fiscal year ending
December 29, 2002. A representative of KPMG 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. Set forth below is
certain information concerning aggregate fees billed for professional services
rendered by KPMG during 2001.
Audit Fees.................................................. $2,771,000
Financial Information Systems Design and Implementation
Fees...................................................... $ -0-
All Other Fees.............................................. $3,435,000
The Audit Committee has considered whether the provision of non-audit
services by KPMG is compatible with maintaining KPMG's independence.
28
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 2003
annual meeting must be received by the Company at its executive offices no later
than December 5, 2002. The address of the Company's executive offices is 1027
Newport Avenue, Pawtucket, Rhode Island 02862.
In accordance with the By-Laws of the Company, which the Company believes
are consistent with the Articles of Incorporation, any new business proposed by
any shareholder to be taken up at the 2003 annual meeting must be stated in
writing and filed with the Secretary of the Company by December 16, 2002. Except
for proposals made pursuant to the preceding paragraph, the Company will retain
discretion to vote proxies with respect to proposals received prior to December
16, 2002, provided (i) the Company includes in its 2003 annual meeting proxy
statement advice on the nature of the proposal and how it intends to exercise
its voting discretion and (ii) the proponent does not issue a proxy statement.
IMPORTANT NOTICE REGARDING DELIVERY OF SHAREHOLDER DOCUMENTS
In accordance with a notice sent to certain street name shareholders of our
Common Stock who share a single address, only one copy of this proxy statement
and our Annual Report on Form 10-K for the year ended December 30, 2001 is being
sent to that address unless we received contrary instructions from any
shareholder at that address. This practice, known as "householding", is designed
to reduce our printing and postage costs. However, if any shareholder residing
at such an address wishes to receive a separate copy of this proxy statement or
our Annual Report on Form 10-K for the year ended December 30, 2001, he or she
may contact Karen Warren, Investor Relations, Hasbro, Inc., 1027 Newport Avenue,
Pawtucket, Rhode Island 02862, phone (401) 431-8697, and we will deliver those
documents to such shareholder promptly upon receiving the request. Any such
shareholder may also contact Investor Relations using the above contact
information if he or she would like to receive separate proxy statements and
annual reports in the future. If you are receiving multiple copies of our annual
report and proxy statement, you may request householding in the future by
contacting Investor Relations at the address set forth above.
29
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. The
Company has also retained Morrow & Co., Inc. to aid in the solicitation of
proxies at an estimated cost of $4,000 plus reimbursement of reasonable
out-of-pocket expenses. In addition to use of mail, proxies may be solicited by
officers and employees of the Company or of Morrow & Co., Inc. in person or by
telephone.
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 vote by
Internet, by telephone or by marking, signing and dating the enclosed proxy and
returning 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
Barry Nagler
Secretary
Dated: April 4, 2002
Pawtucket, Rhode Island
30
APPENDIX A
CHARTER OF THE AUDIT COMMITTEE
OF
THE BOARD OF DIRECTORS
OF
HASBRO, INC.
PURPOSE
The primary purpose of the Audit Committee (the "Committee") is to assist
the Board of Directors (the "Board") of Hasbro, Inc. (the "Company") in
fulfilling its responsibility to oversee management's conduct of the Company's
financial reporting process, the financial reports provided by the Company, the
Company's systems of internal accounting and financial controls, and the annual
independent audit of the Company's financial statements.
In discharging its oversight role, the Committee is empowered to
investigate any matter brought to its attention with full access to all books,
records, facilities and personnel of the Company and the power to retain outside
counsel, auditors or other experts for this purpose. The Board and the Committee
are in place to represent the Company's shareholders; accordingly, the outside
auditor is ultimately accountable to the Board and the Committee.
The Committee shall review and reassess the adequacy of this Charter on an
annual basis.
STRUCTURE, PROCESSES AND MEMBERSHIP
The Committee shall be comprised of not less than three members of the
Board, and the Committee's composition will meet the requirements of the Audit
Committee Policy of the New York Stock Exchange.
Accordingly, all of the members will be directors:
1. Who have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company; and
2. Who are financially literate or who become financially literate
within a reasonable period of time after appointment to the Committee. In
addition, at least one member of the Committee will have accounting or
related financial management expertise.
Committee members shall be appointed by the Board, which shall designate
the Audit Committee Chair, who shall preside over meetings of the Committee. The
Committee shall hold at least three scheduled meetings during each year. A
majority of the members of the Committee shall constitute a quorum for doing
business. All actions of the Committee shall be taken by a majority vote of the
members of the Committee present at the meeting, provided a quorum is present.
KEY RESPONSIBILITIES
The Committee's job is one of oversight and it recognizes that the
Company's management is responsible for preparing the Company's financial
statements and that the outside auditors are responsible for auditing those
financial statements. Additionally, the Committee recognizes that the Company's
management, as well as the outside auditors, have more time, knowledge and more
detailed information with respect to the Company than do Committee members;
consequently, in carrying out its oversight responsibilities, the Committee is
not providing any expert or special assurances as to the Company's financial
statements or any professional certification as to the outside auditor's work.
A-1
The following functions shall be the common recurring activities of the
Committee in carrying out its oversight function. These functions are set forth
as a guide with the understanding that the Committee may diverge from this guide
as appropriate given the circumstances.
- The full Board, as assisted by the Committee, shall have the ultimate
authority and responsibility to select, evaluate and, where appropriate,
replace the outside auditor.
- The full Board, as assisted by management, the outside auditors and the
Committee, shall have the ultimate authority and responsibility to
include the audited financial statements in the Company's Annual Report
on Form 10-K (or the Annual Report to Shareholders if distributed prior
to the filing of Form 10-K).
- The Committee shall review with management and the outside auditors the
audited financial statements to be included in the Company's Annual
Report on Form 10-K (or the Annual Report to Shareholders if distributed
prior to the filing of Form 10-K) and review and consider with the
outside auditors the matters required to be discussed by Statement of
Auditing Standards ("SAS") No. 61, and shall be responsible for
recommending to the full Board the inclusion of the Company's audited
financial statements in the Form 10-K.
- As a whole, or through the Committee chair, the Committee shall review
with management and the outside auditors the Company's interim financial
results to be included in the Company's quarterly reports to be filed
with the Securities and Exchange Commission and the matters required to
be discussed by SAS No. 61, within the time periods set forth in SAS No.
71.
- The Committee shall discuss with management and the outside and internal
auditors the quality and adequacy of the Company's internal controls.
- The Committee shall:
- request from the outside auditors annually, a formal written
statement delineating all relationships between the auditor and the
Company consistent with Independence Standards Board Standard Number
1;
- actively engage in a dialogue with the outside auditors with respect
to any such disclosed relationships or services and their impact on
the outside auditor's objectivity and independence; and
- recommend that the Board take appropriate action in response to the
outside auditors' report to satisfy itself of the auditors'
independence.
- review the arrangements for and scope of the outside audit and the
fees proposed for such audit.
- review the appointment, performance, replacement, reassignment, or
dismissal of the Vice President -- Internal Audit.
- ask management, the Vice President -- Internal Audit and the outside
auditors about significant risks or exposures and assess steps to
minimize such risks to the Company.
- review with the Vice President -- Internal Audit and management, the
Internal Audit plan, scope, staffing and result of work performed,
as well as coordination of efforts with the outside auditors.
- consider and review with management, the outside auditors and the
Vice President -- Internal Audit any management letter provided by
the outside auditors together with management responses thereto and
the implementation thereof.
- review management's plan for assuring compliance with the Company's
Code of Conduct and other Company programs designed to promote
regulatory compliance and ethical business conduct.
- consider and approve, if appropriate, major changes to the Company's
auditing and accounting policies, principles and practices as
suggested by the outside auditors, management, or Internal Audit.
A-2
- review with management and the outside auditors their qualitative
judgments about the appropriateness, and not just the acceptability,
of accounting principles and financial disclosure practices used or
proposed to be adopted by the Company.
- meet with the Vice President -- Internal Audit and the outside
auditors, in separate executive sessions.
- report Committee actions to the Board on a regular basis with such
recommendations as the Committee may deem appropriate.
- seek to ensure open communication among internal auditors, outside
auditors, management and the Board.
- prepare the report required by the rules of the Securities and
Exchange Commission to be included in the Company's annual proxy
statement.
A-3
0537-PS-02
APPENDIX B
HASBRO, INC.
1027 NEWPORT AVENUE
PAWTUCKET, RI 02862
DEAR FELLOW SHAREOWNER:
YOU ARE CORDIALLY INVITED TO ATTEND THE 2002 ANNUAL MEETING OF SHAREHOLDERS
OF HASBRO, INC. TO BE HELD AT 10:00 A.M. ON WEDNESDAY, MAY 15, 2002, AT 1027
NEWPORT AVENUE, PAWTUCKET, RHODE ISLAND. 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 2002 ANNUAL MEETING,
IT IS IMPORTANT THAT YOUR SHARES BE VOTED. PLEASE FOLLOW THE INSTRUCTIONS ON THE
OTHER SIDE OF THIS PROXY CARD. YOU MAY, OF COURSE, ATTEND THE 2002 ANNUAL
MEETING AND VOTE IN PERSON, EVEN IF YOU HAVE PREVIOUSLY VOTED. I AM LOOKING
FORWARD TO SEEING YOU THERE.
SINCERELY,
ALAN G. HASSENFELD
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
YOUR VOTE IS IMPORTANT
DETACH HERE
PROXY
HASBRO, INC.
ANNUAL MEETING OF SHAREHOLDERS - MAY 15, 2002
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 ALFRED J. VERRECCHIA 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, 2002
at 10:00 a.m. at 1027 Newport Avenue, Pawtucket, Rhode Island, and at any
adjournment thereof.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE NOMINEES
LISTED IN PROPOSAL 1, "AGAINST" PROPOSAL 2, "AGAINST" PROPOSAL 3 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 THE ENCLOSED ENVELOPE
----------- -----------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
----------- -----------
HASBRO, INC.
C/O EQUISERVE
P.O. BOX 43068
PROVIDENCE, RI 02940
-------------------
VOTE BY TELEPHONE
-------------------
It's fast, convenient, and immediate!
Call Toll-Free on a Touch-Tone Phone
1-877-PRX-VOTE (1-877-779-8683).
----------------------------------------------------
FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT AND
PROXY CARD.
2. CALL THE TOLL-FREE NUMBER
1-877-PRX-VOTE (1-877-779-8683).
3. ENTER YOUR VOTER CONTROL NUMBER LOCATED ON
YOUR PROXY CARD ABOVE YOUR NAME.
4. FOLLOW THE RECORDED INSTRUCTIONS.
----------------------------------------------------
YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE anytime!
-------------------
VOTE BY INTERNET
-------------------
It's fast, convenient, and your vote is immediately
confirmed and posted.
----------------------------------------------------
FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT AND
PROXY CARD.
2. GO TO THE WEBSITE
http://www.eproxyvote.com/has
3. ENTER YOUR VOTER CONTROL NUMBER LOCATED ON
YOUR PROXY CARD ABOVE YOUR NAME.
4. FOLLOW THE INSTRUCTIONS PROVIDED.
----------------------------------------------------
YOUR VOTE IS IMPORTANT!
Go to http://www.eproxyvote.com/has anytime!
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR
INTERNET
DETACH HERE
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED IN
PROPOSAL 1, "AGAINST" PROPOSAL 2 AND "AGAINST" PROPOSAL 3.
1. ELECTION OF DIRECTORS
For Terms Expiring 2005: (01) Basil L. Anderson, (02) E. Gordon Gee,
(03) E. John Rosenwald, Jr. and (04) Eli J. Segal.
FOR WITHHELD
ALL [ ] [ ] FROM ALL
NOMINEES NOMINEES
[ ] __________________________________________
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. Shareholder Proposal [ ] [ ] [ ]
Repeal Classified Board.
3. Shareholder Proposal
Hasbro - Global Human Rights Standards. [ ] [ ] [ ]
4. 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 [ ]
The shares of Common Stock represented by any units you may hold in the Hasbro
Stock Fund under the Retirement Savings Plan are designated above as "401". If
no box in Proposal 1, 2 or 3 above is marked, the "401" shares will not be
voted with respect to that Proposal.
Sign exactly as your 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:________