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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
HASBRO, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
HASBRO, INC.
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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HASBRO, INC.
1027 NEWPORT AVENUE
PAWTUCKET, RHODE ISLAND 02862
MAILING DATE: APRIL 4, 1997
ANNUAL MEETING OF SHAREHOLDERS
MAY 14, 1997
Notice is hereby given that the Annual Meeting of Shareholders of Hasbro,
Inc. (the "Company") will be held at 10:00 A.M. on May 14, 1997 at the offices
of the Company, 1027 Newport Avenue, Pawtucket, Rhode Island, for the following
purposes:
1. To elect five directors of the Company to terms expiring in 2000;
2. To ratify the selection by the Board of Directors of KPMG Peat
Marwick LLP as independent certified public accountants for the Company for
the fiscal year ending December 28, 1997; and
3. To transact such other business as may properly come before the
meeting.
The Board of Directors recommends that Shareholders vote FOR the election
of the five persons nominated in the accompanying Proxy Statement and the
ratification of the selection of KPMG Peat Marwick LLP as the Company's
independent certified public accountants for the fiscal year ending December 28,
1997. Shareholders are urged to attend the meeting in person. If you are not
able to do so and wish that your stock be voted, you are requested to complete,
sign, date and return the accompanying Proxy in the enclosed envelope. No
postage is required if mailed in the United States.
By Order of the Board of Directors
PHILLIP H. WALDOKS
Secretary
Dated: April 4, 1997
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HASBRO, INC.
1027 NEWPORT AVENUE
PAWTUCKET, RHODE ISLAND 02862
Mailing Date: April 4. 1997
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
------------------------
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") of Hasbro, Inc. (the "Company") of Proxies
to be used at the Annual Meeting of Shareholders of the Company, to be held at
10:00 A.M. on May 14, 1997, at the offices of the Company, 1027 Newport Avenue,
Pawtucket, Rhode Island, and at any adjournments thereof. If Proxies in the
accompanying form are properly completed and returned, the shares of the
Company's common stock, par value $.50 per share (the "Common Stock"),
represented thereby will be voted as instructed on the Proxy. If no instructions
are given, such shares will be voted for the election of the five persons
nominated below and in favor of the ratification of the selection of KPMG Peat
Marwick LLP as independent certified public accountants for the Company for the
fiscal year ending December 28, 1997.
VOTING
Holders of record (the "Shareholders") of the Common Stock on March 28,
1997 are entitled to vote at the Annual Meeting or any adjournments thereof. As
of that date there were 128,555,729 shares of Common Stock outstanding and
entitled to vote and a majority of the outstanding shares will constitute a
quorum for the transaction of business at the Annual Meeting. Each share of
Common Stock entitles the holder thereof to one vote on all matters to come
before the meeting, including the election of directors. Any Proxy may be
revoked by a Shareholder prior to its exercise upon written notice to the
Secretary of the Company, by submission of a duly executed Proxy bearing a later
date or by the vote of a Shareholder cast in person at the meeting.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
Five directors are to be elected at the Annual Meeting to terms expiring in
2000. The Board has recommended as nominees for election as directors the first
five persons named in the table below. All of the nominees are currently
directors of the Company. The Board is divided into three classes. The terms of
the ten remaining directors expire in 1998 and 1999. Unless otherwise specified
in the accompanying Proxy, the shares voted pursuant thereto will be cast for
the persons named below as nominees for election as directors. If, for any
reason, any of the nominees named below should be unable to serve as a director,
it is intended that such Proxy will be voted for the election, in his or her
place, of a substituted nominee who would be recommended by management.
Management, however, has no reason to believe that any nominee named below will
be unable to serve as a director.
The following table sets forth as to each nominee and as to each incumbent
director whose term of office extends to 1998 and 1999 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.
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POSITIONS WITH COMPANY,
PRINCIPAL OCCUPATION AND HAS BEEN A TERM
NAME AGE OTHER DIRECTORSHIPS DIRECTOR SINCE EXPIRES
- - ----------------------------- --- -------------------------------------- -------------- -------
Nominees for Term Expiring in 2000
Harold P. Gordon............. 59 Vice Chairman since 1995. Prior 1988 *
thereto, Partner, Stikeman, Elliott
(law firm). Director, Alliance
Communications Corporation, Fonorola
Inc. and G.T.C. Transcontinental
Group, Ltd.
Alex Grass................... 69 Chairman of the Executive Committee, 1981 *
Rite Aid Corporation (drug store
chain) since 1995. Prior thereto,
Chairman of the Board and Chief
Executive Officer, Rite Aid
Corporation. Chairman of the Board,
SuperRite Corporation.
Alan G. Hassenfeld........... 48 Chairman of the Board, President and 1978 *
Chief Executive Officer.
Marie Josee Kravis........... 47 Senior Fellow, Hudson Institute 1995 *
(public policy analysis) since 1994.
Prior thereto, Executive Director,
Hudson Institute of Canada. Visiting
Fellow, Council on Foreign Relations.
Director, Canadian Imperial Bank of
Commerce, Ford Motor Company,
Hollinger International, Inc., The
Seagram Company Ltd. and Unimedia Inc.
Preston Robert Tisch......... 71 Co-Chairman and Co-Chief Executive 1988 *
Officer, Loews Corporation since 1994.
Prior thereto, President and Co-Chief
Executive Officer, Loews Corporation.
Director, Bulova Watch Company, Inc.,
CNA Financial Corporation, Loews
Corporation and Rite Aid Corporation.
Directors Whose Terms Expire in 1998 and 1999
Alan R. Batkin............... 52 Vice Chairman, Kissinger Associates, 1992 1998
Inc. (geopolitical strategic
consulting firm).
Sylvia K. Hassenfeld......... 76 Former Chairman since 1996 and prior 1983 1999
thereto Chairman of the Board,
American Jewish Joint Distribution
Committee, Inc. ("JDC") since 1993.
Prior thereto, President of JDC.
Claudine B. Malone........... 60 President, Financial and Management 1992 1998
Consulting, Inc. Director, Dell
Computer Corporation, Hannaford
Brothers Co., Houghton Mifflin
Company, Lafarge Corp., The Limited,
Inc., Lowe's Companies, Inc.,
Mallinckrodt Group, Inc., Science
Applications International Corporation
and Union Pacific Resources
Corporation.
Morris W. Offit.............. 60 Chief Executive Officer, Offitbank 1995 1998
(investment management). Director,
Aegon, USA, Inc., Cantel Industries,
Inc. and Mercantile Bankshares
Corporation.
Norma T. Pace................ 75 President, Paper Analytics Associates 1984 1999
(economic consulting) since 1995.
Senior Economic Advisor, WEFA Group
(economic consulting and planning)
since 1992. Director, Englehard Corp.
- - ---------------
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POSITIONS WITH COMPANY,
PRINCIPAL OCCUPATION AND HAS BEEN A TERM
NAME AGE OTHER DIRECTORSHIPS DIRECTOR SINCE EXPIRES
- - ----------------------------- --- -------------------------------------- -------------- -------
E. John Rosenwald, Jr........ 67 Vice Chairman, The Bear Stearns 1983 1999
Companies, Inc. (investment bankers).
Director, The Bear Stearns Companies,
Inc., Frequency Electronics, Inc. and
HFS Inc.
Carl Spielvogel.............. 68 Chairman of the Board and Chief 1992 1998
Executive Officer, United Auto Group,
Inc. (operator of multiple-franchise
auto dealerships) since 1994. Prior
thereto, Chairman of the Board and
Chairman of the Executive Committee,
Backer Spielvogel Bates Worldwide,
Inc. (advertising) during 1994. Prior
thereto, Chairman and Chief Executive
Officer, Backer Spielvogel Bates
Worldwide, Inc. Director, Data
Broadcasting Inc. and Foamex
International Incorporated.
Henry Taub................... 69 Honorary Chairman of the Board and 1986 1998
Chairman of the Executive Committee,
Automatic Data Processing Company,
Inc. Director, Automatic Data
Processing Company, Inc. and Rite Aid
Corporation.
Alfred J. Verrecchia......... 54 Executive Vice President and 1992 1999
President -- Global Operations since
1996. Prior thereto, Chief Operating
Officer -- Domestic Toy Operations.
Director, Old Stone Corp.
Paul Wolfowitz............... 53 Dean, Paul H. Nitze School of Advanced 1995 1998
International Studies, The Johns
Hopkins University, since 1994. Prior
thereto, Distinguished Visiting
Fellow, National Defense University
and George F. Kennan Professor of
National Security Strategy, National
War College during 1993. Prior
thereto, Undersecretary of Defense for
Policy, U.S. Department of Defense.
Prior thereto, U.S. Ambassador to the
Republic of Indonesia. Director of
eleven mutual funds of the Dreyfus
Corporation.
* * *
Sylvia K. Hassenfeld is the mother of Alan G. Hassenfeld.
Those directors who are also executive officers of the Company serve as
officers and directors of the Company's various subsidiaries at the request and
convenience of the Company.
During 1996, the Board held eight meetings. Mr. Offit attended fewer than
75% of the aggregate number of meetings of the Board and the Committee on which
he served during 1996.
The Executive Committee of the Board, which currently consists of Alan R.
Batkin, Alan G. Hassenfeld, Norma T. Pace and E. John Rosenwald, Jr., met once
in 1996. The Executive Committee is vested with all of the powers that are held
by the Board, except that by law the Executive Committee may not exercise any
power of the Board relating to amendment of the Articles of Incorporation or
By-Laws of the Company, adoption of a plan of merger or consolidation, the sale,
lease or exchange of all or substantially all the property or assets of the
Company or the voluntary dissolution of the Company. The Executive Committee
also performs such functions as are assigned to it by the Board from time to
time.
The Nominating and Governance Committee of the Board, which currently
consists of Sylvia K. Hassenfeld, Henry Taub, Preston Robert Tisch and Paul
Wolfowitz, did not meet in 1996. The Nominating
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and Governance Committee makes recommendations for possible additions to the
Board and at the request of the Board is authorized to make recommendations
regarding the governance of the Board and the Committees thereof. The Nominating
and Governance Committee has neither the authority nor the procedures to
consider nominees recommended by shareholders. The By-Laws provide that
shareholders may nominate directors at an annual meeting by giving notice to the
Secretary of the Company not less than 60 days nor more than 90 days prior to
the one-year anniversary date of the immediately preceding annual meeting and
providing specified information regarding the proposed nominee and each
shareholder proposing such nomination.
The Audit Committee of the Board, which currently consists of Alex Grass,
Claudine B. Malone, Morris W. Offit and Norma T. Pace (Chair), held six meetings
in 1996. The function of the Audit Committee is to recommend to the Board the
accounting firm to serve as the Company's independent auditors and to review
with such firm, and with the Company's internal auditors and officers, matters
relating to corporate financial reporting procedures and policies, adequacy of
financial, accounting and operating controls and the scope of the respective
audits performed by the Company's auditors and internal auditors.
The Compensation and Stock Option Committee of the Board, which currently
consists of Alan R. Batkin, Marie Josee Kravis and Carl Spielvogel (Chair), held
two meetings in 1996. The Compensation and Stock Option Committee has been
delegated primary responsibility for establishing and administering senior
executive compensation programs (including the Senior Management Annual
Performance Plan), is authorized to make grants and awards under the Company's
employee stock option plans and considers and recommends Board actions relating
to compensation under other compensation plans.
COMPENSATION OF DIRECTORS
Members of the Board who are not otherwise employed by the Company
("Non-employee Directors") receive a retainer of $25,000 per year and a fee of
$1,000 per Board or committee meeting attended, except that if two or more of
such meetings are held on the same day, the fee for the first meeting is $1,000
and the fee for each additional meeting is $500. The Chair of the Audit
Committee and the Chair of the Compensation and Stock Option Committee each
receive an additional retainer of $3,500 per year. Action by written consent is
not considered attendance at a meeting for purposes of fees to directors.
Pursuant to the Deferred Compensation Plan for Non-employee Directors (the
"Deferred Compensation Plan"), which is unfunded, Non-employee Directors must
defer a minimum of 20% of the annual Board retainer fee into a stock unit
account, the value of each unit initially being equal to the fair market value
of one share of Common Stock as of the end of the quarter in which the
compensation being deferred would otherwise be payable. Stock units increase or
decrease in value based on the fair market value of the Common Stock. In
addition, an amount equal to the dividends paid on an equivalent number of
shares of Common Stock is credited to each Non-employee Director's stock unit
account as of the end of the quarter in which the dividend was paid.
Non-employee Directors may defer the remainder of their retainer and/or meeting
fees into the stock unit account or an interest account, which bears interest at
the five year Treasury rate. The Company makes a deemed matching contribution to
the stock unit account equal to 10% of the amount deferred, with one-half of
such Company contribution vesting on December 31 of the calendar year in which
the deferred compensation otherwise would have been paid and one-half on the
next December 31, provided the participant is a director on such vesting date.
Unvested Company contributions will automatically vest on death, total
disability or retirement by the director at or after age seventy-two. The
Deferred Compensation Plan provides that compensation deferred under the
Deferred Compensation Plan, whether in the stock unit account or the interest
account, will be paid out in cash after termination of service as a director.
Directors may elect that compensation so deferred be paid out in a lump sum or
in up to ten annual installments, commencing either in the quarter following, or
in the January following, the quarter in which service as a director terminates.
Under the Hasbro, Inc. Retirement Plan for Directors (the "Retirement
Plan"), which is unfunded, each director (who is not otherwise eligible for
benefits under the Company's Pension Plan) who has attained the age of
sixty-five and completed five years of service on the Board is entitled to
receive, beginning at age seventy-two, an annual benefit equal to the annual
retainer payable to directors during the year in which the
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director retires (which does not include the fees paid to directors for
attendance at meetings). If a director retires on or after the director's
seventy-second birthday, the annual benefit will continue for the life of the
director. If a director retires between the ages of sixty-five and seventy-two,
the number of annual payments will not exceed the retired director's years of
service. Upon a Change of Control, as defined in the Retirement Plan, directors
and retired directors are entitled to lump-sum payments equal to the present
value of their benefits under the Retirement Plan.
Under the Stock Option Plan for Non-employee Directors, approved by
shareholders on May 11, 1994, each Non-employee Director then in office received
on May 11, 1994, each Non-employee Director who joined the Board after May 11,
1994 received upon becoming a Director, and any new Non-employee Director will
receive upon becoming a Director, a one-time grant of a nontransferable ten year
option to purchase 7,500 shares (as adjusted to reflect the 3 for 2 stock split
paid in the form of a 50% stock dividend on March 21, 1997) of Common Stock at
110% of the fair market value per share of Common Stock on the date of grant.
The options become exercisable at a rate of 20% per year commencing on the first
anniversary of the date of grant, except that exercisability will be accelerated
upon a participant ceasing to be a member of the Board because of permanent
disability, death, retirement at or after a Change of Control, as defined in the
Stock Option Plan for Non-employee Directors.
CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND LITIGATION
The Company's wholly owned subsidiary, Hasbro Canada Inc. ("Hasbro
Canada"), leases its manufacturing and warehouse facilities from Central Toy
Manufacturing Co. ("CTMC"), a real estate corporation which is 25% owned by the
estate of Merrill Hassenfeld, a former Chief Executive Officer and director of
the Company. Sylvia K. Hassenfeld, a director of the Company, is executrix and a
beneficiary of the estate of Merrill Hassenfeld. Total rent paid by Hasbro
Canada to CTMC for the lease of manufacturing and warehouse facilities in 1996
was approximately $579,000 Canadian (approximately $425,000 U.S.). In
management's opinion, these leases are on terms at least as favorable as would
otherwise presently be obtainable.
Since January 1, 1996, the Company has paid an aggregate of approximately
$397,000 of legal expenses on behalf of George R. Ditomassi, Jr., a director and
executive officer of the Company, pursuant to the Company's bylaws and the
indemnification provisions of the Rhode Island Business Corporation Act. In
1997, Mr. Ditomassi reimbursed the Company in the aggregate amount of
approximately $48,000 with respect to certain goods and services received in
previous years.
The Company and its subsidiaries paid an aggregate of approximately
$20,000,000 in royalties to Time Warner Inc. ("Time Warner") and its
subsidiaries for the Company's 1996 fiscal year pursuant to character license
agreements entered into at arms-length in the ordinary course of business. It is
currently anticipated that royalties to be paid by the Company and its
subsidiaries for the 1997 fiscal year to Time Warner and its subsidiaries
pursuant to character license agreements will exceed $60,000. See "Voting
Securities and Principal Holders Thereof".
Since January 1, 1996, the Company has paid an aggregate amount of
approximately $443,000 to Lindsay Associates for architectural services provided
at arms-length in the ordinary course of business in connection with the
redesign of the Company's headquarters. Lindsay Boutros-Ghali, an architect, is
the principal of Lindsay Associates and the spouse of Adam Klein, an executive
officer of the Company.
Since December 30, 1996, the Company has paid an aggregate amount of
approximately $61,000 to Heidrick & Struggles, an executive recruitment firm,
pursuant to an agreement entered into at arms-length in the ordinary course of
business. Mr. Thomas Rosenwald is a principal of Heidrick & Struggles and a
brother of E. John Rosenwald, Jr., a director of the Company.
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In connection with an unsolicited business combination proposal publicly
announced by a third party in January 1996, the Company retained a subsidiary of
The Bear Stearns Companies, Inc. to assist the Company in evaluating the
proposal. E. John Rosenwald, Jr., a director of the Company, is a director and
Vice Chairman of The Bear Stearns Companies, Inc.
Following the public announcement of the unsolicited business combination
proposal described above, seven purported class actions were filed in state
court in Rhode Island against the Company and certain of its officers and
directors. In May 1996, all of these actions were voluntarily dismissed by the
plaintiffs with prejudice and without any consideration, monetary or otherwise,
given by or on behalf of any of the defendants.
The vote of a majority of those shares present or represented by proxy at
the Annual Meeting is required to elect directors. Accordingly, an abstention or
broker non-vote will in effect constitute a vote against a nominee. THE BOARD
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE ELECTION OF THE FIVE NOMINEES
NAMED ABOVE (PROPOSAL NO. 1).
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN AMONG HASBRO, S&P
500 AND RUSSELL 1000 CONSUMER DISCRETIONARY ECONOMIC SECTOR(1)
The following graph tracks an assumed investment of $100 on the start dates
indicated below in the Company's Common Stock, the S&P 500 Index and the Russell
1000 Consumer Discretionary Economic Sector, assuming full reinvestment of
dividends and no payment of brokerage or other commissions or fees. Past
performance is not necessarily indicative of future performance.
Russell 1000
Consumer
Measurement Period Discretionary
(Fiscal Year Covered) Hasbro S&P 500 Economic Sector
1991 100 100 100
1992 129 111 117
1993 143 121 124
1994 115 123 118
1995 125 169 141
1996 155 213 161
- - ---------------
(1) While the information for Hasbro & the S&P 500 is as of the trading day in
Hasbro's fiscal year, the data for the Russell Sector is as of the last
trading day in the calendar year.
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REPORT OF THE
COMPENSATION AND STOCK OPTION COMMITTEE
OF THE BOARD OF DIRECTORS
1996 COMPENSATION POLICIES WITH RESPECT TO EXECUTIVE OFFICERS
The general goal of the Compensation and Stock Option Committee (the
"Committee") with respect to the compensation of executive officers (including
those named in the summary compensation table below) is that the Company provide
competitive compensation and benefits that
- attract and retain capable executives who are important to the success of
the Company,
- reward them for performance,
- provide them with a strong incentive to increase shareholder value, and
- accomplish the foregoing in as fair, understandable and cost-effective
manner as possible.
Executive compensation during 1996 consisted of salary, a management
incentive bonus and stock options. In authorizing and approving compensation
increases and awards for executive officers (other than the Chief Executive
Officer), the Committee relies principally upon the recommendations of the Chief
Executive Officer.
Base salaries for new executive officers are initially determined by
evaluating the responsibilities of the position held, the experience of the
individual and the competitive marketplace for comparable executive talent.
Subsequent yearly adjustments are made by reference to changes in duties and
responsibilities, competitive market conditions and personal performance. In
approving the increases to base salaries for 1996, the Committee targeted the
Company's pay levels to correspond with approximately the 75th percentile of
salaries paid by other consumer non-durable products companies surveyed in
Management Compensation Services Project 777 Executive Compensation Study, whose
participants partially overlap with the companies included in the Russell 1000
Consumer Discretionary Economic Sector (the "Russell Sector") set forth in the
above graph. The Frank Russell Company does not publish compensation data for
the companies included in the Russell Sector.
Approximately 1,370 employees, including executive officers, were eligible
for annual management incentive bonuses with respect to fiscal 1996. During
1996, the Committee, upon the recommendations of an outside compensation
consultant, approved the establishment of corporate and business unit bonus
pools based on fixed formulae keyed to corporate and business unit performance.
A certain fixed percentage of a designated amount of corporate pre-tax profits
with respect to corporate participants and differing fixed percentages of
differing designated amounts of business unit pre-tax profits with respect to
all other participants plus a higher fixed percentage of pre-tax profits above
the designated fixed amounts of pre-tax profits were put into a pool to fund
individual bonus awards. The designated fixed amounts of pre-tax profits for the
corporation and individual business units are to increase by a fixed percentage
each year with the same lower fixed percentage of pre-tax profits to apply to
such higher designated pre-tax profit amount and the higher fixed percentage to
apply only if such higher pre-tax profit amount is exceeded. In addition,
individual awards to corporate participants are conditioned on the Company's
achieving a certain fixed percentage return on equity. Corporate and business
unit performance objectives were principally determined by management and the
outside consultant on the basis of a budget review carried out by senior
management with respect to each operating unit which in turn formed the basis
for the 1996 operating plan prepared by senior management and approved by the
Board in February 1996. Target bonuses for executive officers (other than the
Chief Executive Officer) range from 30% to 45% of base salary. Formula bonuses
in excess of 100% of base salary require special Committee review and approval.
The management incentive bonus for executive officers who are deemed to have
corporate-wide responsibility (which include all the executive officers named in
the summary compensation table below) was based 75% on corporate performance and
25% on individual performance (except for the Chief Executive Officer, see "1996
Compensation of the Chief Executive Officer" below). The management incentive
bonus for those individuals deemed to have business unit responsibility was
weighted 75% for business unit performance and 25% for individual performance.
The 1996
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management bonuses for executive officers were based in part on the applicable
corporate and business unit performance and in part on the contribution of the
individual.
In 1996, stock options were granted to approximately 530 employees,
including executive officers, pursuant to the Company's employee stock option
plans. The Committee, which was composed solely of "disinterested persons" prior
to August 15, 1996 and since that date has been composed solely of "Non-Employee
Directors", each as defined in accordance with Rule 16b-3 of the rules and
regulations of the Securities and Exchange Commission, granted individual
options to executive officers in order to provide an incentive to motivate and
retain those individuals who are important to the Company's future success.
Stock options are designed to align the interests of executives with those of
shareholders, since the executives can only benefit from the options if there is
price appreciation in the Common Stock after the date of grant. All stock
options granted in 1996 were non-qualified, had an exercise price equal to the
fair market value of the Common Stock on the date of grant and vest over three
years. The amount of stock options previously awarded and outstanding for each
executive officer is reviewed by the Committee but is not considered a critical
factor in determining the size of any executive stock option award in any year.
Options granted were allocated on the basis of individual compensation level,
responsibility and performance.
1996 COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
As set forth in the accompanying tables, Mr. Hassenfeld's salary of
$957,900 for 1996 represented an approximate 3.3% increase over his 1995 salary,
his management incentive bonus with respect to 1996 was $450,000 which
represented approximately 47% of his 1996 salary, and in 1996 he was granted
options to purchase 37,500 (as adjusted to reflect the 3 for 2 stock split paid
in the form of a 50% stock dividend on March 21, 1997) shares of Common Stock,
which represented 2.0% of all options granted to employees during 1996. All
compensation decisions regarding Mr. Hassenfeld were made by the Committee,
which is also composed solely of outside directors in accordance with Section
162(m) of the Internal Revenue Code of 1986, as amended, in all cases without
the participation of Mr. Hassenfeld or other executive officers of the Company.
In setting Mr. Hassenfeld's 1996 salary, the Committee took into account
comparative data with respect to chief executive officer compensation provided
to the Committee with a view towards setting Mr. Hassenfeld's compensation
levels at approximately the 75th percentile of other consumer non-durable
products companies surveyed. The Committee determined Mr. Hassenfeld's
management bonus pursuant to the Company's Senior Management Annual Performance
Plan (the "Annual Performance Plan") which was approved by shareholders in 1994.
Mr. Hassenfeld is the only participant in the Annual Performance Plan. Under the
Annual Performance Plan, the Committee designated a net earnings performance
goal for the Company for 1996, which was based on the 1996 operating plan
approved by the Board in February 1996. The target bonus for Mr. Hassenfeld
under the Annual Performance Plan is 75% of salary, if 100% of the performance
goal is achieved, with a maximum bonus of 150% of salary, if 130% or more of the
performance goal is attained. No bonus is payable under the Annual Performance
Plan unless at least 70% of the performance goal is attained. More than 70% but
less than 100% of the targeted performance goal was achieved by the Company
resulting in the bonus paid to Mr. Hassenfeld. The options granted to Mr.
Hassenfeld in 1996 reflected individual compensation level, responsibility and
performance.
Alan R. Batkin, Marie Josee Kravis and Carl Spielvogel (Chairman)
as members of the Compensation and Stock Option Committee of the Board
of Directors as of 1996 fiscal year end.
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EXECUTIVE COMPENSATION
The following table summarizes compensation paid by the Company for
services rendered during 1996, 1995 and 1994 by the Chief Executive Officer of
the Company and the four most highly compensated executives of the Company other
than the Chief Executive Officer:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
---------------------------------- LONG TERM
OTHER COMPENSATION
ANNUAL(A) ------------ ALL OTHER(C)
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS(B) COMPENSATION
- - -------------------------------------- ----- -------- -------- ------------ ------------ ------------
Alan G. Hassenfeld.................... 1996 $957,900 $450,000 $ 33,493 37,500 $ 44,171
Chairman of the Board, 1995 927,577 220,000 35,295 150,000 43,448
President and Chief Executive Officer 1994 902,286 221,600 34,301 45,000 40,057
Alfred J. Verrecchia.................. 1996 618,397 160,000 13,465 37,500 30,440
Executive Vice President 1995 597,400 130,000 11,974 105,000 30,347
and President -- Global Operations 1994 496,720 131,200 15,794 30,000 26,081
George R. Ditomassi, Jr............... 1996 560,577 145,000 15,545 37,500 2,375
Executive Vice President 1995 540,192 165,000 16,945 97,500 2,310
and President -- Corporate Innovation 1994 489,238 172,000 16,000 37,500 2,310
Harold P. Gordon...................... 1996 528,230 175,000 63,771 37,500 6,215
Vice Chairman 1995 455,650 135,000 17,746 225,000 3,938
John T. O'Neill....................... 1996 462,840 175,000 8,599 37,500 25,357
Executive Vice President and 1995 436,450 150,000 10,176 75,000 21,786
Chief Financial Officer 1994 352,205 120,000 10,096 30,000 16,387
- - ---------------
(a) Includes the following amounts which were included in 1996 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: $8,493 for Mr. Hassenfeld, $11,715 for Mr. Verrecchia, $10,200 for
Mr. Ditomassi, $9,727 for Mr. Gordon and $7,749 for Mr. O'Neill. Also
includes the following amounts paid by the Company and included in 1996
taxable income for each named individual in connection with a program
whereby certain financial planning and tax preparation services are provided
to the individual and paid for by the Company: $25,000 for Mr. Hassenfeld,
$1,750 for Mr. Verrecchia, $5,345 for Mr. Ditomassi, $19,000 for Mr. Gordon,
and $850 for Mr. O'Neill. Includes for Mr. Gordon $35,044 in relocation
expenses reimbursed by the Company. Does not include other personal benefits
that do not in the aggregate exceed $50,000 in any year for any individual.
(b) All share amounts are adjusted to reflect the 3 for 2 stock split paid in
the form of a 50% stock dividend on March 21, 1997.
(c) Includes, except for Mr. Ditomassi and Mr. Gordon, the executive's pro-rata
share of the Company's contribution to the profit-sharing account under the
Company's Retirement Savings Plan (the "Retirement Savings Plan") which is
in part contributed to the executive's account in the Retirement Savings
Plan and, to the extent in excess of certain Internal Revenue Code of 1986,
as amended, (the "Code") maximums, deemed allocated to the executive's
account in the Company's unfunded Supplemental Benefit Retirement Plan (the
"Supplemental Plan"), which in 1996 amounted to $44,171 for Mr. Hassenfeld,
$28,065 for Mr. Verrecchia, and $22,982 for Mr. O'Neill. Includes for each
individual, other than Mr. Hassenfeld, the sum of $2,375, which represents
the Company's 25% match of sums saved in 1996 by each named executive in his
savings account under the Company's Retirement Savings Plan and Supplemental
Plan. Also includes $3,840 in premiums paid by the Company in 1996 for an
individual life insurance policy for Mr. Gordon.
* * *
9
12
The following table sets forth certain information regarding stock option
grants in 1996 to the executive officers named above. All amounts have been
adjusted to reflect the 3 for 2 stock split paid in the form of a 50% stock
dividend on March 21, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL
REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL
SECURITIES OPTIONS RATES OF STOCK
UNDERLYING GRANTED TO PRICE APPRECIATION
OPTIONS EMPLOYEES EXERCISE FOR OPTION TERM(A)
GRANTED IN FISCAL PRICE PER EXPIRATION -----------------------------
NAME (B)(C) YEAR SHARE DATE 0% 5% 10%
- - -------------------------- ---------- ---------- --------- ---------- --- -------- ----------
Alan G. Hassenfeld........ 37,500 2.0% $ 23.5417 2/15/06 0 $555,196 $1,406,976
Alfred J. Verrecchia...... 37,500 2.0% 23.5417 2/15/06 0 555,196 1,406,976
George R. Ditomassi,
Jr...................... 37,500 2.0% 23.5417 2/15/06 0 555,196 1,406,976
Harold P. Gordon.......... 37,500 2.0% 23.5417 2/15/06 0 555,196 1,406,976
John T. O'Neill........... 37,500 2.0% 23.5417 2/15/06 0 555,196 1,406,976
- - ---------------
(a) Potential realizable value is based on an assumption that the price of the
Common Stock appreciates at the annual rates shown (compounded annually)
from the date of grant until the end of the ten year option term. These
numbers are calculated based on the rules and regulations promulgated by the
Securities and Exchange Commission and do not reflect the Company's estimate
of future stock price growth.
(b) These options are non-qualified and were granted at fair market value on the
date of grant. Thirty-three and one-third percent of each option becomes
exercisable on the first anniversary of the date of grant and thirty-three
and one-third percent becomes exercisable on each anniversary thereafter
until fully exercisable. All options become fully vested in the event of
death, disability or retirement at the optionee's normal retirement date and
are exercisable for a period of one year thereafter. An optionee taking
early retirement may, under certain circumstances, exercise all or a portion
of the options unvested at his or her early retirement date and may exercise
such options for three months or such longer period as the Committee may
approve. 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) Upon a Change of Control, as defined below, all options become immediately
exercisable and, with certain exceptions, will be canceled in exchange for a
cash payment in the amount of the difference between the highest price paid
for a share of Common Stock in the transaction or series of transactions
pursuant to which the Change of Control shall have occurred or, if higher,
the highest reported sales price of a share of Common Stock during the
sixty-day period immediately preceding the date of the Change of Control.
Participants may exercise options and satisfy tax withholding liabilities by
payments in cash or by delivery of Common Stock equal to the exercise price
and the tax withholding liability. In addition, participants may instruct
the Company to withhold shares issuable upon exercise in satisfaction of tax
withholding liability.
* * *
The following table sets forth as to each of the named executive officers:
(a) the number of shares acquired upon exercise of options during fiscal 1996;
(b) the value realized (market value on date of exercise less exercise price)
upon the exercise of such options during fiscal 1996; (c) the number of
exercisable and unexercisable options held on December 29, 1996, the last day of
the 1996 fiscal year; and (d) the value of such options at December 29, 1996.
The number of options set forth below correspond to the number of shares to
which they relate and have been adjusted to reflect the 3 for 2 stock split paid
in the form of a 50% stock dividend on March 21, 1997.
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AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 29, IN-THE-MONEY OPTIONS
1996 AT DECEMBER 29, 1996
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ----------------------------- --------------- ---------- ----------- ------------- ----------- -------------
Alan G. Hassenfeld........... -- -- 475,125 262,500 $ 3,413,050 $ 746,009
Alfred J. Verrecchia......... 75,000 $1,688,195 447,874 186,250 4,308,664 542,854
George R. Ditomassi, Jr. .... 31,500 559,125 300,699 182,751 1,660,816 544,312
Harold P. Gordon............. -- -- 67,999 202,000 250,493 637,879
John T. O'Neill.............. -- -- 259,849 148,525 1,883,005 428,243
* * *
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) Covered compensation under the Pension Plan and the Supplemental Plan
includes total salaries and bonuses (as set forth in the Summary
Compensation Table) for the five highest consecutive years during the ten
years preceding retirement ("Average Compensation").
(2) Estimated retirement benefit amounts shown are prior to reduction by an
Internal Revenue Service designated amount keyed to a participant's latest
three-year average Social Security entitlement. Amounts shown are computed
on the single straight-life annuity option. Early retirement, which is
permitted up to 10 years prior to the normal retirement date, and other
payment options will reduce the annual benefit amount shown. Payments from
the Supplemental Plan, which is unfunded, are not subject to provisions of
the Code that limit benefits under the Pension Plan. As set forth in the
above table and subject to the foregoing, the retirement benefit after
thirty years of credited service is generally 50% of Average Compensation,
except for certain employees (which include Mr. Ditomassi) who had
substantial credited service with Milton Bradley Company prior to its
acquisition by the Company, as to which the retirement benefit is 60% of
Average Compensation.
(3) For purposes of determining benefits under the Pension Plan and the
Supplemental Plan, credited years of service cannot exceed 30.
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The following table sets forth, as to the five named executive officers,
their years of credited service under the Pension Plan and the Supplemental
Plan:
CREDITED YEARS
OF SERVICE (A)
--------------
Alan G. Hassenfeld......................................... 28
Alfred J. Verrecchia....................................... 30
George R. Ditomassi, Jr.................................... 30
Harold P. Gordon........................................... 2
John T. O'Neill............................................ 10
- - ---------------
(a) In 1996, the Pension Plan was amended, effective January 1, 1997, to delete
a provision which reduced by five years the number of years of credited
service of certain classes of Company employees employed prior to 1986. As a
result, credited years of service for all named executive officers reflect
actual years of service, subject to the 30 year maximum.
EMPLOYMENT AGREEMENTS
Nine executive officers, including the five named executive officers, are
parties to employment agreements (the "Agreements") with the Company. The
Agreements come into effect only upon a "Change of Control," as defined, and
continue for three years after such date (the "Employment Period"). If, during
the Employment Period, an executive's employment with the Company is
involuntarily terminated other than for "cause," the executive is entitled to
three times the executive's average annual base salary and bonus for the five
years preceding the Change of Control, plus an amount equal to the shortfall
between the actuarial benefit payable to the executive under the Company's
retirement plans as a result of the early termination and the amount the
executive would have received if the executive had continued in the employ of
the Company for the remainder of the Employment Period. The executive and the
executive's family would also be entitled to the continuation of medical,
welfare, life insurance, disability and other benefits for at least the
remainder of the Employment Period. If the executive is subject to the payment
of excise tax under Section 280G of the Code, the Company will pay such
executive an additional amount so as to place the executive in the same
after-tax position such executive would have been in had such excise tax not
applied. In addition, the Agreements permit an executive to terminate the
executive's employment for "Good Reason" at any time or for any reason during a
30-day period immediately following the first anniversary of the Change of
Control and receive the above-described severance benefits. "Good Reason"
includes diminution of the executive's responsibilities or compensation,
relocation or purported termination otherwise than as expressly permitted by the
Agreements. Under certain circumstances, certain payments by the Company
pursuant to the Agreements may not be deductible for federal income tax
purposes. A "Change of Control" is defined (for purposes of the Agreements, the
Retirement Plan and the Company's stock option plans) as the occurrence of
certain events, including acquisition by a third party of 20% or more of the
Company's outstanding voting securities, a change in the majority of the Board
or approval by shareholders of a reorganization, merger, consolidation,
liquidation or dissolution of the Company subject, in each case, to certain
exceptions. "Cause" is defined (for purposes of the Agreements and the Agreement
described in the next succeeding paragraph) as demonstrably willful or
deliberate violations of the Employee'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 Employee of a felony involving moral turpitude.
Mr. Gordon (the "Employee") has an additional employment agreement, dated
as of January 1, 1996 (the "Agreement"), pursuant to which he received,
effective February 1, 1996, annual salary of $526,000, which salary is subject
to upward adjustment by the Company. The Employee is eligible to participate in
the Company's management incentive bonus arrangements (with a target bonus of
45% of base salary, a threshold of 10% and a maximum of 90%), as well as other
benefit plans and programs available to senior executives and employees
generally. The Company agrees to use its best efforts to cause Employee to be
nominated for re-election as a Director upon expiration of his current or any
future term and to recommend such re-election. If the Employee's employment
terminates for any reason, he will be entitled to a life annuity payment from
the
12
15
Company equal to 3.33% of his "Final Average Pay" multiplied by the number of
full years employed, payable at age 65, less any amounts payable under the
Company's Pension Plan, Supplemental Plan or U.S. Social Security. In addition,
the Company will maintain a key executive life insurance policy in an amount
sufficient to pay a life annuity benefit commencing at age 65 (or termination of
employment, if later) of $225,000 per year. If the Employee is terminated by the
Company (other than for "Cause") prior to February 1, 2000, he would be entitled
to an annual life insurance annuity benefit of $160,714 and may acquire
additional years of vested benefits at a cost of $216,480 per year. If he dies
before the commencement of the life insurance annuity payments, his beneficiary
would receive a lump sum death benefit of $1,500,000 and none of the other life
insurance annuity payments would be payable. If he dies after the life insurance
annuity payments begin but before the receipt of 240 months of payments, the
balance of said 240 months of payments will be made to his beneficiary. If the
insurance policy value is insufficient to make the foregoing payments, the
Company will make these payments from its general assets. If the Employee is
terminated (other than for "Cause") prior to January 31, 1998, he would receive
three years of base salary as severance pay, with the length of the severance
pay reduced by three months for every additional three months of service
thereafter until January 31, 2000. In the event of a Change of Control (as
defined above), the Employee would be entitled to receive the greater of the
severance benefits set forth in the immediately preceding sentence and the
amounts payable under the Agreement described in the immediately preceding
paragraph (the "Change of Control Agreement"). The Agreement also amended the
Employee's Change of Control Agreement to make certain clarifying and conforming
changes. The Company agreed to provide short-term financing during the
Employee's transition to the Company at the Company's cost of borrowing in
connection with Employee's Canadian tax obligations or planning opportunities,
to pay for the issuance of any letter of credit that may be required by Canadian
tax authorities for exit purposes and generally to use its best efforts to
provide the necessary financial and legal assistance to eliminate negative
effects on the Employee due to differences in the Canadian and U.S. tax systems.
The Employee is entitled to relocation benefits under existing policies except
that such benefits are provided for both of Employee's Canadian residences.
Further, if Employee purchases a primary residence in the United States and is
terminated (other than for "Cause") within the first seven years of employment,
the Company will provide relocation assistance for such residence including a
guarantee of the original purchase price thereof plus the fair market value of
any capital improvements. In addition, the Employee shall receive such
additional relocation benefits as may be agreed between the chief executive
officer and the Employee. The Employee may terminate his employment and collect
benefits under the Agreement within one year after any diminution of his
responsibilities, removal from or failure to be re-elected to the Board,
relocation or any breach by the Company of any of its obligations described
above or any other material breach of the Agreement by the Company. "Final
Average Pay" is defined in the Agreement as one-fifth of total salaries and
bonuses received by the Employee in the five highest consecutive years of
employment or if Employee was employed for less than five years, the annualized
average of salaries and bonuses.
Dan D. Owen, an executive officer of the Company (the "Executive"), who is
party to one of the Change of Control Agreements, is also party to a Severance
and Settlement Agreement and Release, as amended effective January 1, 1997 (the
"Severance Agreement"), pursuant to which the Company would continue to pay the
Executive an amount equal to the equivalent of two year's base salary in effect
on the date of termination, plus applicable bonuses, if the Executive's
employment is terminated voluntarily or involuntarily (except for "Cause" or in
the event of death) on or prior to June 30, 1998, less applicable withholdings
and, in the case of termination due to disability, less disability benefits
provided under Company plans. The Executive, as long as he is unemployed, will
also continue to participate in the Company's auto lease and health programs for
one year. In the event of death, the Executive's estate would receive four
month's salary. The Executive will not compete with the Company during the
period of the Severance Agreement. Upon a "Change of Control," the Executive's
Change of Control Agreement will supersede the Severance Agreement. "Cause" is
defined in the Severance Agreement as a good faith finding by the Company of a
material failure to perform assigned duties, dishonesty, gross negligence or
misconduct. In addition, all vested options of the Executive at termination of
employment will be exercisable for six months after termination and certain
options that would have become vested within six months following termination
would continue to vest and become exercisable for three months after such
vesting.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information, as of March 21, 1997 (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 BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
----------------------------------------------------- ----------------- --------
Alan G. Hassenfeld................................... 12,285,458(2) 9.5
1027 Newport Avenue Pawtucket, RI 02862
TIME WARNER INC. .................................... 18,086,341(3) 14.1
75 Rockefeller Center New York, NY 10019
FMR CORP. ........................................... 17,636,154(4) 13.7
82 Devonshire Street Boston, MA 02109
- - ---------------
(1) Based upon information furnished by each shareholder or contained in filings
made with the Securities and Exchange Commission. All amounts have been
adjusted to reflect the 3 for 2 stock split paid in the form of a 50% stock
dividend on March 21, 1997.
(2) Includes 5,927,281 shares held as sole trustee for the benefit of his
mother, 552,898 shares held as sole trustee of a trust for Mr. Hassenfeld's
benefit and currently exercisable options to purchase 571,625 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 726,900 shares owned
by The Hassenfeld Foundation, of which Mr. Hassenfeld is an officer and
director, as to which shares Mr. Hassenfeld disclaims beneficial ownership,
567,747 shares held as one of the trustees of a charitable lead trust for
the benefit of The Hassenfeld Foundation and 102,811 shares held as one of
the trustees of a trust for the benefit of his mother and her grandchildren.
(3) These shares are owned by a wholly owned subsidiary of Time Warner Inc.
("Time Warner"). In December 1992, Time Warner sold in a public offering
approximately $1.65 billion (principal amount at maturity) of Liquid Yield
Options(TM) Zero Coupon -- Senior Notes due 2012 ("LYONS(TM)"). Each LYON,
whose original issue price was $292.04 and whose principal amount at
maturity will be $1,000, is exchangeable at the option of the holder for
10.9515 (rounded to the nearest .0001 of a share) shares of the Common Stock
of the Company owned by Time Warner. Time Warner may elect to deliver cash
in lieu of Common Stock to any LYON holder who elects to exchange a LYON for
Common Stock. The LYONS are not redeemable, and no LYON holder may elect to
cause Time Warner to repurchase any LYON, prior to December 17, 1997. In
August 1995, Time Warner Financing Trust sold in a public offering
12,057,561 $1.24 Preferred Exchangeable Redemption Cumulative Securities
("PERCS(R)"). Each of the PERCS, whose original issue price was $31, pays
cumulative cash distributions of $1.24 per annum and is mandatorily
redeemable for cash on December 23, 1997 at the lesser of $54.41 and the
average of the closing prices of 1.5 shares of Common Stock for the five
trading day period ending on the trading day immediately preceding December
17, 1997, plus, in each case, accrued and unpaid distributions to the
mandatory redemption date. Time Warner has the right to pay the redemption
price of the PERCS through a combination of shares of Common Stock and cash.
As a result of the issuance of the PERCS and the existence of the LYONS
described above, Time Warner has stated that it intends to retain possession
of its shares of Common Stock until it delivers such shares to satisfy its
obligations in respect of either the PERCS or the LYONS. Time Warner retains
sole voting and investment authority over these shares.
(4) FMR Corp. has sole voting power over 740,914 shares, no voting power over
16,895,232 shares and sole investment power over 17,636,154 shares. Fidelity
Management & Research Company, a wholly-owned subsidiary of FMR Corp., owns
16,508,082 shares as an investment advisor to various investment
14
17
companies. Its holdings include 549,735 and 4,077,750 shares of Common Stock
owned upon the assumed conversion of $10,444,000 principal amount of the
Company's Convertible Subordinated Notes due 1998 (the "Convertible Notes")
and the assumed exchange of 2,718,500 PERCS, respectively. Fidelity
Management Trust Company, a bank and another wholly-owned subsidiary of FMR
Corp., owns 1,128,072 shares as investment manager of institutional
accounts. Its holdings include 160,569 and 256,350 shares of Common Stock
owned upon assumed conversion of $3,140,000 principal amount of Convertible
Notes and the assumed exchange of 170,900 PERCS, respectively. Edward C.
Johnson 3d and Abigail P. Johnson may, together with certain Johnson family
members and trusts, be deemed to form a controlling group with respect to
FMR Corp. The foregoing information is as of December 31, 1996.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information, as of March 21, 1997, with
respect to the ownership of the Common Stock (the only class of outstanding
equity securities of the Company) by each director of the Company, each named
executive officer and by all directors and executive officers as a group. Unless
otherwise indicated, each person has sole voting and investment authority.
PERCENT
COMMON OF
NAME OF DIRECTOR OR EXECUTIVE OFFICER(1) STOCK CLASS
---------------------------------------------------------------- ---------- -------
Alan R. Batkin(2)............................................... 10,971 *
George R. Ditomassi, Jr.(3)..................................... 370,458 *
Harold P. Gordon(4)............................................. 149,824 *
Alex Grass(5)................................................... 26,681 *
Alan G. Hassenfeld(6)........................................... 12,285,458 9.5
Sylvia K. Hassenfeld(7)......................................... 789,454 *
Marie Josee Kravis(8)........................................... 1,807 *
Claudine B. Malone(9)........................................... 5,560 *
Morris W. Offit(10)............................................. 3,394 *
John T. O'Neill(11)............................................. 267,625 *
Norma T. Pace(12)............................................... 8,814 *
E. John Rosenwald, Jr.(13)...................................... 145,432 *
Carl Spielvogel(14)............................................. 36,555 *
Henry Taub(15).................................................. 13,725 *
Preston Robert Tisch(16)........................................ 7,510 *
Alfred J. Verrecchia(17)........................................ 632,738 *
Paul Wolfowitz(18).............................................. 5,545 *
All Directors and Executive Officers as a Group (includes 25
persons)(19).................................................. 14,739,480 11.2
- - ---------------
* Less than one percent.
(1) Information in this table is based upon information furnished by each
director and executive officer. All amounts have been adjusted to reflect
the 3 for 2 stock split paid in the form of a 50% stock dividend on March
21, 1997.
(2) Includes currently exercisable options and options exercisable within sixty
days hereof granted under the Company's Stock Option Plan for Non-employee
Directors to purchase an aggregate of 4,500 shares as well as 5,346 shares
deemed to be held in Mr. Batkin's stock unit account under the Deferred
Compensation Plan.
(3) Includes currently exercisable options granted under the Company's employee
stock option plans to purchase an aggregate of 352,200 shares.
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18
(4) Includes currently exercisable options and options exercisable within sixty
days hereof granted under the Company's stock option plans to purchase an
aggregate of 146,100 shares as well as 2,224 shares deemed to be held in
Mr. Gordon's stock unit account under the Deferred Compensation Plan.
(5) Includes currently exercisable options and options exercisable within sixty
days hereof granted under the Company's Stock Option Plan for Non-employee
Directors to purchase an aggregate of 4,500 shares as well as 5,065 shares
deemed to be held in Mr. Grass' stock unit account under the Deferred
Compensation Plan. Does not include 11,250 shares owned by the spouse of
Mr. Grass, as to which Mr. Grass disclaims beneficial ownership.
(6) See note (2) to the immediately preceding table.
(7) Includes currently exercisable options and options exercisable within sixty
days hereof granted under the Company's Stock Option Plan for Non-employee
Directors to purchase an aggregate of 4,500 shares, 726,900 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 760 shares deemed to be held in Mrs. Hassenfeld's stock unit account
under the Deferred Compensation Plan. Does not include the shares of Common
Stock held in trust for Mrs. Hassenfeld's benefit referred to in note (2)
to the immediately preceding table.
(8) Represents currently exercisable options granted under the Company's Stock
Option Plan for Non-employee Directors to purchase 1,500 shares as well as
307 shares deemed to be held in Mrs. Kravis' stock unit account under the
Deferred Compensation Plan.
(9) Includes currently exercisable options and options exercisable within sixty
days hereof granted under the Company's Stock Option Plan for Non-employee
Directors to purchase an aggregate of 4,500 shares as well as 760 shares
deemed to be held in Ms. Malone's stock unit account under the Deferred
Compensation Plan.
(10) Represents options currently exercisable and exercisable within sixty days
hereof granted under the Company's Stock Option Plan for Non-employee
Directors to purchase an aggregate of 3,000 shares as well as 394 shares
deemed to be held in Mr. Offit's stock unit account under the Deferred
Compensation Plan.
(11) Includes currently exercisable options granted under the Company's employee
stock option plans to purchase an aggregate of 252,625 shares.
(12) Includes currently exercisable options and options exercisable within sixty
days hereof granted under the Company's Stock Option Plan for Non-employee
Directors to purchase an aggregate of 4,500 shares as well as 3,279 shares
deemed to be held in Mrs. Pace's stock unit account under the Deferred
Compensation Plan.
(13) Includes currently exercisable options and options exercisable within sixty
days hereof granted under the Company's Stock Option Plan for Non-employee
Directors to purchase an aggregate of 4,500 shares as well as 5,932 shares
deemed to be held in Mr. Rosenwald's stock unit account under the Deferred
Compensation Plan. Does not include shares held by The Bear Stearns
Companies Inc. in an investment account. Mr. Rosenwald is Vice Chairman of
The Bear Stearns Companies Inc.
(14) Includes currently exercisable options and options exercisable within sixty
days hereof granted under the Company's Stock Option Plan for Non-employee
Directors to purchase an aggregate of 4,500 shares as well as 2,322 shares
deemed to be held in Mr. Spielvogel's stock unit account under the Deferred
Compensation Plan.
(15) Includes currently exercisable options and options exercisable within sixty
days hereof granted under the Company's Stock Option Plan for Non-employee
Directors to purchase an aggregate of 4,500 shares as well as 4,725 shares
deemed to be held in Mr. Taub's stock unit account under the Deferred
Compensation Plan.
(16) Includes currently exercisable options and options exercisable within sixty
days hereof granted under the Company's Stock Option Plan for Non-employee
Directors to purchase an aggregate of 4,500 shares as well as 706 shares
deemed to be held in Mr. Tisch's stock unit account under the Deferred
Compensation Plan.
16
19
(17) Includes currently exercisable options granted under the Company's employee
stock option plans to purchase an aggregate of 516,625 shares. Does not
include 101,250 shares owned by Mr. Verrecchia's spouse, 2,025 shares owned
by Mr. Verrecchia as trustee of a trust for one of his daughters and 787
shares owned directly by that daughter, and 2,025 shares owned by Mr.
Verrecchia as trustee of a trust for another daughter, as to which in each
case Mr. Verrecchia disclaims beneficial ownership.
(18) Represents options currently exercisable and exercisable within sixty days
hereof granted under the Company's Stock Option Plan for Non-employee
directors to purchase an aggregate of 3,000 shares as well as 2,545 shares
deemed to be held in Mr. Wolfowitz's stock unit account under the Deferred
Compensation Plan.
(19) Of these shares, all directors and executive officers as a group have sole
voting and investment power with respect to 13,224,685 shares and have
shared voting and/or investment power with respect to 1,514,795 shares.
Includes 2,440,487 shares purchasable by directors and executive officers
upon exercise of currently exercisable options, or options exercisable
within sixty days hereof, granted under the Company's stock option plans
and 34,419 shares deemed to be held in stock unit accounts under the
Deferred Compensation Plan.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Act, as amended, requires the Company's directors
and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission and the American Stock Exchange initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Executive officers, directors and greater than
ten-percent shareholders are required by regulation promulgated by the
Securities and Exchange Commission to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during the last fiscal year ended December 29, 1996, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were complied with, except that Mr.
Gordon filed a late report in 1997 with respect to his gift of shares and a
stock option grant to him in 1996 and amended that report to reflect certain
shares deemed to be held in his account under the Deferred Compensation Plan and
Mr. Spielvogel filed a late report in 1997 with respect to three purchases of
shares in July 1992 and amended a report in 1997 to reflect a gift of shares by
him in 1996 and the foregoing purchases.
RATIFICATION OF SELECTION OF AUDITORS
(PROPOSAL NO. 2)
The Board, upon recommendation of the Audit Committee of the Board, has
selected KPMG Peat Marwick LLP, independent certified public accountants, to
audit the consolidated financial statements of the Company for the fiscal year
ending December 28, 1997. KPMG Peat Marwick LLP has acted as independent
certified public accountants for the Company since 1964 and has advised that
neither it nor any of its members has any direct financial interest or any
material indirect financial interest in the Company or any of its subsidiaries,
nor any connection with the Company or any of its subsidiaries during the past
three years other than as an independent certified public accountant and in
furnishing certain related services. A representative of KPMG Peat Marwick LLP
is expected to be present at the Annual Meeting, will have the opportunity to
make a statement, if so desired, and will be available to respond to appropriate
questions.
The vote of a majority of the shares of Common Stock present or represented
by proxy at the Annual Meeting is required for approval of Proposal No. 2.
Accordingly, both an abstention and a broker non-vote will in effect constitute
a vote against Proposal No. 2. THE BOARD RECOMMENDS THAT THE SHAREHOLDER VOTE
FOR RATIFICATION OF SUCH SELECTION (PROPOSAL NO. 2).
17
20
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 1998
Annual Meeting must be received by the Company at its executive offices no later
than December 2, 1997. The address of the Company's executive offices is 1027
Newport Avenue, Pawtucket, Rhode Island 02862.
FINANCIAL STATEMENTS
A copy of the Annual Report of the Company for the fiscal year ended
December 29, 1996 accompanies this Proxy Statement.
COST OF SOLICITATION
The cost of soliciting Proxies in the accompanying form has been or will be
borne by the Company. In addition to solicitation by mail, arrangements will be
made with brokerage houses and other custodians, nominees and fiduciaries to
send proxies and proxy material to their principals and the Company will
reimburse them for any reasonable expenses incurred in connection therewith.
It is important that your shares be represented at the meeting. If you are
unable to be present in person, you are respectfully requested to mark, sign and
date the enclosed Proxy and return it in the pre-addressed envelope as promptly
as possible. No postage is required if mailed in the United States.
By Order of the Board of Directors
Phillip H. Waldoks
Secretary
Dated: April 4, 1997
Pawtucket, Rhode Island
18
21
HASBRO, INC.
Annual Meeting of Shareholders - May 14,1997
P
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
R The undersigned acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement of Hasbro, Inc. (the "Company") and hereby
appoints ALAN G. HASSENFELD and HAROLD P. GORDON and each of them, with
O 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
X held on May 14, 1997 at 10:00 A.M. at the offices of the Company, 1027
Newport Avenue, Pawtucket, Rhode Island, and at any adjournments thereof.
Y UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" PROPOSALS
1 AND 2 AND IN SUPPORT OF MANAGEMENT ON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
PLEASE MARK, SIGN AND DATE ON REVERSE SIDE AND PROMPTLY MAIL
IN ENCLOSED ENVELOPE.
SEE REVERSE
SIDE
22
HASBRO, INC.
1027 NEWPORT AVENUE
PAWTUCKET, RI 02862
April 4, 1997
Dear Fellow Shareholders:
You are cordially invited to attend the 1997 Annual Meeting of
Shareholders of Hasbro, Inc. to be held at 10:00 a.m. on Wednesday, May 14,
1997 at the Company's worldwide headquarters, 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 1997 Annual
Meeting. It is important that your shares be voted. Accordingly, please
complete, sign and date the proxy card attached below and return it in the
enclosed postage-paid envelope. You may, of course, attend the 1997 Annual
Meeting and vote in person, even if you have previously returned your proxy
card. I am looking forward to seeing you there.
Sincerely,
Alan G. Hassenfeld
Chairman of the Board
and Chief Executive Officer
YOUR VOTE IS IMPORTANT
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY CARD
Detach Here
[x] Please mark
votes as in
this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2.
1. Election of Directors
For Terms Expiring in 2000: Harold P. Gordon, Alex Grass, Alan G.
Hassenfeld, Marie Josee Kravis and Preston Robert Tisch
FOR WITHHELD
[ ] [ ]
--------------------------------------
For all nominees except as noted above
2. Ratification of the selection of KPMG Peat Marwick LLP as independent
accountants of the Company for the 1997 fiscal year.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT
Sign exactly as name(s) appear(s) hereon. When signing in a representative
capacity, please give full title as such. If more than one name is shown,
include the case of joint tenants, each person should sign.
Signature: _______________ Date: ______ Signature: _______________ Date: ______
