Hasbro (HAS)

(11) Stock Options, Restricted Stock and Warrants

        Hasbro has various stock incentive plans for employees as well as a plan for non-employee members of the Board (collectively, the "plans") and has reserved 24,143 shares of its common stock for issuance upon exercise of options and the grant of other awards granted or to be granted under the plans. These options generally vest in equal annual amounts over three to five years. The plans provide that options be granted at exercise prices not less than fair market value on the date the option is granted and options are adjusted for such changes as stock splits and stock dividends. Generally, options are exercisable for periods of no more than ten years after date of grant. Certain of the plans permit the granting of awards in the form of stock options, stock appreciation rights, stock awards and cash awards in addition to options.

        The Company issued restricted stock and granted deferred restricted stock units to certain key employees of 35 and 20 during 2003 and 2002, respectively. The Company did not issue or grant any restricted stock or deferred restricted stock units during 2004. These shares or units are nontransferable and subject to forfeiture for periods prescribed by the Company. Upon granting of these awards, unearned compensation equivalent to the market value at the date of grant is charged to shareholders' equity and subsequently amortized over the periods during which the restrictions lapse, generally 3 years. Amortization of deferred, unearned compensation relating to the restricted stock and deferred restricted stock units of $138, $172 and $1,770 was recorded in fiscal 2004, 2003 and 2002, respectively.

        The weighted average fair value of options granted in 2004, 2003 and 2002 were $6.32, $4.93 and $7.34, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2004, 2003 and 2002, respectively: risk-free interest rates of 3.85%, 3.02% and 4.58%; expected dividend yields of 1.29%, 1.04% and 0.72% and expected volatility of approximately 40%, 43% and 43%. The weighted average assumptions used for expected option lives were approximately 5 years in 2004, and approximately 6 years in 2003 and 2002. Pro forma information regarding net earnings (loss) as required by SFAS No. 123, "Accounting for Stock-Based Compensation" has been determined as if the Company had accounted for its employee stock options under the fair value method (note 1).

        Additionally, the Company has reserved 17,450 shares of its common stock for issuance upon exercise of outstanding warrants.

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        Information with respect to options and warrants for the three years ended December 26, 2004 is as follows:

        Information with respect to the 38,491 options and warrants outstanding and the 30,020 exercisable at December 26, 2004, is as follows:

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