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<SEC-DOCUMENT>0000950135-02-001070.txt : 20020414
<SEC-HEADER>0000950135-02-001070.hdr.sgml : 20020414
ACCESSION NUMBER:		0000950135-02-001070
CONFORMED SUBMISSION TYPE:	S-3
PUBLIC DOCUMENT COUNT:		7
FILED AS OF DATE:		20020222

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			HASBRO INC
		CENTRAL INDEX KEY:			0000046080
		STANDARD INDUSTRIAL CLASSIFICATION:	GAMES, TOYS & CHILDREN'S VEHICLES (NO DOLLS & BICYCLES) [3944]
		IRS NUMBER:				050155090
		STATE OF INCORPORATION:			RI
		FISCAL YEAR END:			1227

	FILING VALUES:
		FORM TYPE:		S-3
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-83250
		FILM NUMBER:		02556319

	BUSINESS ADDRESS:	
		STREET 1:		1027 NEWPORT AVE
		STREET 2:		P O BOX 1059
		CITY:			PAWTUCKET
		STATE:			RI
		ZIP:			02861
		BUSINESS PHONE:		4014318697

	MAIL ADDRESS:	
		STREET 1:		200 NARRAGANSETT PARK DRIVE
		CITY:			PAWTUCKET
		STATE:			RI
		ZIP:			02862-0200

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	HASBRO BRADLEY INC
		DATE OF NAME CHANGE:	19850814

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	HASBRO INDUSTRIES INC
		DATE OF NAME CHANGE:	19840917

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	HASSENFELD BROTHERS INC
		DATE OF NAME CHANGE:	19720615
</SEC-HEADER>
<DOCUMENT>
<TYPE>S-3
<SEQUENCE>1
<FILENAME>b41930his-3.txt
<DESCRIPTION>HASBRO INC.
<TEXT>
<PAGE>

   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 22, 2002

                                                     REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                               ---------------------
                                     FORM S-3
            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
                             ---------------------
                                  HASBRO, INC.
             (Exact name of registrant as specified in its charter)

<Table>
<S>                                                 <C>
                   RHODE ISLAND                                         05-0155090
          (State or other jurisdiction of                            (I.R.S. Employer
          incorporation or organization)                          Identification Number)
</Table>
                              ---------------------
                              1027 NEWPORT AVENUE
                         PAWTUCKET, RHODE ISLAND 02862
                                 (401) 431-8697
  (Address, including zip code, and telephone number, including area code, of
                   registrant's principal executive offices)

                                  BARRY NAGLER
                   SENIOR VICE PRESIDENT AND GENERAL COUNSEL
                                  HASBRO, INC.
                              1027 NEWPORT AVENUE
                         PAWTUCKET, RHODE ISLAND 02862
                                 (401) 431-8697
  (Name and address, including zip code, and telephone number, including area
                     code, of agent for service of process)
                             ---------------------
                                   COPIES TO:

                             KEITH F. HIGGINS, ESQ.
                                  ROPES & GRAY
                            ONE INTERNATIONAL PLACE
                          BOSTON, MASSACHUSETTS 02110
                                 (617) 951-7000

     APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:  From time
to time after the effective date of this Registration Statement as determined by
market conditions.
     If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.  [ ]
     If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.  [X]
     If this Registration Statement is filed to register additional securities
for an offering pursuant to Rule 462(b) under the Securities Act, please check
the following box and list the Securities Act registration number of the earlier
effective registration statement for the same offering.  [ ]
     If this Registration Statement is a post-effective amendment filed pursuant
to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.  [ ]
     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.  [ ]
                        CALCULATION OF REGISTRATION FEE

<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
                                                                      PROPOSED MAXIMUM     PROPOSED MAXIMUM
          TITLE OF EACH CLASS OF                   AMOUNT TO         OFFERING PRICE PER   AGGREGATE OFFERING       AMOUNT OF
        SECURITIES TO BE REGISTERED              BE REGISTERED        UNIT OR SHARE(1)         PRICE(1)        REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>                     <C>                  <C>                  <C>
2.75% Convertible Senior Debentures due
  2021(2)..................................      $250,000,000               $930             $232,500,000           $21,390
- ---------------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.50 par value..............  11,574,075 shares(2)           (3)                  (3)                  (3)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>

(1) Estimated solely for the purpose of calculating the registration fee
    pursuant to Rule 457(c) on the basis of the average of the bid and asked
    prices of the 2.75% Convertible Senior Debentures due 2021 on the PORTAL
    system on February 20, 2002.
(2) The shares of common stock registered hereunder are issuable upon conversion
    of the debentures at the initial rate of 46.2963 shares of common stock per
    $1,000 principal amount of the debentures. Pursuant to Rule 416 under the
    Securities Act, such number of shares of common stock registered hereby
    shall include an indeterminate number of shares of common stock that may be
    issued in connection with a stock split, stock dividend, recapitalization or
    similar event.
(3) Pursuant to Rule 457(i), there is no additional filing fee with respect to
    the shares of common stock issuable upon conversion of the debentures
    because no additional consideration will be received in connection with the
    exercise of the conversion right.
                             ---------------------
     THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

PROSPECTUS       SUBJECT TO COMPLETION. DATED FEBRUARY 22, 2002

                              [HASBRO, INC. LOGO]

                                  $250,000,000

                                  HASBRO, INC.
                  2.75% CONVERTIBLE SENIOR DEBENTURES DUE 2021
                                      AND
                   11,574,075 SHARES OF COMMON STOCK ISSUABLE
                       UPON CONVERSION OF THE DEBENTURES
                             ---------------------
     Hasbro, Inc., or Hasbro, issued the debentures in a private placement in
November 2001. This prospectus will be used by selling securityholders to
resell, from time to time, their debentures and the common stock issuable upon
conversion of their debentures. We will not receive any of the proceeds from any
sale of the debentures or common stock issuable upon conversion of the
debentures.

     Interest on the debentures is payable on June 1 and December 1 of each
year, beginning on June 1, 2002. Holders may convert the debentures into 46.2963
shares of our common stock for each $1,000 principal amount of debentures
(equivalent to an initial conversion price of $21.60 per share based on the
issue price of the debentures) under any of the following circumstances: (i)
during any calendar quarter if the sale price of our common stock for at least
20 trading days in the 30 consecutive trading days ending on the last day of the
previous quarter is more than 110% of the accreted conversion price (as defined
in this prospectus) per share of common stock on such last trading day; (ii) if
the debentures have been called for redemption; (iii) upon the occurrence of
specified corporate transactions; and (iv) upon the occurrence of specified
credit rating events with respect to the debentures. The conversion rate may be
adjusted as described in this prospectus. Our common stock is quoted on the New
York Stock Exchange under the symbol "HAS." The last reported price of our
common stock on February 21, 2002 was $13.44 per share.

     The debentures will mature on December 1, 2021. We may redeem for cash some
or all of the debentures at any time on or after December 6, 2005 at a price
equal to 100% of the principal amount of the debentures to be redeemed plus
accrued and unpaid interest to the redemption date if the sale price of our
common stock for at least 20 trading days in a period of 30 consecutive trading
days ending on the fifth business day preceding the date of our notice of
redemption is more than 125% of the accreted conversion price.

     The interest rate on the debentures is 2.75% per year. If the average of
the sale prices of our common stock is less than or equal to 45% of the accreted
conversion price per share of common stock (as defined in this prospectus) for
any 20 out of the last 30 trading days ending on the fifth day preceding each
June 1 and December 1 beginning on December 1, 2005, then the interest rate on
the debentures will be subject to an upward interest adjustment to the
applicable reset rate for the subsequent six-month period. If an upward interest
adjustment is in effect for a particular six-month period, we will pay a portion
of the interest adjustment as cash interest at a rate of 0.25% per year (0.125%
per six-month period) of the principal amount plus accrued and unpaid
non-current interest, and the remaining additional interest will be accrued and
payable at maturity. Following a tax event (as defined in this prospectus), we
may elect to pay interest entirely in cash. If the average of the sale prices of
our common stock is not less than or equal to 45% of the accreted conversion
price per share of common stock for any 20 out of the last 30 trading days of
the six-month period ending on the fifth day preceding each June 1 and December
1, then the interest rate on the debentures for the subsequent six-month period
will revert to 2.75% per year. For United States federal income tax purposes,
holders are required to treat the debentures as contingent payment debt
instruments. See "Certain United States Federal Income Tax Considerations."

     The debentures are our unsecured obligations and rank equally with all of
our other existing and future unsecured senior indebtedness. Holders may require
us to purchase all or a portion of their debentures on December 1, 2005,
December 1, 2011 and December 1, 2016 at a price equal to 100% of the principal
amount of the debentures to be purchased plus accrued and unpaid interest to
such purchase date. We may choose to pay the purchase price in cash, shares of
our common stock or a combination of cash and shares of our common stock.
Holders may also require us to purchase debentures for cash upon a Fundamental
Change (as defined in this prospectus) involving Hasbro. In the case of a
purchase upon a Fundamental Change, the purchase price will be equal to 100% of
the principal amount of the debentures plus accrued and unpaid interest.
                             ---------------------
INVESTING IN THE DEBENTURES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE
                                       2.

     NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

                 The date of this prospectus is          , 2002
<PAGE>

     YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. THIS PROSPECTUS MAY ONLY BE USED WHERE IT IS LEGAL TO
SELL THESE SECURITIES. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN
THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF
THIS PROSPECTUS. OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
PROSPECTS MAY HAVE CHANGED SINCE THAT DATE.

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

                               TABLE OF CONTENTS

<Table>
<Caption>
                                                               PAGE
                                                               ----
<S>                                                            <C>
Note Regarding Forward-Looking Statements...................    ii
Where You Can Find More Information.........................   iii
Incorporation of Certain Documents by Reference.............   iii
Summary.....................................................     1
Risk Factors................................................     2
Use of Proceeds.............................................     8
Ratio of Earnings to Fixed Charges..........................     8
Description of Debentures...................................     9
Description of Capital Stock................................    28
Certain Anti-Takeover Provisions............................    29
Certain United States Federal Income Tax Considerations.....    34
Selling Securityholders.....................................    40
Plan of Distribution........................................    44
Validity of Securities......................................    46
Experts.....................................................    46
</Table>

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

                                        i
<PAGE>

                   NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This prospectus and the documents incorporated in this prospectus by
reference may contain "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). These statements may be identified by the use of forward-looking words or
phrases such as "anticipate," "believe," "expect," "intend," "may," "planned,"
"potential," "should," "will," and "would." These forward-looking statements
reflect our current expectations and are based upon currently available data.
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for such forward-looking statements. In order to comply with the terms of the
safe harbor, we note that a variety of factors could cause actual results and
experience to differ materially from the anticipated results or other
expectations expressed in the forward-looking statements. These factors include,
but are not limited to:

     - our ability to manufacture, source and ship new and continuing products
       in a timely manner and customers' and consumers' acceptance of those
       products in a competitive product environment;

     - economic conditions, currency fluctuations, political instability and
       government regulation and other actions in the various markets in which
       we operate throughout the world;

     - our ability to generate sales during the fourth quarter, particularly
       during the relatively brief holiday season, which is the period in which
       we derive a substantial portion of our revenues;

     - the inventory policies of retailers, including the continuing trend of
       concentration of our revenues in the second half and fourth quarter of
       the year, together with the continuing consolidation of our retail
       customer base and their increased reliance on quick response inventory
       management techniques, which increases the risks of our underproducing
       popular items, overproducing less popular items and failing to achieve
       tight and compressed shipping schedules;

     - the bankruptcy or other lack of success of one or more of our significant
       retailers, which could negatively impact our revenues or bad debt
       exposure;

     - the impact of competition on revenues, margins and other aspects of our
       business, including our ability to secure, maintain and renew popular
       licenses and our ability to attract and retain employees in a competitive
       environment;

     - the risk that anticipated benefits of acquisitions may not occur or be
       delayed or reduced in their realization;

     - the risk that the market appeal of our licensed products will be less
       than expected or that the sales revenue generated by those products will
       be insufficient to cover the minimum guaranteed royalties;

     - our ability to obtain and enforce intellectual property rights both in
       the United States and abroad;

     - the risk that any litigation or arbitration disputes or regulatory
       investigations could entail significant expense;

     - our ability to obtain external financing on terms acceptable to us in
       order to meet our working capital needs;

     - the risk that we may be subject to governmental sanctions for failure to
       comply with applicable regulations or to product liability suits relating
       to products we manufacture and distribute;

     - the risk that our reported goodwill may become impaired, requiring us to
       take a charge against our income; and

     - risks described from time to time in our Annual Report on Form 10-K,
       Quarterly Reports on Form 10-Q and other filings under the Exchange Act.

     These or other events or circumstances could cause our actual performance
or financial results in future periods to differ materially from those expressed
in the forward-looking statements. We undertake no obligation to make any
revisions to the forward-looking statements contained in this prospectus or the
documents incorporated by reference in this prospectus, or to update the
forward-looking statements to reflect events or circumstances occurring after
the date of this prospectus.

                                        ii
<PAGE>

                      WHERE YOU CAN FIND MORE INFORMATION

     We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. Our SEC filings are
available over the Internet at the SEC's web site at http://www.sec.gov. You may
also read and copy any document we file with the SEC at its public reference
facility:

                                  Public Reference Room
                                  450 Fifth Street, N.W.
                                  Room 1024
                                  Washington, D.C. 20549

     You may also obtain copies of the documents at prescribed rates by writing
to the Public Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024,
Washington, DC 20549. Please call 1-800 SEC-0330 for further information on the
operations of the public reference facilities and copying charges. Our SEC
filings are also available at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.

                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     We incorporate by reference in this prospectus the following documents
filed by us with the SEC:

     - Our Annual Report on Form 10-K for the fiscal year ended December 31,
       2000;

     - Our Quarterly Reports on Form 10-Q for the quarters ended April 1, 2001,
       July 1, 2001, and September 30, 2001;

     - Our Current Reports on Form 8-K dated February 8, 2001, April 23, 2001,
       July 25, 2001, October 22, 2001, November 27, 2001, December 3, 2001,
       December 13, 2001, and February 7, 2002; and

     - Our Registration Statement on Form 8-A as filed with the SEC on June 4,
       1999.

     Any statement made in a document incorporated by reference or deemed
incorporated herein by reference is deemed to be modified or superseded for
purposes of this prospectus if a statement contained in this prospectus or in
any other subsequently filed document which also is incorporated or deemed
incorporated by reference herein modifies or supersedes that statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this prospectus. We also incorporate by
reference all documents filed pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this prospectus and prior to the termination
of this offering.

     Statements made in this prospectus or in any document incorporated by
reference in this prospectus as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the documents incorporated by reference, each such statement
being qualified in all material respects by such reference.

     We will provide a copy of these filings and any exhibits specifically
incorporated by reference in these filings and a copy of the indenture and
registration agreement referred to herein at no cost by request (written or
oral) directed to us at the following address and telephone number: Hasbro,
Inc., 1027 Newport Avenue, Pawtucket, Rhode Island, 02862, Attention: Investor
Relations, or by telephone to Investor Relations at (401) 431-8697.

                                       iii
<PAGE>

                                    SUMMARY

     The following summary is qualified in its entirety by and should be read
together with the more detailed information and the audited and unaudited
financial statements, including the related notes, incorporated by reference in
this prospectus. Except as expressly indicated or unless the context otherwise
requires, "Hasbro", "we", "our" and "us" means Hasbro, Inc., a Rhode Island
corporation organized on January 8, 1926, and its consolidated subsidiaries.
Unless the context requires otherwise, all references to "common stock" are to
our common stock, par value $0.50 per share, and the associated rights issued
under our Shareholders Rights Plan dated June 16, 1999.

                                COMPANY OVERVIEW

     Hasbro is a worldwide leader in children's and family leisure time and
entertainment products and services, including the design, manufacture and
marketing of games and toys ranging from traditional to high-tech. Both
internationally and in the United States, our widely recognized core brands such
as PLAYSKOOL, TONKA, SUPER SOAKER, MILTON BRADLEY, PARKER BROTHERS, TIGER, and
WIZARDS OF THE COAST provide what we believe to be the highest quality play
experiences in the world. We manage our business by focusing on two major areas:
Toys and Games. Our offerings include a broad variety of games, including
traditional board and card, hand-held electronic, children's consumer
electronic, trading card and roleplaying games, as well as electronic
interactive products, robotic pets, electronic learning aids and puzzles. Toy
offerings include boys' action, preschool, creative play and girls' toys, dolls
and plush products. We also license to others various trademarks, characters and
other property rights for use in connection with consumer promotions and the
sale by others of noncompeting toys and non-toy products.

     In our U.S. Toys segment, we market our products as boys' toys, girls'
toys, preschool and creative play. Brands and products from the Toys segment
include: MR. POTATO HEAD, TONKA, G.I. JOE, STAR WARS, MONSTERS, INC., BOB THE
BUILDER, TRANSFORMERS, TINKERTOY, EASY BAKE OVEN, PLAY-DOH and PLAYSKOOL.

     In our Games segment, we market our games and puzzles under several well
known core brands, including MILTON BRADLEY, PARKER BROTHERS, AVALON HILL, TIGER
and WIZARDS OF THE COAST. Brands and products from the Games segment include:
MONOPOLY, BATTLESHIP, THE GAME OF LIFE, SCRABBLE, CHUTES AND LADDERS, CANDY
LAND, TROUBLE, MOUSETRAP, OPERATION, HUNGRY HUNGRY HIPPOS, CONNECT FOUR,
TWISTER, YAHTZEE, JENGA, CLUE, SORRY!, RISK, BOGGLE, OUIJA, TRIVIAL PURSUIT,
DIPLOMACY, ACQUIRE and WHEELS ON THE BUS.

     Our Tiger Electronics brand products bring innovation and technology to
entertainment and lifestyle products for the whole family, including the HIT
CLIPS micro music systems. WIZARDS OF THE COAST trading card and roleplaying
games include the popular MAGIC: THE GATHERING, DUNGEONS AND DRAGONS and HARRY
POTTER trading card game, based on The New York Times best-selling novels.

     We operate in more than 25 countries, selling a representative range of the
toy and game products we market in the United States, together with some items
which are sold only internationally. In the year ended December 31, 2000, we
derived approximately 41% of our total consolidated net revenues from
international customers.

     Our common stock is listed on the New York Stock Exchange under the symbol
"HAS." Our principal executive offices are located at 1027 Newport Avenue,
Pawtucket, Rhode Island, 02862. Our telephone number at that address is (401)
431-8697. For additional information about our business, please see our Form
10-K for the fiscal year ended December 31, 2000 and our other filings with the
SEC which are incorporated by reference into this document. The capitalized
terms used above are our trademarks or trade names, or those of our licensors.

                                        1
<PAGE>

                                  RISK FACTORS

     Investing in the debentures involves risk. The risks and uncertainties
described are not the only ones facing our company. Additional risks and
uncertainties not presently known to us or that we currently deem immaterial may
also impair our business operations.

                         RISKS RELATING TO OUR BUSINESS

VOLATILITY OF CONSUMER PREFERENCES AND THE HIGH LEVEL OF COMPETITION IN THE
FAMILY ENTERTAINMENT INDUSTRY MAKES IT DIFFICULT TO MAINTAIN THE LONG-TERM
SUCCESS OF EXISTING PRODUCT LINES AND CONSISTENTLY INTRODUCE SUCCESSFUL NEW
PRODUCTS.

     Our business and operating results depend largely upon the appeal of our
family entertainment products, principally games and toys. A decline in the
popularity of our existing products and product lines or the failure of new
products and product lines to achieve and sustain market acceptance could result
in reduced overall revenues and margins, which could have a material adverse
effect on our business, financial condition and results of operations. Our
continued success will depend on our ability to redesign, restyle and extend our
existing family entertainment product lines and to develop, introduce and gain
customer acceptance of new family entertainment product lines. However, consumer
preferences with respect to family entertainment are continuously changing and
are difficult to predict. Individual family entertainment products generally,
and high technology products in particular, often have short life cycles. The
success of entertainment properties released theatrically, such as STAR WARS,
DISNEY or HARRY POTTER related productions, can significantly affect revenues we
derive from licensed product related to those properties. In addition,
competition in the industry could adversely impact our ability to secure,
maintain, and renew popular licenses on beneficial terms, if at all, and to
attract and retain the talented employees necessary to design, develop and
market successful products. We cannot assure you that:

     - any of our current products or product lines will continue to be popular
       for any significant period of time;

     - any property for which we have a significant license will achieve
       popularity;

     - any new products or product lines introduced by us will achieve an
       adequate degree of market acceptance;

     - any new product's life cycle will be sufficient to permit us to
       profitably recover development, manufacturing, marketing, royalties
       (including royalty advances and guarantees) and other costs of the
       product; or

     - we will be able to manufacture, source and ship new or continuing
       products in a timely basis to meet constantly changing consumer demands.

Our failure to successfully anticipate, identify and react to consumer
preferences in family entertainment could have an adverse effect on our
revenues, profitability and results of operations.

OUR BUSINESS IS SEASONAL AND OUR ANNUAL OPERATING RESULTS WILL DEPEND, IN LARGE
PART, ON OUR SALES DURING THE RELATIVELY BRIEF HOLIDAY SEASON. FURTHER, THIS
SEASONALITY IS INCREASING, AS LARGE RETAILERS BECOME MORE EFFICIENT IN THEIR
CONTROL OF INVENTORY LEVELS THROUGH QUICK RESPONSE MANAGEMENT TECHNIQUES.

     Sales of our family entertainment products at the retail level are
seasonal, with a majority of retail sales occurring during the period from
September through December in anticipation of the holiday season. This
seasonality is increasing, as large retailers become more efficient in their
control of inventory levels through quick response management techniques. These
customers are timing reorders so that they are being filled by suppliers closer
to the time of purchase by consumers, which to a large extent occurs during
September through December, rather than maintaining large on-hand inventories
throughout the year to meet consumer demand. While these techniques reduce a
retailer's investment in inventory, they increase pressure on suppliers like us
to fill orders promptly and shift a significant portion of inventory risk and
                                        2
<PAGE>

carrying costs to the supplier. The limited inventory carried by retailers may
also reduce or delay retail sales. Additionally, the logistics of supplying more
and more product within shorter time periods will increase the risk that we fail
to achieve tight and compressed shipping schedules. This seasonal pattern
requires significant use of working capital mainly to manufacture inventory
during the year prior to the holiday season, and requires accurate forecasting
of demand for products during the holiday season. Our failure to accurately
predict and respond to consumer demand could result in our underproducing
popular items and/or overproducing less popular items which would have an
adverse effect on our sales and results of operations. In addition, as a result
of the seasonal nature of our business, we would be significantly and adversely
affected by unforeseen events, such as a terrorist attack, that negatively
affect the retail environment if such events were to occur in the fourth
quarter.

THE CONTINUING CONSOLIDATION OF OUR RETAIL CUSTOMER BASE MEANS THAT CHANGES IN
THE PURCHASING POLICIES OF OUR MAJOR CUSTOMERS COULD HAVE A SIGNIFICANT IMPACT
ON US.

     We depend upon a relatively small retail customer base to sell our
products. For the fiscal year ended December 31, 2000, Wal-Mart Stores, Inc. and
Toys R Us, Inc. accounted for approximately 14% and 13%, respectively, of our
consolidated net revenues and our five largest customers, including Wal-Mart and
Toys R Us, in the aggregate accounted for approximately 41% of our consolidated
net revenues. In order to maintain our relationships with our major customers,
from time to time we may find it necessary to permit customers to return
slow-moving items for credit and/or allow price reductions as to certain
products then held by retailers in inventory. If one or more of our major
customers were to experience difficulties in fulfilling their obligations to us,
cease doing business with us, significantly reduce the amount of their purchases
from us or return substantial amounts of our products, it could have a material
adverse effect on our business, financial condition and results of operations.

WE MAY NOT REALIZE ANTICIPATED BENEFITS OF ACQUISITIONS OR THESE BENEFITS MAY BE
DELAYED OR REDUCED IN THEIR REALIZATION; OUR ABILITY TO MAKE ACQUISITIONS IS
LIMITED BY OUR CREDIT AGREEMENT.

     Acquisitions have been a significant part of our growth over the years and
have enabled us to further broaden and diversify our product offerings. Although
we target companies that we believe offer attractive family entertainment
products, we cannot assure you that the products of companies we acquire will
achieve or maintain popularity with consumers. In some cases, we expect that the
integration of the product lines of the companies that we acquire into our
operations will create production, marketing and other operating synergies. We
believe that creating these synergies can create greater revenue growth and
profitability and, where applicable, cost savings, operating efficiencies and
other synergies. However, we cannot assure you that these synergies,
efficiencies and cost savings will be realized. Even if achieved, these benefits
may be delayed or reduced in their realization. In other cases, we acquire
companies that we believe have strong and creative management, in which case we
plan to create synergies by operating them autonomously rather than integrating
them into our operations. We cannot assure you that the key talented individuals
at these companies will continue to work for us after the acquisition or that
they will continue to develop popular and profitable products or services.

     Because of limitations in our credit agreement, we are limited in our
ability to make substantial acquisitions in the near term. Although we plan to
focus greater attention and resources on our core owned and controlled brands,
we cannot assure you that such efforts will produce revenue growth to replace
the growth historically provided by acquisitions.

OUR SUBSTANTIAL SALES AND MANUFACTURING OPERATIONS OUTSIDE THE UNITED STATES
SUBJECT US TO RISKS NORMALLY ASSOCIATED WITH INTERNATIONAL OPERATIONS.

     We operate facilities and sell products in numerous countries outside the
United States. For the fiscal year ended December 31, 2000, our net revenues
from international customers comprised approximately 41% of our total
consolidated net revenues. We expect our sales to international customers to
continue to account for a significant portion of our revenues. Additionally, we
utilize third-party manufacturers located principally in the Far East and we
have manufacturing facilities in Ireland and Spain. These sales and
                                        3
<PAGE>

manufacturing operations are subject to the risks normally associated with
international operations, including:

     - currency conversion risks and currency fluctuations;

     - limitations, including taxes, on the repatriation of earnings;

     - political instability, civil unrest and economic instability;

     - greater difficulty enforcing intellectual property rights and weaker laws
       protecting such rights;

     - complications in complying with laws in varying jurisdictions and changes
       in governmental policies;

     - natural disasters and the greater difficulty and expense in recovering
       therefrom;

     - transportation delays and interruptions; and

     - the imposition of tariffs.

     Our reliance on external sources of manufacturing can be shifted, over a
period of time, to alternative sources of supply, should such changes be
necessary. However, if we were prevented from obtaining products or components
for a material portion of our product line due to political, labor or other
factors beyond our control, our operations would be disrupted while alternative
sources of products were secured. Also, the imposition of trade sanctions by the
United States or the European Union against a class of products imported by us
from, or the loss of "normal trade relations" status by, the Peoples Republic of
China could significantly increase our cost of products imported into the United
States or Europe. Because of the importance of our international sales and
international sourcing of manufacturing to our business, our financial condition
and results of operations could be significantly and adversely affected if any
of the risks described above were to occur.

WE MAY NOT REALIZE THE FULL BENEFIT OF OUR LICENSES IF THE LICENSED MATERIAL HAS
LESS MARKET APPEAL THAN EXPECTED OR IF SALES REVENUE FROM THE LICENSED PRODUCTS
IS NOT SUFFICIENT TO EARN OUT THE MINIMUM GUARANTEED ROYALTIES.

     An important part of our business involves obtaining licenses to produce
products based on various theatrical releases, such as STAR WARS, MONSTERS,
INC., and HARRY POTTER AND THE SORCERER'S STONE. The license agreements usually
require us to pay minimum royalty guarantees that may be substantial, and in
some cases may be greater than what we are able to recoup from actual sales. In
addition, acquiring or renewing licenses may require the payment of minimum
guaranteed royalties that we consider to be too high to be profitable, which may
result in losing licenses we currently hold when they become available for
renewal, or missing business opportunities for new licenses. As a licensee, we
have no guaranty that a particular brand will be a successful toy or game
product. Furthermore, there can be no assurance that a successful brand will
continue to be successful or maintain a high level of sales in the future. In
the event that we are not able to acquire or maintain advantageous licenses, our
revenues and profits may be adversely effected.

OUR BUSINESS IS DEPENDENT ON INTELLECTUAL PROPERTY RIGHTS AND WE MAY NOT BE ABLE
TO PROTECT SUCH RIGHTS SUCCESSFULLY.

     Our intellectual property, including our license agreements and other
agreements which establish our ownership rights and maintain our
confidentiality, are of great value. We rely on a combination of trade secret,
copyright, trademark, patent and other proprietary rights laws to protect our
rights to this valuable intellectual property related to our brands. From time
to time, third parties have challenged, and may in the future try to challenge,
our ownership of our intellectual property. In addition, our business is subject
to the risk of third parties counterfeiting our products or infringing on our
intellectual property rights. We may need to resort to litigation in the future
to protect our intellectual property rights, which could result in substantial
costs and diversion of resources. Our failure to protect our intellectual
property rights, and in

                                        4
<PAGE>

particular the loss of ownership rights granted pursuant to licensing
agreements, could have a material adverse effect on our business and competitive
position.

WE ARE INVOLVED IN CERTAIN LITIGATION, ARBITRATION AND REGULATORY MATTERS WHERE
THE OUTCOME IS UNCERTAIN AND WHICH COULD ENTAIL SIGNIFICANT EXPENSE.

     As is the case with many large multinational corporations, we are subject
from time to time to regulatory investigations, litigation and arbitration
disputes. Because the outcome of litigation, arbitration and regulatory
investigations is inherently difficult to predict, it is possible that the
outcome of such matters could entail significant expense.

     During 2001, we received two inquiries from the Office of Fair Trading in
the United Kingdom (the "OFT") into allegedly anti-competitive pricing practices
by our United Kingdom ("U.K.") subsidiary, Hasbro U.K. Ltd. ("Hasbro U.K.").
While the first inquiry related to a small portion of Hasbro U.K.'s business,
the inquiry received in the third quarter of 2001 from the OFT sought, among
other things, information relating to Hasbro U.K.'s trading arrangements with
its direct retail accounts, which represented the bulk of its business in the
United Kingdom. If a fine is imposed pursuant to the OFT inquiry, we currently
estimate that the amount of the fine could range from approximately $236,000 to
$38.3 million. Because of a number of factors, including the relatively early
stage of this inquiry, the lack of precedent under the applicable U.K. statute,
and the significant appeal rights available to us in the event of an adverse
determination by the OFT, there is no amount within this range which is a better
estimate than any other amount in the range. Although we are vigorously pursuing
our position with the OFT, we cannot assure you that the outcome of this matter
will not result in a significant fine that materially affects our financial
position.

WE RELY ON EXTERNAL FINANCING, INCLUDING OUR CREDIT FACILITY, TO MAINTAIN OUR
OPERATIONS. IF WE ARE UNABLE TO OBTAIN SUCH FINANCING, OR IF THE RESTRICTIONS
IMPOSED BY SUCH FINANCING WERE TOO BURDENSOME, OUR BUSINESS WOULD BE NEGATIVELY
AFFECTED.

     In order to meet our working capital needs, particularly those prior to the
fourth quarter, we rely on our credit facility. In February 2001, we entered
into an amended and restated secured revolving credit agreement with our
existing lenders. This facility is secured by substantially all of our domestic
accounts receivable and inventory, as well as certain of our investments and
intangible assets. The agreement contains certain restrictive covenants setting
forth minimum cash flow and coverage requirements, and a number of other
limitations, including restrictions on capital expenditures, investments,
acquisitions, share repurchases, incurrence of indebtedness and dividend
payments. These restrictive covenants may limit our future actions, and
financial, operating and strategic flexibility. In addition, our financial
covenants were set at the time we entered into our credit facility. Our
performance and financial condition may not meet our original expectations,
causing us to fail to meet such financial covenants. If we were unable to meet
our financial covenants, or if we failed to comply with other covenants in our
credit facility, we could face significant negative consequences.

     We also may choose to finance our capital needs, from time to time, through
the issuance of debt securities. Our ability to issue such securities on
satisfactory terms, if at all, will depend on the state of our business and
financial condition, any ratings issued by major credit rating agencies, market
interest rates, and the overall condition of the financial and credit markets at
the time of the offering. The condition of the credit markets and prevailing
interest rates have fluctuated in the past and are likely to fluctuate in the
future. Fluctuations in these factors could make it difficult for us to sell
debt securities or require us to offer higher interest rates in order to sell
new debt securities. The failure to receive financing on desirable terms, or at
all, could adversely affect our ability to support our future operations or
capital needs or engage in other business activities.

                                        5
<PAGE>

MARKET CONDITIONS, GOVERNMENT ACTIONS AND REGULATIONS AND OTHER THIRD PARTY
CONDUCT COULD NEGATIVELY IMPACT IMPLEMENTATION OF OUR CONSOLIDATION PROGRAMS,
MARGINS, AND OTHER BUSINESS INITIATIVES.

     Economic conditions, such as rising fuel prices, may adversely impact our
margins. In addition, general economic conditions were significantly and
negatively affected by the September 11th terrorist attacks and could be
similarly affected by any future attacks. Such a weakened economic and business
climate, as well as consumer uncertainty created by such a climate, could
adversely affect our sales and profitability. Other conditions, such as the
unavailability of electrical components, may impede our ability to manufacture,
source and ship new and continuing products on a timely basis. Additional
factors outside of our control could delay or increase the cost of implementing
our consolidation programs or alter our actions and reduce actual results.

AS A MANUFACTURER OF CONSUMER RETAIL PRODUCTS, WE ARE SUBJECT TO VARIOUS
GOVERNMENT REGULATIONS, VIOLATION OF WHICH CAN SUBJECT US TO SANCTIONS, AND WE
COULD BE THE SUBJECT OF FUTURE PRODUCT LIABILITY SUITS, WHICH CAN HARM OUR
BUSINESS.

     As a manufacturer of consumer retail products, we are subject to
significant government regulation under the Consumer Products Safety Act, the
Federal Hazardous Substances Act, and the Flammable Fabrics Act. While we take
all the steps we believe are necessary to comply with these acts, there can be
no assurance that we will be in compliance in the future. Failure to comply
could result in sanctions which could have a negative impact on our business,
financial condition, and results of operations.

     In addition to government regulation, products that have been or may be
developed by us may expose us to potential liability from personal injury or
property damage claims by the users of such products. There can be no assurance
that a claim will not be brought against us in the future. While we currently
maintain product liability insurance coverage in amounts we believe sufficient
for our business risks, we may not be able to maintain such coverage or such
coverage may not be adequate to cover all potential claims. Moreover, even if we
maintain successful insurance coverage, any successful claim could materially
and adversely affect our business and financial condition and results of
operations.

WE HAVE A MATERIAL AMOUNT OF GOODWILL WHICH, IF IT BECOMES IMPAIRED, WOULD
RESULT IN A REDUCTION IN OUR NET INCOME.

     Approximately $803.2 million, or 20.9%, of our total assets as of December
31, 2000 represented goodwill. Goodwill is the amount by which the cost of an
acquisition accounted for using the purchase method exceeds the fair value of
the net assets we acquire. We record goodwill as an intangible asset on our
balance sheet and have historically amortized it on a straight-line basis over a
period of 10 to 40 years. Recently, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standard ("SFAS") No. 142, Goodwill and
Other Intangible Assets, which is effective for us in the first quarter of
fiscal 2002. SFAS No. 142 results in goodwill no longer being amortized.
Instead, goodwill is subject to a periodic impairment evaluation based on the
fair value of the reporting unit. Reductions in our net income caused by the
write-down of goodwill could materially and adversely affect our results of
operations.

                RISKS RELATED TO THE DEBENTURES AND THE OFFERING

WE EXPECT THAT THE TRADING VALUE OF THE DEBENTURES WILL BE SIGNIFICANTLY
AFFECTED BY THE PRICE OF OUR COMMON STOCK AND OTHER FACTORS.

     The market price of the debentures is expected to be significantly affected
by the market price of our common stock. This may result in greater volatility
in the trading value of the debentures than would be expected for nonconvertible
debt securities we issue. In addition, the debentures have a number of features,
including conditions to conversion, which, if not met, could result in a holder
receiving less than the value of the common stock into which the debentures are
otherwise convertible. These features could adversely affect the value and the
trading prices for the debentures.

                                        6
<PAGE>

CHANGES IN OUR CREDIT RATING OR THE CREDIT MARKETS COULD ADVERSELY AFFECT THE
PRICE OF THE DEBENTURES.

     The price of the debentures is based on a number of factors, including:

     - our rating with major credit rating agencies;

     - the prevailing interest rates being paid by other companies similar to
       us; and

     - the overall condition of the financial markets.

     The condition of the credit markets and prevailing interest rates have
fluctuated in the past and are likely to fluctuate in the future. Fluctuations
in these factors could have an adverse effect on the price of the debentures.

     In addition, credit rating agencies continually revise their ratings for
the companies that they follow, including us. The credit rating agencies also
evaluate the family entertainment industry as a whole and may change their
credit rating for us based on their overall view of our industry. We cannot be
sure that credit rating agencies will maintain their ratings on the debentures.
A negative change in our rating could have an adverse effect on the price of the
debentures.

AN ACTIVE TRADING MARKET FOR DEBENTURES MAY NOT DEVELOP.

     We cannot assure you that an active trading market for the debentures will
develop or as to the liquidity or sustainability of any such market, or the
ability of holders to sell their debentures or the price at which holders of the
debentures may be able to sell their debentures. If an active market for the
debentures fails to develop or be sustained, the trading prices of the
debentures could be adversely affected. Future trading prices of the debentures
will also depend on many other factors, including, among other things,
prevailing interest rates, the market for similar securities, the price of our
common stock, our performance and other factors.

WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE
FUNDAMENTAL CHANGE PURCHASE OR PURCHASE AT THE OPTION OF THE HOLDER.

     On December 1, 2005, December 1, 2011 and December 1, 2016, and upon the
occurrence of a Fundamental Change (as defined below under "Description of
Debentures -- Fundamental Change") of Hasbro, holders of the debentures may
require us to purchase their debentures. However, it is possible that we would
not have sufficient funds at that time to make the required purchase of the
debentures. In addition, certain important corporate events, such as leveraged
recapitalizations that would increase the level of our indebtedness, may not
constitute a Fundamental Change under the indenture. See "Description of
Debentures -- Purchase of Debentures by Us at the Option of the Holder" and
"-- Fundamental Change."

YOU SHOULD CONSIDER THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF OWNING
THE DEBENTURES.

     While the proper tax treatment of a holder of the debentures is uncertain,
we and each holder agreed in the indenture to treat the debentures as
"contingent payment debt instruments" and to be bound by our application of the
Treasury regulations that govern contingent payment debt instruments. Pursuant
to this agreement, a holder is required to accrue interest on a constant
yield-to-maturity basis at a rate comparable to the rate at which we would
borrow in a noncontingent, nonconvertible borrowing (8.24%). A holder will
recognize taxable income significantly in excess of cash received while the
debentures are outstanding. In addition, a holder will recognize ordinary income
upon a sale, exchange, conversion or redemption of the debentures at a gain. See
"Certain United States Federal Income Tax Considerations."

                                        7
<PAGE>

                                USE OF PROCEEDS

     All of the debentures and the shares of our common stock issuable upon
conversion of the debentures are being sold by the selling securityholders or
their pledges, donees, transferees or other successors in interest. We will not
receive any proceeds from the sale of the debentures or the shares of our common
stock issuable upon conversion of the debentures.

                       RATIO OF EARNINGS TO FIXED CHARGES

     The table below sets forth the ratio of earnings to fixed charges of Hasbro
and its consolidated subsidiaries for each of the periods indicated.

<Table>
<Caption>
      NINE MONTHS ENDED SEPTEMBER(1)                                FISCAL YEARS(2)
- ------------------------------------------   --------------------------------------------------------------
PRO FORMA 2001(3)     2001         2000         2000         1999         1998         1997         1996
- -----------------  ----------   ----------   ----------   ----------   ----------   ----------   ----------
<S>                <C>          <C>          <C>          <C>          <C>          <C>          <C>
      1.26            1.13         1.54          *           4.10         6.70         5.66         7.51
</Table>

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

 *  Earnings for the fiscal year ended in December 31, 2000 were inadequate to
    cover fixed charges by $225,986.

(1) Nine months ended September 30, 2001 and October 1, 2000.

(2) Fiscal years 2000, 1999, 1998, 1997 and 1996 ended on December 31, 2000,
    December 26, 1999, December 27, 1998, December 28, 1997 and December 29,
    1996 respectively.

(3) The pro forma ratio of earnings to fixed charges for the nine months ended
    September 30, 2001 gives effect to the repurchase of $250,127,000 in
    principal amount of indebtedness primarily from the proceeds received by
    Hasbro from the issuance of the debentures in November 2001 as if (i) the
    receipt of such proceeds and (ii) the repurchase of such indebtedness had
    both occurred on January 1, 2001.

For purposes of computing the ratios of earnings to fixed charges:

     - fixed charges include interest, amortization of debt expense and
       one-third of rentals; and

     - earnings available for fixed charges represent earnings before cumulative
       effect of accounting change, fixed charges and income taxes.

                                        8
<PAGE>

                           DESCRIPTION OF DEBENTURES

     We issued the debentures under an indenture dated as of November 30, 2001
between us and The Bank of Nova Scotia Trust Company of New York, as trustee.

     The following summary does not purport to be complete, and is subject to,
and is qualified in its entirety by reference to, all of the provisions of the
debentures and the indenture. We urge you to read the indenture and the form of
the debentures, which you may obtain from us upon request. In this section,
references to "Hasbro", "we", "our" or "us" refer solely to Hasbro, Inc. and not
its subsidiaries.

GENERAL

     The debentures are senior unsecured obligations of ours and are limited to
an aggregate principal amount of $250,000,000. The debentures will mature on
December 1, 2021. The debentures rank equally with all of our existing and
future senior unsecured indebtedness.

     The debentures were initially offered at a price to investors of $1,000 per
debenture. The debentures accrue interest at a rate of 2.75% per year from
November 30, 2001 or from the most recent interest payment date to which
interest has been paid or duly provided, payable semiannually in arrears on June
1 and December 1 of each year, beginning June 1, 2002. In addition, we will pay
an upward interest adjustment under the circumstances described below. The
maturity value of each debenture may exceed $1,000 in the event an upward
interest adjustment becomes payable on the debentures. The debentures were
issued only in denominations of $1,000 principal amount and multiples of $1,000
principal amount.

     Interest, including additional amounts in the event of an upward interest
adjustment, will be paid to the person in whose name a debenture is registered
at the close of business on May 15 or November 15, as the case may be,
immediately preceding the relevant interest payment date. We will calculate
interest on the debentures on the basis of a 360-day year composed of twelve
30-day months.

     You have the option to convert your debentures into shares of our common
stock initially at a conversion rate of 46.2963 shares of common stock per
debenture. This is equivalent to an initial conversion price of $21.60 per share
of common stock. The conversion rate is subject to adjustment if certain events
occur. Upon conversion, you will receive only shares of our common stock. You
will not receive any cash payment for interest accrued to the conversion date.

     If any interest payment date, maturity date, redemption date or purchase
date of a debenture falls on a day that is not a business day, the required
payment of principal and interest will be made on the next succeeding business
day as if made on the date that the payment was due and no interest will accrue
on that payment for the period from and after the interest payment date,
maturity date, redemption date or purchase date, as the case may be, to the date
of that payment on the next succeeding business day. The term "business day"
means, with respect to any debenture, any day other than a Saturday, a Sunday or
a day on which banking institutions in The City of New York are authorized or
required by law, regulation or executive order to close.

     Each holder agreed in the indenture, for United States federal income tax
purposes, to treat the debentures as "contingent payment debt instruments" and
to be bound by our application of the Treasury regulations that govern
contingent payment debt instruments, including our determination that the rate
at which interest will be deemed to accrue for United States federal income tax
purposes is 8.24%, which is the rate comparable to the rate at which we would
borrow on a noncontingent, nonconvertible borrowing. Accordingly, each holder is
required to accrue interest on a constant yield to maturity basis at that rate,
with the result that a holder will recognize taxable income significantly in
excess of cash received while the debentures are outstanding. Based on our
treatment of the debentures for United States federal income tax purposes, as
discussed above, a holder would be required to recognize ordinary income upon a
conversion of a debenture into our common stock equal to the excess, if any,
between the value of the stock received on the conversion and the holder's
adjusted tax basis in the debentures. For a more detailed discussion, see
"Certain United States Federal Income Tax Considerations." However, the proper
application of the regulations that govern contingent payment debt instruments
to a holder of a debenture
                                        9
<PAGE>

is uncertain in a number of respects, and if our treatment were successfully
challenged by the Internal Revenue Service, it might be determined that, among
other differences, a holder should have accrued interest income at a lower rate,
should not have recognized income or gain upon the conversion, and should not
have recognized ordinary income upon a taxable disposition of its debenture.

EACH INVESTOR SHOULD CONSULT A TAX ADVISOR REGARDING THE TAX TREATMENT OF AN
INVESTMENT IN THE DEBENTURES AND WHETHER AN INVESTMENT IN THE DEBENTURES IS
ADVISABLE IN LIGHT OF THE AGREED UPON TAX TREATMENT AND THE INVESTOR'S
PARTICULAR TAX SITUATION.

INTEREST ADJUSTMENT

     The interest rate on the debentures is 2.75% per year through December 1,
2005. If the average of the sale prices of our common stock is less than or
equal to 45% of the accreted conversion price per share of common stock for any
20 out of the last 30 trading days ending on the fifth day preceding any June 1
or December 1, as applicable, commencing December 1, 2005, then the interest
rate on the debentures will be subject to an upward interest adjustment to the
applicable reset rate (as defined below) for the six-month period beginning June
1 or December 1. If an upward interest adjustment is in effect and the average
of the sale prices of our common stock is not less than or equal to 45% of the
accreted conversion price of the debentures for any 20 out of the last 30
trading days ending on the fifth day preceding any June 1 or December 1, then
the interest rate on the debentures for the six-month period beginning on such
June 1 or December 1 will revert to 2.75% per year. If an upward interest
adjustment is in effect for a particular six-month period, we will pay a portion
of the interest adjustment as cash interest at an annualized rate of 0.25% per
year (0.125% per six-month period) of the sum of the principal amount plus any
accrued and unpaid non-current interest, and the remaining interest will be
accrued and payable at maturity. Following a tax event, we may elect to pay
interest entirely in cash.

     In the event of an upward interest adjustment, the maturity value of a
debenture will exceed its initial maturity value of $1,000.

     The "sale price" of our common stock on any date means the closing per
share sale price (or if no closing sale price is reported, the average of the
bid and ask prices or, if more than one in either case, the average of the
average bid and the average asked prices) on that date as reported on the New
York Stock Exchange or, if our common stock is not then listed on the New York
Stock Exchange, then as reported by the Nasdaq system.

     The accreted conversion price per share of our common stock as of any day
will equal 100% of the principal amount of the debentures plus accrued and
unpaid non-current interest, divided by the number of shares of common stock
issuable upon conversion of such debenture on that day.

     In the event of any upward interest adjustment, we will disseminate a press
release through Dow Jones & Company, Inc. or Bloomberg Business News containing
this information or publish the information on our Web site or through such
other public medium as we may use at that time.

     The "applicable reset rate" for any six-month period in which there is an
upward interest adjustment in effect will be the rate set as of each purchase
date (as defined below) and will be equal to the rate (the "reference fixed
rate") that would, in the sole and reasonable judgment of the reset rate agent,
result in a trading price of par for a hypothetical issue of senior,
non-convertible, fixed-rate, callable debt securities of ours with:

          (i) a final maturity equal to the term from the most recent purchase
     date until the next purchase date;

          (ii) an aggregate principal amount equal to the then principal amount
     of the debentures plus accrued and unpaid non-current interest; and

          (iii) provisions that are, insofar as would be practicable for an
     issue of senior, non-convertible, fixed-rate, callable debt securities,
     substantially identical to those of the debentures;
                                        10
<PAGE>

provided that the applicable reset rate for any period shall not exceed 11% per
year. If the reset rate agent determines in its reasonable judgment that there
is no suitable reference fixed rate, the applicable interest rate on the
debentures for that period will be the interest rate then in effect on the
debentures, such interest rate to remain in effect until the reset rate agent
determines that there is a suitable reference fixed rate at which time the reset
rate agent shall determine the applicable reset rate for the period ending on
the next purchase date.

RESET RATE AGENT; DETERMINATIONS CONCLUSIVE

     We have designated Salomon Smith Barney Inc. as the reset rate agent. For
the determination of the applicable reset rate, the reset rate agent will seek
indicative reference rates from one other nationally recognized investment bank.
The determination of any applicable reset rate will be made by the reset rate
agent by averaging the indicative reference rates obtained by Salomon Smith
Barney Inc. and such other investment bank. The determination of any applicable
reset rate by the reset rate agent will be conclusive and binding upon the reset
rate agent, Hasbro, the trustee and the holders of the debentures, in the
absence of manifest error.

     The reset rate agent may be removed at any time with or without cause by us
giving at least 60 days' written notice to the reset rate agent. The reset rate
agent may resign at any time upon giving at least 30 days' written notice to us.
A successor reset rate agent will be appointed by us.

INTEREST

     We will pay interest on the sum of principal amount plus accrued and unpaid
non-current interest, if any, on the debentures at a rate of 2.75% per year. In
addition, we will pay additional interest in the event of an upward interest
adjustment. Interest will be based on a 360-day year comprised of twelve 30-day
months, and will be payable semiannually on June 1 or December 1. Cash interest
as a result of an upward interest adjustment will be paid at the rate of 0.25%
per year (0.125% per six-month period), and any remaining interest resulting
from the upward interest adjustment will accrue and be payable at maturity. The
record date for the payment of interest to holders will be May 15 and November
15 of each year. Following a tax event (as defined below), we may elect to pay
interest entirely in cash. We will give notice to holders of the debentures, no
later than 30 days prior to each record date, of the amount of cash interest to
be paid as of the next interest payment date. We will pay interest on the
debentures by wire transfer or by check mailed to the address of the registered
holders of the debentures as of the record date relating to each interest
payment date.

     You should be aware that interest that accrues for the period you hold the
debentures must be included in your gross income for United States federal
income tax purposes in accordance with the Treasury regulations that govern debt
instruments providing for contingent payments. For more information, see the
discussion below in the section captioned "Certain United States Federal Income
Tax Considerations."

TAX EVENT

     We can elect to pay the entire interest adjustment on the debentures in
cash from and after the date a tax event occurs instead of having non-current
interest accrue on the debentures. If that happens, the principal amount on
which we pay cash interest will be restated and will be equal to the principal
amount as of the day of restatement plus accrued and unpaid non-current
interest. This restated principal amount will be the amount due at maturity. If
we elect this option, interest will be based on a 360-day year comprised of
twelve 30-day months. Cash interest at the higher rate will accrue from our
option exercise date and will be payable semiannually in arrears on June 1 or
December 1.

                                        11
<PAGE>

     The term "tax event" means the receipt by us of an opinion of a nationally
recognized independent tax counsel experienced in such matters to the effect
that, as a result of:

     - any amendment to or change (including any announced prospective change
       (which will not include a proposed change)) in the laws (or any
       regulations thereunder) of the United States or any political subdivision
       or taxing authority of the United States or any political subdivision,
       provided that a tax event will not occur more than 90 days before the
       effective date of any prospective change in such laws or regulations; or

     - any judicial decision or official administrative pronouncement, ruling,
       regulatory procedure, notice or announcement, including any notice or
       announcement of intent to adopt such procedures or regulations (an
       "administrative action"); or

     - any amendment to or change in the administrative position or
       interpretation of any administrative action or judicial decision that
       differs from the theretofore generally accepted position, in each case,
       by any legislative body, court, governmental agency or regulatory body,
       irrespective of the manner in which such amendment or change is made
       known, which amendment or change is effective or such administrative
       action or decision is announced, in each case, on or after the date of
       original issuance of the debentures;

there is more than an insubstantial risk that interest on the debentures,
including interest pursuant to an upward interest adjustment, either:

     - would not be deductible by us in its entirety on a current accrual basis;
       or

     - would not be deductible under any other method, in whole or in part, by
       us for United States federal income tax purposes.

OPTIONAL REDEMPTION

     No sinking fund is provided for the debentures. Prior to December 6, 2005,
we cannot redeem the debentures. On or after December 6, 2005, we may redeem for
cash all or part of the debentures at any time, upon not less than 30 nor more
than 60 days' notice by mail to holders of debentures, for a price equal to 100%
of the principal amount of the debentures to be redeemed plus any accrued and
unpaid interest to the redemption date, if the sale price of our common stock
for at least 20 trading days in any period of 30 consecutive trading days ending
on the fifth day preceding the date of such notice is more than 125% of the
accreted conversion price per share of common stock.

     If we decide to redeem fewer than all of the outstanding debentures, the
trustee will select the debentures to be redeemed by lot, or on a pro rata basis
or by another method the trustee considers fair and appropriate.

     If the trustee selects a portion of your debenture for partial redemption
and you convert a portion of the same debenture, the converted portion will be
deemed to be from the portion selected for redemption.

     In the event of any redemption in part, we will not be required to:

     - issue, register the transfer of or exchange any debenture during a period
       of 15 days before any selection of debentures for redemption; or

     - register the transfer of or exchange any debenture so selected for
       redemption, in whole or in part, except the unredeemed portion of any
       debenture being redeemed in part.

CONVERSION RIGHTS

     Subject to the conditions described below, holders may convert each of
their debentures into shares of our common stock initially at a conversion ratio
of 46.2963 shares of common stock per $1,000 principal amount of debentures
(equivalent to an initial conversion price of $21.60 per share of common stock
based on the issue price of the debentures). The conversion rate and the
equivalent conversion price in effect at

                                        12
<PAGE>

any given time are referred to as the "applicable conversion rate" and the
"applicable conversion price," respectively, and will be subject to adjustment
as described below. If a debenture has been called for redemption, holders will
be entitled to convert the debentures from the date of notice of the redemption
until the close of business two business days immediately preceding the date of
redemption. A holder may convert fewer than all of such holder's debentures so
long as the debentures converted are an integral multiple of $1,000 principal
amount.

     Holders may surrender their debentures for conversion into shares of our
common stock prior to stated maturity under the following circumstances.

  CONVERSION UPON SATISFACTION OF SALE PRICE CONDITION

     A holder may surrender any of its debentures for conversion into shares of
our common stock during any calendar quarter if the sale price of our common
stock for at least 20 trading days in the period of 30 consecutive trading days
ending on the last trading day of the previous quarter is more than 110% of the
accreted conversion price per share of common stock on such last trading day.

  CONVERSION UPON REDEMPTION

     A holder may surrender for conversion any debenture called for redemption
at any time prior to the close of business two business days prior to the
redemption date, even if it is not otherwise convertible at such time.

  CONVERSION UPON SPECIFIED CORPORATE TRANSACTIONS

     If we elect to:

     - distribute to all holders of our common stock certain rights entitling
       them to purchase shares of our common stock at less than the sale price
       of a share of our common stock as of the business day prior to the date
       of declaration for such distribution or

     - distribute to all holders of our common stock our assets, debt securities
       or certain rights to purchase our securities, which distribution has a
       per share value exceeding 15% of the sale price of our common stock on
       the day preceding the declaration date for such distribution,

we must notify the holders of the debentures at least 20 days prior to the
ex-dividend date for such distribution. Once we have given such notice, holders
may surrender their debentures for conversion at any time until the earlier of
the close of business on the business day prior to the ex-dividend date or our
announcement that such distribution will not take place, even if the debentures
are not otherwise convertible at such time; provided that a holder may not
exercise this right to convert if the holder will otherwise participate in the
distribution without conversion.

     In addition, if we are party to a consolidation, merger or binding share
exchange pursuant to which our common stock would be converted into cash,
securities or other property (other than if such property consists of shares of
voting common stock of the surviving person that are, or upon issuance will be,
traded on a United States national securities exchange or approved for trading
on an established automated over-the-counter trading market in the United
States, and such shares represent at least 95% of the aggregate fair market
value (as determined by our board of directors) of such property), a holder may
surrender debentures for conversion at any time from and after the date which is
15 days prior to the anticipated effective date of the transaction until 15 days
after the actual effective date of such transaction. If we are a party to a
consolidation, merger or binding share exchange pursuant to which our common
stock is converted into cash, securities or other property, then at the
effective time of the transaction, the right to convert a debenture into common
stock will be changed into a right to convert it into the kind and amount of
cash, securities or other property which the holder would have received if the
holder had converted its debentures immediately prior to the transaction. If the
transaction also constitutes a Fundamental Change, as defined below, a holder
can require us to purchase all or a portion of its debentures as described below
under "-- Fundamental Change."
                                        13
<PAGE>

  CONVERSION UPON CREDIT RATINGS EVENT

     A holder may surrender any of its debentures for conversion at any time if
the long-term credit rating assigned to the debentures by any two of Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings Group ("S&P") or
Fitch IBCA Duff & Phelps are reduced two notches below Ba3, BB and BB,
respectively, or if the debentures are no longer rated by any two of these
ratings services, or if the ratings for the debentures have been suspended by
any two of these ratings services.

     The initial conversion rate is 46.2963 shares of common stock for each
debenture. This is equivalent to an initial conversion price of $21.60 per share
of common stock based on the issue price of the debentures. You will not receive
any cash payment representing accrued and unpaid interest upon conversion of a
debenture. Instead, upon conversion we will deliver to you a fixed number of
shares of our common stock and any cash payment to account for fractional
shares. The cash payment for fractional shares will be based on the sale price
of our common stock on the trading day immediately prior to the conversion date.
Delivery of shares of common stock will be deemed to satisfy our obligation to
pay the principal amount of the debentures, including accrued interest. Accrued
and unpaid interest will be deemed paid in full rather than canceled,
extinguished or forfeited. We will not adjust the conversion rate to account for
the accrued interest. We have designated the trustee to initially act as the
conversion agent.

     If a holder wishes to exercise its conversion right, such holder must
deliver an irrevocable conversion notice, together, if the debentures are in
certificated form, with the certificated security, to the conversion agent who
will, on the holder's behalf, convert the debentures into shares of our common
stock. Holders may obtain copies of the required form of the conversion notice
from the conversion agent.

     If a holder has already delivered a purchase notice or a Fundamental Change
notice with respect to a debenture, however, the holder may not surrender that
debenture for conversion until the holder has withdrawn the notice in accordance
with the indenture.

     Based on our treatment of the debentures for United States federal income
tax purposes, as discussed above, a holder would be required to recognize
ordinary income upon a conversion of a debenture into our common stock equal to
the excess, if any, between the value of the stock received on the conversion
and the holder's adjusted tax basis in the debentures. For a more detailed
discussion, see "Certain United States Federal Income Tax Considerations."

     The conversion rate is subject to adjustment upon the following events:

          (1) the payment of dividends and other distributions payable
     exclusively in shares of our common stock on our common stock;

          (2) the issuance to all or substantially all holders of our common
     stock of rights or warrants that allow the holders to purchase shares of
     our common stock at less than the then Average Sale Price (as defined in
     the indenture); provided that no adjustment will be made if holders of the
     debentures may participate in the transaction on a basis and with notice
     that our board of directors determines to be fair and appropriate or in
     certain other cases;

          (3) subdivisions, combinations, or reclassifications of our common
     stock;

          (4) payment of dividends or distributions to all holders of our common
     stock consisting of evidences of our indebtedness, securities or capital
     stock, cash or assets, excluding any common stock referred to in (1) above,
     any rights or warrants referred to in (2) above and dividends and
     distributions paid solely in cash;

          (5) payment of dividends or distributions on our common stock paid
     exclusively in cash, excluding:

         - cash dividends that do not exceed the per share amount of the
           immediately preceding regular cash dividend, as adjusted to reflect
           any of the events described in (1) to (4) above;

                                        14
<PAGE>

         - cash dividends, if the annualized per share amount thereof does not
           exceed 15% of the current market price of our common stock on the
           trading day immediately prior to the date of declaration of the
           dividend; and

         - a redemption of any rights issued under our shareholders rights plan;
           and

          (6) payment to holders of our common stock in respect of a tender or
     exchange offer, other than an odd lot offer, made by us or any subsidiary
     of ours for our common stock (excluding stock options) in excess of 110% of
     the current market price of our common stock as of the trading day next
     succeeding the last date tenders or exchanges may be made in the tender or
     exchange offer.

     In the event we elect to make a distribution described in (2) or (5) above
which, in the case of (5), has a per share value equal to more than 15% of the
sale price of our shares of common stock on the day preceding the declaration
date for such distribution, we will be required to give notice to the holders of
the debentures at least 20 days prior to the ex-dividend date for such
distribution and, upon the giving of such notice, the debentures may be
surrendered for conversion at any time until the close of business on the
business day prior to the ex-dividend date or until we announce that such
distribution will not take place. No adjustment to the conversion rate or the
ability of a holder of a debenture to convert will be made if the holder will
otherwise participate in the distribution without conversion or in certain other
cases.

     If our shareholders rights plan, described under "Certain Anti-Takeover
Provisions -- Shareholders Rights Plan," is triggered, holders of the debentures
will be entitled to receive these rights provided that the debentures are
converted into shares of common stock prior to the distribution of the separate
certificate representing those rights. There shall not be any adjustment to the
conversion rate as a result of:

     - the issuance of the rights;

     - the distribution of separate certificates representing the rights;

     - the exercise or redemption of the rights in accordance with any rights
       agreement; or

     - the termination or invalidation of the rights.

     The applicable conversion price will not be adjusted:

     - upon the issuance of any shares of our common stock pursuant to any
       present or future plan providing for the reinvestment of dividends or
       interest payable on our securities and the investment of additional
       optional amounts in shares of our common stock under any plan;

     - upon the issuance of any shares of our common stock or options or rights
       to purchase those shares pursuant to any present or future employee,
       director or consultant benefit plan or program of or assumed by Hasbro or
       any of its subsidiaries; or

     - upon the issuance of any shares of our common stock pursuant to any
       option, warrant, right, or exercisable, exchangeable or convertible
       security outstanding as of the date the debentures were first issued.

     We may increase the conversion rate as permitted by law for at least 20
days, so long as the increase is irrevocable during the period. If any action
would require adjustment of the conversion rate under more than one of the
provisions described above, only one adjustment will be made and that adjustment
will be the amount of adjustment that has the highest absolute value to the
holders of the debentures. No adjustment in the applicable conversion price will
be required unless the adjustment would require an increase or decrease of at
least 1% of the applicable conversion price. If the adjustment is not made
because the adjustment does not change the applicable conversion price by more
than 1%, then the adjustment that is not made will be carried forward and taken
into account in any future adjustment. Except as specifically described above,
the applicable conversion price will not be subject to adjustment in the case of
the issuance of any of our common stock, or securities convertible into or
exchangeable for our common stock.

                                        15
<PAGE>

PURCHASE OF DEBENTURES BY US AT THE OPTION OF THE HOLDER

     Holders have the right to require us to purchase the debentures on December
1, 2005, December 1, 2011 and December 1, 2016 (each, a "purchase date"). We
will be required to purchase any outstanding debentures for which a holder
delivers a written purchase notice to the paying agent. This notice must be
delivered during the period beginning at any time from the opening of business
on the date that is 20 business days prior to the relevant purchase date until
the close of business two business days prior to the purchase date. If the
purchase notice is given and withdrawn during such period, we will not be
obligated to purchase the related debentures. Our purchase obligation is also
subject to some additional conditions as described in the indenture. Also, our
ability to satisfy our purchase obligations may be affected by the factors
described in "Risk Factors" under the caption "We may not have the ability to
raise the funds necessary to finance the Fundamental Change purchase or purchase
at the option of the holder."

     The purchase price payable will be equal to 100% of the principal amount of
the debentures to be purchased plus any accrued and unpaid interest to such
purchase date.

     We may choose to pay the purchase price in cash or shares of our common
stock or a combination of cash and shares of our common stock, provided that we
will pay any accrued and unpaid current cash interest in cash. For a discussion
of the United States federal income tax treatment of a holder receiving cash,
shares of common stock or any combination thereof, see "Certain United States
Federal Income Tax Considerations."

     If we choose to pay the purchase price in whole or in part in shares of our
common stock or a combination of cash and shares of our common stock, we will be
required to give notice on a date not less than 20 business days prior to each
purchase date to all holders at their addresses shown in the register of the
registrar, and to beneficial owners as required by applicable law (i.e. if no
notice is given, we will pay the purchase price with cash), stating, among other
things:

     - whether we will pay the purchase price of the debentures in cash, in
       shares of our common stock, or any combination thereof, specifying the
       percentages of each;

     - If we elect to pay with shares of our common stock, the method of
       calculating the price of our common stock; and

     - the procedures that holders must follow to require us to purchase their
       debentures.

     If we pay with shares of our common stock, they will be valued at 97.5% of
the market price of our common stock.

     Simultaneously with such notice of purchase, we will disseminate a press
release through Dow Jones & Company, Inc. or Bloomberg Business News containing
this information and publish the information on our Web site or through such
other public medium as we may use at that time.

     A holder's notice electing to require us to purchase your debentures must
state:

     - if certificated debentures have been issued, the debentures certificate
       numbers, or if not certificated, your notice must comply with appropriate
       DTC procedures;

     - the portion of the principal amount of debentures to be purchased, in
       multiples of $1,000;

     - that the debentures are to be purchased by us pursuant to the applicable
       provisions of the debentures; and

     - in the event we elect, pursuant to the notice that we are required to
       give, to pay the purchase price in shares of our common stock, in whole
       or in part, but the purchase price is ultimately to be paid to the holder
       entirely in cash because any of the conditions to payment of the purchase
       price or

                                        16
<PAGE>

       portion of the purchase price in shares of our common stock is not
       satisfied prior to the close of business on the last business day prior
       to the purchase date, whether the holder elects:

          (1) to withdraw the purchase notice as to some or all of the
     debentures to which it relates, or

          (2) to receive cash in respect of the entire purchase price for all
     debentures or portions of debentures subject to the purchase notice.

     If the holder fails to indicate the holder's choice with respect to the
election described in the final bullet point above, the holder will be deemed to
have elected to receive cash in respect of the entire purchase price for all
debentures subject to the purchase notice in these circumstances. For a
discussion of the United States federal income tax treatment of a holder
receiving cash instead of shares of our common stock, see "Certain United States
Federal Income Tax Considerations."

     You may withdraw any purchase notice by a written notice of withdrawal
delivered to the paying agent prior to the close of business on the date that is
two business days prior to the purchase date. The notice of withdrawal must
state:

     - the principal amount of the withdrawn debentures;

     - if certificated debentures have been issued, the certificate numbers of
       the withdrawn debentures, or if not certificated, your notice must comply
       with appropriate DTC procedures; and

     - the principal amount, if any, which remains subject to the purchase
       notice.

     If we elect to pay the purchase price, in whole or in part, in shares of
our common stock, the number of shares to be delivered by us will be equal to
the portion of the purchase price to be paid in shares of our common stock
divided by 97.5% of the market price of one share of our common stock as
determined by us in our purchase notice. We will pay cash based on the market
price for all fractional shares.

     The "market price" means the average of the sale prices of our common stock
for the 20 trading day period ending on the third business day prior to the
applicable purchase date or the date of determination (if the third business day
prior to the applicable purchase date or the date of determination is a trading
day, or if not, then on the last trading day prior to the third business day),
appropriately adjusted to take into account the occurrence, during the period
commencing on the first of the trading days during such 20 trading day period
and ending on the applicable purchase date or the date of determination, of some
events that would result in an adjustment of the conversion rate with respect to
our common stock.

     Because the market price of our common stock is determined prior to the
applicable purchase date, holders of the debentures bear the market risk with
respect to the value of our common stock to be received from the date the market
price is determined to the purchase date. We may pay the purchase price or any
portion of the purchase price in shares of our common stock only if the
information necessary to calculate the market price is published in a daily
newspaper of national circulation.

     Upon determination of the actual number of shares of our common stock to be
paid upon redemption of the debentures, we will disseminate a press release
through Dow Jones & Company, Inc. or Bloomberg Business News containing this
information or publish the information on our Web site or through such other
public medium as we may use at that time.

     A holder must either effect book-entry transfer or deliver the debentures,
together with necessary endorsements, to the office of the paying agent after
delivery of the purchase notice to receive payment of the purchase price. You
will receive payment on the purchase date or the time of book-entry transfer or
the delivery of the debentures. If the paying agent holds money or securities
sufficient to pay the purchase price of the debentures on the business day
following the purchase date, then:

     - the debentures will cease to be outstanding;

     - interest, including any interest payable pursuant to an interest
       adjustment will cease to accrue; and

     - all other rights of the holder will terminate.

                                        17
<PAGE>

     This will be the case whether or not book-entry transfer of the debentures
is made or whether or not the debenture is delivered to the paying agent.

RANKING

     The debentures are our senior unsecured obligations and rank equally with
all of our existing and future senior unsecured indebtedness. However, the
debentures are effectively subordinated to all existing and future obligations
of our subsidiaries.

     As of December 30, 2001, we had approximately $1,149.9 million of total
indebtedness outstanding, excluding the indebtedness of our subsidiaries. As of
December 30, 2001, our subsidiaries had approximately $52.1 million of
outstanding indebtedness, to which the debentures would have been structurally
subordinated.

FUNDAMENTAL CHANGE

     If a Fundamental Change as defined below occurs, a holder of debentures
will have the right, at its option, to require us to purchase all of its
debentures not previously called for redemption, or any portion of the principal
amount thereof, that is equal to $1,000 or an integral multiple of $1,000. The
price we are required to pay is equal to 100% of the principal amount of the
debentures to be purchased plus accrued and unpaid interest to the purchase
date.

     Within 30 days after the occurrence of a Fundamental Change, we are
obligated to give to the holders of the debentures notice of the Fundamental
Change and of the purchase right arising as a result of the Fundamental Change.
We must also deliver a copy of this notice to the trustee. To exercise the
purchase right, a holder of the debentures must deliver on or before the 30th
day after the date of our notice irrevocable written notice to the trustee of
the holder's exercise of its purchase right, together with the debentures with
respect to which the right is being exercised. We are required to purchase the
debentures on the date that is 45 days after the date of our notice.

     A Fundamental Change will be deemed to have occurred at the time that any
of the following occurs:

          (1) any person acquires beneficial ownership, directly or indirectly,
     through a purchase, merger or other acquisition transaction or series of
     transactions, of shares of our capital stock entitling the person to
     exercise 50% or more of the total voting power of all shares of our capital
     stock that is entitled to vote generally in elections of directors ("voting
     stock"), other than an acquisition by us, any of our subsidiaries or any of
     our employee benefit plans; or

          (2) we merge or consolidate with or into any other person, any merger
     of another person into us, or we convey, sell, transfer or lease all or
     substantially all of our assets to another person, other than any
     transaction:

         - that does not result in any reclassification, conversion, exchange or
           cancellation of outstanding shares of our capital stock (such as an
           acquisition by a subsidiary); or

         - where the holders of our voting stock immediately prior to the
           transaction have 50% or more of the total voting stock of Hasbro or
           its successor immediately after the transaction; or

         - which is effected solely to change our jurisdiction of incorporation
           and results in a reclassification, conversion or exchange of
           outstanding shares of our common stock solely into shares of our
           common stock of the surviving entity; or

          (3) any time our continuing directors do not constitute a majority of
     our board of directors (or, if applicable, a successor corporation to us).

     However, a Fundamental Change will not be deemed to have occurred if
either:

          (A) the sale price of our common stock for any five trading days
     within the period of 10 consecutive trading days ending immediately after
     the later of the Fundamental Change or the public

                                        18
<PAGE>

     announcement of the Fundamental Change in the case of a Fundamental Change
     relating to an acquisition of capital stock, or the period of 10
     consecutive trading days ending immediately before the Fundamental Change,
     in the case of Fundamental Change relating to a merger, consolidation or
     asset sale, equals or exceeds 105% of the accreted conversion price per
     share of common stock in effect on each of those trading days; or

          (B) all of the consideration (excluding cash payments for fractional
     shares and cash payments made pursuant to dissenters' appraisal rights) in
     a merger or consolidation otherwise constituting a Fundamental Change under
     clause (1) and/or clause (2) above consists of shares of common stock
     traded on a national securities exchange or quoted on the Nasdaq National
     Market (or will be so traded or quoted immediately following the merger or
     consolidation) and as a result of the merger or consolidation the
     debentures become convertible into such common stock.

     For purposes of these provisions:

     - whether a person is a "beneficial owner" will be determined in accordance
       with Rule 13d-3 under the Exchange Act; and

     - "person" includes any syndicate or group that would be deemed to be a
       "person" under Section 13(d)(3) of the Exchange Act.

     The definition of Fundamental Change includes a phrase relating to the
conveyance, transfer, sale, lease or disposition of "all or substantially all"
of our assets. There is no precise, established definition of the phrase
"substantially all" under applicable law. Accordingly, the ability of a holder
of the debentures to require us to purchase its debentures as a result of the
conveyance, transfer, sale, lease or other disposition of less than all of our
assets may be uncertain.

     The foregoing provisions would not necessarily provide the holders of the
debentures with protection if we are involved in a highly leveraged or other
transaction that may adversely affect the holders.

     If a Fundamental Change were to occur, we may not have enough funds to pay
the Fundamental Change purchase price. See "Risk Factors" under the caption "We
may not have the ability to raise the funds necessary to finance the Fundamental
Change purchase or purchase at the option of the holder." In addition, we have,
and may in the future incur, other indebtedness with similar change in control
provisions permitting our holders to accelerate or to require us to purchase our
indebtedness upon the occurrence of similar events or on some specific dates. If
we fail to purchase the debentures when required following a Fundamental Change,
we will be in default under the indenture.

MERGER AND SALES OF ASSETS BY HASBRO

     We may not, in a single transaction or a series of related transactions (1)
consolidate with or merge into any other person or convey, transfer, sell or
lease our properties and assets substantially as an entirety to any person or
(2) permit any person to consolidate with or merge into us unless:

     - the person formed by the consolidation or into which we are merged or the
       person to which our properties and assets are so conveyed, transferred,
       sold or leased, shall be a corporation, limited liability company,
       partnership or trust organized and existing under the laws of the United
       States, any State within the United States or the District of Columbia
       and, if we are not the surviving person, the surviving person assumes the
       payment of the principal of and interest on the debentures and the
       performance of our other covenants under the indenture;

     - in all cases, immediately after giving effect to the transaction, no
       event of default, and no event that, after notice or lapse of time or
       both, would become an event of default, will have occurred and be
       continuing; and

     - we or such successor person shall have delivered to the trustee an
       officers' certificate and an opinion of counsel, each stating that such
       transaction and the supplemental indenture comply with the

                                        19
<PAGE>

       indenture and that all conditions precedent in the indenture relating to
       such transaction have been satisfied.

EVENTS OF DEFAULT

     The following are events of default with respect to the debentures:

          (1) default for 30 days in payment of any interest or liquidated
     damages (as described below) due and payable on the debentures, including
     additional interest payable upon an upward interest adjustment;

          (2) default in payment of the principal amount of the debentures and
     accrued and unpaid interest at maturity, upon redemption, purchase at the
     option of the holder or following a Fundamental Change when the same
     becomes due and payable;

          (3) default in our obligation to deliver shares of our common stock
     upon an appropriate election by holders of debentures to convert those
     debentures and continuance of such default for 10 days;

          (4) failure to comply in any material respect with any other covenant
     or agreement in respect of the debentures contained in the indenture or the
     debentures for 60 days after written notice to us by the trustee or to us
     and the trustee by holders of at least 25% in aggregate principal amount of
     the debentures then outstanding;

          (5) failure to provide timely notice of a Fundamental Change;

          (6) default under any credit agreement, mortgage, indenture or
     instrument under which there may be issued or by which there may be secured
     or evidenced any indebtedness for money borrowed by us or any of our
     significant subsidiaries (or the payment of which is guaranteed by us or
     any of our significant subsidiaries), which default

         - is caused by a failure to pay when due any principal of such
           indebtedness within the grace period provided for in such
           indebtedness, which failure continues beyond any applicable grace
           period, or

         - results in the acceleration of such indebtedness prior to its express
           maturity, without such acceleration being rescinded or annulled,

     and, in each case, the principal amount of such indebtedness, together with
     the principal amount of any other such indebtedness under which there is a
     payment default or the maturity of which has been so accelerated,
     aggregates $25,000,000 or more and such payment default is not cured or
     such acceleration is not annulled within 30 days after written notice to us
     by the trustee or to us and the trustee by holders of at least 25% in
     aggregate principal amount of the debentures then outstanding;

          (7) failure by us or any of our significant subsidiaries to pay final,
     non-appealable judgments (other than any judgment as to which a reputable
     insurance company has accepted full liability) aggregating in excess of
     $25,000,000, which judgments are not stayed, bonded or discharged within 60
     days after their entry; and

          (8) certain events involving our or any of our significant
     subsidiaries' bankruptcy, insolvency or reorganization.

     The indenture requires that we file annually with the trustee a certificate
describing any material default by us in the performance of any conditions or
covenants that has occurred under the indenture and its status. We must give the
trustee written notice within 30 days of any event of default described in (4),
(5), (6), (7) or (8) above.

     The indenture provides that if an event of default occurs and is continuing
with respect to the debentures, either the trustee or the holders of at least
25% in aggregate principal amount of the outstanding debentures may declare the
principal amount plus accrued and unpaid interest, if any, on the debentures to
be due and payable immediately. If an event of default relating to events or
bankruptcy,
                                        20
<PAGE>

insolvency or reorganization occurs, the principal amount plus accrued and
unpaid interest, if any, on the debentures will become immediately due and
payable without any action on the part of the trustee or any holder.

     A holder of debentures may pursue any remedy under the indenture only if:

     - the holder gives the trustee written notice of a continuing event of
       default for the debentures;

     - the holders of at least 25% in principal amount of the outstanding
       debentures make a written request to the trustee to pursue the remedy;

     - the holder offers to the trustee indemnity reasonably satisfactory to the
       trustee;

     - the trustee fails to act for a period of 60 days after receipt of notice
       and offer of indemnity; and

     - during that 60-day period, the holders of a majority in principal amount
       of the debentures do not give the trustee a direction inconsistent with
       the request.

     This provision does not, however, affect the right of a holder of
debentures to sue for enforcement of payment of the principal of or interest,
including liquidated damages, on the holder's debenture on or after the
respective due dates expressed in its debenture or the holder's right to convert
its debenture in accordance with the indenture.

     The trustee is entitled under the indenture, subject to the duty of the
trustee during a default to act with the required standard of care, to be
indemnified before proceeding to exercise any right or power under the indenture
at the direction of the registered holders of the debentures or which requires
the trustee to expend or risk its own funds or otherwise incur any financial
liability. The indenture also provides that the registered holders of a majority
in principal amount of the outstanding debentures (or of all debt securities
affected, voting as one class) may direct the time, method and place of
conducting any proceeding for any remedy available to the trustee or exercising
any trust or power conferred on the trustee with respect to that series of debt
securities. The trustee, however, may refuse to follow any such direction that
conflicts with law or the indenture, is unduly prejudicial to the rights of
other registered holders of that series of debt securities, or would involve the
trustee in personal liability.

     The indenture provides that while the trustee generally must mail notice of
a default or event of default to the registered holders of the debentures within
60 days of occurrence, the trustee may withhold notice of any default or event
of default (except in payment on the debt securities) if the trustee in good
faith determines that the withholding of such notice is in the interest of the
registered holders of the debentures.

MODIFICATION AND WAIVER

     We may amend or supplement the indenture if the holders of a majority in
principal amount of the debentures consent to it. Without the consent of the
holder of each debenture affected, however, no modification may:

     - reduce the amount of debentures whose holders must consent to an
       amendment, supplement or waiver;

     - reduce the rate of accrual of interest or change the time for payment of
       interest on the debentures;

     - reduce the value of our common stock to which reference is made in
       determining whether an interest adjustment will be made on the
       debentures, or change the method by which this value is calculated;

     - reduce the principal amount of the debentures or change its stated
       maturity;

     - reduce the redemption or purchase price of the debentures or change the
       time at which the debentures may or must be redeemed or purchased;

                                        21
<PAGE>

     - make payments on the debentures payable in currency other than as
       originally stated in the debentures;

     - impair the holder's right to institute suit for the enforcement of any
       payment on the debentures;

     - make any change in the percentage of principal amount of debentures
       necessary to waive compliance with some provisions of the indenture or to
       make any change in this provision for modification;

     - waive a continuing default or event of default regarding any payment on
       the debentures; or

     - adversely affect the conversion or repurchase provisions of the
       debentures.

     We may amend or supplement the indenture or waive any provision of it
without the consent of any holders of debentures in some circumstances,
including:

     - to cure any ambiguity, omission, defect or inconsistency, provided such
       amendment does not materially and adversely affect the debentures;

     - to provide for the assumption of our obligations under the indenture by a
       successor upon any merger, consolidation or asset transfer permitted
       under the indenture;

     - to provide for uncertificated debentures in addition to or in place of
       certificated debentures or to provide for bearer debentures;

     - to provide any security for or guarantees of the debentures;

     - to comply with any requirement to effect or maintain the qualification of
       the indenture under the Trust Indenture Act of 1939;

     - to add covenants that would benefit the holders of debentures or to
       surrender any rights we have under the indenture;

     - to add events of default with respect to the debentures; or

     - to make any change that we and the trustee may deem necessary or
       desirable, provided such amendment does not materially and adversely
       affect the debentures.

     The holders of a majority in principal amount of the outstanding debentures
may waive any existing or past default or event of default. Those holders may
not, however, waive any default or event of default in any payment on any
debenture or compliance with a provision that cannot be amended or supplemented
without the consent of each holder affected.

REGISTRATION RIGHTS

     The shelf registration statement of which this prospectus forms a part has
been filed under the terms of the registration agreement we entered into with
the initial purchasers of the debentures. Pursuant to the registration
agreement, we agreed for the benefit of the holders of the debentures and common
stock issued upon conversion thereof that

     - we would, at our cost, within 90 days after the original issue date of
       the debentures, file a shelf registration statement with the SEC with
       respect to resales of the debentures and the common stock issuable upon
       their conversion;

     - we will use our commercially reasonable efforts to cause such shelf
       registration statement to be declared effective under the Securities Act
       within 180 days after the issue date; and

     - subject to our rights to suspend the use of the shelf registration
       statement, we will use our commercially reasonable efforts to keep the
       shelf registration statement continuously effective under the Securities
       Act until the earliest of (i) the second anniversary of the issue date,
       (ii) the date on which the debentures or the common stock issuable upon
       their conversion may be sold by non-affiliates of us pursuant to
       paragraph (k) of Rule 144 (or any successor provision) promulgated by
                                        22
<PAGE>

       the SEC under the Securities Act and (iii) the date as of which all the
       debentures or the common stock issuable upon their conversion have been
       sold pursuant to the shelf registration statement.

     If the shelf registration statement

     - is not filed with the SEC on or prior to 90 days, or has not been
       declared effective by the SEC within 180 days or

     - is filed and declared effective but shall thereafter cease to be
       effective (without being succeeded immediately by a replacement shelf
       registration statement filed and declared effective) or usable for the
       offer and sale of transfer restricted securities for a period of time
       (including any suspension period) which exceeds 90 days in the aggregate
       in any 12-month period during the period beginning on the issue date and
       ending on or prior to the second anniversary of such date

(both of which we refer to as a "registration default"), we will pay liquidated
damages to each holder of transfer restricted securities which has complied with
its obligations under the registration agreement.

     The amount of liquidated damages payable during any period in which a
registration default has occurred and is continuing is that amount which is
equal to:

     - 0.25 percent (or 25 basis points) per annum per $1,000 principal amount
       of debentures or $2.50 per annum per 46.2963 shares of our common stock
       (subject to adjustment in the event of a stock split, stock
       recombination, stock dividend and the like) constituting transfer
       restricted securities, for the first 90 days during which a Registration
       Default has occurred and is continuing; and

     - 0.50 percent (or 50 basis points) per annum per $1,000 principal amount
       of debentures or $5.00 per annum per 46.2963 shares of our common stock
       (subject to adjustment as set forth above) constituting transfer
       restricted securities for any additional days during which such
       registration default has occurred and is continuing.

All accrued liquidated damages will be paid on each damages payment date (as
defined in the registration agreement). Following the cure of a registration
default, liquidated damages will cease to accrue with respect to such
registration default.

     "Transfer restricted securities" means each debenture and any share of our
common stock issued on conversion thereof until the date on which such debenture
or share, as the case may be:

     - has been transferred pursuant to the shelf registration statement or
       another registration statement covering such debenture or share which has
       been filed with the SEC pursuant to the Securities Act, in either case
       after such registration statement has become effective under the
       Securities Act;

     - has been transferred pursuant to Rule 144 under the Securities Act (or
       any similar provision then in force); or

     - may be sold or transferred pursuant to paragraph (k) of Rule 144 under
       the Securities Act (or any successor provision promulgated by the SEC).

     Upon request, we will provide or cause to be provided to each holder of the
debentures, or our common stock issuable upon conversion of the debentures,
copies of this prospectus. We will also notify or cause to be notified each such
holder when the shelf registration statement for the debentures or our common
stock issuable upon conversion of the debentures has become effective and take
certain other actions as are required to permit unrestricted resales of the
debentures or our common stock issuable upon conversion of the debentures. A
holder of debentures or our common stock issuable upon conversion of the
debentures that sells such securities pursuant to a shelf registration
statement:

     - is required to be named as a selling security holder in this prospectus
       and to deliver this prospectus to purchasers;

     - is subject to certain of the civil liability provisions under the
       Securities Act in connection with such sales; and

                                        23
<PAGE>

     - is bound by the provisions of the registration agreement that are
       applicable to such holder (including certain indemnification and
       contribution rights or obligations).

     Holders of debentures or our common stock wishing to resell debentures or
our common stock issuable upon their conversion pursuant to the shelf
registration statement are required to complete and deliver to us a notice and
questionnaire. Holders are required to complete and deliver the questionnaire at
least 10 days prior to the effectiveness of the shelf registration statement if
they wish to be named as selling securityholders in this prospectus at the time
of effectiveness. If we receive a completed questionnaire, together with such
other information as may be reasonably requested by us, from a holder of
debentures following the effectiveness of the shelf registration statement, we
will, as promptly as practicable but in any event within five business days of
such receipt, file such supplements to this prospectus as are necessary to
permit such holder to deliver this prospectus to purchasers of debentures or our
common stock issuable upon their conversion (subject to our right to suspend the
use of the prospectus as described below). However, to the extent that we are
required to file an amendment to the shelf registration statement in order to
permit any such holder to deliver this prospectus to purchasers of debentures or
our common stock issuable upon their conversion, we will file such an amendment
no later than the first business day of the next calendar quarter that begins on
or after ten business days following the date we receive the completed
questionnaire. Any holder that does not timely complete and deliver a
questionnaire or provide such other information will not be named as a selling
securityholder in this prospectus and therefore will not be permitted to sell
any securities pursuant to the shelf registration statement.

     We are permitted to suspend the use of this prospectus which is a part of
the shelf registration statement for a period not to exceed 45 days in any
three-month period or for two periods not to exceed an aggregate of 90 days in
any twelve-month period (both of which we refer to as a "suspension period")
under certain circumstances relating to pending corporate developments, public
filings with the SEC and similar events. We will pay all expenses of the shelf
registration statement; however, each holder is required to bear the expense of
any broker's commission, agency fee or underwriter's discount or commission.

     The summary herein of certain provisions of the registration agreement is
subject to, and is qualified in its entirety by reference to, all the provisions
of the registration agreement, a copy of which is available upon request to us
as described under "Where You Can Find More Information."

CALCULATIONS IN RESPECT OF DEBENTURES

     We are responsible for making all calculations called for under the
debentures, except for such calculations made by the reset rate agent. These
calculations include, but are not limited to, determinations of the market
prices of our common stock, accrued interest payable on the debentures and the
accreted conversion price of the debentures. We will make all these calculations
in good faith and, absent manifest error, our calculations will be final and
binding on holders of debentures. We will provide a schedule of our calculations
to each of the trustee and the conversion agent, and each of the trustee and
conversion agent is entitled to rely upon the accuracy of our calculations
without independent verification. The trustee will forward our calculations to
any holder of debentures upon the request of that holder.

GOVERNING LAW

     The indenture and the debentures are governed by, and construed in
accordance with, the laws of the State of New York.

TRUSTEE

     The Bank of Nova Scotia Trust Company of New York is the trustee, security
registrar, paying agent and conversion agent.

                                        24
<PAGE>

     If an event of default occurs and is continuing, the trustee will be
required to use the degree of care and skill of a prudent man in the conduct of
his own affairs. The trustee will become obligated to exercise any of its powers
under the indenture at the request of any of the holders of any debentures only
after those holders have offered the trustee indemnity reasonably satisfactory
to it.

     If the trustee becomes one of our creditors, it will be subject to
limitations in the indenture on its rights to obtain payment of claims or to
realize on some property received for any such claim, as security or otherwise.
The trustee is permitted to engage in other transactions with us. If, however,
it acquires any conflicting interest, it must eliminate that conflict or resign.
The Bank of Nova Scotia Trust Company of New York is currently serving as the
trustee under other indentures governing our debt issuances.

FORM, EXCHANGE, REGISTRATION AND TRANSFER

     We issued the debentures in registered form, without interest coupons. We
will not charge a service charge for any registration of transfer or exchange of
the debentures. We may, however, require the payment of any tax or other
governmental charge payable for that registration.

     The debentures are exchangeable for other debentures, for the same total
principal amount and for the same terms but in different authorized
denominations in accordance with the indenture. Holders may present debentures
for registration of transfer at the office of the security registrar or any
transfer agent we designate. The security registrar or transfer agent will
effect the transfer or exchange when it is satisfied with the documents of title
and identity of the person making the request.

     We have appointed the trustee as security registrar for the debentures. We
may at any time rescind that designation or approve a change in the location
through which any registrar acts. We are required to maintain an office or
agency for transfers and exchanges in each place of payment. We may at any time
designate additional registrars for the debentures.

     In the case of any redemption, the security registrar will not be required
to register the transfer or exchange of any debentures either:

     - during a period of 15 days before any selection of debentures for
       redemption; or

     - if the debentures have been called for redemption in whole or in part,
       except the unredeemed portion of any debentures being redeemed in part.

PAYMENT AND PAYING AGENT

     Payments on the debentures will be made in U.S. dollars at the office of
the trustee. At our option, however, we may make payments by check mailed to the
holder's registered address or, with respect to global debentures, by wire
transfer. We will make interest payments to the person in whose name the
debentures are registered at the close of business on the record date for the
interest payment.

     We have designated the trustee as our paying agent for payments on
debentures. We may at any time designate additional paying agents or rescind the
designation of any paying agent or approve a change in the office through which
any paying agent acts.

     Subject to the requirements of any applicable abandoned property laws, the
trustee and paying agent shall pay to us upon written request any money held by
them for payments on the debentures that remain unclaimed for two years after
the date upon which that payment has become due. After payment to us, holders
entitled to the money must look to us for payment. In that case, all liability
of the trustee or paying agent with respect to that money will cease.

NOTICES

     Except as otherwise described herein, notice to registered holders of the
debentures will be given by mail to the addresses as they appear in the security
register. Notices will be deemed to have been given on the date of such mailing.

                                        25
<PAGE>

REPLACEMENT OF DEBENTURES

     We will replace any debentures that become mutilated, destroyed, stolen or
lost at the expense of the holder upon delivery to the trustee of the mutilated
debentures or evidence of the loss, theft or destruction satisfactory to us and
the trustee. In the case of a lost, stolen or destroyed debentures, indemnity
satisfactory to the trustee and us may be required at the expense of the holder
of the debentures before a replacement debenture will be issued.

PAYMENT OF STAMP AND OTHER TAXES

     We will pay all stamp and other duties, if any, which may be imposed by the
United States or any political subdivision thereof or taxing authority thereof
or therein with respect to the issuance of the debentures. We will not be
required to make any payment with respect to any other tax, assessment or
governmental charge imposed by any government or any political subdivision
thereof or taxing authority thereof or therein.

BOOK-ENTRY SYSTEM

     The debentures are represented by one or more global securities. Each
global security is deposited with, or on behalf of, DTC and is registered in the
name of a nominee of DTC. Except under circumstances described below, the
debentures will not be issued in definitive form.

     Investors who purchase debentures in offshore transactions in reliance on
Regulation S under the Securities Act may hold their interest in a global
security directly through Euroclear Bank S.A./N.V., as operator of the Euroclear
System ("Euroclear") and Clearstream Banking, societe anonyme ("Clearstream"),
if they are participants in such systems, or indirectly through organizations
that are participants in such systems. Euroclear and Clearstream hold interests
in the global securities on behalf of their participants through their
respective depositaries, which in turn hold such interests in the global
securities in customers' securities accounts in the depositaries' names on the
books of DTC.

     Upon the issuance of the global security, DTC credited on its book-entry
registration and transfer system the accounts of persons designated by the
initial purchaser with the respective principal amounts of the debentures
represented by the global security. Ownership of beneficial interests in a
global security is limited to persons that have accounts with DTC or its nominee
("participants") or persons that may hold interests through participants.
Ownership of beneficial interests in a global security is shown on, and the
transfer of that ownership is effected only through, records maintained by DTC
or its nominee (with respect to interests of persons other than participants).
The laws of some states require that some purchasers of securities take physical
delivery of the securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a global security.

     So long as DTC or its nominee is the registered owner of a global security,
DTC or its nominee, as the case may be, is considered the sole owner or holder
of the debentures represented by that global security for all purposes under the
indenture. Except as provided below, owners of beneficial interests in a global
security are not entitled to have debentures represented by that global security
registered in their names, are not entitled to receive (and will not receive)
physical delivery of debentures in definitive form and are not considered the
owners or holders thereof under the indenture. Principal and interest payments,
if any, on debentures registered in the name of DTC or its nominee will be made
to DTC or its nominee, as the case may be, as the registered owner of the
relevant global security. Neither Hasbro, the trustee, any paying agent or the
security registrar for the debentures has any responsibility or liability for
any aspect of the records relating to nor payments made on account of beneficial
interests in a global security or for maintaining, supervising or reviewing any
records relating to such beneficial interests.

     We expect that DTC or its nominee, upon receipt of any payment of principal
or interest, if any, will credit immediately participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of the relevant global security as shown on the records of
DTC or its nominee. We also expect that payments by participants to owners of
beneficial interests in a global

                                        26
<PAGE>

security held through these participants will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of the participants.

     Unless and until they are exchanged in whole or in part for debentures in
definitive form, the global securities may not be transferred except as a whole
by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of
DTC.

     Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds. Transfers
between participants in Euroclear and Clearstream will be effected in the
ordinary way in accordance with their respective rules and operating procedures.

     Cross-market transfers between DTC, on the one hand, and directly or
indirectly through Euroclear or Clearstream participants, on the other, will be
effected in DTC in accordance with DTC rules on behalf of Euroclear or
Clearstream, as the case may be, by its respective depositary; however, such
cross-market transactions will require delivery of instructions to Euroclear or
Clearstream, as the case may be, by the counterparty in such system in
accordance with its rules and procedures and within its established deadlines
(Brussels time). Euroclear or Clearstream, as the case may be, will, if the
transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in the global securities in DTC, and making or
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and Clearstream
participants may not deliver instructions directly to the depositaries for
Euroclear or Clearstream.

     Because of time zone differences, the securities account of a Euroclear or
Clearstream participant purchasing an interest in the global securities from a
DTC participant will be credited during the securities settlement processing day
(which must be a business day for Euroclear or Clearstream, as the case may be)
immediately following the DTC settlement date, and such credit of any
transactions interests in the global securities settled during such processing
day will be reported to the relevant Euroclear or Clearstream participant on
such day. Cash received in Euroclear or Clearstream as a result of sales of
interests in the global securities by or through a Euroclear or Clearstream
participant to a DTC participant will be received with value on the DTC
settlement date, but will be available in the relevant Euroclear or Clearstream
cash account only as of the business day following settlement in DTC.

     If DTC is at any time unwilling or unable to continue as a depositary and a
successor depositary is not appointed by us within 90 days, we will issue
debentures in definitive form in exchange for the global securities relating to
the debentures. In addition, we may at any time and in our sole discretion
determine not to have debentures represented by global securities and, in such
event, will issue debentures in definitive form in exchange for the global
securities relating to the debentures. In any such instance, an owner of a
beneficial interest in a global security will be entitled to physical delivery
in definitive form of debentures represented by the global security equal in
principal amount to the beneficial interest and to have the debentures
registered in its name. Debentures so issued in definitive form will be issued
as registered debentures in denominations of $1,000 and integral multiples
thereof, unless otherwise specified by us.

                                        27
<PAGE>

                          DESCRIPTION OF CAPITAL STOCK

GENERAL

     Our authorized capital stock consists of 600,000,000 shares of common
stock, and 5,000,000 shares of preference stock. No shares of preference stock
were issued or outstanding as of February 21, 2002. However, 60,000 shares of
preference stock (the "Junior Participating Preference Stock") have been
authorized and reserved for issuance in connection with the preference stock
purchase rights (the "Rights") described in "Certain Anti-Takeover Provisions
"-- Shareholders Rights Plan" and "-- Junior Participating Preference Stock."

VOTING RIGHTS

     Each holder of common stock is entitled to one vote for each share held on
all matters to be voted upon by shareholders.

DIVIDEND RIGHTS

     The holders of common stock, subject to the rights of holders of any
outstanding preference stock, are entitled to receive dividends as determined by
the board of directors.

LIQUIDATION RIGHTS AND OTHER PROVISIONS

     Subject to the prior rights of creditors and the holders of any outstanding
preference stock, the holders of the common stock are entitled to share ratably
in our remaining assets in the event of our liquidation, dissolution or winding
up.

     The common stock is fully paid and is not liable to any calls or
assessments and is not convertible into any other securities. There are no
redemption or sinking fund provisions applicable to the common stock, and, in
accordance with the Rhode Island Business Corporation Act and our Articles of
Incorporation, there are no preemptive rights.

     EquiServe Trust Company, N.A., acting directly and through EquiServe L.P.,
acts as transfer agent and registrar for our common stock.

DIRECTORS' LIABILITY

     Our Articles of Incorporation provide that, to the fullest extent permitted
by the Rhode Island Business Corporation Act, a member of the board of directors
will not be personally liable to us or our shareholders for monetary damages for
breaches of his or her legal duties to us or our shareholders as a director,
except for liability:

     - for any breach of the director's duty of loyalty to us or our
       shareholders;

     - for acts or omissions not in good faith or which involve intentional
       misconduct or a knowing violation of law;

     - for unlawfully declaring dividend payments or purchasing stock; or

     - for any transaction from which the director derived an improper personal
       benefit, other than as permitted under Section 7-1.1-37 of the Rhode
       Island Business Corporation Act.

     In addition, we have entered into an indemnification agreement with each of
our directors, whereby we have agreed to indemnify each director for amounts
that the director is legally obligated to pay, including judgments, settlements
of fines, including certain related expenses to be advanced by us, due to

                                        28
<PAGE>

any actual or alleged breach of duty, neglect, error, misstatement, misleading
statement or other act or omission by a director in his or her capacity as a
director. This indemnification agreement excludes claims:

     - covered by our directors and officers liability insurance policy;

     - for which the director is otherwise indemnified or reimbursed;

     - relating to certain judgments or adjudications under which the director
       is liable for breaches of duty of loyalty, acts or omissions not in good
       faith or involving intentional misconduct or involving knowing violations
       of law, liability imposed pursuant to the provisions of Section 7-1.1-43
       of the Rhode Island Business Corporation Act, actions or certain
       transactions from which the director derives an improper personal
       benefit;

     - relating to the director's liability for accounting for profits under
       Section 16 of the Exchange Act;

     - in respect of remuneration, if found unlawful; and

     - as to which a final and non-appealable judgment has determined that
       payment to the director thereunder is unlawful.

     In addition, our By-Laws include certain provisions which provide that our
directors and officers generally shall be indemnified against specific
liabilities to the fullest extent permitted or required by the Rhode Island
Business Corporation Act.

                        CERTAIN ANTI-TAKEOVER PROVISIONS

     The provisions of our Articles of Incorporation summarized in the
succeeding paragraphs could have an anti-takeover effect. These provisions are
intended to enhance the likelihood of continuity and stability in the
composition of our Board of Directors and in their policies. They may, however,
delay, defer or prevent a tender offer or takeover attempt that a shareholder
might consider to be in his or her best interest, including those attempts that
might result in a premium over the market price for the shares held by
shareholders.

     Our Board of Directors is divided into three classes that are elected for
staggered three-year terms. Directors can be removed from office only for cause
and, with certain exceptions, only with the approval of a majority vote of the
entire Board of Directors or by the affirmative vote of holders of a majority of
our then outstanding shares of capital stock entitled to vote for these
directors. Vacancies on the Board of Directors may be filled only by the
remaining directors and not by the shareholders.

     Under our Articles of Incorporation, the Board of Directors by resolution
may establish one or more series of preference stock having the number of
shares, designation, relative voting rights, dividend rates, liquidation and
other rights, preferences and limitations as may be fixed by the Board of
Directors without any further shareholder approval. These rights, preferences,
privileges and limitations as may be established could have the effect of
impeding or discouraging the acquisition of control of us.

     Our Articles of Incorporation also provide that any action required or
permitted to be taken by our shareholders may be effected only at an annual or
special meeting of shareholders, or by the unanimous written consent of
shareholders.

     In order to approve a number of extraordinary corporate transactions, such
as a merger, consolidation or sale of all or substantially all assets, with an
Interested Person, as defined below, our Articles of Incorporation require:

     - an 80% vote of all outstanding shares entitled to vote, including a
       majority vote of all disinterested shareholders;

     - the approval of a majority of the entire Board of Directors, including
       the affirmative vote of a majority of the "Continuing Directors," as
       defined in our Articles of Incorporation; and

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<PAGE>

     - the satisfaction of procedural requirements which are intended to assure
       that shareholders are treated fairly under the circumstances.

     "Interested Person," as used in the preceding paragraph means:

     - any person together with its "Affiliates" and "Associates," as defined in
       the Exchange Act, and any person acting in concert therewith who is the
       beneficial owner, directly or indirectly, of ten percent or more of the
       votes held by the holders of the securities generally entitled to vote
       for directors (the "Voting Stock"),

     - any Affiliate or Associate of an Interested Person, including without
       limitation, a Person acting in concert therewith,

     - any person that at any time within the two year period immediately prior
       to the date in question was the beneficial owner, directly or indirectly,
       of ten percent or more of the votes held by the holders of shares of
       Voting Stock, or

     - an assignee of, or successor to, any shares of Voting Stock which were at
       any time within the two year period prior to the date in question
       beneficially owned by any Interested Person, if such assignment or
       succession occurred in a transaction or series of transactions not
       involving a public offering as defined by the Securities Act.

     This definition of an Interested Person is subject to certain exceptions as
contained within our Articles of Incorporation.

     The 80% vote will not be required and, in accordance with the Rhode Island
Business Corporation Act, only a majority vote of shareholders will generally be
required if this type of a transaction is approved by a majority of the entire
Board of Directors, including the affirmative vote of at least two-thirds of the
Continuing Directors.

SHAREHOLDERS RIGHTS PLAN

     On June 16, 1999, we entered into a rights agreement with BankBoston, N.A.,
the predecessor to EquiServe Trust Company, N.A., as Rights Agent. This
agreement, as amended on December 4, 2000, replaced a previous rights agreement,
dated June 4, 1989, which expired on June 30, 1999. As with most shareholder
rights agreements, the terms of our rights agreement are complex and not easily
summarized, particularly as they relate to the acquisition of our common stock
and to exercisability of the Rights. This summary may not contain all of the
information that is important to you. Accordingly, you should carefully read our
rights agreement, which is incorporated by reference into this prospectus in its
entirety. Capitalized terms used in this summary and not otherwise defined shall
have the meanings given to them in the rights agreement.

     The Rights attach to all certificates representing shares of common stock
outstanding at the close of business on June 30, 1999 and will attach to any
shares of common stock issued by us, including upon the exercise of any warrants
and options or upon conversion of any convertible debt securities, after this
date and prior to the Distribution Date, as defined below. The Rights will
become exercisable and will separate from the common stock and be represented by
separate certificates on the Distribution Date, the date which is approximately
10 days after anyone acquires or commences a tender offer to acquire 15% of more
of our outstanding common stock (an "Acquiring Person"). The Rights will not be
exercisable until such date, if any, and will expire on June 30, 2009, unless
this date is extended or unless the Rights are earlier exchanged or redeemed by
us. Upon the Distribution Date, the Rights will initially be exercisable, at a
price of $140, for one ten-thousandth of a share of our Junior Participating
Preference Stock, although the terms of the exercise are subject to adjustment
under the rights agreement. Under the rights agreement, the following are not
Acquiring Persons:

     - Hasbro;

     - any of our subsidiaries;

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<PAGE>

     - employee benefit plans of ours or any of our subsidiaries;

     - individuals and entities connected with the Hassenfeld family, as
       described in the rights agreement;

     - any person who becomes the owner of 15% or more of the common stock by
       virtue of a repurchase of our common stock, unless after becoming aware
       of this fact, such person acquires an additional 1%; and

     - any person who reports the ownership of 15% or more of the common stock
       in a filing under the Exchange Act, who does not state any intention to
       control our management and who, upon request, certifies to us that the
       15% threshold was crossed inadvertently and with no knowledge of the
       terms of the Rights.

     Upon any person becoming an Acquiring Person, subject to the exception
noted below in this paragraph, each Right will entitle the holder to purchase a
number of shares of our common stock having a then current market value of twice
the exercise price of the Right. For example, at the initial exercise price of
$140, upon exercise, each Right would entitle its holder to receive $280 worth
of common stock or other consideration, as described below. A holder of a Right
will not be entitled to purchase shares if any person becomes an Acquiring
Person in a tender offer or exchange offer for all outstanding shares that has
been determined by our Board of Directors, after receiving advice from one or
more investment banking firms, to be at a price which is fair to and otherwise
in the best interests of the shareholders.

     In addition, each Right will entitle the holder to purchase a number of
shares of common stock of the acquiring company having a current market value of
twice the exercise price of the Right, if, after the date upon which someone has
become an Acquiring Person:

     - we are party to a merger or another business combination transaction in
       which we are not the surviving corporation;

     - we are the surviving corporation in a merger or other business
       combination, but all or part of our common stock is changed into or
       exchanged for stock or other securities of another person, cash, or any
       other property; or

     - we sell 50% or more of our consolidated assets, cash flow or earning
       power.

If any of the above events occurs, the acquiring company shall assume all of our
obligations under the rights agreement.

     From and after the occurrence of the event which triggers the exercise of
the Rights, any Rights that are or were acquired or beneficially owned by any
Acquiring Person, any Associate or any Affiliate shall be void and any holder of
these Rights shall thereafter have no right to exercise these Rights.

     At any time prior to the earlier of ten business days following the date
upon which someone has become an Acquiring Person and the expiration date of the
Rights, our Board of Directors may redeem all, but not less than all, of the
outstanding Rights at a price of $.01 per Right, subject to adjustment, payable
in cash, shares of common stock or other consideration. Immediately upon any
redemption of the Rights, the right to exercise the Rights will terminate, and
the only right of the holders of Rights will be to receive the redemption price.
The exercisability of the Rights triggered by someone becoming an Acquiring
Person, as described above, will not occur until after the expiration of this
redemption right. If, however, a majority of our Board of Directors was elected
by shareholder action by written consent or is not comprised of members who were
nominated by the predecessor Board of Directors, the Rights shall not be
redeemed if this type of a redemption is likely to have the effect of allowing
anyone to become an Acquiring Person or to otherwise trigger the exercisability
of the Rights, as described above, for a period of 180 days following the
election.

     At any time after a person becomes an Acquiring Person and prior to the
acquisition by a person or group of 50% or more of our outstanding common stock,
our Board of Directors may exchange the Rights, other than those Rights owned by
the person or group which have become void. This exchange may be in whole or in
part, at a ratio of one share of common stock per Right, subject to adjustment.
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     In the event that, after the Rights become exercisable for shares of our
common stock, there is an insufficient number of shares of our common stock
available to permit the full exercise of Rights, our Board of Directors has the
ability to substitute an equivalent value in:

     - cash;

     - a reduction in the exercise price of the Rights;

     - shares of preference stock with an equivalent value to our common stock;

     - debt securities;

     - other assets; or

     - any combination of the foregoing.

     Prior to the Distribution Date, the rights agreement may be amended by our
Board of Directors without the consent of the holders of the Rights. After the
Distribution Date, the rights agreement may only be amended by our Board of
Directors, without the consent of the holders of the Rights, as follows:

     - to cure any ambiguity;

     - to correct any provisions which are defective or inconsistent;

     - to shorten or lengthen any time period, though any lengthening must be
       for the purpose of protecting the interests of the holders of the Rights;
       or

     - to make changes which do not adversely affect the interests of the
       holders of the Rights.

The rights agreement may not be amended, however, at any time when the Rights
are not redeemable.

     Until a holder of a Right exercises the Right, the holder will have no
rights as our shareholder, including, without limitation, the right to vote or
to receive dividends.

     While the distribution of the Rights will not be taxable to shareholders or
to us, shareholders may, depending on the circumstances, recognize taxable
income in the event that the Rights become exercisable for our common stock, or
other consideration, or in the event the Rights are redeemed by us.

     The Rights may have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire us in a
manner which causes the Rights to become exercisable. We do not believe,
however, that the Rights would affect any prospective offeror willing to make an
offer at a price that is fair and otherwise in the best interests of the
shareholders, since the Board of Directors would be required by its fiduciary
duties under applicable law to consider the offer. If the offer were fair and
otherwise in the best interests of the shareholders, the Board could, at its
option, exercise its right to redeem the Rights as described above. In
considering the merits of a proposed offer and pursuant to Rhode Island law and
our Articles of Incorporation, however, our directors are authorized to take
into account our interests in addition to the interests of our shareholders. In
considering our interests, our directors may evaluate the effect of the proposed
offer on our employees, suppliers, creditors and customers. Our directors may
also consider the effect of the proposed offer on the communities in which we
operate as well as our long and short term interests, including the possibility
that these interests may be best served by our continued independence. If in
considering any of these factors, the Board of Directors determines the proposed
offer is not in our best interests, the Board may reject the offer and has no
obligation to facilitate or refrain from impeding the proposed offer. Because of
the redemption right, the Rights should also not interfere with any merger or
business combination approved by our Board of Directors.

JUNIOR PARTICIPATING PREFERENCE STOCK

     In connection with the rights agreement, 60,000 shares of Junior
Participating Preference Stock have been reserved and authorized for issuance by
our Board of Directors. No shares of Junior Participating Preference Stock were
outstanding as of February 21, 2002. The following statements with respect to
the
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Junior Participating Preference Stock are subject to, and are qualified in their
entirety by reference to, the detailed provisions of our Articles of
Incorporation, including the Certificate of Designation relating to the Junior
Participating Preference Stock (the "Certificate of Designation"), which is
incorporated herein by reference.

     Shares of Junior Participating Preference Stock purchasable upon exercise
of the Rights will not be redeemable. Each share of Junior Participating
Preference Stock will be entitled to a minimum preferential quarterly dividend
payment of $10 per share but will be entitled to an aggregate dividend of 10,000
times the dividend declared per share of common stock. In the event of
liquidation, the holders of the Junior Participating Preference Stock will be
entitled to a minimum preferential liquidation payment of $10,000 per share,
plus accrued and unpaid dividends, and will also be entitled to preferential
treatment on the distribution of any remaining assets. Each share of Junior
Participating Preference Stock will have 10,000 votes, voting together with the
common stock. In the event of any merger, consolidation or other transaction in
which shares of common stock are exchanged, each share of Junior Participating
Preference Stock will be entitled to receive 10,000 times the amount received
per share of common stock. These Rights are subject to proportionate adjustment
in the event of certain stock splits, recombinations and other events.

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            CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

     The following is a summary of certain United States federal income tax
considerations relevant to the ownership and disposition of the debentures and
the shares of common stock into which the debentures may be converted. This
summary deals only with the debentures and the shares of common stock held as
capital assets for United States federal income tax purposes. As used in this
prospectus, "U.S. Holders" are any beneficial owners of the debentures or the
shares of common stock that are, for United States federal income tax purposes:
(1) citizens or residents of the United States, (2) corporations (or entities
treated as corporations for federal income tax purposes) created or organized in
or under the laws of the United States, any state thereof or the District of
Columbia, (3) estates, the income of which is subject to United States federal
income taxation regardless of its source, and (4) trusts, if a court within the
United States is able to exercise primary supervision over the administration of
the trust and one or more United States persons have the authority to control
all substantial decisions of the trust. As used in this prospectus, "Non-U.S.
Holders" are holders of the debentures or the shares of common stock that are,
for United States federal income tax purposes, (1) nonresident alien
individuals, (2) foreign corporations and (3) foreign estates or trusts that are
not subject to United States federal income taxation on their worldwide income.
If a partnership (including for this purpose any entity treated as a partnership
for United States federal income tax purposes) is a beneficial owner of the
debentures or the shares of common stock, the treatment of a partner in the
partnership will generally depend upon the status of the partner and upon the
activities of the partnership. A holder of the debentures or the shares of
common stock that is a partnership and partners in such partnership should
consult their tax advisors about the United States federal income tax
consequences of holding and disposing of the debentures or the shares of common
stock, as the case may be. Unless otherwise stated, this summary does not deal
with special classes of holders such as banks, thrifts, real estate investment
trusts, regulated investment companies, insurance companies, dealers in
securities or currencies, tax-exempt investors, holders that hold the debentures
as part of a hedge, straddle, "synthetic security" or other integrated
transaction for United States federal income tax purposes and holders whose
functional currency is not the U.S. dollar. Further, this summary does not
include any description of any alternative minimum tax consequences, United
States federal estate or gift tax laws or the tax laws of any state, local or
foreign government that may be applicable to the debentures or the shares of
common stock.

     This summary is based on the Internal Revenue Code of 1986, as amended, the
Treasury regulations promulgated thereunder and administrative and judicial
interpretations thereof, all as of the date hereof, and all of which are subject
to change and differing interpretations, possibly on a retroactive basis. No
statutory, administrative or judicial authority directly addresses the treatment
of the debentures or instruments similar to the debentures for United States
federal income tax purposes. Therefore, there can be no assurance that the
Internal Revenue Service (the "IRS") will not successfully challenge one or more
of the conclusions described in this prospectus.

     We urge prospective investors to consult their tax advisors with respect to
the tax consequences to them of the purchase, ownership and disposition of the
debentures and the shares of common stock in light of their own particular
circumstances, including the tax consequences under state, local, foreign and
other tax laws and the possible effects of changes in United States federal and
other tax laws.

CLASSIFICATION OF THE DEBENTURES

     Pursuant to the terms of the indenture, each holder of the debentures
agreed, for United States federal income tax purposes, to treat the debentures
as indebtedness for United States federal income tax purposes subject to the
regulations governing contingent payment debt instruments and to be bound by our
application of those regulations to the debentures, including our determination
of the rate at which interest is deemed to accrue on the debentures for United
States federal income tax purposes. The remainder of this discussion assumes
that the debentures are treated in accordance with that agreement and our
determinations. However, the proper application of the regulations governing
contingent payment debt instruments to a holder of a debenture is uncertain in a
number of respects, and no assurance can be given that the IRS will not assert
that the debentures should be treated differently or that such an assertion
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<PAGE>

would not prevail. Such treatment could affect the amount, timing and character
of income, gain or loss in respect of an investment in the debentures. In
particular, it might be determined that a holder should have accrued interest
income at a lower rate, should not have recognized income or gain upon the
conversion, and should have recognized capital gain upon a taxable disposition
of its debentures.

TREATMENT OF U.S. HOLDERS

     Under the rules governing contingent payment debt instruments, a U.S.
Holder will generally be required to accrue interest income on the debentures,
in the amounts described below, regardless of whether the U.S. Holder uses the
cash or accrual method of tax accounting. Accordingly, U.S. Holders will likely
be required to include interest in taxable income in each year in excess of the
accruals on the debentures for non-tax purposes and in excess of any interest
payments actually received in that year. A U.S. Holder must accrue on its
debentures an amount of original issue discount as ordinary interest income for
United States federal income tax purposes for each accrual period prior to and
including the maturity date of the debentures that equals:

     - the product of (i) the adjusted issue price (as defined below) of the
       debentures as of the beginning of the accrual period; and (ii) the
       comparable yield to maturity (as defined below) of the debentures,
       adjusted for the length of the accrual period;

     - divided by the number of days in the accrual period; and

     - multiplied by the number of days during the accrual period that the U.S.
       Holder held the debentures.

     The "issue price" of a debenture is the first price at which a substantial
amount of the debentures is sold to the public, excluding bond houses, brokers
or similar persons or organizations acting in the capacity of underwriters,
placement agents or wholesalers. The "adjusted issue price" of a debenture is
its issue price increased by any interest income previously accrued, determined
without regard to any adjustments to interest accruals described below, and
decreased by the projected amounts of any payments with respect to the
debentures.

     Under the rules governing contingent payment debt instruments, we are
required to establish the "comparable yield" for the debentures. We have
determined that the comparable yield for the debentures is the annual yield we
would incur, as of the initial issue date, on a fixed rate nonconvertible debt
security with no contingent payments, but with terms and conditions otherwise
comparable to those of the debentures including the absence of subordination,
term, timing of payments and general market conditions, but excluding any
adjustments for liquidity or the riskiness of the contingencies with respect to
the debentures. Accordingly, we have determined the comparable yield to be 8.24%
compounded semiannually.

     We are required to provide to U.S. Holders, solely for United States
federal income tax purposes, a schedule of the projected amounts of payments on
the debentures. This schedule must produce the comparable yield. Our
determination of the projected payment schedule for the debentures includes
estimates for payments of contingent interest and an estimate for a payment at
maturity taking into account the conversion feature. U.S. Holders may obtain the
projected payment schedule by submitting a written request for it to us at the
address set forth in "Where You Can Find More Information."

THE COMPARABLE YIELD AND THE SCHEDULE OF PROJECTED PAYMENTS ARE NOT DETERMINED
FOR ANY PURPOSE OTHER THAN FOR THE DETERMINATION OF A U.S. HOLDER'S INTEREST
ACCRUALS AND ADJUSTMENTS THEREOF IN RESPECT OF THE DEBENTURES FOR UNITED STATES
FEDERAL INCOME TAX PURPOSES AND DO NOT CONSTITUTE A PROJECTION OR REPRESENTATION
REGARDING THE ACTUAL AMOUNTS PAYABLE TO U.S. HOLDERS OF THE DEBENTURES.

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<PAGE>

  ADJUSTMENTS TO INTEREST ACCRUALS ON THE DEBENTURES

     If a U.S. Holder receives actual payments with respect to the debentures in
a taxable year that in the aggregate exceed the total amount of projected
payments for that taxable year, the U.S. Holder will incur a "net positive
adjustment" equal to the amount of such excess. The U.S. Holder will treat the
"net positive adjustment" as additional interest income for the taxable year.
For this purpose, the payments in a taxable year include the fair market value
of property (including common stock) received in that year.

     If a U.S. Holder receives actual payments with respect to the debentures in
a taxable year that in the aggregate are less than the amount of the projected
payments for that taxable year, the U.S. Holder will incur a "net negative
adjustment" equal to the amount of such deficit. This adjustment will (a) reduce
the U.S. Holder's interest income on the debentures for that taxable year, and
(b) to the extent of any excess after the application of (a), give rise to an
ordinary loss to the extent of the U.S. Holder's interest income on the
debentures during prior taxable years, reduced to the extent such interest was
offset by prior net negative adjustments.

  SALE, EXCHANGE, CONVERSION OR REDEMPTION

     Generally, the sale or exchange of a debenture, or the redemption of a
debenture for cash, will result in taxable gain or loss to a U.S. Holder. In
addition, as described above, our calculation of the comparable yield and the
schedule of projected payments for the debentures includes the receipt of common
stock upon conversion of a debenture into shares of our common stock as a
contingent payment with respect to the debentures. Accordingly, we intend to
treat the receipt of our common stock by a U.S. Holder upon the conversion of a
debenture, or upon the redemption of a debenture where we elect to pay the
redemption price in shares of our common stock, as a contingent payment. As
described above, holders are generally bound by our determination of the
comparable yield and the schedule of projected payments. Under this treatment,
such a conversion or redemption also will result in taxable gain or loss to the
U.S. Holder. The amount of gain or loss on a taxable sale, exchange, conversion
or redemption will equal the difference between (a) the amount of cash plus the
fair market value of any other property received by the U.S. Holder, including
the fair market value of any common stock received, and (b) the U.S. Holder's
adjusted tax basis in the debentures. A U.S. Holder's adjusted tax basis in a
debenture on any date generally will equal the U.S. Holder's original purchase
price for the debentures, increased by any original issue discount previously
accrued by the U.S. Holder (determined without regard to any positive or
negative adjustments to interest accruals described above), and decreased by the
amount of any projected payments on the debentures projected to have been made
through that date. Gain recognized upon a sale, exchange, conversion or
redemption of a debenture generally will be treated as ordinary interest income;
any loss will be ordinary loss to the extent of interest previously included in
income, and thereafter, capital loss (which will be long-term if the debenture
is held for more than one year). The deductibility of net capital losses is
subject to limitations.

     A U.S. Holder's tax basis in shares of our common stock received upon a
conversion of a debenture or upon a holder's exercise of a put right that we
elect to pay in shares of our common stock will equal the then current fair
market value of such common stock. The U.S. Holder's holding period for the
shares of our common stock received will commence on the date of conversion or
redemption.

  PURCHASERS OF DEBENTURES AT A PRICE OTHER THAN THE ADJUSTED ISSUE PRICE

     A U.S. Holder that purchases debentures in the secondary market for an
amount that differs from the adjusted issue price of the debentures at the time
of purchase will be required to accrue interest income on the debentures in the
same manner as a U.S. Holder that purchased debentures in the initial offering.
A U.S. Holder must also reasonably allocate any difference between the adjusted
issue price and the U.S. Holder's basis in the debentures to daily portions of
interest or projected payments over the remaining term of the debentures. If the
purchase price of the debentures is greater than the adjusted issue price, the
amount of the difference allocated to a daily portion of interest or to a
projected payment is treated as a "negative adjustment" on the day the daily
portion accrues or the payment is made, respectively. If the

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purchase price of the debentures is less than the adjusted issue price, the
amount of the difference allocated to a daily portion of interest or to a
projected payment is treated as a "positive adjustment" on the day the daily
portion accrues or the payment is made, respectively. Any such negative or
positive adjustment will decrease or increase, respectively, the U.S. Holder's
adjusted tax basis in the debentures.

     Certain U.S. Holders will receive Forms 1099-OID reporting interest
accruals on their debentures. Those forms will not reflect the effect of any
positive or negative adjustments resulting from the U.S. Holder's purchase of
debentures in the secondary market at a price different from adjusted issue
price of the debentures on the date of purchase. U.S. Holders are urged to
consult their tax advisors as to whether, and how, such adjustments should be
taken into account in determining their interest accruals with regard to the
debentures.

  DISTRIBUTIONS ON COMMON STOCK

     If a U.S. Holder converts the debentures into shares of our common stock,
in general, distributions on the shares of our common stock that are paid out of
our current or accumulated earnings and profits, as defined for United States
federal income tax purposes, will constitute dividends and will be includible in
income by a holder and taxable as ordinary income when received or accrued, in
accordance with that holder's method of accounting for United States federal
income tax purposes. If a distribution exceeds our current and accumulated
earnings and profits, the excess will be treated first as a tax-free return of
the U.S. Holder's investment, up to the U.S. Holder's basis in the shares of our
common stock. Any remaining excess will be treated as capital gain.

  CONSTRUCTIVE DIVIDENDS

     An adjustment in the conversion rate of the debentures, or a failure to
adjust the conversion rate, may in certain circumstances be treated as a taxable
dividend to holders of the debentures or of our common stock. For example, if at
any time we make a distribution of property to our stockholders that would be
taxable to the stockholders as a dividend for United States federal income tax
purposes and, in accordance with the anti-dilution provisions of the debentures,
the conversion rate of the debentures is increased, such increase may be deemed
to be the payment of a taxable dividend to holders of the debentures. An
increase in the conversion rate in the event of distribution of our evidences of
indebtedness or our assets or an increase in the event of an extraordinary cash
dividend will generally result in deemed dividend treatment to holders of the
debentures, but an increase in the event of stock dividends or the distribution
of rights to subscribe for our common stock generally will not. If an event
occurs that dilutes the interests of the holders of the debentures and the
conversion price is not adjusted, the resulting increase in the proportionate
interest of our holders of common stock could be treated as a taxable dividend
to such stockholders.

TREATMENT OF NON-U.S. HOLDERS

     The rules governing United States federal income taxation of Non-U.S.
Holders are complex and no attempt will be made in this prospectus to provide
more than a brief description of such rules. Non-U.S. Holders should consult
with their tax advisors to determine the effect of United States federal, state,
local and foreign income tax laws, as well as treaties, with regard to an
investment in the debentures and shares of our common stock, including any
reporting requirements.

  PAYMENTS MADE WITH RESPECT TO THE DEBENTURES

     The 30% United States federal withholding tax will not apply to any payment
to a Non-U.S. Holder of principal or interest (including amounts taken into
income as interest under the accrual rules described above under "Treatment of
U.S. Holders" and amounts attributable to the shares of our common stock
received upon a conversion of the debentures) on debentures, provided that: (i)
the Non-U.S. Holder does not own, actually or constructively, 10% or more of the
total combined voting power of our common stock, (ii) the Non-U.S. Holder is not
a controlled foreign corporation related, directly or indirectly, to us

                                        37
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through stock ownership; (iii) the Non-U.S. Holder is not a bank which acquired
the debentures in consideration for an extension of credit made pursuant to a
loan agreement entered into in the ordinary course of business; (iv) our common
stock is actively traded within the meaning of Section 871(h)(4)(C)(v)(I) of the
Internal Revenue Code; and (v) either (a) the beneficial owner of debentures
certifies to us or our paying agent on IRS Form W-8BEN or an appropriate
substitute form, under penalties of perjury, that it is not a United States
person and provides its name, address and certain other information or (B) the
beneficial owner holds its debentures through certain foreign intermediaries or
certain foreign partnerships and such holder satisfies certain certification
requirements.

     If the Non-U.S. Holder cannot satisfy the requirements described above,
payments of interest (including amounts taken into income under the accrual
rules described above under "Treatment of U.S. Holders" and amounts attributable
to our common stock received upon a conversion of the debentures) will be
subject to the 30% United States federal withholding tax unless the Non-U.S.
Holder provides us with a properly executed (1) IRS Form W-8BEN (or successor
form) claiming an exemption from or reduction in withholding under an applicable
tax treaty or (2) IRS Form W-8ECI (or successor form) stating that interest paid
on the debentures is not subject to withholding tax because it is effectively
connected with the Non-U.S. Holder's conduct of a trade or business in the
United States.

     If a Non-U.S. Holder of the debentures is engaged in a trade or business in
the United States, and if interest on the debentures is effectively connected
with the conduct of such trade or business, the Non-U.S. Holder, although exempt
from the withholding tax discussed in the preceding paragraphs if it provides a
properly executed IRS Form W-8 ECI, will generally be subject to United States
federal income tax on interest and on any gain realized on the sale, exchange or
conversion of the debentures on a net basis in the same manner as if it were a
U.S. Holder.

     In addition, if such Non-U.S. Holder is a foreign corporation, such
Non-U.S. Holder may be subject to a branch profits tax equal to 30% (or such
lower tax rate provided by an applicable treaty) of its effectively connected
earnings and profits for the taxable year, subject to certain adjustments.

  SALE OR EXCHANGE OF DEBENTURES OR COMMON STOCK

     A Non-U.S. Holder will not generally be subject to United States federal
income or withholding tax with respect to gain upon the sale, exchange or other
disposition (other than a conversion or a redemption) of the debentures or
shares of our common stock, unless: (1) the income or gain is "U.S. trade or
business income," which means income or gain that is effectively connected with
the conduct by the Non-U.S. Holder of a trade or business, or, in the case of a
treaty resident, attributable to a permanent establishment or a fixed base, in
the United States; (2) such Non-U.S. Holder is an individual who is present in
the United States for 183 days or more in the taxable year of disposition and
certain other conditions are met; (3) such Non-U.S. Holder is subject to tax
pursuant to the provisions of the Internal Revenue Code applicable to certain
United States expatriates; or (4) in the case of an amount which is attributable
to original issue discount, the Non-U.S. Holder does not meet the conditions for
exemption from United States federal withholding tax described above.

     U.S. trade or business income of a Non-U.S. Holder will generally be
subject to United States federal income tax on a net basis in the same manner as
if it were realized by a U.S. Holder. A Non-U.S. Holder that realizes U.S. trade
or business income with respect to the debentures or common stock should consult
its tax advisors as to the treatment of such income or gain. In addition, U.S.
trade or business income of a Non-U.S. Holder that is a corporation may be
subject to a branch profits tax at a rate of 30%, or such lower rate provided by
an applicable income tax treaty.

  DISTRIBUTIONS ON COMMON STOCK

     A Non-U.S. Holder of shares of our common stock will generally be subject
to United States federal income or withholding tax at a 30% rate (or lower rate
provided under any applicable income tax treaty) on distributions by us with
respect to our common stock that are treated as dividends. Except to the extent
that an applicable tax treaty otherwise provides, a Non-U.S. Holder generally
will be taxed in the same
                                        38
<PAGE>

manner as a U.S. Holder on dividends that are effectively connected with the
Non-U.S. Holder's conduct of a trade or business in the United States, and a
Non-U.S. Holder that is a corporation may also be subject to a United States
branch profits tax at a 30% rate or such lower rate as may be specified in an
applicable income tax treaty.

BACK-UP WITHHOLDING AND INFORMATION REPORTING

  U.S. HOLDERS

     Payments of interest or dividends made by us on, or the proceeds of the
sale or other disposition of, the debentures or shares of our common stock may
be subject to information reporting and United States federal backup withholding
tax if the recipient of such payment fails to supply an accurate taxpayer
identification number or otherwise fails to comply with applicable United States
information reporting or certification requirements. Any amount withheld from a
payment to an U.S. Holder under the backup withholding rules is allowable as a
credit against the holder's United States federal income tax, provided that the
required information is furnished to the IRS.

  NON-U.S. HOLDERS

     A Non-U.S. Holder may be required to comply with certification procedures
to establish that the holder is not a U.S. person in order to avoid backup
withholding tax requirements with respect to our payments of principal and
interest, including cash payments in respect of original issue discount on the
debentures, or the proceeds of the sale or other disposition of the debentures.
In addition, we must report annually to the IRS and to each Non-U.S. Holder the
amount of any dividends paid to, and the tax withheld with respect to, such
holder, regardless of whether any tax was actually withheld. Copies of these
information returns may also be made available under the provisions of a
specific treaty or agreement to the tax authorities of the country in which the
Non-U.S. Holder resides.

TAX EVENT

     The modification of the terms of the debentures by us upon a Tax Event
could possibly alter the amount and timing of income recognition by the holders
with respect to the payments of interest due after the option exercise date.

THE PROPER TAX TREATMENT OF A HOLDER OF THE DEBENTURES IS UNCERTAIN IN A NUMBER
OF RESPECTS. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE UNITED
STATES FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF AN INVESTMENT IN
THE DEBENTURES AND WHETHER AN INVESTMENT IN THE DEBENTURES IS ADVISABLE IN LIGHT
OF THE AGREED UPON TAX TREATMENT AND THE HOLDER'S PARTICULAR TAX SITUATION.

                                        39
<PAGE>

                            SELLING SECURITYHOLDERS

     We originally issued the debentures in a private placement in November
2001. The debentures were resold by the initial purchasers to qualified
institutional buyers under Rule 144A under the Securities Act. Selling
securityholders may offer and sell the debentures and the underlying common
stock pursuant to this prospectus.

     The following table sets forth information as of February 21, 2002 about
the principal amount of debentures and the underlying common stock, beneficially
owned by each selling securityholder who has provided us with a completed
questionnaire, that may be offered using this prospectus.

     Unless otherwise described below, to our knowledge, no selling
securityholder nor any of its affiliates has held any position or office with,
been employed by or otherwise has had any material relationship with us or our
affiliates during the three years prior to the date of this prospectus.

     A selling securityholder may offer all or some portion of the debentures
and shares of the common stock issuable upon conversion of the debentures.
Accordingly, no estimate can be given as to the amount or percentage of
debentures or our common stock that will be held by the selling securityholders
upon termination of sales pursuant to this prospectus. In addition, the selling
securityholders identified below may have sold, transferred or disposed of all
or a portion of their debentures since the date on which they provided the
information regarding their holdings in transactions exempt from the
registration requirements of the Securities Act.

<Table>
<Caption>
                                      PRINCIPAL AMOUNT
                                       OF DEBENTURES
                                        OWNED BEFORE     PERCENTAGE OF   NUMBER OF SHARES OF   PERCENTAGE OF
                                      THE OFFERING AND    DEBENTURES      COMMON STOCK THAT     COMMON STOCK
NAME                                  THAT MAY BE SOLD    OUTSTANDING      MAY BE SOLD(1)      OUTSTANDING(2)
- ----                                  ----------------   -------------   -------------------   --------------
<S>                                   <C>                <C>             <C>                   <C>
Akela Capital Master Fund, Ltd. ....    $ 1,000,000              *               46,296              *
American Fidelity Assurance
  Company...........................    $   250,000              *               11,574              *
Aventis Pension Master Trust........    $   505,000              *               23,379              *
BankAmerica Pension Plan(3).........    $ 2,000,000              *               92,592              *
Barclays Global Investors
  Limited(3)........................    $ 1,000,000              *               46,296              *
BNP Paribas Equity Strategies,
  SNC(3)............................    $ 3,585,000           1.43%             165,972              *
Boilermaker -- Blacksmith Pension
  Trust.............................    $ 2,100,000              *               97,222              *
CALAMOS(R) Convertible Fund --
  CALAMOS(R) Investment Trust.......    $ 7,000,000           2.80%             324,074              *
CALAMOS(R) Convertible Growth and
  Income Fund -- CALAMOS(R)
  Investment Trust..................    $ 6,100,000           2.44%             282,407              *
CALAMOS(R) Convertible Portfolio --
  CALAMOS(R) Advisors Trust.........    $   210,000              *                9,722              *
CALAMOS(R) Global Convertible
  Fund -- CALAMOS Investment Trust..    $   220,000              *               10,185              *
CALAMOS(R) Market Neutral Fund --
  CALAMOS(R) Investment Trust.......    $10,000,000           4.00%             462,963              *
Canyon Capital Arbitrage Master
  Hedge Fund, Ltd. .................    $ 7,000,000           2.80%             324,074              *
Canyon MAC 18 Ltd. (RMF)............    $ 2,000,000              *               92,592              *
Canyon Value Realization Fund
  (Cayman), Ltd. ...................    $10,000,000           4.00%             462,963              *
CFFX, LLC...........................    $ 4,000,000           1.60%             185,185              *
Citi SAM Fund Ltd. .................    $ 4,800,000           1.92%             222,222              *
City of Albany Pension Plan.........    $   180,000              *                8,333              *
</Table>

                                        40
<PAGE>

<Table>
<Caption>
                                      PRINCIPAL AMOUNT
                                       OF DEBENTURES
                                        OWNED BEFORE     PERCENTAGE OF   NUMBER OF SHARES OF   PERCENTAGE OF
                                      THE OFFERING AND    DEBENTURES      COMMON STOCK THAT     COMMON STOCK
NAME                                  THAT MAY BE SOLD    OUTSTANDING      MAY BE SOLD(1)      OUTSTANDING(2)
- ----                                  ----------------   -------------   -------------------   --------------
<S>                                   <C>                <C>             <C>                   <C>
City of Knoxville Pension System....    $   675,000              *               31,250              *
Clarica Life Insurance
  Co. -- U.S. ......................    $   515,000              *               23,842              *
Consulting Group Capital Markets
  Funds.............................    $   500,000              *               23,148              *
Cooper Neff Convertible Strategies
  Fund, LP(3).......................    $   950,000              *               43,981              *
Delta Airlines Master Trust.........    $ 3,400,000           1.36%             157,407              *
Delta Pilots Disability and
  Survivorship Trust................    $   675,000              *               31,250              *
Deutsche Banc Alex Brown Inc. ......    $15,800,000           6.32%             731,481              *
Dorinco Reinsurance Company.........    $ 1,200,000              *               55,555              *
Drury University....................    $    85,000              *                3,935              *
First Union International Capital
  Markets Inc. .....................    $ 6,000,000           2.40%             277,777              *
First Union Securities Inc. ........    $27,780,000          11.11%           1,286,111              *
Gaia Offshore Master Fund Ltd. .....    $ 4,550,000           1.82%             210,648              *
Genesee County Employees'
  Retirement System.................    $   975,000              *               45,138              *
Grace Brothers Management, LLC......    $ 1,500,000              *               69,444              *
Grace Brothers, Ltd.................    $ 1,000,000              *               46,296              *
Granville Capital Corporation.......    $ 5,000,000           2.00%             231,481              *
Greek Catholic Union of the USA.....    $    95,000              *                4,398              *
H. K. Porter Company, Inc. .........    $    50,000              *                2,314              *
HFR Master Fund, LTD. ..............    $    60,000              *                2,777              *
IMF Convertible Fund................    $   800,000              *               37,037              *
Investcorp -- SAM Fund Ltd. ........    $ 4,200,000           1.68%             194,444              *
Jackson County Employees' Retirement
  System............................    $   175,000              *                8,101              *
JMG Convertible Investments, LP. ...    $ 5,500,000           2.20%             254,629              *
Kettering Medical Center Funded
  Depreciation Account..............    $   125,000              *                5,787              *
Knoxville Utilities Board Retirement
  System............................    $   300,000              *               13,888              *
Lipper Convertibles, L.P. ..........    $ 4,000,000           1.60%             185,185              *
Lipper Offshore Convertibles,
  L.P. .............................    $ 3,320,000           1.33%             153,703              *
Louisiana Workers' Compensation
  Corporation.......................    $   515,000              *               23,842              *
Lyxor Master Fund...................    $   450,000              *               20,833              *
Macomb County Employees' Retirement
  System............................    $   500,000              *               23,148              *
NMS Services (Cayman) Inc...........    $ 2,000,000              *               92,592              *
NORCAL Mutual Insurance Company.....    $   400,000              *               18,518              *
Peoples Benefit Life Insurance
  Company Teamsters.................    $ 5,000,000           2.00%             231,481              *
</Table>

                                        41
<PAGE>

<Table>
<Caption>
                                      PRINCIPAL AMOUNT
                                       OF DEBENTURES
                                        OWNED BEFORE     PERCENTAGE OF   NUMBER OF SHARES OF   PERCENTAGE OF
                                      THE OFFERING AND    DEBENTURES      COMMON STOCK THAT     COMMON STOCK
NAME                                  THAT MAY BE SOLD    OUTSTANDING      MAY BE SOLD(1)      OUTSTANDING(2)
- ----                                  ----------------   -------------   -------------------   --------------
<S>                                   <C>                <C>             <C>                   <C>
Port Authority of Allegheny County
  Retirement and Disability
  Allowance Plan for the Employees
  Represented by Local 85 of the
  Amalgamated Transit Union.........    $ 2,150,000              *               99,537              *
Prisma Foundation...................    $    80,000              *                3,703              *
Quattro Fund, Ltd. .................    $ 7,000,000           2.80%             324,074              *
Rhapsody Fund, LP. .................    $ 7,000,000           2.80%             324,074              *
Robertson Stephens(4)...............    $ 5,000,000           2.00%             231,481              *
SCI Endowment Care Common Trust
  Fund -- First Union...............    $    65,000              *                3,009              *
SCI Endowment Care Common Trust
  Fund -- National Fiduciary
  Services..........................    $   225,000              *               10,416              *
SCI Endowment Care Common Trust
  Fund -- Suntrust..................    $   125,000              *                5,787              *
SG Cowen Securities Corporation.....    $   440,000              *               20,370              *
Southdown Pension Plan..............    $   210,000              *                9,722              *
Southern Farm Bureau Life Insurance
  Company...........................    $ 1,100,000              *               50,925              *
SPT.................................    $ 2,500,000           1.00%             115,740              *
St. Albans Partners Ltd. ...........    $ 4,000,000           1.60%             185,185              *
Sturgeon Limited....................    $   465,000              *               21,527              *
The Cockrell Foundation.............    $   125,000              *                5,787              *
The Dow Chemical Company Employees'
  Retirement Plan...................    $ 4,000,000           1.60%             185,185              *
The Fondren Foundation..............    $   125,000              *                5,787              *
Thomas Weisel Partners..............    $ 3,000,000           1.20%             138,888              *
TQA Master Fund, Ltd. ..............    $ 3,000,000           1.20%             138,888              *
TQA Master Plus Fund, Ltd. .........    $ 2,000,000              *               92,592              *
Tribeca Investments, L.L.C. ........    $ 2,000,000              *               92,592              *
Union Carbide Retirement Account....    $ 2,100,000              *               97,222              *
United Food and Commercial Workers
  Local 1262 and Employers Pension
  Fund..............................    $   950,000              *               43,981              *
Value Realization Fund, L.P. .......    $ 6,000,000           2.40%             277,777              *
Vopak USA Inc., Retirement Plan
  (f.k.a. Van Waters & Rogers Inc.
  Retirement Plan)..................    $   500,000              *               23,148              *
Yield Strategies Fund I, LP.........    $ 2,500,000           1.00%             115,740              *
Yield Strategies Fund II, LP........    $ 2,500,000           1.00%             115,740              *
Zurich Institutional Benchmarks
  Management........................    $ 2,200,000              *              101,851              *
Unknown(5)..........................    $29,595,000          11.84%           1,370,138              *
</Table>

                                        42
<PAGE>

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

 *  Less than 1%

(1) Assumes conversion of all of the holder's debentures at an initial
    conversion rate of 46.2963 shares of common stock per $1,000 principal
    amount of the debentures. However, this conversion rate will be subject to
    adjustment as described under "Description of Debentures -- Conversion
    Rights." As a result, the amount of common stock issuable upon conversion of
    the debentures may increase or decrease in the future.

(2) Calculated based on 172,575,079 shares of common stock outstanding as of
    February 18, 2002. In calculating this amount, we treated as outstanding
    that number of shares of common stock issuable upon conversion of all of
    that particular holder's debentures. However, we did not assume the
    conversion of any other holder's debentures.

(3) The selling securityholder is an affiliate of, or an investment fund or plan
    managed by an affiliate of, an initial purchaser of the debentures in
    November 2001.

(4) Robertson Stephens, Inc. served as an initial purchaser of the debentures in
    November 2001.

(5) The name "Unknown" represents the remaining selling securityholders for whom
    we have not received a completed questionnaire. We are unable to provide the
    names of these securityholders because the debentures held by these
    securityholders are currently evidenced by a global note which has been
    deposited with DTC and registered in the name of Cede & Co. as DTC's
    nominee.

     If, after the date of this prospectus, a securityholder notifies us
pursuant to the registration agreement of its intent to dispose of debentures
pursuant to the registration statement, we will file either a prospectus
supplement or a post-effective amendment to the registration statement to
include this information.

                                        43
<PAGE>

                              PLAN OF DISTRIBUTION

     We will not receive any of the proceeds of the sale of the debentures and
the underlying common stock offered by this prospectus. The debentures and the
underlying common stock may be sold from time to time to purchasers:

     - directly by the selling securityholders; or

     - through underwriters, broker-dealers or agents who may receive
       compensation in the form of discounts, concessions or commissions from
       the selling securityholders or the purchasers of the debentures and the
       underlying common stock (which discounts, concessions or commissions as
       to particular underwriters, broker-dealers or agents may be in excess of
       those customary in the types of transactions involved).

     The selling securityholders and any such broker-dealers or agents who
participate in the distribution of the debentures and the underlying common
stock may be deemed to be "underwriters." As a result, any profits on the sale
of the underlying common stock by selling securityholders and any discounts,
commissions or concessions received by any such broker-dealers or agents might
be deemed to be underwriting discounts and commissions under the Securities Act.
If the selling securityholders were deemed to be underwriters, the selling
securityholders may be subject to certain statutory liabilities as underwriters
under the Securities Act.

     If the debentures and the underlying common stock are sold through
underwriters or broker-dealers, the selling securityholders will be responsible
for underwriting discounts or commissions or agent's commissions.

     The debentures and the underlying common stock may be sold in one or more
transactions at:

     - fixed prices;

     - prevailing market prices at the time of sale;

     - varying prices determined at the time of sale; or

     - negotiated prices.

     These sales may be effected in transactions:

     - on any national securities exchange or quotation service on which the
       debentures and underlying common stock may be listed or quoted at the
       time of the sale, including the New York Stock Exchange in the case of
       the common stock;

     - in the over-the-counter market;

     - in transactions otherwise than on such exchanges or services or in the
       over-the-counter market;

     - through the writing of options, whether or not the options are listed on
       an options exchange;

     - through the distribution of the securities by any selling securityholder
       to its partners, members or stockholders; or

     - through any combination of the above.

     These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as an agent on both sides of the
trade.

     In connection with the sales of the debentures and the underlying common
stock or otherwise, the selling securityholders may enter into hedging
transactions with broker-dealers. These broker-dealers may in turn engage in
short sales of the debentures and the underlying common stock in the course of
hedging their positions. The selling securityholders may also sell the
debentures and the underlying common stock short and deliver debentures and the
underlying common stock to close out short positions, or loan or

                                        44
<PAGE>

pledge debentures and the underlying common stock to broker-dealers that in turn
may sell the debentures and the underlying common stock.

     The selling securityholders may pledge or grant a security interest in some
or all of the debentures and the underlying common stock owned by them and, if
any selling securityholders default in the performance of such secured
obligations, the pledgees or secured parties may offer and sell the relevant
debentures and underlying common stock pursuant to this prospectus.

     To our knowledge, there are currently no plans, arrangements or
understandings between any selling securityholders and any underwriter,
broker-dealer or agent regarding the sale of the debentures and the underlying
common stock by the selling securityholders. There can be no assurance that any
selling securityholders will sell any or all of the debentures and the
underlying common stock pursuant to this prospectus. In addition, the selling
securityholders may transfer or donate the debentures and the underlying common
stock by other means not described in this prospectus.

     Our common stock trades on the New York Stock Exchange under the symbol
"HAS." We do not intend to apply for listing of the debentures on any securities
exchange or for quotation through NASDAQ. Accordingly, no assurance can be given
as to the development of liquidity or any trading market for the debentures.

     Any debentures or underlying common stock covered by this prospectus that
qualify for sale pursuant to Rule 144 or Rule 144A of the Securities Act may be
sold under Rule 144 or Rule 144A rather than pursuant to this prospectus.

     The selling securityholders and any other person participating in such
distribution will be subject to the Exchange Act. The Exchange Act rules
include, without limitation, Regulation M, which may limit the timing of
purchases and sales of any of the debentures and the underlying common stock by
the selling securityholders and any such other person. In addition, Regulation M
of the Exchange Act may restrict the ability of any person engaged in the
distribution of the debentures and the underling common stock to engage in
market-making activities with respect to the particular debentures and
underlying common stock being distributed for a period of up to five business
days prior to the commencement of such distribution. This may affect the
marketability of the debentures and the underlying common stock and the ability
of any person or entity to engage in market-making activities with respect to
the debentures and the underlying common stock.

     Pursuant to the registration agreement that has been filed as an exhibit to
this registration statement, we and the selling securityholders will each
indemnify the other against certain liabilities, including certain liabilities
under the Securities Act, or will be entitled to contribution in connection with
these liabilities.

     We have agreed to pay substantially all of the expenses incidental to the
registration, offering and sale of the debentures and the underlying common
stock to the public other than commissions, fees and discounts of underwriters,
brokers, dealers and agents.

                                        45
<PAGE>

                             VALIDITY OF SECURITIES

     The validity of the debentures and the common stock issuable upon
conversion will be passed on for us by Ropes & Gray, Boston, Massachusetts.

                                    EXPERTS

     The consolidated financial statements of Hasbro as of December 31, 2000 and
December 26, 1999 and for each of the fiscal years in the three-year period
ended December 31, 2000 incorporated by reference in this prospectus have been
audited by KPMG LLP, independent certified public accountants, as stated in
their reports thereon.

                                        46
<PAGE>

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

                                  $250,000,000

                                  HASBRO, INC.

                  2.75% CONVERTIBLE SENIOR DEBENTURES DUE 2021
                                      AND
                       11,574,075 SHARES OF COMMON STOCK
                   ISSUABLE UPON CONVERSION OF THE DEBENTURES

                               [HASBRO INC. LOGO]

                              -------------------
                                   PROSPECTUS
                              -------------------

                                         , 2002
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

                                    PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the distribution of the securities being registered. All of the amounts
shown are estimates, except the Securities and Exchange Commission registration
fee.

<Table>
<S>                                                           <C>
Securities and Exchange Commission registration fee.........  $ 21,390
Printing and engraving fees.................................    20,000
Accountant's fees and expenses..............................    30,000
Legal fees and expenses.....................................    25,000
Trustee and Transfer Agent fees and expenses................     4,000
Miscellaneous expenses......................................    20,000
                                                              --------
     Total..................................................  $120,390
</Table>

ITEM 15.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

     The Registrant is incorporated in Rhode Island. Under Section 7-1.1-4.1 of
the Rhode Island Business Corporation Act, a Rhode Island corporation has the
power, under specified circumstances, to indemnify its officers, directors,
employees and agents against judgments, penalties, fines, settlements and
reasonable expenses, including attorneys' fees, actually incurred by them in
connection with any proceeding to which these persons were made parties by
reason of the fact that these persons are or were directors, officers, employees
or agents, if:

     - these persons shall have acted in good faith,

     - they reasonably believed that their actions were in the best interests of
       the corporation, if the proceeding involves conduct in an official
       capacity with the corporation, or not opposed to the best interests of
       the corporation, if the proceeding involves conduct other than in an
       official capacity with the corporation, and

     - in criminal proceedings, they had no reasonable cause to believe that
       their conduct was unlawful.

     The foregoing statement is subject to the detailed provisions of 7-1.1-4.1
of the Rhode Island Business Corporation Act.

     Article X of the By-Laws of the Registrant provides that the Registrant
shall indemnify its directors and officers to the full extent permitted by
Section 7-1.1-4.1 of the Rhode Island Business Corporation Act.

     Section 7-1.1-48 of the Rhode Island Business Corporation Act provides that
articles of incorporation may contain a provision eliminating or limiting the
personal liability of a director to the corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director provided that the
provision shall not eliminate or limit the liability of a director:

     - for any breach of the director's duty of loyalty to the corporation or
       its shareholders,

     - for acts or omissions not in good faith or which involve intentional
       misconduct or a knowing violation of law,

     - under Section 7-1.1-43 of the Rhode Island Business Corporation Act,
       which relates to liability for unauthorized acquisitions or redemptions
       of, or dividends or distribution on, capital stock, or

                                       II-1
<PAGE>

     - for any transaction from which the director derived an improper personal
       benefit, unless said transaction is permitted by Section 7-1.1-37.1 of
       the Rhode Island Business Corporation Act, which relates to director
       conflicts of interest.

     Article Thirteenth of the Registrant's Articles of Incorporation contains
such a provision.

     Section 7-1.1-4.1(j) of the Rhode Island Business Corporation Act empowers
a Rhode Island corporation to purchase and maintain insurance on behalf of its
current and prior directors, officers, employees and agents against any
liability incurred or asserted against them as a result of their official
capacities, whether or not the corporation would have the power to indemnify
such person against the insured liability under the provisions of such Section.
The Registrant has a directors and officers liability insurance policy.

     The Registrant has entered into an indemnification agreement with each of
its directors, whereby the Registrant has agreed to indemnify each such director
for amounts which the director is legally obligated to pay, including judgments,
settlements of fines, including certain related expenses to be advanced by the
Registrant, due to any actual or alleged breach of duty, neglect, error,
misstatement, misleading statement or other act or omission by a director in his
capacity as a director. This indemnification excludes claims:

     - covered by the Registrant's directors and officers liability insurance
       policy,

     - for which the director is otherwise indemnified or reimbursed,

     - relating to certain judgments or adjudications under which the director
       is liable for breaches of duty of loyalty, acts or omissions not in good
       faith or involving intentional misconduct or involving knowing violations
       of law, actions or certain transactions from which the director derives
       an improper personal benefit,

     - relating to the director's liability for accounting for profits under
       Section 16 of the Securities Exchange Act of 1934, as amended,

     - in respect of remuneration, if found unlawful, and

     - as to which a final and non-appealable judgment has determined that
       payment to the director thereunder is unlawful.

ITEM 16.  EXHIBITS

<Table>
<C>   <S>
 4.1  Indenture dated as of November 30, 2001 between Hasbro, Inc.
      and The Bank of Nova Scotia Trust Company of New York.
 4.2  Form of 2.75% Convertible Senior Debenture due 2021
      (included in Exhibit 4.1).
 4.3  Registration Agreement dated as of November 30, 2001 between
      Hasbro, Inc. and Salomon Smith Barney Inc., as
      representative of the Initial Purchasers.
 5.1  Opinion of Ropes & Gray.
12.1  Statement Regarding Computation of Ratios of Earnings to
      Fixed Charges.
23.1  Consent of KPMG LLP.
23.2  Consent of Ropes & Gray (see Exhibit 5.1).
24.1  Powers of Attorney (included on the signature page).
25.1  Statement of Eligibility and Qualification of Trustee on
      Form T-1.
</Table>

                                       II-2
<PAGE>

ITEM 17.  UNDERTAKINGS

     a.  The undersigned registrant hereby undertakes:

          (1)  To file, during any period in which offers or sales are being
     made, a post-effective amendment to this registration statement:

             (i)  To include any prospectus required by Section 10(a)(3) of the
        Securities Act of 1933;

             (ii)  To reflect in the prospectus any facts or events arising
        after the effective date of the registration statement (or the most
        recent post-effective amendment thereof) which, individually or in the
        aggregate, represent a fundamental change in the information set forth
        in the registration statement. Notwithstanding the foregoing, any
        increase and decrease in volume of securities offered (if the total
        dollar value of securities offered would not exceed that which was
        registered) and any deviation from the low or high end of the estimated
        maximum offering range may be reflected in the form of prospectus filed
        with the Commission pursuant to Rule 424(b) if, in the aggregate, the
        changes in volume and price represent no more than a 20 percent change
        in the maximum aggregate offering price set forth in the "Calculation of
        Registration Fee" table in the effective registration statement; and

             (iii)  To include any material information with respect to the plan
        of distribution not previously disclosed in the registration statement
        or any material change to such information in the registration
        statement.

          (2)  That, for the purposes of determining any liability under the
     Securities Act of 1933, each such post-effective amendment shall be deemed
     to be a new registration statement relating to the securities offered
     therein, and the offering of such securities at that time shall be deemed
     to be the initial bona fide offering thereof.

          (3)  To remove from registration by means of a post-effective
     amendment any of the securities being registered which remain unsold at the
     termination of the offering.

     b.  The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.

     c.  Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the financial
adjudication of such issue.

                                       II-3
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Pawtucket, State of Rhode Island.

                                          HASBRO, INC.

                                          By:    /s/ ALAN G. HASSENFELD
                                            ------------------------------------
                                                    Alan G. Hassenfeld
                                                Chairman of the Board and
                                                 Chief Executive Officer

Dated: February 22, 2002

                               POWER OF ATTORNEY

     Each person whose signature appears below constitutes and appoints David D.
R. Hargreaves, Barry Nagler and Tarrant L. Sibley, and each of them singly, his
or her true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement on Form S-3 and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to be done in and about
the premises, as fully to all intents and purposes as he or she might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or their substitutes, may lawfully do or cause to be done by virtue
hereof.

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the date indicated.

<Table>
<S>                                         <C>



          /s/ ALAN G. HASSENFELD                    /s/ DAVID D. R. HARGREAVES
- ------------------------------------------  ------------------------------------------
            Alan G. Hassenfeld                        David D. R. Hargreaves
        Chairman of the Board and                   Senior Vice President and
         Chief Executive Officer                     Chief Financial Officer
      (Principal Executive Officer)                  (Principal Financial and
                                                       Accounting Officer)




         /s/ ALFRED J. VERRECCHIA                       /s/ ALAN R. BATKIN
- ------------------------------------------  ------------------------------------------
           Alfred J. Verrecchia                           Alan R. Batkin
  President, Chief Operating Officer and                     Director
                 Director




         /s/ FRANK J. BIONDI, JR.
- ------------------------------------------  ------------------------------------------
           Frank J. Biondi, Jr.                           E. Gordon Gee
                 Director                                    Director
</Table>

                                       II-4
<PAGE>
<Table>
<S>                                         <C>




           /s/ HAROLD P. GORDON                      /s/ SYLVIA K. HASSENFELD
- ------------------------------------------  ------------------------------------------
             Harold P. Gordon                          Sylvia K. Hassenfeld
                 Director                                    Director




          /s/ CLAUDINE B. MALONE                        /s/ NORMA T. PACE
- ------------------------------------------  ------------------------------------------
            Claudine B. Malone                            Norma T. Pace
                 Director                                    Director




        /s/ E. JOHN ROSENWALD, JR.                       /s/ ELI J. SEGAL
- ------------------------------------------  ------------------------------------------
          E. John Rosenwald, Jr.                           Eli J. Segal
                 Director                                    Director




           /s/ CARL SPIELVOGEL                           /s/ PAULA STERN
- ------------------------------------------  ------------------------------------------
             Carl Spielvogel                               Paula Stern
                 Director                                    Director




         /s/ PRESTON ROBERT TISCH
- ------------------------------------------
           Preston Robert Tisch
                 Director
</Table>

Dated: February 22, 2002

                                       II-5
<PAGE>

                                 EXHIBIT INDEX

<Table>
<Caption>
EXHIBIT
  NO.                             DESCRIPTION
- -------                           -----------
<C>       <S>
  4.1     Indenture dated as of November 30, 2001 between Hasbro, Inc.
          and The Bank of Nova Scotia Trust Company of New York.
  4.2     Form of 2.75% Convertible Senior Debenture due 2021
          (included in Exhibit 4.1).
  4.3     Registration Agreement dated as of November 30, 2001 between
          Hasbro, Inc. and Salomon Smith Barney Inc., as
          representative of the Initial Purchasers.
  5.1     Opinion of Ropes & Gray.
 12.1     Statement Regarding Computation of Ratios of Earnings to
          Fixed Charges.
 23.1     Consent of KPMG LLP.
 23.2     Consent of Ropes & Gray (see Exhibit 5.1).
 24       Power of Attorney (see page II-4).
 25.1     Statement of Eligibility and Qualification of Trustee on
          Form T-1.
</Table>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.1
<SEQUENCE>3
<FILENAME>b41930hiex4-1.txt
<DESCRIPTION>INDENTURE DATED 11/30/01
<TEXT>
<PAGE>
                                                                     EXHIBIT 4.1


                                       HASBRO, INC.



                       2.75% Convertible Senior Debentures due 2021

                                         Indenture





                                        Dated as of
                                     November 30, 2001




                    THE BANK OF NOVA SCOTIA TRUST COMPANY OF NEW YORK,

                                          Trustee

<PAGE>
                                     TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                              PAGE
                                     ARTICLE I

                     DEFINITIONS AND INCORPORATION BY REFERENCE

<S>                                                                                          <C>
Section 1.1    Definitions................................................................    1
Section 1.2    Other Definitions..........................................................    5
Section 1.3    Incorporation by Reference of Trust Indenture Act..........................    6
Section 1.4    Rules of Construction......................................................    6
Section 1.5    Acts of Holders............................................................    7

                                     ARTICLE II

                                   THE SECURITIES

Section 2.1    Form and Dating............................................................    8
Section 2.2    Execution and Authentication...............................................    9
Section 2.3    Registrar, Paying Agent and Conversion Agent...............................   10
Section 2.4    Paying Agent to Hold Money and Securities in Trust.........................   10
Section 2.5    Securityholder Lists.......................................................   11
Section 2.6    Transfer and Exchange......................................................   11
Section 2.7    Replacement Securities.....................................................   12
Section 2.8    Outstanding Securities; Determinations of Holders' Action Securities.......   13
Section 2.9    Temporary Securities.......................................................   14
Section 2.10   Cancellation...............................................................   14
Section 2.11   Persons Deemed Owners......................................................   14
Section 2.12   Global Securities..........................................................   14
Section 2.13   CUSIP Numbers..............................................................   19
Section 2.14   Ranking....................................................................   19
Section 2.15   Regulation S...............................................................   19

                                    ARTICLE III

                              REDEMPTION AND PURCHASES

Section 3.1    Company's Right to Redeem; Notices to Trustee..............................   20
Section 3.2    Selection of Securities to Be Redeemed.....................................   20
Section 3.3    Notice of Redemption.......................................................   20
Section 3.4    Effect of Notice of Redemption.............................................   21
Section 3.5    Deposit of Redemption Price................................................   21
Section 3.6    Securities Redeemed in Part................................................   21
Section 3.7    Purchase of Securities by the Company at Option of the Holder..............   21
Section 3.8    Purchase of Securities at Option of the Holder upon a Fundamental
               Change.....................................................................   28

</TABLE>



                                       i
<PAGE>

                                TABLE OF CONTENTS
                                   (continued)


<TABLE>
<CAPTION>
                                                                                             PAGE


<S>            <C>                                                                           <C>
Section 3.9    Effect of Purchase Notice or Fundamental Change Purchase Notice............   30
Section 3.10   Deposit of Purchase Price or Fundamental Change Purchase Price.............   32
Section 3.11   Securities Purchased in Part...............................................   32
Section 3.12   Covenant to Comply With Securities Laws Upon Purchase of Securities........   32
Section 3.13   Repayment to the Company...................................................   32

                                     ARTICLE IV

                                     COVENANTS

Section 4.1    Payment of Securities......................................................   33
Section 4.2    SEC and Other Reports......................................................   33
Section 4.3    Compliance Certificate.....................................................   33
Section 4.4    Further Instruments and Acts...............................................   33
Section 4.5    Maintenance of Office or Agency............................................   34
Section 4.6    Delivery of Certain Information............................................   34
Section 4.7    Calculation of Original Issue Discount.....................................   34

                                     ARTICLE V

                               SUCCESSOR CORPORATION

Section 5.1    When Company May Merge or Transfer Assets..................................   35

                                     ARTICLE VI

                               DEFAULTS AND REMEDIES

Section 6.1    Events of Default..........................................................   36
Section 6.2    Acceleration...............................................................   37
Section 6.3    Other Remedies.............................................................   38
Section 6.4    Waiver of Past Defaults....................................................   38
Section 6.5    Control by Majority........................................................   38
Section 6.6    Limitation on Suits........................................................   38
Section 6.7    Rights of Holders to Receive Payment.......................................   39
Section 6.8    Collection Suit by Trustee.................................................   39
Section 6.9    Trustee May File Proofs of Claim...........................................   39
Section 6.10   Priorities.................................................................   40
Section 6.11   Undertaking for Costs......................................................   40
Section 6.12   Waiver of Stay, Extension or Usury Laws....................................   40
</TABLE>

                                       ii
<PAGE>
                                TABLE OF CONTENTS
                                   (continued)

<TABLE>
<CAPTION>
                                                                                           Page
                                                                                           ====
                                    ARTICLE VII

                                      TRUSTEE

<S>            <C>                                                                           <C>
Section 7.1    Duties of Trustee..........................................................   41
Section 7.2    Rights of Trustee..........................................................   42
Section 7.3    Individual Rights of Trustee...............................................   43
Section 7.4    Trustee's Disclaimer.......................................................   43
Section 7.5    Notice of Defaults.........................................................   43
Section 7.6    Reports by Trustee to Holders..............................................   44
Section 7.7    Compensation and Indemnity.................................................   44
Section 7.8    Replacement of Trustee.....................................................   45
Section 7.9    Successor Trustee by Merger................................................   45
Section 7.10   Eligibility; Disqualification..............................................   45
Section 7.11   Preferential Collection of Claims Against Company..........................   46

                                    ARTICLE VIII

                               DISCHARGE OF INDENTURE

Section 8.1    Discharge of Liability on Securities.......................................   46
Section 8.2    Repayment to the Company...................................................   46

                                     ARTICLE IX

                                     AMENDMENTS

Section 9.1    Without Consent of Holders.................................................   46
Section 9.2    With Consent of Holders....................................................   47
Section 9.3    Compliance with Trust Indenture Act........................................   48
Section 9.4    Revocation and Effect of Consents, Waivers and Actions.....................   48
Section 9.5    Notation on or Exchange of Securities......................................   48
Section 9.6    Trustee to Sign Supplemental Indentures....................................   48
Section 9.7    Effect of Supplemental Indentures..........................................   48

                                     ARTICLE X

                                    CONVERSIONS

Section 10.1   Conversion Privilege.......................................................   49
Section 10.2   Conversion Procedure.......................................................   49
Section 10.3   Fractional Shares..........................................................   50
Section 10.4   Taxes on Conversion........................................................   50
Section 10.5   Company to Provide Stock...................................................   51
</TABLE>


                                       iii
<PAGE>
                                TABLE OF CONTENTS
                                   (continued)
<TABLE>
<CAPTION>
                                                                                            Page
                                                                                            ====
<S>            <C>                                                                           <C>
Section 10.6   Adjustment for Change in Capital Stock.....................................   51
Section 10.7   Adjustment for Rights Issue................................................   52
Section 10.8   Adjustment for Other Distributions.........................................   53
Section 10.9   Adjustment for Self Tender Offer...........................................   55
Section 10.10  When Adjustment May Be Deferred............................................   56
Section 10.11  When No Adjustment Required................................................   56
Section 10.12  Notice of Adjustment.......................................................   56
Section 10.13  Voluntary Increase.........................................................   57
Section 10.14  Notice of Certain transactions.............................................   57
Section 10.15  Reorganization of Company; Special Distributions...........................   57
Section 10.16  Company Determination Final................................................   58
Section 10.17  Trustee's Adjustment Disclaimer............................................   58
Section 10.18  Simultaneous Adjustments...................................................   58
Section 10.19  Successive Adjustments.....................................................   58
Section 10.20  Restriction on Common Stock Issuable Upon Conversion.......................   58

                                        ARTICLE XI
                                       MISCELLANEOUS

Section 11.1   Trust Indenture Act Controls...............................................   59
Section 11.2   Notices....................................................................   59
Section 11.3   Communication by Holders with Other Holders................................   60
Section 11.4   Certificate and Opinion as to Conditions Precedent.........................   60
Section 11.5   Statements Required in Certificate or Opinion..............................   61
Section 11.6   Separability Clause........................................................   61
Section 11.7   Rules by Trustee, Paying Agent, Conversion Agent and Registrar.............   61
Section 11.8   Legal Holidays.............................................................   61
Section 11.9   Governing Law..............................................................   61
Section 11.10  No Recourse Against Others.................................................   61
Section 11.11  Successors.................................................................   61
Section 11.12  Multiple Originals.........................................................   62
</TABLE>

                                       iv
<PAGE>

                             CROSS-REFERENCE TABLE*


Trust Indenture Act Section                                   Indenture Section

310(a)(1)..................................................................7.10
(a)(2) ....................................................................7.10
(a)(3).....................................................................N.A.
(a)(4).....................................................................N.A.
(a)(5).....................................................................N.A.
(b)...................................................................7.8, 7.10
(c)........................................................................N.A.
311(a).....................................................................7.11
(b)........................................................................7.11
(c)........................................................................N.A.
312(a)......................................................................2.5
(b)........................................................................11.3
(c)........................................................................11.3
313(a)......................................................................7.6
(b)(1)......................................................................7.6
(b)(2)......................................................................7.6
(c).........................................................................7.6
(d).........................................................................7.6
314(a).................................................................4.2, 4.3
(b)........................................................................N.A.
(c)(1).....................................................................11.4
(c)(2).....................................................................11.4
(c)(3).....................................................................N.A.
(d)........................................................................N.A.
(e)........................................................................11.5
(f)........................................................................N.A.
315(a)...................................................................7.1(b)
(b).........................................................................7.5
(c) .....................................................................7.1(a)
(d)......................................................................7.1(c)
(e)........................................................................6.11
316(a)(1)(A)................................................................6.5
(a)(1)(B)...................................................................6.4
(a)(2).....................................................................N.A.
(b).........................................................................6.7
(c)......................................................................1.5(e)
317(a)(1)...................................................................6.8
(a)(2)......................................................................6.9
(b).........................................................................2.4
318(a).....................................................................N.A.

N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>

        INDENTURE dated as of November 30, 2001 between HASBRO, INC., a
corporation duly organized and existing under the laws of the State of Rhode
Island ("Company") and THE BANK OF NOVA SCOTIA TRUST COMPANY OF NEW YORK, a New
York banking corporation ("Trustee").

        Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the Company's 2.75% Convertible
Senior Debentures due 2021:

                                   ARTICLE I

                        DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.1    DEFINITIONS.

        "Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" when used with respect to any specified person means the power to
direct or cause the direction of the management and policies of such person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.

        "Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Security or beneficial interest therein, the
rules and procedures of the Depositary for such Global Security, in each case to
the extent applicable to such transaction and as in effect from time to time.

        "Board of Directors" means either the board of directors of the Company,
the executive committee of such board or any duly authorized committee of such
board.

        "Business Day" means, with respect to any Security, a day that in the
City of New York, is not a day on which banking institutions are authorized by
law or regulation to close.

        "Capital Stock" for any corporation means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) stock issued by that corporation.

        "Certificated Securities" means Securities that are in the form of the
Securities attached hereto as Exhibit A-2.

        "Common Stock" shall mean the shares of common stock, par value $0.50
per share, of the Company existing on the date of this Indenture or any other
shares of Capital Stock of the Company into which such common stock shall be
reclassified or changed.

        "Company" means the party named as the "Company" in the first paragraph
of this Indenture until a successor replaces it pursuant to the applicable
provisions of this Indenture and, thereafter, shall mean such successor. The
foregoing sentence shall likewise apply to any subsequent such successor or
successors.


                                       1
<PAGE>

        "Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman, its President, its Chief Operating Officer, its Chief Financial
Officer, or an Executive Vice President, and by its Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary, and delivered to the
Trustee.

        "Continuing Directors" means, as of any date of determination, any
member of the Board of Directors who (i) was a member of such Board of Directors
on the date of this Indenture or (ii) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board of Directors at the time of such
nomination or election.

        "Corporate Trust Office" means the principal office of the Trustee at
which at any time its corporate trust business shall be administered, which
office at the date hereof is located at One Liberty Plaza, New York, New York
10006, Attention: Corporate Trust Administration, or such other address as the
Trustee may designate from time to time by notice to the Holders and the
Company, or the principal corporate trust office of any successor Trustee (or
such other address as a successor Trustee may designate from time to time by
notice to the Holders and the Company).

        "Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.

        "Depositary" means, with respect to any Global Security, a clearing
agency that is registered as such under the Exchange Act and is designated by
the Company to act as Depositary for such Global Security (or any successor
securities clearing agency so registered), which shall initially be DTC.

        "Global Securities" means Securities that are in the form of the
Securities attached hereto as Exhibit A-1, and that are issued to a Depositary.

        "Holder" or "Securityholder" means a person in whose name a Security is
registered on the Registrar's books.

        "Indebtedness" means, without duplication, the principal or face amount
of (i) all obligations for borrowed money, (ii) all obligations evidenced by
debentures, notes or other similar instruments, (iii) all obligations in respect
of letters of credit or bankers acceptances or similar instruments (or
reimbursement obligations with respect thereto), (iv) all obligations to pay the
deferred purchase price of property or services, except trade accounts payable
arising in the ordinary course of business, (v) all obligations as lessee which
are capitalized in accordance with generally accepted accounting principles, and
(vi) all Indebtedness of others guaranteed by the Company or any of its
Subsidiaries or for which the Company or any of its Subsidiaries is legally
responsible or liable (whether by agreement to purchase indebtedness of, or to
supply funds or to invest in, others).

        "Indenture" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof, including the provisions of the TIA
that are deemed to be a part hereof.

                                       2
<PAGE>
        "Issue Date" of any Security means the date on which the Security was
originally issued or deemed issued as set forth on the face of the Security.

        "Liquidated Damages" has the meaning specified in the Registration
Agreement dated as of November 30, 2001, between the Company and Salomon Smith
Barney Inc.

        "Material Subsidiary" means any subsidiary of the Company which at the
date of determination is a "significant subsidiary" as defined in Rule 1-02(w)
of Regulation S-X under the Securities Act and the Exchange Act.

        "NYSE" means The New York Stock Exchange.

        "Officer" means the Chairman of the Board, the Vice Chairman, the
President, the Chief Operating Officer, the Chief Financial Officer, any
Executive Vice President, any Senior Vice President, any Vice President, the
Controller, the Treasurer, the Secretary, any Assistant Treasurer or any
Assistant Secretary

        "Officers' Certificate" means a written certificate containing the
information specified in Sections 11.4 and 11.5, signed in the name of the
Company by the Chairman of the Board, the Vice Chairman, the President, the
Chief Operating Officer or an Executive Vice President, and by the Chief
Financial Officer, Controller, the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary, of the Company, and delivered to the
Trustee. An Officers' Certificate given pursuant to Section 4.3 shall be signed
by an authorized financial or accounting officer of the Company but need not
contain the information specified in Sections 11.4 and 11.5.

        "Opinion of Counsel" means a written opinion containing the information
specified in Sections 11.4 and 11.5, from legal counsel who is reasonably
acceptable to the Trustee. The counsel may be an employee of, or counsel to, the
Company or the Trustee.

        "person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, or government or any agency or political
subdivision thereof.

        "Redemption Date" or "redemption date" shall mean the date specified in
a notice of redemption on which the Securities may be redeemed in accordance
with the terms of the Securities and this Indenture.

        "Redemption Price" or "redemption price" shall have the meaning set
forth in Paragraph 5 of the Securities.

        "Responsible Officer" shall mean, when used with respect to the Trustee,
any officer within the corporate trust administration division of the Trustee or
any other officer of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.

                                       3
<PAGE>
        "Restricted Common Stock Legend" means the legend labeled as such and
that is set forth in Exhibit C hereto.

        "Restricted Security" means a Security required to bear the restrictive
legend set forth in the form of Security set forth in Exhibits A-1 and A-2 of
this Indenture.

        "Rule 144A" means Rule 144A under the Securities Act (or any successor
provision), as it may be amended from time to time.

        "SEC" means the Securities and Exchange Commission.

        "Securities" means any of the Company's 2.75% Convertible Senior
Debentures due 2021, as amended or supplemented from time to time, issued under
this Indenture.

        "Securityholder" or "Holder" means a person in whose name a Security is
registered on the Registrar's books.

        "Shelf Registration Statement" shall have the meaning set forth in the
Registration Agreement.

        "Stated Maturity", when used with respect to any Security, means
December 1, 2021.

        "Subsidiary" means any person of which at least a majority of the
outstanding Voting Stock shall at the time directly or indirectly be owned or
controlled by the Company or by one or more Subsidiaries or by the Company and
one or more Subsidiaries.

        "TIA" means the Trust Indenture Act of 1939 as in effect on the date of
this Indenture, provided, however, that in the event the TIA is amended after
such date, TIA means, to the extent required by any such amendment, the TIA as
so amended.

        "trading day" means a day during which trading in securities generally
occurs on the NYSE or, if the Common Stock is not listed on the NYSE, on the
principal other national or regional securities exchange on which the Common
Stock then is listed or, if the Common Stock is not listed on a national or
regional securities exchange, on the National Association of Securities Dealers
Automated Quotation System or, if the Common Stock is not quoted on the National
Association of Securities Dealers Automated Quotation System, on the principal
other market on which the Common Stock is then traded.

        "Trustee" means the party named as the "Trustee" in the first paragraph
of this Indenture until a successor replaces it pursuant to the applicable
provisions of this Indenture and, thereafter, shall mean such successor. The
foregoing sentence shall likewise apply to any subsequent such successor or
successors.

        "Vice President," when used with respect to the Company, means any vice
president, whether or not designated by a number or a word or words added before
or after the title "vice president."

                                       4
<PAGE>
        "Voting Stock" of a person means Capital Stock of such person of the
class or classes pursuant to which the holders thereof have the general voting
power under ordinary circumstances to elect at least a majority of the board of
directors, managers or trustees of such person (irrespective of whether or not
at the time Capital Stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency).

Section 1.2    OTHER DEFINITIONS.

<TABLE>
<CAPTION>
Term Section:                                                              Defined in:
<S>                                                                        <C>
"Accreted Conversion Price"..........................................      Exhibit A-1
"Accreted Value".....................................................      Exhibit A-1
"Act"................................................................      1.5
"Administrative Action"..............................................      Exhibit A-1
"Agent Members"......................................................      2.12(e)
"Average Sale Price".................................................      10.7
"beneficial owner"...................................................      3.8(a)
"cash"...............................................................      3.7(b)
"Clearstream"........................................................      2.1(a)
"Company Notice".....................................................      3.7(e)
"Company Notice Date"................................................      3.7(c)
"Conversion Agent"...................................................      2.3
"Conversion Date"....................................................      10.2
"Conversion Rate"....................................................      10.1
"Euroclear"..........................................................      2.1(a)
"Event of Default"...................................................      6.1
"Exchange Act".......................................................      3.7(d)
"Ex-Dividend Time"...................................................      10.1
"Extraordinary Cash Dividend"........................................      10.8
"Fundamental Change".................................................      3.8(a)
"Fundamental Change Purchase Date"...................................      3.8(a)
"Fundamental Change Purchase Notice".................................      3.8(b)
"Fundamental Change Purchase Price"..................................      3.8(a)
"Interest Payment Date"..............................................      Exhibit A-1
"Legal Holiday"......................................................      11.8
"Legend".............................................................      2.6(f)
"Market Price".......................................................      3.7(d)
"Notice of Default"..................................................      6.1
"Option Exercise Date"...............................................      Exhibit A-1
"Paying Agent".......................................................      2.3
"Payment Default"....................................................      6.1(6)
"Purchase Date"......................................................      3.7(a)
"Purchase Notice"....................................................      3.7(a)
"Purchase Price".....................................................      3.7(a)
"QIB"................................................................      2.1(a)
"Reference Fixed Rate"...............................................      Exhibit A-1
"Registrar"..........................................................      2.3
</TABLE>

                                       5
<PAGE>

<TABLE>
<CAPTION>
<S>                                                                        <C>
"Regular Record Date"................................................      Exhibit A-1
"Regulation S".......................................................      2.1(a)
"Reset Rate".........................................................      Exhibit A-1
"Reset Rate Agent"...................................................      Exhibit A-1
"Rule 144A"..........................................................      2.1(a)
"Rule 144A Information"..............................................      4.6
"Sale Price".........................................................      3.7(d)
"Securities Act".....................................................      3.7(d)
"Tax Event"..........................................................      Exhibit A-1
"Time of Determination"..............................................      10.1
"Upward Interest Adjustment".........................................      Exhibit A-1
</TABLE>

        Section 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever
this Indenture refers to a provision of the TIA, the provision is incorporated
by reference in and made a part of this Indenture. The following TIA terms used
in this Indenture have the following meanings:

               "Commission" means the SEC.

               "indenture securities" means the Securities.

               "indenture security holder" means a Securityholder.

               "indenture to be qualified" means this Indenture.

               "indenture trustee" or "institutional trustee" means the Trustee.

               "obligor" on the indenture securities means the Company.

        All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.

        Section 1.4 RULES OF CONSTRUCTION. Unless the context otherwise
requires:

        (1) a term has the meaning assigned to it;

        (2) an accounting term not otherwise defined has the meaning assigned to
it in accordance with generally accepted accounting principles as in effect in
the United States from time to time;

        (3) "or" is not exclusive;

        (4) "including" means including, without limitation; and

        (5) words in the singular include the plural, and words in the plural
include the singular.
                                       6
<PAGE>

        Section 1.5 ACTS OF HOLDERS. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by agent duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and conclusive in favor of the Trustee and the
Company, if made in the manner provided in this Section.

        (b) The fact and date of the execution by any person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to such officer the execution thereof.
Where such execution is by a signer acting in a capacity other than such
signer's individual capacity, such certificate or affidavit shall also
constitute sufficient proof of such signer's authority. The fact and date of the
execution of any such instrument or writing, or the authority of the person
executing the same, may also be proved in any other manner which the Trustee
deems sufficient.

        (c) The ownership of Securities shall be proved by the register for the
Securities.

        (d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.

        (e) If the Company shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
at its option, by or pursuant to a board resolution, fix in advance a record
date for the determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other Act, but the Company
shall have no obligation to do so. If such a record date is fixed, such request,
demand, authorization, direction, notice, consent, waiver or other Act may be
given before or after such record date, but only the Holders of record at the
close of business on such record date shall be deemed to be Holders for the
purposes of determining whether Holders of the requisite proportion of
outstanding Securities have authorized or agreed or consented to such request,
demand, authorization, direction, notice, consent, waiver or other Act, and for
that purpose the outstanding Securities shall be computed as of such record
date; provided that no such authorization, agreement or consent by the Holders
on such record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture not later than six months after the
record date.

                                       7
<PAGE>

                                   ARTICLE II

                                 THE SECURITIES

        Section 2.1 FORM AND DATING. The Securities and the Trustee's
certificate of authentication shall be substantially in the form of Exhibits A-1
and A-2, which are a part of this Indenture. To the extent any provisions of the
Securities and this Indenture are in conflict, the provisions of this Indenture
shall control. The Securities may have notations, legends or endorsements
required by law, stock exchange rule or usage (provided that any such notation,
legend or endorsement required by usage is in a form acceptable to the Company).
The Company shall provide any such notations, legends or endorsements to the
Trustee in writing. Each Security shall be dated the date of its authentication.

        (a) 144A/REGULATION S GLOBAL SECURITIES. The Securities are being
offered and sold (i) in reliance on Regulation S under the Securities Act
("Regulation S") or (ii) to "qualified institutional buyers" as defined in Rule
144A ("QIBs") in reliance on Rule 144A under the Securities Act ("Rule 144A"),
and shall be issued in the form of one or more permanent Global Securities
substantially in the form of Exhibit A-1. Such Global Securities shall be
deposited on behalf of the purchasers of the Securities represented thereby with
the Trustee, as custodian for the Depositary, and registered in the name of the
Depositary or a nominee of the Depositary for the accounts of participants in
the Depositary (and, in the case of Securities held in accordance with
Regulation S, registered with the Depositary for the accounts of designated
agents holding on behalf of the Euroclear System ("Euroclear") or Clearstream
Banking, societe anonyme ("Clearstream")), duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of a Global Security may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its nominee
as hereinafter provided.

        (b) GLOBAL SECURITIES IN GENERAL. Each Global Security shall represent
such of the outstanding Securities as shall be specified therein and each shall
provide that it shall represent the aggregate amount of outstanding Securities
from time to time endorsed thereon and that the aggregate amount of outstanding
Securities represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges, redemptions and conversions.

        Any adjustment of the aggregate principal amount of a Global Security to
reflect the amount of any increase or decrease in the amount of outstanding
Securities represented thereby shall be made by the Trustee in accordance with
instructions given by the Holder thereof as required by Section 2.12 hereof and
shall be made on the records of the Trustee and the Depositary.

        (c) BOOK-ENTRY PROVISIONS. This Section 2.1(c) shall apply only to
Global Securities deposited with or on behalf of the Depositary.

        The Company shall execute and the Trustee shall, in accordance with this
Section 2.1(c), authenticate and deliver initially one or more Global Securities
that (a) shall be registered in the name of the Depositary, (b) shall be
delivered by the Trustee to the Depositary or pursuant to the Depositary's
instructions and (c) shall bear legends substantially to the following effect:

                                       8
<PAGE>

               "UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
               REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR
               ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
               ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
               IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
               REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT
               HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
               REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
               COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
               OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED
               OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

               TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
               TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A SUCCESSOR
               THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF
               THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
               ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE TWO OF THE
               INDENTURE REFERRED TO ON THE REVERSE HEREOF."

        (d) CERTIFICATED SECURITIES. In the event that the Securities are issued
as Certificated Securities, including pursuant to Section 2.12(a)(ii), such
Securities will be issued substantially in the form of Exhibit A-2 attached
hereto.

        Section 2.2 EXECUTION AND AUTHENTICATION. The Securities shall be
executed on behalf of the Company by any Officer. The signature of the Officer
on the Securities may be manual or facsimile.

        Securities bearing the manual or facsimile signatures of individuals who
were at the time of the execution of the Securities Officers of the Company
shall bind the Company, notwithstanding that such individuals or any of them
have ceased to hold such offices prior to the authentication and delivery of
such Securities or did not hold such offices at the date of authentication of
such Securities.

        No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein duly
executed by the Trustee by manual signature of an authorized officer, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder.

                                       9
<PAGE>
        The Trustee shall authenticate and deliver the Securities for original
issue in an aggregate principal amount of up to $250,000,000 upon one or more
Company Orders without any further action by the Company. The aggregate
principal amount of the Securities due at the Stated Maturity thereof
outstanding at any time may not exceed the amount set forth in the foregoing
sentence, except as provided in Section 2.7 and upon the occurrence of an Upward
Interest Adjustment and a Tax Event as contemplated in the form of Security
attached hereto as Exhibit A-1.

        The Securities shall be issued only in registered form without coupons
and only in denominations of $1,000 of principal amount (or the related Accreted
Value if a Tax Event has occurred) and any integral multiple thereof.

        Section 2.3   REGISTRAR, PAYING AGENT AND CONVERSION AGENT. The Company
shall maintain an office or agency where Securities may be presented for
registration of transfer or for exchange ("Registrar"), an office or agency
where Securities may be presented for purchase or payment ("Paying Agent") and
an office or agency where Securities may be presented for conversion
("Conversion Agent"). The Registrar shall keep a register of the Securities and
of their transfer and exchange. The Company may have one or more co-registrars,
one or more additional paying agents and one or more additional conversion
agents. The term Paying Agent includes any additional paying agent, including
any named pursuant to Section 4.5. The term Conversion Agent includes any
additional conversion agent, including any named pursuant to Section 4.5.

        The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent, Conversion Agent or co-registrar (that is not also the
Trustee). The agreement shall implement the provisions of this Indenture that
relate to such agent. The Company shall notify the Trustee of the name and
address of any such agent. If the Company fails to maintain a Registrar, Paying
Agent or Conversion Agent, the Trustee shall act as such and shall be entitled
to appropriate compensation therefor pursuant to Section 7.7. The Company or any
Subsidiary or an Affiliate of either of them may act as Paying Agent, Registrar,
Conversion Agent or co-registrar.

        The Company initially appoints the Trustee as Registrar, Conversion
Agent and Paying Agent in connection with the Securities.

        Section 2.4 PAYING AGENT TO HOLD MONEY AND SECURITIES IN TRUST. Except
as otherwise provided herein, on or prior to each due date of payments in
respect of any Security, the Company shall deposit with the Paying Agent a sum
of money (in immediately available funds if deposited on the due date) or shares
of Common Stock sufficient to make such payments when so becoming due. The
Company shall require each Paying Agent (other than the Trustee) to agree in
writing that the Paying Agent shall hold in trust for the benefit of
Securityholders or the Trustee all money and shares of Common Stock held by the
Paying Agent for the making of payments in respect of the Securities and shall
notify the Trustee of any default by the Company in making any such payment. At
any time during the continuance of any such default, the Paying Agent shall,
upon the written request of the Trustee, forthwith pay to the Trustee all money
and shares of Common Stock so held in trust. If the Company, a Subsidiary or an
Affiliate of either of them acts as Paying Agent, it shall segregate the money
and shares of


                                       10
<PAGE>
Common Stock held by it as Paying Agent and hold it as a separate trust fund.
The Company at any time may require a Paying Agent to pay all money and shares
of Common Stock held by it to the Trustee and to account for any funds and
Common Stock disbursed by it. Upon doing so, the Paying Agent shall have no
further liability for the money or shares of Common Stock.

        Section 2.5 SECURITYHOLDER LISTS. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall cause the Registrar to furnish to the Trustee at
least semiannually on June 1 and December 1 a listing of Securityholders dated
within 15 days of the date on which the list is furnished and at such other
times as the Trustee may request in writing a list in such form and as of such
date as the Trustee may reasonably require of the names and addresses of
Securityholders.

        Section 2.6 TRANSFER AND EXCHANGE. (a) Subject to Section 2.12 hereof,
upon surrender for registration of transfer of any Security, together with a
written instrument of transfer satisfactory to the Registrar duly executed by
the Securityholder or such Securityholder's attorney duly authorized in writing,
at the office or agency of the Company designated as Registrar or co-registrar
pursuant to Section 2.3, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities of any authorized denomination or
denominations, of a like aggregate principal amount (or the related Accreted
Value if a Tax Event has occurred). The Company shall not charge a service
charge for any registration of transfer or exchange, but the Company may require
payment of a sum sufficient to pay all taxes, assessments or other governmental
charges that may be imposed in connection with the transfer or exchange of the
Securities from the Securityholder requesting such transfer or exchange.

        At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination or denominations, of a like aggregate
principal amount (or the related Accreted Value if a Tax Event has occurred),
upon surrender of the Securities to be exchanged, together with a written
instrument of transfer satisfactory to the Registrar duly executed by the
Securityholder or such Securityholder's attorney duly authorized in writing, at
such office or agency. Whenever any Securities are so surrendered for exchange,
the Company shall execute, and the Trustee shall authenticate and deliver, the
Securities, which the Holder making the exchange is entitled to receive.

        The Company shall not be required to make, and the Registrar need not
register, transfers or exchanges of Securities selected for redemption (except,
in the case of Securities to be redeemed in part, the portion thereof not to be
redeemed) or any Securities in respect of which a Purchase Notice or Fundamental
Change Purchase Notice has been given and not withdrawn by the Holder thereof in
accordance with the terms of this Indenture (except, in the case of Securities
to be purchased in part, the portion thereof not to be purchased) or any
Securities for a period of 15 days before the selection of Securities to be
redeemed in part.

        (b) Notwithstanding any provision to the contrary herein, so long as a
Global Security remains outstanding and is held by or on behalf of the
Depositary, transfers of a Global Security, in whole or in part, shall be made
only in accordance with Section 2.12 and this Section 2.6(b). Transfers of a
Global Security shall be limited to transfers of such Global Security in whole
or in


                                       11
<PAGE>
part, to the Depositary, to nominees of the Depositary or to a successor of the
Depositary or such successor's nominee.

        (c) Successive registrations and registrations of transfers and
exchanges as aforesaid may be made from time to time as desired, and each such
registration shall be noted on the register for the Securities.

        (d) Any Registrar appointed pursuant to Section 2.3 hereof shall provide
to the Trustee such information as the Trustee may reasonably require in
connection with the delivery by such Registrar of Securities upon transfer or
exchange of Securities.

        (e) No Registrar shall be required to make registrations of transfer or
exchange of Securities during any periods designated in the text of the
Securities or in this Indenture as periods during which such registration of
transfers and exchanges need not be made.

        (f) If Securities are issued upon the transfer, exchange or replacement
of Securities subject to restrictions on transfer and bearing the legends set
forth on the forms of Security attached hereto as Exhibits A-1 and A-2 setting
forth such restrictions (collectively, the "Legend"), or if a request is made to
remove the Legend on a Security, the Securities so issued shall bear the Legend,
or the Legend shall not be removed, as the case may be, unless there is
delivered to the Company and the Registrar such satisfactory evidence (which in
the case of a transfer pursuant to Rule 144 under the Securities Act may include
an Opinion of Counsel), as may be reasonably required by the Company and the
Registrar, that neither the Legend nor the restrictions on transfer set forth
therein are required to ensure that transfers thereof comply with the provisions
of Rule 144A, Regulation S or Rule 144 under the Securities Act or that such
Securities are not "restricted" within the meaning of Rule 144 under the
Securities Act. Upon (i) provision of such satisfactory evidence, or (ii)
notification by the Company to the Trustee and Registrar of the sale of such
Security pursuant to a registration statement that is effective at the time of
such sale, the Trustee, at the written direction of the Company, shall
authenticate and deliver a Security that does not bear the Legend. If the Legend
is removed from the face of a Security and the Security is subsequently held by
the Company or an Affiliate of the Company, the Legend shall be reinstated.

        Section 2.7 REPLACEMENT SECURITIES. If (a) any mutilated Security is
surrendered to the Trustee, or (b) the Company and the Trustee receive evidence
to their satisfaction of the destruction, loss or theft of any Security, and
there is delivered to the Company and the Trustee such security or indemnity as
may be required by them to save each of them harmless, then, in the absence of
notice to the Company or the Trustee that such Security has been acquired by a
protected purchaser, the Company shall execute and upon its written request the
Trustee shall authenticate and deliver, in exchange for any such mutilated
Security or in lieu of any such destroyed, lost or stolen Security, a new
Security of like tenor and principal amount (or the related Accreted Value if a
Tax Event has occurred), bearing a certificate number not contemporaneously
outstanding.

        In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, or is about to be purchased by the
Company pursuant to Article 3

                                       12
<PAGE>
hereof, the Company in its discretion may, instead of issuing a new Security,
pay or purchase such Security, as the case may be.

        Upon the issuance of any new Securities under this Section 2.7, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.

        Every new Security issued pursuant to this Section 2.7 in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all benefits of this Indenture equally and proportionately with any
and all other Securities duly issued hereunder.

        The provisions of this Section 2.7 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.

        Section 2.8   OUTSTANDING SECURITIES; DETERMINATIONS OF HOLDERS' ACTION
SECURITIES. Securities outstanding at any time are all the Securities
authenticated by the Trustee except for those cancelled by it, those paid
pursuant to Section 2.7, those delivered to it for cancellation and those
described in this Section 2.8 as not outstanding. A Security does not cease to
be outstanding because the Company or an Affiliate thereof holds the Security;
provided, however, that in determining whether the Holders of the requisite
principal amount of Securities have given or concurred in any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which a Responsible Officer of the Trustee
actually knows to be so owned shall be so disregarded. Subject to the foregoing,
only Securities outstanding at the time of such determination shall be
considered in any such determination (including, without limitation,
determinations pursuant to Articles 6 and 9).

        If a Security is replaced pursuant to Section 2.7, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a protected purchaser.

        If the Paying Agent holds, in accordance with this Indenture, on a
Redemption Date, or on the Business Day following a Purchase Date or a
Fundamental Change Purchase Date, or on Stated Maturity, money or securities, if
permitted hereunder, sufficient to pay Securities payable on that date, then
immediately after such Redemption Date, Purchase Date, Fundamental Change
Purchase Date or Stated Maturity, as the case may be, such Securities shall
cease to be outstanding and interest, if any, on such Securities shall cease to
accrue; provided, that if such Securities are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made.

                                       13
<PAGE>

        If a Security is converted in accordance with Article X, then from and
after the Conversion Date, such Security shall cease to be outstanding and
interest, if any, shall cease to accrue on such Security.

        Section 2.9   TEMPORARY SECURITIES. Pending the preparation of
definitive Securities, the Company may execute, and upon Company Order the
Trustee shall authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as conclusively evidenced by their execution of such Securities.

        If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 2.3,
without charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount (or the
related Accreted Value if a Tax Event has occurred) of definitive Securities of
authorized denominations. Until so exchanged the temporary Securities shall in
all respects be entitled to the same benefits under this Indenture as definitive
Securities.

        Section 2.10 CANCELLATION. All Securities surrendered for payment,
purchase by the Company pursuant to Article 3, conversion, redemption or
registration of transfer or exchange shall, if surrendered to any person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled by
it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly cancelled by the Trustee. The Company may not issue new
Securities to replace Securities it has paid or delivered to the Trustee for
cancellation or that any Holder has converted pursuant to Article X. No
Securities shall be authenticated in lieu of or in exchange for any Securities
cancelled as provided in this Section, except as expressly permitted by this
Indenture. All cancelled Securities held by the Trustee shall be disposed of by
the Trustee in accordance with the Trustee's customary procedure.

        Section 2.11 PERSONS DEEMED OWNERS. Prior to due presentment of a
Security for registration of transfer, the Company, the Trustee and any agent of
the Company or the Trustee may treat the person in whose name such Security is
registered in the records of the Registrar as the owner of such Security for the
purpose of receiving payment of principal of the Security or the payment of any
Redemption Price, Purchase Price or Fundamental Change Purchase Price in respect
thereof, and interest thereon, for the purpose of conversion and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.

        Section 2.12 GLOBAL SECURITIES. (a) Notwithstanding any other provisions
of this Indenture or the Securities, (A) transfers of a Global Security, in
whole or in part, shall be made


                                       14
<PAGE>
only in accordance with Section 2.6(b) and Section 2.12(a)(i), (B) transfers of
a beneficial interest in a Global Security for a Certificated Security shall
comply with Section 2.6 and Section 2.12(a)(ii) below, and (C) transfers of a
Certificated Security shall comply with Section 2.6 and Sections 2.12(a)(iii)
and (iv) below.

                (i) Transfer of Global Security. A Global Security may not be
        transferred, in whole or in part, to any person other than the
        Depositary or one or more nominees or any successor thereof, and no such
        transfer to any such other person may be registered; provided that this
        clause (i) shall not prohibit any transfer of a Security that is issued
        in exchange for a Global Security but is not itself a Global Security.
        No transfer of a Security to any person shall be effective under this
        Indenture or the Securities unless and until such Security has been
        registered in the name of such person. Nothing in this Section
        2.12(a)(i) shall prohibit or render ineffective any transfer of a
        beneficial interest in a Global Security effected in accordance with the
        other provisions of this Section 2.12(a).

                (ii) Restrictions on Transfer of a Beneficial Interest in a
        Global Security for a Certificated Security. A beneficial interest in a
        Global Security may not be exchanged for a Certificated Security except
        upon the circumstances contemplated in Section 2.12(e)(1) below and
        additionally, upon satisfaction of the requirements set forth below.
        Upon receipt by the Trustee of a transfer of a beneficial interest in a
        Global Security in accordance with Applicable Procedures for a
        Certificated Security in the form satisfactory to the Trustee, together
        with:

                (A)     so long as the Securities are Restricted Securities,
                        certification in the form set forth in Exhibit B,

                (B)     written instructions to the Trustee to make, or direct
                        the Registrar to make, an adjustment on its books and
                        records with respect to such Global Security to reflect
                        a decrease in the aggregate principal amount of the
                        Securities represented by the Global Security, such
                        instructions to contain information regarding the
                        Depositary account to be credited with such decrease,
                        and

                (C)     if the Company so requests, an opinion of counsel or
                        other evidence reasonably satisfactory to it as to the
                        compliance with the restrictions set forth in the
                        Legend,

        the Trustee shall cause, or direct the Registrar to cause, in accordance
        with the standing instructions and procedures existing between the
        Depositary and the Registrar, the aggregate principal amount of the
        Securities represented by the Global Security to be decreased by the
        aggregate principal amount of the Certificated Security to be issued,
        shall issue such Certificated Security and shall debit or cause to be
        debited to the account of the person specified in such instructions a
        beneficial interest in the Global Security equal to the principal amount
        or the related Accreted Value of the Certificated Security so issued.

                                       15
<PAGE>

                (iii) Transfer and Exchange of Certificated Securities. When
        Certificated Securities are presented to the Registrar with a request:

                      (y) to register the transfer of such Certificated
                 Securities; or

                      (z) to exchange such Certificated Securities for an equal
                 principal amount of Certificated Securities of other authorized
                 denominations,

        the Registrar shall register the transfer or make the exchange as
        requested if its reasonable requirements for such transaction are met;
        provided, however, that the Certificated Securities surrendered for
        transfer or exchange:

        (1)     shall be duly endorsed or accompanied by a written instrument of
                transfer in form reasonably satisfactory to the Company and the
                Registrar, duly executed by the Holder thereof or his attorney
                duly authorized in writing; and

        (2)     so long as such Securities are Restricted Securities, such
                Securities are being transferred or exchanged pursuant to an
                effective registration statement under the Securities Act or
                pursuant to clause (A), (B) or (C) below, and are accompanied by
                the following additional information and documents, as
                applicable:

                (A)     if such Certificated Securities are being delivered to
                        the Registrar by a Holder for registration in the name
                        of such Holder, without transfer, a certification from
                        such Holder to that effect; or

                (B)     if such Certificated Securities are being transferred to
                        the Company, a certification to that effect; or

                (C)     if such Certificated Securities are being transferred
                        pursuant to an exemption from registration, (i) a
                        certification to that effect (in the form set forth in
                        Exhibit B, if applicable) and (ii) if the Company so
                        requests, an opinion of counsel or other evidence
                        reasonably satisfactory to it as to the compliance with
                        the restrictions set forth in the Legend.

                (iv) Restrictions on Transfer of a Certificated Security for a
        Beneficial Interest in a Global Security. A Certificated Security may
        not be exchanged for a beneficial interest in a Global Security except
        upon satisfaction of the requirements set forth below.

                Upon receipt by the Trustee of a Certificated Security, duly
        endorsed or accompanied by appropriate instruments of transfer, in form
        satisfactory to the Trustee, together with:

                (I) so long as the Securities are Restricted Securities,
        certification, in the form set forth in Exhibit B-1, that such
        Certificated Security is being transferred in accordance with Rule 144A,
        Regulation S or Rule 144; and

               (II) written instructions directing the Trustee to make, or to
        direct the Registrar to make, an adjustment on its books and records
        with respect to such Global Security to


                                       16
<PAGE>
        reflect an increase in the aggregate principal amount of the Securities
        represented by the Global Security, such instructions to contain
        information regarding the Depositary account to be credited with such
        increase, then the Trustee shall cancel such Certificated Security and
        cause, or direct the Registrar to cause, in accordance with the standing
        instructions and procedures existing between the Depositary and the
        Registrar, the aggregate principal amount of Securities represented by
        the Global Security to be increased by the aggregate principal amount of
        the Certificated Security to be exchanged, and shall credit or cause to
        be credited to the account of the person specified in such instructions
        a beneficial interest in the Global Security equal to the principal
        amount of the Certificated Security so cancelled. If no Global
        Securities are then outstanding, the Company shall issue and the Trustee
        shall authenticate, upon written order of the Company in the form of an
        Officers' Certificate, a new Global Security in the appropriate
        principal amount.

        (b) Subject to the succeeding paragraph (c), every Security shall be
subject to the restrictions on transfer provided in the Legend. Whenever any
Restricted Security is presented or surrendered for registration of transfer or
for exchange for a Security registered in a name other than that of the Holder,
such Security must be accompanied by a certificate in substantially the form set
forth in Exhibit B, dated the date of such surrender and signed by the Holder of
such Security, as to compliance with such restrictions on transfer. The
Registrar shall not be required to accept for such registration of transfer or
exchange any Security not so accompanied by a properly completed certificate.

        (c) The restrictions imposed by the Legend upon the transferability of
any Security shall cease and terminate when such Security has been sold pursuant
to an effective registration statement under the Securities Act or transferred
in compliance with Rule 144 under the Securities Act (or any successor provision
thereto) or, if earlier, upon the expiration of the holding period applicable to
sales thereof under Rule 144(k) under the Securities Act (or any successor
provision). Any Security as to which such restrictions on transfer shall have
expired in accordance with their terms or shall have terminated may, upon a
surrender of such Security for exchange to the Registrar in accordance with the
provisions of this Section 2.12 (accompanied, in the event that such
restrictions on transfer have terminated by reason of a transfer in compliance
with Rule 144 or any successor provision, by an opinion of counsel having
substantial experience in practice under the Securities Act and otherwise
reasonably acceptable to the Company, addressed to the Company and in form
acceptable to the Company, to the effect that the transfer of such Security has
been made in compliance with Rule 144 or such successor provision), be exchanged
for a new Security, of like tenor and aggregate principal amount, which shall
not bear the restrictive Legend. The Company shall inform the Trustee of the
effective date of any registration statement registering the resale of the
Securities under the Securities Act. The Trustee shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
aforementioned opinion of counsel or registration statement.

        (d) As used in the preceding two paragraphs of this Section 2.12, the
term "transfer" encompasses any sale, pledge, transfer, loan, hypothecation, or
other disposition of any Security.

        (e) The provisions of clauses (1), (2), (3) and (4) below shall apply
only to Global Securities:

                                       17
<PAGE>

                (1)     Notwithstanding any other provisions of this Indenture
                        or the Securities, a Global Security shall not be
                        exchanged in whole or in part for a Security registered
                        in the name of any person other than the Depositary or
                        one or more nominees or any successor thereof, provided
                        that a Global Security may be exchanged for Securities
                        registered in the names of any person designated by the
                        Depositary in the event that (i) the Depositary has
                        notified the Company that it is unwilling or unable to
                        continue as Depositary for such Global Security or such
                        Depositary has ceased to be a "clearing agency"
                        registered under the Exchange Act, and a successor
                        Depositary is not appointed by the Company within 90
                        days, (ii) an Event of Default has occurred and is
                        continuing with respect to the Securities or (iii) the
                        Company in its sole discretion elects not to have the
                        Securities represented by a Global Security and to cause
                        the issuance of Certificated Securities. Any Global
                        Security exchanged pursuant to clause (i) or (iii) above
                        shall be so exchanged in whole and not in part, and any
                        Global Security exchanged pursuant to clause (ii) above
                        may be exchanged in whole or from time to time in part
                        as directed by the Depositary. Any Security issued in
                        exchange for a Global Security or any portion thereof
                        shall be a Global Security; provided that any such
                        Security so issued that is registered in the name of a
                        person other than the Depositary or a nominee thereof
                        shall not be a Global Security and shall be deemed a
                        Certificated Security.

                (2)     Securities issued in exchange for a Global Security or
                        any portion thereof shall be issued in definitive, fully
                        registered form, without interest coupons, shall have an
                        aggregate principal amount (or the related Accreted
                        Value if a Tax Event has occurred) equal to that of such
                        Global Security or portion thereof to be so exchanged,
                        shall be registered in such names and be in such
                        authorized denominations as the Depositary shall
                        designate and shall bear the applicable legends provided
                        for herein. Any Global Security to be exchanged in whole
                        shall be surrendered by the Depositary to the Trustee,
                        as Registrar. With regard to any Global Security to be
                        exchanged in part, either such Global Security shall be
                        so surrendered for exchange or, if the Trustee is acting
                        as custodian for the Depositary or its nominee with
                        respect to such Global Security, the principal amount
                        thereof shall be reduced, by an amount equal to the
                        portion thereof to be so exchanged, by means of an
                        appropriate adjustment made on the records of the
                        Trustee. Upon any such surrender or adjustment, the
                        Trustee shall authenticate and deliver the Security
                        issuable on such exchange to or upon the order of the
                        Depositary or an authorized representative thereof.

                (3)     Subject to the provisions of clause (5) below, the
                        registered Holder may grant proxies and otherwise
                        authorize any person, including Agent Members (as
                        defined below) and persons that may hold interests
                        through Agent Members, to take any action which a holder
                        is entitled to take under this Indenture or the
                        Securities.

                (4)     In the event of the occurrence of any of the events
                        specified in clause (1) above, the Company will promptly
                        make available to the Trustee a reasonable supply of


                                       18
<PAGE>
                        Certificated Securities in definitive, fully registered
                        form, without interest coupons.

                (5)     Neither any members of, or participants in, the
                        Depositary (collectively, the "Agent Members") nor any
                        other persons on whose behalf Agent Members may act
                        shall have any rights under this Indenture with respect
                        to any Global Security registered in the name of the
                        Depositary or any nominee thereof, or under any such
                        Global Security, and the Depositary or such nominee, as
                        the case may be, may be treated by the Company, the
                        Trustee and any agent of the Company or the Trustee as
                        the absolute owner and holder of such Global Security
                        for all purposes whatsoever. Notwithstanding the
                        foregoing, nothing herein shall prevent the Company, the
                        Trustee or any agent of the Company or the Trustee from
                        giving effect to any written certification, proxy or
                        other authorization furnished by the Depositary or such
                        nominee, as the case may be, or impair, as between the
                        Depositary, its Agent Members and any other person on
                        whose behalf an Agent Member may act, the operation of
                        customary practices of such Persons governing the
                        exercise of the rights of a holder of any Security.

        Section 2.13 CUSIP NUMBERS. The Company may issue the Securities with
one or more "CUSIP" numbers (if then generally in use), and, if so, the Trustee
shall use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers. The Company will
promptly notify the Trustee of any change in the CUSIP numbers.

        Section 2.14 RANKING. The Indebtedness of the Company arising under or
in connection with this Indenture and every outstanding Security issued under
this Indenture from time to time constitutes and will constitute a senior
unsecured obligation of the Company, ranking equally with other existing and
future senior unsecured Indebtedness of the Company and ranking senior to any
future subordinated Indebtedness of the Company.

        Section 2.15 REGULATION S. The Company agrees that it will refuse to
register any transfer of Securities or any shares of Common Stock issued upon
conversion of Securities that is not made in accordance with the provisions of
Regulation S under the Securities Act, pursuant to a registration statement
which has been declared effective under the Securities Act or pursuant to an
available exemption from the registration requirements of the Securities Act;
provided that the provisions of this paragraph shall not be applicable to any
Securities which do not bear a Legend or to any shares of Common Stock evidenced
by certificates which do not bear a Restricted Common Stock Legend.

                                       19
<PAGE>

                                  ARTICLE III

                            REDEMPTION AND PURCHASES

        Section 3.1 COMPANY'S RIGHT TO REDEEM; NOTICES TO TRUSTEE. The Company,
at its option, may redeem the Securities in accordance with the provisions of
Paragraph 5 of the Securities. If the Company elects to redeem Securities
pursuant to Paragraph 5 of the Securities, it shall notify the Trustee in
writing of the Redemption Date, the principal amount of Securities to be
redeemed and the Redemption Price. The Company shall give the notice to the
Trustee provided for in Section 3.3 by a Company Order, at least 40 days before
the Redemption Date (unless a shorter notice shall be satisfactory to the
Trustee).

        Section 3.2 SELECTION OF SECURITIES TO BE REDEEMED. If less than all the
Securities are to be redeemed, unless the procedures of the Depositary provide
otherwise, the Trustee shall select the Securities to be redeemed by lot, on a
pro rata basis or by another method the Trustee considers fair and appropriate
(so long as such method is not prohibited by the rules of any stock exchange on
which the Securities are then listed). The Trustee shall make the selection at
least 35 days but not more than 60 days before the Redemption Date from
outstanding Securities not previously called for redemption. The Trustee may
select for redemption portions of the principal amount of Securities that have
denominations larger than $1,000. Securities and portions of Securities that the
Trustee selects shall be in principal amounts of $1,000 or an integral multiple
of $1,000, if less than all of the Securities are being redeemed. Provisions of
this Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption. The Trustee shall notify the
Company promptly of the Securities or portions of the Securities to be redeemed.
If any Security selected for partial redemption is converted in part before
termination of the conversion right with respect to the portion of the Security
so selected, the converted portion of such Security shall be deemed (so far as
may be) to be the portion selected for redemption. Securities, which have been
converted during a selection of Securities to be redeemed, may be treated by the
Trustee as outstanding for the purpose of such selection.

        Section 3.3 NOTICE OF REDEMPTION. At least 30 days but not more than 60
days before a Redemption Date, the Company shall mail a notice of redemption by
first-class mail, postage prepaid, to each Holder of Securities to be redeemed.
The notice shall identify the Securities to be redeemed and shall state:

        (1) the Redemption Date;

        (2) the Redemption Price;

        (3) the Conversion Rate;

        (4) the name and address of the Paying Agent and Conversion Agent;

        (5) that Securities called for redemption may be converted at any time
before the close of business on the date that is two (2) Business Days prior to
the Redemption Date;

                                       20
<PAGE>

        (6) that Holders who want to convert their Securities must satisfy the
requirements set forth in Paragraph 8 of the Securities;

        (7) that Securities called for redemption must be surrendered to the
Paying Agent at least two (2) Business Days prior to the Redemption Date to
collect the Redemption Price;

        (8) if fewer than all of the outstanding Securities are to be redeemed,
the certificate numbers, if any, and principal amounts of the particular
Securities to be redeemed;

        (9) that, unless the Company defaults in making payment of such
Redemption Price, interest, if any, on Securities called for redemption will
cease to accrue on and after the Redemption Date; and

        (10) the CUSIP number(s) of the Securities.

        At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense, provided that the
Company makes such request at least three Business Days prior to the date by
which such notice of redemption must be given to Holders in accordance with this
Section 3.3.

        Section 3.4 EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is
given, Securities called for redemption become due and payable on the Redemption
Date and at the Redemption Price stated in the notice except for Securities
which are converted in accordance with the terms of this Indenture.

        Section 3.5 DEPOSIT OF REDEMPTION PRICE. Prior to 10:00 a.m. (New York
City time), on the Redemption Date, the Company shall deposit with the Paying
Agent (or if the Company or a Subsidiary or an Affiliate of either of them is
the Paying Agent, shall segregate and hold in trust) money sufficient to pay the
Redemption Price of all Securities to be redeemed on that date other than
Securities or portions of Securities called for redemption which on or prior
thereto have been delivered by the Company to the Trustee for cancellation or
have been converted. The Paying Agent shall as promptly as practicable return to
the Company any money not required for that purpose because of conversion of
Securities pursuant to Article X. If such money is then held by the Company in
trust and is not required for such purpose it shall be discharged from such
trust.

        Section 3.6 SECURITIES REDEEMED IN PART. Upon surrender of a Security
that is redeemed in part, the Company shall execute and the Trustee shall
authenticate and deliver to the Holder a new Security in an authorized
denomination equal in principal amount to the unredeemed portion of the Security
surrendered.

        Section 3.7 PURCHASE OF SECURITIES BY THE COMPANY AT OPTION OF THE
HOLDER. (a) General. Securities shall be purchased by the Company pursuant to
Paragraph 6 of the Securities at the option of the Holder on December 1, 2005,
December 1, 2011 and December 1, 2016 (each, a "Purchase Date"), at the Accreted
Value plus accrued and unpaid current cash interest, if any, on such Purchase
Date (the "Purchase Price"). Purchases of Securities hereunder shall be made, at
the option of the Holder thereof, upon:

                                       21
<PAGE>

(1)            delivery to the Paying Agent by the Holder of a written notice of
               purchase (a "Purchase Notice") during the period beginning at any
               time from the opening of business on the date that is 20 Business
               Days prior to the relevant Purchase Date until the close of
               business two Business Days prior to such Purchase Date stating:

               (A)    the certificate number of the Security which the Holder
                      will deliver to be purchased or the appropriate Depositary
                      procedures if Certificated Securities have not been
                      issued,

               (B)    the portion of the principal amount of the Security which
                      the Holder will deliver to be purchased, which portion
                      must be in principal amounts of $1,000 or an integral
                      multiple thereof, if less than all of the Securities are
                      being redeemed,

               (C)    that such Security shall be purchased by the Company as of
                      the Purchase Date pursuant to the terms and conditions
                      specified in Paragraph 6 of the Securities and in this
                      Indenture, and

               (D)    in the event the Company elects, pursuant to Section
                      3.7(b), to pay the Purchase Price, in whole or in part, in
                      shares of Common Stock but such portion of the Purchase
                      Price shall ultimately be paid to such Holder entirely in
                      cash because any of the conditions to payment of the
                      Purchase Price in shares of Common Stock is not satisfied
                      prior to the close of business two Business Days prior to
                      the relevant Purchase Date, as set forth in Section
                      3.7(d), whether such Holder elects (i) to withdraw such
                      Purchase Notice as to some or all of the Securities to
                      which such Purchase Notice relates (stating the principal
                      amount and certificate numbers, if any, of the Securities
                      as to which such withdrawal shall relate), or (ii) to
                      receive cash in respect of the entire Purchase Price for
                      all Securities (or portions thereof) to which such
                      Purchase Notice relates; and

       (2)    delivery of such Security to the Paying Agent prior to, on or
              after the Purchase Date (together with all necessary endorsements)
              at the offices of the Paying Agent, such delivery being a
              condition to receipt by the Holder of the Purchase Price therefor;
              provided, however, that such Purchase Price shall be so paid
              pursuant to this Section 3.7 only if the Security so delivered to
              the Paying Agent shall conform in all respects to the description
              thereof in the related Purchase Notice, as determined by the
              Company.

       If a Holder, in such Holder's Purchase Notice and in any written notice
of withdrawal delivered by such Holder pursuant to the terms of Section 3.9,
fails to indicate such Holder's choice with respect to the election set forth in
clause (D) of Section 3.7(a)(1), such Holder shall be deemed to have elected to
receive cash in respect of the entire Purchase Price for all Securities subject
to such Purchase Notice in the circumstances set forth in such clause (D).

       The Company shall purchase from the Holder thereof, pursuant to this
Section 3.7, a portion of a Security, only if the principal amount of such
portion is $1,000 or an integral


                                       22
<PAGE>
       multiple of $1,000. Provisions of this Indenture that apply to the
       purchase of all of a Security also apply to the purchase of such portion
       of such Security.

        Any purchase by the Company contemplated pursuant to the provisions of
this Section 3.7 shall be consummated by the delivery of the consideration to be
received by the Holder promptly following the later of the Purchase Date and the
time of delivery of the Security.

        Notwithstanding anything herein to the contrary, any Holder delivering
to the Paying Agent the Purchase Notice contemplated by this Section 3.7(a)
shall have the right to withdraw such Purchase Notice at any time prior to the
close of business two Business Days prior to the Purchase Date by delivery of a
written notice of withdrawal to the Paying Agent in accordance with Section 3.9.

        The Paying Agent shall promptly notify the Company of the receipt by it
of any Purchase Notice or written notice of withdrawal thereof.

       (b) COMPANY'S RIGHT TO ELECT MANNER OF PAYMENT OF PURCHASE PRICE FOR
PAYMENT. The Securities to be purchased on any Purchase Date pursuant to Section
3.7(a) may be paid for, in whole or in part, at the election of the Company, in
U.S. legal tender ("cash") or shares of Common Stock, or in any combination of
cash and shares of Common Stock, subject to the conditions set forth in Sections
3.7(c) and (d). The Company shall designate, in the Company Notice delivered
pursuant to Section 3.7(e), whether the Company will purchase the Securities for
cash or shares of Common Stock, or, if a combination thereof, the percentages of
the Purchase Price of Securities in respect of which it will pay in cash or
shares of Common Stock; provided that the Company will pay cash for fractional
interests in shares of Common Stock. For purposes of determining the existence
of potential fractional interests, all Securities subject to purchase by the
Company held by a Holder shall be considered together (no matter how many
separate certificates are to be presented). Each Holder whose Securities are
purchased pursuant to this Section 3.7 shall receive the same percentage of cash
or shares of Common Stock in payment of the Purchase Price for such Securities,
except (i) as provided in Section 3.7(d) with regard to the payment of cash in
lieu of fractional shares of Common Stock and (ii) in the event that the Company
is unable to purchase the Securities of a Holder or Holders for shares of Common
Stock because any necessary qualifications or registrations of the shares of
Common Stock under applicable state securities laws cannot be obtained, the
Company may purchase the Securities of such Holder or Holders for cash. The
Company may not change its election with respect to the consideration (or
components or percentages of components thereof) to be paid once the Company has
given its Company Notice to Holders except pursuant to this Section 3.7(b) or
pursuant to Section 3.7(d) in the event of a failure to satisfy, prior to the
close of business two Business Days prior to the Purchase Date, any condition to
the payment of the Purchase Price, in whole or in part, in shares of Common
Stock.

        At least three Business Days before each Company Notice Date (as defined
below), the Company shall deliver an Officers' Certificate to the Trustee
specifying:

               (i)    the manner of payment selected by the Company,

               (ii)   the information required by Section 3.7(e) in the Company
                      Notice,

                                       23
<PAGE>

               (iii)  if the Company elects to pay the Purchase Price, or a
                      specified percentage thereof, in shares of Common Stock,
                      that the conditions to such manner of payment set forth in
                      Section 3.7(d) have been or will be complied with,

               (iv)   whether the Company desires the Trustee to give the
                      Company Notice required by Section 3.7(e), and

               (v)    the principal amount of the Securities plus accrued and
                      unpaid interest.

       (c) PURCHASE WITH CASH. At the option of the Company, the Purchase Price
of Securities in respect of which a Purchase Notice pursuant to Section 3.7(a)
has been given, or a specified percentage thereof, may be paid by the Company
with cash equal to the aggregate Purchase Price of such Securities, except that
accrued and unpaid current cash interest must be paid in cash. The Company
Notice, as provided in Section 3.7(e), shall be sent to Holders not less than 20
Business Days prior to such Purchase Date (the "Company Notice Date").

       (d) PAYMENT BY ISSUANCE OF SHARES OF COMMON STOCK. At the option of the
Company, the Purchase Price of Securities in respect of which a Purchase Notice
pursuant to Section 3.7(a) has been given, or a specified percentage thereof,
may be paid by the Company by the issuance of a number of shares of Common Stock
equal to the quotient obtained by dividing (i) the portion of the Purchase Price
to be paid in shares of Common Stock by (ii) 97.5% of the Market Price of one
share of Common Stock as determined by the Company in the Company Notice,
subject to the next succeeding paragraph, except that accrued and unpaid current
cash interest must be paid in cash.

        The Company will not issue fractional shares of Common Stock in payment
of the Purchase Price. Instead, the Company will pay cash based on the Market
Price for all fractional shares. For purposes of determining the existence of
potential fractional interests, all Securities subject to purchase by the
Company held by a Holder shall be considered together (no matter how many
separate certificates are to be presented).

        If the Company elects to purchase the Securities by the issuance of
shares of Common Stock, the Company Notice, as provided in Section 3.7(e), shall
be sent to the Holders not later than the Company Notice Date.

        The Company's right to exercise its election to purchase Securities
through the issuance of shares of Common Stock shall be conditioned upon:

              (i) the Company's not having given its Company Notice of an
       election to pay entirely in cash and its giving of timely Company Notice
       of an election to purchase all or a specified percentage of the
       Securities with shares of Common Stock as provided herein;

              (ii) the registration of such shares of Common Stock under the
       Securities Act of 1933, as amended (the "Securities Act"), or the
       Securities Exchange Act of 1934, as amended (the "Exchange Act"), in each
       case, if required by applicable law;

                                       24
<PAGE>

              (iii) the listing of such shares of Common Stock on the principal
       national securities exchange (currently the NYSE) or other principal
       exchange or market on which the shares of Common Stock are listed or
       traded;

              (iv) any necessary qualification or registration under applicable
       state securities laws or the availability of an exemption from such
       qualification and registration; and

              (v) the receipt by the Trustee by the Purchase Date of an
       Officers' Certificate and an Opinion of Counsel each stating that

              (A)    the terms of the issuance of the shares of Common Stock are
                     in conformity with this Indenture and

              (B)    the shares of Common Stock to be issued by the Company in
                     payment of the Purchase Price in respect of Securities have
                     been duly authorized and, when issued and delivered
                     pursuant to the terms of this Indenture in payment of the
                     Purchase Price in respect of the Securities, will be
                     validly issued, fully paid and non-assessable and, to the
                     best of such counsel's knowledge, free from preemptive
                     rights, and, in the case of such Officers' Certificate,
                     stating that the conditions above and the condition set
                     forth in the second succeeding sentence have been satisfied
                     and, in the case of such Opinion of Counsel, stating that
                     the conditions in clauses (ii) through (iv) above have been
                     satisfied. Such Officers' Certificate shall also set forth
                     the number of shares of Common Stock to be issued for each
                     $1,000 principal amount of Securities and the Sale Price of
                     a share of Common Stock on each trading day during the
                     period commencing on the first trading day of the period
                     during which the Market Price is calculated and ending on
                     the third trading day prior to the applicable Purchase
                     Date. The Company may pay the Purchase Price (or any
                     portion thereof) in shares of Common Stock only if the
                     information necessary to calculate the Market Price is
                     published in a daily newspaper of national circulation. If
                     the foregoing conditions are not satisfied with respect to
                     a Holder or Holders prior to the close of business on the
                     last Business Day prior to the Purchase Date, and the
                     Company has elected to purchase the Securities pursuant to
                     this Section 3.7 through the issuance of shares of Common
                     Stock, the Company shall pay the entire Purchase Price of
                     the Securities of such Holder or Holders in cash.

       The "Market Price" means the average of the Sale Prices of the shares of
Common Stock for the 20 trading day period ending on the third Business Day
prior to the applicable Purchase Date (if the third Business Day prior to the
applicable Purchase Date is a trading day, or if not, then on the last trading
day prior to the third Business Day), appropriately adjusted to take into
account the occurrence, during the period commencing on the first of the trading
days during the five trading day period and ending on the Purchase Date, of any
event described in Sections 10.6, 10.7, 10.8 or 10.9; subject, however, to the
conditions set forth in Sections 10.10 and 10.11.

                                       25
<PAGE>

        The "Sale Price" of the shares of Common Stock on any date means the
closing per share sale price (or, if no closing sale price is reported, the
average of the bid and ask prices or, if more than one in either case, the
average of the average bid and the average asked prices) on such date as
reported on the NYSE or, if the shares of Common Stock are not listed on the
NYSE, as reported by the Nasdaq system. In the absence of such quotations, the
Company shall be entitled to determine the sales price on the basis of such
quotations as it considers appropriate.

        Upon determination of the actual number of shares of Common Stock to be
issued upon redemption of Securities, the Company will disseminate a press
release through Dow Jones & Company, Inc. or Bloomberg Business News containing
this information or publish the information on the Company's Web site or through
such other public medium as the Company may use at that time.

       (e) NOTICE OF ELECTION. In connection with any purchase of Securities
pursuant to Paragraph 6 of the Securities, the Company shall give notice to
Holders setting forth information specified in this Section 3.7(e) (the "Company
Notice").

        In the event the Company has elected to pay the Purchase Price (or a
specified percentage thereof) with shares of Common Stock, the Company Notice
shall:

       (1)    state that each Holder will receive shares of Common Stock, 97.5%
              of the Market Price (determined as of a specified date prior to
              the Purchase Date) of which shares will be equal to such specified
              percentage of the Purchase Price of the Securities held by such
              Holder (except any cash amount to be paid in lieu of fractional
              shares);

       (2)    set forth the method of calculating the Market Price of the shares
              of Common Stock; and

       (3)    state that because the Market Price of shares of Common Stock will
              be determined prior to the Purchase Date, Holders of the
              Securities will bear the market risk with respect to the value of
              the shares of Common Stock to be received from the date such
              Market Price is determined to the Purchase Date.


       In any case, each Company Notice shall include a form of Purchase Notice
to be completed by a Holder and shall state:

              (i)    the Purchase Price and the Conversion Rate;

              (ii)   the name and address of the Paying Agent and the Conversion
                     Agent;

              (iii)  that Securities as to which a Purchase Notice has been
                     given may be converted if they are otherwise convertible
                     only in accordance with Article X hereof and Paragraph 8 of
                     the Securities if the applicable Purchase Notice has been
                     withdrawn in accordance with the terms of this Indenture;

              (iv)   that Securities must be surrendered to the Paying Agent to
                     collect payment;

                                       26
<PAGE>

              (v)    that the Purchase Price for any security as to which a
                     Purchase Notice has been given and not withdrawn will be
                     paid promptly following the later of the Purchase Date and
                     the time of surrender of such Security as described in
                     (iv);

              (vi)   the procedures the Holder must follow to exercise its put
                     rights under this Section 3.7 and a brief description of
                     those rights;

              (vii)  briefly, the conversion rights of the Securities;

              (viii) the procedures for withdrawing a Purchase Notice
                     (including, without limitation, for a conditional
                     withdrawal pursuant to the terms of Section 3.7(a)(1)(D) or
                     Section 3.9);

              (ix)   that, unless the Company defaults in making payment on
                     Securities for which a Purchase Notice has been submitted,
                     interest, if any, on such Securities will cease to accrue
                     on the Purchase Date; and

              (x)    the CUSIP number of the Securities.

        At the Company's request, the Trustee shall give such Company Notice in
the Company's name and at the Company's expense; provided, however, that, in all
cases, the text of such Company Notice shall be prepared by the Company.

       (f) COVENANTS OF THE COMPANY. All shares of Common Stock delivered upon
purchase of the Securities shall be newly issued shares or treasury shares,
shall be duly authorized, validly issued, fully paid and nonassessable, and
shall be free from preemptive rights and free of any lien or adverse claim.

       (g) PROCEDURE UPON PURCHASE. The Company shall deposit cash (in respect
of a cash purchases under this Section 3.7 or for fractional interests, as
applicable) or shares of Common Stock, or a combination thereof, as applicable,
at the time and in the manner as provided in Section 3.10, sufficient to pay the
aggregate Purchase Price of all Securities to be purchased pursuant to this
Section 3.7. As soon as practicable after the later of the Purchase Date and the
time of surrender of the Security, the Company shall deliver to each Holder
entitled to receive shares of Common Stock through the Paying Agent, a
certificate for the number of full shares of Common Stock issuable in payment of
the Purchase Price and cash in lieu of any fractional interests. The person in
whose name the certificate for the shares of Common Stock is registered shall be
treated as a holder of record of Common Stock on the Business Day following the
date of delivery of such certificate as described in the previous sentence.
Subject to Section 3.7(d), no payment or adjustment will be made for dividends
on the shares of Common Stock the record date for which occurred on or prior to
the Purchase Date.

       (h) TAXES. If a Holder of a purchased Security is paid in shares of
Common Stock, the Company shall pay any documentary, stamp or similar issue or
transfer tax due on such issue of Common Stock. However, the Holder shall pay
any such tax which is due because the Holder requests the Common Stock to be
issued in a name other than the Holder's name. The Paying Agent may refuse to
deliver the certificates representing the shares of Common Stock being issued in
a name other than the Holder's name until the Paying Agent receives a sum
sufficient

                                       27
<PAGE>
to pay any tax which will be due because the shares of Common Stock are to be
issued in a name other than the Holder's name. Nothing herein shall preclude any
income tax withholding required by law or regulations.

       Section 3.8 PURCHASE OF SECURITIES AT OPTION OF THE HOLDER UPON A
FUNDAMENTAL CHANGE. (a) If a Fundamental Change occurs, the Securities not
previously purchased by the Company shall be purchased by the Company, at the
option of the Holder thereof, at a purchase price specified in Paragraph 6 of
the Securities (the "Fundamental Change Purchase Price"), as of the date that is
45 days after the date of the notice of Fundamental Change delivered by the
Company (the "Fundamental Change Purchase Date"), subject to satisfaction by or
on behalf of the Holder of the requirements set forth in Section 3.8(c).

        A "Fundamental Change" shall be deemed to have occurred at such time
after the Securities are originally issued as any of the following events shall
occur:

              (i) any person acquires beneficial ownership, directly or
       indirectly, through a purchase, merger or other acquisition transaction
       or series of transactions, of shares of the Company's Capital Stock
       entitling the person to exercise 50% or more of the total voting power of
       all shares of the Company's Capital Stock that are entitled to vote
       generally in elections of directors, other than an acquisition by the
       Company, any of its Subsidiaries or any of its employee benefit plans; or

              (ii) the Company merges or consolidates with or into any other
       person, any merger of another person into the Company, or the Company
       conveys, sells, transfers or leases all or substantially all of its
       assets to another person, other than any transaction:

              (A)    that does not result in any reclassification, conversion,
                     exchange or cancellation of outstanding shares of the
                     Company's Capital Stock, or

              (B)    pursuant to which the holders of Common Stock immediately
                     prior to the transaction have the entitlement to exercise,
                     directly or indirectly, 50% or more of the total voting
                     power of all shares of Capital Stock entitled to vote
                     generally in the election of directors of the continuing or
                     surviving corporation immediately after the transaction, or

              (C)    which is effected solely to change the Company's
                     jurisdiction of incorporation and results in a
                     reclassification, conversion or exchange of outstanding
                     shares of the Common Stock solely into shares of common
                     stock of the surviving entity; or

              (iii) any time the Company's Continuing Directors do not
       constitute a majority of the Board of Directors of the Company (or, if
       applicable, a successor corporation to the Company).

Notwithstanding the foregoing provisions of this Section 3.8, a Fundamental
Change shall not be deemed to have occurred if (A) the Sale Price per share of
Common Stock for any five trading days within the period of 10 consecutive NYSE
trading days ending immediately after the later of a Fundamental Change or the
public announcement of a Fundamental Change, in the case of a

                                       28
<PAGE>
Fundamental Change relating to an acquisition of Capital Stock, or the period of
10 consecutive trading days ending immediately before a Fundamental Change, in
the case of a Fundamental Change relating to a merger, consolidation or asset
sale, equals or exceeds 105% of the Accreted Conversion Price of the Securities
in effect on each of those trading days or (B) all of the consideration
(excluding cash payments for fractional shares and cash payments made pursuant
to dissenters' appraisal rights) in a merger or consolidation otherwise
constituting a Fundamental Change under clause (i) and/or clause (ii) above
consists of shares of common stock traded on a national securities exchange or
quoted on the Nasdaq National Market (or will be so traded or quoted immediately
following the merger or consolidation) and as a result of the merger or
consolidation the Securities become convertible into such common stock. For
purposes of this Section 3.8, (x) whether a person is a "beneficial owner" shall
be determined in accordance with Rule 13d-3 under the Exchange Act and (y)
"person" includes any syndicate or group that would be deemed to be a "person"
under Section 13(d)(3) of the Exchange Act.

              (b) No later than 30 days after the occurrence of a Fundamental
       Change, the Company shall mail a written notice of the Fundamental Change
       by first-class mail to the Trustee and to each Holder. The notice shall
       include a form of written notice of purchase (the "Fundamental Change
       Purchase Notice") to be completed by the Holder and shall state:

              (1)    briefly, the events causing a Fundamental Change and the
                     date of such Fundamental Change;

              (2)    the date by which the Fundamental Change Purchase Notice
                     pursuant to this Section 3.8 must be given;

              (3)    the Fundamental Change Purchase Date;

              (4)    the Fundamental Change Purchase Price;

              (5)    the name and address of the Paying Agent and the Conversion
                     Agent;

              (6)    the Conversion Rate and any adjustments thereto;

              (7)    that the Securities as to which a Fundamental Change
                     Purchase Notice has been given may be converted if they are
                     otherwise convertible pursuant to Article X hereof only if
                     the Fundamental Change Purchase Notice has been withdrawn
                     in accordance with the terms of this Indenture;

              (8)    that the Securities must be surrendered to the Paying Agent
                     to collect payment;

              (9)    that the Fundamental Change Purchase Price for any Security
                     as to which a Fundamental Change Purchase Notice has been
                     duly given and not withdrawn will be paid promptly
                     following the later of the Fundamental Change Purchase Date
                     and the time of surrender of such Security as described in
                     (8);

              (10)   briefly, the procedures the Holder must follow to exercise
                     rights under this Section 3.10;

                                       29
<PAGE>

              (11)   briefly, the conversion rights, if any, of the Securities;

              (12)   the procedures for withdrawing a Fundamental Change
                     Purchase Notice;

              (13)   that, unless the Company defaults in making payment of such
                     Fundamental Change Purchase Price, interest, if any, on
                     Securities surrendered for purchase by the Company will
                     cease to accrue on and after the Fundamental Change
                     Purchase Date; and

              (14)   the CUSIP number(s) of the Securities.

              (c) A Holder may exercise its rights specified in Section 3.8(a)
       upon delivery of an irrevocable Fundamental Change Purchase Notice to the
       Paying Agent at any time on or prior to the 30th day after the date the
       Company delivers its written Fundamental Change notice, stating:

              (1)    the certificate number of the Security which the Holder
                     will deliver to be purchased;

              (2)    the portion of the principal amount of the Security which
                     the Holder will deliver to be purchased, which portion, if
                     not the entire amount of the Security, must be $1,000 or an
                     integral multiple thereof; and

              (3)    that such Security shall be purchased pursuant to the terms
                     and conditions specified in Paragraph 6 of the Securities.

        The delivery of such Security to the Paying Agent with the Fundamental
Change Purchase Notice (together with all necessary endorsements) at the offices
of the Paying Agent shall be a condition to the receipt by the Holder of the
Fundamental Change Purchase Price therefor; provided, however, that such
Fundamental Change Purchase Price shall be so paid pursuant to this Section 3.8
only if the Security so delivered to the Paying Agent shall conform in all
respects to the description thereof set forth in the related Fundamental Change
Purchase Notice.

        The Company shall purchase from the Holder thereof, pursuant to this
Section 3.8, a portion of a Security only if the principal amount of such
portion is $1,000 or an integral multiple of $1,000. Provisions of this
Indenture that apply to the purchase of all of a Security also apply to the
purchase of such portion of such Security.

        Any purchase by the Company contemplated pursuant to the provisions of
this Section 3.8 shall be consummated by the delivery of the consideration to be
received by the Holder on the Fundamental Change Purchase Date.

        The Paying Agent shall promptly notify the Company of the receipt by it
of any Fundamental Change Purchase Notice.

       Section 3.9 EFFECT OF PURCHASE NOTICE OR FUNDAMENTAL CHANGE PURCHASE
NOTICE. Upon receipt by the Paying Agent of the Purchase Notice or the
Fundamental Change Purchase Notice specified in Section 3.7(a) or Section
3.8(c), as applicable, the Holder of the Security in respect

                                       30
<PAGE>
of which such Purchase Notice or Fundamental Change Purchase Notice, as the case
may be, was given shall (unless such Purchase Notice or Fundamental Change
Purchase Notice, as the case may be, is withdrawn as specified in the following
two paragraphs) thereafter be entitled to receive solely the Purchase Price or
the Fundamental Change Purchase Price, as the case may be, with respect to such
Security. Such Purchase Price or Fundamental Change Purchase Price shall be paid
to such Holder, subject to receipts of funds and/or securities by the Paying
Agent, as soon as practicable following the later of (x) the Purchase Date or
the Fundamental Change Purchase Date, as the case may be, with respect to such
Security (provided the conditions in Section 3.7(a) or Section 3.8(c), as
applicable, have been satisfied) and (y) the time of delivery of such Security
to the Paying Agent by the Holder thereof in the manner required by Section
3.7(a) or Section 3.8(c), as applicable. Securities in respect of which a
Purchase Notice or Fundamental Change Purchase Notice has been given by the
Holder thereof may not be converted pursuant to Article X hereof on or after the
date of the delivery of such Purchase Notice or Fundamental Change Purchase
Notice unless such Purchase Notice or Fundamental Change Purchase Notice has
first been validly withdrawn as specified in the following two paragraphs.

        A Purchase Notice may be withdrawn by means of a written notice of
withdrawal delivered to the office of the Paying Agent in accordance with the
Purchase Notice at any time prior to the close of business on the last Business
Day prior to the Purchase Date specifying:

       (1)    the certificate number, if any, of the Security in respect of
              which such notice of withdrawal is being submitted,

       (2)    the principal amount of the Security with respect to which such
              notice of withdrawal is being submitted, and

       (3)    the principal amount, if any, of such Security which remains
              subject to the original Purchase Notice or Fundamental Change
              Purchase Notice, as the case may be, and which has been or will be
              delivered for purchase by the Company.

        A written notice of withdrawal of a Purchase Notice may be in the form
set forth in the preceding paragraph or may be in the form of (i) a conditional
withdrawal contained in a Purchase Notice pursuant to the terms of Section
3.7(a)(1)(D) or (ii) a conditional withdrawal containing the information set
forth in Section 3.7(a)(1)(D) and the preceding paragraph and contained in a
written notice of withdrawal delivered to the Paying Agent as set forth in the
preceding paragraph.

        There shall be no purchase of any Securities pursuant to Section 3.7 or
3.8 if there has occurred (prior to, on or after, as the case may be, the
giving, by the Holders of such Securities, of the required Purchase Notice or
Fundamental Change Purchase Notice, as the case may be) and is continuing an
Event of Default (other than a default in the payment of the Purchase Price or
Fundamental Change Purchase Price, as the case may be, with respect to such
Securities). The Paying Agent will promptly return to the respective Holders
thereof any Securities (x) with respect to which a Purchase Notice or
Fundamental Change Purchase Notice, as the case may be, has been withdrawn in
compliance with this Indenture, or (y) held by it during the continuance of an
Event of Default (other than a default in the payment of the Purchase Price or
Fundamental Change Purchase Price, as the case may be, with respect to such
Securities) in which case, upon

                                       31
<PAGE>
such return, the Purchase Notice or Fundamental Change Purchase Notice with
respect thereto shall be deemed to have been withdrawn.

       Section 3.10 DEPOSIT OF PURCHASE PRICE OR FUNDAMENTAL CHANGE PURCHASE
PRICE. Prior to 10:00 a.m. (local time in the City of New York) on the Purchase
Date or the Fundamental Change Purchase Date, as the case may be, the Company
shall deposit with the Trustee or with the Paying Agent (or, if the Company or a
Subsidiary or an Affiliate of either of them is acting as the Paying Agent,
shall segregate and hold in trust as provided in Section 2.4) an amount of cash
(in immediately available funds if deposited on such Business Day) or Common
Stock, if permitted hereunder, sufficient to pay the aggregate Purchase Price or
Fundamental Change Purchase Price, as the case may be, of all the Securities or
portions thereof which are to be purchased as of the Purchase Date or
Fundamental Change Purchase Date, as the case may be.

       Section 3.11 SECURITIES PURCHASED IN PART. Any Certificated Security
which is to be purchased only in part shall be surrendered at the office of the
Paying Agent (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or such Holder's attorney duly
authorized in writing) and the Company shall execute and the Trustee shall
authenticate and deliver to the Holder of such Security, without service charge,
a new Security or Securities, of any authorized denomination as requested by
such Holder in aggregate principal amount equal to, and in exchange for, the
portion of the principal amount of the Security so surrendered which is not
purchased.

       Section 3.12 COVENANT TO COMPLY WITH SECURITIES LAWS UPON PURCHASE OF
SECURITIES. When complying with the provisions of Section 3.7 or 3.8 hereof
(provided that such offer or purchase constitutes an "issuer tender offer" for
purposes of Rule 13e-4 (which term, as used herein, includes any successor
provision thereto) under the Exchange Act at the time of such offer or
purchase), the Company shall (i) comply with Rule 13e- 4 and Rule 14e-1 (or any
successor provision) under the Exchange Act, (ii) file the related Schedule TO
(or any successor schedule, form or report) under the Exchange Act, and (iii)
otherwise comply with all Federal and state securities laws so as to permit the
rights and obligations under Sections 3.7 and 3.8 to be exercised in the time
and in the manner specified in Sections 3.7 and 3.8.

       Section 3.13 REPAYMENT TO THE COMPANY. The Trustee and the Paying Agent
shall return to the Company any cash or shares of Common Stock that remain
unclaimed as provided in Paragraph 12 of the Securities, together with interest
or dividends, if any, thereon (subject to the provisions of Section 7.1(f)),
held by them for the payment of the Purchase Price or Fundamental Change
Purchase Price, as the case may be; provided, however, that to the extent that
the aggregate amount of cash or shares of Common Stock deposited by the Company
pursuant to Section 3.10 exceeds the aggregate Purchase Price or Fundamental
Change Purchase Price, as the case may be, of the Securities or portions thereof
which the Company is obligated to purchase as of the Purchase Date or
Fundamental Change Purchase Date, as the case may be, then, unless otherwise
agreed in writing with the Company, promptly after the Business Day following
the Purchase Date or Fundamental Change Purchase Date, as the case may be, the
Trustee shall return any such excess to the Company together with interest or
dividends, if any, thereon (subject to the provisions of Section 7.1(f)).

                                       32
<PAGE>
                                   ARTICLE IV
                                    COVENANTS

         Section 4.1 PAYMENT OF SECURITIES. The Company shall promptly make all
payments in respect of the Securities on the dates and in the manner provided in
the Securities or pursuant to this Indenture. Any amounts of cash or shares of
Common Stock to be given to the Trustee or Paying Agent, shall be deposited with
the Trustee or Paying Agent by 10:00 a.m. New York City time by the Company.
Principal amount, Accreted Value plus accrued interest, if any, Redemption
Price, Purchase Price, Fundamental Change Purchase Price and cash interest, if
any, shall be considered paid on the applicable date due if on such date (or, in
the case of a Purchase Price or Fundamental Change Purchase Price, on the
Business Day following the applicable Purchase Date or Fundamental Change
Purchase Date, as the case may be) the Trustee or the Paying Agent holds, in
accordance with this Indenture, cash or securities, if permitted hereunder,
sufficient to pay all such amounts then due.

         Section 4.2 SEC AND OTHER REPORTS. The Company shall file with the
Trustee, within 15 days after it files such annual and quarterly reports,
information, documents and other reports with the SEC, copies of its annual
report and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the SEC may by rules and regulations
prescribe) which the Company is required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act. In the event the Company is at any time
no longer subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, it shall continue to provide the Trustee with reports containing
substantially the same information as would have been required to be filed with
the SEC had the Company continued to have been subject to such reporting
requirements. In such event, such reports shall be provided at the times the
Company would have been required to provide reports had it continued to have
been subject to such reporting requirements. The Company also shall comply with
the other provisions of TIA Section 314(a). Delivery of such reports,
information and documents to the Trustee is for informational purposes only and
the Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely conclusively on Officers'
Certificates).

         Section 4.3 COMPLIANCE CERTIFICATE. The Company shall deliver to the
Trustee within 105 days after the end of each fiscal year of the Company
(beginning with the fiscal year ending on December 30, 2001) an Officers'
Certificate, stating whether or not to the best knowledge of the signers
thereof, the Company is in default in the performance and observance of any of
the terms, provisions and conditions of this Indenture (without regard to any
period of grace or requirement of notice provided hereunder) and if the Company
shall be in default, specifying all such defaults and the nature and status
thereof of which they may have knowledge.

         Section 4.4 FURTHER INSTRUMENTS AND ACTS. Upon request of the Trustee,
the Company will execute and deliver such further instruments and do such
further acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Indenture.

                                       33
<PAGE>
         Section 4.5 MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain
in the Borough of Manhattan, the City of New York, an office or agency of the
Trustee, Registrar, Paying Agent and Conversion Agent where Securities may be
presented or surrendered for payment, where Securities may be surrendered for
registration of transfer, exchange, purchase, redemption or conversion and where
notices and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The office of The Bank of Nova Scotia Trust Company of
New York, One Liberty Plaza, New York, New York 10006 (Attention: Corporate
Trust Administration), shall initially be such office or agency for all of the
aforesaid purposes. The Company shall give prompt written notice to the Trustee
of the location, and of any change in the location, of any such office or agency
(other than a change in the location of the office of the Trustee). If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 11.2.

         The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York, for such purposes.

         Section 4.6 DELIVERY OF CERTAIN INFORMATION. At any time when the
Company is not subject to Section 13 or 15(d) of the Exchange Act, upon the
request of a Holder or any beneficial owner of Securities or holder or
beneficial owner of shares of Common Stock issued upon conversion thereof, or in
accordance with Section 3.8(c), the Company will promptly furnish or cause to be
furnished Rule 144A Information (as defined below) to such Holder or any
beneficial owner of Securities or holder or beneficial owner of shares of Common
Stock, or to a prospective purchaser of any such security designated by any such
holder, as the case may be, to the extent required to permit compliance by such
Holder or holder with Rule 144A under the Securities Act in connection with the
resale of any such security. "Rule 144A Information" shall be such information
as is specified pursuant to Rule 144A(d)(4) under the Securities Act. Whether a
person is a beneficial owner shall be determined by the Company to the Company's
reasonable satisfaction.

         Section 4.7 CALCULATION OF ORIGINAL ISSUE DISCOUNT. The Company and
each Holder will be deemed to have agreed (i) that for United States federal
income tax purposes the Securities will be treated as indebtedness subject to
the Treasury regulations governing contingent payment debt instruments, (ii)
that the Holders will report original issue discount and interest on the
Securities in accordance with the Company's determination of both the
"comparable yield" and the "projected payment schedule" and (iii) to be bound by
the Company's application of the Treasury regulations that govern contingent
payment debt instruments. For this purpose, the "comparable yield" for the
Securities is 8.24% compounded semi-annually and the "projected payment
schedule" is attached as Schedule A hereto. The Company shall file with the
Trustee no later than the end of each calendar year or at any other time as the
Trustee may request (i) a written notice specifying the amount of original issue
discount (including daily rates and accrual periods) accrued on outstanding
Securities as of the


                                       34
<PAGE>
end of such year and (ii) such other specific information relating to such
original issue discount as may then be relevant under the Internal Revenue Code
of 1986, as amended from time to time.

                                   ARTICLE V
                              SUCCESSOR CORPORATION

         Section 5.1 WHEN COMPANY MAY MERGE OR TRANSFER ASSETS. The Company
shall not, in a single transaction or a series of related transactions,
consolidate with or merge with or into any other person or convey, transfer,
sell or lease its properties and assets substantially as an entirety to any
person, or permit any person to consolidate with or merge into the Company,
unless:

         (a) either (1) the Company shall be the continuing corporation or (2)
the person (if other than the Company) formed by such consolidation or into
which the Company is merged or the person which acquires by conveyance, transfer
or lease the properties and assets of the Company substantially as an entirety
(i) shall be a corporation, limited liability company, partnership or trust
organized and validly existing under the laws of the United States or any State
thereof or the District of Columbia and (ii) shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee, in form
reasonably satisfactory to the Trustee, all of the obligations of the Company
under the Securities and this Indenture;

         (b) immediately after giving effect to such transaction, no Event of
Default, and no event that, after notice or lapse of time or both, would become
an Event of Default, shall have occurred and be continuing; and

         (c) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture,
comply with this Article 5 and that all conditions precedent herein provided for
relating to such transaction have been satisfied; provided, however, that no
such Opinion of Counsel need to be delivered in connection with a transactions
or transactions whereby a Subsidiary is consolidated with or merged into the
Company.

         For purposes of the foregoing, the transfer (by lease, assignment, sale
or otherwise) of the properties and assets of one or more Subsidiaries (other
than to the Company or another Subsidiary), which, if such assets were owned by
the Company, would constitute all or substantially all of the properties and
assets of the Company, shall be deemed to be the transfer of all or
substantially all of the properties and assets of the Company.

         The successor person formed by such consolidation or into which the
Company is merged or the successor person to which such conveyance, transfer or
lease is made shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture with the same effect as if
such successor had been named as the Company herein; and thereafter, except in
the case of a lease and obligations the Company may have under a supplemental
indenture pursuant to Section 10.14, the Company shall be discharged from all
obligations and covenants under this Indenture and the Securities. Subject to
Section 9.6, the


                                       35
<PAGE>
Company, the Trustee and the successor person shall enter into a supplemental
indenture to evidence the succession and substitution of such successor person
and such discharge and release of the Company.

                                   ARTICLE VI
                              DEFAULTS AND REMEDIES

         Section 6.1 EVENTS OF DEFAULT. An "Event of Default" occurs if:

         (1) the Company defaults in the payment of the Accreted Value plus
accrued and unpaid current cash interest on any Security when the same becomes
due and payable at its Stated Maturity, upon redemption, upon declaration, when
due for purchase by the Company or otherwise;

         (2) the Company defaults in the payment of any cash interest (including
interest which becomes payable after an Upward Interest Adjustment or any
election by the Company to pay cash interest on the Securities following a Tax
Event) or Liquidated Damages when due and payable, and continuance of such
default for a period of 30 days;

         (3) the Company fails to deliver the shares of Common Stock upon an
appropriate election by Holders to convert the Securities into shares of Common
Stock, and continuance of such default for a period of 10 days;

         (4) the Company fails to comply in any material respect with any of its
agreements or covenants in the Securities or this Indenture (other than those
referred to in clause (1), (2) or (3) above) and such failure continues for 60
days after receipt by the Company of a Notice of Default;

         (5) the Company fails to provide timely notice of any Fundamental
Change in accordance with Section 3.8(b);

         (6) a default under any credit agreement, mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any Material
Subsidiary of the Company (or the payment of which is guaranteed by the Company
or any of its Material Subsidiaries), whether such Indebtedness or guarantee
exists on the date of this Indenture or is created thereafter, which default (i)
is caused by a failure to pay when due any principal of such Indebtedness within
the grace period provided for in such Indebtedness (which failure continues
beyond any applicable grace period) (a "Payment Default") or (ii) results in the
acceleration of such Indebtedness prior to its express maturity (without such
acceleration being rescinded or annulled) and, in each case, the principal
amount of such Indebtedness, together with the principal amount of any other
such Indebtedness under which there is a Payment Default or the maturity of
which has been so accelerated, aggregates $25,000,000 or more and such Payment
Default is not cured or such acceleration is not annulled within 30 days after
receipt by the Company of a Notice of Default; or

         (7) a final, non-appealable judgment or final, non-appealable judgments
(other than any judgment as to which a reputable insurance company has accepted
full liability) for the payment


                                       36
<PAGE>
of money are entered by a court or courts of competent jurisdiction against the
Company or any Material Subsidiaries of the Company and remain unstayed,
unbonded or undischarged for a period (during which execution shall not be
effectively stayed) of 60 days, provided that the aggregate amount of all such
judgments exceeds $25,000,000; or

         (8) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company in an involuntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company as bankrupt or insolvent, or approving as properly filed a petition by
one or more Persons other than the Company seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company under any applicable
federal or state law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official for the Company or for any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and the continuance of any such decree or order for relief or any
such other decree or order unstayed and in effect for a period of 90 consecutive
days; or

         (9) the commencement by the Company or any Material Subsidiary of the
Company of a case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law or of any other case
or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to
the entry of a decree or order for relief in respect of the Company or any
Material Subsidiary of the Company in a case or proceeding under any applicable
federal or state bankruptcy, insolvency, reorganization or other similar law or
to the commencement of any bankruptcy or insolvency case or proceeding against
it, or the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable federal or state law, or the
consent by it to the filing of such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator
or similar official of the Company or any Material Subsidiary of the Company or
of any substantial part of its property, or the making by it of an assignment
for the benefit of creditors, or the admission by it in writing of its inability
to pay its debts generally as they become due, or the taking of corporate action
by the Company or by any Material Subsidiary of the Company in furtherance of
any such action.

         A Default under clause (4) and (6) above is not an Event of Default
until the Trustee notifies the Company, or the Holders of at least 25% in
aggregate principal amount of the Securities at the time outstanding notify the
Company and the Trustee, of the Default and the Company does not cure such
Default (and such Default is not waived) within the time specified in clause (4)
above after actual receipt of such notice. Any such notice must specify the
Default, demand that it be remedied and state that such notice is a "Notice of
Default".

         The Company shall deliver to the Trustee, within 30 days after it
becomes aware of the occurrence thereof, written notice of any Event of Default
under clause (5), (7) or (8) above or any event described in clause (4) or (6)
which would become an Event of Default upon the passage of time specified in
such clause (4) or (6) following a Notice of Default, its status and what action
the Company is taking or proposes to take with respect thereto.

         Section 6.2 ACCELERATION. If an Event of Default (other than an Event
of Default specified in Section 6.1(8) or (9)) occurs and is continuing, the
Trustee by notice to the Company, or the Holders of at least 25% in aggregate
principal amount of the Securities at the


                                       37
<PAGE>
time outstanding by notice to the Company and the Trustee, may declare the
Accreted Value plus accrued and unpaid current cash interest, if any, on all the
Securities to be immediately due and payable. Upon such a declaration, such
accelerated amount shall be due and payable immediately. If an Event of Default
specified in Section 6.1(8) or (9) occurs and is continuing, the Accreted Value
plus accrued and unpaid current cash interest, if any, on all the Securities
shall become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any Securityholders. The Holders of a majority
in aggregate principal amount of the Securities at the time outstanding, by
notice to the Trustee (and without notice to any other Securityholder) may
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default have
been cured or waived except nonpayment of the Accreted Value plus accrued and
unpaid current cash interest, if any, that have become due solely as a result of
acceleration and if all amounts due to the Trustee under Section 7.7 have been
paid. No such rescission shall affect any subsequent Default or impair any right
consequent thereto.

         Section 6.3 OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of the Accreted Value plus accrued and unpaid current cash interest, if any, on
the Securities or to enforce the performance of any provision of the Securities
or this Indenture.

         The Trustee may maintain a proceeding even if the Trustee does not
possess any of the Securities or does not produce any of the Securities in the
proceeding. A delay or omission by the Trustee or any Securityholder in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of, or acquiescence in, the
Event of Default. No remedy is exclusive of any other remedy. All available
remedies are cumulative.

         Section 6.4 WAIVER OF PAST DEFAULTS. The Holders of a majority in
aggregate principal amount of the Securities at the time outstanding, by notice
to the Trustee (and without notice to any other Securityholder), may waive an
existing Default and its consequences except (a) an Event of Default described
in Section 6.1(1), (2), or (3) or (b) a Default in respect of a provision that
under Section 9.2 cannot be amended without the consent of each Securityholder
affected. When a Default is waived, it is deemed cured, but no such waiver shall
extend to any subsequent or other Default or impair any consequent right. This
Section 6.4 shall be in lieu of Section 316(a)(1)(B) of the TIA and such Section
316(a)(1)(B) is hereby expressly excluded from this Indenture, as permitted by
the TIA.

         Section 6.5 CONTROL BY MAJORITY. The Holders of a majority in aggregate
principal amount of the Securities at the time outstanding may direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or of exercising any trust or power conferred on the Trustee. However,
the Trustee may refuse to follow any direction that conflicts with law or this
Indenture or that the Trustee determines in good faith is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability unless the Trustee is offered indemnity satisfactory to it. This
Section 6.5 shall be in lieu of Section 316(a)(1)(A) of the TIA and such Section
316(a)(1)(A) is hereby expressly excluded from this Indenture, as permitted by
the TIA.

                                       38
<PAGE>
         Section 6.6 LIMITATION ON SUITS. A Securityholder may not pursue any
remedy with respect to this Indenture or the Securities unless:

         (1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;

         (2) the Holders of at least 25% in aggregate principal amount of the
Securities at the time outstanding make a written request to the Trustee to
pursue the remedy;

         (3) such Holder or Holders offer to the Trustee security or indemnity
reasonably satisfactory to the Trustee against any loss, liability or expense;

         (4) the Trustee does not comply with the request within 60 days after
receipt of such notice, request and offer of security or indemnity; and

         (5) the Holders of a majority in aggregate principal amount of the
Securities at the time outstanding do not give the Trustee a direction
inconsistent with the request during such 60-day period.

         A Securityholder may not use this Indenture to prejudice the rights of
any other Securityholder or to obtain a preference or priority over any other
Securityholder.

         Section 6.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any
other provision of this Indenture, the right of any Holder to receive payment of
the principal amount of the Securities plus accrued and unpaid interest in
respect of the Securities held by such Holder, on or after the respective due
dates expressed in the Securities or any Redemption Date, and to convert the
Securities in accordance with Article X, or to bring suit for the enforcement of
any such payment on or after such respective dates or the right to convert,
shall not be impaired or affected adversely without the consent of such Holder.

         Section 6.8 COLLECTION SUIT BY TRUSTEE. If an Event of Default
described in Section 6.1(1) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
for the whole amount owing with respect to the Securities and the amounts
provided for in Section 7.7.

         Section 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency
of any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
the Company or any other obligor upon the Securities or the property of the
Company or of such other obligor or their creditors, the Trustee (irrespective
of whether the principal amount of the Securities plus accrued and unpaid
interest in respect of the Securities shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand on the Company for the payment of any such amount)
shall be entitled and empowered, by intervention in such proceeding or
otherwise,

         (a) to file and prove a claim for the whole amount of the principal
amount of the Securities plus accrued and unpaid interest and to file such other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the


                                       39
<PAGE>
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel or any other amounts due the Trustee under Section 7.7)
and of the Holders allowed in such judicial proceeding, and

         (b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or similar official in any
such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay the Trustee any amount
due to it for the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, and any other amounts due the Trustee
under Section 7.7.

         Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.

         Section 6.10 PRIORITIES. If the Trustee collects any money pursuant to
this Article 6, it shall pay out the money in the following order:

                  FIRST: to the Trustee for amounts due under Section 7.7;

                  SECOND: to Securityholders for amounts due and unpaid on the
         Securities for the principal amount of the Securities plus accrued and
         unpaid interest, ratably, without preference or priority of any kind,
         according to such amounts due and payable on the Securities; and

                  THIRD: the balance, if any, to the Company.

         The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section 6.10. At least 15 days before such
record date, the Trustee shall mail to each Securityholder and the Company a
notice that states the record date, the payment date and the amount to be paid.

         Section 6.11 UNDERTAKING FOR COSTS. In any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant (other than the Trustee) in the suit of
an undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees and expenses,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 6.11
does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section
6.7 or a suit by Holders of more than 10% in aggregate principal amount of the
Securities at the time outstanding. This Section 6.11 shall be in lieu of
Section 315(e) of the TIA and such Section 315(e) is hereby expressly excluded
from this Indenture, as permitted by the TIA.

         Section 6.12 WAIVER OF STAY, EXTENSION OR USURY LAWS. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any


                                       40
<PAGE>
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury or other law wherever enacted, now or at any time
hereafter in force, which would prohibit or forgive the Company from paying all
or any portion of the principal amount of the Securities plus accrued and unpaid
interest or any interest on such amounts, as contemplated herein, or which may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.

                                   ARTICLE VII

                                     TRUSTEE

         Section 7.1 DUTIES OF TRUSTEE. (a) If an Event of Default has occurred
and is continuing, the Trustee shall exercise the rights and powers vested in it
by this Indenture and use the same degree of care and skill in its exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.

         (b) Except during the continuance of an Event of Default:

         (1)      the Trustee need perform only those duties that are
                  specifically set forth in this Indenture and no duties shall
                  be inferred or implied; and

         (2)      in the absence of bad faith on its part, the Trustee may
                  conclusively rely, as to the truth of the statements and the
                  correctness of the opinions expressed therein, upon
                  certificates or opinions furnished to the Trustee and
                  conforming to the requirements of this Indenture, but in case
                  of any such certificates or opinions which by any provision
                  hereof are specifically required to be furnished to the
                  Trustee, the Trustee shall examine the certificates and
                  opinions to determine whether or not they conform to the
                  requirements of this Indenture, but need not confirm or
                  investigate the accuracy of mathematical calculations or other
                  facts stated therein. This Section 7.1(b) shall be in lieu of
                  Section 315(a) of the TIA and such Section 315(a) is hereby
                  expressly excluded from this Indenture, as permitted by the
                  TIA.

         (c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:

         (1)      this paragraph (c) does not limit the effect of paragraph (b)
                  of this Section 7.1;

         (2)      the Trustee shall not be liable for any error of judgment made
                  in good faith by a Responsible Officer unless it is proved
                  that the Trustee was negligent in ascertaining the pertinent
                  facts; and

         (3)      the Trustee shall not be liable with respect to any action it
                  takes or omits to take in good faith in accordance with a
                  direction received by it pursuant to Section 6.5.

                                       41
<PAGE>
Subparagraphs (c)(1), (2) and (3) shall be in lieu of Sections 315(d)(1),
315(d)(2) and 315(d)(3) of the TIA and such Sections 315(d)(1), 315(d)(2) and
315(d)(3) are hereby expressly excluded from this Indenture, as permitted by the
TIA.

         (d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section 7.1.

         (e) The Trustee may refuse to perform any duty or exercise any right or
power or extend or risk its own funds or otherwise incur any financial liability
unless it receives indemnity satisfactory to it against any loss, liability or
expense.

         (f) Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee (acting in
any capacity hereunder) shall be under no liability for interest on any money
received by it hereunder unless otherwise agreed in writing with the Company.

         Section 7.2 RIGHTS OF TRUSTEE. Subject to its duties and
responsibilities under the TIA (as modified by Section 7.1),

         (a) the Trustee may conclusively rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties;

         (b) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
conclusively rely upon an Officers' Certificate;

         (c) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder;

         (d) The Trustee shall not be liable for any action taken, suffered, or
omitted to be taken by it in good faith which it believes to be authorized or
within its rights or powers conferred under this Indenture;

         (e) The Trustee may consult with counsel selected by it and any advice
or Opinion of Counsel shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it hereunder in good faith
and in accordance with such advice or Opinion of Counsel;

         (f) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders, pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee security or


                                       42
<PAGE>
indemnity satisfactory to it against the costs, expenses and liabilities which
may be incurred therein or thereby;

         (g) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a board resolution;

         (h) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or attorney
at the sole cost of the Company and shall incur no liability or additional
liability of any kind by reason of such inquiry or investigation;

         (i) the Trustee shall not be deemed to have notice of any Default or
Event of Default unless a Responsible Officer of the Trustee has actual
knowledge thereof or unless written notice of any event which is in fact such a
default is received by the Trustee at the Corporate Trust Office of the Trustee,
and such notice references the Securities and this Indenture;

         (j) the rights, privileges, protections, immunities and benefits given
to the Trustee, including, without limitation, its right to be indemnified, are
extended to, and shall be enforceable by, the Trustee in each of its capacities
hereunder, and to each agent, custodian and other person employed to act
hereunder; and

         (k) the Trustee may request that the Company deliver an Officers'
Certificate setting forth the names of individuals and/or titles of officers
authorized at such time to take specified actions pursuant to this Indenture,
which Officers' Certificate may be signed by any person authorized to sign an
Officers' Certificate, including any person specified as so authorized in any
such certificate previously delivered and not superseded.

         Section 7.3 INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual
or any other capacity may become the owner or pledgee of Securities and may
otherwise deal with the Company or its Affiliates with the same rights it would
have if it were not Trustee. Any Paying Agent, Registrar, Conversion Agent or
co-registrar may do the same with like rights. However, the Trustee must comply
with Sections 7.10 and 7.11.

         Section 7.4 TRUSTEE'S DISCLAIMER. The Trustee makes no representation
as to the validity or adequacy of this Indenture or the Securities, it shall not
be accountable for the Company's use or application of the proceeds from the
Securities, it shall not be responsible for any statement in the registration
statement for the Securities under the Securities Act or in any offering
document for the Securities, the Indenture or the Securities (other than its
certificate of authentication), or the determination as to which beneficial
owners are entitled to receive any notices hereunder.

         Section 7.5 NOTICE OF DEFAULTS. If a Default occurs and if it is known
to the Trustee, the Trustee shall give to each Securityholder notice of the
Default within 60 days after it occurs


                                       43
<PAGE>
or, if later, within 15 days after it is known to the Trustee, unless such
Default shall have been cured or waived before the giving of such notice.
Notwithstanding the preceding sentence, except in the case of a Default
described in Section 6.1(1) or (2), the Trustee may withhold the notice if and
so long as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of Securityholders. The second
sentence of this Section 7.5 shall be in lieu of the proviso to Section 315(b)
of the TIA and such proviso is hereby expressly excluded from this Indenture, as
permitted by the TIA. The Trustee shall not be deemed to have knowledge of a
Default unless a Responsible Officer of the Trustee has received written notice
of such Default.

         Section 7.6 REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after each
November 15 beginning with the November 15 following the date of this Indenture,
the Trustee shall mail to each Securityholder a brief report dated as of such
November 15 that complies with TIA Section 313(a), if required by such Section
313(a). The Trustee also shall comply with TIA Section 313(b).

         A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each securities exchange, if any, on which the
Securities are listed. The Company agrees to notify the Trustee promptly
whenever the Securities become listed on any securities exchange and of any
delisting thereof.

         Section 7.7 COMPENSATION AND INDEMNITY. The Company agrees:

         (a) to pay to the Trustee from time to time such compensation as the
Company and the Trustee shall from time to time agree in writing for all
services rendered by it hereunder (which compensation shall not be limited (to
the extent permitted by law) by any provision of law in regard to the
compensation of a trustee of an express trust);

         (b) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses, advances and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may be caused by
its negligence or bad faith; and

         (c) to indemnify the Trustee or any predecessor Trustee and their
agents for, and to hold them harmless against, any loss, damage, claim,
liability, cost or expense (including attorney's fees and expenses, and taxes
(other than taxes based upon, measured by or determined by the income of the
Trustee)) incurred without negligence or bad faith on its part, arising out of
or in connection with the acceptance or administration of this trust, including
the costs and expenses of defending itself against any claim (whether asserted
by the Company or any Holder or any other person) or liability in connection
with the exercise or performance of any of its powers or duties hereunder.

         To secure the Company's payment obligations in this Section 7.7, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee, except that held in trust to pay the principal
amount, plus accrued and unpaid interest on particular Securities.

                                       44
<PAGE>
         The Company's payment obligations pursuant to this Section 7.7 shall
survive the discharge of this Indenture and the resignation or removal of the
Trustee. When the Trustee incurs expenses after the occurrence of a Default
specified in Section 6.1(5) or (6), the expenses including the reasonable
charges and expenses of its counsel, are intended to constitute expenses of
administration under any Bankruptcy Law.

         Section 7.8 REPLACEMENT OF TRUSTEE. The Trustee may resign by so
notifying the Company; provided, however, no such resignation shall be effective
until a successor Trustee has accepted its appointment pursuant to this Section
7.8. The Holders of a majority in aggregate principal amount of the Securities
at the time outstanding may remove the Trustee by so notifying the Trustee and
the Company. The Company shall remove the Trustee if:

         (1)      the Trustee fails to comply with Section 7.10;

         (2)      the Trustee is adjudged bankrupt or insolvent;

         (3)      a receiver or public officer takes charge of the Trustee or
                  its property; or

         (4)      the Trustee otherwise becomes incapable of acting.

         If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint, by
resolution of its Board of Directors, a successor Trustee.

         A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company satisfactory in form and
substance to the retiring Trustee and the Company. Thereupon the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Securityholders. The retiring Trustee shall promptly transfer all property held
by it as Trustee to the successor Trustee, subject to the lien provided for in
Section 7.7.

         If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in aggregate principal amount of the Securities at the
time outstanding may petition any court of competent jurisdiction at the expense
of the Company for the appointment of a successor Trustee.

         If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.

         Section 7.9 SUCCESSOR TRUSTEE BY MERGER. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to, another corporation, the resulting,
surviving or transferee corporation without any further act shall be the
successor Trustee.

                                       45
<PAGE>
         Section 7.10 ELIGIBILITY; DISQUALIFICATION. The Trustee shall at all
times satisfy the requirements of TIA Sections 310(a)(1) and 310(b). The Trustee
(or its parent holding company) shall have a combined capital and surplus of at
least $50,000,000 as set forth in its most recent published annual report of
condition. Nothing herein contained shall prevent the Trustee from filing with
the Commission the application referred to in the penultimate paragraph of TIA
Section 310(b).

         Section 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.

                                  ARTICLE VIII

                             DISCHARGE OF INDENTURE

         Section 8.1 DISCHARGE OF LIABILITY ON SECURITIES. When (i) the Company
delivers to the Trustee all outstanding Securities (other than Securities
replaced or repaid pursuant to Section 2.7) for cancellation or (ii) all
outstanding Securities have become due and payable and the Company deposits with
the Trustee cash (and/or, as permitted by this Indenture, shares of Common
Stock) sufficient to pay all amounts due and owing on all outstanding Securities
(other than Securities replaced pursuant to Section 2.7), and if in either case
the Company pays all other sums payable hereunder by the Company, then this
Indenture shall, subject to Section 7.7, cease to be of further effect. The
Trustee shall join in the execution of a document prepared by the Company
acknowledging satisfaction and discharge of this Indenture on demand of the
Company accompanied by an Officers' Certificate and Opinion of Counsel and at
the cost and expense of the Company.

         Section 8.2 REPAYMENT TO THE COMPANY. The Trustee and the Paying Agent
shall return to the Company upon written request any money or securities held by
them for the payment of any amount with respect to the Securities that remains
unclaimed for two years, subject to applicable unclaimed property law. After
return to the Company, Holders entitled to the money or securities must look to
the Company for payment as general creditors unless an applicable abandoned
property law designates another person and the Trustee and the Paying Agent
shall have no further liability to the Securityholders with respect to such
money or securities for that period commencing after the return thereof.

                                   ARTICLE IX

                                   AMENDMENTS

         Section 9.1 WITHOUT CONSENT OF HOLDERS. The Company and the Trustee may
amend this Indenture or the Securities without the consent of any
Securityholder:

         (1) to cure any ambiguity, omission, defect or inconsistency provided
that such modification or amendment does not materially and adversely affect the
interests of the holders of the Securities;

                                       46
<PAGE>
         (2) to make any changes that the Company and the Trustee may deem
necessary or desirable, provided such amendment or modification does not
materially and adversely affect the interests of the holders of the Securities;

         (3) to comply with Article 5 or Section 10.14;

         (4) to secure the Company's obligations or add any guarantee under the
Securities and this Indenture;

         (5) to add Events of Default with respect to the Securities; or

         (6) to add to the Company's covenants for the benefit of the
Securityholders or to surrender any right or power conferred upon the Company;
or

         (7) to make any change necessary for the registration of the Securities
under the Securities Act or to comply with the TIA, or any amendment thereto, or
to comply with any requirement of the SEC in connection with the qualification
of the Indenture under the TIA, provided that such modification or amendment
does not materially and adversely affect the interests of the holders of the
Securities.

         (8) to provide for uncertificated Securities in addition to or in place
of certificated Securities or to provide for bearer Securities.

         Section 9.2 WITH CONSENT OF HOLDERS. With the written consent of the
Holders of at least a majority in aggregate principal amount of the Securities
at the time outstanding, the Company and the Trustee may amend this Indenture or
the Securities. However, without the consent of each Securityholder affected, an
amendment to this Indenture or the Securities may not:

         (1) reduce the interest rate or the rate of accrual upon an upward
interest adjustment referred to in paragraph 1 of the Securities or change the
time for payment of interest thereon;

         (2) reduce the principal amount of or extend the Stated Maturity of any
Security;

         (3) reduce the calculation of the value of the Common Stock to which
reference is made in determining whether an Upward Interest Adjustment will be
made on the Securities, or change the method by which this value is calculated;

         (4) reduce the Redemption Price, Purchase Price or Fundamental Change
Purchase Price of any Security or change the time at which the Securities may be
redeemed or repurchased;

         (5) make any payments on the Securities payable in currency or
securities other than as stated in the Security;

         (6) make any change in the percentage of the principal amount of
Securities necessary to waive compliance with the provisions of Section 6.4,
Section 6.7 or this Section 9.2, except to increase any percentage set forth
therein;

                                       47
<PAGE>
         (7) make any change that adversely affects the right to convert any
Security in accordance with the terms thereof and this Indenture;

         (8) make any change that adversely affects the right to require the
Company to purchase the Securities in accordance with the terms thereof and this
Indenture;

         (9) impair a Holder's right to institute suit for the enforcement of
any payment on the Securities;

         (10) waive a continuing default or Event of Default regarding any
payment on the Securities; or

         (11) make any change that adversely effects the Holders' rights under
Section 3.7, Section 3.8 and Article X.

         It shall not be necessary for the consent of the Holders under this
Section 9.2 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.

         After an amendment under this Section 9.2 becomes effective, the
Company shall mail to each Holder a notice briefly describing the amendment.

         Section 9.3 COMPLIANCE WITH TRUST INDENTURE ACT. Every supplemental
indenture executed pursuant to this Article shall comply with the TIA.

         Section 9.4 REVOCATION AND EFFECT OF CONSENTS, WAIVERS AND ACTIONS.
Until an amendment, waiver or other action by Holders becomes effective, a
consent thereto by a Holder of a Security hereunder is a continuing consent by
the Holder and every subsequent Holder of that Security or portion of the
Security that evidences the same obligation as the consenting Holder's Security,
even if notation of the consent, waiver or action is not made on the Security.
However, any such Holder or subsequent Holder may revoke the consent, waiver or
action as to such Holder's Security or portion of the Security if the Trustee
receives the notice of revocation before the date the amendment, waiver or
action becomes effective. After an amendment, waiver or action becomes
effective, it shall bind every Securityholder.

         Section 9.5 NOTATION ON OR EXCHANGE OF SECURITIES. Securities
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article may, and shall if required by the Trustee, bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Company shall so determine, new Securities so
modified as to conform, in the opinion of the Trustee and the Board of
Directors, to any such supplemental indenture may be prepared and executed by
the Company and authenticated and delivered by the Trustee in exchange for
outstanding Securities.

         Section 9.6 TRUSTEE TO SIGN SUPPLEMENTAL INDENTURES. The Trustee shall
sign any supplemental indenture authorized pursuant to this Article 9 if the
amendment contained therein does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the Trustee may, but need
not, sign such supplemental indenture. In signing such supplemental indenture
the Trustee shall receive, and (subject to the provisions of Section 7.1) shall
be fully


                                       48
<PAGE>
protected in relying upon, an Officers' Certificate and an Opinion of Counsel
stating that such amendment is authorized or permitted by this Indenture.

         Section 9.7 EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of
any supplemental indenture under this Article, this Indenture shall be modified
in accordance therewith, and such supplemental indenture shall form a part of
this Indenture for all purposes; and every Holder of Securities theretofore or
thereafter authenticated and delivered hereunder shall be bound thereby.

                                   ARTICLE X

                                  CONVERSIONS

         Section 10.1 CONVERSION PRIVILEGE. A Holder of a Security may convert
such Security into shares of Common Stock at any time during the period stated
in Paragraph 8 of the Securities. The number of shares of Common Stock issuable
upon conversion of a Security per $1,000 of principal amount thereof (the
"Conversion Rate") shall be that set forth in Paragraph 8 of the Securities,
subject to adjustment as herein set forth. The Company shall notify the Trustee
(which shall in turn notify the Holders promptly upon receipt of such
notification from the Company) of the date on which the Securities first become
convertible (and, if the Securities cease to be convertible at any time or from
time to time, of the first date thereafter on which the Securities again become
convertible), which notification shall set forth the calculations on which such
determination was made.

         A Holder may convert a portion of the principal amount of a Security if
the portion converted is in a $1,000 principal amount or an integral multiple of
$1,000. Provisions of this Indenture that apply to conversion of all of a
Security also apply to conversion of a portion of a Security.

         In the event that the Ex-Dividend Time (as defined below) (or in the
case of a subdivision, combination or reclassification, the effective date with
respect thereto) with respect to a dividend, subdivision, combination or
reclassification to which Section 10.6(1), (2), (3) or (4) applies occurs during
the period applicable for calculating "Average Sale Price" pursuant to the
definition in the preceding sentence, "Average Sale Price" shall be calculated
for such period in a manner determined by the Board of Directors to reflect the
impact of such dividend, subdivision, combination or reclassification on the
Sale Price of the shares of Common Stock during such period.

         "Time of Determination" means the time and date of the earlier of (i)
the determination of stockholders entitled to receive rights, warrants or
options or a distribution, in each case, to which Section 10.7 or 10.8 applies
and (ii) the time ("Ex-Dividend Time") immediately prior to the commencement of
"ex-dividend" trading for such rights, warrants or options or distribution on
the NYSE or such other U.S. national or regional exchange or market on which the
shares of Common Stock are then listed or quoted.

         Section 10.2 CONVERSION PROCEDURE. To convert a Security a Holder must
satisfy the requirements in Paragraph 8 of the Securities. The first Business
Day on which the Holder


                                       49
<PAGE>
satisfies all those requirements and submits such Holder's Securities for
conversion is the conversion date (the "Conversion Date").

         As soon as practicable after the Conversion Date, the Company shall
deliver to the Holder, through the Conversion Agent, a certificate for the
number of full shares of Common Stock issuable upon the conversion or exchange
and cash in lieu of any fractional share determined pursuant to Section 10.3.
The person in whose name the certificate is registered shall be treated as a
shareholder of record as of the close of business on the Conversion Date. Upon
conversion of a Security in its entirety, such person shall no longer be a
Holder of such Security.

         No payment or adjustment will be made for dividends on, or other
distributions with respect to, any shares of Common Stock except as provided in
this Article X. On conversion of a Security, except as provided below with
respect to cash interest payable on Securities or portions thereof converted
after a Regular Record Date, (x) that portion of accrued and unpaid current cash
interest on the converted Securities attributable to the period from the most
recent Interest Payment Date through the Conversion Date and (y) that portion of
accrued and unpaid interest adjustment, including interest adjustment payable in
cash, shall not be cancelled, extinguished or forfeited, but rather shall be
deemed to be paid in full to the Holder thereof through delivery of the shares
of Common Stock (together with the cash payment, if any, in lieu of fractional
shares) for the Security being converted pursuant to the provisions hereof. The
Company will not adjust the conversion rate to account for accrued interest, if
any. If the Holder converts more than one Security at the same time, the number
of shares of Common Stock issuable upon the conversion shall be based on the
total principal amount of the Securities converted.

         The Securities or portions thereof surrendered for conversion during
the period from the close of business on any Regular Record Date to the opening
of business on the date on which such cash interest is payable shall (unless
such Securities or portions thereof have been called for redemption on a
Redemption Date within such period) be accompanied by payment to the Company or
its order, in New York Clearing House funds or other funds acceptable to the
Company, of an amount equal to the cash interest payable on such cash interest
payment date on the principal amount of the Securities or portions thereof being
surrendered for conversion.

         If the last day on which a Security may be converted is a Legal
Holiday, the Security may be surrendered on the next succeeding day that is not
a Legal Holiday.

         Upon surrender of a Security that is converted in part, the Company
shall execute, and the Trustee shall authenticate and deliver to the Holder, a
new Security in an authorized denomination equal in principal amount to the
unconverted portion of the Security surrendered.

         Section 10.3 FRACTIONAL SHARES. The Company will not issue fractional
shares of Common Stock upon conversion of a Security. Instead, the Company will
pay cash based on the current Market Price for all fractional shares. The
current market value of a fractional share shall be determined, to the nearest
1/1,000th of a share, by multiplying the Sale Price on the last trading day
immediately prior to the Conversion Date, of a full share by the fractional
amount and rounding the product to the nearest whole cent. It is understood that
if a Holder elects to have more than one Security converted, the number of
shares of Common Stock shall be based on the aggregate principal amount of
Securities to be converted.

                                       50
<PAGE>
         Section 10.4 TAXES ON CONVERSION. If a Holder submits a Security for
conversion, the Company shall pay all stamp and all other duties, if any, which
may be imposed by the United States or any political subdivision thereof or
taxing authority thereof or therein with respect to the issuance of shares of
Common Stock upon the conversion. However, the Holder shall pay any such tax
which is due because the Holder requests the shares to be issued in a name other
than the Holder's name. The Conversion Agent may refuse to deliver the
certificates representing the shares of Common Stock being issued in a name
other than the Holder's name until the Conversion Agent receives a sum
sufficient to pay any tax which will be due because the shares are to be issued
in a name other than the Holder's name. Nothing herein shall preclude any tax
withholding required by law or regulations.

         Section 10.5 COMPANY TO PROVIDE STOCK. The Company shall, prior to
issuance of any Securities under this Article X, and from time to time as may be
necessary, reserve out of its authorized but unissued shares of Common Stock a
sufficient number of shares of Common Stock to permit the conversion of the
Securities.

         All shares of Common Stock delivered upon conversion of the Securities
shall be newly issued shares or treasury shares, shall be duly and validly
issued and fully paid and nonassessable, and shall be free from preemptive
rights and free of any lien or adverse claim. The Company will endeavor promptly
to comply with all federal and state securities laws regulating the offer and
delivery of shares of Common Stock upon conversion of Securities, if any, and
will list or cause to have quoted such shares of Common Stock on each national
securities exchange or in the over-the-counter market or such other market on
which the shares of Common Stock are then listed or quoted.

         Section 10.6 ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If, after the
Issue Date of the Securities, the Company:

         (1) pays a dividend or makes another distribution to all holders of its
Common Stock payable exclusively in shares of its Common Stock;

         (2) subdivides the outstanding shares of its Common Stock into a
greater number of shares of Common Stock;

         (3) combines the outstanding shares of its Common Stock into a smaller
number of shares of Common Stock; or

         (4) issues by reclassification of its Common Stock any shares of
Capital Stock,

then the conversion privilege and the Conversion Rate in effect immediately
prior to such action shall be adjusted so that the Holder of a Security
thereafter converted may receive the number of shares of Capital Stock of the
Company which such Holder would have owned immediately following such action if
such Holder had converted the Security immediately prior to the record date for
such action.

         The adjustment shall become effective immediately after the record date
in the case of a dividend or distribution and immediately after the effective
date in the case of a subdivision, combination or reclassification.

                                       51
<PAGE>
         If after an adjustment a Holder of a Security upon conversion of such
Security may receive shares of two or more classes of Capital Stock of the
Company, the Conversion Rate shall thereafter be subject to adjustment upon the
occurrence of an action taken with respect to any such class of Capital Stock as
is contemplated by this Article X with respect to the shares of Common Stock, on
terms comparable to those applicable to shares of Common Stock in this Article
X.

         Section 10.7 ADJUSTMENT FOR RIGHTS ISSUE. Except as provided in Section
10.11, if after the Issue Date of the Securities, the Company distributes any
rights or warrants to all or substantially all holders of shares of its Common
Stock entitling them to purchase shares of Common Stock at a price per share
less than the Average Sale Price as of the Time of Determination, unless the
Holders of Securities may participate in the distribution without conversion on
a basis and with the notice that the Company's Board of Directors determines to
be fair and appropriate, the Conversion Rate shall be adjusted in accordance
with the formula:

                                    (O + N)
                    R' = R x  ---------------------
                               (O + (N x P)/M)

                  where:

                  R'   =   the adjusted Conversion Rate.

                  R    =   the current Conversion Rate.

                  O    =   the number of shares of Common Stock outstanding on
                           the record date for the distribution to which this
                           Section 10.7 is being applied.

                  N    =   the number of additional shares of Common Stock
                           offered pursuant to the distribution.

                  P    =   the offering price per share of the additional
                           shares.

                  M    =   the Average Sale Price, minus, in the case of (i) a
                           distribution to which Section 10.6(4) applies or (ii)
                           a distribution to which Section 10.8 applies, for
                           which, in each case, (x) the record date shall occur
                           on or before the record date for the distribution to
                           which this Section 10.7 applies and (y) the
                           Ex-Dividend Time shall occur on or after the date of
                           the Time of Determination for the distribution to
                           which this Section 10.7 applies, the fair market
                           value (on the record date for the distribution to
                           which this Section 10.7 applies) of the:

         (1) Capital Stock of the Company distributed in respect of each share
of Common Stock in such Section 10.6(4) distribution; and

         (2) the Company's debt, securities or assets or certain rights,
warrants or options to purchase securities of the Company distributed in respect
of each share of Common Stock in such Section 10.8 distribution.

                                       52
<PAGE>
         The Board of Directors of the Company shall determine fair market
values for the purposes of this Section 10.7, except as Section 10.8 otherwise
provides in the case of a Spin-off.

         "Average Sale Price" means the average of the Sales Prices of the
shares of Common Stock for the shorter of:

                  (i) 30 consecutive trading days ending on the last full
         trading day prior to the Time of Determination with respect to the
         rights, warrants or options or distribution in respect of which the
         Average Sale Price is being calculated;

                  (ii) the period (x) commencing on the date next succeeding the
         first public announcement of (a) the issuance of rights, warrants or
         options or (b) the distribution, in each case, in respect of which the
         Average Sale Price is being calculated and (y) proceeding through the
         last full trading day prior to the Time of Determination with respect
         to the rights, warrants or options or distribution in respect of which
         the Average Sale Price is being calculated (excluding days within such
         period, if any, which are not trading days); or

                  (iii) the period, if any, (x) commencing on the date next
         succeeding the Ex-Dividend Time with respect to the next preceding (a)
         issuance of rights, warrants or options or (b) distribution, in each
         case, for which an adjustment is required by the provisions of Section
         10.7, 10.8 or 10.9 and (y) proceeding through the last full trading day
         prior to the Time of Determination with respect to the rights, warrants
         or options or distribution in respect of which the Average Sale Price
         is being calculated (excluding days within such period, if any, which
         are not trading days).

         In the event that the Ex-Dividend Time (or in the case of a
subdivision, combination or reclassification, the effective date with respect
thereto) with respect to a dividend, subdivision, or combination or
reclassification to which Section 10.6(1), (2), (3) or (4) applies occurs during
the period applicable for calculating "Average Sale Price" pursuant to the
definition in the preceding sentence, "Average Sale Price" shall be calculated
for such period in a manner determined by the Board of Directors of the Company
to reflect the impact of such dividend, subdivision, combination or
reclassification on the Sales Price of the shares of Common Stock during such
period.

         The adjustment shall become effective immediately after the record date
for the determination of shareholders entitled to receive the rights, warrants
or options to which this Section 10.7 applies. If all of the shares of Common
Stock subject to such rights, warrants or options have not been issued when such
rights, warrants or options expire, then the Conversion Rate shall promptly be
readjusted to the Conversion Rate which would then be in effect had the
adjustment upon the issuance of such rights, warrants or options been made on
the basis of the actual number of shares of Common Stock issued upon the
exercise of such rights, warrants or options.

         No adjustment shall be made under this Section 10.7 if the application
of the formula stated above in this Section 10.7 would result in a value of R'
that is equal to or less than the value of R.

                                       53
<PAGE>
         Section 10.8 ADJUSTMENT FOR OTHER DISTRIBUTIONS. Except as provided in
Section 10.11, if, after the Issue Date of the Securities, the Company
distributes to all holders of its shares of Common Stock any of its debt,
securities or assets or any rights, warrants or options to purchase securities
of the Company (including securities or cash, but excluding (x) distributions of
Capital Stock referred to in Section 10.6 and distributions of rights, warrants
or options referred to in Section 10.7 and (y) payments made to redeem rights
issued under any present or future rights agreement of the Company and (z) cash
dividends or other cash distributions that do not exceed the per share amount of
the immediately preceding regular cash dividend on the Common Stock and other
cash dividends or distributions unless such other cash dividends or cash
distributions are Extraordinary Cash Dividends) and unless the Holders of
Securities may participate in the distribution without conversion, the
Conversion Rate shall be adjusted, subject to the provisions of the last
paragraph of this Section 10.8, in accordance with the formula:

                              R x M
                    R' =  -------------
                             (M - F)

                  where:

                  R'   =   the adjusted Conversion Rate.

                  R    =   the current Conversion Rate.

                  M    =   the Average Sale Price.

                  F    =   the fair market value (on the record date for the
                           distribution to which this Section 10.8 applies) of
                           the assets, securities, rights, warrants or options
                           to be distributed in respect of each share of Common
                           Stock in the distribution to which this Section 10.8
                           is being applied (including, in the case of cash
                           dividends or other cash distributions giving rise to
                           an adjustment, all such cash distributed
                           concurrently).

         In the event the Company distributes shares of Capital Stock of a
Subsidiary, the Conversion Rate will be adjusted, if at all, based on the market
value of the Subsidiary stock so distributed relative to the market value of the
Common Stock, as discussed below. The Board of Directors of the Company shall
determine fair market values for the purposes of this Section 10.8, except that
in respect of a dividend or other distribution of shares of Capital Stock of any
class or series, or similar equity interests, of or relating to a Subsidiary or
other business unit of the Company (a "Spin-off"), the fair market value of the
securities to be distributed shall equal the average of the daily Sales Prices
of those securities for the five consecutive trading days commencing on and
including the sixth day of trading of those securities after the effectiveness
of the Spin-off and the average of the Sales Prices shall mean the average Sales
Prices for the Company's Common Stock for the same five trading days. In the
event, however, that an underwritten initial public offering of the securities
in the Spin-off occurs simultaneously with the Spin-off, fair market value of
the securities distributed in the Spin-off shall mean the initial public
offering price of such securities and the Average Sale Price, for purposes of
this sentence, shall mean the Sales Price for the Company's Common Stock on the
same trading day.

                                       54
<PAGE>
         The adjustment shall become effective immediately after the record date
for the determination of shareholders entitled to receive the distribution to
which this Section 10.8 applies, except that an adjustment related to a Spin-off
shall become effective at the earlier to occur of (i) 10 trading days after the
effective date of the Spin-off and (ii) the initial public offering of the
securities distributed in the Spin-off.

         For purposes of this Section 10.8, the term "Extraordinary Cash
Dividend" shall mean all all-cash distributions to all or substantially all
holders of the Company's Common Stock made within the 365 days preceding the
Time of Determination (or the period from the Issue Date to the Time of
Determination if such period is shorter than 365 days) not triggering a
Conversion Rate adjustment (other than payments made to redeem rights issued
under any present or future rights agreement of the Company and cash dividends
or other cash distributions that do not exceed the per share amount of the
immediately preceding regular cash dividend on the Common Stock), to the extent
such aggregate amount exceeds an amount equal to 15% of the Sale Price of the
Company's Common Stock on the Business Day immediately preceding the day on
which the Company declares the distribution times the number of shares of Common
Stock outstanding on such day.

         If, upon the date prior to the Ex-Dividend Time with respect to a cash
dividend on the shares of Common Stock, the aggregate amount of such cash
dividend together with the amounts of all cash dividends and distributions
referred to in the definition of Extraordinary Cash Dividend gives rise to an
adjustment of the Conversion Rate, then such cash dividend together with all
such other cash dividends and distributions shall, for purposes of applying the
formula set forth above in this Section 10.8, cause the value of "F" to equal
(y) the aggregate amount of such cash dividend and other cash dividends and
distributions, minus (z) the aggregate amount of all cash dividends or other
cash distributions during the preceding 365 days for which an adjustment in the
Conversion Rate was previously made.

         In the event that, with respect to any distribution to which this
Section 10.8 would otherwise apply, the difference "M-F" as defined in the above
formula is less than $1.00 or "F" is equal to or greater than "M", then the
adjustment provided by this Section 10.8 shall not be made and in lieu thereof
the provisions of Section 10.15 shall apply to such distribution.

         Section 10.9 ADJUSTMENT FOR SELF TENDER OFFER. If, after the Issue Date
of the Securities, the Company or any Subsidiary of the Company pays holders of
the Company's Common Stock in respect of a tender or exchange offer, other than
an odd-lot offer by the Company or any of its Subsidiaries, for the Company's
Common Stock (excluding stock options) consideration per share of Common Stock
having a fair market value, as determined in good faith by the Board of
Directors of the Company, whose determination shall be conclusive, in excess of
110% of the Sale Price of the Common Stock as of the first Business Day (the
"Measurement Date") next succeeding the last Business Day tenders or exchanges
may be made pursuant to the offer (the "Expiration Time"), the Conversion Rate
shall be increased so that the same shall equal the rate determined by
multiplying the Conversion Rate in effect immediately prior to the effectiveness
of the Conversion Rate adjustment contemplated by this Section 10.9 by a
fraction, the numerator of which shall be the sum of (x) the fair market value
of the aggregate consideration payable to stockholders based on the acceptance
of all shares validly tendered or exchanged and not withdrawn as of the
Expiration Time up to the maximum


                                       55
<PAGE>
specified in the tender or exchange offer (the "Purchased Shares") and (y) the
product of the number of shares of Common Stock outstanding (less any Purchased
Shares) at the Expiration Time and the Sale Price of a share of Common Stock on
the Measurement Date, and the denominator of which shall be the number of shares
of Common Stock outstanding (including any tendered or exchanged shares) at the
Expiration Time (including the Purchased Shares) multiplied by the Sale Price of
one share of Common Stock on the Measurement Date. Such reduction shall become
effective immediately prior to the opening of business on the day following the
Measurement Date.

         Section 10.10 WHEN ADJUSTMENT MAY BE DEFERRED. No adjustment in the
Conversion Rate need be made unless the adjustment would require an increase or
decrease of at least 1% in the Conversion Rate. Any adjustments that are not
made shall be carried forward and taken into account in any subsequent
adjustment.

         All calculations under this Article X shall be made to the nearest cent
or to the nearest 1/1,000th of a share, as the case may be.

         Section 10.11 WHEN NO ADJUSTMENT REQUIRED. No adjustment to the
Conversion Rate need be made as a result of:

         (1) (i) the issuance of the rights; (ii) the distribution of separate
certificates representing the rights; (iii) the exercise or redemption of the
rights in accordance with any rights agreement; or (iv) the termination or
invalidation of the rights, in each case, pursuant to the Company's existing
stockholders rights plan, as amended, modified, or supplemented from time to
time or any newly adopted stockholders rights plans;

         (2) upon the issuance of any shares of Common Stock pursuant to any
present or future plan providing for the reinvestment of dividends or interest
payable on securities of the Company and the investment of additional optional
amounts in shares of Common Stock under any plan;

         (3) upon the issuance of any shares of Common Stock or options or
rights to purchase those shares pursuant to any present or future employee,
director or consultant benefit plan or program of or assumed by the Company or
any of its Subsidiaries; or

         (4) upon the issuance of any shares of Common Stock pursuant to any
option, warrant, right, or exercisable, exchangeable or convertible security
outstanding as of the date the Securities were first issued.

         To the extent the Securities become convertible pursuant to this
Article X in whole or in part into cash, no adjustment need be made thereafter
as to the cash. Interest will not accrue on the cash.

         Section 10.12 NOTICE OF ADJUSTMENT. Whenever the Conversion Rate is
adjusted, the Company shall promptly mail to Holders a notice of the adjustment.
The Company shall file with the Trustee and the Conversion Agent such notice
briefly stating the facts requiring the adjustment and the manner of computing
it. The certificate shall be conclusive evidence that the adjustment is correct.
Neither the Trustee nor any Conversion Agent shall be under any duty or

                                       56
<PAGE>
responsibility with respect to any such certificate except to exhibit the same
to any Holder desiring inspection thereof.

         Section 10.13 VOLUNTARY INCREASE. The Company from time to time may
increase the Conversion Rate by any amount at any time for at least 20 days, so
long as the increase is irrevocable during such period. Whenever the Conversion
Rate is increased, the Company shall mail to Securityholders and file with the
Trustee and the Conversion Agent a notice of the increase. The Company shall
mail the notice at least 15 days before the date the increased Conversion Rate
takes effect. The notice shall state the increased Conversion Rate and the
period it will be in effect. A voluntary increase of the Conversion Rate does
not change or adjust the Conversion Rate otherwise in effect for purposes of
Section 10.6, 10.7 or 10.8.

         Section 10.14 NOTICE OF CERTAIN TRANSACTIONS. If:

         (1) the Company takes any action that would require an adjustment in
the Conversion Rate pursuant to Section 10.6, 10.7, 10.8 or 10.9 (unless no
adjustment is to occur pursuant to Section 10.11); or

         (2) the Company takes any action that would require a supplemental
indenture pursuant to Section 10.16; or

         (3) there is a liquidation or dissolution of the Company;

then the Company shall mail to Holders and file with the Trustee and the
Conversion Agent a notice stating the proposed record date for a dividend,
distribution or subdivision or the proposed effective date of a combination,
reclassification, consolidation, merger, binding share exchange, transfer,
liquidation or dissolution. The Company shall file and mail the notice at least
15 days before such date. Failure to file or mail the notice or any defect in it
shall not affect the validity of the transaction.

         Section 10.15 REORGANIZATION OF COMPANY; SPECIAL DISTRIBUTIONS. If the
Company is a party to a transaction subject to Section 5.1 (other than a sale of
all or substantially all of the assets of the Company in a transaction in which
the holders of shares of Common Stock immediately prior to such transaction do
not receive securities, cash or other assets of the Company or any other person)
or a merger or binding share exchange which reclassifies or changes its
outstanding shares of Common Stock, the person obligated to deliver securities,
cash or other assets upon conversion of Securities shall enter into a
supplemental indenture. If the issuer of securities deliverable upon conversion
of Securities is an Affiliate of the successor Company, that issuer shall join
in the supplemental indenture.

         The supplemental indenture shall provide that the Holder of a Security
may convert it into the kind and amount of securities, cash or other assets
which such Holder would have received immediately after the consolidation,
merger, binding share exchange or transfer if such Holder had converted the
Security immediately before the effective date of the transaction, assuming (to
the extent applicable) that such Holder (i) was not a constituent person or an
Affiliate of a constituent person to such transaction; (ii) made no election
with respect thereto; and (iii) was treated alike with the plurality of non-
electing Holders. The supplemental indenture shall provide for adjustments which
shall be as nearly equivalent as may be practical to


                                       57
<PAGE>
the adjustments provided for in this Article X. The successor Company shall mail
to Securityholders a notice briefly describing the supplemental indenture.

         If this Section applies, neither Section 10.6 nor 10.7 applies.

         If the Company makes a distribution to all holders of its shares of
Common Stock of any of its assets, or debt securities or any rights, warrants or
options to purchase securities of the Company that, but for the provisions of
the last paragraph of Section 10.8, would otherwise result in an adjustment in
the Conversion Rate pursuant to the provisions of Section 10.8, then, from and
after the record date for determining the holders of shares of Common Stock
entitled to receive the distribution, a Holder of a Security that converts such
Security in accordance with the provisions of this Indenture shall upon such
conversion be entitled to receive, in addition to the shares of shares of Common
Stock into which the Security is convertible, the kind and amount of securities,
cash or other assets comprising the distribution that such Holder would have
received if such Holder had converted the Security immediately prior to the
record date for determining the holders of shares of Common Stock entitled to
receive the distribution.

         Section 10.16 COMPANY DETERMINATION FINAL. Any determination that the
Company or the Board of Directors must make pursuant to Section 10.3, 10.6,
10.7, 10.8, 10.9, 10.10, 10.11, 10.15 or 10.17 is conclusive, absent manifest
error.

         Section 10.17 TRUSTEE'S ADJUSTMENT DISCLAIMER. The Trustee has no duty
to determine when an adjustment under this Article X should be made, how it
should be made or what it should be. The Trustee has no duty to determine
whether a supplemental indenture under Section 10.15 need be entered into or
whether any provisions of any supplemental indenture are correct. The Trustee
shall not be accountable for and makes no representation as to the validity or
value of any securities or assets issued upon conversion of Securities. The
Trustee shall not be responsible for the Company's failure to comply with this
Article X. Each Conversion Agent shall have the same protection under this
Section 10.17 as the Trustee. All calculations required under Article X shall be
performed by the Company, with notice thereof to the Trustee.

         Section 10.18 SIMULTANEOUS ADJUSTMENTS. In the event that this Article
X requires adjustments to the Conversion Rate under more than one of Sections
10.6(4), 10.7 or 10.8, and the record dates for the distributions giving rise to
such adjustments shall occur on the same date, then such adjustments shall be
made by applying, first, the provisions of Section 10.6, second, the provisions
of Section 10.8 and, third, the provisions of Section 10.7.

         Section 10.19 SUCCESSIVE ADJUSTMENTS. After an adjustment to the
Conversion Rate under this Article X, any subsequent event requiring an
adjustment under this Article X shall cause an adjustment to the Conversion Rate
as so adjusted.

         Section 10.20 RESTRICTION ON COMMON STOCK ISSUABLE UPON CONVERSION.

         (1) Shares of Common Stock to be issued upon conversion of the
Securities prior to the effectiveness of a Shelf Registration Statement shall be
physically delivered in certificated form to the holders converting such
Securities, and the certificate representing such shares of Common Stock shall
bear the Restricted Common Stock Legend unless removed in accordance with
Section 10.20(3).

                                       58
<PAGE>
         (2) If (i) shares of Common Stock to be issued upon conversion of a
Security prior to the effectiveness of a Shelf Registration Statement are to be
registered in a name other than that of the holder of such Security or (ii)
shares of Common Stock represented by a certificate bearing the Restricted
Common Stock Legend are transferred subsequently by such holder, then, unless
the Shelf Registration Statement has become effective and such shares are being
transferred pursuant to the Shelf Registration Statement, the holder must
deliver to the transfer agent for the Common Stock a certificate in
substantially the form of Exhibit D as to compliance with the restrictions on
transfer applicable to such shares of Common Stock, and neither the transfer
agent nor the registrar for the Common Stock shall be required to register any
transfer of such Common Stock not so accompanied by a properly completed
certificate.

         (3) Except for transfers in connection with a Shelf Registration
Statement, if certificates representing shares of Common Stock are issued upon
the registration of transfer, exchange or replacement of any other certificate
representing shares of Common Stock bearing the Restricted Common Stock Legend,
or if a request is made to remove such Restricted Common Stock Legend from
certificates representing shares of Common Stock, the certificates so issued
shall bear the Restricted Common Stock Legend, or the Restricted Common Stock
Legend shall not be removed, as the case may be, unless there is delivered to
the Company such satisfactory evidence, which, in the case of a transfer made
pursuant to Rule 144 under the Securities Act, may include an opinion of counsel
as may be reasonably required by the Company, that neither the legend nor the
restrictions on transfer set forth therein are required to ensure that transfers
thereof comply with the provisions of Rule 144A, Rule 144 or Regulation S under
the Securities Act or that such shares of Common Stock are securities that are
not "restricted" within the meaning of Rule 144 under the Securities Act. Upon
provision to the Company of such reasonably satisfactory evidence, the Company
shall cause the transfer agent for the Common Stock to countersign and deliver
certificates representing shares of Common Stock that do not bear the legend.

                                   ARTICLE XI

                                  MISCELLANEOUS

         Section 11.1 TRUST INDENTURE ACT CONTROLS. If any provision of this
Indenture limits, qualifies, or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.

         Section 11.2 NOTICES. Any request, demand, authorization, notice,
waiver, consent or communication shall be in writing and delivered in person or
mailed by first-class mail, postage prepaid, addressed as follows or transmitted
by facsimile transmission (confirmed by guaranteed overnight courier) to the
following facsimile numbers:

         if to the Company:

         Hasbro, Inc.
         200 Narrangansett Park Drive
         Pawtucket, RI 02862-0200
         Attn: Treasurer

                                       59
<PAGE>
         with a copy to:
         Hasbro, Inc.
         1027 Newport Avenue
         Pawtucket, RI 02862
         Attn: General Counsel

         if to the Trustee:

         The Bank of Nova Scotia Trust Company of New York
         One Liberty Plaza
         New York, NY 10006

         Telephone No. (212) 635-4452
         Facsimile No. (212) 635-4165
         Attention: Corporate Trust Administration

         The Company or the Trustee by notice given to the other in the manner
provided above may designate additional or different addresses for subsequent
notices or communications.

         Any notice or communication given to a Securityholder shall be mailed
to the Securityholder, by first-class mail, postage prepaid, at the
Securityholder's address as it appears on the registration books of the
Registrar and shall be sufficiently given if so mailed within the time
prescribed.

         Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not received by the addressee.

         If the Company mails a notice or communication to the Securityholders,
it shall mail a copy to the Trustee and each Registrar, Paying Agent, Conversion
Agent or co-registrar.

         Section 11.3 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar, the Paying Agent, the
Conversion Agent and anyone else shall have the protection of TIA Section
312(c).

         Section 11.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon
any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:

         (1) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and

         (2) an Opinion of Counsel stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.

                                       60
<PAGE>
         Section 11.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each
Officers' Certificate or Opinion of Counsel with respect to compliance with a
covenant or condition provided for in this Indenture shall include:

         (1) a statement that each person making such Officers' Certificate or
Opinion of Counsel has read such covenant or condition;

         (2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such Officers'
Certificate or Opinion of Counsel are based;

         (3) a statement that, in the opinion of each such person, he has made
such examination or investigation as is necessary to enable such person to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and

         (4) a statement that, in the opinion of such person, such covenant or
condition has been complied with.

         Section 11.6 SEPARABILITY CLAUSE. In case any provision in this
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.

         Section 11.7 RULES BY TRUSTEE, PAYING AGENT, CONVERSION AGENT AND
REGISTRAR. The Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar, the Conversion Agent and the Paying Agent may
make reasonable rules for their functions.

         Section 11.8 LEGAL HOLIDAYS. A "Legal Holiday" is any day other than a
Business Day. If any specified date (including a date for giving notice) is a
Legal Holiday, the action shall be taken on the next succeeding day that is not
a Legal Holiday, and, if the action to be taken on such date is a payment in
respect of the Securities, no interest, if any, shall accrue for the intervening
period.

         Section 11.9 GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK SHALL
GOVERN THIS INDENTURE AND THE SECURITIES, WITHOUT REGARD AS TO CONFLICT OF LAWS
PRINCIPLES.

         Section 11.10 NO RECOURSE AGAINST OTHERS. A director, officer, employee
or stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or this Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder shall waive and release
all such liability. The waiver and release shall be part of the consideration
for the issue of the Securities.

         Section 11.11 SUCCESSORS. All agreements of the Company in this
Indenture and the Securities shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.

                                       61
<PAGE>
         Section 11.12 MULTIPLE ORIGINALS. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Indenture.




                                       62
<PAGE>
         IN WITNESS WHEREOF, the undersigned, being duly authorized, have
executed this Indenture on behalf of the respective parties hereto as of the
date first above written.

                                          HASBRO, INC.


                                          By: /s/ MARTIN R. TRUEB
                                             -----------------------------------
                                              Name:  Martin R. Trueb
                                              Title: Senior Vice President and
                                                     Treasurer


                                          THE BANK OF NOVA SCOTIA TRUST COMPANY
                                              OF NEW YORK, as Trustee


                                          By:  /s/ WARREN A. GOSHINE
                                              ----------------------------------
                                              Name:  WARREN A. GOSHINE
                                              Title: SECRETARY



                                       63
<PAGE>
                                                                     EXHIBIT A-1

                        [FORM OF FACE OF GLOBAL SECURITY]

         THIS SECURITY WILL BE SUBJECT TO THE REGULATIONS GOVERNING CONTINGENT
PAYMENT DEBT INSTRUMENTS FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. AS
REQUIRED UNDER APPLICABLE TREASURY REGULATIONS, THE COMPANY HAS SET FORTH THE
"COMPARABLE YIELD" IN SECTION 4.7 OF THE INDENTURE PURSUANT TO WHICH THIS
SECURITY IS BEING ISSUED. THE HOLDER OF THIS SECURITY MAY OBTAIN THE PROJECTED
PAYMENT SCHEDULE BY SUBMITTING A WRITTEN REQUEST FOR SUCH INFORMATION TO HASBRO,
INC., 200 NARRAGANSETT PARK DRIVE, PAWTUCKET, RI 02862-0200, ATTENTION:
TREASURER.

         UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

         TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS TO
NOMINEES OF THE DEPOSITORY TRUST COMPANY, OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

         THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF
THE ISSUE HEREOF (OR ANY PREDECESSOR SECURITY HEREOF) OR (Y) BY ANY HOLDER THAT
WAS AN "AFFILIATE" (WITHIN THE MEANING OF RULE 144 UNDER THE SECURITIES ACT) OF
THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH
TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS
SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A"), TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN


                                      A-1-1
<PAGE>
RELIANCE ON RULE 144A, (3) IN AN OFFSHORE TRANSACTION (AS DEFINED IN REGULATION
S UNDER THE SECURITIES ACT) IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES
ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT OR (5) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES
FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER OR
(2) NOT A U.S. PERSON AND IS OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR
AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (k)(2) OF RULE 902 UNDER)
REGULATION S UNDER THE SECURITIES ACT. IN ANY CASE THE HOLDER HEREOF WILL NOT,
DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTION WITH REGARD TO THIS
SECURITY OR ANY COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY EXCEPT AS
PERMITTED BY THE SECURITIES ACT.

         The foregoing legend may be removed from this Security on satisfaction
of the conditions specified in the Indenture.

                                      A-1-2
<PAGE>
                                  HASBRO, INC.

                  2.75% Convertible Senior Debentures due 2021

No.                                                           CUSIP: 418056 AM 9
Issue Date: November 30, 2001
Issue Price: 100% of principal amount


         HASBRO, INC., a corporation duly organized and existing under the laws
of the State of Rhode Island, promises to pay to Cede & Co. or registered
assigns, the principal amount of [__________________] ($___________) on December
1, 2021.

         This Security shall bear interest at a rate of 2.75% per year except as
specified on the other side of this Security. This Security is convertible as
specified on the other side of this Security.

         Additional provisions of this Security are set forth on the other side
of this Security.

Dated:
                                          HASBRO, INC.


                                          By:
                                             -----------------------------------
                                              Title:
                                                    ----------------------------


TRUSTEE'S CERTIFICATE OF AUTHENTICATION


THE  BANK OF NOVA SCOTIA TRUST COMPANY OF NEW YORK,
     as Trustee, certifies that this is one
     of the Securities referred to in the
     within-mentioned Indenture.

By
  ------------------------------------------------
     Authorized Signatory


Dated:


                                     A-1-3
<PAGE>
                      [FORM OF REVERSE OF GLOBAL SECURITY]

                  2.75% Convertible Senior Debentures due 2021

1.       Interest.

         Except as provided below, this Security shall bear interest at a rate
of 2.75% per year on the Accreted Value (as defined below) hereof, from November
30, 2001 or from the most recent Interest Payment Date (as defined below) to
which payment has been paid or duly provided for, payable semiannually in
arrears on June 1 and December 1 of each year (each an "Interest Payment Date")
to the persons in whose names the Securities are registered at the close of
business on May 15 and November 15 (each a "Regular Record Date") (whether or
not a Business Day), as the case may be, next preceding such Interest Payment
Date. Interest on the Securities will be computed on the basis of a 360-day year
comprised of twelve 30-day months.

         Cash interest on Securities converted after a record date, but prior to
the corresponding Interest Payment Date, will be paid to the Holder of the
Securities on the Regular Record Date but, upon conversion, the Holder must pay
the Company the cash interest which has accrued and will be paid on such
Interest Payment Date. No such payment needs to be made with respect to
Securities that will be redeemed after a Regular Record Date and prior to the
corresponding Interest Payment Date.

         If the principal amount of a Security, plus accrued and unpaid
interest, or any portion thereof, is not paid when due (whether upon
acceleration pursuant to Section 6.2 of the Indenture, upon the date set for
payment of the Redemption Price pursuant to Paragraph 5 hereof, upon the date
set for payment of the Purchase Price or the Fundamental Change Purchase Price
pursuant to Paragraph 6 hereof, or upon the Stated Maturity of this Security),
then, in each such case, the overdue amount shall, to the extent permitted by
law, bear interest at a rate of 2.75% per year, compounded semi-annually, which
interest shall accrue from the date such overdue amount was originally due to
the date of payment of such amount, including interest thereon, has been made or
duly provided for. All such interest shall be payable on demand and shall be
based on a 360-day year comprised of twelve 30-day months.

         (a) Upward Interest Adjustment. The interest rate on this Security will
be 2.75% per year through December 1, 2005. If the average of the Sale Prices
(as defined below) of the Company's Common Stock is less than or equal to 45% of
the Accreted Conversion Price (as defined below) of this Security for any 20 out
of the last 30 trading days ending on the fifth day preceding each June 1 and
December 1, beginning on December 1, 2005, then the interest rate on this
Security will be subject to an upward interest adjustment for the six-month
period beginning on such June 1 or December 1 (an "Upward Interest Adjustment").
The Upward Interest Adjustment will result in the interest on this Security
being equivalent to the applicable Reset Rate (as defined below).

         If an Upward Interest Adjustment is then in effect for any six-month
period and the average of the Sale Prices of the Company's Common Stock is not
less than or equal to 45% of the Accreted Conversion Price of this Security for
any 20 out of the last 30 trading days of the six-month period ending on the
fifth day preceding any June 1or December 1, as applicable, then


                                      A-1-4
<PAGE>
the interest rate on this Security for the six-month period beginning on such
June 1 or December 1 will revert to 2.75% per year of the Accreted Value.

         If an Upward Interest Adjustment is in effect for a particular
six-month period, the Company will pay a portion of the Upward Interest
Adjustment as cash interest at a rate of 0.25% per year (0.125% per six-month
period) of the Accreted Value, and the remaining interest will be accrued and
payable at the Stated Maturity or earlier upon the redemption or repurchase of
the Securities.

         The applicable "Reset Rate" for any six-month period in which there is
an Upward Interest Adjustment in effect, as determined by the Reset Rate Agent
(as defined below), will be set as of the Purchase Date on which such adjustment
is required or, if the adjustment is required as of a date that is not a
Purchase Date, the immediately preceding Purchase Date, and will be equal to the
rate (the "Reference Fixed Rate") that would, in the sole and reasonable
judgment of the Reset Rate Agent, result in a trading price of par for a
hypothetical issue of senior, non-convertible, fixed-rate, callable debt
securities of the Company with:

                  (i) a final maturity equal to the term from the most recent
         Purchase Date until the next Purchase Date;

                  (ii) an aggregate principal amount equal to the then Accreted
         Value of the Securities; and

                  (iii) provisions that are, insofar as would be practicable for
         an issue of senior, non-convertible, fixed-rate, callable debt
         securities with no restrictive covenants, substantially identical to
         those of the Securities.

         In no case, however, will the applicable Reset Rate for any period
exceed 11% per year. Also, if the Reset Rate Agent determines in its reasonable
judgment that there is no suitable Reference Fixed Rate, the applicable interest
rate on this Security for that period will be the interest rate then in effect
and to remain in effect until the Reset Rate Agent determines that there is a
suitable Reference Fixed Rate at which time the Reset Rate Agent shall determine
a new applicable Reset Rate for the period ending on the next Purchase Date.

         "Accreted Conversion Price" means, as of any date, the Accreted Value
of this Security divided by the number of shares of Common Stock issuable upon
conversion of this Security on that day.

         "Accreted Value" for any Security means, as of any date, the sum of the
principal amount of such Security and the accrued and unpaid non-current
interest thereon as of such date.

         The "Sale Price" of the Common Stock on any date means the closing per
share sale price (or if no closing sale price is reported, the average of the
bid and ask prices or, if more than one in either case, the average of the
average bid and the average asked prices) on that date as reported on The New
York Stock Exchange or, if the Common Stock is not then listed on The New York
Stock Exchange, then as reported on the National Association of Securities
Dealers Automated Quotation System.


                                      A-1-5
<PAGE>
         The Company and the Trustee agree that Salomon Smith Barney Inc. will
act as the Reset Rate Agent (the "Reset Rate Agent") unless and until removed as
provided below. For the determination of the applicable Reset Rate, the Reset
Rate Agent will seek indicative reference rates from one other nationally
recognized investment bank. The determination of any applicable Reset Rate shall
be made by the Reset Rate Agent by averaging the indicative reference rates
obtained by Salomon Smith Barney Inc. and such other investment bank. The
determination of any applicable Reset Rate by the Reset Rate Agent will be
conclusive and binding upon the Reset Rate Agent, the Company, the Trustee and
the holders of the Securities, in the absence of manifest error. The Reset Rate
Agent may be removed at any time with or without cause by the Company giving at
least sixty (60) days' written notice to the Reset Rate Agent. The Reset Rate
Agent may resign at any time upon giving at least thirty (30) days' written
notice to the Company. A successor Reset Rate Agent, if any, will be appointed
by the Company.

         In the event of any Upward Interest Adjustment, the Company will
disseminate a press release through Dow Jones & Company, Inc. or Bloomberg
Business News containing this information or publish the information on the
Company's web site or through such other public medium as the Company may use at
that time.

         (b) TAX EVENT.

         From and after the date of the occurrence of a Tax Event, the Company
will have the option to elect to pay interest at the applicable Reset Rate on
this Security entirely in cash instead of accruing interest pursuant to an
Upward Interest Adjustment. Following the Company's election to pay interest in
cash following a Tax Event, the Company will execute new Securities to restate
the principal amount of the Securities to reflect the Accreted Value of the
Securities, and interest will be payable on the Accreted Value of the Securities
as of the date of the Company's election (the "Option Exercise Date").

         Such interest shall accrue from the Option Exercise Date and will be
payable semiannually on the Interest Payment Dates to Holders of record as of
the Regular Record Dates immediately preceding the Interest Payment Dates. The
Company will give notice to the Holders, no later than 30 days prior to each
Regular Record Date, of the amount of cash interest to be paid on the subsequent
Interest Payment Date. Cash interest accrued and unpaid to the Option Exercise
Date shall be paid to the Holders of the Securities together with the cash
interest at the higher rate accrued from the Option Exercise Date.

         A "Tax Event" means that the Company shall have received an opinion
from a nationally recognized independent tax counsel experienced in such matters
to the effect that as a result of:

         -        any amendment to or change (including any announced
                  prospective change (which will not include a proposed change))
                  in the laws (or any regulations thereunder) of the United
                  States or any political subdivision or taxing authority of the
                  United States or any political subdivision, provided that a
                  tax event will not occur more than 90 days before the
                  effective date of any prospective change in such laws or
                  regulations; or

                                      A-1-6
<PAGE>
         -        any judicial decision or official administrative
                  pronouncement, ruling, regulatory procedure, notice or
                  announcement, including any notice or announcement of intent
                  to adopt such procedures or regulations (an "Administrative
                  Action"); or

         -        any amendment to or change in the administrative position or
                  interpretation of any Administrative Action or judicial
                  decision that differs from the theretofore generally accepted
                  position, in each case, by any legislative body, court,
                  governmental agency or regulatory body, irrespective of the
                  manner in which such amendment or change is made known, which
                  amendment or change is effective or such Administrative Action
                  or decision is announced, in each case, on or after the date
                  of original issuance of the debentures;

there is more than an insubstantial risk that interest on the debentures,
including interest pursuant to an upward interest adjustment, either:

         -        would not be deductible in its entirety on a current accrual
                  basis; or

         -        would not be deductible under any other method, in whole or in
                  part, by the Company for United States federal income tax
                  purposes.

         (c) GENERAL. Except as provided below, interest and Liquidated Damages,
if any, will be paid (i) on the Global Securities to DTC in immediately
available funds, (ii) on the definitive Securities having an aggregate principal
amount of $10,000,000 or less, by check mailed to the Holders of such
Securities, and (iii) on the definitive Securities having an aggregate principal
amount of more than $10,000,000, by wire transfer in immediately available funds
at the election of the Holders of these Securities.

2.       METHOD OF PAYMENT.

         Subject to the terms and conditions of the Indenture, the Company will
make payments in cash in respect of Redemption Prices, Purchase Prices,
Fundamental Change Purchase Prices and at Stated Maturity to Holders who
surrender Securities to the Paying Agent to collect such payments in respect of
the Securities, provided that the Company may make payments in shares of Common
Stock or combination of cash and Common Stock in respect of the Purchase Price
on a Purchase Date, as provided for in Section 3.7 of the Indenture. The Company
will pay cash amounts in money of the United States that at the time of payment
is legal tender for payment of public and private debts. However, the Company
may make such cash payments by check payable in such money.

3.       PAYING AGENT, CONVERSION AGENT AND REGISTRAR.

         Initially, The Bank of Nova Scotia Trust Company of New York (the
"Trustee") will act as Paying Agent, Conversion Agent and Registrar. The Company
may appoint and change any Paying Agent, Conversion Agent or Registrar without
notice, other than notice to the Trustee; provided that the Company will
maintain at least one Paying Agent in the State of New York, City of New York,
Borough of Manhattan, which shall initially be an office or agency of the
Trustee. The Company or any of its Subsidiaries or any of their Affiliates may
act as Paying Agent, Conversion Agent or Registrar.

                                      A-1-7
<PAGE>
4.       INDENTURE.

         The Company issued the Securities under an Indenture dated as of
November 30, 2001 (the "Indenture"), between the Company and the Trustee. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as in
effect from time to time (the "TIA"). Capitalized terms used herein and not
defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all such terms, and Securityholders are referred to
the Indenture and the TIA for a statement of those terms. To the extent any
provisions of this Security and the Indenture conflict, the provisions of the
Indenture shall control.

         The Securities are senior unsecured obligations of the Company limited
to $250,000,000 aggregate principal amount (subject to Section 2.7 of the
Indenture, Upward Interest Adjustments and the Company's election to pay
interest in cash following a Tax Event). The Indenture does not limit other
indebtedness of the Company, secured or unsecured.

5.       REDEMPTION AT THE OPTION OF THE COMPANY.

         No sinking fund is provided for the Securities. The Securities are
redeemable at the option of the Company in whole or in part, on or after
December 6, 2005 upon not less than 30 nor more than 60 days' notice by mail for
a cash price equal to the Accreted Value plus accrued and unpaid current cash
interest, if any, to the Redemption Date (the "Redemption Price"), if the Sale
Price of the Common Stock for at least 20 trading days in any period of 30
consecutive trading days ending on the fifth Business Day preceding the date of
such notice is more than 125% of the Accreted Conversion Price as of the last
day of such 30 trading day period.

6.       PURCHASE BY THE COMPANY AT THE OPTION OF THE HOLDER.

         Subject to the terms and conditions of the Indenture, the Company shall
become obligated to purchase, at the option of the Holder, all or any portion of
the Securities held by such Holder on any Purchase Date in integral multiples of
$1,000, if less than all of the Securities are being redeemed, at a Purchase
Price equal to the Accreted Value plus accrued and unpaid current cash interest,
if any, to the Purchase Date. To exercise such right, a Holder shall deliver to
the Company a Purchase Notice containing the information set forth in the
Indenture at any time from the opening of business on the date that is 20
Business Days prior to such Purchase Date until the close of business two
Business Days prior to such Purchase Date, and shall deliver the Securities to
the Paying Agent as set forth in the Indenture.

         The Purchase Price may be paid, at the option of the Company, in cash
or by the issuance and delivery of shares of Common Stock, or in any combination
thereof, provided that accrued and unpaid current cash interest shall be paid in
cash.

         At the option of the Holder and subject to the terms and conditions of
the Indenture, the Company shall become obligated to offer to purchase the
Securities held by such Holder within 30 days (which purchase shall occur 45
days after the date of such offer) after the occurrence of a Fundamental Change
for a Fundamental Change Purchase Price equal to the Accreted Value plus accrued
and unpaid current cash interest, if any, to the Fundamental Change Purchase
Date, which Fundamental Change Purchase Price shall be paid in cash.

                                      A-1-8
<PAGE>
         Holders have the right to withdraw any Purchase Notice or Fundamental
Change Purchase Notice, as the case may be, by delivering to the Paying Agent a
written notice of withdrawal in accordance with the provisions of the Indenture.

         If cash (and/or shares of Common Stock if permitted under the
Indenture) sufficient to pay the Purchase Price or Fundamental Change Purchase
Price, as the case may be, of all Securities or portions thereof to be purchased
on the Purchase Date or the Fundamental Change Purchase Date, as the case may
be, is deposited with the Paying Agent on the Purchase Date or the Fundamental
Change Purchase Date, interest ceases to accrue on such Securities or portions
thereof immediately after such Purchase Date or Fundamental Change Purchase
Date, and the Holder thereof shall have no other rights as such other than the
right to receive the Purchase Price or Fundamental Change Purchase Price upon
surrender of such Security.

7.       NOTICE OF REDEMPTION.

         Notice of redemption pursuant to Paragraph 5 of this Security will be
mailed at least 30 days but not more than 60 days before the Redemption Date to
each Holder of Securities to be redeemed at the Holder's registered address. If
money sufficient to pay the Redemption Price of all Securities or portions
thereof to be redeemed on the Redemption Date is deposited with the Paying Agent
prior to or on the Redemption Date, interest ceases to accrue on such Securities
or portions thereof immediately after such Redemption Date. Securities in
denominations larger than $1,000 of principal amount may be redeemed in part but
only in integral multiples of $1,000 of principal amount, if less than all of
the Securities are being redeemed.

8.       CONVERSION.

         Holders may surrender Securities for conversion into shares of Common
Stock if during any calendar quarter the Sale Price of our Common Stock for at
least 20 trading days in the period of 30 consecutive trading days ending on the
last trading day of the previous quarter is more than 110% of the Accreted
Conversion Price per share of the Common Stock on such last trading day. A
Holder may also surrender for conversion a Security or portion of a Security
which has been called for redemption pursuant to Paragraph 5 hereof, even if
bthe foregoing provision has not been satisfied, and such Securities may be
surrendered for conversion until the close of business on the day that is two
Business Days prior to the Redemption Date.

         In the event that the Conversion Rate must be adjusted because the
Company declares a dividend or distribution described in Section 10.7 of the
Indenture or a dividend or a distribution described in Section 10.8 of the
Indenture where the fair market value of such dividend or distribution per share
of Common Stock, as determined in the Indenture, exceeds 15% of the Sale Price
of a share of Common Stock as of the Business Day prior to the date of
declaration for such distribution, unless the Holder may participate in this
distribution without conversion, the Securities may be surrendered for
conversion beginning on the date the Company gives notice to the Holders of such
right, which shall be not less than 20 days prior to the Ex-Dividend Time for
such dividend or distribution, and the Securities may be surrendered for
conversion at any time thereafter until the close of business on the Business
Day prior to the Ex-Dividend Time or until the Company announces that such
distribution will not take place.

                                      A-1-9
<PAGE>
         In the event the Company is a party to a consolidation, merger or
binding share exchange pursuant to which the shares of Common Stock would be
converted into cash, securities or other property (other than if such property
consists of shares of voting common stock of the surviving person that are, or
upon issuance will be, traded on a United States national securities exchange or
approved for trading on an established automated over-the-counter trading market
in the United States, and such shares represent at least 95% of the aggregate
fair market value (as determined by the Board of Directors) of such property),
the Securities may be surrendered for conversion at any time from and after the
date which is 15 days prior to the date the Company announces as the anticipated
effective time until 15 days after the actual date of such transaction.

         Finally, if the long-term credit rating assigned to the Securities by
any two of Moody's Investors Service, Inc., Standard & Poor's Ratings Group or
Fitch IBCA Duff & Phelps are reduced two notches below Ba3, BB and BB,
respectively, or if the Securities are no longer rated by any two of these
ratings services or if the ratings for the Securities have been suspended by two
of these rating services, the Securities may be surrendered for conversion
beginning on the date the Company gives notice to the Holders of such right,
which shall not be later than 15 days after the date on which the Company is
notified of any such event by the relevant ratings service.

         A Security in respect of which a Holder has delivered a Purchase Notice
or Fundamental Change Purchase Notice exercising the option of such Holder to
require the Company to purchase such Security may be converted only if such
notice of exercise is withdrawn in accordance with the terms of the Indenture.

         The initial Conversion Rate is 46.2963 shares of Common Stock per
$1,000 principal amount of Securities, subject to adjustment in certain events
described in the Indenture. A Holder that surrenders Securities for conversion
will receive cash or a check in lieu of any fractional shares of Common Stock.

         To surrender a Security for conversion, a Holder must (1) complete and
manually sign the irrevocable conversion notice below (or complete and manually
sign a facsimile of such notice) and deliver such notice to the Conversion
Agent, (2) surrender the Security to the Conversion Agent, (3) furnish
appropriate endorsements and transfer documents and (4) pay any transfer or
similar tax, if required.

         A Holder may convert a portion of a Security if the principal amount of
such portion is $1,000 or an integral multiple of $1,000. No payment or
adjustment will be made for dividends on the shares of Common Stock except as
provided in the Indenture. Except as provided in Paragraph 1 hereof, on
conversion of a Security, the Holder will not receive any cash payment
representing accrued interest with respect to the converted Securities. Instead,
upon conversion the Company will deliver to the Holder a fixed number of shares
of Common Stock and any cash payment to account for fractional shares. Accrued
interest will be deemed paid in full rather than canceled, extinguished or
forfeited. The Company will not adjust the Conversion Rate to account for
accrued interest.

         The Conversion Rate will be adjusted as provided in Article 10 of the
Indenture. The Company may increase the Conversion Rate for at least 20 days, so
long as the increase is irrevocable during such period.

                                     A-1-10
<PAGE>
         If the Company is a party to a consolidation, merger or binding share
exchange or a transfer of all or substantially all of its assets, or upon
certain distributions described in the Indenture, then at the effective time of
the transaction the right to convert a Security into shares of Common Stock may
be changed into a right to convert it into securities, cash or other assets of
the Company or another person.

9.       CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION.

         Any Securities called for redemption, unless surrendered for conversion
before the close of business on the day that is two Business Days prior to the
Redemption Date, may be deemed to be purchased from the Holders of such
Securities at an amount not less than the Redemption Price, by one or more
investment bankers or other purchasers who may agree with the Company to
purchase such Securities from the Holders, to convert them into shares of Common
Stock and to make payment for such Securities to the Trustee in trust for such
Holders.

10.      DENOMINATIONS; TRANSFER; EXCHANGE.

         The Securities are in fully registered form, without coupons, in
minimum denominations of $1,000 of principal amount and integral multiples of
$1,000 (except as necessary to reflect the related Accreted Value of any
Security). A Holder may transfer or exchange the Securities in accordance with
the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
transfer or exchange any Securities selected for redemption (except, in the case
of a Security to be redeemed in part, the portion of the Security not to be
redeemed) or any Securities in respect of which a Purchase Notice or Fundamental
Change Purchase Notice has been given and not withdrawn (except, in the case of
a Security to be purchased in part, the portion of the Security not to be
purchased) or any Securities for a period of 15 days before the mailing of a
notice of redemption of Securities to be redeemed.

11.      PERSONS DEEMED OWNERS.

         The registered Holder of this Security may be treated as the owner of
this Security for all purposes.

12.      UNCLAIMED MONEY OR SECURITIES.

         The Trustee and the Paying Agent shall return to the Company upon
written request any money or securities held by them for the payment of any
amount with respect to the Securities that remains unclaimed for two years,
subject to applicable unclaimed property law. After return to the Company,
Holders entitled to the money or securities must look to the Company for payment
as general creditors unless an applicable abandoned property law designates
another person.

13.      AMENDMENT; WAIVER.

         Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in aggregate

                                     A-1-11
<PAGE>
principal amount of the Securities at the time outstanding and (ii) certain
Defaults may be waived with the written consent of the Holders of a majority in
aggregate principal amount of the Securities at the time outstanding. Subject to
certain exceptions set forth in the Indenture, without the consent of any
Holder, the Company and the Trustee may amend the Indenture or the Securities
among other things, (i) to cure any ambiguity, omission, defect or
inconsistency, provided that such modification or amendment does not materially
and adversely affect the interests of the holders of the Securities, (ii) to
comply with Article 5 or Section 10.14 of the Indenture, (iii) to secure the
Company's obligations or to add any guarantee under the Securities and the
Indenture; (iv) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power conferred upon the Company, (v) to
make any change necessary for the registration of the Securities under the
Securities Act or to comply with the TIA, or any amendment thereto, or to comply
with any requirement of the SEC in connection with the qualification of the
Indenture under the TIA, provided that such modification or amendment does not
materially and adversely affect the interests of the holders of the Securities,
(vi) to provide for uncertificated Securities in addition to or in place of
certificated Securities or to provide for bearer Securities or (vii) to make any
modifications or amendments that that the Company and the Trustee may deem
necessary or desirable, provided such amendment or modification does not
materially and adversely affect the interests of the Holders of the Securities.

14.      DEFAULTS AND REMEDIES.

         Under the Indenture, Events of Default include (i) default in payment
of the principal amount of the Securities plus accrued and unpaid interest when
the same becomes due and payable at Stated Maturity, upon redemption, upon
declaration, when due for purchase by the Company or otherwise, (ii) default in
the payment of any cash interest (including interest which becomes payable after
an Upward Interest Adjustment or any election by the Company to pay interest
entirely in cash on the Securities following a Tax Event), when due and payable,
subject to lapse of time, (iii) failure by the Company to comply in any material
respect with other agreements or covenants in the Indenture or the Securities,
subject to notice and lapse of time; (iv) failure by the Company to deliver
shares of Common Stock upon the election by the Holders to convert their
Securities, subject to lapse of time; (v) failure to provide timely notice of a
Fundamental Change; (vi) default under any credit agreement, mortgage, indenture
or instrument under which there may be issued or by which there may be secured
or evidenced any Indebtedness for money borrowed by the Company or any of its
Material Subsidiaries (or the payment of which is guaranteed by the Company or
any of its Material Subsidiaries), whether such Indebtedness or guarantee exists
on the date of the Indenture or is created thereafter, which default (A) is
caused by a failure to pay when due any principal of such Indebtedness within
the grace period provided for in such Indebtedness (which failure continues
beyond any applicable grace period) (a "Payment Default") or (B) results in the
acceleration of such Indebtedness prior to its express maturity (without such
acceleration being rescinded or annulled) and, in each case, the principal
amount of such Indebtedness, together with the principal amount of any other
such Indebtedness under which there is a Payment Default or the maturity of
which has been so accelerated, aggregates $25,000,000 or more and such Payment
Default is not cured or such acceleration is not annulled within 30 days after
notice; or (vii) failure by the Company or any Material Subsidiary of the
Company to pay final, non-appealable judgments (other than any judgment as to
which a reputable insurance company has accepted full liability) aggregating in
excess of $25,000,000, which judgments are not stayed, bonded or discharged
within 60 days

                                     A-1-12
<PAGE>
after their entry; and (vii) certain events of bankruptcy, insolvency and
reorganization of the Company.

         Holders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Securities unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in aggregate principal amount of the
Securities at the time outstanding may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from the Holders notice of any
continuing Default (except a Default in payment of amounts specified in clause
(ii) above) if it determines that withholding notice is in their interests.

15.      TRUSTEE DEALINGS WITH THE COMPANY.

         Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with the Company or its Affiliates
with the same rights it would have if it were not Trustee.

16.      CALCULATIONS IN RESPECT OF SECURITIES.

         The Company will be responsible for making all calculations called for
under the Securities, except for such calculations made by the Reset Rate Agent.
These calculations include, but are not limited to, determination of the market
prices for the Common Stock, accrued interest payable on the Securities and the
Accreted Conversion Price of the Securities. Any calculations made in good faith
and without manifest error will be final and binding on Holders of the
Securities. The Company will be required to deliver to each of the Trustee and
the Conversion Agent a schedule of its calculations and each of the Trustee and
the Conversion Agent will be entitled to rely upon the accuracy of such
calculations without independent verification. The Trustee will forward the
Company's calculations to any Holder of the Securities upon the request of such
Holder.

17.      NO RECOURSE AGAINST OTHERS.

         A director, officer, employee or stockholder, as such, of the Company
or the Trustee shall not have any liability for any obligations of the Company
under the Securities or the Indenture or for any claim based on, in respect of
or by reason of such obligations or their creation. By accepting a Security,
each Holder waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Securities.

18.      AUTHENTICATION.

         This Security shall not be valid until an authorized signatory of the
Trustee manually signs the Trustee's Certificate of Authentication on the other
side of this Security.

19.      ABBREVIATIONS.

         Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants

                                     A-1-13
<PAGE>
with right of survivorship and not as tenants in common), CUST (=custodian), and
U/G/M/A (=Uniform Gift to Minors Act).

20.      GOVERNING LAW.

         THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THIS
SECURITY.

         The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture which has in it the text of this Security in
larger type. Requests may be made to:

         Hasbro, Inc.
         200 Narragansett Park Drive
         Pawtucket, RI 02862-0200
         Attn: Treasurer

21.      REGISTRATION RIGHTS.

         The Holders of the Securities are entitled to the benefits of a
Registration Agreement, dated as of November 30, 2001, between the Company and
Salomon Smith Barney Inc., including the receipt of liquidated damages upon a
registration default (as defined in such agreement).

                                     A-1-14

<PAGE>
                            FORM OF CONVERSION NOTICE

To: HASBRO, INC.

         The undersigned beneficial owner of the Security hereby irrevocably
exercises the option to convert this Security, or portion hereof (which is
$1,000 or an integral multiple thereof) below designated, into shares of Common
Stock of Hasbro, Inc. in accordance with the terms of the Indenture referred to
in this Security, and directs that the shares issuable and deliverable upon the
conversion, together with any check in payment for fractional shares and
Securities representing any unconverted principal amount hereof, be issued and
delivered to the beneficial owner hereof unless a different name has been
indicated below. If shares or any portion of this Security not converted are to
be issued in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto. Any amount required to
be paid by the undersigned on account of interest, Liquidated Damages and taxes
accompanies this Security.
<TABLE>
<CAPTION>
<S>                                                            <C>
Dated:                                                         --------------------------------------------------------

Fill in for registration of shares if to be delivered,         --------------------------------------------------------
and Securities if to be issued, other than to and in
the name of the beneficial owner                               --------------------------------------------------------
(Please Print):                                                Signature(s)
                                                               Principal amount to be converted (if less than all):
- ----------------------------------------------------------
                           (Name)                                                       $___,000

- ----------------------------------------------------------     ---------------------------------------------------------
                      (Street Address)                         Social Security or other Taxpayer Identification Number

- ----------------------------------------------------------
                 (City, State and Zip Code)
</TABLE>

Signature Guarantee:

- ----------------------------------------------------------
Signatures must be guaranteed by an eligible Guarantor Institution (banks,
brokers, dealers, savings and loan associations and credit unions) with
membership in an approved signature guarantee medallion program pursuant to
Securities and Exchange Commission Rule 17Ad-15 if shares are to be issued, or
Securities are to be delivered, other than to and in the name of the registered
holder(s).

                                     A-1-15
<PAGE>
                                 ASSIGNMENT FORM

         To assign this Security, fill in the form below:

         (I) or (we) assign and transfer this Security to


- --------------------------------------------------------------------------------
               (Insert assignee's social security or tax I.D. no.)


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

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

- --------------------------------------------------------------------------------
              (Print or type assignee's name, address and zip code)

and irrevocably appoint ____________________________________ agent to transfer
this Security on the books of the Company. The agent may substitute another to
act for him.



         Your Signature: ______________________________________________
     (Sign exactly as your name appears on the other side of this Security)

         Date:
              ----------------------------

         Medallion Signature Guarantee:
                                       -----------------------------------------

[FOR INCLUSION ONLY IF THIS SECURITY BEARS A RESTRICTED SECURITIES LEGEND] In
connection with any transfer of any of the Securities evidenced by this
certificate which are "restricted securities" (as defined in Rule 144 (or any
successor thereto) under the Securities Act), the undersigned confirms that such
Securities are being transferred:

         CHECK ONE BOX BELOW

         (1)   [ ]    to the Company; or

         (2)   [ ]    pursuant to and in compliance with Rule 144A under the
                      Securities Act of 1933; or

         (3)   [ ]    pursuant to and in compliance with Regulation S under the
                      Securities Act of 1933; or

         (4)   [ ]    pursuant to an exemption from registration under the
                      Securities Act of 1933 provided by Rule 144 thereunder.

         Unless one of the boxes is checked, the Registrar will refuse to
         register any of the Securities evidenced by this certificate in the
         name of any person other than the registered holder thereof; provided,
         however, that if box (3) or (4) is checked, the Trustee may

                                     A-1-16
<PAGE>
         require, prior to registering any such transfer of the Securities, such
         certifications and other information, and if box (4) is checked such
         legal opinions, as the Company has reasonably requested in writing, by
         delivery to the Trustee of a standing letter of instruction, to confirm
         that such transfer is being made pursuant to an exemption from, or in a
         transaction not subject to, the registration requirements of the
         Securities Act of 1933; provided that this paragraph shall not be
         applicable to any Securities which are not "restricted securities" (as
         defined in Rule 144 (or any successor thereto) under the Securities
         Act).

         Your Signature:
                        --------------------------------------------------------
                          (Sign exactly as your name appears on the other side
                                          of this Security)

         Date:
              -------------------------------

         Medallion Signature Guarantee:
                                       -----------------------------------------

                                     A-1-17
<PAGE>
             SCHEDULE OF INCREASES AND DECREASES OF GLOBAL SECURITY

    Initial Principal Amount of Global Security:             ($           ).
                                                -------------  -----------
<TABLE>
<CAPTION>
        Date           Amount of Increase     Amount of Decrease in     Principal Amount of         Notation by
                       in Principal Amount     Principal Amount of        Global Security          Registrar or
                       of Global Security        Global Security         After Increase or      Security Custodian
                                                                              Decrease
        <S>            <C>                    <C>                       <C>                    <C>
</TABLE>


                                     A-1-18
<PAGE>
                                                                     EXHIBIT A-2

                     [FORM OF FACE OF CERTIFICATED SECURITY]

         THIS SECURITY WILL BE SUBJECT TO THE REGULATIONS GOVERNING CONTINGENT
PAYMENT DEBT INSTRUMENTS FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. AS
REQUIRED UNDER APPLICABLE TREASURY REGULATIONS, THE COMPANY HAS SET FORTH THE
"COMPARABLE YIELD" IN SECTION 4.7 OF THE INDENTURE PURSUANT TO WHICH THIS
SECURITY IS BEING ISSUED. THE HOLDER OF THIS SECURITY MAY OBTAIN THE PROJECTED
PAYMENT SCHEDULE BY SUBMITTING A WRITTEN REQUEST FOR SUCH INFORMATION TO HASBRO,
INC., 200 NARRAGANSETT PARK DRIVE, PAWTUCKET, RI 02862-0200.

         THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF
THE ISSUE HEREOF (OR ANY PREDECESSOR SECURITY HEREOF) OR (Y) BY ANY HOLDER THAT
WAS AN "AFFILIATE" (WITHIN THE MEANING OF RULE 144 UNDER THE SECURITIES ACT) OF
THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH
TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS
SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A"), TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (3) IN AN OFFSHORE TRANSACTION (AS DEFINED IN REGULATION S UNDER THE
SECURITIES ACT) IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT, (4)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT OR (5) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES
FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER OR
(2) NOT A U.S. PERSON AND IS OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR
AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (k)(2) OF RULE 902 UNDER)
REGULATION S UNDER THE SECURITIES ACT. IN ANY CASE THE HOLDER HEREOF WILL NOT,
DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTION WITH REGARD TO THIS
SECURITY OR ANY COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY EXCEPT AS
PERMITTED BY THE SECURITIES ACT.

         The foregoing legend may be removed from this Security on satisfaction
of the conditions specified in the Indenture.

                                     A-2-1
<PAGE>
                                  HASBRO, INC.

                  2.75% Convertible Senior Debentures due 2021

No.                                                           CUSIP: 418056 AM 9
Issue Date: November 30, 2001
Issue Price: 100% of principal amount


         HASBRO, INC., a corporation duly organized and existing under the laws
of the State of Rhode Island, promises to pay to ____________________, or
registered assigns, the principal amount of [($__________________) on December
1, 2021.

         This Security shall bear interest at a rate of 2.75% per year except as
specified on the other side of this Security. This Security is convertible as
specified on the other side of this Security.

         Additional provisions of this Security are set forth on the other side
of this Security.

Dated:
                                         HASBRO, INC.


                                         By:
                                            ------------------------------------
                                             Name:
                                             Title:


TRUSTEE'S CERTIFICATE OF AUTHENTICATION


THE BANK OF NOVA SCOTIA TRUST COMPANY OF NEW YORK,
     as Trustee, certifies that this is one
     of the Securities referred to in the
     within-mentioned Indenture.

By
  ------------------------------------------------
     Authorized Signatory


Dated:

                                     A-2-2
<PAGE>
                    [FORM OF REVERSE OF CERTIFICATED SECURITY
                          IS IDENTICAL TO EXHIBIT A-1]


                                     A-2-3
<PAGE>
                                                                       EXHIBIT B

                  2.75% Convertible Senior Debentures due 2021

                              Transfer Certificate

In connection with any transfer of any of the Securities within the period prior
to the expiration of the holding period applicable to the sales thereof under
Rule 144(k) under the Securities Act of 1933, as amended (the "Securities Act")
(or any successor provision), the undersigned registered owner of this Security
hereby certifies with respect to $____________ principal amount of the
above-captioned Securities presented or surrendered on the date hereof (the
"Surrendered Securities") for registration of transfer, or for exchange or
conversion where the securities issuable upon such exchange or conversion are to
be registered in a name other than that of the undersigned registered owner
(each such transaction being a "transfer"), the undersigned confirms that such
Securities are being transferred:

         CHECK ONE BOX BELOW

         (1)   [ ]    to the Company; or

         (2)   [ ]    pursuant to and in compliance with Rule 144A under the
                      Securities Act of 1933; or

         (3)   [ ]    pursuant to and in compliance with Regulation S under the
                      Securities Act of 1933; or

         (4)   [ ]    pursuant to an exemption from registration under the
                      Securities Act of 1933 provided by Rule 144 thereunder.

         Unless one of the boxes is checked, the Registrar will refuse to
         register any of the Securities evidenced by this certificate in the
         name of any person other than the registered holder thereof; provided,
         however, that if box (3) or (4) is checked, the Trustee may require,
         prior to registering any such transfer of the Securities, such
         certifications and other information, and if box (4) is checked such
         legal opinions, as the Company has reasonably requested in writing, by
         delivery to the Trustee of a standing letter of instruction, to confirm
         that such transfer is being made pursuant to an exemption from, or in a
         transaction not subject to, the registration requirements of the
         Securities Act of 1933; provided that this paragraph shall not be
         applicable to any Securities which are not "restricted securities" (as
         defined in Rule 144 (or any successor thereto) under the Securities
         Act).

         Your Signature:
                        --------------------------------------------------------
                               (Sign exactly as your name appears on the
                                     other side of this Security)

         Date:
              ----------------------------------


         Medallion Signature Guarantee:
                                       -----------------------------------------


                                      B-1
<PAGE>
                                    EXHIBIT C

                     FORM OF RESTRICTED COMMON STOCK LEGEND

"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE
ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO, INCLUDING THE RELATED
DEBENTURE) OR (Y) BY ANY HOLDER THAT WAS AN "AFFILIATE" (WITHIN THE MEANING OF
RULE 144 UNDER THE SECURITIES ACT) OF THE COMPANY AT ANY TIME DURING THE THREE
MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE
COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (3) IN AN OFFSHORE TRANSACTION
(AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN ACCORDANCE WITH
REGULATION S UNDER THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER
THE SECURITIES ACT OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A
QUALIFIED INSTITUTIONAL BUYER OR (2) NOT A U.S. PERSON AND IS OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF
PARAGRAPH (k)(2) OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT. IN
ANY CASE THE HOLDER HEREOF WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY
HEDGING TRANSACTION WITH REGARD TO THIS SECURITY EXCEPT AS PERMITTED BY THE
SECURITIES ACT."

                                      C-1
<PAGE>
                                    EXHIBIT D

                    FORM OF TRANSFER CERTIFICATE FOR TRANSFER
                           OF RESTRICTED COMMON STOCK

             (Transfers pursuant to Section 10.20 of the Indenture)

[NAME AND ADDRESS OF COMMON STOCK TRANSFER AGENT]

         Re: Hasbro, Inc. 2.75% Convertible Senior Debentures due 2021 (the
"Securities")

         Reference is hereby made to the Indenture dated as of November 30, 2001
(the "Indenture") between Hasbro, Inc. and The Bank of Nova Scotia Trust Company
of New York, as Trustee. Capitalized terms used but not defined herein shall
have the meanings given them in the Indenture.

         This letter relates to _________ shares of Common Stock represented by
the accompanying certificate(s) that were issued upon conversion of Securities
and which are held in the name of [name of transferor] (the "Transferor") to
effect the transfer of such Common Stock.

         In connection with the transfer of such shares of Common Stock, the
undersigned confirms that such shares of Common Stock are being transferred:

CHECK ONE BOX BELOW

         (1)   [ ]    to the Company; or

         (2)   [ ]    pursuant to and in compliance with Rule 144A under the
                      Securities Act of 1933; or

         (3)   [ ]    pursuant to and in compliance with Regulation S under the
                      Securities Act of 1933; or

         (4)   [ ]    pursuant to an exemption from registration under the
                      Securities Act of 1933 provided by Rule 144 thereunder.

                                      D-1
<PAGE>
         Unless one of the boxes is checked, the transfer agent will refuse to
register any of the Common Stock evidenced by this certificate in the name of
any person other than the registered holder thereof; provided, however, that if
box (3) or (4) is checked, the transfer agent may require, prior to registering
any such transfer of the Common Stock such certifications and other information,
and if box (4) is checked such legal opinions, as the Company has reasonably
requested in writing, by delivery to the transfer agent of a standing letter of
instruction, to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933.

                                    [Name of Transferor],



                                    By
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------



Dated:

                                      D-2
<PAGE>
                                   SCHEDULE A

                           Projected Payment Schedule*

<TABLE>
<CAPTION>
                                                      Projected Payment per
           Period                                          Debenture
           ------                                          ---------
<S>                                                   <C>
November 30, 2001 - June 1, 2002                            $13.75
June 1, 2002 - December 1, 2002                             $13.75
December 1, 2002 - June 1, 2003                             $13.75
June 1, 2003 - December 1, 2003                             $13.75
December 1, 2003 - June 1, 2004                             $13.75
June 1, 2004 - December 1, 2004                             $13.75
December 1, 2004 - June 1, 2005                             $13.75
June 1, 2005 - December 1, 2005                             $13.75
December 1, 2005 - June 1, 2006                             $14.05
June 1, 2006 - December 1, 2006                             $14.07
December 1, 2006 - June 1, 2007                             $14.09
June 1, 2007 - December 1, 2007                             $14.10
December 1, 2007 - June 1, 2008                             $14.12
June 1, 2008 - December 1, 2008                             $14.13
December 1, 2008 - June 1, 2009                             $14.15
June 1, 2009 - December 1, 2009                             $14.16
December 1, 2009 - June 1, 2010                             $14.17
June 1, 2010 - December 1, 2010                             $14.18
December 1, 2010 - June 1, 2011                             $14.20
June 1, 2011 - December 1, 2011                             $14.21
December 1, 2011 - June 1, 2012                             $14.22
June 1, 2012 - December 1, 2012                             $14.23
December 1, 2012 - June 1, 2013                             $14.24
June 1, 2013 - December 1, 2013                             $14.25
December 1, 2013 - June 1, 2014                             $14.26
June 1, 2014 - December 1, 2014                             $14.27
December 1, 2014 - June 1, 2015                             $14.28
June 1, 2015 - December 1, 2015                             $14.29
December 1, 2015 - June 1, 2016                             $14.30
June 1, 2016 - December 1, 2016                             $14.32
December 1, 2016 - June 1, 2017                             $14.33
June 1, 2017 - December 1, 2017                             $14.34
December 1, 2017 - June 1, 2018                             $14.35
June 1, 2018 - December 1, 2018                             $14.36
December 1, 2018 - June 1, 2019                             $14.37
June 1, 2019 - December 1, 2019                             $14.38
December 1, 2019 - June 1, 2020                             $14.39
June 1, 2020 - December 1, 2020                             $14.40
December 1, 2020 - June 1, 2021                             $14.41
June 1, 2021 - December 1, 2021                          $3,668.19
</TABLE>
<PAGE>
- -------------------
* The comparable yield and the schedule of projected payments are determined on
the basis of certain assumptions and are not determined for any purpose other
than for the determination of interest accruals and adjustments thereof in
respect of the Securities for United States federal income tax purposes. The
comparable yield and the schedule of projected payments do not constitute a
projection or representation regarding the amounts payable on Securities.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.3
<SEQUENCE>4
<FILENAME>b41930hiex4-3.txt
<DESCRIPTION>REGISTRATION AGREEMENT
<TEXT>
<PAGE>
                                                                     EXHIBIT 4.3

                                  HASBRO, INC.

                                  $225,000,000
                  2.75% Convertible Senior Debentures due 2021

                             REGISTRATION AGREEMENT

                                                              New York, New York
                                                               November 30, 2001

Salomon Smith Barney Inc.
As Representative of the Initial Purchasers Named in
   Schedule I to the Purchase Agreement (as defined below)
388 Greenwich Street
New York, New York 10013

Ladies and Gentlemen:

                  Hasbro, Inc., a Rhode Island corporation (the "COMPANY"),
proposes to issue and sell (such issuance and sale, the "INITIAL PLACEMENT") to
the several parties named in Schedule I to the Purchase Agreement (the "INITIAL
PURCHASERS") for whom you (the "REPRESENTATIVE") are acting as representative,
upon the terms set forth in a purchase agreement dated November 27, 2001 (the
"PURCHASE AGREEMENT"), $225,000,000 aggregate principal amount (plus up to an
additional $25,000,000 aggregate principal amount to cover over-allotments, if
any) of its 2.75% Convertible Senior Debentures due 2021 (the "SECURITIES"). The
Securities will be convertible into shares of Common Stock (as defined herein),
at the conversion price set forth in the Offering Memorandum (as defined
herein), as the same may be adjusted from time to time pursuant to the Indenture
(as defined herein). As an inducement to you to enter into the Purchase
Agreement and in satisfaction of a condition to your obligations thereunder, the
Company agrees with you, (i) for your benefit and (ii) for the benefit of the
holders from time to time of the Securities and the Common Stock issuable upon
conversion of the Securities (including you), as follows:

                  1. DEFINITIONS. Capitalized terms used herein without
definition shall have the respective meanings set forth in the Purchase
Agreement. As used in this Agreement, the following capitalized terms shall have
the following meanings:

                  "ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.

                  "BROKER-DEALER" means any broker or dealer registered as such
under the Exchange Act.

                  "BUSINESS DAY" has the meaning set forth in the Indenture.
<PAGE>
                  "CLOSING DATE" means November 30, 2001.

                  "COMMON STOCK" means the common stock, par value $0.50 per
share, of the Company, as it exists on the date of this Agreement and any other
shares of capital stock or other securities of the Company into which such
Common Stock may be reclassified or changed, together with any and all other
securities which may from time to time be issuable upon conversion of
Securities.

                  "DAMAGES PAYMENT DATE" means, with respect to the Securities
or the Common Stock issuable upon conversion thereof, as applicable, each
Interest Payment Date; and in the event that any Security, or portion thereof,
is called for redemption or surrendered for purchase by the Company and not
withdrawn pursuant to the Indenture, the relevant redemption date or purchase
date, as the case may be, shall also be a Damages Payment Date with respect to
such Security, or portion thereof, unless the Indenture provides that accrued
and unpaid interest on the Security (or portion thereof) to be redeemed or
repurchased, as the case may be, is to be paid to the person who was the record
holder on the books and records of the registrar thereof on a record date prior
to such redemption date or purchase date, as the case may be, in which case the
relevant Damages Payment Date shall be the date on which interest is payable to
such record holder.

                  "DEFAULT RATE" means the rate of interest payable with respect
to overdue amounts on the Securities pursuant to Section 4.01 of the Indenture.

                  "DTC" means The Depository Trust Company.

                  "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.

                  "FINAL MATURITY DATE" means December 1, 2021.

                  "HOLDER" means a person who is a holder or beneficial owner
(including the Initial Purchasers) of any Securities or shares of Common Stock
issued upon conversion of Securities; PROVIDED that, unless otherwise expressly
stated herein, only registered holders of Securities or Common Stock issued on
conversion thereof shall be counted for purposes of calculating any proportion
of holders entitled to take any action or give notice pursuant to this
Agreement.

                  "INDENTURE" means the Indenture relating to the Securities
dated as of November 30, 2001, between the Company and the Trustee, as the same
may be amended from time to time in accordance with the terms thereof.

                  "INITIAL PLACEMENT" has the meaning set forth in the preamble
hereto.

                  "INITIAL PURCHASERS" has the meaning set forth in the preamble
hereto.

                                       2
<PAGE>
                  "INTEREST PAYMENT DATE" shall mean June 1 and December 1.

                  "LIQUIDATED DAMAGES" has the meaning set forth in Section 2(e)
hereof.

                  "LOSSES" has the meaning set forth in Section 5(d) hereof.

                  "MAJORITY HOLDERS" means the Holders of a majority of the then
outstanding aggregate principal amount of Securities registered under a Shelf
Registration Statement; PROVIDED that Holders of Common Stock issued upon
conversion of Securities shall be deemed to be Holders of the aggregate
principal amount of Securities from which such Common Stock was converted; and
PROVIDED, FURTHER, that Securities or Common Stock which have been sold or
otherwise transferred pursuant to the Shelf Registration Statement shall not be
included in the calculation of Majority Holders.

                  "MAJORITY UNDERWRITING HOLDERS" means, with respect to any
Underwritten Offering, the Holders of a majority of the then outstanding
aggregate principal amount of Securities registered under any Shelf Registration
Statement whose Securities are or are to be included in such Underwritten
Offering; PROVIDED that Holders of Common Stock issued upon conversion of
Securities shall be deemed to be Holders of the aggregate principal amount of
Securities from which such Common Stock was converted.

                  "MANAGING UNDERWRITERS" means the Underwriter or Underwriters
that shall administer an Underwritten Offering.

                  "NASD" has the meaning set forth in Section 3(i) hereof.

                  "NOTICE AND QUESTIONNAIRE" means a Notice of Registration
Statement and Selling Securityholder Questionnaire substantially in the form of
Exhibit A hereto.

                  "NOTICE HOLDER" shall mean, on any date, any Holder of
Transfer Restricted Securities that has delivered a completed and signed Notice
and Questionnaire to the Company on or prior to such date.

                  "OFFERING MEMORANDUM" means the Final Memorandum as defined in
the Purchase Agreement.

                  "PERSON" has the meaning set forth in the Indenture.

                  "PROSPECTUS" means the prospectus included in any Shelf
Registration Statement (including, without limitation, a prospectus that
discloses information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A under the Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Securities or Common Stock issuable upon
conversion thereof covered by such Shelf Registration Statement, and all
amendments and supplements to such


                                       3
<PAGE>
prospectus, including all documents incorporated or deemed to be incorporated by
reference in such prospectus.

                  "PURCHASE AGREEMENT" has the meaning set forth in the preamble
hereto.

                  "REGISTRATION DEFAULT" has the meaning set forth in Section
2(e) hereof.

                  "REPRESENTATIVE" has the meaning set forth in the preamble
hereto.

                  "RULE 144" means Rule 144 (or any successor provision) under
the Act.

                  "SEC" means the Securities and Exchange Commission.

                  "SECURITIES" has the meaning set forth in the preamble hereto.

                  "SHELF REGISTRATION" means a registration effected pursuant to
Section 2 hereof.

                  "SHELF REGISTRATION PERIOD" has the meaning set forth in
Section 2(c) hereof.

                  "SHELF REGISTRATION STATEMENT" means a "shelf" registration
statement of the Company filed pursuant to the provisions of Section 2 hereof
which covers some or all of the Securities and the Common Stock issuable upon
conversion thereof, as applicable, on Form S-3 or on another appropriate form
for an offering to be made on a delayed or continuous basis pursuant to Rule 415
under the Act, or any similar rule that may be adopted by the SEC, and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all documents incorporated or deemed to be
incorporated by reference therein.

                  "SUSPENSION PERIOD" has the meaning set forth in Section 2(d)
hereof.

                  "TRANSFER RESTRICTED SECURITIES" means each Security and each
share of Common Stock issuable or issued upon conversion thereof until the date
on which such Security or share of Common Stock, as the case may be, (i) has
been transferred pursuant to the Shelf Registration Statement or another
registration statement covering such Security or share of Common Stock which has
been filed with the SEC pursuant to the Act, in either case after such
registration statement has become effective and while such registration
statement is effective under the Act, (ii) has been transferred pursuant to Rule
144 under the Act (or any similar provision then in force) or (iii) may be sold
or transferred pursuant to Rule 144(k) under the Act (or any successor provision
then in force).

                  "TRUSTEE" means the trustee with respect to the Securities
under the Indenture.

                                       4
<PAGE>
                  "UNDERWRITER" means any underwriter of the Securities or
Common Stock issuable upon conversion thereof in connection with an offering
thereof under a Shelf Registration Statement.

                  "UNDERWRITTEN OFFERING" means an offering in which the
Securities or Common Stock issued upon conversion thereof are sold to an
Underwriter or with the assistance of an Underwriter for reoffering to the
public.

                  All references in this Agreement to financial statements and
schedules and other information which is "contained", "included", or "stated" in
the Shelf Registration Statement, any preliminary Prospectus or Prospectus (and
all other references of like import) shall be deemed to mean and include all
such financial statements and schedules and other information which is
incorporated or deemed to be incorporated by reference in such Shelf
Registration Statement, preliminary Prospectus or Prospectus, as the case may
be; and all references in this Agreement to amendments or supplements to the
Shelf Registration Statement, any preliminary Prospectus or Prospectus shall be
deemed to mean and include any document filed with the SEC under the Exchange
Act, after the date of such Shelf Registration Statement, preliminary Prospectus
or Prospectus, as the case may be, which is incorporated or deemed to be
incorporated by reference therein.

                  2. SHELF REGISTRATION STATEMENT.

                  (a) The Company shall prepare and file with the SEC within 90
days following the Closing Date a Shelf Registration Statement with respect to
resales of the Transfer Restricted Securities by the Holders from time to time
in accordance with the methods of distribution elected by such Holders and set
forth in such Shelf Registration Statement and thereafter shall use commercially
reasonable efforts to cause such Shelf Registration Statement to be declared
effective under the Act within 180 days after the Closing Date; PROVIDED that if
any Securities are issued upon exercise of the over-allotment option granted to
the Initial Purchasers in the Purchase Agreement and the date on which such
Securities are issued occurs after the Closing Date, the Company will take such
steps, prior to the effective date of the Shelf Registration Statement, to
ensure that such Securities and Common Stock issuable upon conversion thereof
are included in the Shelf Registration Statement on the same terms as the
Securities issued on the Closing Date. The Company shall supplement or amend the
Shelf Registration Statement if required by the rules, regulations or
instructions applicable to the registration form used by the Company for the
Shelf Registration Statement, or by the Act, the Exchange Act or the SEC.

                  (b) (1) Not less than 30 calendar days prior to the
effectiveness of the Shelf Registration Statement, the Company shall mail the
Notice and Questionnaire to the Holders of Transfer Restricted Securities. The
Company shall take action to name each Holder that is a Notice Holder as of the
date that is 10 calendar days prior to the effectiveness of the Shelf
Registration Statement so that such Holder is named as a selling securityholder
in the Shelf


                                       5
<PAGE>
Registration Statement at the time of its effectiveness and is permitted to
deliver the Prospectus forming a part thereof as of such time to purchasers of
such Holder's Transfer Restricted Securities in accordance with applicable law.
The Company shall be under no obligation to name any Holder that is not a Notice
Holder as a selling securityholder in the Shelf Registration Statement.

                  (2) After the Shelf Registration Statement has become
effective, the Company shall, upon the request of any Holder of Transfer
Restricted Securities, promptly send a Notice and Questionnaire to such Holder.
From and after the date on which the Shelf Registration Statement has become
effective, the Company shall (i) (x) as promptly as is practicable after the
date a completed and signed Notice and Questionnaire is delivered to the
Company, and in any event within five Business Days after such date, prepare and
file with the SEC a supplement to the Prospectus and any other document required
by applicable law, or (y) if the company is required by applicable law to file a
post-effective amendment to the Shelf Registration Statement, shall prepare and
file such post-effective amendment and any other document required by applicable
law no later than the first day of the next calendar quarter that begins on or
after ten Business Days from the date a completed and signed Notice and
Questionnaire is delivered to the Company, in each case so that the Holder
delivering such Notice and Questionnaire is named as a selling securityholder in
the Shelf Registration Statement and is permitted to deliver the Prospectus to
purchasers of such Holder's Transfer Restricted Securities in accordance with
applicable law, and (ii) if the Company shall file a post-effective amendment to
the Shelf Registration Statement, use commercially reasonable efforts to cause
such post-effective amendment to become effective under the Act as promptly as
is practicable; PROVIDED, HOWEVER, that if a Notice and Questionnaire is
delivered to the Company during a Suspension Period, the Company shall not be
obligated to take the actions set forth in clauses (i) and (ii) until the
termination of such Suspension Period.

                  (c) The Company shall use commercially reasonable efforts to
keep the Shelf Registration Statement continuously effective under the Act in
order to permit the Prospectus forming a part thereof to be usable, subject to
Section 2(d), by all Notice Holders until the earliest of (i) the second
anniversary of the Closing Date or, if later, the second anniversary of the last
date on which any Securities are issued upon exercise of the Initial Purchasers'
over-allotment option, (ii) the date on which all the Securities and Common
Stock issued or issuable upon conversion thereof may be sold by non-affiliates
("affiliates" for such purpose having the meaning set forth in Rule 144) of the
Company pursuant to paragraph (k) of Rule 144 (or any successor provision)
promulgated by the SEC under the Act and (iii) such date as of which all the
Securities and the Common Stock issued or issuable upon conversion thereof have
been sold pursuant to the Shelf Registration Statement (in any such case, such
period being called the "SHELF REGISTRATION PERIOD"). The Company will, (x)
subject to Section 2(d), prepare and file with the SEC such amendments and
post-effective amendments to the Shelf Registration Statement as may be
necessary to keep the Shelf Registration Statement continuously effective for
the Shelf Registration Period, (y) subject to Section 2(d), cause the related
Prospectus to be


                                       6
<PAGE>
supplemented by any required supplement, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) under the Act and
(z) comply in all material respects with the provisions of the Act with respect
to the disposition of all securities covered by the Shelf Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the sellers thereof set forth in such Shelf Registration
Statement as so amended or such Prospectus as so supplemented.

                  (d) The Company may suspend the use of the Prospectus for a
period not to exceed 45 days in any three-month period or for two periods not to
exceed an aggregate of 90 days in any 12-month period (the "SUSPENSION PERIOD")
for valid business reasons, to be determined by the Company in good faith (not
including avoidance of the Company's obligations hereunder), including, without
limitation, the acquisition or divestiture of assets, public filings with the
SEC, pending corporate developments and similar events; PROVIDED that the
Company promptly thereafter complies with the requirements of Section 3(j)
hereof, if applicable; PROVIDED, FURTHER, that the existence of a Suspension
Period will not prevent the occurrence of a Registration Default or otherwise
limit the obligation of the Company to pay Liquidated Damages.

                  (e) If (i) the Shelf Registration Statement is not filed with
the SEC on or prior to 90 days after the Closing Date, (ii) the Shelf
Registration Statement has not been declared effective by the SEC within 180
days after the Closing Date, or (iii) the Shelf Registration Statement is filed
and declared effective but shall thereafter cease to be effective (without being
succeeded immediately by a replacement shelf registration statement filed and
declared effective) or usable (including as a result of a Suspension Period) for
the offer and sale of Transfer Restricted Securities for a period of time
(including any Suspension Period) which shall exceed 90 days in the aggregate in
any 12-month period during the period beginning on the Closing Date and ending
on the second anniversary of the Closing Date or, if later, the second
anniversary of the last date on which any Securities are issued upon exercise of
the Initial Purchasers' over-allotment option (each such event referred to in
clauses (i) through (iii), a "REGISTRATION DEFAULT"), the Company will pay
liquidated damages ("LIQUIDATED DAMAGES") to each Holder of Transfer Restricted
Securities who has complied with such Holder's obligations under this Agreement.
The amount of Liquidated Damages payable during any period in which a
Registration Default has occurred and is continuing is the amount which is equal
to one-quarter of one percent (25 basis points) per annum per $1,000 principal
amount of Securities and $2.50 per annum per 46.2963 shares of Common Stock
(subject to adjustment in the event of a stock split, stock recombination, stock
dividend and the like) constituting Transfer Restricted Securities for the first
90 days during which a Registration Default has occurred and is continuing and
one-half of one percent (50 basis points) per annum per $1,000 principal amount
of Securities and $5.00 per annum per 46.2963 shares of Common Stock (subject to
adjustment as set forth above) constituting Transfer Restricted Securities for
any additional days during which a Registration Default has occurred and is
continuing (in each case subject to further adjustment from time to time in the
event of a stock split, stock recombination, stock dividend


                                       7
<PAGE>
and the like), it being understood that all calculations pursuant to this and
the preceding sentence shall be carried out to five decimals. Following the cure
of all Registration Defaults, Liquidated Damages will cease to accrue with
respect to such Registration Default. Liquidated Damages shall cease to accrue
in respect of any Transfer Restricted Security when it shall cease to be such.
All accrued Liquidated Damages shall be paid on each Damages Payment Date in the
manner provided for the payment of interest in the Indenture, and Liquidated
Damages will be calculated on the basis of a 360-day year consisting of twelve
30-day months. In the event that any Liquidated Damages are not paid when due,
then to the extent permitted by law, such overdue Liquidated Damages, if any,
shall bear interest until paid at the Default Rate, compounded semi-annually.
The parties hereto agree that the Liquidated Damages provided for in this
Section 2(e) constitute a reasonable estimate of the damages that may be
incurred by Holders by reason of a Registration Default.

                  (f) All of the Company's obligations (including, without
limitation, the obligation to pay Liquidated Damages) set forth in the preceding
paragraph which are outstanding or exist with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
security shall have been satisfied in full.

                  (g) Immediately upon the occurrence or the termination of a
Registration Default, the Company shall give the Trustee, in the case of notice
with respect to the Securities, and the transfer and paying agent for the Common
Stock, in the case of notice with respect to Common Stock issued or issuable
upon conversion thereof, notice of such commencement or termination, of the
obligation to pay Liquidated Damages with regard to the Securities and Common
Stock and the amount thereof and of the event giving rise to such commencement
or termination (such notice to be contained in an Officers' Certificate (as such
term is defined in the Indenture)), and prior to receipt of such Officers'
Certificate the Trustee and such transfer and paying agent shall be entitled to
assume that no such commencement or termination has occurred, as the case may
be.

                  (h) All Securities which are redeemed, purchased or otherwise
acquired by the Company or any of its subsidiaries or affiliates (as defined in
Rule 144 (or any successor provision) under the Act) prior to the Final Maturity
Date shall be delivered to the Trustee for cancellation and the Company may not
hold or resell such Securities or issue any new Securities to replace any such
Securities or any Securities that any Holder has converted pursuant to the
Indenture. All shares of Common Stock issued upon conversion of the Securities
which are repurchased or otherwise acquired by the Company or any of its
subsidiaries or affiliates (as defined in Rule 144 (or any successor provision)
under the Act) at any time while such shares are "restricted securities" within
the meaning of Rule 144 shall not be resold or otherwise transferred except
pursuant to a registration statement which has been declared effective under the
Act.

                  3. REGISTRATION PROCEDURES. In connection with any Shelf
Registration Statement, the following provisions shall apply:

                                       8
<PAGE>
                  (a) The Company shall (i) furnish to the Representative, prior
to the filing thereof with the SEC, a copy of any Shelf Registration Statement,
and each amendment thereof, and a copy of any Prospectus, and each amendment or
supplement thereto (excluding amendments caused by the filing of a report under
the Exchange Act), and shall use commercially reasonable efforts to reflect in
each such document, when so filed with the SEC, such comments as the
Representative reasonably may promptly propose; and (ii) include information
regarding the Notice Holders and the methods of distribution they have elected
for their Transfer Restricted Securities provided to the Company in Notice and
Questionnaires as necessary to permit such distribution by the methods specified
therein.

                  (b) Subject to Section 2(d), the Company shall ensure that (i)
any Shelf Registration Statement and any amendment thereto and any Prospectus
forming a part thereof and any amendment or supplement thereto comply in all
material respects with the Act and the rules and regulations thereunder, (ii)
any Shelf Registration Statement and any amendment thereto does not, when it
becomes effective, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading and (iii) any Prospectus forming a part of any
Shelf Registration Statement, and any amendment or supplement to such
Prospectus, does not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading; PROVIDED
that the Company makes no representation with respect to information with
respect to any Underwriter or any Holder required to be included in any Shelf
Registration Statement or Prospectus pursuant to the Act or the rules and
regulations thereunder and which information is included therein in reliance
upon and in conformity with information furnished to the Company in writing by
such Underwriter or Holder.

                  (c) The Company, as promptly as practicable, shall advise the
Representative and each Notice Holder and, if requested by you or any such
Holder, confirm such advice in writing:

                           (i) when a Shelf Registration Statement and any
                  amendment thereto has been filed with the SEC and when the
                  Shelf Registration Statement or any post-effective amendment
                  thereto has become effective;

                           (ii) of any request by the SEC following
                  effectiveness of the Shelf Registration Statement for
                  amendments or supplements to the Shelf Registration Statement
                  or the Prospectus or for additional information (other than
                  any such request relating to a review of the Company's
                  Exchange Act filings);

                           (iii) of the determination by the Company that a
                  post-effective amendment to the Shelf Registration Statement
                  would be appropriate;

                                       9
<PAGE>
                           (iv) of the commencement or termination of (but not
                  the nature of or details concerning) any Suspension Period;

                           (v) of the issuance by the SEC of any stop order
                  suspending the effectiveness of the Shelf Registration
                  Statement or the initiation of any proceedings for that
                  purpose;

                           (vi) of the receipt by the Company of any
                  notification with respect to the suspension of the
                  qualification of the Transfer Restricted Securities included
                  in any Shelf Registration Statement for sale in any
                  jurisdiction or the initiation or threat of any proceeding for
                  such purpose;

                           (vii) of the happening of (but not the nature of or
                  details concerning) any event that requires the making of any
                  changes in the Shelf Registration Statement or the Prospectus
                  so that, as of such date, the statements therein are not
                  misleading and the Shelf Registration Statement or the
                  Prospectus, as the case may be, does not include an untrue
                  statement of a material fact or omit to state a material fact
                  required to be stated therein or necessary to make the
                  statements therein (in the case of the Prospectus, in light of
                  the circumstances under which they were made) not misleading;
                  and

                           (viii) of the Company's suspension of the use of the
                  Prospectus as a result of any of the events or circumstances
                  described in paragraphs (ii) through (vii) above, and of the
                  termination of any such suspension.

                  (d) The Company shall use commercially reasonable efforts to
obtain the withdrawal of any order suspending the effectiveness of any Shelf
Registration Statement or the lifting of any suspension of the qualification (or
exemption from qualification) of any of the Transfer Restricted Securities for
offer or sale in any jurisdiction at the earliest possible time.

                  (e) The Company shall promptly furnish to each Notice Holder
upon request, without charge, at least one copy of any Shelf Registration
Statement and any post-effective amendment thereto, including all exhibits
(including those incorporated by reference), financial statements and schedules.

                  (f) The Company shall, during the Shelf Registration Period,
promptly deliver to each Initial Purchaser, each Notice Holder and any sales or
placement agent or underwriters acting on their behalf, without charge, as many
copies of the Prospectus (including each preliminary Prospectus) included in any
Shelf Registration Statement (excluding documents incorporated by reference),
and any amendment or supplement thereto, as such person may reasonably request;
and, except as provided in Sections 2(d) and 3(s) hereof, the Company consents
to the use of the Prospectus or any amendment or supplement thereto by each of
the selling Holders in connection with the offering and sale of the Transfer
Restricted Securities covered by the Prospectus or any amendment or supplement
thereto.

                                       10
<PAGE>
                  (g) Prior to any offering of Transfer Restricted Securities
pursuant to any Shelf Registration Statement, the Company shall register or
qualify or cooperate with the Notice Holders and their respective counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Transfer Restricted Securities for offer
and sale, under the securities or blue sky laws of such jurisdictions within the
United States as any such Notice Holders reasonably request and shall maintain
such qualification in effect so long as required and do any and all other acts
or things necessary or advisable to enable the offer and sale in such
jurisdictions of the Transfer Restricted Securities covered by such Shelf
Registration Statement; PROVIDED, HOWEVER, that the Company will not be required
to (A) qualify generally to do business as a foreign corporation or as a dealer
in securities in any jurisdiction where it is not then so qualified or to (B)
take any action which would subject it to service of process or taxation in any
such jurisdiction where it is not then so subject.

                  (h) The Company shall cooperate with the Holders to facilitate
the timely preparation and delivery of certificates representing Transfer
Restricted Securities sold pursuant to any Shelf Registration Statement free of
any restrictive legends and in such denominations permitted by the Indenture and
registered in such names as Holders may request prior to settlement of sales of
Transfer Restricted Securities pursuant to such Shelf Registration Statement.

                  (i) Subject to the exceptions contained in (A) and (B) of
Section 3(g) hereof, the Company shall use commercially reasonable efforts to
cause the Transfer Restricted Securities covered by the applicable Shelf
Registration Statement to be registered with or approved by such other federal,
state and local governmental agencies or authorities, and self-regulatory
organizations in the United States as may be necessary to enable the Holders to
consummate the disposition of such Transfer Restricted Securities as
contemplated by the Shelf Registration Statement; without limitation to the
foregoing, the Company shall provide all such information as may be required by
the National Association of Securities Dealers, Inc. (the "NASD") in connection
with the offering under the Shelf Registration Statement of the Transfer
Restricted Securities (including, without limitation, such as may be required by
NASD Rule 2710 or 2720), and shall cooperate with each Holder in connection with
any filings required to be made with the NASD by such Holder in that regard.

                  (j) Upon the occurrence of any event described in Section
3(c)(vii) hereof, the Company shall promptly prepare and file with the SEC a
post-effective amendment to any Shelf Registration Statement or an amendment or
supplement to the related Prospectus or any document incorporated therein by
reference or file a document which is incorporated or deemed to be incorporated
by reference in such Shelf Registration Statement or Prospectus, as the case may
be, so that, as thereafter delivered to purchasers of the Transfer Restricted
Securities included therein, the Shelf Registration Statement and the
Prospectus, in each case as then amended or supplemented, will not include an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements


                                       11
<PAGE>
therein (in the case of the Prospectus in light of the circumstances under which
they were made) not misleading and, in the case of a post-effective amendment,
use its best efforts to cause it to become effective as promptly as practicable;
PROVIDED that the Company's obligations under this paragraph (j) shall be
suspended if the Company has suspended the use of the Prospectus in accordance
with Section 2(d) hereof and given notice of such suspension to Notice Holders,
it being understood that the Company's obligations under this Section 3(j) shall
be automatically reinstated at the end of such Suspension Period.

                  (k) The Company shall use commercially reasonable efforts to
provide, on or prior to the first Business Day following the effective date of
any Shelf Registration Statement hereunder (i) a CUSIP number for the Transfer
Restricted Securities registered under such Shelf Registration Statement and
(ii) global certificates for such Transfer Restricted Securities to the Trustee,
in a form eligible for deposit with DTC.

                  (l) The Company shall use commercially reasonable efforts to
comply with all applicable rules and regulations of the SEC and shall make
generally available to its security holders as soon as practicable but in any
event not later than 50 days after the end of a 12-month period (or 105 days, if
such period is a fiscal year) after (i) the effective date of the applicable
Shelf Registration Statement, (ii) the effective date of each post-effective
amendment to any Shelf Registration Statement, and (iii) the date of each filing
by the Company with the SEC of an Annual Report on Form 10-K that is
incorporated by reference or deemed to be incorporated by reference in the Shelf
Registration Statement, an earnings statement satisfying the provisions of
Section 11(a) of the Act and Rule 158 promulgated by the SEC thereunder.

                  (m) The Company shall use commercially reasonable efforts to
cause the Indenture to be qualified under the TIA (as defined in the Indenture)
in a timely manner.

                  (n) The Company shall cause all Common Stock issued or
issuable upon conversion of the Securities to be listed on each securities
exchange or quotation system on which the Common Stock is then listed no later
than the date the applicable Shelf Registration Statement is declared effective
and, in connection therewith, to make such filings as may be required under the
Exchange Act and to have such filings declared effective as and when required
thereunder.

                  (o) The Company may require each Holder of Transfer Restricted
Securities to be sold pursuant to any Shelf Registration Statement to furnish to
the Company such information regarding the Holder and the distribution of such
Transfer Restricted Securities sought by the Notice and Questionnaire and such
additional information as may, from time to time, be required by the Act and the
rules and regulations promulgated thereunder, and the obligations of the Company
to any Holder hereunder shall be expressly conditioned on the compliance of such
Holder with such request.

                                       12
<PAGE>
                  (p) The Company shall, if reasonably requested, use
commercially reasonable efforts to promptly incorporate in a Prospectus
supplement or post-effective amendment to a Shelf Registration Statement (i)
such information as the Majority Holders provide or, if Transfer Restricted
Securities are being sold in an Underwritten Offering, as the Managing
Underwriters or the Majority Underwriting Holders reasonably agree should be
included therein and provide to the Company in writing for inclusion in the
Shelf Registration Statement or Prospectus, and (ii) such information as a
Holder may provide from time to time to the Company in writing for inclusion in
a Prospectus or any Shelf Registration Statement concerning such Holder and the
distribution of such Holder's Transfer Restricted Securities and, in either
case, shall make all required filings of such Prospectus supplement or
post-effective amendment promptly after being notified in writing of the matters
to be incorporated in such Prospectus supplement or post-effective amendment,
PROVIDED that the Company shall not be required to take any action under this
Section 3(p) that is not, in the reasonable opinion of counsel for the Company,
in compliance with applicable law and shall not be required to file a
post-effective amendment more than once per quarter.

                  (q) The Company shall enter into such customary agreements
(including underwriting agreements) and take all other appropriate actions as
may be reasonably requested in order to expedite or facilitate the registration
or the disposition of the Transfer Restricted Securities, and in connection
therewith, if an underwriting agreement is entered into, cause the same to
contain indemnification and contribution provisions and procedures no less
favorable than those set forth in Section 5. The plan of distribution in the
Shelf Registration Statement and the Prospectus included therein shall permit
resales of Transfer Restricted Securities to be made by selling securityholders
through underwriters, brokers and dealers, and shall also include such other
information as the Representative may reasonably request.

                  (r) The Company shall if reasonably requested in writing by
Majority Holders, by Majority Underwriting Holders or by the Managing
Underwriter:

                           (i) subject to confidentiality procedures and
                  agreements in form and substance reasonably acceptable to the
                  Company, make available for inspection during normal business
                  hours by any Underwriter participating in any disposition
                  pursuant to such Shelf Registration Statement, and any
                  attorney, accountant or other agent retained by any such
                  Underwriter all relevant financial and other records,
                  pertinent corporate documents and properties of the Company
                  and its subsidiaries as is customary for due diligence
                  examinations in connection with public offerings; PROVIDED
                  that any such due diligence examination shall be coordinated
                  on behalf of the Notice Holders and the other parties entitled
                  thereto by one counsel designated by and on behalf of such
                  Notice Holders and other parties that is reasonably acceptable
                  to the Company;

                           (ii) cause the Company's officers, directors,
                  employees, accountants and auditors to supply all relevant
                  information requested by any such Underwriter, attorney,
                  accountant or agent in connection with any such Shelf
                  Registration Statement as is


                                       13
<PAGE>
                  customary for similar due diligence examinations; PROVIDED,
                  HOWEVER, that any information that is designated in writing by
                  the Company, in good faith, as confidential at the time of
                  delivery of such information shall be kept confidential by the
                  Holders or any such Underwriter, attorney, accountant or
                  agent, unless disclosure thereof is made in connection with a
                  court, administrative or regulatory proceeding or required by
                  law, or such information has become available to the public
                  generally through the Company or through a third party without
                  an accompanying obligation of confidentiality;

                           (iii) deliver a letter, addressed to the selling
                  Holders and the Underwriters, if any, in which the Company
                  shall make such representations and warranties in form,
                  substance and scope as are customarily made by issuers to
                  Underwriters;

                           (iv) obtain opinions of counsel to the Company and
                  updates thereof (which counsel and opinions, in form, scope
                  and substance, shall be reasonably satisfactory to the
                  Managing Underwriters, if any) addressed to each selling
                  Holder and the Underwriters, if any, covering such matters as
                  are customarily covered in opinions requested in public
                  offerings;

                           (v) obtain "cold comfort" letters and updates thereof
                  from the current and former independent certified public
                  accountants of the Company (and, if necessary, any other
                  independent certified public accountants of any subsidiary of
                  the Company or of any business acquired by the Company for
                  which financial statements and financial data are, or are
                  required to be, included in the Shelf Registration Statement),
                  addressed to each selling Holder (PROVIDED that such Holder
                  furnishes the accountants, prior to the date such "cold
                  comfort" letter is required to be delivered, with such
                  representations as the accountants customarily require in
                  similar situations) and the Underwriters, if any, in customary
                  form and covering matters of the type customarily covered in
                  "cold comfort" letters in connection with primary underwritten
                  offerings; and

                           (vi) deliver such documents and certificates as may
                  be requested by the Majority Holders or, in the case of an
                  Underwritten Offering, the Majority Underwriting Holders, and
                  the Managing Underwriters, if any, including those to evidence
                  compliance with Section 3(j) and with any customary conditions
                  contained in the underwriting agreement or other agreement
                  entered into by the Company.

                  The foregoing actions set forth in clauses (iii), (iv), (v)
and (vi) of this Section 3(r) shall be performed at (A) the effectiveness of
such Shelf Registration Statement and each post-effective amendment thereto and
(B) each closing under any underwriting or similar agreement as and to the
extent required thereunder.

                  (s) Each Notice Holder agrees that, upon receipt of notice of
the happening of an event described in Sections 3(c)(ii) through and including
3(c)(viii), each Holder shall forthwith discontinue (and shall cause its agents
and representatives to discontinue) disposition


                                       14
<PAGE>
of Transfer Restricted Securities and will not resume disposition of Transfer
Restricted Securities until such Holder has received copies of an amended or
supplemented Prospectus contemplated by Section 3(j) hereof, or until such
Holder is advised in writing by the Company that the use of the Prospectus may
be resumed or that the relevant Suspension Period has been terminated, as the
case may be, PROVIDED that the foregoing shall not prevent the sale, transfer or
other disposition of Transfer Restricted Securities by a Notice Holder in a
transaction which is exempt from, or not subject to, the registration
requirements of the Act, so long as such Notice Holder does not and is not
required to deliver the applicable Prospectus or Shelf Registration Statement in
connection with such sale, transfer or other disposition, as the case may be;
and PROVIDED, FURTHER, that the provisions of this Section 3(s) shall not
prevent the occurrence of a Registration Default or otherwise limit the
obligation of the Company to pay Liquidated Damages.

                  (t) The Company shall in connection with an Underwritten
Offering use commercially reasonable efforts (i) if the Securities have been
rated prior to the initial sale of such Securities, to confirm that such ratings
will apply to the Securities covered by the Shelf Registration Statement; or
(ii) if the Securities were not previously rated, to cause the Securities
covered by the Shelf Registration Statement to be rated with at least one
nationally recognized statistical rating agency, if so requested by the Majority
Holders or by any Managing Underwriters.

4. REGISTRATION EXPENSES. The Company shall bear all fees and expenses incurred
in connection with the performance of its obligations under Sections 2 and 3
hereof and the reasonable fees and expenses of a single counsel to the Initial
Purchasers in connection with the initial filing of the Shelf Registration
Statement. In addition, in the event of an Underwritten Offering or if in any
other event the Company requires that inspection and information gathering be
coordinated by counsel for the selling Holders as provided in Section 3(r)(i)
hereof, the Company shall pay the reasonable fees and expenses of a single
counsel selected by the selling Holders of not less than 25% of the Transfer
Restricted Securities to be included in such Underwritten Offering to represent
them. The selling Holders participating in such offering (or, in any such other
event, participating in such inspection and information gathering) shall be
responsible on a pro rata basis based on the respective amount of their Transfer
Restricted Securities included in such offering, for all fees and expenses of
such counsel in excess of $50,000. Notwithstanding the provisions of this
Section 4, each Holder shall bear the expense of any broker's commission, agency
fee or underwriter's discount or commission.

                  5. INDEMNIFICATION AND CONTRIBUTION.

                  (a) The Company agrees to indemnify and hold harmless each
Holder of Transfer Restricted Securities covered by any Shelf Registration
Statement (including each of the Initial Purchasers), the directors, officers,
employees and agents of each such Holder and each person who controls any such
Holder within the meaning of either the Act or the Exchange Act against any and
all losses, claims, damages or liabilities, joint or several, to which they or
any of


                                       15
<PAGE>
them may become subject under the Act, the Exchange Act or other federal or
state law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in the Shelf Registration Statement as originally filed or in any
amendment thereof, or in any preliminary Prospectus or Prospectus, or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and agrees to
reimburse each such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by any of them in connection with investigating or
defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon (A) any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any Holder or any Initial Purchaser
specifically for inclusion therein, (B) use of a Shelf Registration Statement or
the related Prospectus during a period when use of such Prospectus has been
suspended pursuant to Section 2(d) or Section 3(s) hereof; PROVIDED, FURTHER, in
each case, that Holders received prior notice of such suspension, or (C) if the
Holder fails to deliver a Prospectus, as then amended or supplemented, PROVIDED
that the Company shall have delivered to such Holder such Prospectus, as then
amended or supplemented. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.

                  (b) Each Holder of Transfer Restricted Securities covered by a
Shelf Registration Statement (including the Initial Purchasers) severally and
not jointly agrees to indemnify and hold harmless (i) the Company, (ii) each of
its directors, (iii) each of its officers and employees and (iv) each person who
controls the Company within the meaning of either the Act or the Exchange Act to
the same extent as the foregoing indemnity from the Company to each such Holder,
but only with reference to written information furnished to the Company by or on
behalf of such Holder specifically for inclusion in the documents referred to in
the foregoing indemnity. This indemnity agreement shall be in addition to any
liability which any such Holder may otherwise have.

                  (c) Promptly after receipt by an indemnified party under this
Section 5 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 5, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party will
not relieve it from liability under paragraph (a) or (b) above unless and to the
extent it did not otherwise learn of such action and such failure results in the
forfeiture by the indemnifying party of substantial rights and defenses. The
indemnifying party shall be entitled to assume the defense of such action and
appoint counsel of the indemnifying party's choice at the indemnifying party's
expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be


                                       16
<PAGE>
responsible for the fees and expenses of any separate counsel retained by the
indemnified party or parties except as set forth below); PROVIDED, HOWEVER, that
such counsel shall be reasonably satisfactory to the indemnified party.
Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of
interest; (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party and that
representation of the indemnified party by counsel chosen by the indemnifying
party would be inappropriate due to actual or potential differing interests
among the parties represented by such counsel; (iii) the indemnifying party
shall not have assumed the defense of such action and employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action; or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. Neither an indemnifying party
nor an indemnified party will, without the prior written consent of the other
parties, settle or compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not such other parties are actual or potential parties to such claim
or action) unless such settlement, compromise or consent includes an
unconditional release of such other parties from all liability arising out of
such claim, action, suit or proceeding. An indemnifying party shall not be
liable for any losses, claims, damages or liabilities by reason of any
settlement of any action or proceeding effected without such indemnifying
party's prior written consent, which consent will not be unreasonably withheld.

                  (d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 5 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party shall
have an obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "LOSSES"), as incurred, to
which such indemnified party may be subject in such proportion as is appropriate
to reflect the relative benefits received by such indemnifying party, on the one
hand, and such indemnified party, on the other hand, from the Initial Placement
and any sales of Transfer Restricted Securities under the Shelf Registration
Statement; PROVIDED, HOWEVER, that in no case shall the Initial Purchasers be
responsible, in the aggregate, for any amount in excess of the purchase discount
or commission applicable to the Securities, as set forth in the Purchase
Agreement. If the allocation provided by the immediately preceding sentence is
unavailable for any reason, the indemnifying party and the indemnified party
shall contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of such indemnifying party, on the
one hand,


                                       17
<PAGE>
and such indemnified party, on the other hand, in connection with the statements
or omissions which resulted in such Losses as well as any other relevant
equitable considerations. Benefits received by the Company shall be deemed to be
equal to the total net proceeds from the Initial Placement (before deducting
expenses). Benefits received by the Initial Purchasers shall be deemed to be
equal to the total purchase discounts and commissions received in connection
with the Initial Placement, and benefits received by any other Holders shall be
deemed to be equal to the value of receiving Transfer Restricted Securities
registered under the Act. Benefits received by any Underwriter shall be deemed
to be equal to the total underwriting discounts and commissions, as set forth on
the cover page of the Prospectus forming a part of the Shelf Registration
Statement which resulted in such Losses. Relative fault shall be determined by
reference to whether any untrue statement or omission or alleged untrue
statement or omission relates to information provided by the indemnifying party,
on the one hand, or by the indemnified party, on the other hand, the intent of
the parties and their relative knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The parties agree that
it would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this Section 5(d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 5, each person who controls a Holder within the meaning of either
the Act or the Exchange Act and each director, officer, employee and agent of
such Holder shall have the same rights to contribution as such Holder, and each
person who controls the Company within the meaning of either the Act or the
Exchange Act, each officer of the Company who signed the Shelf Registration
Statement and each director of the Company shall have the same rights to
contribution as the Company, and each person who controls an Underwriter within
the meaning of either the Act or the Exchange Act and each officer and director
of each Underwriter shall have the same rights to contribution as such
Underwriter, subject in each case to the applicable terms and conditions of this
paragraph (d).

                  (e) The provisions of this Section 5 will remain in full force
and effect, regardless of any investigation made by or on behalf of any Holder,
any Underwriter or the Company or any of the officers, directors or controlling
persons referred to in Section 5 hereof, and will survive the sale by a Holder
of Transfer Restricted Securities covered by a Shelf Registration Statement.

                  6. MISCELLANEOUS.

                  (a) NO INCONSISTENT AGREEMENTS. The Company shall not, on or
after the date hereof, enter into, any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders herein or otherwise
conflicts with the provisions hereof.

                  (b) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and


                                       18
<PAGE>
waivers or consents to departures from the provisions hereof may not be given,
unless the Company has obtained the written consent of the Majority Holders;
provided that with respect to any matter that directly or indirectly affects the
rights of the Initial Purchasers hereunder, the Company shall obtain the written
consent of each of the Initial Purchasers against which such amendment,
qualification, supplement, waiver or consent is to be effective. Notwithstanding
the foregoing (except the foregoing proviso), a waiver or consent to departure
from the provisions hereof with respect to a matter that relates exclusively to
the rights of Holders whose Transfer Restricted Securities are being sold
pursuant to a Shelf Registration Statement and that does not directly or
indirectly affect the rights of other Holders may be given by the Majority
Holders, determined on the basis of the Transfer Restricted Securities being
sold rather than registered under such Shelf Registration Statement.

                  (c) NOTICES. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telecopier, or overnight courier guaranteeing overnight delivery:

                  (1) if to the Representative, initially at its address set
forth in the Purchase Agreement;

                  (2) if to any other Holder, at the most current address of
such Holder maintained by the Registrar under the Indenture or the registrar of
the Common Stock (PROVIDED that while the Securities or the Common Stock are in
book-entry form, notice to the Trustee shall serve as notice to the Holders),
or, in the case of the Notice Holder, the address set forth in its Notice and
Questionnaire; and

                  (3) if to the Company, initially at its address set forth in
the Purchase Agreement.

                  All such notices and communications shall be deemed to have
been duly given when received, if delivered by hand or overnight courier, and
when sent, if sent by first-class mail or telecopier.

                  The Initial Purchasers or the Company by notice to the other
may designate additional or different addresses for subsequent notices or
communications.

                  (d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent by
the Company thereto, subsequent Holders. The Company hereby agrees to extend the
benefits of this Agreement to any Holder and Underwriter and any such Holder and
Underwriter may specifically enforce the provisions of this Agreement as if an
original party hereto. In the event that any other person shall succeed to the
Company under the Indenture, then such successor shall enter into an agreement,
in form and substance


                                       19
<PAGE>
reasonably satisfactory to the Representative, whereby such successor shall
assume all of the Company's obligations under this Agreement.

                  (e) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

                  (f) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

                  (g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.

                  (h) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.

                  (i) SECURITIES HELD BY THE COMPANY, ETC. Whenever the consent
or approval of Holders of a specified percentage of principal amount of
Securities or the Common Stock issuable upon conversion thereof is required
hereunder, Securities or the Common Stock issued upon conversion thereof held by
the Company or its affiliates (as defined in Rule 144 (or any successor
provision) under the Act) (other than subsequent Holders of Securities or the
Common Stock issued upon conversion thereof if such subsequent Holders are
deemed to be affiliates solely by reason of their holdings of such Securities or
Common Stock) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.

                  (j) TERMINATION. This Agreement and the obligations of the
parties hereunder shall terminate upon the end of the Shelf Registration Period,
except for any liabilities or obligations under Section 2(e), 4 or 5 to the
extent arising prior to the end of the Shelf Registration Period.


                                       20
<PAGE>
                  Please confirm that the foregoing correctly sets forth the
agreement between the Company and you.

                                         Very truly yours,

                                         HASBRO, INC.



                                         By: /s/ Martin R. Trueb
                                            ------------------------------------
                                            Name: Martin R. Trueb
                                            Title: Senior Vice President
                                                   and Treasurer



The foregoing Agreement is hereby
confirmed and accepted as of the date first
above written.

SALOMON SMITH BARNEY INC.


By:  /s/ Michael A. Eck
   -----------------------------------------
Name:    Michael A. Eck
Title:   Managing Director

For itself and the other Initial
Purchasers named in Schedule I to the
Purchase Agreement.


                                       21
<PAGE>
                                                                       EXHIBIT A

             FORM OF SELLING SECURITYHOLDER NOTICE AND QUESTIONNAIRE

         The undersigned beneficial holder (the "Selling Securityholder") of
2.75% Convertible Senior Debentures due 2021 (the "Notes") of Hasbro, Inc. (the
"Company") or shares of Company common stock issuable upon conversion of the
Notes (together with the Notes, the "Transfer Restricted Securities") of the
Company understands that the Company has filed or intends to file with the
Securities and Exchange Commission (the "Commission") a registration statement
on Form S-3 (the "Shelf Registration Statement") for the registration and resale
under Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"),
of the Transfer Restricted Securities in accordance with the terms of the
Registration Agreement (the "Registration Agreement") dated as of November 30,
2001 between the Company and the Initial Purchasers named therein. The
Registration Agreement is available from the Company upon request at the address
set forth below. All capitalized terms not otherwise defined herein shall have
the meaning ascribed thereto in the Registration Agreement.

         In order to sell or otherwise dispose of any Transfer Restricted
Securities pursuant to the Shelf Registration Statement, a beneficial owner of
Transfer Restricted Securities generally will be required to be named as a
selling securityholder in the related prospectus, deliver a prospectus to
purchasers of Transfer Restricted Securities and be bound by those provisions of
the Registration Agreement applicable to such beneficial owner (including
certain indemnification provisions as described below). Beneficial owners are
encouraged to complete and deliver this Notice and Questionnaire prior to the
effectiveness of the Shelf Registration Statement so that such beneficial owners
may be named as selling securityholders in the related prospectus at the time of
effectiveness.

         Certain legal consequences arise from being named as selling
securityholders in the Shelf Registration Statement and the related prospectus.
Accordingly, holders and beneficial owners of Transfer Restricted Securities are
advised to consult their own securities law counsel regarding the consequences
of being named or not being named as a selling securityholder in the Shelf
Registration Statement and the related prospectus.

NOTICE

         The undersigned beneficial owner (the "Selling Securityholder") of
Transfer Restricted Securities hereby gives notice to the Company of its
intention to sell or otherwise dispose of Transfer Restricted Securities
beneficially owned by it and listed below in Item (3) (unless otherwise
specified under Item (3)) pursuant to the Shelf Registration Statement. The
undersigned, by signing and returning this Notice and Questionnaire, understands
that it will be bound by the terms and conditions of this Notice and
Questionnaire and the Registration Agreement.

                                       A-1
<PAGE>
         The undersigned hereby provides the following information to the
Company and represents and warrants that such information is accurate and
complete:

QUESTIONNAIRE

1.       (a)      Full legal name of Selling Securityholder:


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

         (b)      Full legal name of registered holder (if not the same as (a)
                  above) through which Transfer Restricted Securities listed in
                  Item (3) below are held (if the Transfer Restricted Securities
                  are held through a broker-dealer or other third party and, as
                  a result, you do not know the legal name of the registered
                  holder, please complete Item (1)(c) below):


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

         (c)      Full legal name of broker-dealer or other third party through
                  which Transfer Restricted Securities listed in Item (3) below
                  are held:


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

         (d)      Full legal name of DTC Participant (if applicable and if not
                  the same as (b) or (c) above) through which Transfer
                  Restricted Securities listed in Item (3) below are held:


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

2.       Address for Notices to Selling Securityholder:


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

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

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

         Telephone:
                   -------------------------------------------------------------

         Fax:
             -------------------------------------------------------------------

         Contact Person:
                        --------------------------------------------------------

                                       A-2
<PAGE>
3.       Beneficial Ownership of Transfer Restricted Securities:

         (a)      Type and principal amount (or number of shares) of Transfer
                  Restricted Securities beneficially owned:


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


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


         (b)      CUSIP No(s). of such Transfer Restricted Securities
                  beneficially owned:


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


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

                  Unless otherwise indicated in the space provided below, all
                  Notes and all shares of common stock listed in response to
                  Item (3)(a) above, and all shares of common stock issuable
                  upon conversion of the Notes listed in response to Item (3)(a)
                  above, will be included in the Shelf Registration Statement.
                  If the undersigned does not wish all such Notes or shares of
                  common stock to be so included, please indicate below the
                  principal amount or the number of shares to be included:


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


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


4.       Beneficial ownership of other securities of the Company owned by the
         Selling Securityholder:

         Except as set forth below in this Item (4), the undersigned is not the
         beneficial or registered owner of any securities of the Company other
         than the Transfer Restricted Securities listed above in Item (3).

         (a)      Type and amount of other securities of the Company
                  beneficially owned by the Selling Securityholder:


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


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


         (b)      CUSIP No(s). of such other securities of the company
                  beneficially owned:

                                       A-3
<PAGE>
                  --------------------------------------------------------------


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


5.       Relationship with the Company:

         Except as set forth below, neither the undersigned nor any of its
         affiliates, directors or principal equity holders (5% or more) has held
         any position or office or has had any other material relationship with
         the Company (or its predecessors or affiliates) during the past three
         years.

         State any exceptions here:


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


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


6.       Plan of Distribution

         Except as set forth below, the undersigned (including its donees or
         pledgees) intends to distribute the Transfer Restricted Securities
         listed above in Item (3) pursuant to the Shelf Registration Statement
         only as follows (if at all): Such Transfer Restricted Securities may be
         sold from time to time directly by the undersigned or alternatively
         through underwriters or broker-dealers or agents. If the Transfer
         Restricted Securities are sold through underwriters or broker-dealers,
         the Selling Securityholder will be responsible for underwriting
         discounts or commissions or agent's commissions. Such Transfer
         Restricted Securities may be sold in one or more transactions at fixed
         prices, at prevailing market prices at the time of sale, at varying
         prices determined at the time of sale, or at negotiated prices. Such
         sales may be effected in transactions (which may involve block
         transactions) (i) on any national securities exchange or quotation
         service on which the Transfer Restricted Securities may be listed or
         quoted at the time of sale, (ii) in the over-the-counter market, (iii)
         in transactions otherwise than on such exchanges or services or in the
         over-the-counter market, or (iv) through the writing of options. In
         connection with sales of the Transfer Restricted Securities or
         otherwise, the undersigned may enter into hedging transactions with
         broker-dealers, which may in turn engage in short sales of the Transfer
         Restricted Securities, short and deliver Transfer Restricted Securities
         to close out such short positions, or loan or pledge Transfer
         Restricted Securities to broker-dealers that in turn may sell such
         securities. The Selling Securityholder may pledge or grant security
         interest in some or all of the Transfer Restricted Securities owned by
         it and, if it defaults in the performance of its secured obligations,
         the pledgees or secured parties may offer and sell the Transfer
         Restricted Securities from time to time pursuant to the prospectus. The
         Selling Securityholder also may transfer

                                      A-4
<PAGE>
         and donate shares in other circumstances in which case the transferees,
         donees, pledgees or other successors in interest will be the selling
         securityholder for purposes of the prospectus.

         State any exceptions here:


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


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


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


         Note:    The Company's obligation to cooperate in an underwritten
                  offering of the Transfer Restricted Securities is limited
                  under Section 3(r) of the Registration Agreement.

         The undersigned acknowledges that it understands its obligation to
comply with the provisions of the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder relating to stock manipulation,
particularly Regulation M thereunder (or any successor rules or regulations) and
the provisions of the Securities Act of 1933 relating to prospectus delivery, in
connection with any offering of Transfer Restricted Securities pursuant to the
Shelf Registration Statement. The undersigned agrees that neither it nor any
person acting on its behalf will engage in any transaction in violation of such
provisions.

         The Selling Securityholder hereby acknowledges its obligations under
the Registration Agreement to indemnify and hold harmless certain persons set
forth therein.

         Pursuant to the Registration Agreement, the Company has agreed under
certain circumstances to indemnify the Selling Securityholders against certain
liabilities.

         In accordance with the undersigned's obligation under the Registration
Agreement to provide such information as may be required by law for inclusion in
the Shelf Registration Statement, the undersigned agrees to promptly notify the
Company of any inaccuracies or changes in the information provided herein that
may occur subsequent to the date hereof at any time while the Shelf Registration
Statement is required to remain effective. All notices hereunder and pursuant to
the Registration Agreement shall be made in writing at the address set forth
below.

         By signing below, the undersigned consents to the disclosure of the
information contained herein in its answers to Items (1) through (6) above and
the inclusion of such information in the Shelf Registration Statement and the
related prospectus. The undersigned understands that such information will be
relied upon by the Company in connection with the preparation or amendment of
the Shelf Registration Statement and the related prospectus.


                                      A-5
<PAGE>
         IN WITNESS WHEREOF, the undersigned, by authority duly given, has
caused this Notice and Questionnaire to be executed and delivered either in
person or by its duly authorized agent.

                                    Beneficial Owner

                                    By:
                                       -----------------------------------------
                                       Name:
                                       Title:

Dated:

        PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE
                                 TO THE COMPANY:

                                  HASBRO, INC.
                               1027 NEWPORT AVENUE
                               PAWTUCKET, RI 02862
                            FACSIMILE: (401) 729-7025
                           ATTENTION: GENERAL COUNSEL

                                 WITH A COPY TO:

                                  ROPES & GRAY
                             ONE INTERNATIONAL PLACE
                              BOSTON, MA 02110-2624
                            FACSIMILE: (617) 951-7050
                            ATTENTION: JULIE H. JONES

                                      A-6


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-5.1
<SEQUENCE>5
<FILENAME>b41930hiex5-1.txt
<DESCRIPTION>OPINION OF ROPES & GRAY
<TEXT>
<PAGE>
                                                                     Exhibit 5.1

                                   February 22, 2002



Hasbro, Inc.
1027 Newport Avenue
Pawtucket, Rhode Island 02862

Ladies and Gentlemen:

     This opinion is furnished to you in connection with a registration
statement on Form S-3 (the "Registration Statement"), filed with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended, for the registration of $250,000,000 aggregate principal amount of
2.75% Convertible Senior Debentures due 2021 (the "Debentures") of Hasbro, Inc.
(the "Company") and 11,574,075 shares of common stock, $0.50 par value per
share, (the "Shares") initially issuable upon conversion of the Debentures. The
Debentures were issued under an indenture dated as of November 30, 2001 between
the Company and The Bank of Nova Scotia Trust Company of New York (the
"Indenture"). All of the Debentures and Shares are being registered on behalf
of the holders of the Debentures.

     We have acted as counsel for the Company in connection with the preparation
and filing of the Registration Statement. For purposes of our opinion, we have
examined such documents and made such other investigation as we have deemed
appropriate to render the opinions set forth below. As to matters of fact
material to our opinions, we have relied, without independent verification, on
representations made in the Indenture and the purchase agreement relating to the
Debentures and on certificates and other inquiries of officers of the Company
and of public officials.

     We express no opinion as to the applicability of, compliance with or effect
of federal law or the law of any jurisdiction other than the Rhode Island
Business Corporation Act, the laws of the State of New York and the federal laws
of the United States of America.

     Based upon the foregoing, we are of the opinion that:

     1.  The Debentures constitute valid and binding obligations of the
Company enforceable against it in accordance with their terms.

<PAGE>

Hasbro, Inc.                       -2-                      February 22, 2002


     2.  The Shares have been duly authorized and, when issued upon
conversion of the Debentures, will be validly issued and fully paid and
nonassessable.

     Our opinions in paragraph 1 are subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other similar laws of
general application affecting the rights and remedies of creditors and to
general principles of equity.

     We understand that this opinion is to be used in connection with the
Registration Statement. We hereby consent to the filing of this opinion as part
of the Registration Statement and to the use of our name therein and in the
related prospectus under the caption "Validity of Securities."

                                   Very truly yours,

                                   /s/ Ropes & Gray

                                   Ropes & Gray


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.1
<SEQUENCE>6
<FILENAME>b41930hiex12-1.txt
<DESCRIPTION>STATEMENT REGARDING COMPUTATION OF RATIOS OF...
<TEXT>
<PAGE>
                                                                    EXHIBIT 12.1


                          HASBRO, INC. AND SUBSIDIARIES
                Computation of Ratio of Earnings to Fixed Charges
                         Fiscal Years Ended in December
                             (Thousands of Dollars)


<TABLE>
<CAPTION>
                                  Nine Months Ended Sept.                                    Fiscal Years
                             ----------------------------------     -------------------------------------------------------------
                             Pro Forma
                               2001         2001         2000         2000          1999         1998         1997         1996
                             --------     --------     --------     --------      --------     --------     --------     --------
<S>                          <C>          <C>          <C>          <C>           <C>          <C>          <C>          <C>
Earnings available
 for fixed charges:
  Net earnings (loss)        $ 13,696        7,247       35,459     (144,631)      188,953      206,365      134,986      199,912
  Add:
   Cumulative effect of
    accounting change           1,066        1,066           --           --            --           --           --           --
   Fixed charges               84,750       94,233       94,870      135,302        88,456       53,209       43,893       47,174
   Taxes on income              6,946        3,912       15,931      (81,355)       84,892       97,113       69,539      106,981
                             --------     --------     --------     --------      --------     --------     --------     --------
    Total                    $106,458      106,458      146,260      (90,684)      362,301      356,687      248,418      354,067
                             ========     ========     ========     ========      ========     ========     ========     ========
Fixed charges:
  Interest on long-term
   debt                      $ 55,606       65,089       53,115       74,206        25,068        9,688        7,348        9,258
  Other interest charges       12,238       12,238       27,091       40,215        44,272       26,423       20,138       22,207
  Amortization of debt
   expense                      1,532        1,532        1,213        1,724           425          121          377          339
  Rental expense
   representative of
   interest factor             15,374       15,374       13,451       19,157        18,691       16,977       16,030       15,370
                             --------     --------     --------     --------      --------     --------     --------     --------
    Total                    $ 84,750       94,233       94,870      135,302        88,456       53,209       43,893       47,174
                             ========     ========     ========     ========      ========     ========     ========     ========

Ratio of earnings to
 fixed charges                   1.26         1.13         1.54        (0.67)         4.10         6.70         5.66         7.51
                             ========     ========     ========     ========      ========     ========     ========     ========
</TABLE>


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>7
<FILENAME>b41930hiex23-1.txt
<DESCRIPTION>CONSENT OF KPMG LLP
<TEXT>
<PAGE>
                                                                    Exhibit 23.1

                         CONSENT OF INDEPENDENT AUDITORS




The Board of Directors
Hasbro, Inc.:

We consent to use of our reports incorporated by reference in the Hasbro, Inc.
Annual Report on Form 10-K for the fiscal year ended December 31, 2000, which is
incorporated by reference herein, and to the reference to our firm under the
heading "Experts" in the prospectus.

                                             /s/ KPMG LLP


Providence, Rhode Island
February 19, 2002


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-25.1
<SEQUENCE>8
<FILENAME>b41930hiex25-1.txt
<DESCRIPTION>FORM T-1
<TEXT>
<PAGE>
                                                                    Exhibit 25.1
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                    FORM T-1

                            STATEMENT OF ELIGIBILITY
                   UNDER THE TRUST INDENTURE ACT OF 1939 OF A
                    CORPORATION DESIGNATED TO ACT AS TRUSTEE

                      CHECK IF AN APPLICATION TO DETERMINE
                      ELIGIBILITY OF A TRUSTEE PURSUANT TO
                               SECTION 305(B)(2)

                THE BANK OF NOVA SCOTIA TRUST COMPANY OF NEW YORK
               --------------------------------------------------
               (Exact name of trustee as specified in its charter)

                    New York                                  13-5691211
 ----------------------------------------------          ---------------------
 (Jurisdiction of incorporation or organization             (I.R.S. employer
          if not a U.S. national bank)                   Identification number)

              One Liberty Plaza
               New York, N.Y.                                    10006
           ---------------------                              ----------
           (Address of principal                              (Zip code)
             executive office)

                                       N/A
             -------------------------------------------------------
             Name, address and telephone number of agent for service

                                  HASBRO, INC.
               --------------------------------------------------
               (Exact name of obligor as specified in its charter)

              Rhode Island                                     05-0155090
    -------------------------------                         ------------------
    (State or other jurisdiction of                          (I.R.S. employer
     incorporation or organization)                         identification no.)

          1027 Newport Avenue
             Pawtucket, RI                                        02862
- ----------------------------------------                      -------------
(Address of principal executive offices)                      (Postal Code)


                  2.75% CONVERTIBLE SENIOR DEBENTURES due 2021
                  --------------------------------------------
                       (Title of the indenture securities)


<PAGE>
                                      -2-

Item 1.     GENERAL INFORMATION

            Furnish the following information as to the trustee:

            (a) Name and address of each examining or supervising authority
                to which it is subject.

                           Board of Governors of the Federal Reserve System
                           Washington, D.C.

                           State of New York Banking Department
                           State House, Albany, N.Y.

            (b) Whether it is authorized to exercise corporate trust powers.

                           The Trustee is authorized to exercise corporate
                           trust powers.

Item 2.     AFFILIATION WITH THE OBLIGOR.

            If the obligor is an affiliate of the trustee, describe each such
            affiliation.

                 The obligor is not an affiliate of the Trustee.

Item 3.     Not applicable

Item 4.     TRUSTEESHIPS UNDER OTHER INDENTURES.

            If the trustee is a trustee under another indenture under which any
            other securities, or certificates of interest or participation in
            any other securities, of the obligor are outstanding, furnish the
            following information:

            (a) Title of the securities outstanding under each such other
                indenture.

                                   Hasbro, Inc.
                                   7.95% Notes due 2003
                                   8.50% Notes due 2006

            (b) A brief statement of the facts relied upon as a basis for the
                claim that no conflicting interest within the meaning of
                Section 310(b)(1) of the Act arises as a result of the
                trusteeship under any such other indenture, including a
                statement as to how the indenture securities will rank as
                compared with the securities issued under such other
                indentures.

                           The trustee does not believe there is a default
                           under the outstanding indenture securities. The
                           ranking of the securities to be issued under this
                           indenture will rank pari passu with the securities
                           issued and outstanding under such other indentures.

Item 5 through Item 15.  Not applicable.

<PAGE>

Item 16.    LIST OF EXHIBITS.

            List below all exhibits filed as part of this statement of
            eligibility.

            1.  A copy of the articles of association of the trustee as
                now in effect.

                  A copy of the Organization Certificate of the trustee, as
                  now in effect, is on file with the Securities and Exchange
                  Commission as Exhibit 1 to the Statement of Eligibility
                  and Qualification of Trustee (Form T-1) filed with
                  Registration Statement No. 333-6688 and is incorporated
                  herein by reference thereto.

            2.  A copy of the  certificate of authority of the trustee to
                commence  business, if not contained in the articles of
                association.

                  A copy of the Certificate of Authority to commence
                  business, as now in effect, is on file with the Securities
                  and Exchange Commission as Exhibit 2 to the Statement of
                  Eligibility and Qualification of Trustee (Form T-1) filed
                  with Registration Statement No. 333-6688 and is
                  incorporated herein by reference thereto.

            3.  A copy of the authorization of the trustee to exercise
                corporate trust powers, if such authorization is not
                contained in the documents specified in paragraph (1) or
                (2) above.

                  The authorization to exercise corporate trust powers is
                  contained in the documents specified in paragraphs (1) and
                  (2) above.

            4.  A copy of the existing by-laws of the trustee, or
                instruments corresponding thereto.

                  A copy of the existing by-laws of the trustee, as now in
                  effect, is on file with the Securities and Exchange
                  Commission as Exhibit 4 to the Statement of Eligibility
                  and Qualification of Trustee (Form T-1) filed with
                  Registration Statement No. 333-6688 and is incorporated
                  herein by reference thereto.

            5.  A copy of each indenture referred to in Item 4, if the
                obligor is in default.

                  Not Applicable.

            6.  The consents of the United States institutional trustees
                required by Section 321(b) of the Act.

                  The consent of the trustee required by Section 321 (b) of
                  the Act is on file with the Securities and Exchange
                  Commission as Exhibit 6 to the Statement of Eligibility
                  and Qualification of Trustee (Form T-1) filed with
                  Registration Statement No. 333-27685 and is incorporated
                  herein by reference thereto.

            7.  A copy of the latest report of condition of the trustee
                published pursuant to law or the  requirements of its
                supervising or examining authority.

                  A copy of the latest report of condition of the trustee
                  published pursuant to law

<PAGE>

                      or the requirements of its supervising or examining
                      authority is annexed hereto as Exhibit 7 and made a part
                      hereof.



                                    SIGNATURE


         Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, The Bank of Nova Scotia Trust Company of New York, a corporation
organized and existing under the laws of the State of New York, has duly caused
this statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New York,
on the 11th day of February, 2002.


                                               THE BANK OF NOVA SCOTIA TRUST
                                               COMPANY OF NEW YORK


                                               By: /s/ John F. Neylan
                                                   -----------------------------
                                                     John F. Neylan
                                                     Trust Officer
<PAGE>

THE BANK OF NOVA SCOTIA TRUST COMPANY OF NEW YORK                PAGE RC-2
- -------------------------------------------------                  [10]
Legal Title of Bank

ONE LIBERTY PLAZA, 23RD FLOOR
- -------------------------------------------------
City

NEW YORK, NY 10006
- -------------------------------------------------
State                              Zip Code

FDIC Certificate Number __________


CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 2001

All Schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.

Schedule RC--Balance Sheet

<TABLE>
<CAPTION>


                                                                                                 -----------------------------
                                                                    Dollar Amounts in Thousands  RCON    Bil    Mil    Thou
- ------------------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>                    <C>      <C>     <C>   <C>    <C>
ASSETS
1.   Cash and balances due from depository institutions (from Schedule RC-A):
                                                                                                -----------------------------
     a.  Noninterest-bearing balances and currency and coin(1)................................   0081                  517     1.a.
                                                                                                -----------------------------
     b.  Interest-bearing balances(2).........................................................   0071               4  945     1.b.
                                                                                                -----------------------------
2.   Securities:
                                                                                                -----------------------------
     a.  Held-to-maturity securities (from Schedule RC-B, column A)...........................   1754               1  220     2.a.
                                                                                                -----------------------------
     b.  Available-for-sale securities (from Schedule RC-B, column D).........................   1773                   0      2.b.
                                                                                                -----------------------------
3.   Federal funds sold and securities PURCHASED UNDER AGREEMENTS TO RESELL...................   1350              13  000     3.
                                                                                                -----------------------------
4.   Loans and lease financing receivables (from Schedule RC-C):
                                                                                                -----------------------------
     a.  Loans and leases held for sale.......................................................   5369                   0      4.a.
                                                                       ------------------------------------------------------
     b.  Loans and leases, net of unearned income.....................  B528                                                   4.b.
                                                                       ------------------------------------------------------
     c.  LESS:  Allowance for loan and lease losses...................  3123                                                   4.c.
                                                                       ------------------------------------------------------
     d.  Loans and leases, net of unearned income and allowance
          (item 4.b minus 4.c)................................................................   B529                   0      4.d.
                                                                                                -----------------------------
5.   Trading assets (from Schedule RC-D)......................................................   3545                   0      5.
                                                                                                -----------------------------
6.   Premises and fixed assets (including capitalized leases).................................   2145                   0      6.
                                                                                                -----------------------------
7.   Other real estate owned (from Schedule RC-M).............................................   2150                   0      7.
                                                                                                -----------------------------
8.   Investments in unconsolidated subsidiaries and associated companies
      (from Schedule RC-M)....................................................................   2130                   0      8.
                                                                                                -----------------------------
9.   Customers' liability to this bank on acceptances outstanding.............................   2155                   0      9.
                                                                                                -----------------------------
10.  Intangible assets:
                                                                                                -----------------------------
     a.  Goodwill.............................................................................   3163                   0      10.a.
                                                                                                -----------------------------
     b.  Other intangible assets (from Schedule RC-M).........................................   0426                   0      10.b.
                                                                                                -----------------------------
11.  Other assets (from Schedule RC-F)........................................................   2160               1  255     11.
                                                                                                -----------------------------
12.  Total assets (sum of items 1 through 11).................................................   2170              20  937     12.
                                                                                                -----------------------------
</TABLE>

- ----------
(1) Includes cash items in process of collection and unposted debits.

(2) Includes time certificates of deposit not held for trading.

<PAGE>
Schedule RC - Continued                                            PAGE RC-2
                                                                      [11]
<Table>
<Caption>
                                                                                                --------------------------
                                                                   Dollar Amounts in Thousands  RCON    Bil    Mil    Thou
- ---------------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>          <C>  <C>    <C>    <C>    <C>   <C>   <C>
LIABILITIES
13.  Deposits:
                                                                                                --------------------------
      a.  In domestic officdes (sum of totals of columns A and C
            from Schedule RC-E)................................................................  2200             7  645    13.a.
                                                                       ---------------------------------------------------
          (1) Noninterest-bearing(1)..................................  6631          7  614                                13.a.(1)
                                                                       ------------------------
          (2) Interest-bearing........................................  6636              31                                13.a.(2)
                                                                       ------------------------
      b.  Not applicable
                                                                                                --------------------------
14.   Federal funds purchased and securities sold under agreements to repurchase..............   2800                 0     14.
                                                                                                --------------------------
15.   Trading liabilites (from Schedule RC-D).................................................   3548                 0     15.
                                                                                                --------------------------
16.   Other borrowed money (includes mortgage inebtedness and obligations
        under capitilized leases) (from Schedule RC-M)........................................   3190                 0     16.
                                                                                                --------------------------
17.   Not applicable
                                                                                                --------------------------
18.   Bank's liability on acceptances executed and outstanding................................   2920                 0     18.
                                                                                                --------------------------
19.   Subordinated notes and debentures(2)....................................................   3200                 0     19.
                                                                                                --------------------------
20.   Other liabilities (from Schedule RC-G)..................................................   2930               218     20.
                                                                                                --------------------------
21.   Total liabilites (sum of items 13 through 20)...........................................   2948            7  863     21.
                                                                                                --------------------------
22.   Minority intest in consolidated subsidiaries............................................   3000                 0     22.
                                                                                                --------------------------
EQUITY CAPITAL
                                                                                                --------------------------
23.   Perpetual preferred stock and related surplus...........................................   3838                 0     23.
                                                                                                --------------------------
24.   Common stock............................................................................   3230            1  000     24.
                                                                                                --------------------------
25.   Surplus (exclude all surplus related to preferred stock)................................   3839           10  030     25.
                                                                                                --------------------------
26.   a. Retained earning.....................................................................   3632            2  044     26.a.
                                                                                                --------------------------
      b. Accumulated other comprehensive income(3)............................................   B530                 0     26.b.
                                                                                                --------------------------
27.   Other equity capital components(4)......................................................   A130                 0     27.
                                                                                                --------------------------
28.   Total equity capital (sum of items 23 through 27).......................................   3210           13  074     28.
                                                                                                --------------------------
29.   Total liabilities, minority interest, and equity capital (sum of items 21,22,
        and 28)...............................................................................   3300           20  937     29.
                                                                                                --------------------------
Memorandum

TO BE REPORTED WITH THE MARCH REPORT OF CONDITION
                                                                                                     ---------------------
1.   Indicate in the box at the right the number of the statement below that best describes          RCON   Number
     the most comprehensive level of auditing work performed for the bank by independent             ---------------------
     auditors as of any date during 2000...........................................................  6724                  M.1.
                                                                                                     ---------------------

1 = Independent audit of the bank conducted in accordance with          4 = Directors' examination of the bank conducted in
    generally accepted auditing standards by a certified public             accordance with generally accepted auditing standards
    accounting firm which submits a report on the bank                      by a certified public accounting firm (may be required
2 = Independent audit of the bank's parent holding company con-             by state chartering authority)
    ducted in accordance with generally accepted auditing               5 = Directors' examination of the bank performed by
    standards by a certified public accounting firm which submits           other external auditors (may be required by state
    a report on the consolidated holding company (but not on the bank       chartering authority)
    separately)                                                         6 = Review of the bank's financial statements by external
3 = Attestation on bank management's assertion on the                       auditors
    effectiveness of the bank's internal control over financial         7 = Compilation of the bank's financial statements by
    reporting by a certified public accounting firm                         external auditors
                                                                        8 = Other audit procedures (excluding tax preparation
                                                                            work)
                                                                        9 = No external audit work.

- ----------
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.

(2) Includes limited-life preferred stock and related surplus.

(3) Includes net unrealized holding gains (losses) on available-for-sale
    securities, accumulated net gains (losses) on cash flow hedges, and
    minimum pension liability adjustments.

(4) Includes treasury stock and unearned Employee Stock Ownership Plan shares.

</TABLE>

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