Employment Agreement - Hasbro Inc. and Herbert M. Baum


                           EMPLOYMENT AGREEMENT

  THIS EMPLOYMENT AGREEMENT (the 'Agreement'), made as of the 5th day of 
January, 1999 is entered into by Hasbro, Inc., a corporation with its 
principal place of business at Pawtucket, Rhode Island (the 'Company'), and 
Herbert M. Baum (the 'Employee').

  WHEREAS, the Company desires to employ the Employee as President and Chief 
Operating Officer of the Company and the Employee desires to be employed by 
the Company as President and Chief Operating Officer;

  NOW, THEREFORE, in consideration of the mutual covenants and promises 
contained herein, and other good and valuable consideration, the receipt and 
sufficiency of which are hereby acknowledged by the parties hereto, the 
parties agree as follows:

   1.  Term of Employment
       ------------------
  The Company hereby agrees to employ the Employee, and the Employee hereby 
accepts employment with the Company, upon the terms set forth in this 
Agreement, for the period commencing on January 5, 1999 (the 'Commencement 
Date') and ending on January 5, 2002, unless sooner terminated in accordance 
with the provisions of Section 5 or extended as hereinafter provided in this 
Section 1 (such period, as it may be extended or terminated, the 'Employment 
Period').  The Employment Period may be extended not later than January 5, 
2002 for an additional one year period from the then current expiration date 
of the Employment Period provided the Employee and the Company mutually agree 
in writing to extend the Employment Period.

   2.  Title; Capacity
       ---------------
  The Company will employ the Employee, and the Employee agrees to work for 
the Company, as its President and Chief Operating Officer of the Company and 
in such other senior executive positions with the Company and with domestic 
and foreign subsidiaries of the Company  as the Company's Board of Directors 
(the 'Board') and the Chairman of the Board and Chief Executive Officer of 
the Company may reasonably determine from time to time.  The Employee shall 
be based at the Company's headquarters in Pawtucket, Rhode Island and shall 
undertake such domestic and foreign business travel as shall be reasonably 
required to fulfill his duties.  The Employee shall report directly to the 
Chairman of the Board and Chief Executive Officer of the Company.

  The Employee shall have authorities, duties and responsibilities 
commensurate with his position of President and Chief Operating Officer 
(including but not limited to, responsibility for all operating functions and 
units of the Company with all of said functions and units reporting directly 
or, with his consent, indirectly to him) and shall have such other 
authorities, duties and responsibilities commensurate with his position as
the Board shall from time to time reasonably assign to him.  The Employee
shall devote substantially his full business time in the performance of the
foregoing services, except that he may serve on the boards of directors of
other businesses, trade associations and charitable organizations, engage in
charitable activities and community affairs and manage his personal
investments and affairs as long as these activities present no conflict of
interest and do not materially interfere with the performance of his duties
hereunder.

  The Employee agrees to abide in all material respects with the policies of 
the Company applicable to senior executives, officers and members of the 
Board and any changes therein which may be adopted from time to time by the 
Company with regard to conflicts of interest.

   3.  Member of the Board
       -------------------
  During the Employment Period, the Company agrees that it shall recommend to 
the Board the  election of the Employee as a Director of the Company on  the 
Commencement Date or as soon as practical thereafter.  Upon the expiration of 
his term as a Director during the Employment Period, the Company agrees to 
use its best efforts to cause him to be re-nominated for election  and to 
recommend his election.

   4.  Compensation and Benefits
       -------------------------  
       4.1  Salary
            ------
  During the Employment Period, the Company shall pay the Employee, in weekly 
installments one week in arrears, an annual base salary of not less than 
$750,000 (the 'Base Salary').  Such Base Salary shall be considered for 
upward adjustment annually in accordance with the Company's salary increase 
guidelines based upon the Employee's achievement of individual performance 
goals but subject to recommendation by the Chairman and Chief Executive 
Officer and approval by the Compensation and Stock Option Committee of the 
Board (the 'Compensation Committee').  Once increased, Base Salary shall not 
be reduced and shall thereafter be the 'Base Salary' hereunder.

       4.2  Bonus
            -----
  During the Employment Period, the Employee shall be eligible to participate 
in the Company's management incentive bonus arrangement with a target bonus 
of not less than 45% of Base Salary.  The Employee's actual bonus may be 
greater or less than his target bonus for such year depending upon the 
Company's and the Employee's actual performance during the applicable bonus 
year.  In the event Employee's employment is terminated prior to the 
completion of a bonus year due to (I) his death or Disability, (ii) a 
termination by the Employee for 'Good Reason,' or (iii) a termination by the 
Company without 'Cause,' the Company will pay the Employee a pro rata bonus 
for such year equal to at least the bonus for such year he would have 
received based on assuming his individual performance was the same as that of 
the prior year and the actual Company performance for such year multiplied by 
a fraction, the numerator of which is the number of days during such bonus 
year that the Employee is employed by the Company, and the denominator of 
which is three hundred sixty-five (365).  If such pro rata bonus is for 1999, 
the entire bonus shall be based on the actual Company performance for such 
year.

       4.3  Stock Options
            -------------
  (a)  Subject to the approval of the Compensation Committee of the Board the 
Company shall grant to the Employee options (the 'Options') to purchase 
175,000 shares of the Company's Common Stock (the 'Shares') on the 
Commencement Date, or as soon thereafter as practical, at the then-current 
Fair Market Value of the Company Shares as of the date of the grant under and 
according to the terms of the Company's Stock Incentive Performance Plan and 
the applicable Stock Option Agreement.  During the Employment Period, Options 
to purchase 58,333 shares shall vest on each of the first two anniversaries 
of the Commencement Date and the remaining Options to purchase 58,334 shares 
shall vest on January 5, 2002, the last day of the initial three year 
Employment Period.
 
  (b)  Subsequent grants of regular stock options may be made subject to the 
Company's standard practice and policy in making such grants, except that the 
Employee will not have any right to participate in the Company's premium 
priced stock option program.  Subsequent stock option grants will be subject 
to not less favorable vesting and exercise provisions than those set forth in 
this Section 4.3.

  (c)  Unless the termination of Employee's employment is for Cause, the 
Employee will have three (3) years from the date on which his  employment 
terminates or, if earlier, until the expiration of stated term of the 
Options, to exercise all unexercised vested Options.

  (d)  If the Employee's employment with the Company terminates upon or after 
the expiration of the initial three year Employment Period for any reason 
whatsoever other than Cause, provided the Employee executes a non-compete 
agreement in the form of Exhibit A hereto, the Options shall become fully 
vested on the date of termination.  In the event the prior sentence does not 
apply and the Employee is terminated by the Company without Cause or the 
Employee terminates his employment with or without Good Reason either during 
or after the initial three year Employment Period, the Options shall continue 
to vest during the period which the Employee is receiving severance payment 
from the Company.