March 23, 1999 Mr. Adam Klein 7 Lowell Street Cambridge, MA 02138 Dear Adam: In connection with your termination of employment on April 1, 1999 ('Termination Date') and subject to the approval of the Compensation and Stock Option Committee of the Board of Directors, Hasbro, Inc. (the 'Company') will provide you with the benefits described below provided you timely sign, return and do not revoke this Letter Agreement within the seven (7) day revocation period. 1. Description of Severance ------------------------ In return for the execution of this Letter Agreement, the Company agrees to pay you five hundred and twenty thousand dollars and fifty-two cents ($520,000.52), less all applicable state and federal taxes, as severance pay. The severance pay will be paid to you from April 1, 1999 through March 31, 2000 ('the Severance Period') as follows: $43,333.16 on April 1, 1999; and In weekly installments commencing on April 9,1999 and ending on March 31, 2000; each installment in the gross amount of nine thousand one hundred sixty-six dollars and sixty-eight cents ($9,166.68). You will not be eligible for payment under the Company's holiday bonus during the Severance Period. The payments will commence no sooner than April 1, 1999 and the eighth (8th) day after the execution of this Agreement, provided it has become binding between you and the Company. 2. Benefits Continuation --------------------- During the Severance Period, the Company further agrees to the following: (a) Effective as of the termination date, you shall be considered to have elected to continue receiving group medical and dental insurance pursuant to the law known as COBRA, 29 U.S.C. section 1161 et. seq. During the Severance Period, the Company will continue to pay the share of the premiums for such coverage that is paid by the Company for active and similarly situated executives who receive the same type of coverage. The remaining balance of any premium costs, and all premium costs after the Severance Period, shall be paid by you on a monthly basis for as long as and to the extent that, you remain eligible for COBRA continuation. (b) Continuation of your Company provided life insurance. (c) Use of your Company leased vehicle, cellphone, personal computer and fax machine provided that you will be responsible for all operating and maintenance costs (other than automobile insurance and lease payments). (d) During the first quarter of the year 2000, you shall receive a management bonus equivalent for 1999. This payment shall be made in accordance with general Company practice and will be one hundred and seventy thousand dollars ($170,000.00), less applicable state and federal taxes.