-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LRapxd9g59JlgsnwFGnnbL7Y45ALG+VbbjwYpz83WPojcOzS91E4mYItLBSlLdYE FssJHYcp4zSgcpDRg9jEkw== 0000950136-97-001653.txt : 19971118 0000950136-97-001653.hdr.sgml : 19971118 ACCESSION NUMBER: 0000950136-97-001653 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970927 FILED AS OF DATE: 19971117 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOLDEN BOOKS FAMILY ENTERTAINMENT INC CENTRAL INDEX KEY: 0000790706 STANDARD INDUSTRIAL CLASSIFICATION: BOOKS: PUBLISHING OR PUBLISHING AND PRINTING [2731] IRS NUMBER: 061104930 STATE OF INCORPORATION: DE FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 000-14399 FILM NUMBER: 97722955 BUSINESS ADDRESS: STREET 1: 850 THIRD AVE STREET 2: STE 601 CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2127538500 MAIL ADDRESS: STREET 1: 850 THIRD AVENUE STREET 2: STE 601 CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: WESTERN PUBLISHING GROUP INC DATE OF NAME CHANGE: 19920703 10-Q/A 1 AMENDED FORM 10-Q UNTIED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 27, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------------ ------------------- Commission file number 0-14399 ------- GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. -------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 06-1104930 - ------------------- ------------------ (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 888 Seventh Avenue, New York, New York 10106 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code (212) 547-6700 (Registrant's telephone number, including area code) 850 Third Avenue, New York, NY 10022 (Former nam, former address and formal fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceeding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common stock, par value $.01 per share: 26,887,313 shares outstanding as of November 7, 1997. 1 The purpose of this amendment is to add Exhibits 10.1 and 10.2 (listed below) to the registrant's Form 10-Q for the quarterly period ended September 27, 1997. PART II OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit Number Description 10.1 Licensed Book Publishing Agreement between Disney Licensed Publishing and Golden Books Publishing Company, Inc., dated September 26, 1997 (confidential portions of which have been omitted and filed separately with the Commission pursuant to a request for an order granting confidential treatment). 10.2 Warrant Agreement between Golden Books Family Entertainment, Inc. and Disney Enterprises, Inc., dated September 26, 1997. 27.1* Financial Data Schedule (b) Reports on Form 8-K *Current Report on Form 8-K dated October 1, 1997 * Previously filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. November 17, 1997 /s/ Richard E. Snyder _______________________________ Richard E. Snyder Chairman of the Board, President and Chief Executive Officer November 17, 1997 /s/ Philip E. Rowley _______________________________ Philip E. Rowley Executive Vice President and Chief Financial Officer EX-10.1 2 LICENSED BOOK PUBLISHING AGREEMENT Licensed Book Publishing Agreement Between Disney Licensed Publishing and Golden Books Publishing Company, Inc. Dated September 26, 1997 INDEX
Page 1. DEFINITIONS..................................................................................................1 1.1 "Licensed Property"................................................................................1 1.2 "Book".............................................................................................1 1.3 "Term".............................................................................................1 1.4 "Distribution Period"..............................................................................1 1.5 "Territory"........................................................................................1 1.6 "Royalties"........................................................................................1 1.7 "Royalty Payment Period"...........................................................................4 1.8 [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]....................................................................4 1.9 "Guarantee"........................................................................................5 1.10 "Promotion Commitment"............................................................................6 1.11 "Affiliate".......................................................................................7 1.12 "Laws"............................................................................................7 1.13 "Suppliers".......................................................................................7 1.14 [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]....................................................................8 2. GRANT OF RIGHTS..............................................................................................8 3. ADVANCE.....................................................................................................13 4. GUARANTEE...................................................................................................13 5. PUBLICATION, PRESS RUN & FREE COPIES........................................................................13 6. CONTENT.....................................................................................................14 7. PRE-PRODUCTION APPROVALS....................................................................................14 8. APPROVAL OF PRODUCTION SAMPLES..............................................................................16 9. THIRD PARTY APPROVALS.......................................................................................17 10. COMPLIANCE WITH APPLICABLE LAWS AND STANDARDS..............................................................18 11. PRINTING AND/OR MANUFACTURING BY THIRD PARTIES.............................................................21 12. ADVERTISING................................................................................................22 13. PROMOTION COMMITMENT.......................................................................................22 -i- 14. COMMON MARKETING FUND......................................................................................23 15. OWNERSHIP..................................................................................................24 16. COPYRIGHT NOTICE...........................................................................................26 17. REGISTRATIONS..............................................................................................27 18. UNLICENSED USE OF LICENSED PROPERTY........................................................................27 19. WARRANTIES AND INDEMNITIES.................................................................................28 20. INSURANCE..................................................................................................30 21. STATEMENTS AND PAYMENT OF ROYALTIES........................................................................30 22. INTEREST...................................................................................................34 23. AUDITS AND MAINTAINING RECORDS.............................................................................34 24. WITHDRAWAL OF LICENSED MATERIAL............................................................................35 25. TERMINATION................................................................................................35 26. RIGHTS AND OBLIGATIONS UPON EXPIRATION OR TERMINATION......................................................37 27. NON-ASSIGNABILITY..........................................................................................39 28. NOTICES....................................................................................................42 29. MUSIC......................................................................................................43 30. GOODWILL...................................................................................................43 31. RELATIONSHIP...............................................................................................43 32. CONSTRUCTION...............................................................................................43 33. MODIFICATIONS OR EXTENSIONS OF THIS AGREEMENT..............................................................44 34. RESERVATION OF RIGHTS......................................................................................44 35. WAIVERS....................................................................................................44 36. SEVERABILITY...............................................................................................44 37. CHOICE OF LAW AND FORUM....................................................................................44 -ii- 38. EQUITABLE RELIEF...........................................................................................44 39. POWER TO SIGN..............................................................................................45 40. CONFIDENTIALITY............................................................................................45 41. PREVIOUS AGREEMENTS........................................................................................46 42. SURVIVAL OF OBLIGATIONS....................................................................................46
-iii- LICENSED BOOK PUBLISHING AGREEMENT This book publishing license agreement (the "Agreement") dated September 26, 1997, is made by and between Disney Book Publishing, Inc., doing business as Disney Licensed Publishing ("Licensor") located at 500 S. Buena Vista Street, Burbank, California 91521 and GOLDEN BOOKS PUBLISHING COMPANY, INC., A WHOLLY-OWNED SUBSIDIARY OF GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. ("Licensee") located at 888 Seventh Avenue, New York, NY 10019. 1. DEFINITIONS 1.1 "LICENSED PROPERTY" means the characters set forth in Schedule A, which is attached hereto and incorporated herein by this reference. It is hereby mutually acknowledged and agreed that the Licensed Property shall not include any characters the publishing rights to which Licensor does not own and that Licensee's use of the Licensed Property is subject to Licensor's rights of approval as more fully set forth in this Agreement. 1.2 "BOOK" means the book(s) described in Schedules B and C, which are attached hereto and incorporated herein by this reference, in the English language as developed by Licensee. For purposes of this Agreement, the term "Book" shall not include educational books or educational workbooks. 1.3 "TERM" means the period commencing October 1, 1997, and ending December 31, 2001. Subject to Subparagraph 2.7 below, the Term shall not be extended or continued beyond such date, by implication or otherwise, than by a separate written agreement newly entered into. 1.4 "DISTRIBUTION PERIOD" means the following period during which the Book shall be distributed and available for purchase in the distribution channels authorized pursuant to Subparagraph 2.3 below: October 1, 1997 through the end of the Term, and any extension thereof. Without limiting the foregoing, Licensee agrees to use its best efforts to distribute any Book the publication of which is tied to the release (or re-release) in any medium (e.g., home video and motion picture) of a Disney-branded feature animation or live action movie on or about the official release date for the overall licensing program established for that movie, but in no event prior to such official release date. 1.5 "TERRITORY" means Canada, the United States, United States PX's wherever located, and United States territories and possessions, excluding Puerto Rico, Guam, Commonwealth of Northern Mariana Islands and Palau. 1.6 "ROYALTIES" means a royalty in the amounts set forth below: (i) The royalty rates set forth in Schedule C, which is attached hereto and Golden books Publishing Company, Inc. Agreement dated September 26, 1997 incorporated herein by this reference. (ii) On sublicenses (all sublicenses are subject to Licensor's prior written approval pursuant to Subparagraph 27.4 below), Licensee shall pay Licensor a royalty rate of [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission] of Licensee's Net Invoiced Billings for such sales of the Book; (iii) For sales of the Book to book clubs, book fairs, schools, libraries and other educational outlets (all of which are subject to Licensor's prior written approval) and "special" sales (i.e., sales of the Book outside of the distribution channels set forth herein for which Licensee must obtain Licensor's prior written approval), a royalty rate of [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission] of Licensee's Net Invoiced Billings if the sales are based on a sublicense sale, or [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission] of the applicable royalty rate for sales made on an "inventory/all-in basis" (i.e., when the Book is sold directly from Licensee's inventory stock to the purchaser). (iv) For sales of "Golden Value" versions of the Book, for which Licensee must obtain Licensor's prior written approval, a royalty rate of [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission] of the applicable royalty rate as set forth in Schedule C hereto. (v) "NET INVOICED BILLINGS" means the following: actual invoiced billings (i.e., gross sales quantity multiplied by Licensee's selling price) for copies of the Book sold, and all other receivables of any kind whatsoever, received in payment for the Book, whether received by Licensee or any of Licensee's Affiliates, except as provided in Subparagraph 1.6(vi) below, less "Allowable Deductions" as hereinafter defined. The following are not part of Net Invoiced Billings: invoiced charges for transportation of the Book within the Territory which are separately identified on the sales invoice, and sales taxes. (vi) "ALLOWABLE DEDUCTIONS" means the following: volume discounts, and other discounts from the invoice price (or post-invoice credits) unilaterally imposed in the regular course of business by Licensee's customers, so long as Licensee documents such discounts (or credits) to Licensor's satisfaction. In the event a documented unilateral discount (or credit) is taken with respect to combined sales of the Book and other products not licensed by Licensor, and Licensee cannot document the portion of the discount (or credit) applicable to the Book, Licensee may apply only a pro Golden books Publishing Company, Inc. Agreement dated September 26, 1997 rata portion of the discount (or credit) to the Book. Unilateral discounts or credits are never deductible if they represent items listed hereinbelow. -2- Without limiting the generality of the foregoing, the following are not Allowable Deductions, whether granted on sales invoices or unilaterally imposed as discounts or as post-invoice credits: cash discounts granted as terms of payment; early payment discounts; allowances or discounts relating to advertising; costs incurred in manufacturing, importing, selling or advertising the Book; freight costs incorporated in the selling price; and uncollectible accounts. Commencing on October 1, 1998, the following are not Allowable Deductions: mark down allowances, new store allowances, defective goods allowances or allowances taken by customers in lieu of returning goods. (vii) Notwithstanding anything in this Agreement to the contrary, during the period commencing October 1, 1997 through December 31, 1997, Licensee shall pay royalties for sales of the Book based on the royalty rates set forth in Paragraph 3 of that certain Publishing License between Western Publishing Company, Inc. and The Disney Publishing Group dated October 23, 1992 (the "1992 Publishing License Agreement"). Effective as of January 1, 1998, Licensee shall pay Royalties for sales of the Book based on the royalty rates set forth in this Subparagraph 1.6. Similarly, notwithstanding anything in this Agreement to the contrary, during the period commencing October 1, 1997 through December 31, 1997, Licensee shall pay royalties for sales of the Magic Slate(R) products licensed pursuant to that certain agreement between Western Publishing Group, Inc. and Disney Licensed Publishing dated February 16, 1995, as amended, pursuant to the royalty rates set forth in Subparagraph 1.G. of that agreement. (viii) No Royalties will be payable on copies of the Book that are provided gratis for review, promotion, advertising, sample, or similar purposes intended to promote the Book, which copies are not intended for sale, up to a maximum of five hundred (500) copies of each title of the Book. In addition, no Royalties will be payable on free copies provided to Licensor pursuant to Subparagraph 5.3 of this Agreement. (ix) It is intended that the royalty on sales of the Book covered by Subparagraphs 1.6 (ii), (iii), and (iv) above which require the approval of Licensor shall be agreed in writing when such sale is approved. If it is not so agreed in writing, the royalty payable shall be the same as would be payable if the Book had been sold through the distribution channels authorized in Subparagraph 2.3 below. Licensee shall submit all requests for approval for proposed sales of the Book covered by Subparagraphs 1.6(ii), (iii), and (iv) to the Vice-President of Disney Licensed Publishing (or his or her designee) on the form attached hereto as Exhibit 5, which -3- form may change from time to time. Licensor shall endeavor to indicate its approval or disapproval of such requests in a timely manner, but such approvals should be sought as early as possible. (x) With respect to copies of the Book sold in Canada, the foregoing Royalties shall be computed based on the corresponding price of the Book as sold in the United States. (xi) Royalties reported on sales of the Book which have been returned to Licensee for credit or refund and on which a refund has been made or credit memo issued may be credited against Royalties due. The credit shall be taken in the Royalty Payment Period in which the refund is given or credit memo issued. Unused credits may be carried forward, but in no event shall Licensee be entitled to a refund of Royalties. 1.7 "ROYALTY PAYMENT PERIOD" means each calendar monthly period during the Term, and during the Sell-off Period, if any. 1.8 [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]. -4- 1.9 "GUARANTEE" means the following sum(s) which Licensee agrees and guarantees to pay Licensor as minimum Royalties on sales of the Book for the following periods during the Term: (i) Seven million three hundred seventy thousand United States Dollars (U.S. $7,370,000.00) for the period commencing January 1, 1998, and ending September 30, 1998; and (ii) Eleven million six hundred seventy thousand United States Dollars (U.S. $11,670,000.00) for the period commencing October 1, 1998, and ending September 30, 1999; and (iii) Thirteen million three hundred forty thousand United States Dollars (U.S. $13,340,000.00) for the period commencing October 1, 1999, and ending September 30, 2000; and (iv) Fifteen million three hundred forty thousand United States Dollars (U.S. $15,340,000.00) for the period commencing October 1, 2000, and ending September 30, 2001; and five million two hundred eighty thousand United States Dollars (U.S. $5,280,000.00) for the period commencing October 1, 2001, and ending December 31, 2001, unless the Term of the Agreement is extended pursuant to Subparagraph 2.7 below; and (v) In the event the Term of the Agreement is extended pursuant to Subparagraph 2.7 below, sixteen million six hundred seventy thousand United States Dollars (U.S. $16,670,000.00) for the period commencing October 1, 2001, and ending September 30, 2002; and (vi) In the event the Term of the Agreement is extended pursuant to Subparagraph 2.7 below, five million six hundred ten thousand United -5- States Dollars (U.S. $5,610,000.00) for the period commencing October 1, 2002, and ending December 31, 2002. Licensee may apply Royalties earned from sales of the Book (i.e., any authorized format utilizing any Licensed Property) towards meeting the respective Guarantees set forth hereinabove. However, any Royalties earned which exceed the Guarantee amount for one Guarantee period may not be applied towards meeting the Guarantee for any other Guarantee period. Notwithstanding anything in this Agreement to the contrary, if the Term of this Agreement is extended pursuant to Subparagraph 2.7 below, Licensee may apply Royalties earned which exceed the Guarantee for the period October 1, 2001, and ending September 30, 2002 towards meeting the Guarantee for the period October 1, 2002, and ending December 31, 2002. If the Term is not extended, Licensee may apply Royalties earned which exceed the Guarantee for the period October 1, 2000, and ending September 30, 2001 towards meeting the Guarantee for the period October 1, 2001, and ending December 31, 2001. 1.10 "PROMOTION COMMITMENT" means the following promotional and marketing support which Licensee agrees to provide for the Book: (i) Licensee shall include the Book in its catalog, if any, in accordance with the following: the catalogs shall have a separate page or pages showing all new formats and titles. The Book shall in addition to being included in the main index of the catalog be separately indexed in an index listing all formats and titles of the Book. All such catalog pages are subject to Licensor's prior written approval. (ii) Licensee shall make available point-of-purchase marketing support materials for all new theatrical and video releases and, as it deems appropriate, for Disney-animated television programs and brand programs covered by the Book. All such marketing support materials are subject to Licensor's prior written approval. (iii) Licensee shall endeavor to conduct two (2) major Territory-wide in-store marketing promotions for any of the character(s) included in the Licensed Property, at Licensee's sole discretion, during each year of the Term, and any extension thereof, and Licensor will contribute without charge creative and marketing direction assistance for such annual promotions. Notwithstanding the foregoing, Licensee acknowledges the importance to Licensor of supporting the Disney-animated feature releases. All such promotions are subject to Licensor's prior written approval. -6- (iv) Twice each calendar year, Licensee agrees to provide Licensor with a detailed sales, marketing, and creative program (the "Program") specifying how Licensee intends to support and promote each of the character classes in the Licensed Property (i.e., the "A" , "B" and "C" Properties as set forth in Schedule A hereto) in a manner and at a level commensurate with (a) the extensive publishing rights granted to Licensee hereunder, and (b) Licensee's status as Licensor's principal licensed publisher for the Book. Licensee shall use its best efforts to implement the Program presented to Licensor, with the goal of meeting Licensor's expectation and intention that Licensee will actively and mutually support each of the character classes in the Licensed Property in approximately the following ratios: [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]. License shall provide Licensor with complete copies of all materials utilized in presenting the Program. (v) All requests for approval required under this Subparagraph 1.10 shall be sought by Licensee as early as possible and should include all information necessary to allow Licensor to make an informed decision. Licensor shall endeavor to indicate its approval or disapproval of such requests in a timely manner. 1.11 "AFFILIATE" means, with regard to Licensee, any corporation or other entity which directly or indirectly controls, is controlled by, or is under common control with Licensee; with regard to Licensor, "Affiliate" means any corporation or other entity which directly or indirectly controls, or is controlled by, or is under common control with, Disney Enterprises, Inc. "Control" of an entity shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies of such entity, whether through ownership of voting securities, by contract or otherwise. 1.12 "LAWS" means any and all applicable laws, rules, and regulations, including but not limited to, local and national laws, rules and regulations, treaties, voluntary industry standards, association laws, codes or other obligations pertaining to any of Licensee's activities under this Agreement, including but not limited to those applicable to the manufacture, pricing, sales and/or distribution of the Book. 1.13 "SUPPLIERS" means any of Licensee's third-party manufacturers and suppliers (and their sub-manufacturers and suppliers) which reproduce or use the Licensed Property in the Book, or components of the Book, and/or which assemble the Book. -7- 1.14 [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]. 2. GRANT OF RIGHTS 2.1 Subject to the terms and conditions of this Agreement, and in consideration for Licensee's promise to pay and Licensee's payment of all Royalties, Fees, Advances, Guarantees, and Common Marketing Fund payments required hereunder, Licensor hereby grants to Licensee, during the Term, the non-exclusive right throughout the Territory, to create, print, bind, market, advertise, publish, and sell the English language version(s) of the Book. Licensee shall have the right to publish Licensee's existing backlist of "Sturdy Shape" titles of the Book, plus up to six (6) new "Sturdy Shape" versions of the Book per each year of the Term; provided, however, that no "Sturdy Shape" versions of the Book (including backlist titles) may utilize the Licensed Property "WINNIE THE POOH". For purposes of the preceding sentence, "backlist titles" shall include all "Sturdy Shape" titles being published by Licensee as of the date of this Agreement. The Licensed Property shall include Licensee's backlist of titles to the Book; provided, however, that prior to such publication, Licensor shall have the opportunity to review the backlist and may require Licensee to update the artwork and/or any other creative aspects of the Book (including, but not limited to, the interior art and covers) so as to be fresh and current, to conform to all new or updated publishing reference material guidelines, to comply with any material changes in character art styles or standards introduced by Licensor, to conform with all material branding initiatives of Licensor, or to maintain all art quality standards as required by Licensor, to be determined solely at Licensor's discretion, so long as such creative aspect(s) of the Book were not previously approved by Licensor within the preceding twenty-four (24) months. During the first twelve (12) months of the Term, the parties hereby agree to conduct a review of the backlist of those titles of the Book which Licensee intends to seek approval for publication pursuant to this Agreement. Licensor shall not unreasonably withhold its approval of backlist titles submitted by Licensee. Notwithstanding the foregoing, Licensee may continue to publish those backlist titles or group -8- of backlist titles which Licensee is actively publishing as of the date of this Agreement until such time as Licensor notifies Licensee of its desire to exercise the approval rights set forth hereinabove with respect to a title or group of titles. 2.2 Notwithstanding that this Agreement is non-exclusive, Licensee shall be the principal licensed publisher for the Book. The parties recognize that Licensee's status as principal licensed publisher for the Book gives rise to certain mutual responsibilities commensurate with the financial commitment being made by Licensee and the scope of properties being licensed by Licensor under this Agreement. On Licensee's part, principal licensed publisher means that, during the Term, Licensee agrees to exercise actively the rights granted hereunder, to use its best efforts to maximize sales of the Book in the Territory during the Term (or any renewal thereof), and to support the Licensed Property and each of the properties contained therein in a focused, substantive, and meaningful way, but at a minimum, not less than as set forth in Subparagraph 1.10 above. Further, Licensee agrees that if Licensee (or any Publishing Affiliate of Licensee) enters into another license agreement for any other major animated or live action motion picture which is anticipated to be a significant media event with high-profile promotional, advertising, and marketing campaigns, and the term of such license agreement overlaps with the Term (or any extension thereof) of this Agreement, Licensee shall use its best efforts to ensure that Licensee's commitment to the Licensed Property is not adversely impacted and that the Licensed Property receives the appropriate priority. On Licensor's part, principal licensed publisher means that, during the Term, [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]. Further, and notwithstanding that this Agreement is non-exclusive, and provided that Licensee has satisfactorily performed the terms and conditions of this Agreement, and paid all sums due Licensor hereunder, Licensee shall have the right of first refusal, during the Term to publish in the English language in the Territory, -9- [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]. Licensee's right of first refusal does not extend to any product which, in whole or in part, falls outside of Licensor's customary licensed publishing business, which is published, manufactured or licensed or being published, manufactured or licensed by Licensor's Affiliates or which is part of a promotional license agreement between Licensor or its Affiliates and a third-party promotion partner. Without limiting the generality of item 1(c) above in this paragraph, [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]. Licensor will notify Licensee in writing, if Licensor, in its absolute discretion, determines to license such additional book formats. If Licensee fails to notify Licensor in writing of its election to exercise this right of first refusal for any given format submitted to Licensee for consideration within thirty (30) days from the date upon which Licensor notifies Licensee of such format, or if the parties are unable to agree upon any material terms or conditions specific to such format after attempting in good faith to do so within thirty (30) days after Licensee notifies Licensor of its intent to exercise its right of first refusal, Licensor shall have the full right to license a third party to publish the new formats without further obligation to Licensee. For purposes of clarity, any books licensed to Licensee by Licensor under this right of first refusal shall be subject to a separate written agreement to be mutually negotiated by the parties, and shall not be included within the meaning of "Book" under this Agreement and shall not apply towards meeting Licensee's Advance and Guarantee obligations under this Agreement. Further, Licensor shall not be obligated to offer to Licensee, as part of Licensee's right of first refusal, any color and activity or storybook concepts or ideas to the extent such disclosure violates any applicable Laws, professional obligations customary in the publishing industry, and/or, based on a reasonable and good faith determination by Licensor, constitutes confidential proprietary information or trade secrets of Licensor or a third party. 2.3 The Book may be sold only to department stores, gift stores, specialty retail stores, mass market stores, discount stores, supermarkets, drug stores, convenience stores, toy stores, airport stores, warehouse clubs, major and independent book stores and book store chains, wholesalers and jobbers, and book wholesalers and jobbers who may sell to schools, libraries and other educational outlets. If there is a question as to whether a particular customer falls within any of the categories specified above, Licensor's determination shall be binding. Licensee may not sell the Book to retailers that sell the Book on a duty-free basis, or to wholesalers for resale to such retailers, unless such retailer or wholesaler has -10- a then-current license agreement with Licensor or an Affiliate of Licensor permitting it to make such duty-free sales. In addition, the Book may not be sold by direct marketing methods, which include, but are not limited to, computer on-line selling, home shopping television programs, direct mail and door-to-door solicitation. Licensee shall make all solicitations, sales and collections solely in its own name and in accordance with all applicable Laws. Licensee agrees not to sell the Book, including any part or adaptation thereof, otherwise than as herein provided without Licensor's prior written approval. 2.4 The Book shall not be used or sold to others for use as a giveaway, fundraiser, or to customers for inclusion in another product, or for lotteries, premiums, promotions, sweepstakes, or advertising purposes in connection with other publications or articles, or to sell other products, without the prior written consent of Licensor. 2.5 The prohibition of computer on-line selling referenced in Subparagraph 2.3 above includes, but is not limited to, the display, promotion or offering of the Book in or on any on-line venues (e.g. Websites), except as specifically permitted in the following two sentences. With Licensor's prior written permission, the Book approved by Licensor may be displayed and promoted on Disney-controlled on-line venues, only within the Territory. Licensee may sell the Book to retailers, within the channels of distribution authorized pursuant to Subparagraph 2.3, who sell the Book in or on such retailer's own Website. In the event any such retailer is displaying and/or selling the Book in an unauthorized manner, Licensee agrees to cooperate with Licensor in Licensor's efforts to prohibit such unauthorized activity. 2.6 Licensee recognizes and acknowledges the vital importance to Licensor of the characters and other proprietary material owned and created by The Walt Disney Company and its Affiliates (collectively referred to herein as "Disney") and the association of the Disney name with them. In order to prevent the denigration of Disney's products and the value of their association with the Disney name, and in order to ensure the dedication of Licensee's best efforts to preserve and maintain that value, Licensee agrees that, during the Term and any extension thereof, Licensee will neither itself manufacture, advertise, promote, merchandise, display, package, sell and/or distribute (nor permit any sublicensee, distributor or other person or entity to do so) (a) any non-Disney product, in such a manner as to imply an association with Disney and/or its proprietary material, (b) any published product which contains any artwork or other representation not owned by Disney, but which Licensor determines, in its reasonable discretion, is confusingly similar to Disney characters or other Disney proprietary material, (c) any book which contains any non-Disney owned images of a character for which there is a Disney-owned image, or (d) any product containing material which -11- Licensor determines, in its sole discretion, is lewd, lascivious, obscene, offensive, defamatory or otherwise injurious to Disney or the Disney name, business, products, or proprietary material. [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]. 2.7 Provided that Licensee has complied with all terms and conditions of this Agreement, including without limitation Subparagraph 1.10(iv) above, and Licensee has met its Guarantee obligation, as set forth in Subparagraph 1.9 above, for the period commencing October 1, 1999, and ending September 30, 2000, this Agreement shall renew for an additional twelve (12) month period commencing on January 1, 2002, and ending December 31, 2002. 2.8 Licensor may during the Term of this Agreement determine to license a new category of educational workbooks. In the event Licensor agrees to do so, prior to licensing the publication of such books, Licensor shall provide Licensee with the opportunity to present proposals to become a licensed publisher for this new product category . For purposes of clarity, any educational workbooks licensed to Licensee by Licensor under this Subparagraph shall be subject to a separate written agreement to be mutually negotiated by the parties, and shall not be included within the meaning of "Book" under this Agreement and shall not apply towards meeting Licensee's Advance and Guarantee obligations under this Agreement. 2.9 As further consideration for the licensing rights granted to Licensee hereunder, Licensee shall issue to Licensor a Warrant granting Licensor the right to purchase the number of shares of common stock in Golden Books Family Entertainment, Inc., specified in that certain Warrant Agreement of even date herewith (the "Warrant Agreement"), to be executed by Licensor and Licensee contemporaneously with the execution of this Agreement. -12- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 3. ADVANCE 3.1 Licensee agrees to pay to Licensor the Advance, which shall be on account of Royalties accruing during the Term only, and only with respect to sales in the Territory; provided, however, that if any part of the Advance is specified in Subparagraph 1.8 above as applying to any period less than the Term, such part shall be on account of Royalties accruing during such lesser period only. If said Royalties should be less than the Advance, no part of the Advance shall be refundable. 3.2 Royalties accruing during the Sell-off Period, if any, or any extension of the Term shall not be offset against the Advance, unless otherwise agreed in writing. Subject to Subparagraph 1.9 above, Royalties accruing during any extension of the Term or any other term shall be offset only against an advance paid with respect to such extended term. 4. GUARANTEE 4.1 Licensee shall, with Licensee's statement of account for the last Royalty Payment Period of each Guarantee period set forth in Subparagraph 1.9 above, pay Licensor the amount, if any, by which Royalties paid with respect to sales in the Territory during the Guarantee period fall short of the amount of the Guarantee for that period. In addition, Licensee shall, with Licensee's statement of account for the last Royalty Payment Period of the Term, or immediately upon termination if the Agreement is terminated prior to the expiration of the Term, pay Licensor the amount, if any, by which Royalties paid with respect to sales in the Territory during the Term fall short of the amount of the cumulative Guarantee. 4.2 Advances, if any, applicable to Royalties due on sales in the period to which the Guarantee relates shall apply towards meeting the respective Guarantees for those periods set forth in Subparagraph 1.9. 5. PUBLICATION, PRESS RUN & FREE COPIES 5.1 Licensee agrees to exercise actively the rights granted herein. Licensee shall publish the Book and shall keep a sufficient quantity and selection of titles of the Book in print and available for purchase in the distribution channels authorized pursuant to Subparagraph 2.3 above, during the Term of this Agreement, in order to, at a minimum, comply with Licensee's obligations as set forth in Subparagraphs 1.10 and 2.2 above. Licensee shall notify Licensor in writing of the publication date(s) of the Book ninety (90) days prior to such publication date(s). -13- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 5.2 Licensee agrees to print a minimum number of copies of the Book during the Term sufficient to meet the requirements of the Program. 5.3 Licensee agrees to furnish to Licensor, free of charge, one hundred (100) copies of each title of the Book from the first shipment of the Book, and to sell to Licensor at fifty percent (50%) below the published retail price any reasonable quantities of additional copies which Licensor requires for purposes other than resale; provided, however, that if Licensor desires to purchase more than five hundred (500) copies of any title of the Book, Licensor shall advise Licensee of the reasons for such purchase. Licensor agrees not to purchase more than five hundred (500) copies of any title of the Book solely for purposes of giving away such copies to the public for free, without Licensee's prior written consent. Two (2) of the free copies shall be delivered by Licensee directly to Licensor's legal department for copyright registration purposes, attention Copyright Paralegal, The Walt Disney Company, 500 South Buena Vista Street, Burbank, California 91521-6365. 6. CONTENT All creative costs for the Book shall be borne by Licensee. Notwithstanding the foregoing, Licensor agrees to cooperate with Licensee in the preparation of the artwork and text for the Book. To that end, Licensor agrees to make a good faith attempt to provide Licensee such pre-existing artwork, textual, reproduction materials, and reference materials in Licensor's possession as may be available and which Licensor and Licensee deem suitable for inclusion in the Book. Licensee acknowledges that Licensor may charge Licensee for the cost of the foregoing materials or other costs incurred in connection with the preparation of the Book. Licensor shall make reasonable, good faith attempts to provide Licensee with prior notice of any such charges, including the estimated amounts thereof. Estimates of the charges for such materials are available upon request. 7. PRE-PRODUCTION APPROVALS 7.1 All aspects of the Book and its contents (the "Materials"), including without limitation, concepts, format and size, quality of paper, textual, artistic and photographic content, printing, cover, notices (e.g., copyright, trademark, logos), dust jacket (if any), slip case (if any), audio elements (if any), non-printed components (e.g., PVCs, toys) (if any), and title, shall be subject to Licensor's prior review and written approval. Approval or disapproval of the Materials shall lie in Licensor's sole discretion. Licensee shall endeavor to submit the Materials and requests for approval or other action by Licensor early enough to avoid unnecessary time pressure on Licensor. Requests for approvals of the Materials must be accompanied by an approval form provided by Licensor. Licensor shall -14- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 indicate the reasons for disapprovals and the changes needed to obtain approval. Any approval Licensor may give will not constitute or imply a representation or belief by Licensor that such materials comply with any applicable Laws. Without limiting Licensor's right to approve the Materials under this Subparagraph 7.1, Licensor hereby recognizes and acknowledges that Licensor's timely processing of the Materials is important to Licensee's ability to perform its obligations under this Agreement. Licensee hereby recognizes and acknowledges that Licensor's ability to process the Materials is often dependent on, and subject to, extenuating factors, including, but not limited to, when Licensee submits materials, the quality of the materials submitted, the volume of materials submitted (including by other licensees), and the need or requirement for Licensor to consult with third parties to obtain certain approvals. In order to facilitate and expedite the process of submitting and approving the Materials so as to meet the concerns of both parties, Licensor and Licensee hereby agree that, immediately upon the execution of this Agreement, each party shall designate a representative to draft a set of detailed written artwork submission and approval policies and guidelines (the "Policy"). The Policy shall be in place on or before January 1, 1998. Licensor and Licensee shall periodically review and, as necessary, revise the Policy to ensure it is properly functioning. Licensor and Licensee shall also give priority to establishing computer links to facilitate and improve upon the submission and approval of the Materials. 7.2 Subject to the provisions set forth in the Policy, as early as possible, and in any case before commercial production of the Book, Licensee shall submit to Licensor for Licensor's review and written approval all aspects of the Book, at each stage of creation, including, but not limited to, any concepts (covers and interiors), story outlines, layouts, rough pencils, tight pencils, final art, mechanicals, pre-press proofs (digital proof for mechanicals plus a film proof), manuscript drafts, finished manuscripts and sample of paper stock and sound/electronics (if any), and shall supply from the first print run, and each subsequent print run, samples for Licensor's written approval. Licensee shall ensure that each copy thereafter printed shall conform in all respects to what has been approved by Licensor and shall not ship or deliver copies of the Book which do not so conform. If any nonconforming Book is sold by Licensee, Licensor may, in addition to any other remedies available to Licensor (including, but not limited to, termination of this Agreement), by written notice require such Book to be immediately withdrawn from the market. Licensee acknowledges that Licensor may not approve concepts or artwork submitted near the end of the Term. Licensee further acknowledges that the fact that artwork has been created by an artist recommended by Licensor or by an artist who has worked in the past on a Disney publication does not mean that any such artwork will necessarily be approved in connection with the Book licensed hereunder. -15- 8. APPROVAL OF PRODUCTION SAMPLES 8.1 Before shipping the Book to any customer, Licensee agrees to furnish to Licensor, from the first production run of each supplier of the Book, for Licensor's approval of all aspects thereof, samples, with packaging, if any, which shall conform to the approved pre-production samples. Approval or disapproval of the artwork as it appears in the Book, as well as of the quality of the Book, shall lie in Licensor's sole discretion and may, among other things, be based on unacceptable quality of the artwork or of any part of the Book as manufactured. Any part not so approved shall be deemed unlicensed, shall not be sold and, unless otherwise agreed by Licensor in writing, shall be destroyed. Such destruction shall be attested to in a certificate signed by one of Licensee's officers. Production samples of the Book for which Licensor has approved a pre-production sample shall be deemed approved, unless within twenty (20) days of Licensor's receipt of such production sample Licensor notifies Licensee to the contrary. Any approval of a production sample attributable to Licensor shall not constitute or imply a representation or belief by Licensor that such production sample complies with applicable Laws. 8.2 Licensee agrees to make available at no charge such additional samples of the Book as Licensor may from time to time reasonably request for the purpose of comparison with earlier samples or for Licensor's anti-piracy efforts, or to test for compliance with applicable Laws, and to permit Licensor to inspect Licensee's manufacturing operations and testing records (and those of Licensee's Suppliers) of the Book. 8.3 Licensee acknowledges that Licensor may disapprove any part of the Book or a production run of the Book because the quality is unacceptable to Licensor, and accordingly, Licensor recommends that Licensee submit production samples to Licensor for approval before committing to a large original production run or to purchase a large shipment from a new supplier. 8.4 No modification of an approved production sample shall be made without Licensor's further prior written approval. The Book must conform in all respects to the approved production samples. It is understood that if in Licensor's reasonable judgment the quality of the Book as originally approved has deteriorated in later production runs, or if the Book has otherwise been altered, Licensor may, in addition to other remedies available to Licensor, by written notice require such Books to be withdrawn immediately from the market. 8.5 Any part of the Book not meeting the standard of approved samples shall be destroyed or all Licensed Property shall be removed or obliterated therefrom. -16- 8.6 Licensee is responsible for the consistent quality and safety of the Book and its compliance with applicable Laws, Licensor will not unreasonably object to any change in the design of the Book or in the materials used in the manufacture of the Book or in the process of manufacturing the Book which Licensee advises Licensor in writing is intended to make the Book safer or more durable. 8.7 Licensor shall have the right, by written notice to Licensee, to require modification of any part of the Book approved by Licensor under this or any previous agreement between Licensee and Licensor pertaining to the Licensed Property. Likewise, if the Term of this Agreement is extended by mutual agreement, or pursuant to Subparagraph 2.7, Licensor shall have the right, by written notice to Licensee, to require modification of any part of the Book approved by Licensor under this Agreement. It is understood that there is no obligation upon either party to extend the Agreement, except as may be provided in Subparagraph 2.7. 8.8 If Licensor notifies Licensee of a required modification under Subparagraph 8.7 above, such notification shall advise Licensee of the nature of the changes required. If the required modification is material to the integrity of the Book, the Licensed Property in the Book, and/or the Disney Property (as defined below), then Licensee shall not accept any order for the Book until it has been resubmitted to Licensor with such changes and Licensee has received Licensor's written approval of the Book as modified. However, Licensee may continue to distribute Licensee's inventory of the previously approved Book until such inventory has been exhausted (unless the Book is dangerously defective, as determined by Licensor. 8.9 Without limiting Licensor's approval rights under this Paragraph 8, the Policy referenced in Subparagraph 7.1 shall include provisions governing all submissions and approvals which are the subject of this Paragraph 8. 9. THIRD PARTY APPROVALS 9.1 No material which is owned by a third party or in which a third party has rights shall be embodied in the Book or used in conjunction with the Book, unless Licensor has given knowing prior approval in writing, such approval to be granted or withheld within Licensor's sole discretion. In the event that Licensor does so approve, Licensee shall obtain all necessary licenses (and all other licenses required by Licensor) for the use of such material (including but not limited to all audio elements, if any) in or in conjunction with the Book. 9.2 Except with respect to material supplied by Licensor, Licensee shall pay and be solely responsible for the payment of all obligations to third parties arising from the manufacture, distribution, advertising and sale of the Book, including, but not -17- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 limited to, payments to designers, printers, recording artists, musicians and applicable unions and guilds, and shall pay or cause to be paid to the copyright proprietors of the material referenced in Subparagraph 9.1 above, or to their duly authorized agents, all royalties and other sums (including the full statutory mechanical royalty rate if required for audio material) which may become due under and in accordance with said licenses and all applicable Laws. 9.3 Licensee understands that Licensor's interim and final approvals or disapprovals of the Book or any part of the contents of the Book may depend on whether necessary permissions from third parties have been obtained. 10. COMPLIANCE WITH APPLICABLE LAWS AND STANDARDS 10.1 Licensee covenants that the Book and any component thereof distributed hereunder shall be of good quality and free of defects in design, materials and workmanship, and shall comply with all applicable Laws, and such specifications, if any, as may have been specified in connection with this Agreement and shall conform to the sample thereof approved by Licensor. Licensee covenants that it will comply with all applicable Laws in performing this Agreement, including but not limited to, those pertaining to the manufacture, pricing, sale and distribution of the Book. 10.2 Without limiting the foregoing, Licensee covenants on behalf of Licensee's own company, and agrees to require all Suppliers to covenant by signing the Supplier's Agreement (referenced in Paragraph 11 below), as follows: (i) Licensee and the Suppliers agree not to use child labor in the manufacturing, packaging or distribution of the Book. The term "child" refers to a person younger than the local legal minimum age for employment or the age for completing compulsory education, but in no case shall any child younger than fifteen (15) years of age (or fourteen (14) years of age where local law allows) be employed in the manufacturing, packaging or distribution of the Book. Licensee and the Suppliers employing young persons who do not fall within the definition of "children" agree also to comply with any Laws applicable to such persons. (ii) Licensee and the Suppliers agree only to employ persons whose presence is voluntary. Licensee and the Suppliers agree not to use any forced or involuntary labor, whether prison, bonded, indentured or otherwise. (iii) Licensee and the Suppliers agree to treat each employee with dignity and respect, and not to use corporal punishment, threats of violence, or other forms of physical, sexual, psychological or verbal harassment or abuse. -18- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 (iv) Licensee and the Suppliers agree not to discriminate in hiring and employment practices, including salary, benefits, advancement, discipline, termination, or retirement, on the basis of race, religion, age, nationality, social or ethnic origin, sexual orientation, gender, political opinion or disability. (v) Licensee and the Suppliers recognize that wages are essential to meeting employees' basic needs. Licensee and the Suppliers agree to comply, at a minimum, with all applicable wage and hour Laws, including minimum wage, overtime, maximum hours, piece rates and other elements of compensation, and to provide legally mandated benefits. If local Laws do not provide for overtime pay, Licensee and the Suppliers agree to pay at least regular wages for overtime work. Except in extraordinary business circumstances, Licensee and the Suppliers will not require employees to work more than the lesser of (a) 48 hours per week and 12 hours overtime or (b) the limits on regular and overtime hours allowed by local law, or, where local law does not limit the hours of work, the regular work week in such country plus 12 hours overtime. In addition, except in extraordinary business circumstances, employees will be entitled to at least one day off in every seven-day period. Licensee and the Suppliers agree that, where local industry standards are higher than applicable legal requirements, they will meet the higher standards. (vi) Licensee and the Suppliers agree to provide employees with a safe and healthy workplace in compliance with all applicable Laws, ensuring, at a minimum, reasonable access to potable water and sanitary facilities, fire safety and adequate lighting and ventilation. Licensee and the Suppliers also agree to ensure that the same standards of health and safety are applied in any housing they provide for employees. Licensee and the Suppliers agree to provide Licensor with all information Licensor may request about manufacturing, packaging and distribution facilities for the Book. (vii) Licensee and the Suppliers agree to respect the rights of employees to associate, organize and bargain collectively in a lawful and peaceful manner, without penalty or interference, in accordance with applicable Laws. (viii) Licensee and the Suppliers agree to comply with all applicable environmental Laws. -19- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 (ix) Licensee and the Suppliers agree to comply with all applicable Laws, including those pertaining to the manufacture, pricing, sale and distribution of the Book. (x) Licensee and the Suppliers agree that Licensor and its designated agents (including third parties) may engage in monitoring activities to confirm compliance with this Paragraph 10, including unannounced on-site inspections of manufacturing, packaging and distribution facilities, and employer-provided housing, such inspections to include reviews of books and records relating to employment matters and private interviews with employees. Licensee and the Suppliers agree to maintain on site all documentation necessary to demonstrate compliance with this Paragraph 10. Licensee agrees to promptly reimburse Disney for the actual costs of inspections performed pursuant to this Paragraph 10 when any of Licensee's manufacturing facilities or any Suppliers do not pass the inspection(s). (xi) Licensee and the Suppliers agree to take appropriate steps to ensure that the provisions of this code of conduct (the "Code of Conduct") are communicated to employees, including the prominent posting of a copy of the Code of Conduct for Suppliers and Licensees, (copies of which are attached hereto as Exhibits 3 and 4, respectively), as may be applicable, in the local language and in a place readily accessible to employees at all times. 10.3 Licensee agrees to take appropriate steps, in consultation with Licensor, to develop, implement and maintain procedures to evaluate and monitor the Suppliers it uses to manufacture the Book or any components thereof, and to ensure compliance with this Paragraph 10, including but not limited to, unannounced on-site inspections of manufacturing, packaging and distribution facilities and employer-provided housing, reviews of books and records relating to employment matters and private interviews with employees. 10.4 Both before and after Licensee puts the Book on the market, Licensee shall follow reasonable and proper procedures for testing that the Book complies with all applicable product safety Laws, and shall permit Licensor's designees to inspect testing, manufacturing and quality control records and procedures and to test the Book for compliance with product safety and other applicable Laws. Licensee agrees to promptly reimburse Licensor for the actual costs of such testing if the Book fails to comply with such Laws. Licensee shall also give due consideration to any recommendations by Licensor that the Book exceeds the requirements of applicable Laws. Books not manufactured, packaged or distributed in accordance with applicable Laws shall be deemed unapproved, even if previously approved -20- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 by Licensor, and shall not be shipped unless and until they have been brought into full compliance therewith. 11. PRINTING AND/OR MANUFACTURING BY THIRD PARTIES 11.1 All film positives/negatives and other reproduction material used in the manufacture of the Book shall be prepared only by Licensee, or by a third party under Licensee's control and who has been approved by Licensor and who has executed and delivered to Licensor the Supplier's Agreement in the form attached hereto as Exhibit 1, and the Book shall be printed only by Licensee or by a printer approved by Licensor who has executed and delivered to Licensor the said Supplier's Agreement. Licensor hereby approves the Suppliers and printers identified on the list attached hereto as Exhibit 6. 11.2 Licensee shall, upon Licensor's request, deliver to Licensor, or to publishers designated by Licensor, one or more duplicate sets of all film positives, film negatives and other reproduction material used in the manufacture of the Book, and Licensor or such publishers, as the case may be, shall reimburse Licensee for the actual cost of duplicating any such materials delivered as well as for the actual cost of removing Licensee's trade dress from any such materials. In no case shall the charge for such material exceed the lowest price Licensee charges other publishers for similar material. Without limiting the foregoing, Licensor shall not authorize any publisher who is licensed by Licensor to publish in the United States or Canada to repurpose any covers of the Book or to repurpose substantial quantities of artwork or text from the Book without Licensee's prior consent. The foregoing sentence shall apply only to books published during the Term and in the Territory which are similar in format, price point, and distribution channel to the Book. 11.3 Licensee agrees to supply Licensor with the names and addresses of all of its own manufacturing facilities for the Book. If Licensee at any time desires to have any non-printed components of the Book containing Licensed Property manufactured by a third party, whether the third party is located within or outside the United States, Licensee must, as a condition to the continuation of this Agreement, notify Licensor of the accurate name and complete address of such Supplier and the Book or components involved and obtain Licensor's prior written permission to do so. If Licensor is prepared to grant permission, Licensor will do so if Licensee and each of Licensee's Suppliers sign a Consent/Manufacturer's Agreement in a form which Licensor will furnish to Licensee and Licensor receives all such agreements properly signed. 11.4 Licensor shall use reasonable efforts not to disclose the names of Licensee's Suppliers to third parties, including Affiliates of Licensor, except as may be -21- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 necessary to enforce Licensor's contract rights or protect Licensor's trademarks, copyrights, and intellectual property. 11.5 If any such Supplier utilizes the Licensed Property or trademarks for any unauthorized purpose, Licensee shall cooperate fully in bringing such utilization to an immediate halt. If, by reason of Licensee's not having supplied the above-mentioned agreements to Licensor or not having given Licensor the name of any Supplier, Licensor makes any representation or takes any action and is thereby subjected to any penalty or expense, Licensee will fully compensate Licensor for any cost or loss Licensor sustains (in addition to any other legal or equitable remedies available to Licensor). 12. ADVERTISING 12.1 Licensee may, subject to receiving Licensor's prior written approval in each case, advertise the Book in newspapers, periodicals, magazines and other publications and, in catalogs, on billboards, radio, television or by other advertising or promotional techniques; provided, however, that all photography, artwork, text, scripts and storyboards for all advertising shall be submitted to Licensor for its prior review and written approval as to the content of such advertising. Licensor's approval or lack thereof will be given in a timely fashion. As a condition to the right of public distribution licensed hereunder, appropriate and legally sufficient copyright notice in the name of Disney Enterprises, Inc. (hereinafter referred in this Agreement as "Disney Enterprises") shall be included in all advertising for the Book in which any of Disney's characters or other copyrighted materials appear. 12.2 Following the expiration or termination of this Agreement, and the Sell-off Period, if any, Licensee will not advertise or promote the Book in any manner or issue any offering literature or material with respect thereto. 12.3 Licensee warrants that all advertising and promotions for the Book shall comply with all applicable Laws and shall not infringe the rights of any person or entity. Licensor's approval for the use or manner of use of any proposed advertising or promotion hereunder shall not constitute an opinion as to the legal appropriateness or adequacy of such use or manner of use, and Licensee shall be solely responsible for any liability or risk of liability arising out of, or connected with, the use of any such proposed advertising or promotion. 13. PROMOTION COMMITMENT Licensee agrees to carry out the Promotion Commitment set forth in Subparagraph 1.10 above. -22- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 14. COMMON MARKETING FUND 14.1 Licensee shall pay to Licensor an amount equal to [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission] (the "Common Marketing Fund Payment"), which amount Licensee agrees to pay Licensor concurrently with Royalties due each Royalty Payment Period as detailed in Paragraph 21 hereof. Licensee further agrees to pay Licensor the following sums as a guarantee of such minimum payment (the "CMF Guarantee") on Licensee's cumulative sales in the following periods and as non-refundable installments of such guarantee payments (the "CMF Advances"), due and payable on the dates indicated below: [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]. -23- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 14.2 The Common Marketing Fund Payment as defined hereinabove shall be placed in a general fund for use in promoting the Licensed Property, Disney characters, Disney's copyrights, and trademarks (which may include the Licensed Property) and licensee activities generally, all as Licensor deems appropriate in Licensor's sole discretion. Such funds shall be expended by Licensor and/or Licensor's designees (but not paid to Licensor's own employees for services they render) in the amounts and in the manner Licensor deems most appropriate in order to provide national, territorial, regional or local advertising, marketing and promotion, and market research related thereto, of the License Property licensed hereunder or other Disney properties in the same property classification. [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]. 14.3 Licensee agrees to pay in full the CMF Advances on account of the CMF Guarantee to accrue during the Term only and only with respect to sales in the Territory. In addition, with Licensee's statement for each Royalty Payment Period ending on a date indicated hereinabove with respect to the CMF Guarantee, Licensee shall pay Licensor the amount, if any, by which cumulative payment made with respect to sales in the Territory during any period or periods covered by such provision fall short of the amount of the CMF Guarantee specified for that period. 15. OWNERSHIP 15.1 Licensee acknowledges that the copyrights and all other proprietary rights in and to the Licensed Property are exclusively owned by and reserved to Disney Enterprises. Licensee shall neither acquire nor assert any proprietary right, interest, or title to any character used in the Book, to the title of the Book, or to any other material prepared for or contained on or in the Book, or to any copy, reproduction, translation, or derivative work thereof (collectively referred to herein as "Disney Property") in any format or media, now existing or hereafter developed, through the exercise of any rights granted to Licensee hereunder. All -24- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 copyrights and trademarks, service marks, trade dress, and tradenames pertaining to the Book, as well as all rights of every kind in and to the Disney Property, shall be Disney Enterprises' exclusive property, except such trademarks, tradenames or service marks as do not relate to any Disney material and do relate to the business name of the Licensee or the name of any line of books heretofore published by Licensee. No part of the Book or excerpt therefrom may be used by or under the authority of Licensee in any way separate from the Book without Licensor's prior written consent. Licensor acknowledges Licensee's exclusive rights in and to Licensee's trademarks, tradenames, service marks, and trade dress used in connection with Licensee's own publishing activities, including, without limitation, Licensee's distinctive differentiated book spine treatment (collectively, the "Golden Marks). Licensor agrees that it will not use, or knowingly allow the use by a publishing licensee (in connection with that licensee's publishing activities authorized by Licensor), any such Golden Marks or any marks that are confusingly similar in the reasonable judgment of Licensee without Licensee's prior written consent. If Licensee becomes aware of any such unauthorized use before Licensor does, then Licensee shall promptly notify Licensor and provide Licensor with an opportunity to take reasonable corrective action. 15.2 If Licensee creates or acquires material for use in the Book, whether or not based on or using Disney Enterprises' characters, and whether or not actually used in the Book or published, such material shall be deemed a work-for-hire for Disney Enterprises and all ownership rights (including but not limited to the copyright therein) shall belong to Disney Enterprises. Licensee agrees that prior to the creation of any such material by third parties, Licensee shall cause the artists and/or writers who create such material, or the owners of the rights thereto, to execute the work for hire/copyright assignment agreement in the form attached hereto as Exhibit 2, agreeing that all such material shall be considered a work-made-for-hire for Disney Enterprises and fully releasing or assigning to Disney Enterprises all rights in such material, including but not limited to all copyrights, so that all such rights shall inure to Disney Enterprises and become a part of Disney Enterprises' copyright and other rights in and to the Book. Licensee shall provide Licensor with a copy of every work for hire/copyright assignment agreement, and any other agreement entered into with respect to the ownership of the Book. Licensee agrees that it will not give, or agree to give, credit of any kind to any such artists or writers without the prior written approval of Licensor. 15.3 Subject to the rights granted hereunder, title (including copyright and physical ownership) to all material objects incorporating the Disney Property (including without limitation, original drawings and illustrations used in the Book or in promotional or advertising material which portray the Disney Property as well as all photographs and reproductions of the originals), whether supplied by Licensor or prepared by or for Licensee, shall be in Disney Enterprises, and in no event -25- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 shall Licensee sell or lease the use of any such material objects or otherwise part with control thereof. Such material objects shall be delivered to Licensor in good condition (subject to normal wear and tear) upon request, at Licensee's sole expense. If Licensee advises Licensor that any such material objects requested to be returned are being utilized by Licensee for the current development of any title to the Book, then Licensor shall allow Licensee ninety (90) days to create films or other reproduction material necessary for the manufacture of the Book, after which the requested materials must be immediately returned. 15.4 Licensee hereby assigns to Disney Enterprises all right, title and interest (including but not limited to all copyright(s) and any extensions and renewals thereof) throughout the universe in perpetuity which Licensee may have acquired relating to any and all material prepared or published hereunder or contemplated hereby, or relating to the Disney Property or its use of the same hereunder. Licensee hereby appoints Licensor to act as Licensee's attorney-in-fact to execute any documents in Licensee's name and/or on Licensee's behalf necessary to grant or assign such copyrights or other rights to Disney Enterprises. 16. COPYRIGHT NOTICE As a condition to the grant of rights hereunder, each copy of the Book, and any other matter containing Licensed Property, shall bear a properly located permanently affixed copyright notice comprised of c in a circle, plus a yeardate of publication, plus "Disney Enterprises, Inc.", and for those versions of the Book containing Disney-stylized Winnie The Pooh characters, "Based on the Pooh stories by A.A. Milne (copyright the Pooh Properties Trust)" or such other notices as Licensor specifies to Licensee in writing, together with such other notice of copyright or trademark as may be prescribed or required by Laws applicable to the Territory in order to establish, protect, and preserve Disney Enterprises' copyrights and trademarks. If, through inadvertence or otherwise, a copyright notice on the Book or other such matter should appear in Licensee's name or the name of a third party, Licensee hereby agrees to assign to Disney Enterprises the copyright represented by any such copyright notice in Licensee's name and, upon request, cause the execution and delivery to Licensor of whatever documents are necessary to convey to Disney Enterprises that copyright represented by any such copyright notice. If, by inadvertence, a proper copyright notice is omitted from the Book or any other matter containing Licensed Property, Licensee agrees at Licensee's expense to use all reasonable efforts to correct the omission on the Book or other matter in the process of manufacture or in distribution. Licensee agrees to advise Licensor promptly and in writing of the steps being taken to correct any such omission and to make the corrections on existing copies of the Book which can be located. Licensee shall also include such credit lines in the Book as Licensor may require by written notice to Licensee, provided that Licensor shall not require such credit lines to interfere with the Licensee's line look or to be obtrusive. -26- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 17. REGISTRATIONS Except with Licensor's written consent, neither Licensee nor any Affiliate of Licensee will register or attempt to register in any country copyright in the Book and/or in any part of the Disney Property, and/or any trademark which is identical with any mark used by Disney or which is so similar thereto as to present, within the reasonable judgment of Licensor, a likelihood of confusion. In the event of a breach of the foregoing, Licensee agrees, at Licensee's expense and at Licensor's request, immediately to terminate the unauthorized registration activity and promptly to execute and deliver, or cause to be delivered, to Licensor such assignments and other documents as Licensor may require to transfer to Disney Enterprises all rights to the registrations or applications involved. 18. UNLICENSED USE OF LICENSED PROPERTY 18.1 Licensee agrees that Licensee will not use the Licensed Property, or the trademarks, or any other material the copyright to which is owned by Disney Enterprises in any way other than as herein authorized (or as is authorized in any other written contract in effect between the parties). In addition to any other remedy Licensor may have, Licensee agrees that all revenues from any use thereof on products other than the Book (unless authorized by Licensor in writing), and all revenues from the use of any other copyrighted material of Disney Enterprises' without written authorization, shall be immediately payable to Licensor. 18.2 Licensee agrees to give Licensor prompt written notice of any unlicensed use by third parties of the Licensed Property or trademarks of which Licensee becomes aware, and that Licensee will not, without Licensor's written consent, bring or cause to be brought any criminal prosecution, lawsuit or administrative action for infringement, interference with or violation of any rights to the Book, its contents and/or the characters. Because of the need for and the high costs of an effective anti-piracy enforcement program, Licensee agrees to cooperate with Licensor and, if necessary, to be named by Licensor as a sole complainant or co-complainant in any action against an infringer of the Licensed Property and, notwithstanding any right of Licensee to recover same, legal or otherwise, Licensee agrees to pay to Licensor, and hereby waives all claims to, all damages or other monetary relief recovered in such action by reason of a judgment or settlement whether or not such damages or other monetary relief, or any part thereof, represent or are intended to represent injury sustained by Licensee as a licensee hereunder; in any such action against an infringer, Licensor agrees to reimburse Licensee for reasonable expenses incurred at Licensor's request, including reasonable attorney's fees and disbursements if Licensor has requested Licensee to retain separate counsel. -27- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 19. WARRANTIES AND INDEMNITIES 19.1 Licensee hereby represents and warrants that any material used in the Book, other than material supplied by Licensor, shall not infringe upon or interfere with any common law right, or any other right, of any person or entity, and that the creation, manufacture, publishing, marketing, pre-pricing, pricing, sale and distribution of the Book shall be in compliance with all applicable Laws and shall not infringe the rights of any person or entity. Without limiting the foregoing, Licensee represents and warrants that no such material shall infringe any copyright or defame or invade the rights of privacy or publicity of any person or entity. Licensee further represents and warrants that it will not use or allow the use of the name "Walt Disney" or the name "Disney", or the name or likeness of the fanciful characters of Disney or any name, mark, emblem, logo or designation that suggests or implies an association with Disney, for any purpose other than as specified in this Agreement, unless explicitly authorized by Licensor in writing to do so. 19.2 Licensee hereby indemnifies and holds Disney harmless, during and after the Term hereof, against all claims, demands, suits, judgments, losses, liabilities (including settlements entered into in good faith with Licensee's consent, not to be unreasonably withheld) and expenses of any nature (including reasonable attorneys' fees and disbursements) arising out of Licensee's activities under this Agreement, including but not limited to, any actual or alleged: (1) negligent acts or omissions on Licensee's part, (2) defect (whether obvious or hidden and whether or not present in any sample approved by Licensor) in the Book, (3) personal injury, (4) infringement of any rights of any other person by the manufacture, sale, possession or use of the Book, (5) breach on Licensee's part of any covenant, representation or warranty contained in this Agreement or (6) failure of the Book, or by Licensee, to comply with applicable Laws. The parties indemnified hereunder shall include Licensor, and its parent, successors and subsidiaries, and their officers, directors, employees and agents. The indemnity shall not apply to any claim or liability relating to any infringement of the copyright of a third party caused by Licensee's utilization of the Licensed Property in accordance with the provisions hereof, unless such claim or liability arises out of Licensee's failure to obtain the full assignment of rights referenced in Paragraph 15 above. 19.3 Licensor hereby represents and warrants that the Disney Property supplied by Licensor hereunder shall not infringe the copyright of any third party or any right granted by Licensor to such third party. Licensor hereby indemnifies and holds Licensee harmless during and after the Term hereof against all claims, demands, suits, judgments, losses, liabilities, (including settlements entered into in good faith with Licensor's consent, not to be unreasonably withheld), and expenses of -28- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 any nature (including reasonable attorney's fees and disbursements) arising out of any claim that Licensee's use of any representation of the Licensed Property approved in accordance with the provisions of this Agreement infringes the copyright of any third party or infringes any right granted by Licensor to such third party, except for claims arising out of Licensee's failure to obtain the full assignment of rights referenced in Paragraph 15 above. In no event shall Licensor be liable for lost profits. Without limiting the generality of this Subparagraph 19.3, if during the term of this Agreement Licensor enters into another licensed publishing agreement for the Territory in which Licensor agrees to provide representations and warranties which exceed the scope of this Subparagraph 19.3, then such additional representations and warranties shall be included in the representations and warranties provided by Licensor herein. 19.4 If by reason of any claims referred to in Subparagraph 19.3 above, Licensee is precluded from selling any stock of the Book or utilizing any materials in Licensee's possession or which come into Licensee's possession by reason of any required recall, Licensor shall be obligated to purchase such Books and materials from Licensee at the out-of-pocket cost to Licensee, excluding overhead, but Licensor shall have no other responsibility or liability with respect to such Books or materials, except that the Advance and Guarantee shall be adjusted to correspond to the time remaining in the Term at the date of the purchase by Licensor. 19.5 Licensor gives no warranty or indemnity with respect to any liability or expense arising from any claim that use of the Licensed Property or the trademarks on or in connection with the Book hereunder or any packaging, advertising or promotional material infringes on any trademark right of any third party or otherwise constitutes unfair competition by reason of any prior rights acquired by such third party, other than rights acquired from Disney Enterprises. It is expressly agreed that it is Licensee's responsibility to carry out such investigations as Licensee may deem appropriate to establish that the Book, packaging, and promotional and advertising material which are manufactured or created hereunder, including any use made of the Licensed Property and the trademarks therewith, do not infringe such right of any third party, and Licensor shall not be liable to Licensee if such infringement occurs. 19.6 Licensee and Licensor agree to give each other prompt written notice of any claim or suit which may arise under the indemnity provisions set forth above. Without limiting the foregoing, Licensee agrees to give Licensor written notice of any product liability claim made or suit filed with respect to the Book, any investigations or directives regarding the Book issued by the Consumer Product Safety Commission ("CPSC") or other federal, state or local consumer safety agency, and any notices sent by Licensee to, or received by Licensee from, -29- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 the CPSC or other consumer safety agency regarding the Book within seven (7) days of Licensee's receipt or promulgation of the claim, suit, investigation, directive, or notice. 20. INSURANCE Licensee shall maintain in full force and effect at all times while this Agreement is in effect, and for three (3) years thereafter, commercial general liability insurance on a per occurrence form, including broad form coverage for contractual liability, property damage, products liability and personal injury liability (including bodily injury and death), waiving subrogation, with minimum limits of no less than two million United States Dollars (U.S. $2,000,000.00) per occurrence, and naming as additional insureds those indemnified in Subparagraph 19 hereof. Licensee also agrees to maintain in full force and effect at all times while this Agreement is in effect such Worker's Compensation Insurance as is required by applicable law and Employer's Liability Insurance with minimum limits of one million United States Dollars (U.S. $1,000,000.00) per occurrence. All insurance shall be primary and not contributory. Licensee shall deliver to Licensor a certificate(s) of insurance evidencing satisfactory coverage and indicating that Licensor shall receive thirty (30) days unrestricted prior written notice of cancellation, non-renewal, or material change in coverage. Licensee's insurance shall be carried by an insurer with a Best Guide rating of B + VII or better. Compliance herewith in no way limits Licensee's indemnity obligations, except to the extent that Licensee's insurance company actually pays Licensor amounts which Licensee would otherwise pay Licensor. 21. STATEMENTS AND PAYMENT OF ROYALTIES 21.1 Licensee agrees to pay and shall pay to Licensor all Royalties required under this Agreement. Licensee shall submit to Licensor statements of account so as to be received by Licensor no later than twenty-five (25) days after the end of each Royalty Payment Period during the Term. Licensee shall submit such statements of account regardless of whether any sales have taken place and/or any Royalties are payable to Licensor. Licensee's statements shall be on forms substantially similar to those designated by Licensor for Licensee's use (a sample copy of the current form is attached hereto as Exhibit 7), showing all information requested by such forms (subject to Subparagraph 21.8 below), including but not limited to the following: If Licensee's Royalty calculation is based on a percentage of the suggested retail price ("SRP") of the Book: (i) Licensee's product number, ISBN, and title; -30- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 (ii) the Royalty rate code as provided by Licensor; (iii) the applicable SRP Royalty rate; (iv) the applicable Net Invoiced Billings ("NIB") Royalty rate; (v) the gross quantities by title of the Book sold (a sale of the Book shall be deemed to have occurred on the date the Book is shipped to the customer); (vi) the SRP(s) on which the Royalty is calculated; (vii) the sum of the units sold multiplied by the applicable SRP ("Gross SRP Dollars) (viii) Net Invoiced Billings ("NIB Dollars"); (ix) the applicable SRP Royalty rate multiplied by Gross SRP Dollars; (x) the applicable NIB Royalty rate multiplied by NIB Dollars; (xi) the Royalty payment due; and (xii) a separate report for each item number (i) through (xi) above as they apply to returns. If Licensee's Royalty calculation is based on Net Invoiced Billings: (i) Licensee's product number, ISBN, and title; (ii) the Royalty rate code as provided by Licensor; (iii) the applicable NIB Royalty rate; (iv) the gross quantities by title of the Book sold (a sale of the Book shall be deemed to have occurred on the date the Book is shipped to the customer); (v) NIB Dollars; (vi) the Royalty payment due; and (vii) a separate report for each item number (i) through (vi) above as they apply to returns. -31- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 Sales to countries other than the United States, if any such are permitted, shall be reported separately by country. Royalty payments shown as due shall be delivered to Licensor with such statements; provided, however, that Licensee shall deliver directly to Licensor's Canadian office, at the address listed below in Subparagraph 21.4, Royalties payable on sales of the Book in Canada and a separate statement of account for such sales. GST applicable to Royalties or to any other payments due to Licensor shall be indicated on Licensee's statements of account for Canada and paid to Licensor along with the Royalty or other payment. Royalties are also payable, and due with such statements, on inventory shrinkage that exceeds [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission] (excluding free copies authorized pursuant to Subparagraph 1.6(viii) above). Inventory shrinkage means the reduction in Licensee's inventory of the Book not caused by sales or damaged copies. To the extent that Royalties are not paid, Licensor may offset Royalties due hereunder against any sums which Licensor or any of its Affiliates may owe to Licensee or any of its Affiliates. No deduction or withholding from Royalties payable to Licensor shall be made by reason of any tax. Any applicable tax on the manufacture, distribution and sale of the Book shall be borne by Licensee. 21.2 The statement forms Licensor designates for Licensee's use may be changed from time to time, and Licensee agrees to use the most current form Licensor provides to Licensee. Licensee shall fully comply with all of Licensor's instructions for completing such forms. Licensee shall submit, concurrently with Licensee's written statement of account for each Royalty Payment Period, an electronic version (e.g., computer diskette or electronic transmission) of such statement of account. Licensee shall continue to submit, in electronic or written form, the "Supplemental Schedule" which Licensee has heretofore been submitting to Licensor in conjunction with Licensee's statements of account, identifying the new titles being sold for each Royalty Payment Period. 21.3 Sales of books licensed under contracts with Licensor other than this Agreement shall not be reported on the same statement as sales of the Book under this Agreement. 21.4 Licensee's payments, including all Royalties (excluding Royalties payable to Canada), shall be delivered to the attention of the Disney Publishing Group, P.O. Box 101947, Atlanta, Georgia 30392. A copy of each statement and payment must be sent to The Disney Publishing Group, 500 South Buena Vista Street, Burbank, California 91521-6311, to the attention of Disney Licensed Publishing. If Licensee wishes to send statements and payments by overnight courier, please use the following address: The Disney Publishing Group, 3800 West Alameda Avenue, 17th Floor, Burbank, California 91505-6311, Attention Disney Licensed Publishing. Any Advances should be mailed directly to The Disney Publishing Group, 3800 West Alameda Avenue, 16th Floor, Burbank, California 91505-6292, -32- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 to the attention of the Contract Administrator. Statements and Royalties payable to Canada shall be delivered to Disney Worldwide Services, Inc. - T6071, P.O. Box 6100, Postal Station "F", Toronto, Ontario M4Y 2Z2. 21.5 Licensee shall indicate on Licensee's statement of account the amount of any reserve for returns maintained. Licensee shall not maintain an unreasonable reserve for returns. In no event shall Licensee's reserve for returns exceed [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission] of the Royalties due in the Royalty Payment Period being reported, unless Licensee has obtained the prior written consent of Licensor. In the event that actual returns exceed the reserve for returns and cannot be recouped out of Royalties otherwise due in the relevant Royalty Payment Period, or any subsequent Royalty Payment Period, Licensor shall refund at the end of the Term unearned Royalties previously paid in excess of any Advances, and subject to payment by Licensee when due of any guarantee obligation. Such refund may be applied by Licensor against any late charges that may be due by Licensee hereunder. In the event that reserves exceed actual returns, Licensee shall pay Royalties on the difference with Licensee's final statement of account for the Term. Licensee may report returns during the Term of the Agreement only. In no event may Licensee report returns which occur during the Sell-off Period, if granted. For purposes of clarity, in no event shall Licensee be entitled to offset any returns against Licensee's Guarantee obligations. Without limiting the generality of the foregoing, once Licensee has attained the capability to report actual returns on a consistent basis and can demonstrate to Licensor the need to increase the allowable reserve for returns percentage, Licensor shall in good faith consider permitting a reasonable increase. 21.6 Within thirty (30) days prior to the beginning of each Royalty Payment Period and within ninety (90) days prior to the beginning of each Guarantee period, Licensee shall submit to Licensor a forecast of the expected Net Invoiced Billings, projected unit volumes to be sold, unit volumes to be returned, reserve percentages, suggested retail prices, and Royalties for each title of the Book for each respective time period. 21.7 Licensee shall take all necessary steps to ensure that its information systems, including without limitation, all its proprietary and all third party hardware and software, process dates correctly prior to, during and after the calendar year 2000 ("Year 2000 Compliance"). Year 2000 Compliance shall include, without limitation, correct century recognition, calculations that properly accommodate same century and multi-century formulas and date values, and interface values that reflect the appropriate century. Necessary steps to ensure Year 2000 Compliance shall include, without limitation, analysis of all components of Licensee's information systems and, as necessary, development, installation and testing of software fixes, patches and/or updates. In a timely manner, but no later -33- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 than December 31, 1998, Licensee shall advise Licensor in writing whether or not its information systems are Year 2000 Compliant. If Licensee advises Licensor that Licensee's information systems are not Year 2000 Compliant, Licensee shall endeavor to ensure that its information systems are substantially Year 2000 Compliant on or before June 30, 1999. 21.8 Without limiting the generality of this Paragraph 21, Licensor recognizes and acknowledges that Licensee's current automated accounting system may not have the capability to report all of the information required by Licensor, including the information required under Subparagraphs 21.1 and 21.6 above. Licensee represents that it is currently working to improve its automated accounting system so as to be in a position to provide Licensor with all of the information requested by Licensor for reporting purposes under those Subparagraphs by January 1, 2000. Until such time, Licensee shall not be deemed to be in breach of Subparagraphs 21.1 or 21.6 if Licensee (a) uses its best efforts to report to Licensor the maximum amount of information required under Subparagraphs 21.1 and 21.6 which Licensee is reasonably capable of reporting and (b) Licensee provides Licensor any such additional information required, if reasonably available and whether or not contained in Licensee's automated accounting system, on an as-needed basis when requested by Licensor, including, but not limited to, in connection with Licensor's audit rights under Paragraph 23 below. 22. INTEREST Royalties, audit findings or any other payments due to Licensor hereunder which are received after the due date shall bear interest at the rate of [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission] per annum from the due date, or at the maximum rate permissible by law if less than [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]. 23. AUDITS AND MAINTAINING RECORDS 23.1 Licensee agrees to keep and preserve accurate records, during the Term hereof and for two (2) years after the expiration or termination of this Agreement, of all transactions relating to this Agreement and any prior agreement with Licensor regarding the Licensed Property, including, without limitation, print runs, shipments to Licensee of the Book and any components thereof, inventory records, records of sales and shipments by Licensee, and records of returns. Licensor, and/or a representative of Licensor, shall have the right at any time, during the Term hereof and for two (2) years after the expiration or termination of this Agreement, during reasonable business hours upon a prior request made by Licensor, to examine and make extracts from all such records, including the general ledger, invoices, and any other records which Licensor reasonably deems appropriate to verify the accuracy of Licensee's statements of account or -34- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 Licensee's performance under this Agreement. Licensee acknowledges that Licensor may furnish Licensee with an audit questionnaire, and Licensee agrees to fully and accurately complete such questionnaire, and return it to Licensor within the designated time. Licensor's use of an audit questionnaire shall not limit Licensor's ability to conduct any on-site audit(s) as provided above. Licensee acknowledges that an audit conducted by Licensor or its representatives, may involve one or more license agreements at a time. 23.2 If in any audit of Licensee's records it is determined that there is a shortfall of five percent (5%) or more in Royalties reported for any Royalty Payment Period, Licensee shall, upon request from Licensor, reimburse Licensor for the full out-of-pocket costs of the audit, including the costs of employee auditors calculated at their then current hourly rate per person for travel time during normal working hours and actual working time. 23.3 If Licensee has failed to keep accurate records for one or more Royalty Payment Periods, Licensor will assume that the Royalties owed to Licensor for such Royalty Payment Period(s) are equal to a reasonable amount, determined in Licensor's absolute discretion, which may be up to, but will not exceed, the highest Royalties owed to Licensor in a Royalty Payment Period for which Licensee has kept accurate records. If Licensee has failed to keep adequate records for any Royalty Payment Period, Licensor will assume a reasonable amount of Royalties which Licensee will owe to Licensor, based on the records Licensee has kept and other reasonable assumptions Licensor deems appropriate. 24. WITHDRAWAL OF LICENSED MATERIAL Licensor may require Licensee to withhold and/or withdraw the Licensed Property, or any part thereof, the use or sale of which under this Agreement would infringe or reasonably be claimed to infringe the rights of a third party, other than rights granted by Disney Enterprises, in which case Licensor's obligations to Licensee shall be limited to the purchase at cost of the Books and other materials utilizing such withdrawn Licensed Property which cannot be used or sold. In the case of any withdrawal under the preceding sentence, the Advance and Guarantee shall be adjusted to correspond to the time remaining in the Term at the date of withdrawal. 25. TERMINATION Without prejudice to any other right or remedy available to it, Licensor shall have the right at any time to terminate this Agreement, by giving written notice thereof, in the event of the occurrence of one (1) or more of the following: -35- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 25.1 If Licensee delivers to any customer without Licensor's written authorization anything containing representations of the Licensed Property or other material the copyright or other proprietary rights to which are owned by Disney Enterprises, other than the Book described herein and approved in accordance with the provisions hereof and such breach is not cured within thirty (30) days after notification by Licensor of the breach (or, in the event of a breach which cannot be corrected within thirty (30) days, if Licensee fails to commence such correction within such thirty (30) day period and thereafter diligently prosecute it to completion); or 25.2 If Licensee delivers the Book outside the Territory (unless the Book is destined for ultimate delivery in the Territory) or sells the Book to a third party if Licensee knows, or in the exercise of prudent business judgment should know, that such sale will result in delivery of the Book outside the Territory and such breach is not cured within thirty (30) days after notification by Licensor of the breach (or, in the event of a breach which cannot be corrected within thirty (30) days, if Licensee fails to commence such correction within such thirty (30) day period and thereafter diligently prosecute it to completion); or 25.3 If Licensee fails to make any payment and/or furnish any statement as herein provided, and if such failure is not corrected within thirty (30) days following the date said statement or payment was due; or 25.4 If Licensee shall breach any other terms of this Agreement and if any such breach is not corrected within thirty (30) days after notification by Licensor of the breach (or, in the event of a breach which cannot be corrected within thirty (30) days, if Licensee fails to commence such correction within such 30 day period and thereafter diligently prosecute it to completion); or 25.5 If Licensee breaches any material term of any other agreement between the parties to this Agreement, and Licensor terminates such other agreement for cause; or 25.6 If Licensee shall make any assignment for the benefit of creditors, or file a petition in bankruptcy, or be adjudged bankrupt, or become insolvent, or be placed in the hands of a receiver. The equivalent of any of the proceedings or acts referred to in this Subparagraph, though known and/or designated by some other name or term in any part of the Territory shall likewise constitute a ground for termination of this Agreement by Licensor; or 25.7 If Licensee is not permitted or is unable to operate its business in the usual manner, or is not permitted or is unable to provide Licensor with assurances satisfactory to Licensor that Licensee will so operate Licensee's business, as debtor in possession or its equivalent, or is not permitted, unable to otherwise -36- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 meet Licensee's obligations under this Agreement or to provide Licensor with assurance satisfactory to Licensor that Licensee will meet such obligations; or 25.8 If [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission] during the Term of this Agreement (and any extension thereof) Licensee breaches any material provision of this Agreement which is of the same nature, and which violates the same provision of this Agreement, as a breach of which Licensor has previously given Licensee written notice; or 25.9 If Licensee transfers or attempts to transfer this Agreement in contravention of Paragraph 27 below; or 25.10 If [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission] during the Term of this Agreement (and any extension thereof) Licensee breaches any covenant set forth in Paragraph 10 of this Agreement after Licensor has previously given Licensee written notice of a breach of any covenant set forth in such Paragraph 10; or 25.11 If [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission] Consent/Manufacturer's Agreements or Supplier's Agreements, either combined or separately, are terminated in any twelve-month period by Licensor for the Suppliers' failure to pass compliance inspections as referenced in Paragraphs 10 and 11 above; and/or 25.12 If Licensee materially breaches any provision of the Warrant, and such breach is not cured within thirty (30) days after notification by Licensor of the breach (or, in the event of a breach which cannot be corrected within thirty (30) days, if Licensee fails to commence such correction within such thirty (30) day period and thereafter diligently prosecute it to completion). 26. RIGHTS AND OBLIGATIONS UPON EXPIRATION OR TERMINATION 26.1 Upon the expiration or termination of this Agreement, all rights granted herein to Licensee shall revert to Licensor, any unpaid portion of the Guarantee shall be due and payable in accordance with the provisions set forth in Subparagraph 4.1 below, and Licensor shall be entitled to retain any and all consideration paid to Licensor and other things of value paid or delivered to Licensor. 26.2 Licensee agrees that the Book shall be manufactured during the Term in quantities consistent with anticipated demand therefor so as not to result in an excessive inventory build-up immediately prior to the end of the Term. Licensee agrees that from the expiration or termination of this Agreement, Licensee shall neither manufacture nor have manufactured for Licensee the Book, and that except as -37- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 hereinafter may be provided, Licensee will cease selling the Book. Any unauthorized distribution of the Book after the expiration or termination of this Agreement shall constitute copyright infringement. 26.3 If Licensee has any unsold copies of the Book in inventory on the expiration or termination date, Licensee shall provide Licensor with a full itemized statement, certified by an authorized accredited officer of Licensee, of all unsold copies of the Book remaining in stock. If such statement has been provided to Licensor and if Licensee has complied with the material terms of this Agreement, including the payment of all Royalties due and the Guarantee, upon notice from Licensor, Licensee shall have the right to fill orders, as authorized under Paragraph 2 above, from its then remaining stocks of the Book for a limited period of twelve (12) calendar months following the expiration of the Term by the passage of time (the "Sell-off Period"). Licensee shall consult with Licensor regarding its sell-off plan and sell off remaining stocks of the Book only pursuant to such plan and in such distribution channels as are mutually acceptable to the parties. Licensee shall furnish Licensor with statements of account covering such sales and pay Licensor Royalties upon such sales. Such Royalties shall not be applied against the Advance or towards meeting the Guarantee. All rights and remedies available to Licensor during the Term shall be equally available to Licensor during the Sell-off Period. 26.4 Following the expiration of the Sell-off Period, Licensee shall provide Licensor with an itemized statement of all unsold copies of the Book remaining in stock. All unsold copies of the Book shall, at the end of the Sell-off Period (or, if there is no Sell-off Period, upon the expiration or earlier termination of the Term), at Licensor's option, be sold to Licensor at Licensee's actual cost of manufacture, excluding overhead, or shall be destroyed, and Licensee shall furnish Licensor with an affidavit of such destruction signed by a principal officer of Licensee. 26.5 Licensee agrees that all pre-pricing and pricing of the Book shall be in compliance with any and all Laws applicable thereto. In recognition of Licensor's interest in maintaining a stable and viable market for the Book during and after the Term and any Sell-off Period, Licensee agrees to refrain from "dumping" the Book in the market during the Term and any Sell-off Period granted to Licensee. [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]. -38- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 26.6 Except as otherwise agreed by Licensor in writing, any inventory of the Book in Licensee's possession or control after the expiration or termination of this Agreement, and any Sell-off Period granted hereunder, shall be destroyed, or all Licensed Property removed or obliterated therefrom. 26.7 At the expiration or earlier termination of this Agreement, Licensee agrees to deliver to Licensor, without charge to Licensor, any and all artwork, including without limitation, reference materials, mechanicals, digital files, original manuscripts and paintings, film and film positives/negatives, four-color separations, photographs, transparencies, film proofs, and any other reproduction material used in the creation, development, and manufacture of the Book, whether furnished by Licensor, created by Licensee or otherwise acquired by Licensee (the property rights in all of which such materials shall remain vested in Disney Enterprises at all times). If Licensee should for any reason fail to deliver such materials, or any part thereof, and Licensor thereafter must recreate such material, Licensee agrees to reimburse Licensor for the reasonable costs incurred by Licensor in so doing. 26.8 Notwithstanding any provision to the contrary, in the case of termination under Subparagraphs 25.6 or 25.7 above, in order to protect the value of the Book and to avoid any disparagement of the Book which would occur as a result of the circumstances of termination, Licensor shall have the option, in Licensor's absolute discretion, to purchase any or all unsold copies of the Book in Licensee's inventory on the termination date at [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]. 27. NON-ASSIGNABILITY 27.1 This license and the rights granted and obligations undertaken hereunder are personal to Licensee. Licensee shall not voluntarily or by operation of law assign, sub-license, transfer, encumber or otherwise dispose of all or any part of Licensee's interest in this Agreement (including, but not limited to, any encumbrance of the Book) without Licensor's prior written consent, to be granted or withheld in Licensor's absolute discretion. Any attempted assignment, sub-license, transfer, encumbrance or other disposal without such consent shall be void and shall constitute a material default and breach of this Agreement. "Transfer" within the meaning of this Paragraph 27 shall include (1) any merger or consolidation involving Licensee or Golden Books Family Entertainment, Inc. ("GBFE"); (2) any sale or transfer of all or substantially all of Licensee's or GBFE's assets; (3) any transfer of Licensee's rights or duties hereunder to a division, business segment or other entity different from the one specifically referenced on page 1 hereof (or any sale or attempted sale of the Book under a trademark or trade name of such division, business segment or other entity); -39- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 (4) any public offering, or series of public offerings, whereby a cumulative total of thirty-three and one-third percent (33 1/3%) or more of the voting stock (or any other capital stock cumulatively convertible into the right to vote such percentage) of Licensee or GBFE is offered for purchase; and (5) any acquisition, or series of acquisitions, by any person or entity, or group of related persons or entities, of a cumulative total of thirty-three and one-third percent (33-1/3%) or more of the voting stock (or any other capital stock cumulatively convertible into the right to vote such percentage) or the Beneficial Ownership (as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of Licensee or GBFE. 27.2 Licensee hereby represents that, as of the date of this Agreement, Golden Press Holdings, L.L.C. ("GPH") holds all Series "B" Preferred Shares in GBFE (the "Series B Shareholder"). For purposes of clarification, "transfer" within the meaning of this Paragraph 27 shall not include (i) any conversion of Series "B" Preferred Shares into Common Shares by the Series B Shareholder or (ii) any actions described in the definition of "transfer" in Subparagraph 27.1 if such actions occur between or among E.M. Warburg Pincus & Company and its Affiliates. Licensee further represents that, as of the date of this Agreement, E.M. Warburg Pincus & Company, Warburg, Pincus & Co., Warburg Pincus Ventures, L.P., and their respective Affiliates are the Beneficial Owners (as defined above) of thirty-three and one-third percent (33-1/3%) or more of the voting stock (or other capital stock cumulatively convertible into the right to vote such percentage) of GBFE (the "Warburg Pincus Shares"). The following shall apply with respect to any transfer of the Warburg Pincus Shares which requires the consent of Licensor pursuant to Subparagraph 27.1 above: (1) Licensor hereby consents to the transfer by a widely-distributed public offering of the Warburg Pincus Shares to individual investors [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]. (2) [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]. -40- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 (3) [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]. 27.3 Licensee agrees to provide Licensor with at least thirty (30) days prior written notice of any desired assignment of this Agreement or other transfer as defined in this Paragraph 27. At the time Licensee gives such notice, Licensee shall provide Licensor with the information and documentation necessary to evaluate the contemplated transaction. Except as otherwise provided in Subparagraph 27.2 above, Licensor's consent (if given) to any assignment of this Agreement or other transfer as defined in this Paragraph 27 shall be subject to such terms and conditions as Licensor deems appropriate, including but not limited to, payment of a transfer fee. The amount of the transfer fee shall be determined by Licensor based upon the circumstances of the particular assignment or transfer, taking into account such factors as the estimated value of the license being assigned or otherwise transferred; the risk of business interruption or loss of quality, production or control Licensor may suffer as a result of the assignment or other transfer; the identity, reputation, creditworthiness, financial condition and business capabilities of the proposed assignee or other entity involved in the transfer; and Licensor's internal costs related to the assignment or other transfer; provided, however, in no event shall the transfer fee be less than [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission] for any license between Licensor and Licensee involved in an assignment or other transfer. The foregoing transfer fee shall not apply if this Agreement is assigned to one or more of Licensee's Affiliates as part of a corporate reorganization exclusively among some or all of the entities existing in Licensee's corporate structure when this Agreement is signed; provided, however, that Licensee must give Licensor written notice of such assignment and a description of the reorganization. The provisions of this Subparagraph 27 shall supersede any conflicting provisions on this subject in any publishing license agreements previously entered into between Licensee and Licensor for this Territory. 27.4 Notwithstanding Subparagraphs 27.1 and 27.3 above, Licensee may, upon Licensor's prior written consent sublicense Licensee's rights and/or obligations hereunder to any of Licensee's Affiliates, provided that each such Affiliate agrees to be bound by all of the terms and conditions of this Agreement, and provided that each such Affiliate agrees to guarantee Licensee's full performance of this Agreement (including, but not limited to, Paragraph 19) and to indemnify Licensor for any failure of such performance, and further provided that Licensee -41- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 and each such Affiliate agree to provide Licensor with satisfactory documentation of such agreement(s), guarantee(s), and indemnification upon Licensor's request therefor. Licensee hereby irrevocably and unconditionally guarantees that any and all Affiliates sublicensed hereunder will observe and perform all of Licensee's obligations under this Agreement, including, but not limited to, the provisions governing approvals, and compliance with approved samples, applicable Laws, and all other provisions hereof, and that such companies will otherwise adhere strictly to all of the terms hereof and act in accordance with Licensee's obligations hereunder. Any involvement of an Affiliate in the activities which are the subject of this Agreement shall be deemed carried on pursuant to such a sublicense and thus covered by such guarantee; however, unless Licensee has obtained Licensor's consent to sublicense an Affiliate in each instance, such Affiliate shall be deemed to be included in the term "Licensee" for all purposes under this Agreement, and Licensor may treat such unapproved involvement of the Affiliate as a breach of the Agreement. In the event of any sublicense to an Affiliate hereunder, the reference in Subparagraph 27.1 to Licensee shall include such Affiliate sublicensee. 27.5 Licensor's rights and obligations hereunder may be assigned, delegated or otherwise transferred by Licensor. 28. NOTICES All notices which either party is required or may desire to serve upon the other party hereunder shall be in writing and addressed to the party to be served at the address set forth below, or to such other address as either party may hereafter designate: To Licensor: Disney Licensed Publishing 500 S. Buena Vista Street Burbank, California 91521 Attention: Vice-President With a copy to: The Walt Disney Company 114 Fifth Avenue New York, NY 10011 Attention: Kenneth E. Newman Vice President - Eastern Regional Counsel To Licensee: Golden Books Publishing Company, Inc. 888 Seventh Avenue New York, NY 10019 Attention: Willa Perlman -42- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 With a copy to: Golden Books Publishing Company, Inc. 888 Seventh Avenue New York, NY 10019 Attention: Philip Galanes, Esq. Any notice, served by either party, may be served personally or by depositing the same addressed as herein provided (unless and until otherwise notified), postage prepaid, in the official mail of the country in which deposited, or by documented overnight delivery service. Such notice shall be deemed to have been served upon personal delivery or upon the date of mailing. However, Licensor shall be deemed to have been served with a notice of a request for approval of materials under this Agreement only upon Licensor's actual receipt of the request and of any required accompanying materials. 29. MUSIC Music is not licensed hereunder. Any charges, fees or royalties payable for music rights or any other rights not covered by this Agreement shall be additional to the Royalties and covered by separate agreement. 30. GOODWILL Licensee hereby acknowledges that the rights and powers retained by Licensor hereunder are necessary to protect Disney Enterprises' copyrights and property rights, and, specifically, to conserve the goodwill and good name of Licensor's products and Licensor's Affiliates, the Disney Property and the name "Disney", and therefore Licensee agrees that Licensee will not allow the same to become involved in matters which will, or could, detract from or impugn the public acceptance and popularity thereof, or impair their legal status. 31. RELATIONSHIP This Agreement does not provide for a joint venture, partnership, franchise, agency or employment relationship between the parties, or any other relationship than that of licensor and licensee. 32. CONSTRUCTION The language of all parts of this Agreement shall in all cases be construed as a whole, according to its fair meaning and not strictly for or against any of the parties. Headings of paragraphs herein are for convenience of reference only and are without substantive significance. -43- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 33. MODIFICATIONS OR EXTENSIONS OF THIS AGREEMENT Except as otherwise provided herein, this Agreement can only be extended or modified by a writing signed by both parties executed after the effective date hereof; provided, however, that certain modifications shall be effective if signed by the party to be charged and communicated to the other party. 34. RESERVATION OF RIGHTS All rights not specifically granted and licensed to Licensee hereunder are reserved to Licensor. 35. WAIVERS A waiver by either party at any time of a breach of any provision of this Agreement shall not apply to any breach of any other provision of this Agreement, or imply that a breach of the same provision at any other time has been or will be waived, or that this Agreement has been in any way amended, nor shall any failure by either party to object to conduct of the other be deemed to waive such party's right to claim that a repetition of such conduct is a breach hereof. 36. SEVERABILITY In the event any provision contained herein is held to be unlawful or unenforceable, such provision shall be severable from the remaining provisions of this Agreement, which shall remain in full force and effect. 37. CHOICE OF LAW AND FORUM This Agreement shall be deemed to be entered into in California and shall be governed and interpreted according to the laws of the State of California applicable to contracts made and to be fully performed in California. Any legal actions pertaining to this Agreement shall be commenced within the State of California and within either Los Angeles or Orange Counties, and Licensee hereby consents to the jurisdiction of the courts located in Los Angeles or Orange Counties. 38. EQUITABLE RELIEF Licensee acknowledges that Licensor will have no adequate remedy at law if Licensee continues to manufacture, sell, advertise, promote or distribute the Book upon the expiration or termination of this Agreement. Licensee acknowledges and agrees that, in addition to any and all other remedies available to Licensor, Licensor shall have the right to have any such activity by Licensee restrained by equitable relief, including, but not -44- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 limited to, a temporary restraining order, a preliminary injunction, a permanent injunction, or such other alternative relief as may be appropriate, without the necessity of Licensor posting any bond. 39. POWER TO SIGN The parties warrant and represent that their respective representatives signing this Agreement have full power and proper authority to sign this Agreement and to bind the parties. 40. CONFIDENTIALITY 40.1 Licensee represents and warrants that Licensee did not trade on the prospect of a license from Licensor, prior to full execution of this Agreement. Licensee agrees to keep the terms and conditions of this Agreement confidential, and Licensee shall not disclose such terms and conditions to any third party without obtaining Licensor's prior written consent; provided, however, that the terms and conditions of this Agreement may be disclosed on a need-to-know basis to Licensee's outside attorneys and accountants who agree to be bound by this confidentiality provision. In addition, Licensee may have access to information concerning Licensor's and/or its Affiliates' business and operations, and/or information concerning works in progress, artwork, plots, characters or other matters relating to Licensor's and/or its Affiliates' artistic creations, which information may not be accessible or known to the general public. Licensee agrees not to use or disclose such information to any third party without obtaining Licensor's prior written consent. 40.2 Licensor agrees to use reasonable care to keep confidential those terms and conditions of this Agreement which are not standard terms and conditions contained in Licensor's licensed publishing agreements with other licensees, and Licensor shall not disclose such terms and conditions to any third party without obtaining Licensee's prior written consent; provided, however, that the terms and conditions of this Agreement may be disclosed on a need-to-know basis to Licensee's outside attorneys and accountants who agree to be bound by this confidentiality provision. In addition, Licensor may have access to information concerning Licensee's and/or its Affiliates' business and operations which information may not be accessible or known to the general public. Licensee agrees not to use or disclose such information to any third party without obtaining Licensor's prior written consent. 40.3 In the event either party is required to disclose the information deemed confidential in Subparagraphs 40.1 and 40.2 above, pursuant to any law, court order or process, the rules and regulations of any governmental department, -45- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 agency or authority (including, but not limited to, the Securities and Exchange Commission) or any generally accepted accounting rules mandating disclosure in the disclosing party's financial statements, the disclosing party agrees to give the non-disclosing party prior written notice and the disclosing party shall use its best efforts to obtain confidential treatment of the information required to be disclosed. Upon the non-disclosing party's request, the disclosing party agrees to incorporate, to the extent reasonably possible, the non-disclosing party's comments into the disclosing party's request for confidential treatment, provided such request and comments are received by the disclosing party within five (5) business days after receipt the notice referred to in the preceding sentence. 40.4 Licensor and Licensee shall consult with each other before issuing any press release or making any public statement with respect to the execution, termination, expiration or terms and conditions of this Agreement. and, except as may be required by law, shall not issue any such press release or make any public statement unless the text of such statement shall first have been agreed upon by the parties. 41. PREVIOUS AGREEMENTS Effective as of December 31, 1997, the 1992 Publishing License Agreement shall be, and is hereby, terminated. This Agreement, and any confidentiality agreement Licensee may have signed pertaining to any of the Licensed Property, contains the entire agreement between the parties concerning the subject matter hereof and supersedes any pre-existing or contemporaneous agreement and any oral or written communications between the parties. 42. SURVIVAL OF OBLIGATIONS The respective obligations of the parties under this Agreement, which by their nature would continue beyond the termination, cancellation or expiration of this Agreement, including but not limited to indemnification, insurance, payment of Royalties, and -46- Golden books Publishing Company, Inc. Agreement dated September 26, 1997 Paragraph 26 above, shall survive termination, cancellation or expiration of this Agreement. ACCEPTED AND AGREED: GOLDEN BOOKS PUBLISHING DISNEY BOOK PUBLISHING, INC. COMPANY, INC. DBA DISNEY LICENSED PUBLISHING By: /s/ Willa Perlman By: /s/ Jan E. Smith --------------------- ------------------------- Title: President, Children's Title: Senior V.P. Disney Publishing Group ---------------------- -------------------- Date: September 26, 1997 Date: 9-26-97 ------------------- ----------------------- GOLDEN BOOKS PUBLISHING COMPANY, INC. AGREEMENT DATED SEPTEMBER 26, 1997 SCHEDULE A "A" PROPERTIES [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]. (18) Characters from each new major children-oriented Disney-branded feature animation film, animation video, and Disney-branded live action film released or re-released during the Term; (19) Children-oriented television properties which Licensor has previously licensed to Licensee as well as new properties which are derived from the non-television Properties listed above and are developed by Disney for a children-oriented television series; and (20) New children-oriented television properties originally developed by Disney or acquired by Disney, but only if Licensor and Licensee mutually agree to a program whereby Licensee shall provide sufficient publishing support for such new television property. *Tentative title Licensor shall determine the classification of any given property into "A", "B" or "C" Properties, in good faith, in Licensor's absolute discretion, and consistent with existing property classifications. GOLDEN BOOKS PUBLISHING COMPANY, INC. AGREEMENT DATED SEPTEMBER 26, 1997 SCHEDULE A "B" PROPERTIES [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]. -2- GOLDEN BOOKS PUBLISHING COMPANY, INC. AGREEMENT DATED SEPTEMBER 26, 1997 SCHEDULE A "B" PROPERTIES [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]. (24) Children-oriented television properties which Licensor has previously licensed to Licensee as well as new properties which are derived from the non-television Properties listed above and which are developed by Disney for a children-oriented television series; and (25) New children-oriented television properties originally developed by Disney or acquired by Disney, but only if Licensor and Licensee mutually agree to a program whereby Licensee shall provide sufficient publishing support for such new television property. *Tentative title -3- GOLDEN BOOKS PUBLISHING COMPANY, INC. AGREEMENT DATED SEPTEMBER 26, 1997 SCHEDULE A "C" PROPERTIES [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]. (19) Children-oriented television properties which Licensor has previously licensed to Licensee as well as new properties which are derived from the non-television Properties listed above and which are developed by Disney for a children-oriented television series; and (20) New children-oriented television properties originally developed by Disney or acquired by Disney, but only if Licensor and Licensee mutually agree to a program whereby Licensee shall provide sufficient publishing support for such new television property. -4- GOLDEN BOOKS PUBLISHING COMPANY, INC. AGREEMENT DATED SEPTEMBER 26, 1997 SCHEDULE B FORMATS [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]* COLOR & ACTIVITY Activity pads ** Color-by-Number ** Color Surprise (magic) ** Easy Peel Sticker books ** Foil sticker books ** Magic slates* ** Mark & See Magic ** Match & Color ** My Coloring book ** My First Activity book ** Paint with water ** Paint box books ** Paint `N' Marker ** Paper doll book ** Posters to color ** Press-out activity book ** Scented sticker book ** Shaped coloring book ** Special edition coloring book ** Sticker by Number ** Sticker fun ** Super coloring book ** Super paint with water ** Tell-a-Story sticker book ** Trace & Color ** *Licensor and Licensee acknowledge that, prior to the date of this Agreement, they entered into two license agreements, dated August 26, 1996 and March 27, 1997, whereby Licensee has been granted the right to manufacture and sell Magic Slates(R) products utilizing the characters from Disney's Hercules and 101 Dalmatians. The parties hereby confirm that these two Magic Slates agreements shall expire on the expiration dates set forth in those respective agreements, unless earlier terminated, and that immediately upon such expiration or earlier termination, Licensee's right to utilize said characters in the Magic Slates format shall become part of and subject to the terms and conditions of this Agreement. **[Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]. For purposes of this Agreement, the term "Book," as it applies to the color and activity format, shall include, in addition to those color and activity formats listed hereinabove, the following: (a) Licensee's color and activity books, in which the Licensed Property is used, existing as of the date of this Agreement in the format specifications (e.g., trim size and page count) previously approved by Licensor under any prior license agreements between Licensor and Licensee (or their predecessors); (b) New color and activity formats developed by Licensee which meet each of the following criteria: (i) Derivative of any color and activity formats approved by Licensor under this Agreement or under any prior license agreement between Licensor and Licensee (or their predecessors); (ii) Similar in price point to any color and activity formats approved by Licensor under this Agreement or under any prior license agreement between Licensor and Licensee (or its predecessors); and (iii) Subject to the same distribution channels authorized in Subparagraph 2.3 of this Agreement. For purposes of this Agreement, the term "Book," as it applies to the color and activity format, shall not include the following: (a) Any product which is or could be reasonably construed as an entirely new category of product (e.g., educational workbooks or foreign language teaching products); (b) Any product which includes any new or substantially new technology, or a key component of which, was not contemplated by the scope of the authorized color and activity formats licensed hereunder (e.g., a talking coloring book or a color and activity book with a toy or audiocassette); (c) Any product which has been licensed by Licensor to another licensee as of the date of this Agreement, but only for the duration of the term of such license(s); and (d) Any product which, in whole or in part, falls outside of Licensor's customary licensed publishing business or which is published, manufactured or licensed or being published, manufactured or licensed by Licensor's Affiliates. -2- GOLDEN BOOKS PUBLISHING COMPANY, INC. AGREEMENT DATED SEPTEMBER 26, 1997 SCHEDULE B FORMAT [Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]* STORYBOOK Deluxe Super Shape book *** Little Golden book *** Look Look book *** Super Shape book *** First Little Golden book *** Sturdy Shape book** *** Little Look Look book *** Little Little Golden book (2-pack) *** Little Super Shape *** Little Golden Storybook *** *Books are to be of a type and quality designed to sell for the suggested retail prices, provided, however, that Licensee has the absolute discretion to price the books as Licensee deems appropriate. **Subject to Subparagraph 2.1 of this Agreement. ***[Intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]. For purposes of this Agreement, the term "Book" as it applies to the storybook format shall include, in addition to those storybook formats listed above, storybooks developed by Licensee which contain minor modifications (e.g., trim size and page count) to the specifications of the storybook formats listed hereinabove and which are subject to the same distribution channels authorized in Subparagraph 2.3 of this Agreement. Nothing in this Agreement shall preclude Licensee from submitting for Licensor's consideration new storybook opportunities. -3- GOLDEN BOOKS PUBLISHING COMPANY, INC. AGREEMENT DATED SEPTEMBER 26, 1997 SCHEDULE C [Two pages of text intentionally omitted pursuant to a confidential treatment request and separately filed with the Commission]. SUPPLIER'S AGREEMENT EXHIBIT 1 SUPPLIER: ------------------ ------------------ ------------------ Reference is made to the license agreement dated ________ between Disney Licensed Publishing ("Licensor") and ___________ ("Licensee") in which Licensor has licensed the publication by Licensee of ________________________________ (the "publication"). Licensor hereby authorizes you to prepare, from material supplied to you by Licensee and/or Licensor, reproduction material, including as applicable film positives, four color separations, photographs, transparencies, film negatives, black separations, black keyplate proofs and other reproduction material used in the manufacture of the publication, upon the condition that the Supplier shall sign and fully comply in all respects with this agreement. Failure of said condition shall entitle Licensor to terminate this agreement forthwith. The property rights (including but not limited to copyright and physical ownership) in all such materials shall remain vested in Disney Enterprises, Inc., at all times. Said reproduction material will be delivered by you to no one other than Licensee, or as Licensor may otherwise direct. Licensor shall be under no obligation to you with respect to such charges as may be incurred in connection with reproduction material prepared at the request of Licensee. The Supplier signing below agrees that (except as may be authorized under a separate agreement with Licensor): 1. The Supplier will not manufacture the publication or components thereof to the order of anyone but the Licensee, will invoice only the Licensee, will not ship to anyone other than the Licensee or Licensee's designees and will not ship after the expiration date of the License Agreement. 2. The Supplier will not subcontract production of the publication or components thereof without Licensor's written consent. 3. The Supplier will not (without Licensor's written consent) manufacture the publication or components thereof listed above, other than in accordance with this agreement. 4. From time to time, the Supplier will permit Licensor's authorized representatives to inspect its activities and premises, accounting books and invoices relevant to its manufacture and supply of the publication. 5. The Supplier will not publish or cause the publication of pictures from the publication in any other publication or promotional material, nor advertise the fact that it is permitted to manufacture the publication or components thereof, nor use the name "Disney" or any variant thereof without Licensor's prior written consent. 6. In manufacturing the publication, the Supplier will comply with all applicable laws, regulations, voluntary industry standards, codes, or other obligations (collectively "Laws"), including but not limited to, applicable health and safety standards and labor laws for manufacturing operations. Specifically, the Supplier covenants that: (a) The Supplier agrees not to use child labor in the manufacturing or packaging of the publication or components thereof. The term "child" refers to a person younger than the age for completing compulsory education, but in no case shall any child younger than fourteen (14) years of age be employed in the manufacturing or packaging of the publication or components thereof. (b) The Supplier agrees to provide employees with a safe and healthy workplace in compliance with all applicable Laws. The Supplier agrees to provide Licensor with all information Licensor may request about manufacturing or packaging facilities for the publication or components thereof. (c) The Supplier agrees only to employ persons whose presence is voluntary. The Supplier agrees not to use prison labor, or to use corporal punishment or other forms of mental or physical coercion as a form of discipline of employees. (d) The Supplier agrees to comply with all applicable wage and hour Laws, including minimum wage, overtime, and maximum hours. The Supplier agrees to utilize fair employment practices as defined by applicable Laws. (e) The Supplier agrees not to discriminate in hiring and employment practices on grounds of race, religion, national origin, political affiliation, sexual preference, or gender. (f) The Supplier agrees to comply with all applicable environmental Laws. (g) The Supplier agrees that Licensor may engage in activities such as unannounced on-site inspections of manufacturing or packaging facilities in order to monitor compliance with applicable Laws. 7. Upon expiration or termination of the License Agreement, or upon notification by Licensor or Licensee, you will immediately cease manufacturing the publication and deliver to Licensor or its authorized representative such reproduction -2- materials as are necessary for printing, and shall deliver to Licensee, or to Licensor if Licensor so requests, all artwork, textual and reproduction materials for the publication which Licensor or Licensee may have caused to be furnished to you, and all original and reproduction material prepared by you hereunder, unless Licensee has engaged you to do the printing, in which case you will deliver such original and reproduction material at such other time as Licensor may direct, or in the absence of such direction, upon completion of your use of such original and reproduction materials for the printing of the publication. Said materials shall be so delivered without charge other than the expense of delivery, and shall be complete and in reproduction condition. You agree to provide Licensor upon request, a statement and/or a duplicate invoice as to all materials provided to Licensee hereunder. DISNEY LICENSED PUBLISHING ACCEPTED AND AGREED BY: By: By: -------------------------------- ---------------------------- (to be signed by Supplier) Title: Title: ----------------------------- ------------------------- Company: --------------------------- -3- EXHIBIT 2 WORK FOR HIRE AGREEMENT/COPYRIGHT ASSIGNMENT The undersigned agrees that for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, all literary and/or artistic Work (collectively the "Work") written or otherwise created by the undersigned in connection with the publication tentatively entitled ___________________________________ (the "Publication") was written and/or otherwise created by the undersigned as a work made for hire for Disney Enterprises, Inc. ("Disney") pursuant to an agreement between the undersigned and _________________ ("Publisher") dated ________________________. The undersigned acknowledges that the Work was specially ordered or commissioned for use as a contribution to the Publication, that Disney owns throughout the universe in perpetuity all right, title and interest in the Work and the results and proceeds of the undersigned's services, that Disney shall be deemed the author of the Work for purposes of copyright and that Disney is entitled to the copyright(s) therein (and all renewals and extensions thereof), with the right to make such changes in the Work and uses thereof as Disney may from time to time determine within its sole discretion. The undersigned also assigns to Disney all now known and hereafter existing rights of every kind (including the copyright and all renewals and extensions thereof), throughout the universe in perpetuity and in all languages, pertaining to the Work for all now known and hereafter existing uses, media, and forms. The undersigned hereby waives any claims that the undersigned may now or hereafter have in any jurisdiction to so-called "moral rights" or rights of "droit moral" with respect to the Work. The undersigned represents and warrants that, except as to any material provided to the undersigned by Publisher and/or Disney and incorporated in the Work, the Work is wholly original with the undersigned who is the sole creator thereof, the Work does not violate the rights of any third party, the Work is not the subject of any litigation or claim that might give rise to litigation, and that the undersigned has all rights necessary to convey the rights granted to Disney herein. The undersigned agrees to indemnify and hold harmless Publisher and Disney, their respective parent and affiliated companies, successors, licensees, and assigns against any breach of any of the foregoing representations and warranties. The undersigned agrees to execute such further documents and do such other acts as may be required by Disney to evidence or effectuate Disney's rights hereunder. Failure to do so shall automatically empower Disney as the undersigned's attorney-in-fact to execute such documents and do such acts in the place and stead of the undersigned. Disney's rights in the Work may be assigned, licensed, or otherwise transferred by Disney, and this Agreement shall inure to the benefit of Publisher's and Disney's respective successors, licensees, and assignees. Print Name: ------------------------- Signature: -------------------------- Address: ---------------------------- - ------------------------------------ Date: ------------------------------- EXHIBIT 3 CODE OF CONDUCT FOR SUPPLIERS At The Walt Disney Company, we are committed to: o a standard of excellence in every aspect of our business and in every corner of the world; o ethical and responsible conduct in all of our operations; o respect for the rights of all individuals; and o respect for the environment. We expect these same commitments to be shared by all suppliers of Disney publications. At a minimum, we require that all suppliers of Disney publications meet the following standards: CHILD LABOR Suppliers will not use child labor. The term "child" refers to a person younger than 15 (or 14 where local law allows) or, if higher, the local legal minimum age for employment or the age for completing compulsory education. Suppliers employing young persons who do not fall within the definition of "children" will also comply with any laws and regulations applicable to such persons. INVOLUNTARY LABOR Suppliers will not use any forced or involuntary labor, whether prison, bonded, indentured or otherwise. COERCION AND HARASSMENT Suppliers will treat each employee with dignity and respect, and will not use corporal punishment, threats of violence or other forms of physical, sexual, psychological or verbal harassment or abuse. NONDISCRIMINATION Suppliers will not discriminate in hiring and employment practices, including salary, benefits, advancement, discipline, termination or retirement, on the basisof race, religion, age, nationality, social or ethnic origin, sexual orientation, gender, political opinion or disability. ASSOCIATION Suppliers will respect the rights of employees to associate, organize and bargain collectively in a lawful and peaceful manner, without penalty or interference. HEALTH AND SAFETY Suppliers will provide employees with a safe and healthy workplace in compliance with all applicable laws and regulations, ensuring at a minimum, reasonable access to potable water and sanitary facilities, fire safety, and adequate lighting and ventilation. Suppliers will also ensure that the same standards of health and safety are applied in any housing that they provide for employees. COMPENSATION We expect suppliers to recognize that wages are essential to meeting employees' basic needs. Suppliers will, at a minimum, comply with all applicable wage and hour laws and regulations, including those relating to minimum wages, overtime, maximum hours, piece rates and other elements of compensation, and provide legally mandated benefits. If local laws do not provide for overtime pay, suppliers will pay at least regular wages for overtime work. Except in extraordinary business circumstances, suppliers will not require employees to work more than the lesser of (a) 48 hours per week and 12 hours overtime or (b) the limits on regular and overtime hours allowed by local law or, where local law does not limit the hours of work, the regular work week in such country plus 12 hours overtime. In addition, except in extraordinary business circumstances, employees will be entitled to at least one day off in every seven-day period. Where local industry standards are higher than applicable legal requirements, we expect suppliers to meet the higher standards. PROTECTION OF THE ENVIRONMENT Suppliers will comply with all applicable environmental laws and regulations. -2- OTHER LAWS Suppliers will comply with all applicable laws and regulations, including those pertaining to the manufacture, pricing, sale and distribution of publications. All references to "applicable laws and regulations" in this Code of Conduct include local and national codes, rules and regulations as well as applicable treaties and voluntary industry standards. SUBCONTRACTING Suppliers will not use subcontractors for the manufacture of Disney publications or components thereof without Disney's express written consent, and only after the subcontractor has entered into a written commitment with Disney to comply with this Code of Conduct. MONITORING AND COMPLIANCE Suppliers will authorize Disney and its designated agents (including third parties) to engage in monitoring activities to confirm compliance with this Code of Conduct, including unannounced on-site inspections of manufacturing facilities and employer-provided housing; reviews of books and records relating to employment matters; and private interviews with employees. Suppliers will maintain on site all documentation that may be needed to demonstrate compliance with this Code of Conduct. PUBLICATION Suppliers will take appropriate steps to ensure that the provisions of this Code of Conduct are communicated to employees, including the prominent posting of a copy of this Code of Conduct, in the local language and in a place readily accessible to employees, at all times. -3- EXHIBIT 4 CODE OF CONDUCT FOR LICENSEES At The Walt Disney Company, we are committed to: o a standard of excellence in every aspect of our business and in o every corner of the world; ethical and responsible conduct in o all of our operations; respect for the rights of all o individuals; and respect for the environment. We expect these same commitments to be shared by all Disney licensees and the suppliers with which they work in the production of Disney publications. At a minimum, we require that all Disney licensees meet the following standards: CONDUCT OF MANUFACTURING Licensees that engage directly in the manufacturing of Disney publications will comply with all of the standards set forth in Disney's Code of Conduct for Suppliers, a copy of which is attached. Licensees will ensure that each manufacturer other than the licensee also enters into a written commitment with Disney to comply with the standards set forth in Disney's Code of Conduct for Suppliers. Licensees will prohibit suppliers from subcontracting the manufacture of Disney publications or components thereof without Disney's express written consent, and only after the subcontractor has entered into a written commitment with Disney to comply with Disney's Code of Conduct for Suppliers. MONITORING AND COMPLIANCE Licensees will take appropriate steps, in consultation with Disney, to develop, implement and maintain procedures to evaluate and monitor suppliers of Disney publications and ensure compliance with Disney's Code of Conduct for Suppliers, including unannounced on-site inspections of manufacturing facilities and employer-provided housing; review of books and records relating to employment matters; and private interviews with employees. Licensees will authorize Disney and its designated agents (including third parties) to engage in similar monitoring activities to confirm Licensees' compliance with this Code of Conduct. Licensees will maintain on site all documentation that may be needed to demonstrate such compliance. EXHIBIT 5 DISNEY SPECIAL MARKETS APPROVAL FORM APPROVAL ONLY - -------------------------------------------- APPROVAL & SPECIAL ROYALTY RATE - -------------------------------------------- DATE SUBMITTED - -------------------------------------------- DATE APPROVAL NEEDED - -------------------------------------------- GOLDEN SALESPERSON - -------------------------------------------- GOLDEN START SHIP - -------------------------------------------- GOLDEN END SHIP - -------------------------------------------- ITEM # FORMAT TITLE SRP - ---------- ---------- --------- ------- - ---------- ---------- --------- ------- - ---------- ---------- --------- ------- - ---------- ---------- --------- ------- - ---------- ---------- --------- ------- - ---------- ---------- --------- ------- - ---------- ---------- --------- ------- - ---------- ---------- --------- ------- - ---------- ---------- --------- ------- TOTAL - ---------- ---------- --------- ------- SPECIFICATION CHANGES TO TITLES: NONE DESCRIPTION OF CHANGES ---------------------------------------------------- ---------------------------------------------------- ---------------------------------------------------- - ----------------------------------------------------------------------------- CUSTOMER - -------------------------------------------- CUSTOMER USE - -------------------------------------------- CUSTOMER RETAIL - -------------------------------------------- SELL PRICE - -------------------------------------------- PROJECTED UNITS - -------------------------------------------- TOTAL SALES - -------------------------------------------- - ----------------------------------------------------------------------------- ROYALTY RATE - ----------------------------------------------------------------------------- UNIT RATE - ----------------------------------------------------------------------------- TOTAL ROYALTY - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- GOLDEN BUSINESS DEVELOPMENT APPROVAL: DATE - ----------------------------------------------------- ----------------- GOLDEN SPECIAL MARKETS APPROVAL: DATE - ----------------------------------------------------- ----------------- DISNEY APPROVAL: DATE ----------------- - ----------------------------------------------------- - ----------------------------------------------------------------------------- COMMENTS/APPROVAL CONDITIONS - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- EXHIBIT 6 EX-10.2 3 WARRANT AGREEMENT WARRANT AGREEMENT WARRANT AGREEMENT dated as of September 26, 1997(the "Agreement"), between GOLDEN BOOKS FAMILY ENTERTAINMENT,INC., a Delaware corporation (the "Issuer") and DISNEY ENTERPRISES, INC., a Delaware corporation ("Disney"). W I T N E S S E T H : WHEREAS, Disney wishes to acquire from the Issuer, and the Issuer proposes to issue to Disney, 1,100,000 warrants as hereinafter described (each a "Warrant" and collectively the "Warrants"). Each such Warrant will entitle Disney or any of its assigns (the "Warrant Holder"), subject to the terms and conditions set forth herein, to purchase from the Issuer one share of its Common Stock, $.01 par value (the "Common Stock"). NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth and for other good and valuable consideration, the parties hereto agree as follows: SECTION 1. CERTAIN DEFINITIONS. As used in this Agreement, unless the context otherwise requires: "Acceleration Notice" shall have the meaning ascribed thereto in Section 4.D. "Affiliate" shall mean, with respect to a specified Person, any other Person directly or indirectly controlling or controlled by or under common control with such specified Person. For purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agreement" shall have the meaning ascribed thereto in the Recitals. "Appraised Value" shall mean the fair market value of all equity capital, including all outstanding Common Stock and all options, warrants and rights to acquire Common Stock or convert into Common Stock, as determined by a written appraisal (the "Appraisal") prepared by an appraiser acceptable to the Issuer and the Warrant Holder. "Fair market value" is defined for this purpose as the price in a single transaction determined on a going-concern basis that would be agreed upon by the most likely hypothetical buyer for 100% of the equity capital of the Issuer. In the event that the Issuer and Warrant Holder cannot, in good faith, agree upon an appraiser within 15 Business Days after the need for an appraiser arises, then the Issuer, on the one hand, and said holders, on the other hand, shall each immediately select an appraiser, the two appraisers so selected shall immediately select a third appraiser. The third appraiser shall be directed to prepare the Appraisal as promptly as practicable and the term Appraised Value shall mean the appraised value set forth in the Appraisal prepared in accordance with this definition. "Business Day" shall mean any day on which commercial banks are not authorized or required to close in New York, New York. "Commission" shall mean the Securities and Exchange Commission or any other similar or successor agency of the United States government administering the Securities Act. "Common Stock" shall have the meaning ascribed thereto in the Recitals, subject to adjustment pursuant to Section 4. "Convertible Securities" shall mean any securities which are convertible into or exchangeable for Common Stock (whether or not immediately exercisable, convertible or exchangeable). "Current Market Price" per share of Common Stock for the purposes of any provision of this Warrant Agreement at the date herein specified, shall be deemed to be the price determined pursuant to the first applicable of the following methods. (i) If the Common Stock is traded on a national securities exchange or is traded in the over-the-counter market, the Current Market Price per share of Common Stock shall be deemed to be the average of the Daily Market Prices for 10 Trading Days immediately preceding the date of determination. (ii) If the Current Market Price per share of Common Stock cannot be ascertained by the method set forth in paragraph (i) immediately above, the Current 2 Market Price per share of outstanding Common Stock shall be deemed to be the price equal to the quotient determined by dividing the Appraised Value by the number of shares (including any fractional shares) of Common Stock, on a fully-diluted basis in accordance with GAAP. "Daily Market Price", for any date, means (i) if the Common Stock is traded on a national securities exchange, its last sale price on such date, or (ii) if the principal market for the Common Stock is the over-the-counter market and the Common Stock is quoted on the Nasdaq system, the last sale price on such date as reported by Nasdaq, or, if the last sale price is not so reported by Nasdaq, the closing bid quotation on such date as reported by Nasdaq. "Demand" shall have the meaning ascribed thereto in Section 11 hereof. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and any similar or successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Exercise Price" shall have the meaning ascribed thereto in Section 2.B. "GAAP" shall mean generally accepted accounting principles, consistently applied. "Issue Date" shall mean the day, month and year of the issuance of the Warrants. "License Agreement" shall mean the Licensed Book Publishing Agreement between Disney Book Publishing, Inc. and Golden Books Family Entertainment, Inc., dated as of the date hereof. "Payment Shares" shall have the meaning ascribed thereto in Section 2.C. "Person" shall mean a corporation, an association, a trust, a partnership, a joint venture, an organization, a business, an individual, a government or political subdivision thereof or a governmental body. "Restricted Certificate" shall mean a certificate for Common Stock or the Warrants bearing the restrictive legend set forth in Section 10. 3 "Restricted Securities" shall mean Restricted Stock and the Restricted Warrants. "Restricted Stock" shall mean Warrant Stock evidenced by a Restricted Certificate. "Restricted Warrants" shall mean the Warrants evidenced by a Restricted Certificate. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Seller" shall mean a holder of Restricted Stock of the Issuer for which the Issuer shall be required to file a registration statement or which shall be registered under the Securities Act at the request of such holder pursuant to any of the provisions of Section 11. Neither the Issuer nor any of its Affiliates shall be deemed a "Seller" for any purposes of this Agreement. "Trading Day" shall mean any day on which trading occurs on the securities exchange upon which the Common Stock is listed, if any. "Triggering Transaction" shall have the meaning ascribed thereto in Section 4.D. "Triggering Transaction Closing Date" shall have the meaning ascribed thereto in Section 4.D. "Warrants" shall have the meaning ascribed thereto in the Recitals. "Warrant Certificate" shall have the meaning ascribed thereto in Section 2.A. "Warrant Holder" shall have the meaning ascribed thereto in the Recitals. "Warrant Stock" shall mean the shares of Common Stock purchased or purchasable by the Warrant Holder upon the exercise of Warrants. 4 SECTION 2. ISSUANCE, FORM AND EXERCISE OF THE WARRANTS. A. Issuance and Form of Warrants. On the date hereof, the Issuer, upon the terms and subject to the conditions hereinafter set forth, will issue and deliver a certificate representing 1,100,000 warrants to purchase Common Stock (the "Warrant Certificate"). B. Exercise Price. The Warrant Certificate shall entitle the Warrant Holder, subject to the provisions of this Agreement, to purchase one share of Common Stock for each Warrant represented thereby, in each case at a purchase price (the "Exercise Price") of $11.375 per share. The Exercise Price may be adjusted pursuant to Section 4 hereof. As used throughout this Agreement, Exercise Price shall mean as adjusted. C. Manner of Exercise; Other Provisions Regarding Exercise. In order to exercise the Warrants, in whole or in part, the Warrant Holder shall deliver to the Issuer at its office maintained for such purpose pursuant to Section 16 (i) a written notice of such Holder's election to exercise Warrants, which notice shall be in the Form of Election to Purchase attached to the Warrant Certificate, and (ii) aggregate payment in full of the Exercise Price then in effect for each share of Warrant Stock for which the Warrants are then being exercised. Upon delivery thereof, the Issuer shall cause to be executed and delivered to such Holder within five Business Days a certificate or certificates representing the aggregate number of fully-paid and nonassessable shares of Common Stock issuable upon such exercise. Payment of the Exercise Price then in effect may be made, at the option of the Warrant Holder, by certified or bank cashier's check or wire transfer. In addition, the Warrant Holder shall have the right, at its election, in lieu of delivering the Exercise Price then in effect in cash, to instruct the Issuer in the form of Election to Purchase to retain in payment of the Exercise Price then in effect, a number of shares of Common Stock (the "Payment Shares") equal to the quotient of the aggregate Exercise Price then in effect of the shares as to which Warrants are then being exercised divided by the Current Market Price determined immediately prior to the date of exercise and to deduct the number of Payment Shares from the shares to be delivered to the Warrant Holder. The stock certificate or certificates for Warrant Stock so delivered shall be in such denominations as may be specified in said notice and shall be registered in the name of the Warrant Holder or such other name or names as shall be designated in said 5 notice. Such certificate or certificates shall be deemed to have been issued and such Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such shares, including to the extent permitted by law the right to vote such shares or to consent or to receive notice as a stockholder, on the fifth Business Day after the time said notice is delivered to the Issuer as aforesaid. If the Warrants shall have been exercised only in part, the Issuer shall, within five Business Days of delivery of said certificate or certificates, deliver to such Warrant Holder a new Warrant Certificate dated the date it is issued, evidencing the rights of such Holder to purchase the remaining Common Stock called for by such Warrants, which new Warrant Certificate shall in all other respects be identical with the original Warrant Certificate, or, at the request of such Holder, appropriate notation may be made on the Warrant Certificate exercised in part and shall be returned to such Holder. All shares of Common Stock issuable upon the exercise of the Warrants shall be validly issued, fully paid and nonassessable, and free from all liens and other encumbrances thereon. The Issuer will not close its books against the transfer of Warrants or of any share of Warrant Stock in any manner which interferes with the timely exercise of the Warrants. The Issuer shall issue certificates for fractional shares of stock upon any exercise of Warrants whenever, in order to implement the provisions of the Warrants, the issuance of such fractional shares is required, or, at the Issuer's option, the Issuer may promptly pay cash in lieu of fractional shares determined by the Issuer by multiplying such fraction by the Current Market Price on the date immediately prior to the date of exercise. D. Vesting of Warrant. The Warrants shall be exercisable, in whole or in part, unless earlier vested pursuant to Section 2.E, commencing on the earlier of (i) ninety (90) days after the expiration of the License Agreement (i.e., March 31, 2002 or March 31, 2003, if the Term under the License Agreement is extended pursuant to the terms thereof) and (ii) thirty (30) days after the public announcement by either party (which announcement must be approved in advance by both parties) to the License Agreement that (a) the parties thereto have entered into a new master licensed publishing agreement or (b) the parties will not be entering into a new master licensed publishing agreement. The Warrants shall terminate on March 31, 2008. E. Acceleration of Vesting. Notwithstanding the 6 foregoing provisions of this Section 2, the Warrants shall become immediately exercisable upon the occurrence of any of the following: (1) The acquisition, by executive officers and directors of the Issuer or by any "person" except Disney or its Affiliates and the Issuer and its Affiliates of beneficial ownership of voting securities of the Issuer representing 50% or more of the aggregate votes entitled to be cast in the election of directors of the Issuer. For purposes of the foregoing, (x) "person" shall have the meaning defined in Section 13(d) of the Exchange Act and (y) any shares of Warrant Stock shall be deemed beneficially owned by Disney or one of its Affiliates without regard to the actual ownership thereof, except such shares as have been transferred by Disney or any such Affiliate pursuant to any broker's transaction or other public offering thereof; or (2) The Issuer shall effect an assignment for the benefit of creditors or commence a voluntary case under the Federal Bankruptcy Code, or an order for relief shall be entered in an involuntary case under the Federal Bankruptcy Code, or the Issuer shall adopt a plan of liquidation or dissolution; or (3) Five business days prior to the proposed consummation with respect to the Issuer of a "Rule 13e-3 transaction" as defined in Rule 13e-3 under the Exchange Act (or, if necessary, such earlier date as the Issuer shall determine in good faith to be required in order for the holder to be able to participate in such transaction), it being agreed that the Warrant Holder will receive actual notice of the 13e-3 Statement filed with the Commission on the date filed and actual notice of the date of acceleration hereunder no later than such date, and that if such transaction is not consummated, and the Warrants have been exercised, then the Warrant Holder (and to the extent that the Warrants would not but for this paragraph be exercisable, the Issuer) shall be entitled to declare the exercise null and void and the Warrant Holder shall, upon return of the Warrant Stock to the Issuer, be entitled to receive a refund of the exercise price and warrants identical to the Warrants, and such acceleration shall become void ab initio, and the Warrants shall (as to any remaining unexercised portion thereof) remain in full force and effect in accordance with the terms hereof. SECTION 3. TRANSFER. The Warrants are not transferable except to Affiliates of Disney. Transfers shall be noted on the books of the Issuer to be maintained for such purpose, upon surrender of the Warrants at the office of the Issuer maintained for such purpose pursuant to Section 16, together with a written assignment of the Warrants duly executed by the Warrant Holder or 7 its agent or attorney and payment of funds sufficient to pay any stock transfer taxes payable upon the making of such transfer. Upon such surrender and payment the Issuer shall, except as set forth in Section 10, execute and deliver a new Warrant Certificate(s) in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and the original Warrant Certificate shall promptly be canceled. The Issuer shall pay all expenses, taxes (other than stock transfer taxes) and other charges incurred by the Issuer in the performance of its obligations in connection with the preparation, issue and delivery of Warrants under this Section 3. The Issuer agrees to maintain at its aforesaid office books for the registration and transfer of the Warrants. SECTION 4. ADJUSTMENTS. A. Adjustments To Exercise Price. The Exercise Price, the number of shares of Common Stock issuable upon exercise of each Warrant and the securities and other assets due to the Warrant Holder upon exercise of Warrants shall be subject to adjustment as set forth below from time to time as follows: 1. Stock Dividends; Stock Splits; Reverse Stock Splits; Reclassifications. In case the Issuer shall (i) pay a dividend or other distribution on its Common Stock in shares of any class or series of capital stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue any shares of its capital stock in a reclassification of the Common Stock, the number of shares of Common Stock purchasable upon exercise of each Warrant immediately prior to the record date for such dividend or distribution or the effective date of such subdivision or combination shall be adjusted so that the Warrant Holder shall thereafter be entitled to receive for each Warrant the kind and number of shares of Common Stock that the Warrant Holder would have owned or have been entitled to receive after the happening of any of the events described above, had the Warrant been exercised immediately prior to the happening of such event or any record date with respect thereto. An adjustment made pursuant to this Section 4(A)(1) shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. 2. Rights; Options; Warrants. If the Issuer fixes a record date for the distribution of any rights, options or warrants to all holders of its Common Stock entitling such holders to subscribe for or purchase shares of Common Stock (or 8 Convertible Securities), whether or not immediately exercisable, then the Issuer shall also distribute such rights, options or warrants to the Warrant Holder as if the Warrants had been exercised immediately prior to the record date for such distribution. 3. Distribution of Assets or Securities. In case the Issuer shall make a distribution to all holders of shares of Common Stock of any asset or security other than those referred to in Section 4(A)(1) or (2) and other than in connection with the total liquidation, dissolution or winding-up of the Issuer, then and in each such case, the Warrant Holder, shall be entitled to receive, concurrently with such distribution the amount of assets or securities to which the Warrant Holder would have been entitled as a holder of Common Stock if the Warrant Holder had exercised its Warrant immediately prior to the record date for such distribution. 4. Issuance of Common Stock at Less Than Current Market Price. If the Issuer issues shares of Common Stock (or rights, options, warrants or Convertible Securities containing the right to subscribe for or purchase shares of Common Stock), other than pursuant to the items listed on Exhibit B hereto, for a consideration per share less than the Current Market Price per share of Common Stock on the date immediately preceding the date the Issuer issues such additional shares, the Exercise Price shall be adjusted (calculated to the nearest $.0001) so that it shall equal the price determined by multiplying the Exercise Price in effect immediately prior thereto by a fraction, the numerator of which shall be (i) an amount equal to the sum of (A) the number of shares of Common Stock outstanding immediately prior to such sale and issuance plus (B) the number of shares of Common Stock which the aggregate consideration received (determined as provided below) for such sale or issuance would purchase at such Current Market Value per share, and the denominator of which shall be (ii) the total number of shares of Common Stock outstanding immediately after such sale or issuance. Such adjustment shall be made successively whenever such an issuance is made. The number of shares of Common Stock purchasable upon the exercise of each Warrant shall also be adjusted and shall be that number determined by multiplying the number of shares of Common Stock issuable upon exercise immediately prior to such adjustment by a fraction, the numerator of which is the Exercise Price in effect immediately prior to such adjustment and the denominator is the Exercise Price as so adjusted. For the purposes of such adjustments, the shares of Common Stock which the holder of any such rights, options, warrants or convertible or exchangeable securities shall be entitled to subscribe for or 9 purchase shall be deemed to be issued and outstanding as of the date of the sale and issuance of the rights, warrants or convertible or exchangeable securities and the consideration received by the Issuer therefor shall be deemed to be the consideration received by the Issuer for such rights, options, warrants or convertible or exchangeable securities, plus the consideration or premiums stated in such rights, options, warrants or convertible or exchangeable securities to be paid for the shares of Common Stock covered thereby. In case the Issuer shall sell and issue shares of Common Stock or rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase shares of Common Stock for a consideration consisting, in whole or in part, of property other than cash or its equivalent, then in determining the "price per share of Common Stock" and the "consideration received" by the Issuer for purposes of the first sentence of this Section 4(A)(4), the Board of Directors of the Issuer shall determine, in good faith, the fair value of said property. There shall be no adjustment of the Exercise Price in respect of the Common Stock pursuant to this Section 4(A)(4) if the amount of such adjustment shall be less than $0.0001 per share of Common Stock; provided, however, that any adjustments which by reason of this proviso are not required to be made shall be carried forward and taken into account in any subsequent adjustment. This section does not apply to (i) any of the transactions described in Section 4(A)(1), (2) or (3), (ii) the conversion or exchange of securities convertible or exchangeable for Common Stock covered by this Section 4(A)(4), (iii) Common Stock issued in a bona fide public offering pursuant to a firm commitment underwriting. 5. Expiration of Rights, Options and Conversion Privileges. Upon the expiration of any rights, options, warrants or conversion or exchange privileges, the issuance of which caused an adjustment pursuant to Section 4(A)(4) hereof, if any thereof shall not have been exercised, the Exercise Price and the number of shares of Common Stock purchasable upon the exercise of each Warrant shall, upon such expiration, be readjusted and shall thereafter, upon any future exercise, be such as they would have been had they been originally adjusted (or had the original adjustment not been required, as the case may be) as if (A) the only shares of Common Stock so issued were the shares of Common Stock, if any, actually issued or sold upon the exercise of such rights, options, warrants or conversion or exchange rights and (B) such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Issuer upon such exercise plus the consideration, if any, actually received by the Issuer for issuance, sale or grant of all such rights, options, warrants or conversion or exchange rights whether or not 10 exercised; provided, further, that no such readjustment shall have the effect of increasing the Exercise Price by an amount, or decreasing the number of shares purchasable upon exercise of each Warrant by a number, in excess of the amount or number of the adjustment initially made in respect to the issuance, sale or grant of such rights, options, warrants or conversion or exchange rights. 6. Certain Other Events. If any event occurs as to which the foregoing provisions of this Section 4 are not strictly applicable or, if strictly applicable, would not, in the good faith judgment of the Board of Directors of the Issuer fairly protect the purchase rights of the Warrants in accordance with the essential intent and principles of such provisions, then such Board shall make such adjustments in the application of such provisions, in accordance with such essential intent and principles, as shall be reasonably necessary, in the good faith opinion of such Board, to protect such purchase rights as aforesaid, but in no event shall any such adjustment have the effect of increasing the Exercise Price or decreasing the number of shares of Common Stock subject to purchase upon exercise of the Warrants. B. When Adjustments To Be Made. The adjustments required by the preceding subsections of this Section 4 shall be made whenever and as often as any specified event requiring an adjustment shall occur. Adjustments shall become effective immediately after the record date for the determination of stockholders entitled to receive an issuance or distribution, or if there is no record date, then the date of issuance or distribution described in this Section 4. Such adjustments shall be made successively whenever any event specified in this Section 4 shall occur. C. Fractional Interests. In computing adjustments under this Section, fractional interests in Common Stock shall be taken into account to the nearest one-thousandth of a share. D. Merger or Consolidation. If the Issuer shall merge or consolidate into another corporation and, pursuant to the terms of such merger or consolidation, shares of capital stock of the successor corporation are to be received by or distributed to the holders of Common Stock of the Issuer, then provision shall be made so that the holder of the Warrant shall have the right to receive, upon consummation of such transaction, at the aggregate Exercise Price then in effect, the number of shares of capital stock of the successor corporation receivable upon or as a result of such merger or consolidation by a holder of the number of shares of Common Stock immediately prior to such event, plus any cash, shares of stock or other securities or property of any 11 nature whatsoever (including warrants or other subscription or purchase rights that the holder would have been entitled to receive had such holder exercised the Warrants prior to such merger or consolidation, and had such holder thereafter retained such shares of stock, securities or other property from the date of such merger or consolidation through and including the date of exercise of the Warrants, subject to all other adjustments called for during this period under Section 4). In the case of any such merger or consolidation, the successor corporation shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Agreement to be performed and observed by the Issuer and all of the obligations and liabilities hereunder. The foregoing provisions of this Section 4.D shall similarly apply to successive mergers, consolidations or dispositions of assets. E. Notice to Holders of Dissolution, Total Liquidation or Winding Up. In case at any time after the date hereof there shall be a voluntary or involuntary dissolution, total liquidation or winding up of the Issuer, then the Issuer shall cause to be mailed (by first-class mail, postage prepaid) to the Warrant Holder at such Warrant Holder's address as shown on the Warrant transfer books of the Issuer, at the earliest practicable time (and, in any event, not less than ten (10) calendar days before any date set for definitive action), notice of the date on which such dissolution, liquidation or winding up shall take place, as the case may be. Such notice shall also specify the date as of which the holders of the shares of record of Common Stock shall be entitled to exchange their shares for securities, money or other property deliverable upon such dissolution, liquidation or winding up, as the case may be, on which date the Warrant Holder shall be entitled to receive upon surrender of the Warrants the cash or other property, less the Exercise Price for such Warrants then in effect, that the Warrant Holder would have been entitled to receive had the Warrants been exercisable and exercised immediately prior to such dissolution, liquidation or winding up and any and all rights of the Warrant Holder to exercise the Warrants shall terminate in their entirety. SECTION 5. NOTICE TO WARRANT HOLDERS. Whenever the Exercise Price or number of shares subject to each Warrant shall be adjusted pursuant to Section 4, the Issuer shall forthwith obtain a certificate signed by the principal financial officer of the Issuer setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated and specifying the Exercise Price and the number of shares subject to each Warrant, after giving effect to such 12 adjustment or change. The Issuer shall promptly, and in any case within three Business Days after the making of such adjustment, cause a signed copy of such certificate to be delivered to the Warrant Holder. The Issuer shall keep at its office or agency, maintained for the purpose pursuant to Section 16, copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by the Warrant Holder or any prospective purchaser of Warrants designated by the Warrant Holder. SECTION 6. RESERVATION AND AUTHORIZATION OF WARRANT STOCK; REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY. The Issuer shall at all times reserve and keep available for issue upon the exercise of the Warrants such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of the Warrants. Before taking any action which would cause an adjustment reducing the Exercise Price per Warrant below the then par value, if any, of the shares of Common Stock issuable upon exercise of the Warrants, the Issuer shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Issuer may validly and legally issue fully-paid and nonassessable shares of Common Stock at such adjusted Exercise Price. If any shares of Common Stock required to be reserved for issue upon exercise of the Warrants require registration with any governmental authority under any federal or state law (otherwise than as provided in Section 11) before such shares may be so issued, the Issuer will in good faith and as expeditiously as possible and at its expense endeavor to cause such shares to be duly registered. SECTION 7. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS. In the case of all dividends or other distributions by the Issuer to the holders of its Common Stock with respect to which any provision of Section 4 refers to the taking of a record of such holders, the Issuer will in each such case take such a record and will take such record as of the close of business on a Business Day. The Issuer will not at any time, except upon dissolution, liquidation or winding up, close its stock transfer books or Warrant transfer books so as to result in preventing or delaying the exercise or transfer of any Warrant. SECTION 8. TRANSFER TAXES. The Issuer will pay any and all transfer taxes that may be payable in respect of the issuance or delivery of shares of Common Stock on exercise of the Warrants. The Issuer shall not, however, be required to pay any tax that may be payable in respect of any transfer involved in 13 the issue and delivery of shares of Common Stock in a name other than that in which the Warrants are registered, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Issuer the amount of any such tax, or has established, to the satisfaction of the Issuer, that such tax has been paid. SECTION 9. NO VOTING RIGHTS. Except as expressly provided herein, the Warrants shall not entitle the Warrant Holder to any voting rights or other rights as a stockholder of the Issuer. SECTION 10. RESTRICTIONS ON TRANSFERABILITY. Except as set forth in Section 11, Restricted Securities shall not be transferable at any time without the prior written consent of the Issuer, and any purported transfer without such consent shall be void. Notwithstanding any other provisions of this Section 10 to the contrary, the Holder of Restricted Securities shall have the right to transfer any Restricted Securities to an Affiliate of such holder, in each case free of the restrictions imposed by this Section 10 other than the requirement as to the legending of the certificates for such Restricted Securities specified in Section 10.B. Each such transferee shall be subject to the same transfer restrictions imposed on the holder of the Restricted Securities so transferred. A. Restrictive Legend. Unless and until otherwise permitted by this Section 10, the Warrant Certificate and each certificate for Warrant Stock issued upon exercise of any Warrant shall be stamped or otherwise imprinted with a legend in substantially the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER FEDERAL OR STATE SECURITIES LAWS OR UNLESS THE PROPOSED TRANSACTION IS REGISTERED OR QUALIFIED, AS SO REQUIRED. "THE TRANSFER OF AND OTHER TERMS OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE GOVERNED BY AND SUBJECT TO CONDITIONS SPECIFIED IN THAT CERTAIN WARRANT AGREEMENT DATED SEPTEMBER 26, 1997, AND NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. UNDER CERTAIN CIRCUMSTANCES, THE ISSUER HAS AGREED TO ISSUE TO THE HOLDER HEREOF A NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES EVIDENCED HEREBY REGISTERED IN THE NAME OF SUCH HOLDER. THE 14 HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS CONTAINED IN SUCH WARRANT AGREEMENT." B. Notice of Proposed Transfers. Prior to any transfer or attempted transfer of any Restricted Securities pursuant to this Agreement, the holder thereof shall give written notice to the Issuer of such holder's intention to effect such transfer. Each such notice shall describe the manner and circumstances of the proposed transfer in sufficient detail. Upon receipt of such notice, the Issuer may request an opinion of counsel of such holder to the effect that such proposed transfer may be effected without registration of the Restricted Securities under the Securities Act. Upon receipt by the Issuer of such opinion, or if the Issuer does not request such an opinion, within three (3) Business Days after the Issuer receives notice of the proposed transfer, such holder shall thereupon be entitled to transfer such Restricted Securities in accordance with the precise terms and conditions of the notice delivered by such Holder to the Issuer. Each certificate evidencing the Restricted Securities thus to be transferred (and each certificate evidencing any untransferred balance of the Restricted Securities evidenced by such Restricted Certificate) shall bear the restrictive legend set forth above, unless, in the reasonable opinion of counsel to the Issuer, pursuant to Rule 144 of the Securities Act such legend is not required in order to insure compliance with the Securities Act. SECTION 11. REGISTRATION RIGHTS. A. Incidental Registration. If the Issuer at any time proposes to register on or after the Issue Date any of its equity securities under the Securities Act on Form S-1, S-2 or S-3, or any equivalent or successor forms thereto or other applicable form, whether of its own accord or at the request of any holder or holders of such securities, it will give written notice to the Holder of outstanding Restricted Securities of its intention so to do. Upon the written request of a Holder of any Warrant or Warrant Stock given within 30 days after receipt of any such notice (stating the intended method of disposition of such securities by the prospective Seller or Sellers), the Issuer will use its best efforts to cause all Restricted Stock to be registered under the Securities Act, to the extent necessary to permit the sale or other disposition (as previously stated) by such prospective Seller; provided, however, the Issuer may elect not to file a registration statement pursuant to this Section 11.A for any reason whatsoever or may withdraw any registration statement filed pursuant to this Section 11.A at any time prior 15 to the effective date thereof. If the offering to which the proposed registration under this Section 11.A relates is distributed by or through an underwriter or underwriters, and if, in the opinion of the managing underwriter for the respective offering, the inclusion in such registration of all shares of Restricted Stock sought to be registered by Sellers pursuant to this Section 11.A is likely to have an adverse impact on such offering, then such number of shares of Restricted Stock shall be reduced pro rata along with shares of equity securities of other sellers selling pursuant to other incidental registration rights, to the extent necessary to reduce the number of such shares of equity securities to be registered to the number recommended by the managing underwriter. The Issuer or other person initiating such registration shall in no event have to reduce its numbers of shares offered. The incidental registration rights of other sellers referenced in the next above sentence may be granted by Issuer to other sellers after the date of this Agreement without being interpreted to violate Section 11.G hereof, provided that such incidental registration rights of the other sellers are to be exercised pro rata with, and not superior or prior to, those afforded to the Holder of Restricted Securities. B. Registration Procedures. If and whenever the Issuer is required by the provisions of this Section 11 to use its best efforts to effect the registration of any of the Restricted Stock under the Securities Act, the Issuer shall as soon as reasonably practical: (l) cooperate with any underwriters for, and the Sellers of, such Restricted Stock, enter into a usual and customary underwriting agreement with respect thereto and take all such other reasonable actions as are necessary or advisable to permit, expedite and facilitate the disposition of such Restricted Stock in the manner contemplated by the related registration statement, and the Issuer will provide to any Seller of Restricted Stock, any underwriter participating in any distribution thereof pursuant to a registration statement, and any attorney, accountant or other agent retained by any Seller or underwriter, reasonable access to appropriate Issuer officers and employees to answer questions and to supply information reasonably requested by any such Seller, underwriter, attorney, accountant or agent in connection with such registration statement; (2) prepare and file with the Commission as promptly as reasonably practical a registration statement with respect to such securities and use its best efforts to cause such registration statement to become and remain effective; and 16 prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period of 90 days (plus any period during which the effectiveness of the registration statement has been suspended) or until the distribution contemplated by the registration statement is completed, whichever occurs first, and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities covered by such registration statement whenever the Seller or Sellers of such securities shall desire to sell or otherwise dispose of the same; provided that no such registration statement will be filed by the Issuer until Sellers of securities included therein shall have had a reasonable opportunity to review the same and to exercise their rights under clause (l) above with respect thereto, and, to the extent reasonably practicable, no amendment to any such registration statement naming such Sellers as selling stockholders shall be filed with the Commission until such Sellers shall have had at least one day to review such amendment; (3) furnish to each Seller such numbers of copies of a summary prospectus or other prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents, as such Seller may reasonably request in order to facilitate the public sale or other disposition of the securities owned by such Seller; (4) use its best efforts to register or qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as each Seller shall reasonably request, and do any and all other acts and things that may be necessary or advisable to enable such Seller to consummate the public sale or other disposition in such jurisdictions of the securities owned by such Seller, except that the Issuer shall not for any such purpose be required to qualify to do business as a foreign corporation in any jurisdiction wherein it is not so qualified or to file therein any general consent to service of process or submit to the general taxation of any such jurisdiction; (5) use its best efforts to furnish or cause to be furnished to each Seller of Restricted Stock covered by such registration statement, addressed to such Sellers, a copy of the opinion of counsel for the Issuer, and a copy of the "comfort" letter signed by the independent public accountants who have certified the Issuer's financial statements included in the registration statement, delivered on the closing date to the underwriters of such Restricted Stock; 17 (6) in the event of the issuance of any stop order suspending the effectiveness of any registration statement or of any order suspending or preventing the use of any prospectus or suspending the qualification of any Restricted Stock for sale in any jurisdiction, use its best efforts promptly to obtain its withdrawal; (7) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, beginning with the first fiscal quarter beginning after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act; (8) use best efforts to list such securities on any securities exchange on which any stock of the Issuer is then listed; and (9) if requested by any Seller, furnish to such Seller certificates representing the Restricted Stock being offered pursuant to the registration which contain no restrictive legends, in such numbers and denominations as such Seller shall reasonably request; provided, however, that such Seller shall confirm to the Issuer in writing that any transfer of such Restricted Stock shall be made only pursuant to such registration and in accordance with the plan of distribution described therein, and such Seller shall agree in writing to return such certificates to the Issuer (to the extent that such shares of Restricted Stock are not sold in such manner) for reapplication of such restrictive legends. C. Expenses; Limitations on Registration. All expenses incident to the Issuer's performance of or compliance with this Section 11, including without limitation all registration and filing fees, fees and expenses relating to filings with the National Association of Securities Dealers, Inc. and any relevant stock exchange, fees and expenses of compliance with securities or Blue Sky laws (including fees and disbursements of counsel in connection with Blue Sky qualifications of Restricted Stock), printing expenses, messenger and delivery expenses, fees and disbursements of counsel for the Issuer, reasonable fees and disbursements of not more than one special counsel to the Sellers, independent public accountants (including the expenses of any special audit or "cold comfort" letters required by or incident to such performance) and underwriters (excluding discounts and commissions attributable to the securities being registered, but including liability insurance if the Issuer so desires or if the underwriters so 18 require), all the Issuer's internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the expense of any liability insurance referred to above and the fees and expenses incurred in connection with the listing of the securities to be registered on each securities exchange on which such securities issued by the Issuer are then listed, the reasonable fees and expenses of any special experts (including attorneys) retained by the Issuer (if it so desires or the underwriters so require) in connection with such registration and fees and expenses of other persons retained by the Issuer, will be borne by the Issuer. It shall be a condition precedent to the obligation of the Issuer to take any action pursuant to this Section 11 in respect of the securities which are to be registered at the request of any prospective Seller that such prospective Seller shall furnish to the Issuer such information regarding such Seller, the securities held by such Seller and the intended method of disposition thereof as the Issuer shall reasonably request and as shall be required in connection with the action to be taken by the Issuer. D. Termination of Restrictions. Notwithstanding the foregoing provisions of Sections 10 or 11, the restrictions imposed upon the transferability of the Restricted Stock shall cease and terminate as to any particular Restricted Security when (i) such Restricted Security shall have been effectively registered under the Securities Act and sold by the Holder thereof in accordance with such registration or (ii) when such Restricted Stock may be sold in accordance with the safe harbor provisions of Rule 144(k). Whenever the restrictions imposed shall terminate as to any Restricted Security, as hereinabove provided, the holder thereof shall be entitled to receive from the Issuer, without expense, a new certificate not bearing the restrictive legend otherwise required to be borne thereby; provided, however, that the securities evidenced by such new certificate shall still be deemed Restricted Stock entitled to the registration rights of this Section 11. E. Rule 144 and 144A. In order to permit the holder of Restricted Securities to sell the same pursuant to Rule 144 or Rule 144A under the Securities Act (or any successors to such rules), the Issuer will comply with all rules and regulations of the Commission applicable in connection with use of each of Rule 144 and Rule 144A (or any successors thereto), including the timely filing of all reports with the Commission in order to enable such Holder, if he so elects, to utilize Rule 144 or Rule 144A, and the Issuer will cause any restrictive legends to be removed and any transfer restrictions to be rescinded with 19 respect to any sale of Warrant Stock which is exempt from registration under the Securities Act pursuant to Rule 144 or Rule 144A. F. Indemnification. (l) In the event of any registration of any of its securities under the Securities Act pursuant to this Section 11, the Issuer shall indemnify and hold harmless the Seller of such Restricted Stock, its directors and officers, and each other Person, if any, who controls such Seller within the meaning of the Securities Act ("Controlling Person"), against any losses, claims, damages or liabilities, joint or several, to which such Seller or any such director or officer or Controlling Person may become subject under the Securities Act or any other statute or at common law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act, or in any final prospectus contained therein, or any amendment or supplement thereto or (ii) any alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse such Seller or such director, officer or Controlling Person for any legal or any other expenses reasonably incurred by such Seller or such director, officer or Controlling Person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Issuer shall 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 any alleged untrue statement or alleged omission made in such registration statement, prospectus, or amendment or supplement thereto (x) in reliance upon and in conformity with written information furnished to the Issuer through an instrument duly executed by such Seller or such director, officer or Controlling Person specifically for use therein, or (y) which was corrected in any amended prospectus or supplement to prospectus provided to the Seller prior to the sale with respect to which such indemnity is claimed. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Seller or such director, officer or Controlling Person, and shall survive the transfer of such securities by such Seller. (2) Each Holder of any Restricted Stock shall, by acceptance thereof, severally and not jointly, indemnify and hold harmless the Issuer, its directors and officers and each other Person, if any, who controls the Issuer against any losses, claims, damages or liabilities, joint or several, to which the Issuer or any such director or officer or any such Person may 20 become subject under the securities Act or any other statute or at common law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any alleged untrue statement of any material fact contained, on the effective date thereof, in any registration statement under which Restricted Stock was registered under the Securities Act, or in any final prospectus contained therein, or any amendment or supplement thereto, or (ii) any alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent that such alleged untrue statement or alleged omission was contained in written information furnished to the Issuer by such Holder, and shall reimburse the Issuer or such director, officer or other Person for any legal or any other expenses reasonably incurred in connection with investigating or defending any such loss, claim, damage, liability or action. (3) The indemnity and expense reimbursements obligations of the Issuer under clause (l) of this Section 11.F shall be in addition to any liability the Issuer may otherwise have. (4) Each Person ("Indemnitor") who under the preceding provisions of this Section 11.F agrees to indemnify another Person ("Indemnitee") shall have the right, subject to the provisions hereto, to designate counsel (reasonably acceptable to the Indemnitee) to defend any case or proceeding against the Indemnitee arising in respect of any claim of liability for which such indemnification may be claimed, to the end that duplication of legal expense may be minimized; provided that, if the Indemnitee notifies the Indemnitor that the former has been advised by its counsel that any single counsel in such case or proceeding would have a conflict of interest in representing both the Indemnitor and the Indemnitee, the Indemnitee may designate its own counsel in such case or proceeding and, to the extent so provided above in this Section 11.F, shall be entitled to be reimbursed by Indemnitor for its legal expenses reasonably incurred in connection with defending itself in such case or proceeding, provided, however, that no Indemnitor shall be liable hereunder for the fees and expenses of more than one separate law firm, provided, further, that each Indemnitee may engage such legal counsel at the Indemnitor's expense if the Indemnitor shall fail to perform hereunder. (5) If the Restricted Securities are to be sold pursuant to any underwritten public offering, the Issuer and each Seller shall enter into an underwriting agreement that contains, among other things, customary representations, warranties, covenants and indemnities relating to such offering. 21 G. No Impairment of Rights. Following the date hereof, the Issuer will not enter into any agreement regarding the registration of its equity securities, other than as contemplated by Section 11.B hereof, that impairs or otherwise limits the registration rights granted to holder hereunder. SECTION 12. LIMITATION OF LIABILITY. No provision hereof, in the absence of affirmative action by the Warrant Holder to purchase shares of Common Stock, and no mere enumeration herein of the rights or privileges of the Warrant Holder hereof, shall give rise to any liability of such Holder for the purchase price of the Warrant Stock or as a stockholder of the Issuer, whether such liability is asserted by the Issuer or by creditors of the Issuer. SECTION 13. LOSS OR DESTRUCTION OF WARRANT CERTIFICATES. Upon receipt of evidence satisfactory to the Issuer of the loss, theft, destruction or mutilation of the Warrant Certificate and, in the case of any such loss, theft or destruction, upon receipt of indemnity or security satisfactory to the Issuer (the original Warrant Holder's indemnity being satisfactory indemnity in the event of loss, theft or destruction of any Warrant Certificate), or, in the case of any such mutilation, upon surrender and cancellation of such Warrant Certificate, the Issuer will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant Certificate, a new Warrant Certificate of like tenor and for a like aggregate number of Warrants. SECTION 14. FURNISH INFORMATION. The Issuer agrees that it shall deliver to the Warrant Holder promptly after their becoming available copies of all financial statements, reports and proxy statements which the Issuer shall send to its stockholders generally. SECTION 15. TAX TREATMENT. The Issuer and Disney agree to use their best efforts to agree to a consistent determination of the fair value, if any, of the Warrants and to consistent treatment of such determination for income tax reporting purposes. SECTION 16. OFFICE OF THE ISSUER. So long as the Warrants remains outstanding, the Issuer shall maintain an office or a transfer agent for the Warrant Certificate in New York, New York, where the Warrant may be presented for exercise, transfer, division or combination as herein provided. Such office shall be at 888 7th Avenue, 43rd Floor, New York, New York 10106, unless and until the Issuer shall designate and maintain some other office for such purposes and deliver written notice thereof to 22 the Warrant Holder. SECTION 17. NOTICES GENERALLY. Any notice, demand or delivery pursuant to the provisions hereof shall be sufficiently delivered or made if sent by first class mail, postage prepaid, addressed to the Warrant Holder at its last known address appearing on the Warrant transfer books of the Issuer, or, except as herein otherwise expressly provided, to the Issuer at its principal executive office, 888 7th Avenue, 43rd Floor, New York, New York 10106, Attention: President, or such other address as shall have been furnished to the party giving or making such notice, demand or delivery. SECTION 18. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns, and, without limiting the generality of the foregoing, shall inure to the benefit of and be enforceable by each person who shall from time to time be Warrant Holder. SECTION 19. GOVERNING LAW. The Warrant shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to principles of conflicts of laws. SECTION 20. COUNTERPARTS. This Agreement may be executed in any number of counterparts and each of said counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. SECTION 21. HEADINGS. The descriptive headings of the several Sections of this Agreement are inserted for convenience and shall not control or affect the meaning or construction of any of the provisions hereof. SECTION 22. PUBLIC ANNOUNCEMENTS. Issuer and Disney will consult with each other before issuing any press release or making any public statement with respect to the transactions contemplated hereby and, except as may be required by applicable law or any listing agreement with any securities exchange, will not issue any such press release or make any public statement unless the text of such statement shall first have been agreed upon by the parties. 23 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed as of the day, month and year first above written. GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. By: /s/ Richard E. Snyder -------------------------- Name: Richard E. Snyder Title:Chairman & Chief Executive Officer DISNEY ENTERPRISES, INC. By: -------------------------- Name: Title: 24 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed as of the day, month and year first above written. GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. By: -------------------------- Name: Title: DISNEY ENTERPRISES, INC. By: /s/ David K. Thompson -------------------------- Name: David K. Thompson Title: Senior Vice President Assistant General Counsel 24 EXHIBIT A (Form of Warrant Certificate) THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER FEDERAL OR STATE SECURITIES LAWS OR UNLESS THE PROPOSED TRANSACTION IS REGISTERED OR QUALIFIED, AS SO REQUIRED. THE TRANSFER OF AND OTHER TERMS OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE GOVERNED BY AND SUBJECT TO CONDITIONS SPECIFIED IN THAT CERTAIN WARRANT AGREEMENT DATED SEPTEMBER 26, 1997, AND NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. UNDER CERTAIN CIRCUMSTANCES, THE ISSUER HAS AGREED TO ISSUE TO THE HOLDER HEREOF A NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES EVIDENCED HEREBY REGISTERED IN THE NAME OF SUCH HOLDER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS CONTAINED IN SUCH WARRANT AGREEMENT. Warrant No. 1 Certificate for ------ 1,100,000 Warrants GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. WARRANTS TO PURCHASE COMMON STOCK THIS CERTIFIES THAT for value received Disney Enterprises Inc., or registered assigns (the "Warrant Holder"), is the owner of the number of Warrants set forth above, each of which represents the right to purchase one share of common stock $.01, par value (the "Common Stock"), of GOLDEN BOOKS FAMILY ENTERTAINMENT, INC., a Delaware corporation (the "Issuer"), at the purchase price of $11.375 (the "Exercise Price") upon presentation and surrender of this Warrant Certificate with the Form of Election to Purchase duly executed. The number of shares of the Common Stock purchasable upon the exercise of each Warrant and the Exercise Price are subject to adjustment as provided in the Warrant Agreement. 1 This Warrant Certificate is subject to, and entitled to the benefits of, all of the terms, provisions and conditions of the Warrant Agreement, dated as of September 26, 1997 (the "Warrant Agreement") between the Issuer and the Warrant Holder. The Warrant Agreement is hereby incorporated herein by reference and made a part hereof. Reference is hereby made to the Warrant Agreement for a full description of the rights, limitations of rights, obligations and duties hereunder of the Issuer and the Warrant Holder. Copies of the Warrant Agreement are on file at the principal office of the Issuer. Capitalized terms used herein have the same meanings as in the Warrant Agreement. This Warrant Certificate, with or without other Warrant Certificates, upon surrender at the principal office of the Issuer, may be exchanged for another Warrant Certificate or Warrant Certificates of like tenor and date evidencing Warrants entitling the Warrant Holder to purchase a like aggregate number of shares of Common Stock. If this Warrant Certificate shall be exercised in part, the Warrant Holder shall be entitled to receive upon surrender hereof another Warrant Certificate or Warrant Certificates for the number of Warrants not exercised. The Issuer will not be required to issue fractional shares of Common Stock upon the exercise of any Warrant or Warrants evidenced hereby. In lieu thereof, the Issuer may make a cash payment, as provided in the Warrant Agreement. 2 IN WITNESS WHEREOF, the Issuer has caused the signature (or facsimile signature) of its President and Chief Financial Officer to be printed hereon and its corporate seal (or facsimile) to be printed hereon. Dated: September 26, 1997 GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. By: ----------------------- Name: Title: 3 FORM OF ASSIGNMENT (To be executed by the Warrant Holder if such Holder desires to transfer the Warrant Certificate.) FOR VALUE RECEIVED _________________ hereby sells, as- signs and transfers unto _____________________ ( _________ ) the Warrants evidenced by the within Warrant Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ________________________ to transfer such Warrants on the books of the within-named Issuer, with full power of substitution. Dated: , 19 Signature __________________________ NOTICE The signature of the foregoing assignment must correspond to the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or any change whatsoever. 4 ATTACHMENT TO WARRANT CERTIFICATE FORM OF ELECTION TO PURCHASE To: Golden Books Family Entertainment, Inc. The undersigned irrevocable exercises __________ Warrants for the purchase of one share (subject to adjustment) of Common Stock, $.01 par value, of GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. for each Warrant. The Warrants were issued by GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. and are represented by the attached Warrant Certificate. The Exercise Price shall be paid to GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. in the form marked below: Payment of $_________ in the form of certified or bank cashier's check or wire transfer. Describe details of such payment: - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Payment of $_________ in the form of a cashless exercise. Issuer shall retain in payment of the aggregate Exercise Price, __________ shares of Common Stock, which number equals the quotient of the aggregate Exercise Price for the Warrants being exercised divided by the Current Market Price determined immediately prior to the date of this exercise. The undersigned directs that the shares of Common Stock deliverable upon the exercise of said Warrants be in such denominations as specified below and registered or placed in its name or any such other name(s) as specified below. Date: ------------------ DISNEY ENTERPRISES, INC. By: ---------------------------- Name: Title: Taxpayer ID Number: Denominations: Name and Address of Common Stock Certificate holder(s): 5 EXHIBIT B Employee Stock Options or Stock Purchase Plan Warrant to Purchase 3,250,000 shares of Common Stock, held by Golden Press Holding, LLC Series B Convertible Preferred Stock held by Golden Press Holding, L.L.C., currently convertible into 6,500,000 shares of Common Stock 8 3/4% Convertible Debentures due 2016 -----END PRIVACY-ENHANCED MESSAGE-----