-----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, TTKPpM3F0+zeTqNV71cyhx+MMfUn0KjDTVp5uOB6u4w99nlDnSstLPBKd06or6x0 t04frbiWbd051u9awXdqGg== 0000889812-96-000421.txt : 19981229 0000889812-96-000421.hdr.sgml : 19981229 ACCESSION NUMBER: 0000889812-96-000421 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19960203 FILED AS OF DATE: 19960503 DATE AS OF CHANGE: 19981228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTERN PUBLISHING GROUP INC CENTRAL INDEX KEY: 0000790706 STANDARD INDUSTRIAL CLASSIFICATION: 2731 IRS NUMBER: 061104930 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-14399 FILM NUMBER: 96555999 BUSINESS ADDRESS: STREET 1: 444 MADISON AVE STREET 2: STE 601 CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2126884500 MAIL ADDRESS: STREET 1: 444 MADISON AVE 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-K405 1 ANNUAL REPORT FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the Fiscal year ended February 3, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ...... to ...... Commission file number 0-14399 Western Publishing Group, Inc. (Exact name of registrant as specified in its charter) Delaware 06-1104930 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 444 Madison Avenue, New York, New York 10022 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 212-688-4500 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Title of Each Class ------------------- Common Stock, par value $ .01 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 preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X or No ___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, is definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the Registrant's voting stock held by non-affiliates of the Registrant, computed by reference to the closing sales price as quoted on NASDAQ on April 9, 1996, was approximately $246,459,156. As of April 9, 1996, 21,666,739 shares of the Registrant's $.01 par value common stock were outstanding. Portions of the Registrant's April 18, 1996 Proxy Statement for the Special Meeting of Stockholders scheduled for May 8, 1996 are incorporated by reference into Part III. PART I ITEM 1. BUSINESS BACKGROUND Western Publishing Group, Inc., through its two operating subsidiaries, Western Publishing Company, Inc., a Delaware corporation, and Penn Corporation, a Delaware corporation, is engaged in two business segments. The Consumer Products segment creates, produces and markets a variety of consumer products including children's story and picture books, interactive electronic books and games, computer and multi-media "edutainment" products, coloring books and other activity books, educational workbooks sold at retail, craft products, children's pre-recorded audio cassettes, book and audio cassette sets, pre-recorded video cassettes, FRAME-TRAY(R) puzzles, special interest books for adults, decorated paper tableware, paper party accessories, gift wrap products, invitations, stationery and gift items. The Commercial Products segment provides the following printing and manufacturing services: (1) graphic services and commercial printing, such as the printing of books, catalogs, labels, tax forms, magazines and trading cards; (2) educational kit manufacturing, including printing, sourcing, packaging, development and assembly of educational kits; and (3) Custom Publishing(R) services, such as the creation, production, assembly and distribution for consumer product and fast food companies of customized products for their marketing and promotional programs. Western Publishing Group, Inc.'s principal offices are located at 444 Madison Avenue, New York, New York 10022, and its telephone number is (212) 688-4500. Proposed Equity Investment On January 31, 1996, Western Publishing Group, Inc. (the "Company") entered into a Securities Purchase Agreement with Golden Press Holding, L.L.C. ("Golden Press"), a newly-formed Delaware limited liability company owned by Richard E. Snyder, Barry Diller and Warburg, Pincus Ventures, L.P., pursuant to which Golden Press will acquire a significant equity interest in the Company. The transaction is subject to customary conditions, including stockholder approval. Under the terms of the equity investment transaction, Golden Press will invest $65 million of cash in the Company in exchange for $65 million of newly-issued Series B Convertible Preferred Stock and a warrant to purchase 3,250,000 shares of Common Stock (the "Warrant"). The Company will utilize the investment proceeds to redeem its existing Series A Convertible Preferred Stock which matured on March 31, 1996, for expenses associated with the transaction and for general working capital purposes. The Series B Convertible Preferred Stock will have a dividend rate of 12% per annum, will be convertible at $10 per share, and will not have a mandatory redemption date. The preferred stock dividend will be payable quarterly in 195,000 shares of Common Stock for the first four years, subject to certain adjustments based on the market price of the Common Stock at that time. Thereafter, preferred stock dividends will be paid in cash. The Warrant, which will not be exercisable for the first two years, will have a seven year term and an exercise price of $10 per share. Upon consummation of the equity investment by Golden Press, Richard E. Snyder will succeed Richard A. Bernstein as Chairman and Chief Executive Officer of the Company. Since his appointment as President of Western Publishing Group, Inc. on January 31, 1996, Mr. Snyder has not been directly involved in the Company's business or financial decisions. Reference is made to the Company's April 18, 1996 Proxy Statement for the Special Meeting of Stockholders scheduled for May 8, 1996 for a complete description of the Golden Press equity investment and the agreements and instruments referred to above, which Proxy Statement is incorporated by reference herein and included as an exhibit hereto. 2 RESTRUCTURING AND ASSET DISPOSITIONS Provision for Restructuring and Closure of Operations During the quarter ended October 28, 1995, the Company recorded an $8,701,000 provision for restructuring and closure of operations in a further effort to reduce its operating cost structure and improve future operating results, and to reflect the costs incurred in connection with the termination of a previously announced transaction to sell a significant interest in the Company. The provision includes a non-cash charge of $2,000,000 and consists of the following components: o Severance costs of $3,660,000 associated with the Company's previously announced workforce reductions of salaried and hourly personnel. These reductions were completed in the fourth quarter of Fiscal 1996. o Unrecoverable assets and costs of $3,171,000 to be incurred in connection with the Company's decision to close certain of its retail store locations. o Transaction costs of $1,870,000 resulting from the Company's October 17, 1995 announcement of the termination of its initial agreement in principle to sell a significant interest in the Company to Warburg, Pincus Ventures, L.P. and Richard E. Snyder. Sale and Phase Out Of Operations On April 7, 1994, the Company adopted a plan (the "Plan") designed to improve its competitive position and reduce its cost structure through the sale, divestiture, consolidation or phase out of certain operations, properties and products, and a workforce reduction. The Plan included the following major components: o An agreement to sell its game and puzzle operation (including certain inventories) to Hasbro, Inc. ("Hasbro"). This transaction was completed in August 1994 for cash proceeds of approximately $101,400,000. o The decision to exit the Direct Marketing Continuity Clubs and School Book Club businesses. These businesses were sold during the second and third quarters of Fiscal 1995 for aggregate cash proceeds of approximately $14,500,000. o The closedown and sale of the Company's Fayetteville, North Carolina manufacturing and distribution facility, which was primarily dedicated to the game and puzzle operation but was not included in the sale to Hasbro. This property, which is comprised of 702,000 square feet of office, warehousing and distribution space, has been closed and is currently being marketed for sale. o The decision to streamline the Company's publishing business so as to focus on its core competencies. This included a reduction in the management, administrative and direct labor workforces. The Company recorded a net gain from the Plan of $20,352,000 ($12,396,000, net of income taxes), inclusive of operating losses of the game, puzzle, direct marketing and school book club operations from January 30, 1994 through their respective disposition dates in the third quarter of Fiscal 1995. During the second quarter ended July 29, 1995, an additional gain of $2,000,000 was recorded as certain costs and expenses of implementing the Plan were less than originally anticipated. 3 Provision for Write-down of Division During Fiscal 1994, the Company established a provision, including operating losses through the expected disposition date of $28,180,000 ($19,280,000, net of income taxes), to write-down the assets of the Advertising Specialty Division of its Penn Corporation subsidiary to net realizable value. On August 5, 1994, the sale of the Ritepoint/Chromatic and Adtrend businesses of the Division was completed for cash proceeds of approximately $5,650,000. On November 7, 1994, the sale of the Vitronic and K-Studio businesses of the Division was completed for cash proceeds of approximately $8,350,000. As the proceeds from the sale of this Division exceeded management's estimate, the Company adjusted its previously recorded provision for write-down of Division by recognizing a pre-tax gain of $1,100,000 in the fourth quarter of Fiscal 1995. BUSINESS SEGMENT INFORMATION For certain information with respect to net sales, operating profits and identifiable assets attributable to Western Publishing Group, Inc.'s Consumer Products and Commercial Products business segments, see Note 16 of the Notes to the Western Publishing Group, Inc. Consolidated Financial Statements, which appears on pages F-19 to F-20 of the Company's April 18, 1996 Proxy Statement for the Special Meeting of Stockholders scheduled for May 8, 1996, which is incorporated by reference herein and included as an exhibit hereto. CONSUMER PRODUCTS SEGMENT Products Western Publishing Company, Inc. is the largest creator, publisher, manufacturer, printer and marketer of children's books in the United States. Children's books, including story and picture books for children aged two through eight, are principally marketed under the GOLDEN BOOKS(R), LITTLE GOLDEN BOOKS(R), GOLDEN BOOKS(R) WITH SOUND, GOLDEN SING ALONG(R), MY FIRST GOLDEN SOUND STORY(R), GOLDEN TALKING TALES(R), GOLDEN SEEK 'N' SOUND(R) and GOLDEN SOUND STORY(R) trademarks. Activity books and products and educational workbooks for children are marketed under the GOLDEN BOOK(R), MERRIGOLD PRESS(R) and GOLDEN STEP AHEAD(R) trademarks. Activity books and products include coloring books, PAINT WITH WATER & DESIGN(R) books, STICKER FUN(R) books, paper doll books, pop-up books, board books, shape books, MAGIC SLATE(R) pads, crayons, markers and boxed activity products. Western Publishing Company, Inc. also produces and markets pre-recorded video and audio cassettes for children under its GOLDEN BOOK VIDEO(R) and GOLDEN MUSIC(R) trademarks. Coin collecting products are marketed under its WHITMAN(R) trademark. Western Publishing Company, Inc. also sells arts and crafts products under its MERRIGOLD PRESS(R) and GOLDEN BOOKS(R) trademarks, pre-recorded audio cassette tapes packaged with books under its GOLDEN BOOK 'N' TAPE(R) trademark and other products that complement its lines of books, activity products and puzzles. Western Publishing Company, Inc. believes that its GOLDEN BOOK(R) brand name has strong consumer awareness and recognition and a reputation among consumers for creativity, quality, entertainment and educational value and customer satisfaction. Among the best known GOLDEN BOOK(R) titles are "Richard Scarry's Best Word Book Ever", "Pat the Bunny", "The Poky Little Puppy(C)" and the "Golden Treasury of Children's Literature." GOLDEN BOOK(R) products are believed by Western Publishing Company, Inc., as a result of market research, to be recognized by virtually all American mothers with children under the age of ten. 4 Many of Western Publishing Company, Inc.'s products are published or produced under license from authors, inventors and other owners of intellectual properties. Products often feature popular characters licensed from other companies, including The Walt Disney Company, Children's Television Workshop (Sesame Street(R)), Mattel, Inc., Jim Henson Productions, Inc., DC Comics Inc., the Estate of Richard Scarry, Saban Entertainment, Inc., Time-Warner, Inc. and the Lyons Group. Western Publishing Company, Inc.'s adult non-fiction book line is designed to inform the family on subjects of special interest and includes the GOLDEN GUIDES(R) line of books on subjects such as science, birds and astronomy and WHITMAN(R) coin collector products and other special interest adult books. However, Western Publishing Company, Inc. does not have significant market share in the adult book category. Penn Corporation believes that it is a recognized leader in the design and production of quality decorated paper tableware, party accessories, invitations, gift wrap products, stationery and giftware. Under its BEACH(R) and CONTEMPO(R) trademarks, Penn Corporation produces and markets to retailers an extensive line of decorated paper tableware consisting of plates, cups, napkins, table covers and guest towels, in a variety of coordinated designs, themes and colors. Penn Corporation works directly with leading design studios such as Laurette, Gloria Vanderbilt, Peacock Paper, J.G. Hook, Giordano, Pangborn Studios, Brushcreek, Gear, Nick & Nora and Merrimekko to offer tableware patterns that it believes are representative of the most current international design trends. Penn Corporation also produces and markets an extensive line of children's party tableware, party favors and accessories (such as games, horns, hats and blowouts), many of which feature characters licensed from The Walt Disney Company, Western Publishing Company, Inc., Children's Television Workshop (Sesame Street(R)), Jim Henson Productions, Inc., Marvel Entertainment Group, Inc. and Time-Warner, Inc. Penn Corporation also produces under its CONTEMPO(R) trademark a complete line of gift wrap products, including gift wrap paper, ribbons, bows, gift enclosure cards, tissue paper and tote bags. Penn Corporation's gift wrap products are produced in a wide variety of colors and designs, including the work of many of the same leading design studios who design Penn Corporation's tableware products. Penn Corporation's gift wrap paper also comes in a variety of materials, including metallic and high gloss paper. Under the RENNER DAVIS BY CONTEMPO(TM) trademark, Penn Corporation produces and markets hand-crafted stationery and giftware. RENNER DAVIS(R) stationery items include correspondence cards, invitations, writing papers and envelopes. Penn Corporation's writing papers are crafted by hand from fine quality watermarked papers with a high cotton fiber content. All sheets and notes are individually hand-edged and all envelopes are either lined or hand-bordered. The RENNER DAVIS BY CONTEMPO(TM) giftware line includes hand-crafted keepsake boxes, desk accessories and decorative kitchen accessories, such as address books, memo holders, picture frames and pencil holders, which are constructed from quality materials coordinated for color, finish, texture, pattern and style. Imaginative gift books featuring The Walt Disney Company and Jim Henson's Muppet Babies(TM) characters are also marketed to gift and department stores under the RENNER DAVIS BY CONTEMPO(TM) brand. Licensing Licensing agreements are important factors in the differentiation of Western Publishing Group, Inc. products from those of its competitors. For the year ended February 3, 1996 ("Fiscal 1996"), approximately 69% of Western Publishing Group, Inc.'s Consumer Products segment sales were generated by books, games, FRAME-TRAY(R) puzzles, activity products, paper party goods and party favors featuring popular juvenile characters and properties licensed by Western Publishing Company, Inc. and Penn Corporation from authors, illustrators, inventors and other companies. Most of Western Publishing Group, Inc.'s character licenses have terms of one to three years. Despite the relatively short period of each license, Western Publishing Group, Inc. has longstanding relationships with virtually all of its licensors. Licenses from authors and inventors are generally longer in duration, often for the term of the copyright. Approximately 45% of the Consumer Products segment sales in Fiscal 1996 were attributable to juvenile products incorporating characters and properties licensed from its five largest licensors: The Walt Disney Company, Children's Television Workshop (Sesame Street(R)), DC Comics Inc., Mercer Mayer and Time-Warner, Inc. 5 Royalty rates paid by Western Publishing Company, Inc. generally range from 8% to 12% of the invoiced price of the product featuring the licensed characters and properties. Many license agreements require advance royalty payments and minimum royalty guarantees, contain editorial standards that govern Western Publishing Company, Inc.'s use of the characters and properties and can be cancelled for failure to meet these standards or certain other contractual obligations. None of Western Publishing Company, Inc.'s licenses has been cancelled by the licensor for failure to meet these standards or obligations. Western Publishing Company, Inc. selects the characters and properties to be licensed primarily on such factors as adaptability to its markets, compatibility with its product lines, the identity of the licensor and other licensees of the character, the amount of licensor advertising and marketing support for the character, the timing of any scheduled promotion of the character and the terms offered by the licensor. Western Publishing Company, Inc. believes that the large breadth of its product categories and its vast distribution network, as well as the breadth and effectiveness of its sales force, gives it an advantage over its competitors in obtaining licensing rights in part because of the large number of consumer impressions it creates, and the royalties it generates. However, competition to obtain licenses is intense and Western Publishing Company, Inc. sometimes does not obtain a license that it seeks, or only obtains a non-exclusive license, and other times does not obtain a license for all of its desired product categories. In Fiscal 1996, Western Publishing Company, Inc. entered into a number of new and renewed licensing agreements, including one for the Essence(R) trademark with Essence Communications, Inc., a MAGIC SLATE(R) license utilizing a number of Disney characters, a television/animated Batman(R) license covering FRAME-TRAY(TM) puzzles, MAGIC SLATE(R) pads, crayons and markers, a license for a number of Disney movie and standard characters for GOLDEN BOOKS(R) WITH SOUND product with The Walt Disney Company, and an agreement in principle for a Barbie(TM) license with Mattel, Inc. In addition, existing licenses allow product lines to be produced in conjunction with Disney's June 1996 release of the movie "The Hunchback of Notre Dame" and with Jim Henson Productions, Inc.'s February 1996 release of the movie "Muppet Treasure Island(TM)". Upon obtaining a license, Western Publishing Company, Inc. develops story and activity books and other products featuring the licensed character or property to incorporate into its GOLDEN BOOK(R) lines and associated products. To develop those products, Western Publishing Company, Inc. utilizes its internal creative staff of over 84 editors, artists and designers and an extensive network of authors, artists and inventors who work on a regular, but free-lance basis, with Western Publishing Company, Inc. Penn Corporation's BEACH(R)/CONTEMPO(R) Division produces a line of children's party tableware and accessories featuring characters licensed from, among others, The Walt Disney Company, Western Publishing Company, Inc., Children's Television Workshop (Sesame Street(R)), Marvel Entertainment Group, Inc. and Time-Warner, Inc. Royalty rates paid by Penn Corporation generally range from 5% to 10% of the invoiced price of the product featuring the licensed characters and properties. New Product Lines Western Publishing Group, Inc., through market research activities, has intensified its efforts to identify opportunities for either the development or acquisition of new product lines that consumers will recognize as offering value at a popular price and has allocated substantial resources to its new product acquisition and development efforts. In calendar 1993, it introduced new GOLDEN SOUND STORY(R) products including MY FIRST GOLDEN SOUND STORY(R) and GOLDEN TALKING TALES(R) books as well as GOLDEN SEEK 'N' SOUND(R) games. In calendar 1994, it introduced a number of items to its growing boxed arts & crafts category, including Barbie(TM) party pins and keepsakes, a button and magnet maker kit that featured easy to make plaster designs; and Jim Henson's Muppet Workshop(TM), a series of paper based, make your own Muppet(TM) craft kits. The GOLDEN BOOKS(R) WITH SOUND product line introductions included MAGIC CORNER(R) books, a one sound board book series and SOUNDS BY ME(R), a storybook that includes sounds and a recording feature. In calendar 1995, the Company added three new formats to its GOLDEN BOOKS(R) WITH SOUND line: GOLDEN BOOKS(R) SOUND GAMES, an electronic interactive game, SOUND PICTURES(TM), an electronic activity product with interchangeable pictures and SILLY SOUND STORIES(R), an electronic create-your-own story activity product. The Company expanded its GOLDEN BOOKS(R) Interactive Software line adding two new titles, SCIENCE SHOP WITH 6 MONKER and COLORS AND SHAPES WITH HICKORY. GOLDEN BOOKS(R) ENCYCLOPEDIA FOR KIDS on CD-ROM was also introduced. The Company, since acquiring Sight & Sound, Inc. in July 1990, has expanded its GOLDEN BOOKS(R) WITH SOUND product line to over 120 titles, including DELUXE GOLDEN SOUND STORY(TM) books with 10 sounds, MY FIRST GOLDEN SOUND STORY(R) books with 5 sounds, The RANDOMIZER(TM) books featuring electronic book adventures, GOLDEN TALKING TALES(R) books with prerecorded conversations and 9 sounds, LITTLE GOLDEN BOOKS(R) WITH SOUND books with 4 sounds, FAVORITE GOLDEN SOUND STORY(R) books with 7 sounds; MAGIC CORNER(R) books, a one sound board book, GOLDEN SEEK 'N' SOUND(R) ACTIVITIES, a sound based activity board, GOLDEN SING ALONG(R) with 5 sound effects and 8 songs, and SOUNDS BY ME(R) which features pre-programmed sounds and a recording capability to create sounds. The Company sources sound pad components and certain finished goods abroad and as a result, scheduling is an important prerequisite to producing and distributing particular licensed product in a timely fashion. In calendar 1995, all of the aforementioned products were marketed utilizing the GOLDEN BOOKS(R) trademark as their primary brand for consistency and to take advantage of the strong brand loyalty that customers have shown towards GOLDEN BOOKS(R). In calendar 1993, Penn Corporation's BEACH(R)/CONTEMPO(R) Division ("Beach") introduced its first shape and die cut paper plates and its first all over spring designs for napkins and table covers. It also introduced The Disney Gift Book program of social expression books in 8 innovative formats. In calendar 1994, Beach introduced its European designs gift wrap selections with dozens of floral and artistic designs on premium paper. The year also saw the introduction of a full line of party favors, accessories and decorations, including those featuring Disney's Lion King characters. Toward the end of calendar 1994, Beach introduced new products including (a) paper plates with special shapes such as octagon and flower/petal scallops (b) designer napkins with edge to edge printing (c) a new selection of stationery, keepsake gifts and tableware products featuring the Vatican Library Collection and (e) the Gale and Ardie Sayers Celebration Collection of tableware designs. In calendar 1995, Beach broadened its line of designs to include full milestone birthday programs developed under license from Peacock Paper. New party programs featuring Mardi Gras and Luau themes were launched. Other new programs in Fiscal 1996 include expanded programs for picnics, the Fourth of July, Halloween and the Christmas holidays. Accessories which have been included in these expanded design ensembles include candles, treat bags, confetti, cutlery, stadium cups, garlands, balloons and window decorations. Marketing and Distribution Western Publishing Company, Inc.'s marketing strategy for its Consumer Products is to create consumer demand through advertising, promotion and attractive point-of-purchase presentations in order to sell a high volume of popularly priced products through mass merchandising chains such as Wal-Mart Stores, Inc. ("Wal-Mart"), K-Mart Corp., Fred Meyer Inc., Caldor, Inc. and Target Stores Incorporated; national book chains such as Barnes & Noble (B. Dalton Book Seller) and Borders, Inc. (including Waldenbook Co., Inc.); toy stores such as Toys 'R' Us, Inc. and Kay-Bee Toys, Inc.; supermarket chains such as Winn Dixie Stores, Inc., H.E. Butt Grocery Co. and Smith's Food and Drug Centers, Inc.; drug chains such as Walgreen Co., Thrifty-Payless, Inc. and Long's Drug Stores Corporation; warehouse clubs such as Price/Costco and Sam's Clubs (Wal-Mart); deep discount drug stores such as Drug Emporium, Inc., Marc Glassman, Inc. (Marc's) and Phar-Mor, Inc.; trade bookstores; independent toy stores and other retail outlets. A majority of Western Publishing Company, Inc.'s Consumer Products sales are made directly to retailers through its 95 employee direct sales force. Western Publishing Company, Inc. also sells through wholesalers, distributors, sales representative organizations and food brokers. Western Publishing Company, Inc. generally provides retailers with racks, spinners, plan-o-gramming and its computerized space management planning service, all of which it believes provides a 7 competitive advantage in obtaining favorable shelf space for its products. To promote sales, Western Publishing Company, Inc. uses print media, television, cooperative advertising programs, point-of-sale displays and a variety of consumer promotions (See "Retail Businesses"). Beach markets its products to retailers through a combination of independent sales representatives and its own sales force. Beach provides retailers with display units and racks for its party goods and gift wrap products and conducts various sales incentive programs for its sales representatives and retailers. Beach also markets its decorated paper tableware directly to food service organizations and other institutional customers under the CUSTOMPRINTS(R) trademark. These items are imprinted with names, logos or messages for business and promotional use. In the mass market and chain store channels, Beach utilizes Western Publishing Company, Inc. and third party in-store retail merchandising forces. Brand Equity The Company continued to focus on the GOLDEN BOOKS(R) brand building program that it began in Fiscal 1995. The purpose of the GOLDEN BOOKS(R) brand building program is to capitalize on the brand's high level of awareness among consumers and transfer it across all of the Company's consumer product lines. A consumer print advertising campaign, which focuses on the GOLDEN BOOKS(R) brand and the products it represents, began in Fiscal 1996. In addition to consumer advertising, the brand equity effort includes a total branding "line look" for all GOLDEN BOOKS(R) products. The Company's LITTLE GOLDEN BOOKS(R) have retained their historic and universally recognized trade dress. In-Store Merchandising During Fiscal 1996, in anticipation of the resumption of the operation of Wal-Mart's GOLDEN BOOKS STORYLAND FOR KIDS(TM) program by its management (see "Retail Businesses") and in recognition of the trend among mass market retailers to consolidate operating decisions at the headquarters level rather than at store level, the Company announced the elimination of approximately 400 positions from its in-store merchandising and sales forces. The merchandising unit is responsible for providing in-store merchandising services in support of all Western Publishing Group, Inc.'s product lines. This unit is focused on key mass market, discount, toy and drug chain classes of trade and supports Western's expansion into other retail channels. As of February 3, 1996, the Company had a reduced group of merchandisers responsible for setting plan-o-grams, moving merchandise out of stock rooms, building displays, managing racks and product presentation and performing store level ordering services. The Company believes it is providing vital services to the retailer which will enhance product take away and its long-term relationship with the retailer. Retail Businesses o Category Management Western Publishing Company, Inc.'s TOTAL CATEGORY MANAGEMENT(TM) program provides retailers with Western's management of all operational and supply chain functions within the children's book departments. Created in Fiscal 1993, Western's innovative "shop-within-a-store" Books `R' Us(TM) concept at Toys `R' Us, Inc. was expanded to approximately 330 stores, when Toys `R' Us, Inc. assumed day to day management in Fiscal 1995. Books `R' Us(TM) locations feature a full array of GOLDEN BOOKS(R) products. 8 Western's GOLDEN BOOKS STORYLAND FOR KIDS(TM) "store-within-an-aisle" program features a greatly expanded book department at mass market retailers, with a bookstore atmosphere including special racks, signage and full face presentation of children's books. Wal-Mart Stores, Inc., Caldor Inc., Fred Meyer Inc. and other national chains are participants in this program. Toward the end of Fiscal 1996, it was determined that despite the success of the program in expanding the sales of children's books at the mass market level, operation of the Wal-Mart program would be returned to Wal-Mart management. As a result, rack management and product presentation will be the responsibility of Wal-Mart. Additionally, the Company will no longer be responsible for the sourcing of third party ("guest") publisher product for Storyland locations at Wal-Mart. During Fiscal 1995, Western placed its GOLDEN BOOKS(R) kiosk units, a part of its retail management services efforts, in 190 Kids 'R' Us(TM) stores. In Fiscal 1996, Western placed an additional 570 kiosk units primarily in major supermarket chains. The kiosk unit, which is specifically designed to showcase a variety of products in a minimum amount of floor space, features a full product assortment mix of the top selling GOLDEN BOOKS(R), including seasonal products and everyday favorites. o GOLDEN BOOKS(R) Showcase Stores and Factory Outlets The Company has three GOLDEN BOOKS(R) Showcase Store locations in Schaumburg, IL, CityWalk Center at Universal City in Burbank, CA and Rockefeller Center in New York, NY. Each of the stores features only Western Publishing Group, Inc. Consumer Products. The Company opened its first GOLDEN BOOKS(R) Mini Factory Outlet Kiosk in August 1994 in the Gurnee Mills Mall in Gurnee, IL and a second in the Kenosha Factory Outlet Centre in Kenosha, WI in November 1995 to provide an outlet for effective liquidation of corporate overstocks and discontinued products. The kiosk features an array of GOLDEN BOOKS(R) products. During the third quarter of Fiscal 1996, the Company announced that certain of its retail store locations would be closed. The CityWalk Center Showcase store at Universal City in Burbank, CA was closed in March, 1996. The Company is currently negotiating with interested parties to lease certain of its other retail store locations. International Sales Western Publishing Group, Inc.'s international sales in Fiscal 1996 were approximately 10% of net sales, the majority of which were derived through a Canadian subsidiary of Western Publishing Company, Inc., Western Publishing (Canada) Inc., and a sales, distribution and licensing division of Western Publishing Company, Inc. in the United Kingdom. The Canadian subsidiary serves the Canadian market and distributes Western Publishing Company, Inc. Consumer Products, as well as distributing toy products for other manufacturers. The operation located in London, England serves the United Kingdom and other European markets. Additionally, the Company has been expanding its export sales to its distributor in Australia as well as to customers in Spanish speaking countries including Mexico and South America. 9 Competition Although Western Publishing Company, Inc. has one of the largest shares of the market for children's storybooks and activity books, there are other major competitors in the industry, such as Random House, Inc., Simon & Schuster, Inc. and G.P. Putnam & Sons, a division of The Putnam Berkley Publishing Group in the storybook category, Landoll, Inc. in the color and activity category, Publications International, Ltd. in the electronic storybook category and School Zone Inc. in the educational workbook area. There also are numerous competitors in the markets for in-laid puzzles and adult books marketed by Western Publishing Company, Inc. Competition is intense and is based primarily on price, quality, distribution, advertising and licenses. In addition, Western Publishing Company, Inc. competes for a share of consumer spending on juvenile entertainment and educational products against companies that market a broad range of other products for children. Western Publishing Company, Inc. believes that its specialized manufacturing equipment for many of its products results in lower production costs and its integrated production facilities provide it with greater flexibility in the timing and volume of its production of inventory. Its large market share in most of the product lines in which it competes gives it greater economies of scale in producing, marketing, selling and distributing those products. Penn Corporation has many major competitors in the paper tableware, gift wrap and stationery industries, including Hallmark Cards, Inc., American Greetings Corp., Unique Industries, Inc., Fonda Group, Inc. and Amscan, Inc. Trademarks Western Publishing Company, Inc. has numerous registered trademarks and service marks in the United States and other countries for various uses, including LITTLE GOLDEN BOOKS(R), GOLDEN BOOKS(R), GOLDEN PRESS(R), SIGHT & SOUND(R), GOLDEN SOUND STORY(R), ARTISTS & WRITERS GUILD BOOKS(R), GOLDEN STEP AHEAD(R), MERRIGOLD PRESS(R), GOLDEN SEEK 'N' SOUND(R), GOLDEN TALKING TALES(R), GOLDEN SING ALONG(R), GOLDEN BOOK 'N' TAPE(R) and WHITMAN(R). Western Publishing Company, Inc. believes that the GOLDEN BOOK(R) trademark is material to the conduct of its business. Western Publishing Company, Inc. also has registered trademarks for MAGIC SLATE(R), its well-known children's activity product, STICKER FUN(R), its children's activity books, FRAME-TRAY(R), its popular children's in-laid puzzles and WHITMAN(R), its line of products for coin collecting enthusiasts. Western Publishing Company, Inc. has certain patents, some of which are material to the conduct of its business. Penn Corporation has several registered trademarks in the United States, including BEACH(R), CONTEMPO(R) and RENNER DAVIS by CONTEMPO(TM), PARTY MAKERS(R) and FASHION COLORS(R). Inventory; Returns; Backlog Both Western Publishing Company, Inc. and Penn Corporation have their own production capabilities and do not rely to any material extent on suppliers for their finished product inventory needs, except for a limited number of products that they do not self-manufacture. Western Publishing Company, Inc. continues to maintain a high level of finished goods inventory to support the just-in-time nature of its business and fulfill its customer service requirements (see Management's Discussion and Analysis on page 66 of the Company's April 18, 1996 Proxy Statement for the Special Meeting of Stockholders scheduled for May 8, 1996, which is incorporated by reference herein and included as an exhibit hereto for a further discussion of inventory). Under certain circumstances, when Company approval is secured in advance, a customer may return saleable merchandise. Both companies provide payment terms standard in their respective industries. Backlog is not meaningful to either company's business. 10 Regulation Some of Western Publishing Company, Inc.'s products must comply with the child safety laws which, in general, prohibit the use of materials that might be hazardous to children. Western Publishing Company, Inc. maintains its own materials testing laboratory to assure the quality and safety of its products. Western Publishing Company, Inc. has experienced no difficulty and incurred no material costs in complying with these laws. Certain of Penn Corporation's tableware products are subject to regulations of the Food and Drug Administration and the Company has experienced no difficulty and has incurred no material costs in complying with these regulations. COMMERCIAL PRODUCTS SEGMENT Western Publishing Company, Inc., through its Diversified Products Division, provides creative, printing and publishing services to others. Western Publishing Company, Inc. groups these activities into three business categories: graphic art services and commercial printing; educational kit manufacturing and Custom Publishing(R) services. Graphic Art Services and Commercial Printing A substantial portion of Western Publishing Company's graphic services and commercial printing business is concentrated in the printing of books, industrial manuals, catalogs, maps and promotional materials. Western Publishing Company, Inc. also engages in commodity printing (such as tax instruction booklets and tax forms), which business usually is obtained on a competitive bid basis and is generally produced when the Company has production capacity available. Customers include Bantam Doubleday Dell Publishing Group, International Bible Society, American Bible Society, Ralston Purina Company, General Motors Corp. and The Walt Disney Company. Educational Kit Manufacturing Educational kit manufacturing includes the development, printing, sourcing, packaging and assembly of as many as 200 different components for one kit. Western Publishing Company, Inc. has produced educational kits for the nation's foremost educational publishers, including International Horizons (Curacao) N.V., World Book Publishing, Houghton Mifflin Company, Macmillan/McGraw-Hill School Publishing Company, Grolier, Inc., IBM Corp. and P.F. Collier. Custom Publishing Custom Publishing(R) includes the creation, design, production, assembly and distribution for major consumer products and fast food companies of customized products for their marketing and promotional programs. Recent Custom Publishing(R) customers include Wendy's International, Inc., Planters Lifesavers Co., Chick-Fil-A Inc. Hershey Chocolate USA, Toys 'R' Us, Inc. and Blockbuster Entertainment Group. Custom Publishing(R) utilizes the complete creative capabilities of Western Publishing Company, Inc., as well as its marketing, art, editorial, rights and royalty, manufacturing and product engineering groups. 11 Marketing and Competition Western Publishing Company, Inc.'s Diversified Products Division services are sold by approximately 30 employee sales representatives located in field sales offices throughout the United States. Western Publishing Company, Inc. utilizes its Consumer Products resources and relationships to assist in the marketing of its Diversified Products services. Competition, which is based upon formats, price, quality and delivery, is intense, particularly in the graphic art and commercial printing businesses. Western Publishing Company, Inc. has several unique manufacturing processes and creative resources which enhance its competitive position in the marketplace. Western Publishing Company, Inc. competes in this area with numerous companies, the largest of which is R.R. Donnelly & Sons Company. GENERAL INFORMATION Seasonality Western Publishing Group, Inc. experiences seasonality, particularly in its Consumer Products segment, with highest revenues in the third fiscal quarter. Western Publishing Company, Inc. generally uses certain of its production facilities that are not being fully utilized by its Consumer Products segment for its graphic art and commercial printing activities, thereby somewhat reducing the seasonality of Western Publishing Company, Inc.'s overall business. Revenues in the second half of Fiscal 1996 were approximately 52%. Raw Materials Both Western Publishing Company, Inc. and Penn Corporation use a wide variety of paper, plastic, inks and other raw materials in the manufacture of their products. Neither Western Publishing Company, Inc. nor Penn Corporation is dependent on any one supplier for any raw material. However, due to increased industry-wide demand, the Company has experienced price increases and some difficulty in obtaining certain grades of paper from time to time. Western does not anticipate any interruption in its business because of current conditions. Employees Western Publishing Group, Inc. employs in the aggregate approximately 1,950 full-time employees and 150 part-time employees. Approximately 500 employees are represented by labor unions. In Fiscal 1996, Western Publishing Company, Inc. negotiated a new three-year contract with the Graphic Communications International Union, Local 223B; the International Brotherhood of Teamsters, Local 43; the Graphic Communications International Union, Local 254M and the International Union of Operating Engineers, Local 309 on terms it considers satisfactory. Western Publishing Company, Inc. and Penn Corporation believe that their relations with their employees are generally good. ITEM 2. PROPERTIES Western Publishing Company, Inc.'s facilities are designed principally for the manufacture of products of its Consumer Products and Diversified Products Divisions. Western Publishing Company, Inc. devotes substantial resources to maintain its facilities in good operating condition and, where appropriate, to improve facilities so that they are cost efficient and competitive in the principal markets in which it competes. Western Publishing Company, Inc. has substantial sheetfed and web press manufacturing capacity in its Cambridge, MD and Racine, WI plants. Capacity utilization in these facilities, based on operating three shifts a day, five days a week, averaged approximately 68% in Fiscal 1996. 12 Penn Corporation's manufacturing facilities are designed solely for the manufacture of its products. These facilities are maintained in good operating condition and, where necessary, upgraded in line with business needs. Penn Corporation employs certain sophisticated machinery in its manufacturing facilities including napkin, table cover, paper plate and cup making machinery, color presses, a narrow web press, plate formers, table cover embosser/folders and Senning wrap-over machines at its BEACH(R)/CONTEMPO(R) Division; and paper cutting, scoring, box erecting and envelope making machinery at its RENNER DAVIS(R) Division. Certain information as to the significant properties used by Western Publishing Company, Inc. and Penn Corporation in the conduct of their businesses is set forth in the following table: Location Square Feet Type of Use - - -------- ----------- ----------- Racine, WI 960,000 Corporate, creative and marketing offices and printing facilities Kalamazoo, MI 560,000 Corporate offices; manufacturing; warehousing and distribution Coffeyville, KS 547,000 Warehousing and distribution Crawfordsville, IN 403,000 Warehousing and distribution Cambridge, MD 231,000 Printing; warehousing Cambridge, 148,000 Canadian corporate offices; sales offices; Ontario, Canada warehousing and distribution W. Springfield, MA 41,000 Manufacturing; warehousing New York, NY 35,000 Publishing offices; sales offices All of these properties are owned by either Western Publishing Company, Inc. or Penn Corporation, except for two leases covering 90,000 square feet in Cambridge, MD, both of which are on a month to month basis; one lease covering the Massachusetts property (lease expires December 31, 1996); and a lease covering a New York property (lease expires December 31, 2003). All of these properties, except for West Springfield, MA; Kalamazoo, MI and Canadian locations are employed in both the Consumer Products and Commercial Business segments; the West Springfield, MA; Kalamazoo, MI and Canadian properties are used solely in the Consumer Products business segment. In addition to the properties described above, Western Publishing Company, Inc. and Penn Corporation own or rent various other properties that are used for administration, sales offices and warehousing. Western Publishing Group, Inc. believes that, in general, its plants and equipment are well maintained, in good operating condition and adequate for its present needs. Western Publishing Group, Inc. regularly upgrades and modernizes its facilities and equipment. Capital additions were approximately $17,900,000 in Fiscal 1996. 13 ITEM 3. LEGAL PROCEEDINGS Western Publishing Group, Inc. and its subsidiaries are parties to certain legal proceedings which are incidental to their ordinary business and none of which the Company believes will be material to Western Publishing Group, Inc. or its subsidiaries. Two subsidiaries of Western Publishing Group, Inc., Western Publishing Company, Inc. ("Western") and Penn Corporation ("Penn"), have been informed by the United States Environmental Protection Agency ("EPA") and/or state regulatory agencies that they may be potentially responsible parties ("PRPs") and face liabilities under the Comprehensive Environmental Response, Compensation, and Liability Act (commonly known as "CERCLA" or "Superfund") or similar state laws at seven sites that are currently undergoing investigation and/or remediation of environmental contamination. In all but one instance, the relevant subsidiary of Western Publishing Group, Inc. is one of a number of PRPs that have been identified by EPA or the relevant state agency with respect to the site. Western is a PRP at four sites in Wisconsin. With respect to one of those sites, Western has been classified in the de minimis category based upon the initial allocation performed by EPA. The state has identified approximately 100 PRPs at the site. Currently, the PRP group is negotiating the cost and timing of a number of clean-up actions. While the cost of the remedies has not been determined, Western does not believe its contribution will be significant. With respect to the second site, the evidence of Western's involvement as set forth by Federal EPA in support of its claim is conflicting. At most, Western would have used the disposal site for only four of the 30 years that the site was in operation. The estimated cost of the selected remedy for the site is $7.4 million and the owner/operator has agreed to accept a 70% allocable share, leaving the approximately 60 generator PRPs (including Western) with the remaining 30% share. Based on available information, Western's liability should not exceed $20,000. At the third site, Western is in the process of negotiating with the Wisconsin Department of Natural Resources ("WDNR") to resolve its liability at the site. Based on current information, the drum removal action proposed by WDNR, if accepted by Western will cost in the range of $100,000 to $150,000. Western has filed a claim in state court against the estate of the former site owner to recover any costs incurred. At the fourth site, Western's liability pursuant to the terms of a consent decree is limited to approximately 4% of the total costs at the site. The current estimate of total costs is in the range of $22 million. In accordance with the consent decree, Western has provided for its share of the probable cleanup costs. A division of Penn Corporation has been identified as a PRP at a Michigan site. In September 1990, EPA approved a remedial action for this site that EPA estimated would cost $16.2 million. The PRP identified as the largest contributor to the site is conducting the cleanup, and has entered into settlements with approximately 225 other PRPs. This PRP filed a private cost recovery action against Penn Corporation and approximately 40 other PRPs in the U.S. District Court for the Western District of Michigan. The percentage of waste at the site attributed to Penn Corporation is approximately 1% or less of the total volume of waste shipped to the site, but Penn Corporation has not been able to reach a settlement with the plaintiff PRP. The litigation is currently in discovery. At the Hertel Landfill in Plattekill, New York, Western is one of five PRPs sued by EPA in 1994 for recovery of past EPA response costs. United States v. Western Publishing Company, Civil Action No. 94-CV-1247 (CGC\DNH) (N.D.N.Y.). In September 1991, EPA approved a remedial action for the Hertel Landfill site that had a present value cost of approximately $8 million. Currently, one of the PRPs is complying with an EPA unilateral administrative order requiring investigation and cleanup of the Site and is seeking contribution towards its cost from approximately 25 PRPs, including Western. At the time that order was issued, Western, as one of the recipients of the order, chose not to comply with the order, believing that it had sufficient cause not to comply. The 1994 action filed by the United States does not seek penalties or damages related to Western's decision not to comply with the EPA unilateral administrative order. At the current time, the PRPs have not allocated responsibility at this site. Western also has been identified as a PRP at another site in New York State. Western and eight other PRPs received a notice letter from the State of New York regarding this site and is in the process of investigating that alleged use of this site for disposal. The State has incurred past oversight costs of at least $500,000 in connection with this site and has sought to recover a portion of those costs from Western. In addition, there may be future monitoring costs associated with this site, but the amount of these costs is presently not known, as there has been no attempt made to develop an allocation or to identify all PRPs. 14 Western and Penn are actively pursuing resolution of the aforementioned matters. Environmental expenditures that relate to current operations are expensed or capitalized, as appropriate. Liabilities are recorded when environmental assessments and/or remedial efforts are probable, the cost can be reasonably estimated and the Company's responsibility is established. While it is not feasible to predict or determine the outcome of these proceedings, it is the opinion of management that their outcome, to the extent not provided for through insurance or otherwise, will not have a materially adverse effect on the Company's financial position or future results of operations. Western Publishing Group, Inc. believes that certain of its insurance policies may cover these claims and is currently litigating against its insurers for coverage. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. EXECUTIVE OFFICERS OF THE REGISTRANT
NAME AGE POSITION(S) - - ---- --- ----------- Richard A. Bernstein 49 Director, Chairman and Chief Executive Officer of Western Publishing Group, Inc.; Chairman of Western Publishing Company, Inc.; Chairman, President and Chief Executive Officer of Penn Corporation James A. Cohen 50 Senior Vice President-Legal Affairs and Secretary of Western Publishing Group, Inc.; Senior Vice President-Legal Affairs and Secretary of Western Publishing Company, Inc. and Vice President-Legal Affairs and Secretary of Penn Corporation Ira A. Gomberg 52 Vice President-Business Development and Corporate Communications of Western Publishing Group, Inc.; Vice President of Western Publishing Company, Inc.; Vice President of Penn Corporation Dale Gordon 48 Vice President and General Counsel of Western Publishing Group, Inc.; Western Publishing Company, Inc. and Penn Corporation Steven M. Grossman 35 Executive Vice President, Treasurer and Chief Financial Officer of Western Publishing Group, Inc.; Executive Vice President and Treasurer of Western Publishing Company, Inc.; Executive Vice President, Treasurer and Chief Financial Officer of Penn Corporation Michael J. Kutchin 38 Vice President-Chief Financial Officer of Western Publishing Company, Inc. Ilan Reich 41 Vice President-Special Projects of Western Publishing Group, Inc. Richard E. Snyder 63 President of Western Publishing Group, Inc. Hal B. Weiss 39 Vice President and Assistant Treasurer of Western Publishing Group, Inc.
15 Mr. Bernstein has been Chairman and Chief Executive Officer of Western Publishing Group, Inc. and Chairman of Western Publishing Company, Inc. since February 1984. From 1984 to August 1989, Mr. Bernstein was also President of Western Publishing Group, Inc. In November 1986, Mr. Bernstein became Chairman, President and Chief Executive Officer of Penn Corporation. He is President of P & E Properties, Inc., a private commercial real estate ownership/management company, and has been for more than five years. Mr. Bernstein is the sole shareholder of P & E Properties, Inc. He is a member of the Regional Advisory Board of Chemical Bank, a member of the Board of Trustees of New York University, a member of the Board of Overseers of the New York University Stern School of Business, a Director and Vice President of the Police Athletic League, Inc., a member of the Board of Trustees of New York University's Hospital for Joint Diseases/Orthopedic Institute, a member of the Board of Directors of The Big Apple Circus, Inc., and a member of The Economic Club of New York. Mr. Cohen has been Senior Vice President-Legal Affairs and Secretary of Western Publishing Group, Inc. since December 1991 and a senior executive of P & E Properties, Inc. since February 1984. He became Senior Vice President-Legal Affairs & Secretary of Western Publishing Company, Inc. in January 1995. From February 1984 until December 1991 he was Vice President, General Counsel and Secretary of Western Publishing Group, Inc. In March 1987, Mr. Cohen became Secretary of Western Publishing Company, Inc. and in January 1993, Vice President-Legal Affairs of that company. In November 1986, Mr. Cohen became Secretary of Penn Corporation, in April 1987, Vice President and General Counsel, and in May 1991, Vice President-Legal Affairs and Secretary of that corporation. Mr. Gomberg has been Vice President-Business Development and Corporate Communications of Western Publishing Group, Inc. since February 1986. In April 1987, Mr. Gomberg became a Vice President of Penn Corporation. In addition, he is a Vice President and Assistant Secretary of Western Publishing Company, Inc. Since February 1986, he has also been a senior executive of P & E Properties, Inc. From 1976 through January 1986, Mr. Gomberg was employed by Sony Corporation of America, a manufacturer and distributor of consumer electronic products, first as General Counsel and after November 1983 as Vice President-Government Affairs. Mr. Gordon joined Western Publishing Company, Inc. in August 1993 as Vice President and General Counsel. He became Vice President and General Counsel of Western Publishing Group, Inc. and Penn Corporation in January, 1994. From 1980 through July 1993 he was with Playboy Enterprises, Inc. in various legal/management positions, most recently as Vice President, Secretary and Associate General Counsel. Mr. Grossman has been Executive Vice President, Treasurer and Chief Financial Officer of Western Publishing Group, Inc. since June 1994. Prior to that, Mr. Grossman was Vice President-Financial Planning. Since July, 1992, he has also been an employee of P & E Properties, Inc. From August 1983 to July 1992 Mr. Grossman was with the public accounting firm of Deloitte & Touche LLP. He is a Certified Public Accountant licensed in the State of New York. Mr. Kutchin joined Western Publishing Company, Inc. in February 1995 as Vice President-Corporate Controller and was appointed Chief Financial Officer in September 1995. Before joining Western Publishing Company, Inc., he was Vice President-Chief Financial Officer of Ganton Technologies, Inc. From 1982 through 1989 Mr. Kutchin was with the public accounting firm of Price Waterhouse LLP. He is a Certified Public Accountant. Mr. Reich has been Vice President-Special Projects of Western Publishing Group, Inc. since October 1992. Since December, 1987 he has also been an employee of P & E Properties, Inc. Mr. Snyder was elected as President of Western Publishing Group, Inc. on January 31, 1996, in connection with the signing of the Securities Purchase Agreement. Prior to that time, Mr. Snyder had, since 1994, been an independent business consultant and investor. He was the Chairman and Chief Executive Officer of Simon & Schuster from 1975 to 1994. Mr. Snyder is a director of Franklin Electronic Publishers, Inc. and of Reliance Group Holdings, Inc. 16 Mr. Weiss has been Vice President and Assistant Treasurer of Western Publishing Group, Inc. since August 1990. From April 1986 until July 1990, Mr. Weiss was Controller and Assistant Treasurer of Western Publishing Group, Inc. and from November 1986 until July 1989 he was Controller of Penn Corporation. In addition, Mr. Weiss has been Controller of P & E Properties, Inc. since 1985. Mr. Weiss is a Certified Public Accountant. Prior to joining Western Publishing Group, Inc. in 1985, Mr. Weiss practiced public accounting at the firm of Turner, Imowitz and Company. 17 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS STOCKHOLDERS' INFORMATION COMMON STOCK PRICES Western Publishing Group, Inc. completed an initial public offering of its Common Stock on April 22, 1986. The Common Stock is traded over-the-counter and is quoted on the NASDAQ National Market System (symbol WPGI). The following table sets forth the range of prices (which represent actual transactions) by quarter as provided by the National Association of Securities Dealers, Inc. Fiscal Year Ended February 3, 1996 ......................................... High Low First Quarter 9 15/16 8 Second Quarter 11 3/4 9 1/16 Third Quarter 14 1/2 7 7/8 Fourth Quarter 7 3/4 10 7/8 Fiscal Year Ended January 28, 1995 ......................................... High Low First Quarter 20 1/4 11 Second Quarter 12 7/8 9 5/8 Third Quarter 14 1/8 10 Fourth Quarter 12 5/8 9 1/4 DIVIDEND POLICY Since its organization in 1984, Western Publishing Group, Inc. has not paid any cash dividends on its Common Stock. Management does not anticipate the payment of cash dividends on Common Stock in the foreseeable future (see Note 7 to the Company's Consolidated Financial Statements on page F-11 of the Company's April 18, 1996 Proxy Statement, for the Special Meeting of Stockholders scheduled for May 8, 1996, which is incorporated by reference herein and included as an exhibit hereto). 18 ITEM 6. SELECTED FINANCIAL DATA
1996 1995 1994 1993 1992 (In Thousands Except For Per Share Data) INCOME STATEMENT DATA: REVENUES: Net sales $369,572 $398,354 $613,464 $649,089 $552,360 Royalties and other income 4,685 4,201 3,211 3,062 2,141 -------- -------- -------- -------- -------- Total revenues 374,257 402,555 616,675 652,151 554,501 -------- -------- -------- -------- -------- COSTS AND EXPENSES: Cost of sales 281,392 297,421 432,503 425,274 365,913 Selling, general and administrative 129,020 124,128 203,042 188,161 160,059 Provision for restructuring and closure of operations 8,701 Gain on streamlining plan (2,000) (20,352) Provision for write-down of Division (1,100) 28,180 -------- -------- -------- -------- -------- Total costs and expenses 417,113 400,097 663,725 613,435 525,972 -------- -------- -------- -------- -------- (LOSS) INCOME BEFORE INTEREST EXPENSE, INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (42,856) 2,458 (47,050) 38,716 28,529 INTEREST EXPENSE 12,859 17,567 16,270 10,358 6,255 -------- -------- -------- -------- -------- (LOSS) INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (55,715) (15,109) (63,320) 28,358 22,274 PROVISION (BENEFIT) FOR INCOME TAXES 11,332 2,470 (22,295) 10,860 8,580 -------- -------- -------- -------- -------- (LOSS) INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (67,047) (17,579) (41,025) 17,498 13,694 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (14,800) -------- -------- -------- -------- -------- NET (LOSS) INCOME $(67,047) $(17,579) $(55,825) $ 17,498 $ 13,694 ======== ======== ======== ======== ======== (LOSS) INCOME PER COMMON SHARE: Before cumulative effect of change in accounting principle $ (3.23) $ (0.88) $ (1.99) $ 0.80 $ 0.62 Cumulative effect of change in accounting principle (0.71) -------- -------- -------- -------- -------- NET (LOSS) INCOME (3.23) (0.88) (2.70) 0.80 0.62 ======== ======== ======== ======== ======== BALANCE SHEET DATA (AT PERIOD END): Working capital $165,309 $228,240 $332,979 $283,101 $106,556 Total assets 321,965 428,806 505,116 508,585 390,965 Long-term debt 149,845 149,828 229,812 179,797 Convertible preferred stock 9,985 9,985 9,985 9,985 9,985 Common stockholders' equity 74,368 140,794 158,673 215,246 199,393
The selected financial data should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's April 18, 1996 Proxy Statement for the Special Meeting of Stockholders scheduled for May 8, 1996, which is incorporated by reference herein and included as an exhibit hereto. 19 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cautionary Statement on Forward-Looking Statements Forward-looking statements, within the meaning of Section 21E of the Securities and Exchange Act of 1934, are made throughout this Management's Discussion and Analysis and in the other sections of this report. Total Company results may differ materially from those in the forward-looking statements. Forward-looking statements are based on management's current views and assumptions, and involve risks and uncertainties that could significantly affect expected results. For example, operating results may be affected by external factors such as: actions of competitors; changes in laws and regulations, including changes in accounting standards; customer demand; effectiveness of spending or programs; and fluctuations in the cost of supply-chain resources. The Company's expected earnings improvement in Fiscal 1997 is based on its analysis of current financial and operating conditions, which it reviews and updates periodically through its planning process. This process includes an assessment of current operating conditions and the competitive environment, as well as the projected outcome of supply-chain management programs, the effectiveness of its manufacturing and overhead streamlining programs and a reduction in excess inventories. Management's Discussion and Analysis The information called for is incorporated by reference to the information under "Management's Discussion and Analysis of Financial Condition and Results of Operations" on page 66 in the Registrant's April 18, 1996 Proxy Statement for the Special Meeting of Stockholders scheduled for May 8, 1996, which is included as an exhibit hereto. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Item 14 on page 22. CONSOLIDATED QUARTERLY FINANCIAL INFORMATION The information called for is incorporated by reference to the information under "Consolidated Quarterly Financial Information" on page 72 in the Registrant's April 18, 1996 Proxy Statement for the Special Meeting of Stockholders scheduled for May 8, 1996, which is included as an exhibit hereto. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. 20 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information called for with respect to Directors is incorporated by reference to the information under "Business Experience of Directors and Executive Officers" on page 49 in the Registrant's April 18, 1996 Proxy Statement for the Special Meeting of Stockholders scheduled for May 8, 1996, which is included as an exhibit hereto. ITEM 11. EXECUTIVE COMPENSATION The information called for is incorporated by reference to the information under "Executive Compensation" on page 55 in the Registrant's April 18, 1996 Proxy Statement for the Special Meeting of Stockholders scheduled for May 8, 1996, which is included as an exhibit hereto. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information called for is incorporated by reference to the information under "Beneficial Stock Ownership - Principal Stockholders" and "Beneficial Stock Ownership - Directors and Executive Officers" on page 15, respectively in the Registrant's April 18, 1996 Proxy Statement for the Special Meeting of Stockholders scheduled for May 8, 1996, which is included as an exhibit hereto. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information called for is incorporated by reference to the information under "Certain Transactions" on page 57 in the Registrant's April 18, 1996 Proxy Statement for the Special Meeting of Stockholders scheduled for May 8, 1996, which is included as an exhibit hereto. 21 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements. The consolidated financial statements of Western Publishing Group, Inc. and subsidiaries, which appear on pages F-1 through F-20 of the Company's April 18, 1996 Proxy Statement for the Special Meeting of Stockholders scheduled for May 8, 1996, which is incorporated by reference herein and included as an exhibit hereto. Page Reference ------------------------ April 18, 1996 Proxy Form 10-K Statement --------- -------------- WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES Independent Auditors' Report A-1 F-2 Consolidated Balance Sheets as of February 3, 1996 and January 28, 1995 F-3 Consolidated Statements of Operations for the Years ended February 3, 1996, January 28, 1995 and January 29, 1994 F-4 Consolidated Statements of Common Stockholders' Equity for the Years ended February 3, 1996, January 28, 1995 and January 29, 1994 F-5 Consolidated Statements of Cash Flows for the Years ended February 3, 1996, January 28, 1995 and January 29, 1994 F-6 Notes to Consolidated Financial Statements F-7 2. Financial Statement Schedule. II - Valuation and Qualifying Accounts S-1 22 EXHIBITS - - -------- 3.1 Restated Certificate of Incorporation of the Registrant dated March 11, 1986 (incorporated by reference to Exhibit 3.1 to the Registrant's Registration Statement No 33-4127 on Form S-1 (the "Registration Statement")). 3.2 Certificate of Correction of the Certificate of Incorporation of the Registrant dated January 13, 1987 (incorporated by reference to Exhibit 3.2 to the Registrant's Annual Report on Form 10-K for fiscal year 1988 (the "1988 Form 10-K")). 3.3 Amendment to Certificate of Incorporation of Registrant as approved by a majority of the stockholders at the Annual Meeting of Stockholders held May 14, 1987 (incorporated by reference to Exhibit 3.3 to the 1988 Form 10-K). 3.4 Amendment to Certificate of Incorporation of Registrant as approved by a majority of the stockholders at the Annual Meeting of Stockholders held May 17, 1990 (incorporated by reference to Exhibit 3.4 to Registrant's Annual Report on From 10-K for fiscal year 1991 (the "1991 Form 10-K")). 3.41 Amendment to Certificate of Incorporation of Registrant as approved by a majority of the stockholders at the Annual Meeting of Stockholders held December 19, 1995. 3.5 By-laws of the Registrant (incorporated by reference to Exhibit 3.4 to the 1988 Form 10-K). 4.1 Form of certificate for shares of the Registrant's Common Stock (incorporated by reference to Exhibit 4.4 to the Registration Statement). 10.20 Securities Purchase Agreement, dated as of January 31, 1996, by and between Western Publishing Group, Inc. and Golden Press Holding, L.L.C., with exhibits (incorporated by reference to Exhibit 10.20 to the Registrant's Form 8-K as of January 31, 1996). 10.21 Irrevocable Proxy, dated as of January 31, 1996, between Golden Press Holding, L.L.C. and Richard A. Bernstein (incorporated by reference to Exhibit 10.21 to the Registrant's Form 8-K as of January 31, 1996). 10.22 Irrevocable Proxy, dated as of January 31, 1996, between Golden Press Holding, L.L.C. and the Trust, fbo Richard A. Bernstein u/a March 16, 1978, Richard A. Bernstein and Stuart Turner, as trustees (incorporated by reference to Exhibit 10.22 to the Registrant's Form 8-K as of January 31, 1996). 10.23 Irrevocable Proxy, dated as of January 31, 1996, between Golden Press Holding, L.L.C. and the Trust, fbo Richard A. Bernstein u/a Barry S. Bernstein, dated April 5, 1986, Fleet National Bank of Connecticut, as trustee (incorporated by reference to Exhibit 10.23 to the Registrant's Form 8-K as of January 31, 1996). 10.24 Registration Rights Agreement, dated as of January 31, 1996, by and among Western Publishing Group, Inc., Richard A. Bernstein, the Trust, fbo Richard A. Bernstein u/a March 16, 1978, Richard A. Bernstein and Stuart Turner, as trustees, The Richard A. and Amelia Bernstein Foundation, Inc. and the Trust, fbo Richard A. Bernstein u/a Barry S. Bernstein dated April 5, 1986, Fleet National Bank of Connecticut, as trustee (incorporated by reference to Exhibit 10.24 to the Registrant's Form 8-K as of January 31, 1996). 10.25 Amendment No. 1 dated April 5, 1996 to Securities Purchase Agreement. 10.27 Lease dated January 15, 1985, between PG Investments and Western Publishing Company, Inc. with amendment dated January 22, 1986 (incorporated by reference to Exhibit 10.9 to the Registration Statement). 23 10.28 Amendment dated December 29, 1986, between PG Investments and Western Publishing Company, Inc. to the lease dated January 15, 1985, as amended (incorporated by reference to Exhibit 10.9 to the 1988 Form 10-K). 10.29 Amendment dated January 18, 1988, between PG Investments and Western Publishing Company, Inc. to the Lease dated January 15, 1985, as amended (incorporated by reference to Exhibit 10.10 to the 1988 Form 10-K). 10.30 Amendment dated August 25, 1988, between PG Investments and Western Publishing Company, Inc. to the Lease dated January 15, 1985, as amended (incorporated by reference to Exhibit 10.16 to the Registrant's Annual Report on Form 10-K for fiscal year 1989 (the "1989 Form 10-K")). 10.31 Amendment dated December 21, 1989, between PG Investments and Western Publishing Company, Inc. to the Lease dated January 15, 1985, as amended (incorporated by reference to Exhibit 10.31 to the Registrant's Annual Report on Form 10-K for fiscal year 1990 (the "1990 Form 10-K")). 10.33 Lease dated February 1, 1989, between Golden Press, Inc. and 850 Third Avenue LP (incorporated by reference to Exhibit 10.33 to the 1990 Form 10-K). 10.33a First Amendment Agreement dated February 3, 1993 (to lease dated February 1, 1989) between 850 Third Avenue LP and Golden Press, Inc., as modified by Letter Agreement dated February 3, 1993 (incorporated by reference to Exhibit 10.33a to the 1990 Form 10-K). 10.35 Warehouse Lease Agreement - Indenture dated April 15, 1987, between Cambridge Terminal Warehouse and Western Publishing Company, Inc. (incorporated by reference to Exhibit 10.21 to the 1988 Form 10-K). 10.36 Lease Amendment dated March 17, 1989, between Cambridge Terminal Warehouse and Western Publishing Company, Inc. to the Warehouse Lease Agreement - Indenture dated April 15, 1987 (incorporated by reference to Exhibit 10.36 to the 1990 Form 10-K). 10.37 Lease dated May 1, 1987, between West Springfield Industrial Center, Inc. and Penn Corporation (incorporated by reference to Exhibit 10.23 to the 1988 Form 10-K). 10.40 Golden Comprehensive Security Program, as amended and restated, effective January 1, 1993 (incorporated by reference to Exhibit 10.40 to the Registrant's Annual Report on Form 10-K for fiscal year 1993 (the "1993 Form 10-K")). 10.41 First Amendment of Golden Comprehensive Security Program, as amended and restated, effective January 1, 1993 (incorporated by reference to Exhibit 10.41 to the Registrant's Annual Report on Form 10-K for the fiscal year 1995 (the "1995 Form 10-K")). 10.42 Second Amendment of Golden Comprehensive Security Program, as amended and restated, effective January 1, 1993. 10.43 Third Amendment of Golden Comprehensive Security Program, as amended and restated, effective January 1, 1993. 10.53 Golden Retirement Savings Program, as amended and restated, effective January 1, 1993 (incorporated by reference to Exhibit 10.53 to the 1993 Form 10-K). 10.54 First Amendment of Golden Retirement Savings Program, as amended and restated, effective January 1, 1993 (incorporated by reference to Exhibit 10.54 to the 1995 Form 10-K). 10.55 Second Amendment of Golden Retirement Savings Program, as amended and restated, effective January 1, 1993. 24 10.63 Penn Corporation Comprehensive Security Program, effective January 1, 1987 (incorporated by reference to Appendix A to the Registrant's Registration Statement 33-18430 on Form S-8 (the "Penn Comprehensive Registration Statement")). 10.64 First Amendment of Penn Corporation Comprehensive Security Program, effective November 2, 1987 (incorporated by reference to Appendix A to the Penn Comprehensive Registration Statement). 10.65 Second Amendment of Penn Corporation Comprehensive Security Program, effective January 1, 1987 (incorporated by reference to Exhibit 10.36 to the 1988 Form 10-K). 10.66 Third Amendment of Penn Corporation Comprehensive Security Program, effective November 2, 1987 (incorporated by reference to Exhibit 10.37 to the 1988 Form 10-K). 10.67 Fourth Amendment of Penn Corporation Comprehensive Security Program, effective January 1, 1988 (incorporated by reference to Exhibit 10.48 to the 1989 Form 10-K). 10.68 Fifth Amendment of Penn Corporation Comprehensive Security Program, effective January 1, 1988 (incorporated by reference to Exhibit 10.49 to the 1989 Form 10-K). 10.69 Sixth Amendment of Penn Corporation Comprehensive Security Program, effective January 1, 1988 (incorporated by reference to Exhibit 10.50 to the 1989 Form 10-K). 10.70 Seventh Amendment of Penn Corporation Comprehensive Security Program, effective January 1, 1987, 1988 or 1989 as applicable (incorporated by reference to Exhibit 10.52 to the 1990 Form 10-K). 10.71 Eighth Amendment of Penn Corporation Comprehensive Security Program, effective October 18, 1989 (incorporated by reference to Exhibit 10.67 to the 1990 Form 10-K). 10.71a Ninth Amendment of Penn Corporation Comprehensive Security Program, effective July 1, 1991 (incorporated by reference to Exhibit 10.67 to the Registrant's Annual Report on Form 10-K for fiscal year 1992 (the "1992 Form 10-K")). 10.71b Tenth Amendment of Penn Corporation Comprehensive Security Program, effective April 1, 1993 (incorporated by reference to Exhibit 10.67 to the 1994 Form 10-K). 10.71c Eleventh Amendment of Penn Corporation Comprehensive Security Program, effective January 1, 1994 (incorporated by reference to Exhibit 10.71c to the 1995 Form 10-K). 10.71d Twelfth Amendment of Penn Corporation Comprehensive Security Program, effective January 1, 1994. 10.72 Beach Products (Division of Penn Corporation) Retirement Savings Program, effective May 2, 1989 (incorporated by reference to Exhibit 10.72 to the 1992 Form 10-K). 10.73 First Amendment of Beach Products (Division of Penn Corporation) Retirement Savings Program, effective October 1, 1990 (incorporated by reference to Exhibit 10.73 to the 1992 Form 10-K). 10.74 Second Amendment of Beach Products (Division of Penn Corporation) Retirement Savings Program, effective October 17, 1991 (incorporated by reference to Exhibit 10.74 to the 1992 Form 10-K). 10.74a Third Amendment of Beach Products (Division of Penn Corporation) Retirement Savings Program, effective July 1, 1991 (incorporated by reference to Exhibit 10.73 to the 1993 Form 10-K). 10.74b Fourth Amendment of Beach Products (Division of Penn Corporation) Retirement Savings Program, effective April 1, 1993 (incorporated by reference to Exhibit 10.73 to the 1994 Form 10-K). 25 10.74c Fifth Amendment of Beach Products (Division of Penn Corporation) Retirement Savings Program, effective January 1, 1994 (incorporated by reference to Exhibit 10.74c to the 1995 Form 10-K). 10.74d Sixth Amendment of Beach Products (Division of Penn Corporation) Retirement Savings Program, effective January 1, 1994. 10.75 Master Trust Agreement between the Registrant, Western Publishing Company, Inc., Penn Corporation and Bankers Trust Company, effective November 19, 1987 (incorporated by reference to Exhibit 10.38 to the 1988 Form 10-K). 10.76 Form of Agreement between the Registrant, Penn Corporation and certain employees of Penn Corporation relating to the award of shares of common stock of the Registrant, as adopted by the Board of Directors of the Registrant on May 1, 1987 (incorporated by reference to Exhibit 10.39 to the 1988 Form 10-K). 10.77 Amended and Restated 1986 Employee Stock Option Plan of the Registrant (incorporated by reference to Exhibit 10.40 to the 1988 Form 10-K). 10.78 Amendment dated April 11, 1989 to the Amended and Restated 1986 Employee Stock Option Plan of the Registrant (incorporated by reference to Exhibit 10.56 to the 1990 Form 10-K). 10.79 Employment Agreement dated the 24th day of April, 1990 between Western Publishing Group, Inc. and Frank P. DiPrima (incorporated by reference to Exhibit 10.72 to the 1991 Form 10-K). 10.80 Western Publishing Company, Inc.'s Executive Medical Reimbursement Plan dated January 1, 1991 (incorporated by reference to Exhibit 10.73 to the 1991 Form 10-K). 10.85 Western Publishing Group, Inc. 1995 Stock Option Plan (incorporated by reference to Appendix A to the Registrant's November 17, 1995 Proxy Statement). 10.86 Employment Agreement dated as of May 9, 1995 between Western Publishing Group, Inc. and John P. Moore. 10.86a Agreement dated February 6, 1996 between Western Publishing Group, Inc. and John P. Moore. 10.86b Amendment to the Agreement dated February 6, 1996 between Western Publishing Group, Inc. and John P. Moore dated February 7, 1996. 10.88 Credit Agreement dated as of November 12, 1992, providing up to $200 million, among the Registrant, Western Publishing Group, Inc. and a group of commercial banks (incorporated by reference to Exhibit 10.88 to the Form 10-Q for the quarter ended October 31, 1992). 10.89 Amendment No. 1 dated as of July 31, 1993, to the Credit Agreement dated as of November 12, 1992 (incorporated by reference to Exhibit 10.89 to the 1994 Form 10-K). 10.90 Amendment No. 2 dated as of October 30, 1993, to the Credit Agreement dated as of November 12, 1992 (incorporated by reference to Exhibit 10.90 to the 1994 Form 10-K). 10.91 Guarantee Agreement dated as of December 13, 1993, to the Credit Agreement dated as of November 12, 1992 (incorporated by reference to Exhibit 10.91 to the 1994 Form 10-K). 10.92 Amendment No. 3 dated as of May 13, 1994, to the Credit Agreement dated as of November 12, 1992 (incorporated by reference to Exhibit 10.92 to the 1994 Form 10-K). 26 10.93 Amended and Restated Credit Agreement dated as of May 31, 1994, providing up to $140 million, among the Registrant, Western Publishing Group, Inc. and a group of commercial banks (incorporated by reference to Exhibit 10.93 to the 1995 Form 10-K). 10.94 Amendment No. 1 dated as of August 4, 1994, to the Amended and Restated Credit Agreement dated as of May 31, 1994 (incorporated by reference to Exhibit 10.94 to the 1995 Form 10-K). 10.95 Amendment No. 2 dated as of February 21, 1995, to the Amended and Restated Credit Agreement dated as of May 31, 1994 (incorporated by reference to Exhibit 10.95 to the 1995 Form 10-K). 10.96 Asset Purchase and Supply Agreement dated as of August 4, 1994 among Western Publishing Company, Inc., Western Publishing (Canada), Ltd., and Hasbro, Inc. (incorporated by reference to Exhibit 10.96 to the 1995 Form 10-K). 10.97 Agreement dated as of September 23, 1994 between Western Publishing Group, Inc. and George P. Oess (incorporated by reference to Exhibit 10.97 to the 1995 Form 10-K). 10.98 Receivables Purchasing Agreement and related transaction documents dated as of September 29, 1995 between Western Publishing Company, Inc. and Heller Financial, Inc. (incorporated by reference to Exhibit 10.98 to the Registrant's Form 8-K as of September 29, 1995). 10.98a First Amendment to Receivables Purchasing Agreement dated as of December 26, 1995, as relates to the Credit Agreement dated as of September 29, 1995. 21.1 List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the 1995 Form 10-K). 99.4 Undertaking incorporated by reference into Part II of certain registration statements on Form S-8 of the Registrant. 99.5 Proxy Statement dated April 18, 1996 for the Special Meeting of Stockholders scheduled for May 8, 1996, as filed with the Securities and Exchange Commission on April 19, 1996. (b) Form 8-K as of January 31, 1996. 27 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Dated: May 3, 1996 Western Publishing Group, Inc. By: /s/ Richard A. Bernstein ------------------------------------ Richard A. Bernstein, Chairman and Chief Executive Officer 28 Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been executed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. Signature Title Date - - --------- ----- ---- /s/ Richard A. Bernstein Chairman, Chief Executive May 3, 1996 - - -------------------------- Officer and Director Richard A. Bernstein (Principal Executive Officer) /s/ Steven M. Grossman Executive Vice President, May 3, 1996 - - -------------------------- Treasurer and Chief Financial Steven M. Grossman Officer (Principal Financial and Accounting Officer) /s/ Richard H. Hochman Director May 3, 1996 - - -------------------------- Richard H. Hochman /s/ John F. Moore Director May 3, 1996 - - -------------------------- John F. Moore /s/ Jenny Morgenthau Director May 3, 1996 - - -------------------------- Jenny Morgenthau /s/ Michael A. Pietrangelo Director May 3, 1996 - - -------------------------- Michael A. Pietrangelo 29 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Western Publishing Group, Inc.: We have audited the consolidated financial statements of Western Publishing Group, Inc. and subsidiaries as of February 3, 1996 and January 28, 1995, and for each of the three years in the period ended February 3, 1996, and have issued our report thereon dated April 2, 1996 (which report includes an explanatory paragraph regarding the adoption of Statement of Financial Accounting Standards No. 106); such financial statements and report are included in your April 18, 1996 Proxy Statement for the Special Meeting of Stockholders scheduled for May 8, 1996, and are incorporated herein by reference. Our audits also included the financial statement schedule of Western Publishing Group, Inc., listed in Item 14. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Milwaukee, Wisconsin April 2, 1996 A-1 WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS THREE YEARS ENDED FEBRUARY 3, 1996 (IN THOUSANDS)
Allowance for Allowance Doubtful for Accounts Returns Total BALANCES, JANUARY 30, 1993 $ 6,929 $ 8,243 $ 15,172 Additions charged to costs and expenses 5,577 40,951 46,528 Deductions - amounts written off (5,686) (40,268) (45,954) Other changes - net (2,318) 2,767 449 Foreign currency conversion (11) (15) (26) ------- -------- -------- BALANCES, JANUARY 29, 1994 4,491 11,678 16,169 Additions charged to costs and expenses 472 26,248 26,720 Deductions - amounts written off (885) (30,442) (31,327) Foreign currency conversion (11) (12) (23) ------- -------- -------- BALANCES, JANUARY 28, 1995 4,067 7,472 11,539 Additions charged to costs and expenses 1,440 16,712 18,152 Deductions - amounts written off (2,989) (19,708) (22,697) Foreign currency conversion 4 6 10 ------- -------- -------- BALANCES, FEBRUARY 3, 1996 $ 2,522 $ 4,482 $ 7,004 ======= ======== ========
S-1 EX-3.41 2 CERTIFICATE OF AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION OF WESTERN PUBLISHING GROUP, INC. Exhibit 3.41 CERTIFICATE OF AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION OF WESTERN PUBLISHING GROUP, INC. WESTERN PUBLISHING GROUP, INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (hereinafter, the "Corporation"), DOES HEREBY CERTIFY as follows: FIRST: That the Board of Directors of the Corporation duly and validly adopted a resolution proposing and declaring advisable the following amendment to the Restated Certificate of Incorporation: RESOLVED, that Article Fourth of the Restated Certificate of Incorporation of the Corporation be amended by deleting the present provisions thereof and inserting the following in lieu thereof: "Fourth: The Corporation shall have the authority to issue 40,100,000 shares, consisting of 40,000,000 shares of common stock, par value $0.01, and 100,000 shares of preferred stock, without par value. The Board of Directors may authorize the issuance from time to time of preferred stock in one or more series and with such designations, preferences, relative, participating, optional and other special rights, and qualifications, limitations or restrictions (which may differ with respect to each series) as the Board may fix by resolution." SECOND: That such amendment to the Restated Certificate of Incorporation was duly adopted in accordance with the applicable provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed on its behalf by Richard A. Bernstein, the Chairman of the Board and Chief Executive Officer of the Corporation, on this 23 day of January, 1996. WESTERN PUBLISHING GROUP, INC. By: /s/ Richard A. Bernstein Name: Richard A. Bernstein Title: Chairman and Chief Executive Officer EX-10.25 3 AMENDMENT NO. 1 TO SECURITIES PURCHASE AGREEMENT Exhibit 10.25 AMENDMENT NO. 1 TO SECURITIES PURCHASE AGREEMENT AMENDMENT NO. 1 TO SECURITIES PURCHASE AGREEMENT, dated as of April 18, 1996 (the "Amendment"), by and between Western Publishing Group, Inc., a Delaware corporation ("the Company"), and Golden Press Holding, L.L.C., a Delaware limited liability company ("Buyer"). WHEREAS, the Company and Buyer have entered into a Securities Purchase Agreement dated as of January 31, 1996 (the "Agreement"); capitalized terms not otherwise defined herein shall have the meanings set forth in the Agreement); and WHEREAS, the Company and Buyer desire to amend the Agreement in accordance with the terms hereof; NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: SECTION 1. Amendment to the Agreement. The Agreement is, effective as of the date hereof, amended as follows: (a) Section 5.3 of the Agreement is hereby amended by (i) deleting the phrase "increasing the authorized number of shares of Company Common Stock from 40,000,000 to 50,000,000" and inserting in its place the phrase "increasing the authorized number of shares of Company Common Stock from 40,000,000 to 60,000,000" and (ii) deleting the name "Golden Press, Inc." and inserting in its place the name "Golden Books Family Entertainment, Inc." (b) Section 7.1 (b) of the Agreement is hereby amended by deleting the date "May 1, 1996" and inserting in its place the date "May 22, 1996." SECTION 2. Proxy Soliciting Firm. The Company and Buyer agree that the Company will not retain the services of a proxy soliciting firm in connection with the Company Meeting as required by Section 5.2(b) of the Agreement. SECTION 3. Representations. (a) The Company represents to Buyer that it has the requisite corporate power to enter into this Amendment and to carry out its obligations hereunder, that the execution and delivery of this Amendment has been duly authorized by all necessary corporate actions and that this Amendment has been duly executed and delivered on behalf of the Company. (b) The Buyer represents to the Company that it has the requisite power to enter in this Amendment and to carry out its obligations hereunder, that this Amendment has been duly authorized by all necessary actions on the part of the Buyer and that this Amendment has been duly executed and delivered on behalf of the Buyer. SECTION 4. Reference to and Effect on the Agreement. (a) Each reference in the Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import shall mean and be a reference to the Agreement as amended by Section 1 hereof. (b) Except as otherwise provided for in this Amendment, the Agreement shall remain in full force and effect and is hereby rectified and confirmed. SECTION 5. Execution in Counterparts. This Amendment may be executed in any number of counterparts which together shall constitute a single instrument. SECTION 6. Governing Law. This Amendment shall be governed in all respects, including validity, interpretation and effect, by the Laws of the State of New York (without giving effect to the provisions thereof relating to conflicts of law). IN WITNESS HEREOF, each of Buyer and the Company has caused this Amendment to be duly signed on its behalf all as of the date first written above. GOLDEN PRESS HOLDING, L.L.C. By: WARBURG, PINCUS VENTURES, L.P. Member By: WARBURG, PINCUS & CO., its General Partner By: /s/ David A. Tanner ----------------------------------- Name: David A. Tanner Title: Partner WESTERN PUBLISHING GROUP, INC. By: /s/ Richard A. Bernstein ----------------------------------- Name: Richard A. Bernstein Title: Chairman and Chief Executive Officer EX-10.42 4 SECOND AMENDMENT OF GOLDEN COMPREHENSIVE SECURITY PROGRAM Exhibit 10.42 SECOND AMENDMENT OF GOLDEN COMPREHENSIVE SECURITY PROGRAM (As Amended and Restated Effective January 1, 1993) WHEREAS, Western Publishing Company, Inc. (the "Corporation") maintains the Golden Comprehensive Security Program (the "plan"); and WHEREAS, the plan was completely amended and restated effective January 1, 1993, and further amendment of the plan is now considered desirable; NOW, THEREFORE, IT IS RESOLVED that by virtue and in exercise of the power reserved to this corporation under subsection 11.1 of the plan, the plan, as previously amended, be and it hereby is further amended, effective as of January 1, 1995, by adding the following sentence to subsection 11.2 of the plan: "In the event of the termination of employment of substantially all employees of Western Publishing Group, Inc. (the "Company") as a result of the sale of the Company, or a Change of Control, as defined below, of the Company, all participants employed by Western Publishing Group, Inc. on the date of such sale or Change of Control shall be fully vested and have a 100% nonforfeitable interest in their employer contribution and matched employer contribution accounts under the Plan." For the purposes of the preceding paragraph "'Change of Control' means (i) the sale, merger, consolidation or any other extraordinary corporate transaction(s) involving Western Publishing Group, Inc. which results in the then common stockholders of Western Publishing Group, Inc. owning less than 80% of the common equity of the successor company or its parent, or (ii) a change in composition of the Board of Directors of Western Publishing Group, Inc. as the result of a proxy contest, corporate transaction or other agreement which results in the replacement, elimination or increase in membership such that the board members in office just prior to that event cease to constitute a majority of the new board." * * * I, James A. Cohen, Secretary of Western Publishing Company, Inc., hereby certify that the foregoing is a correct copy of a resolution duly adopted by the Board of Directors of said corporation on June 15, 1995, and that said resolution has not been changed or repealed. Dated this 15 day of June, 1995. /s/ James A. Cohen ----------------------------- Secretary as Aforesaid (Corporate Seal) * * * The undersigned, as committee members under the Golden Comprehensive Security Program, hereby acknowledge receipt of a certified copy of the foregoing amendment and hereby consent thereto, this 15 day of June, 1995. /s/ James A. Cohen --------------------------------- /s/ Steven M. Grossman --------------------------------- /s/ Hal B. Weiss --------------------------------- --------------------------------- As Committee Members As Aforesaid EX-10.43 5 THIRD AMENDMENT OF GOLDEN COMPREHENSIVE SECURITY PROGRAM Exhibit 10.43 THIRD AMENDMENT OF GOLDEN COMPREHENSIVE SECURITY PROGRAM (As Amended and Restated Effective January 1, 1993) WHEREAS, this corporation maintains the Golden Comprehensive Security Program (As Amended and Restated Effective January 1, 1993) (the "plan"); and WHEREAS, the plan has been amended, and further amendment thereof is now considered desirable; NOW, THEREFORE, IT IS RESOLVED that, by virtue and in exercise of the power reserved to this corporation under subsection 11.1 of the plan, the plan, as previously amended, be and it hereby is further amended in the following particulars: 1. By substituting the following for subsection 2.1 of the plan: "2.1. Eligibility. Subject to the conditions and limitations of the plan, each employee of an employer who was an active participant in the plan immediately prior to January 1, 1996 will continue to participate in the plan on and after that date. Each other employee of an employer will be eligible to become a participant in the plan if he meets the following requirements: (a) He is either: (i) A salaried employee (that is, an employee whose basic compensation for services rendered to an employer is paid to him in fixed amounts at stated intervals without regard to the number of hours worked, even though he may receive additional compensation in the form of bonuses, overtime pay or commissions); or (ii) A member of a group or class of employees of an employer to whom the plan has been extended by the Board of Directors of the employer; and (b) He does not belong to a collective bargaining unit of employees represented by a collective bargaining representative, except to the extent that an agreement between the employer and such representative extends the plan to such unit of employees. Each employee who meets the requirements of subparagraphs (a) and (b) above will become a participant in the plan on the entry date specified in (c) or (d) below, whichever applies: (c) If the employee is hired by an employer before January 1, 1996, on the first January 1, April 1, July 1 or October 1 (the 'quarterly entry date') coincident with or next following the date he has completed six months of continuous employment (as defined in subsection 2.2); or (d) If the employee is hired by an employer on or after January 1, 1996, on the first day of the calendar month (the 'monthly entry date') coincident with or next following the date he has completed twelve months of continuous employment (as defined in subsection 2.2). Each employee will be notified of the date as of which he becomes a participant in the plan and will 2 be furnished with a summary plan description in accordance with governmental rules and regulations. An employee who would be eligible to participate in the plan on the applicable quarterly entry date or monthly entry date except for the requirements of subparagraph 2.1(a) or (b) will become a participant on the date he satisfies the conditions for participation under such subparagraphs but will not be eligible to make income deferral contributions (as defined in subsection 3.2) or voluntary participant contributions until the quarterly entry date or the monthly entry date, as the case may be, coincident with or next following the date he becomes a participant." 2. By substituting the following for subsection 2.4 of the plan: "2.4. Reemployed Former Participant. If a former participant in the plan is reemployed by an employer after incurring a one-year break in employment, he will again become a participant in the plan on the date he meets the requirements of subparagraphs 2.1(a) and (b) and will be eligible to make income deferral contributions under subsection 3.2 or voluntary participant contributions under subsection 4.1 on the monthly entry date (or, for former participants reemployed before 1996, the quarterly entry date) coincident with or next following the date he becomes a participant." 3. By adding the following new subsection 2.6 to the plan immediately following subsection 2.5 thereof: "2.6. Transferred Participants. If a participant in the plan is transferred from employment covered by the plan to employment with a controlled group member that is a participating employer under any other defined contribution plan of a member of the controlled group, the participant's accounts under this plan shall be transferred to such other plan and shall thereafter be subject to all of the terms and conditions of such other plan. Conversely, if a participant in one of the aforementioned defined contribution plans is transferred to employment cov- 3 ered by this plan, such participant's accounts under the other plan shall be transferred to this plan. Each of a participant's transferred accounts shall be combined with the like account established for the participant under subsection 6.1 of this plan, and the combined total of each such account shall thereafter be subject to all of the terms and conditions of this plan, unless and until such participant's accounts are again transferred to one of the aforementioned plans. Each transfer of account balances under this subsection shall be made in accordance with Sections 401(a)(12) and 414(l) of the Code and the regulations thereunder." 4. By adding the following new sentences to subsection 3.1 of the plan immediately following the last sentence thereof: "Employer contributions payable under this subsection may be paid in cash or in shares of common stock of Western Publishing Group, Inc. ('parent company shares'), or any combination thereof, as the employer may elect. Notwithstanding the next preceding sentence, the participating employers may not make a contribution in parent company shares under this subsection 3.1 if such contribution would cause the aggregate fair market value of parent company shares allocated to participants' employer contribution accounts under subsection 6.5 to exceed ten percent of the fair market value of the total of such participants' employer contribution accounts." 5. By deleting the phrase "by writing filed with the committee," from the first sentence of subsection 3.2 of the plan. 6. By substituting the following sentences for the last two sentences of subsection 3.2 of the plan: 4 "A participant may elect to change the rate of his deferrals, or suspend or resume such deferrals, within the limits stated above, by making a new election. Each election under this subsection shall be made at such time, in such manner and in accordance with such rules as the committee shall determine, and shall be effective beginning with the first full pay period of any month, provided the participant has made a proper election before the fifteenth day of the preceding month." 7. By substituting the following sentences for the first sentence of subsection 3.4 of the plan: "Subject to the limitations of the plan and in addition to the annual employer contributions made under subsection 3.1 and the income deferral contributions made under subsection 3.2, each employer will contribute to the trustee such amount, if any, as the employer may determine in its sole discretion before the beginning of each plan year. Such amount may be stated in terms of an aggregate dollar contribution or a dollar or percentage match of income deferral contributions up to a stated amount or in any other manner. Matching employer contributions as determined under this subsection may be reduced by any forfeitures to be credited to a participant's matched employer contribution account for such period as provided under subsection 7.3." 8. By adding the following new sentence as the final sentence of subsection 3.4 of the plan: "Employer contributions payable under this subsection may be paid in cash or in parent company shares, or any combination thereof, as the employer may elect." 9. By substituting the following for the penultimate sentence of subsection 4.3 of the plan: "Once each month, a participant may withdraw all or a portion of his participant contribution account." 5 10. By substituting the following for clause (i) of the first sentence of subsection 5.2 of the plan: "(i) payment of all of a participant's account balances is not made immediately following his termination date," 11. By substituting the following sentences for the last sentence of subsection 5.2 of the plan: "If a participant described in (ii) or (iii) above subsequently meets the requirements for participation in the plan, he will become an active participant in the plan on the date he satisfies the requirements of subparagraphs 2.1(a) and (b), and will be eligible to make income deferral contributions under subsection 3.2 or voluntary participant contributions under subsection 4.1 on the monthly entry date (or, for participants first hired before 1996, the quarterly entry date) coincident with or next following the date he becomes an active participant. If a participant described in (i) above is later reemployed, his subsequent participation will be determined in accordance with the provisions of subsection 2.4." 12. By substituting the following for the first sentence of subsection 6.2: "A 'regular accounting date' shall occur on each business day." 13. By substituting the following for subsections 6.4 and 6.5 of the plan: "6.4. Valuation of Participants' Accounts. Pursuant to rules established by the committee and applied on a uniform and nondiscriminatory basis, participants' accounts will be valued on each accounting date to reflect the fair market value (as 6 determined by the trustee) of the various investment funds as of such date, including adjustments to reflect any distributions (including withdrawals and loans), contributions, rollovers, transfers between investment funds, income, losses, appreciation, or depreciation with respect to such accounts since the previous accounting date. 6.5. Allocation of Employer Contributions and Forfeitures. Subject to subsection 6.7, as soon as administratively possible after the end of the plan year, each employer's total contribution under subsection 3.1 of the plan for the plan year, plus forfeitures (used to reduce an employer's contribution as provided in subsection 3.1), if any, that are to be allocated in accordance with subsection 7.3 for the plan year, will be allocated and credited to the employer contribution accounts of participants who were employed by such employer during that plan year (excluding participants who resigned or were dismissed from the employ of all of the employers during that year under subparagraph 5.1(e)), pro rata, according to the adjusted compensation paid to them, respectively, by such employer during that year." 14. By substituting the following for subsection 6.8 of the plan: "6.8. Investment Funds. The committee may designate in its discretion one or more funds for the investment of participants' accounts. One such investment fund shall be designated as the Parent Company Stock Fund, which fund will be invested solely in parent company shares. The committee, in its discretion, may from time to time designate or establish new investment funds or eliminate existing investment funds for investment purposes under the plan. Each of the investment funds established under this subsection shall comply with the investment guidelines set forth in the Investment Policy Statement issued by the committee, which Investment Policy Statement (and any subsequent Statement that modifies or replaces it, as determined by the committee from time to time) is incorporated herein by reference. If employer contributions are not made in parent company stock, such contributions will be 7 invested in accordance with the participant's election under subsection 6.9." 15. By adding the following new subsection 6.9 to the plan immediately following subsection 6.8 thereof: "6.9. Investment Fund Elections. Each participant may elect, subject to the following provisions, to have a portion or all of his accounts invested in one or more of the investment funds, subject to the following requirements: (a) Once in each calendar quarter, a participant may make an investment election with respect to future contributions to be made by him or on his behalf. Notwithstanding the next preceding sentence, if the employer elects to make employer contributions under subsection 3.1 or 3.4 in the form of parent company shares, such contributions shall be invested in the Parent Company Stock Fund unless and until the participant makes an election to transfer such amounts in accordance with subparagraph (d) below. (b) Each investment election under (a) above shall be effective as soon as administratively possible after the election has been made, and shall be subject to the provisions of subparagraph (c) below. If no new election is made by a participant, all future contributions will be invested in accordance with the participant's last election under (a) above, or, if there is no prior election, in the same percentages as such participant's accounts are invested under (d) below. (c) Each election under this subsection shall be made in increments of 10 percent, in accordance with such rules as the committee determines. 8 (d) Once in each calendar quarter, a participant may elect to have a portion or all of the amounts previously credited to his accounts transferred among any available investment funds. Such an election shall be effective as soon as administratively possible after the election has been made; and shall be subject to the provisions of subparagraph (c) above. Notwithstanding the foregoing, when an employer contribution under subsection 3.1 or 3.4 is made in the form of parent company shares, each participant may make an additional investment election during the plan year to transfer all or a portion of the employer contribution from the Parent Company Stock Fund to any of the other investment funds. (e) Notwithstanding the foregoing, any elections by a participant who is an officer or director of Western Publishing Group, Inc. or a significant subsidiary with respect to contributions to or withdrawals from, and elections to transfer amounts between the Parent Company Stock Fund and any other fund, may be limited in accordance with any regulations issued by the Securities and Exchange Commission under Section 16 of the Securities Exchange Act of 1934." 16. By adding the following new subsection 6.10 to the plan immediately following subsection 6.9 thereof: "6.10. Voting and Tendering of Parent Company Shares. The voting of parent company shares held in the trust, and if a tender offer is made for parent company shares, the tendering of such shares, shall be subject to the provisions of the Employee Retirement Income Security Act of 1974 ('ERISA') and the following provisions, to the extent such provisions are not inconsistent with ERISA: 9 (a) Voting of parent company shares. With respect to each participant who has an interest in the Parent Company Stock Fund, the trustee shall provide a copy of the notice and proxy statement for each meeting of the holders of common stock issued by Western Publishing Group, Inc., together with an appropriate form for the participant's use in instructing the trustee with respect to the voting of parent company shares that, at the record date for the determination of the shareholders entitled to such notice, and to vote at, such meeting, are allocable to such participant under the Parent Company Stock Fund as of such date. If a participant furnishes timely instructions to the trustee, the trustee (in person or by proxy) shall vote the parent company shares (including fractional shares) allocable to such participant in the Parent Company Stock Fund in accordance with the directions of the participant. Parent company shares allocable to participants in the Parent Company Stock Fund for which timely voting instructions are not received by the trustee shall be voted by the trustee as directed by the committee. (b) Tendering of parent company shares. The trustee shall furnish to each participant who has an interest in the Parent Company Stock Fund notice of any tender offer for, or a request or invitation for tenders of, parent company shares made to the trustee. The trustee shall request from each such participant instructions as to the tendering of parent company shares that are allocable to such participant under the Parent Company Stock Fund. For this purpose, the trustee shall provide participants with a reasonable period of time in which they may consider any such tender offer for, or request or invitation for tenders of, parent company shares made to the trustee. The trustee shall tender parent company shares that are allocable to 10 such participant under the Parent Company Stock Fund as to which the trustee has received instructions to tender from participants within the time specified by the trustee. Parent Company shares that are allocable to a participant under the Parent Company Stock Fund as to which the trustee has not received instructions from participants shall not be tendered. (c) Appointment of fiduciary. The committee shall be designated, under Section 404(c) of ERISA, as the fiduciary responsible for ensuring that (i) the procedures adopted by the plan administrator with respect to the exercise of the foregoing voting and tender rights are sufficient to safeguard the confidentiality of information related to such exercise; (ii) such procedures are being followed by the plan administrator; and (iii) an independent fiduciary is appointed whenever the committee deems it appropriate for the proper exercise of the foregoing voting and tender rights." 17. By substituting the word "on" for the phrase "as at the accounting date coincident with or next following" wherever the latter occurs in subsections 7.1 and 7.2 of the plan. 18. By substituting the reference "subsection 6.4" for the reference "subparagraph 6.4(b)" where the latter reference appears in the second sentence of subsection 7.3 of the plan. 19. By substituting the following for the third, fourth and fifth sentences of subsection 7.3 of the plan: "Forfeitures will be used to reduce the employer's contributions otherwise required under subsection 3.1 11 or subsection 3.4, as determined by the committee. If a participant is reemployed by an employer or controlled group member before he incurs five consecutive one-year breaks in employment, any forfeitures attributable to such participant shall be recredited to such participant's appropriate account(s) as soon as administratively possible following such participant's reemployment if the participant repays the total amount of any previous distribution attributable to his employer contribution account and matched employer contribution account within five years of his date of reemployment." 20. By substituting the following for the final sentence of subparagraph 7.4(a)(ii) of the plan: "Such spouse may elect, in accordance with such procedures as the committee may establish, to have any amounts payable to the spouse paid in a lump sum." 21. By deleting the word "written" from the second sentence of subsection 7.9 of the plan. 22. By deleting the phrase "in writing" from the second sentence of subsection 7.5 of the plan. 23. By substituting the following for the first sentence of subparagraph 7.9(a) of the plan: "Subject to the provisions of the subsection, each participant may borrow from his accounts (other than his employer contribution account and matched employer contribution account) for general purposes or for residential purposes by making application to the trustee and recordkeeper requesting such loan." 12 24. By substituting the following for the final sentence of subparagraph 7.9(d) of the plan: "Amounts repaid by the participant will be recredited to the participant's accounts and investment funds in the same ratio that such participant's accounts are invested under subparagraph 6.9(d) of the plan at the time of repayment." 25. By substituting the following for subparagraph 7.9(f) of the plan: "(f) Interest paid by a participant on a loan made to him under this subsection 7.9 shall be credited to the accounts of the participant as soon as administratively possible after such interest payment was made." 26. By adding the following new subparagraph 7.9(h) to the plan immediately following subparagraph 7.9(g) thereof: "(h) For loans initiated on or after April 1, 1996, there shall be charges for setting up the loan, which charges shall be assessed against the borrowing participant's loan proceeds. There also shall be annual maintenance charges, which charges shall be applied to reduce the borrowing participant's accounts on a pro rata basis. The committee shall determine reasonable amounts for such charges from time to time." 27. By substituting the following for the penultimate sentence of subsection 7.12 of the plan: 13 "Each such election shall be made at such time and in such manner as the committee shall determine and shall be effective in accordance with such rules as the committee may establish from time to time." 28. By substituting the following for the first sentence of subsection 8.1 of the plan: "Each participant in the plan who was previously covered by the Western Publishing Company Employees' Savings and Security Plan ('savings and security plan') and/or Western Profit Sharing Trust Plan has had his account balance(s) under such plan(s) transferred in a lump sum to this plan." 29. By adding the following new sentence as the final sentence of subsection 8.3 of the plan: "A participant may make such a withdrawal once each month." 30. By deleting subsection 12.5 of the plan and by renumbering subsections 12.6 and 12.7 as subsections 12.5 and 12.6, respectively. 31. By substituting the following for subparagraph A-5(a) of Supplement A to the Plan: "(a) The amount available for any such distribution from the Interest Fund II will be the value of the Supplement A participant's IRA account in the Fund determined on the date the distribution is to be made." 32. By substituting the following for subparagraph A-5(c) of Supplement A to the Plan: 14 "(c) Each election under this subsection shall be made at such time and in such manner as specified by the committee." IT IS FURTHER RESOLVED that particulars 16 and 24 above shall be effective as of January 1, 1994; particulars 4, 7, 8 and 19 shall be effective December 31, 1995; particulars 1, 2 and 11 above shall be effective January 1, 1996; and the remaining particulars shall be effective April 1, 1996. * * * I, James A. Cohen, Secretary of Western Publishing Company, Inc., hereby certify that the foregoing is a correct copy of resolutions duly adopted by the Board of Directors of said corporation on January 15, 1996, and that said resolutions have not been changed or repealed. Dated this 15 day of January, 1996. /s/ James A. Cohen ----------------------------- Secretary as Aforesaid (Corporate Seal) * * * The undersigned, as committee members under the Golden Comprehensive Security Program, hereby acknowledge receipt of a certified copy of the foregoing amendment and hereby consent thereto, this 15 day of January, 1996. /s/ James A. Cohen --------------------------------- /s/ Steven M. Grossman --------------------------------- /s/ Hal B. Weiss --------------------------------- 15 --------------------------------- As Committee Members As Aforesaid 16 EX-10.55 6 SECOND AMENDMENT OF GOLDEN RETIREMENT SAVINGS PROGRAM Exhibit 10.55 SECOND AMENDMENT OF GOLDEN RETIREMENT SAVINGS PROGRAM (As Amended and Restated Effective as of January 1, 1993) WHEREAS, this corporation maintains the Golden Retirement Savings Program (As Amended and Restated Effective as of January 1, 1993) (the "plan"); and WHEREAS, the plan has been amended, and further amendment thereof is now considered desirable; NOW, THEREFORE, IT IS RESOLVED that, by virtue and in exercise of the power reserved to this corporation under subsection 11.1 of the plan, the plan, as previously amended, be and it hereby is further amended in the following particulars: 1. By substituting the following for subsection 2.1 of the plan: "2.1. Eligibility. Subject to the conditions and limitations of the plan, each employee of an employer who was an active participant in the plan immediately prior to January 1, 1996 will continue to participate in the plan on and after that date. Each other employee of an employer will be eligible to become a participant in the plan if he meets the following requirements: (a) He is a member of a group of employees to which the plan has been and continues to be extended by his employer, either unilaterally or through collective bargaining, as described in Supplement A. (b) He has completed twelve months of continuous employment (as defined in subsection 2.2) or, if the employee was hired by an employer before January 1, 1996, six months of continuous employment. Each employee who meets the requirements of subparagraphs (a) and (b) above will become a participant in the plan on the entry date specified in (c) or (d) below, whichever applies: (c) If the employee is hired by an employer before January 1, 1996, on the first January 1, April 1, July 1 or October 1 (the 'quarterly entry date') coincident with or next following the date he meets the requirements of subparagraphs (a) and (b); or (d) If the employee is hired by an employer on or after January 1, 1996, on the first day of the calendar month (the 'monthly entry date') coincident with or next following the date he meets the requirements of subparagraphs (a) and (b). Each employee will be notified of the date as of which he becomes a participant in the plan and will be furnished with a summary plan description in accordance with governmental rules and regulations. An employee who would be eligible to participate in the plan on the applicable quarterly entry date or monthly entry date except for the requirement of subparagraph 2.1(a) will become a participant on the date he satisfies the conditions for participation under such subparagraph but will not be eligible to make income deferral contributions (as defined in subsection 3.1) or voluntary participant contributions until the quarterly entry date or the monthly entry date, as the case may be, coincident with or next following the date he becomes a participant." 2 2. By substituting the following for the indented paragraph in subparagraph 2.2(g) of the plan: "If a former employee of the employers who is not vested with respect to any portion of his matched employer contribution account balance or his employer contribution account balance, if any, is reemployed by an employer or controlled group member after he has incurred five consecutive one-year breaks in employment and if such consecutive one-year breaks in employment equal or exceed his years of continuous employment, his period of continuous employment with the employers or controlled group members prior to such five consecutive one-year breaks in employment shall be disregarded for all purposes of the plan upon his reemployment, and such employee shall be treated as a new employee for all purposes of the plan. In no event shall a period of continuous employment after an employee has incurred five consecutive one-year breaks in employment be taken into account in determining the vested portion of his matched employer contribution account balance or his employer contribution account balance, if any, attributable to employment prior to such five consecutive one-year breaks in employment." 3. By substituting the following for subsection 2.4 of the plan: "2.4. Reemployed Former Participant. If a former participant in the plan is reemployed by an employer after incurring a one-year break in employment, he will again become a participant in the plan on the date he meets the requirements of subparagraph 2.1(a) and will be eligible to make income deferral contributions under subsection 3.1 or voluntary participant contributions under subsection 4.1 on the monthly entry date (or, for former participants reemployed before 1996, the quarterly entry date) coincident with or next following the date he becomes a participant." 3 4. By adding the following new subsection 2.6 to the plan immediately following subsection 2.5 thereof: "2.6. Transferred Participants. If a participant in the plan is transferred from employment covered by the plan to employment with a controlled group member that is a participating employer under any other defined contribution plan of a member of the controlled group, the participant's accounts under this plan shall be transferred to such other plan and shall thereafter be subject to all of the terms and conditions of such other plan. Conversely, if a participant in one of the aforementioned defined contribution plans is transferred to employment covered by this plan, such participant's accounts under the other plan shall be transferred to this plan. Each of a participant's transferred accounts shall be combined with the like account established for the participant under subsection 6.1 of this plan, and the combined total of each such account shall thereafter be subject to all of the terms and conditions of this plan, unless and until such participant's accounts are again transferred to one of the aforementioned plans. Each transfer of account balances under this subsection shall be made in accordance with Sections 401(a)(12) and 414(l) of the Code and the regulations thereunder." 5. By deleting the phrase "by writing filed with the committee," from the first sentence of subsection 3.1 of the plan. 6. By substituting the following sentences for the last two sentences of subsection 3.1 of the plan: "A participant may elect to change the rate of his deferrals, or suspend or resume such deferrals, within the limits stated above, by making a new election. Each election under this subsection shall be made at such time, in such manner and in 4 accordance with such rules as the committee shall determine, and shall be effective beginning with the first full pay period of any month, provided the participant has made a proper election before the fifteenth day of the preceding month." 7. By substituting the following sentences for the first sentence of subsection 3.3 of the plan: "Subject to the limitations of the plan and in addition to the income deferral contributions made under subsection 3.1, each employer will contribute to the trustee such amount, if any, as the employer may determine in its sole discretion before the beginning of each plan year. Such amount may be stated in terms of an aggregate dollar contribution or a dollar or percentage match of income deferral contributions up to a stated amount or in any other manner. Matching employer contributions as determined under this subsection shall be reduced by any forfeitures to be credited to a participant's matched employer contribution account for such period as provided under subsection 7.3." 8. By adding the following new sentence as the final sentence of subsection 3.3 of the plan: "Employer contributions payable under this subsection may be paid in cash or in shares of common stock of Western Publishing Group, Inc. ('parent company shares'), or any combination thereof, as the employer may elect." 9. By substituting the following for the penultimate sentence of subsection 4.3 of the plan: "Once each month, a participant may withdraw all or a portion of his participant contribution account." 5 10. By substituting the following for clause (i) of the first sentence of subsection 5.2 of the plan: "(i) payment of all of a participant's account balances is not made immediately following his termination date," 11. By deleting the phrase "or (b)" from clause (iii) of the first sentence of subsection 5.2 of the plan. 12. By substituting the following sentences for the last sentence of subsection 5.2 of the plan: "If a participant described in (ii) or (iii) above subsequently meets the requirements for participation in the plan, he will become an active participant in the plan on the date he satisfies the requirements of subparagraph 2.1(a), and will be eligible to make income deferral contributions under subsection 3.1 or voluntary participant contributions under subsection 4.1 on the monthly entry date (or, for participants first hired before 1996, the quarterly entry date) coincident with or next following the date he becomes an active participant. If a participant described in (i) above is later reemployed, his subsequent participation will be determined in accordance with the provisions of subsection 2.4." 13. By adding the following new subparagraph (e) to subsection 6.1 of the plan immediately following subparagraph (d) thereof: "(e) Employer Contribution Account. This account will reflect his employer contribution account, if any, transferred to the plan under subsection 2.6, and the income, losses, appreciation and depreciation attributable thereto subsequent to the date of transfer." 6 14. By substituting the following for the first sentence of subsection 6.2: "A 'regular accounting date' shall occur on each business day." 15. By substituting the following for subsection 6.3 of the plan: "6.3. Valuation of Participants' Accounts. Pursuant to rules established by the committee and applied on a uniform and nondiscriminatory basis, participants' accounts will be valued on each accounting date to reflect the fair market value (as determined by the trustee) of the various investment funds as of such date, including adjustments to reflect any distributions (including withdrawals and loans), contributions, rollovers, transfers between investment funds, income, losses, appreciation, or depreciation with respect to such accounts since the previous accounting date." 16. By substituting the following for subsection 6.6 of the plan: "6.6. Investment Funds. The committee may designate in its discretion one or more funds for the investment of participants' accounts. One such investment fund shall be designated as the Parent Company Stock Fund, which fund will be invested solely in parent company shares. The committee, in its discretion, may from time to time designate or establish new investment funds or eliminate existing investment funds for investment purposes under the plan. Each of the investment funds established under this subsection shall comply with the investment guidelines set forth in the Investment Policy Statement issued by the committee, which Investment Policy Statement (and any subsequent Statement that modifies or replaces it, as determined by the committee from time to time) is incorporated herein 7 by reference. If employer contributions are not made in parent company stock, such contributions will be invested in accordance with the participant's election under subsection 6.7." 17. By adding the following new subsection 6.7 to the plan immediately following subsection 6.6 thereof: "6.7. Investment Fund Elections. Each participant may elect, subject to the following provisions, to have a portion or all of his accounts invested in one or more of the investment funds, subject to the following requirements: (a) Once in each calendar quarter, a participant may make an investment election with respect to future contributions to be made by him or on his behalf. Notwithstanding the next preceding sentence, if the employer elects to make employer contributions under subsection 3.3 in the form of parent company shares, such contributions shall be invested in the Parent Company Stock Fund unless and until the participant makes an election to transfer such amounts in accordance with subparagraph (d) below. (b) Each investment election under (a) above shall be effective as soon as administratively possible after the election has been made, and shall be subject to the provisions of subparagraph (c) below. If no new election is made by a participant, all future contributions will be invested in accordance with the participant's last election under (a) above or, if there is no prior election, in the same percentages as such participant's accounts are invested under (d) below. (c) Each election under this subsection shall be made in increments of 10 8 percent, in accordance with such rules as the committee determines. (d) Once in each calendar quarter, a participant may elect to have a portion or all of the amounts previously credited to his accounts transferred among any available investment funds. Such an election shall be effective as soon as administratively possible after the election has been made; and shall be subject to the provisions of subparagraph (c) above. Notwithstanding the foregoing, when an employer contribution under subsection 3.3 is made in the form of parent company shares, each participant may make an additional investment election during the plan year to transfer all or a portion of the employer contribution from the Parent Company Stock Fund to any of the other investment funds. (e) Notwithstanding the foregoing, any elections by a participant who is an officer or director of Western Publishing Group, Inc. or a significant subsidiary with respect to contributions to or withdrawals from, and elections to transfer amounts between the Parent Company Stock Fund and any other fund, may be limited in accordance with any regulations issued by the Securities and Exchange Commission under Section 16 of the Securities Exchange Act of 1934." 18. By adding the following new subsection 6.8 to the plan immediately following subsection 6.7 thereof: "6.8. Voting and Tendering of Parent Company Shares. The voting of parent company shares held in the trust, and if a tender offer is made for parent company shares, the tendering of such shares, shall 9 be subject to the provisions of the Employee Retirement Income Security Act of 1974 ('ERISA') and the following provisions, to the extent such provisions are not inconsistent with ERISA: (a) Voting of parent company shares. With respect to each participant who has an interest in the Parent Company Stock Fund, the trustee shall provide a copy of the notice and proxy statement for each meeting of the holders of common stock issued by Western Publishing Group, Inc., together with an appropriate form for the participant's use in instructing the trustee with respect to the voting of parent company shares that, at the record date for the determination of the shareholders entitled to such notice, and to vote at, such meeting, are allocable to such participant under the Parent Company Stock Fund as of such date. If a participant furnishes timely instructions to the trustee, the trustee (in person or by proxy) shall vote the parent company shares (including fractional shares) allocable to such participant in the Parent Company Stock Fund in accordance with the directions of the participant. Parent company shares allocable to participants in the Parent Company Stock Fund for which timely voting instructions are not received by the trustee shall be voted by the trustee as directed by the committee. (b) Tendering of parent company shares. The trustee shall furnish to each participant who has an interest in the Parent Company Stock Fund notice of any tender offer for, or a request or invitation for tenders of, parent company shares made to the trustee. The trustee shall request from each such participant instructions as to the tendering of parent company shares that are allocable to such participant under the Parent Company Stock Fund. For this purpose, the trustee shall provide participants with a reasonable period of time in which they may consider any such 10 tender offer for, or request or invitation for tenders of, parent company shares made to the trustee. The trustee shall tender parent company shares that are allocable to such participant under the Parent Company Stock Fund as to which the trustee has received instructions to tender from participants within the time specified by the trustee. Parent company shares that are allocable to a participant under the Parent Company Stock Fund as to which the trustee has not received instructions from participants shall not be tendered. (c) Appointment of fiduciary. The committee shall be designated, under Section 404(c) of ERISA, as the fiduciary responsible for ensuring that (i) the procedures adopted by the plan administrator with respect to the exercise of the foregoing voting and tender rights are sufficient to safeguard the confidentiality of information related to such exercise; (ii) such procedures are being followed by the plan administrator; and (iii) an independent fiduciary is appointed whenever the committee deems it appropriate for the proper exercise of the foregoing voting and tender rights." 19. By substituting the word "on" for the phrase "as at the accounting date coincident with or next following" where the latter occurs in the last sentence of subsection 7.1 of the plan. 20. By substituting the following for that portion of subsection 7.2 of the plan that precedes the vesting schedule contained therein: "7.2. Resignation or Dismissal. If a participant resigns or is dismissed from the employ of the controlled group members before retirement 11 under subparagraph 5.1(a), (b) or (c), any income deferral contributions or participant contributions made by him previously but not credited to his appropriate account will be returned to him and the balances in his income deferral contribution account, participant contribution account and prior plan account, if any, on his termination date (after all adjustments required under the plan as of that date have been made) shall be nonforfeitable and shall be distributable to him under subsection 7.4 along with the vested balances in his matched employer contribution account and his employer contribution account, if any, on his termination date (after all adjustments required under the plan as of that date have been made) determined in accordance with the following schedule:" 21. By substituting the following for subsection 7.3 of the plan: "7.3. Forfeitures. The amount by which a participant's matched employer contribution account and employer contribution account, if any, are reduced under subsection 7.2 shall be treated as a 'forfeiture' on the earlier of the date of distribution of such participant's account balances or the date such participant incurs five consecutive one-year breaks in employment. Prior to that date, such accounts will continue to be adjusted pursuant to the provisions of subsection 6.3. Forfeitures attributable to a participant's matched employer contribution account and employer contribution account, if any, will be used to reduce the employer's contribution otherwise required under subsection 3.3 and shall be credited to the matched employer contribution accounts of other participants in accordance with that subsection. If a participant is reemployed by an employer or controlled group member before he incurs five consecutive one-year breaks in employment, any forfeitures attributable to such participant shall be recredited to such participant's appropriate account(s) as soon as administratively possible following such participant's reemployment if the participant repays the total amount of any previous distribution attributable to his matched employer contribution account and 12 his employer contribution account, if any, within five years of his date of reemployment. Such participant's matched employer contribution account and employer contribution account, if any, shall be recredited from current unallocated forfeitures or, to the extent there are insufficient unallocated forfeitures for this purpose, from supplemental employer contributions necessary to restore such amount. The actual amount restored to such participant's account shall be the amount of such forfeitures, without investment adjustments." 22. By substituting the following for the final sentence of subparagraph 7.4(a)(ii) of the plan: "Such spouse may elect, in accordance with such procedures as the committee may establish, to have any amounts payable to the spouse paid in a lump sum." 23. By deleting the word "written" from subparagraph 7.4(a)(v)(4) of the plan. 24. By deleting the phrase "in writing" from the second sentence of subsection 7.5 of the plan. 25. By substituting the following for the first sentence of subparagraph 7.10(a) of the plan: "Subject to the provisions of the subsection, each participant may borrow from his accounts (other than his matched employer contribution account and his employer contribution account, if any) for general purposes or for residential purposes by making application to the committee requesting such loan." 13 26. By substituting the following for the final sentence of subparagraph 7.10(e) of the plan: "Amounts repaid by the participant will be recredited to the participant's accounts and investment funds in the same ratio that such participant's accounts are invested under subparagraph 6.7(d) of the plan at the time of repayment." 27. By substituting the following for subparagraph 7.10(g) of the plan: "(g) Interest paid by a participant on a loan made to him under this subsection 7.10 shall be credited to the accounts of the participant as soon as administratively possible after such interest payment was made." 28. By adding the following new subparagraph 7.10(i) to the plan immediately following subparagraph 7.10(h) thereof: "(i) For loans initiated on or after April 1, 1996, there shall be charges for setting up the loan, which charges shall be assessed against the borrowing participant's loan proceeds. There also shall be annual maintenance charges, which charges shall be applied to reduce the borrowing participant's accounts on a pro rata basis. The committee shall determine reasonable amounts for such charges from time to time." 29. By substituting the following for the penultimate sentence of subsection 7.12 of the plan: "Each such election shall be made at such time and in such manner as the committee shall determine and 14 shall be effective in accordance with such rules as the committee may establish from time to time." 30. By substituting the following for the first sentence of subsection 8.1 of the plan: "Each participant in the plan who was previously covered by the Western Publishing Company Employees' Savings and Security Plan ('savings and security plan') and/or Western Profit Sharing Trust Plan has had his account balance(s) under such plan(s) transferred in a lump sum to this plan." 31. By substituting the following for the final sentence of subsection 8.3 of the plan: "Once each month, a participant may withdraw all or a portion of the amounts specified in the next preceding sentence." 32. By deleting subsection 12.6 of the plan and by renumbering subsections 12.7 and 12.8 as subsections 12.6 and 12.7, respectively. IT IS FURTHER RESOLVED that particulars 18, 26 and 32 above shall be effective as of January 1, 1994; particulars 7, 8 and 21 shall be effective December 31, 1995; particulars 1 through 3, 11, 12, 13, 20 and 30 above shall be effective January 1, 1996; and the remaining particulars shall be effective April 1, 1996. 15 * * * I, James A. Cohen, Secretary of Western Publishing Company, Inc., hereby certify that the foregoing is a correct copy of resolutions duly adopted by the Board of Directors of said corporation on January 15, 1996, and that said resolutions have not been changed or repealed. Dated this 15 day of January, 1996. /s/ James A. Cohen ----------------------------- Secretary as Aforesaid (Corporate Seal) * * * The undersigned, as committee members under the Golden Retirement Savings Program, hereby acknowledge receipt of a certified copy of the foregoing amendment and hereby consent thereto, this 15 day of January, 1996. /s/ James A. Cohen --------------------------------- /s/ Steven M. Grossman --------------------------------- /s/ Hal B. Weiss --------------------------------- --------------------------------- As Committee Members As Aforesaid EX-10.71D 7 TWELFTH AMENDMENT OF PENN CORPORATION COMPREHENSIVE SECURITY PROGRAM Exhibit 10.71d TWELFTH AMENDMENT OF PENN CORPORATION COMPREHENSIVE SECURITY PROGRAM WHEREAS, this corporation maintains the Penn Corporation Comprehensive Security Program (the "plan"); and WHEREAS, the plan has been amended, and further amendment thereof is now considered desirable; NOW, THEREFORE, IT IS RESOLVED that, by virtue and in exercise of the power reserved to this corporation under subsection 10.1 of the plan, the plan, as previously amended, be and it hereby is further amended in the following particulars: 1. By substituting the following for subsection 2.1 of the plan: "2.1. Eligibility. Subject to the conditions and limitations of the plan, each employee of an employer who was an active participant in the plan immediately prior to January 1, 1996 will continue to participate in the plan on and after that date. Each other employee of an employer will be eligible to become a participant in the plan if he meets the following requirements: (a) He is either: (i) A salaried employee (that is, an employee whose basic compensation for services rendered to an employer is paid to him in fixed amounts at stated intervals without regard to the number of hours worked, even though he may receive additional compen- sation in the form of bonuses, overtime pay or commissions); or (ii) A member of a group or class of employees of an employer to whom the plan has been extended by the Board of Directors of the employer; and (b) He does not belong to a collective bargaining unit of employees represented by a collective bargaining representative, except to the extent that an agreement between the employer and such representative extends the plan to such unit of employees. Each employee who meets the requirements of subparagraphs (a) and (b) above will become a participant in the plan on the entry date specified in (c) or (d) below, whichever applies: (c) If the employee is hired by an employer before January 1, 1996, on the first January 1, April 1, July 1 or October 1 (the 'quarterly entry date') coincident with or next following the date he has completed six months of continuous employment (as defined in subsection 2.2); or (d) If the employee is hired by an employer on or after January 1, 1996, on the first day of the calendar month (the 'monthly entry date') coincident with or next following the date he has completed twelve months of continuous employment (as defined in subsection 2.2). Each employee will be notified of the date as of which he becomes a participant in the plan and will be furnished with a summary plan description in accordance with governmental rules and regulations. An employee who would be eligible to participate in the 2 plan on the applicable quarterly entry date or monthly entry date except for the requirements of subparagraph 2.1(a) or (b) will become a participant on the date he satisfies the conditions for participation under such subparagraphs but will not be eligible to make income deferral contributions (as defined in subsection 3.2) or voluntary participant contributions until the quarterly entry date or the monthly entry date, as the case may be, coincident with or next following the date he becomes a participant." 2. By substituting the following for subparagraph 2.2(g)(i) of the plan: "(i) If a former employee of the employers who is not vested with respect to any portion of his employer contribution account balance or his matched employer contribution account balance, if any, is reemployed by an employer or controlled group member after he has incurred five consecutive one-year breaks in employment, his period of continuous employment with the employers or controlled group members prior to such five consecutive one-year breaks in employment shall be disregarded for all purposes of the plan upon his reemployment, and such employee shall be treated as a new employee for all purposes of the plan. In no event shall a period of continuous employment after an employee has incurred five consecutive one-year breaks in employment be taken into account in determining the vested portion of his employer contribution account balance or his matched employer contribution account balance, if any, attributable to employment prior to such five consecutive one-year breaks in employment." 3 3. By substituting the following for subsection 2.4 of the plan: "2.4. Reemployed Former Participant. If a former participant in the plan is reemployed by an employer after incurring a one-year break in employment, he will again become a participant in the plan on the date he meets the requirements of subparagraphs 2.1(a) and (b) and will be eligible to make income deferral contributions under subsection 3.2 or voluntary participant contributions under subsection 4.1 on the monthly entry date (or, for former participants reemployed before 1996, the quarterly entry date) coincident with or next following the date he becomes a participant." 4. By adding the following new subsection 2.6 to the plan immediately following subsection 2.5 thereof: "2.6. Transferred Participants. If a participant in the plan is transferred from employment covered by the plan to employment with a controlled group member that is a participating employer under any other defined contribution plan of a member of the controlled group, the participant's accounts under this plan shall be transferred to such other plan and shall thereafter be subject to all of the terms and conditions of such other plan. Conversely, if a participant in one of the aforementioned defined contribution plans is transferred to employment covered by this plan, such participant's accounts under the other plan shall be transferred to this plan. Each of a participant's transferred accounts shall be combined with the like account established for the participant under subsection 6.1 of this plan, and the combined total of each such account shall thereafter be subject to all of the terms and conditions of this plan, unless and until such participant's accounts are again transferred to one of the aforementioned plans. Each transfer of account balances under this subsection shall be made in accordance with Sections 401(a)(12) and 414(l) of the Code and the regulations thereunder." 4 5. By adding the following new sentences to subsection 3.1 of the plan immediately following the last sentence thereof: "Employer contributions payable under this subsection may be paid in cash or in shares of common stock of Western Publishing Group, Inc. ('parent company shares'), or any combination thereof, as the employer may elect. Notwithstanding the next preceding sentence, the participating employers may not make a contribution in parent company shares under this subsection 3.1 if such contribution would cause the aggregate fair market value of parent company shares allocated to participants' employer contribution accounts under subsection 6.5 to exceed ten percent of the fair market value of the total of such participants' employer contribution accounts." 6. By deleting the phrase "by writing filed with the committee," from the first sentence of subsection 3.2 of the plan. 7. By substituting the following sentences for the last two sentences of subsection 3.2 of the plan: "A participant may elect to change the rate of his deferrals, or suspend or resume such deferrals, within the limits stated above, by making a new election. Each election under this subsection shall be made at such time, in such manner and in accordance with such rules as the committee shall determine, and shall be effective beginning with the first full pay period of any month, provided the participant has made a proper election before the fifteenth day of the preceding month." 8. By substituting the following for the penultimate sentence of subsection 4.3 of the plan: 5 "Once each month, a participant may withdraw all or a portion of his participant contribution account." 9. By substituting the following for clause (i) of the first sentence of subsection 5.2 of the plan: "(i) payment of all of a participant's account balances is not made immediately following his termination date," 10. By substituting the following sentences for the last sentence of subsection 5.2 of the plan: "If a participant described in (ii) or (iii) above subsequently meets the requirements for participation in the plan, he will become an active participant in the plan on the date he satisfies the requirements of subparagraphs 2.1(a) and (b), and will be eligible to make income deferral contributions under subsection 3.2 or voluntary participant contributions under subsection 4.1 on the monthly entry date (or, for participants first hired before 1996, the quarterly entry date) coincident with or next following the date he becomes an active participant. If a participant described in (i) above is later reemployed, his subsequent participation will be determined in accordance with the provisions of subsection 2.4." 11. By adding the following new subparagraphs (d) and (e) to subsection 6.1 of the plan immediately following subparagraph (c) thereof: "(d) Prior Plan Account. If a participant has amounts attributable to his participation in any prior plan transferred to this plan as provided in subsection 7.11, this account will reflect such amounts and the income, losses, appreciation and depreciation attributable thereto. 6 (e) Matched Employer Contribution Account. This account will reflect his matched employer contribution account, if any, transferred to the plan under subsection 2.6, and the income, losses, appreciation and depreciation attributable thereto subsequent to the date of transfer." 12. By substituting the following for the first sentence of subsection 6.2: "A 'regular accounting date' shall occur on each business day." 13. By substituting the following for subsections 6.4 and 6.5 of the plan: "6.4. Valuation of Participants' Accounts. Pursuant to rules established by the committee and applied on a uniform and nondiscriminatory basis, participants' accounts will be valued on each accounting date to reflect the fair market value (as determined by the trustee) of the various investment funds as of such date, including adjustments to reflect any distributions (including withdrawals and loans), contributions, rollovers, transfers between investment funds, income, losses, appreciation, or depreciation with respect to such accounts since the previous accounting date. 6.5. Allocation of Employer Contributions and Forfeitures. Subject to subsection 6.7, as soon as administratively possible after the end of the plan year, each employer's total contribution under subsection 3.1 of the plan for the plan year, plus forfeitures (used to reduce an employer's contribution as provided in subsection 3.1), if any, that are to be allocated in accordance with subsection 7.3 for the plan year, will be allocated and credited to the employer contribution accounts of participants who were employed by such employer during that plan year (excluding participants who resigned or were dismiss- 7 ed from the employ of all of the employers during that year under subparagraph 5.1(e)), pro rata, according to the adjusted compensation paid to them, respectively, by such employer during that year." 14. By substituting the following for subsection 6.8 of the plan: "6.8. Investment Funds. The committee may designate in its discretion one or more funds for the investment of participants' accounts. One such investment fund shall be designated as the Parent Company Stock Fund, which fund will be invested solely in parent company shares. The committee, in its discretion, may from time to time designate or establish new investment funds or eliminate existing investment funds for investment purposes under the plan. Each of the investment funds established under this subsection shall comply with the investment guidelines set forth in the Investment Policy Statement issued by the committee, which Investment Policy Statement (and any subsequent Statement that modifies or replaces it, as determined by the committee from time to time) is incorporated herein by reference. If employer contributions are not made in parent company stock, such contributions will be invested in accordance with the participant's election under subsection 6.9." 15. By adding the following new subsection 6.9 to the plan immediately following subsection 6.8 thereof: "6.9. Investment Fund Elections. Each participant may elect, subject to the following provisions, to have a portion or all of his accounts invested in one or more of the investment funds, subject to the following requirements: (a) Once in each calendar quarter, a participant may make an investment election with respect to future contributions to be made by him or on his behalf. Notwithstanding the next preceding sentence, if the employer 8 elects to make employer contributions under subsection 3.1 in the form of parent company shares, such contributions shall be invested in the Parent Company Stock Fund unless and until the participant makes an election to transfer such amounts in accordance with subparagraph (d) below. (b) Each investment election under (a) above shall be effective as soon as administratively possible after the election has been made, and shall be subject to the provisions of subparagraph (c) below. If no new election is made by a participant, all future contributions will be invested in accordance with the participant's last election under (a) above or, if there is no prior election, in the same percentage as such participant's accounts are invested under (d) below. (c) Each election under this subsection shall be made in increments of 10 percent, in accordance with such rules as the committee determines. (d) Once in each calendar quarter, a participant may elect to have a portion or all of the amounts previously credited to his accounts transferred among any available investment funds. Such an election shall be effective as soon as administratively possible after the election has been made; and shall be subject to the provisions of subparagraph (c) above. Notwithstanding the foregoing, when an employer contribution under subsection 3.1 is made in the form of parent company shares, each participant may make an additional investment election during the plan year to transfer all or a portion of the employer contribution from the Parent Company Stock Fund to any of the other investment funds. 9 (e) Notwithstanding the foregoing, any elections by a participant who is an officer or director of Western Publishing Group, Inc. or a significant subsidiary with respect to contributions to or withdrawals from, and elections to transfer amounts between the Parent Company Stock Fund and any other fund, may be limited in accordance with any regulations issued by the Securities and Exchange Commission under Section 16 of the Securities Exchange Act of 1934." 16. By adding the following new subsection 6.10 to the plan immediately following subsection 6.9 thereof: "6.10. Voting and Tendering of Parent Company Shares. The voting of parent company shares held in the trust, and if a tender offer is made for parent company shares, the tendering of such shares, shall be subject to the provisions of the Employee Retirement Income Security Act of 1974 ('ERISA') and the following provisions, to the extent such provisions are not inconsistent with ERISA: (a) Voting of parent company shares. With respect to each participant who has an interest in the Parent Company Stock Fund, the trustee shall provide a copy of the notice and proxy statement for each meeting of the holders of common stock issued by Western Publishing Group, Inc., together with an appropriate form for the participant's use in instructing the trustee with respect to the voting of parent company shares that, at the record date for the determination of the shareholders entitled to such notice, and to vote at, such meeting, are allocable to such participant under the Parent Company Stock Fund as of such date. If a participant furnishes timely instructions to the trustee, the trustee (in person or by proxy) shall vote the parent company shares 10 (including fractional shares) allocable to such participant in the Parent Company Stock Fund in accordance with the directions of the participant. Parent company shares allocable to participants in the Parent Company Stock Fund for which timely voting instructions are not received by the trustee shall be voted by the trustee as directed by the committee. (b) Tendering of parent company shares. The trustee shall furnish to each participant who has an interest in the Parent Company Stock Fund notice of any tender offer for, or a request or invitation for tenders of, parent company shares made to the trustee. The trustee shall request from each such participant instructions as to the tendering of parent company shares that are allocable to such participant under the Parent Company Stock Fund. For this purpose, the trustee shall provide participants with a reasonable period of time in which they may consider any such tender offer for, or request or invitation for tenders of, parent company shares made to the trustee. The trustee shall tender parent company shares that are allocable to such participant under the Parent Company Stock Fund as to which the trustee has received instructions to tender from participants within the time specified by the trustee. Parent company shares that are allocable to a participant under the Parent Company Stock Fund as to which the trustee has not received instructions from participants shall not be tendered. (c) Appointment of fiduciary. The committee shall be designated, under Section 404(c) of ERISA, as the fiduciary responsible for ensuring that (i) the procedures adopted by the plan administrator with respect to the exercise of the foregoing voting and tender rights are sufficient to safeguard the confidentiality of information related to such exercise; (ii) such procedures are being followed by the plan administrator; 11 and (iii) an independent fiduciary is appointed whenever the committee deems it appropriate for the proper exercise of the foregoing voting and tender rights." 17. By substituting the word "on" for the phrase "as at the accounting date coincident with or next following" where the latter occurs subsection 7.1 of the plan. 18. By substituting the following for that portion of subsection 7.2 of the plan that precedes the vesting schedule contained therein: "7.2. Resignation or Dismissal. If a participant resigns or is dismissed from the employ of the controlled group members before retirement under subparagraph 5.1(a), (b) or (c), any income deferral contributions or participant contributions made by him previously but not credited to his appropriate account will be returned to him and the balances in his income deferral contribution account, participant contribution account and prior plan account, if any, on his termination date (after all adjustments required under the plan as of that date have been made) shall be nonforfeitable and shall be distributable to him under subsection 7.4 along with the vested balances in his employer contribution account and his matched employer contribution account, if any, on his termination date (after all adjustments required under the plan as of that date have been made) determined in accordance with the following schedule:" 19. By substituting the following for subsection 7.3 of the plan: "7.3. Forfeitures. The amount by which a participant's employer contribution account and matched employer contribution account, if any, are reduced under subsection 7.2 shall be treated as a 'forfeiture' on the earlier of the date of distribution of 12 such participant's account balances or the date such participant incurs five consecutive one-year breaks in employment. Prior to that date, such accounts will continue to be adjusted pursuant to the provisions of subsection 6.4. Forfeitures attributable to a participant's employer contribution account and matched employer contribution account, if any, will be used to reduce the employer's contribution otherwise required under subsection 3.1 and shall be allocated and credited to the employer contribution accounts of other participants in accordance with subsection 6.5. If a participant is reemployed by an employer or controlled group member before he incurs five consecutive one-year breaks in employment, any forfeitures attributable to such participant shall be recredited to such participant's appropriate account(s) as soon as administratively possible following such participant's reemployment if the participant repays the total amount of any previous distribution attributable to his employer contribution account and his matched employer contribution account, if any, within five years of his date of reemployment. Such participant's employer contribution account and matched employer contribution account, if any, shall be recredited from current unallocated forfeitures or, to the extent there are insufficient unallocated forfeitures for this purpose, from supplemental employer contributions necessary to restore such amount. The actual amount restored to such participant's account shall be the amount of such forfeitures, without investment adjustments." 20. By substituting the following for the final sentence of subparagraph 7.4(a)(ii) of the plan: "Such spouse may elect, in accordance with such procedures as the committee may establish, to have any amounts payable to the spouse paid in a lump sum." 21. By deleting the word "written" from the second sentence of subsection 7.5 of the plan. 13 22. By substituting the following for the first sentence of subparagraph 7.9(a) of the plan: "Subject to the provisions of the subsection, each participant may borrow from his accounts (other than his employer contribution account and matched employer contribution account, if any) for general purposes or for residential purposes by making application to the trustee and recordkeeper requesting such loan." 23. By substituting the following for clause (iii) of subparagraph 7.9(b) of the plan: "(iii) the sum of a participant's income deferral contribution account, voluntary participant contribution account, and prior plan account (excluding any amounts in such account attributable to the Western IRA Plan)." 24. By substituting the following for the last sentence of subparagraph 7.9(d) of the plan: "Amounts repaid by the participant will be recredited to the participant's accounts and investment funds in the same ratio that such participant's accounts are invested under subparagraph 6.9(d) of the plan at the time of repayment." 25. By substituting the following for subparagraph 7.9(f) of the plan: "(f) Interest paid by a participant on a loan made to him under this subsection 7.9 shall be credited to the accounts of the participant as soon as 14 administratively possible after such interest payment was made." 26. By adding the following new subparagraph 7.9(h) to the plan immediately following subparagraph 7.9(g) thereof: "(h) For loans initiated on or after April 1, 1996, there shall be charges for setting up the loan, which charges shall be assessed against the borrowing participant's loan proceeds. There also shall be annual maintenance charges, which charges shall be applied to reduce the borrowing participant's accounts on a pro rata basis. The committee shall determine reasonable amounts for such charges from time to time." 27. By substituting the following sentences for the last three sentences of subsection 7.11 of the plan: "Any such rollover amount or transferred amount (other than transfers pursuant to subsection 2.6) shall be credited to and held in a prior plan account established for the participant, which will be fully vested and nonforfeitable at all times. Any such prior plan account, and any account transferred to this plan in accordance with the provisions of subsection 2.6, will be adjusted from time to time in accordance with the provisions of Section 6, will be invested at the direction of the participant in accordance with subsection 6.9, and will be distributed in accordance with the provisions of Section 7. Withdrawals of any portion of a participant's prior plan account will not be permitted prior to distribution in accordance with Section 7 of the plan, unless such amounts are attributable to such participant's participation in the Western Publishing Company Employees' Savings and Security Plan or the Western IRA Plan, or unless such amounts are attributable to rollover amounts or transferred amounts described in the first two sen- 15 tences of this subsection 7.11. A participant may make such a withdrawal once each month." 28. By deleting the phrase "in writing" from the third sentence of subsection 7.13 of the plan. 29. By substituting the following for the penultimate sentence of subsection 7.13 of the plan: "Each such election shall be made at such time and in such manner as the committee shall determine and shall be effective in accordance with such rules as the committee may establish from time to time." 30. By deleting subsection 11.5 of the plan and by renumbering subsections 11.6 through 11.8 as subsections 11.5 through 11.7, respectively. 31. By substituting the phrase "up to $150,000" for the phrase "up to $200,000" where the latter phrase occurs in the second sentence of subsection 11.5 of the plan (as renumbered). IT IS FURTHER RESOLVED that particulars 16, 24, 30, and 31 above shall be effective as of January 1, 1994; particulars 5 and 19 shall be effective December 31, 1995; particulars 1 through 3, 10, 18 and 23 above shall be effective January 1, 1996; and the remaining particulars shall be effective April 1, 1996. 16 * * * I, James A. Cohen, Secretary of Penn Corporation, hereby certify that the foregoing is a correct copy of resolutions duly adopted by the Board of Directors of said corporation on January 15, 1996, and that said resolutions have not been changed or repealed. Dated this 15 day of January, 1996. /s/ James A. Cohen ----------------------------- Secretary as Aforesaid (Corporate Seal) * * * The undersigned, as committee members under the Penn Corporation Comprehensive Security Program, hereby acknowledge receipt of a certified copy of the foregoing amendment and hereby consent thereto, this 15 day of January, 1996. /s/ James A. Cohen --------------------------------- /s/ Steven M. Grossman --------------------------------- /s/ Hal B. Weiss --------------------------------- --------------------------------- As Committee Members As Aforesaid 17 EX-10.74D 8 SIXTH AMENDMENT OF BEACH PRODUCTS (DIVISION OF PENN CORPORATION) RETIREMENT SAVINGS PROGRAM Exhibit 10.74d SIXTH AMENDMENT OF BEACH PRODUCTS (DIVISION OF PENN CORPORATION) RETIREMENT SAVINGS PROGRAM WHEREAS, this corporation maintains the Beach Products (Division of Penn Corporation) Retirement Savings Program (the "plan"); and WHEREAS, further amendment of the plan now is considered desirable; NOW, THEREFORE, IT IS RESOLVED that, by virtue and in exercise of the power reserved to this corporation under subsection 10.1 of the plan, the plan, as previously amended, be and it hereby is further amended in the following particulars: 1. By substituting the following for subsection 2.1 of the plan: "2.1. Eligibility. Subject to the conditions and limitations of the plan, each employee in the collective bargaining agreement who was an active participant in the plan immediately prior to January 1, 1996 will continue to participate in the plan on and after that date. Each other employee in the collective bargaining unit will be eligible to become a participant in the plan if he meets the following requirements: (a) He is actively employed in the collective bargaining unit; and (b) He has completed twelve months of continuous employment (as defined in subsection 2.2) or, if the employee was hired by the company before January 1, 1996, six months of continuous employment. Each employee who meets the requirements of subparagraphs (a) and (b) above will become a participant in the plan on the entry date specified in (c) or (d) below, whichever applies: (c) If the employee is hired by the company before January 1, 1996, on the first January 1, April 1, July 1 or October 1 (the 'quarterly entry date') coincident with or next following the date he meets the requirements of subparagraphs (a) and (b); or (d) If the employee is hired by the company on or after January 1, 1996, on the first day of the calendar month (the 'monthly entry date') coincident with or next following the date he meets the requirements of subparagraphs (a) and (b). Each employee will be notified of the date as of which he becomes a participant in the plan and will be furnished with a summary plan description in accordance with governmental rules and regulations. An employee who would be eligible to participate in the plan on the applicable quarterly entry date or monthly entry date except for the requirement of subparagraph 2.1(a) will become a participant on the date he satisfies the conditions for participation under such subparagraph but will not be eligible to make income deferral contributions (as defined in subsection 3.1) or voluntary participant contributions until the quarterly entry date or the monthly entry date, as the case may be, coincident with or next following the date he becomes a participant." 2 2. By substituting the following for subparagraph 2.2(f) of the plan: "(f) In determining an employee's or participant's continuous employment for an employee or participant who incurs a one-year break in employment and is reemployed by the company or a controlled group member, continuous employment (both before and after such one-year break in employment) will be taken into account for plan purposes upon his reemployment, except as follows: (i) If a former employee of the company who is not vested with respect to any portion of his employer contribution account balance or his matched employer contribution account balance, if any, is reemployed by the company or a controlled group member after he has incurred five consecutive one-year breaks in employment and if such consecutive one-year breaks in employment equal or exceed his years of continuous employment, his period of continuous employment with the company or controlled group members prior to such five consecutive one-year breaks in employment shall be disregarded for all purposes of the plan upon his reemployment, and such employee shall be treated as a new employee for all purposes of the plan. In no event shall a period of continuous employment after an employee has incurred five consecutive one-year breaks in employment be taken into account in determining the vested portion of his employer contribution account balance or his matched employer contribution account balance, if any, attributable to employment prior to such five consecutive one-year breaks in employment. 3 (ii) A 'one-year break in employment' will be deemed to have occurred for each 12-month period commencing on the date of an employee's termination of employment, and on each anniversary thereof, during which such employee is not employed by the company or a controlled group member. In the case of a maternity or paternity absence (as defined below), an employee's termination of employment will not be deemed to have occurred until the first anniversary of the date of such absence. A 'maternity or paternity absence' means an employee's absence from work because of the pregnancy of the employee or birth of a child of the employee, the placement of a child with the employee in connection with the adoption of such child by the employee, or for purposes of caring for the child immediately following such birth or placement." 3. By substituting the following for subsection 2.4 of the plan: "2.4. Reemployed Former Participant. If a former participant in the plan is reemployed by the company, he will again become a participant in the plan on the date he meets the requirements of subparagraph 2.1(a) and will be eligible to make income deferral contributions under subsection 3.1 or voluntary participant contributions under subsection 4.1 on the monthly entry date (or, for former participants reemployed before 1996, the quarterly entry date) coincident with or next following the date he becomes a participant." 4. By adding the following new subsection 2.6 to the plan immediately following subsection 2.5 thereof: "2.6. Transferred Participants. If a participant in the plan is transferred from 4 employment covered by the plan to employment with a controlled group member that is a participating employer under any other defined contribution plan of a member of the controlled group, the participant's accounts under this plan shall be transferred to such other plan and shall thereafter be subject to all of the terms and conditions of such other plan. Conversely, if a participant in one of the afore-mentioned defined contribution plans is transferred to employment covered by this plan, such partici-pant's accounts under the other plan shall be transferred to this plan. Each of a participant's transferred accounts shall be combined with the like account established for the participant under sub-section 6.1 of this plan, and the combined total of each such account shall thereafter be subject to all of the terms and conditions of this plan, unless and until such participant's accounts are again transferred to one of the aforementioned plans. Each transfer of account balances under this subsection shall be made in accordance with Sections 401(a)(12) and 414(l) of the Code and the regulations thereunder." 5. By deleting the phrase "by writing filed with the committee," from the first sentence of subsection 3.1 of the plan. 6. By substituting the following sentences for the last two sentences of subsection 3.1 of the plan: "A participant may elect to change the rate of his deferrals, or suspend or resume such deferrals, within the limits stated above, by making a new election. Each election under this subsection shall be made at such time, in such manner and in accordance with such rules as the committee shall determine, and shall be effective beginning with the first full pay period of any month, provided the participant has made a proper election before the fifteenth day of the preceding month." 5 7. By adding the following new sentences to subsection 3.2 of the plan immediately following the last sentence thereof: "Company contributions payable under this subsection may be paid in cash or in shares of common stock of Western Publishing Group, Inc. ('parent company shares'), or any combination thereof, as the company may elect. Notwithstanding the next preceding sentence, the company may not make a contribution in parent company shares under this subsection 3.2 if such contribution would cause the aggregate fair market value of parent company shares allocated to participants' employer contribution accounts under subsection 6.4 to exceed ten percent of the fair market value of the total of such participants' employer contribution accounts." 8. By substituting the following for the penultimate sentence of subsection 4.3 of the plan: "Once each month, a participant may withdraw all or a portion of his participant contribution account." 9. By substituting the following for clause (i) of the first sentence of subsection 5.2 of the plan: "(i) payment of all of a participant's account balances is not made immediately following his termination date," 10. By substituting the following sentences for the last sentence of subsection 5.2 of the plan: "If a participant described in (ii) or (iii) above subsequently meets the requirements for participation in the plan, he will become an active participant in the plan on the date he satisfies the requirements of subparagraph 2.1(a), and will be eligible to make 6 income deferral contributions under subsection 3.1 or voluntary participant contributions under subsection 4.1 on the monthly entry date (or, for participants first hired before 1996, the quarterly entry date) coincident with or next following the date he becomes an active participant. If a participant described in (i) above is later reemployed, his subsequent participation will be determined in accordance with the provisions of subsection 2.4." 11. By adding the following new subparagraph (e) to subsection 6.1 of the plan immediately following subparagraph (d) thereof: "(e) Matched Employer Contribution Account. This account will reflect his matched employer contribution account, if any, transferred to the plan under subsection 2.6, and the income, losses, appreciation and depreciation attributable thereto subsequent to the date of transfer." 12. By substituting the following for the first sentence of subsection 6.2: "A 'regular accounting date' shall occur on each business day." 13. By substituting the following for subsections 6.3 and 6.4 of the plan: "6.3. Valuation of Participants' Accounts. Pursuant to rules established by the committee and applied on a uniform and nondiscriminatory basis, participants' accounts will be valued on each accounting date to reflect the fair market value (as determined by the trustee) of the various investment funds as of such date, including adjustments to reflect any distributions (including withdrawals and loans), contributions, rollovers, transfers between 7 investment funds, income, losses, appreciation, or depreciation with respect to such accounts since the previous accounting date. 6.4. Allocation of Company Contributions and Forfeitures. As soon as administratively possible after the end of the plan year, the company's contribution, if any, under subsection 3.2 of the plan for the plan year, will be allocated and credited to the employer contribution accounts of participants who were employed by the company during that plan year (excluding participants who resigned or were dismissed during that year under subparagraph 5.1(e)), pro rata, according to the adjusted compensation paid to such participants, respectively, by the company during that year." 14. By substituting the following for subsection 6.7 of the plan: "6.7. Investment Funds. The committee may designate in its discretion one or more funds for the investment of participants' accounts. One such investment fund shall be designated as the Parent Company Stock Fund, which fund will be invested solely in parent company shares. The committee, in its discretion, may from time to time designate or establish new investment funds or eliminate existing investment funds for investment purposes under the plan. Each of the investment funds established under this subsection shall comply with the investment guidelines set forth in the Investment Policy Statement issued by the committee, which Investment Policy Statement (and any subsequent Statement that modifies or replaces it, as determined by the committee from time to time) is incorporated herein by reference. If employer contributions are not made in parent company stock, such contributions will be invested in accordance with the participant's election under subsection 6.8." 15. By adding the following new subsection 6.8 to the plan immediately following subsection 6.7 thereof: 8 "6.8. Investment Fund Elections. Each participant may elect, subject to the following provisions, to have a portion or all of his accounts invested in one or more of the investment funds, subject to the following requirements: (a) Once in each calendar quarter, a participant may make an investment election with respect to future contributions to be made by him or on his behalf. Notwithstanding the next preceding sentence, if the company elects to make company contributions under subsection 3.2 in the form of parent company shares, such contributions shall be invested in the Parent Company Stock Fund unless and until the participant makes an election to transfer such amounts in accordance with subparagraph (d) below. (b) Each investment election under (a) above shall be effective as soon as administratively possible after the election has been made, and shall be subject to the provisions of subparagraph (c) below. If no new election is made by a participant, all future contributions will be invested in accordance with the participant's last election under (a) above or, if there is no prior election, in the same percentages as such participant's accounts are invested under (d) below. (c) Each election under this subsection shall be made in increments of 10 percent, in accordance with such rules as the committee determines. (d) Once in each calendar quarter, a participant may elect to have a portion or all of the amounts previously credited to his accounts transferred among any available investment funds. Such an election shall be effective as soon as 9 administratively possible after the election has been made; and shall be subject to the provisions of subparagraph (c) above. Notwithstanding the foregoing, when a company contribution under subsection 3.2 is made in the form of parent company shares, each participant may make an additional investment election during the plan year to transfer all or a portion of the company contribution from the Parent Company Stock Fund to any of the other investment funds. (e) Notwithstanding the foregoing, any elections by a participant who is an officer or director of Western Publishing Group, Inc. or a significant subsidiary with respect to contri-butions to or withdrawals from, and elections to transfer amounts between the Parent Company Stock Fund and any other fund, may be limited in accordance with any regulations issued by the Securities and Exchange Commission under Section 16 of the Securities Exchange Act of 1934. 16. By adding the following new subsection 6.9 to the plan immediately following subsection 6.8 thereof: "6.9. Voting and Tendering of Parent Company Shares. The voting of parent company shares held in the trust, and if a tender offer is made for parent company shares, the tendering of such shares, shall be subject to the provisions of the Employee Retirement Income Security Act of 1974 ('ERISA') and the following provisions, to the extent such provisions are not inconsistent with ERISA: (a) Voting of parent company shares. With respect to each participant who has an interest in the Parent Company Stock Fund, the trustee shall provide a copy of the notice and proxy statement for each meeting of the holders of common stock issued by 10 Western Publishing Group, Inc., together with an appropriate form for the participant's use in instructing the trustee with respect to the voting of parent company shares that, at the record date for the determination of the shareholders entitled to such notice, and to vote at, such meeting, are allocable to such participant under the Parent Company Stock Fund as of such date. If a participant furnishes timely instructions to the trustee, the trustee (in person or by proxy) shall vote the parent company shares (including fractional shares) allocable to such participant in the Parent Company Stock Fund in accordance with the directions of the participant. Parent company shares allocable to participants in the Parent Company Stock Fund for which timely voting instructions are not received by the trustee shall be voted by the trustee as directed by the committee. (b) Tendering of parent company shares. The trustee shall furnish to each participant who has an interest in the Parent Company Stock Fund notice of any tender offer for, or a request or invitation for tenders of, parent company shares made to the trustee. The trustee shall request from each such participant instructions as to the tendering of parent company shares that are allocable to such participant under the Parent Company Stock Fund. For this purpose, the trustee shall provide participants with a reasonable period of time in which they may consider any such tender offer for, or request or invitation for tenders of, parent company shares made to the trustee. The trustee shall tender parent company shares that are allocable to such participant under the Parent Company Stock Fund as to which the trustee has received instructions to tender from participants within the time specified by the trustee. Parent company shares that are allocable to a participant under the Parent Company Stock Fund as to which the 11 trustee has not received instructions from participants shall not be tendered. (c) Appointment of fiduciary. The committee shall be designated, under Section 404(c) of ERISA, as the fiduciary responsible for ensuring that (i) the procedures adopted by the plan administrator with respect to the exercise of the foregoing voting and tender rights are sufficient to safeguard the confidentiality of information related to such exercise; (ii) such procedures are being followed by the plan administrator; and (iii) an independent fiduciary is appointed whenever the committee deems it appropriate for the proper exercise of the foregoing voting and tender rights." 17. By substituting the word "on" for the phrase "as at the accounting date coincident with or next following" where the latter occurs in the last sentence of subsection 7.1 of the plan. 18. By substituting the following for that portion of subsection 7.2 of the plan that precedes the vesting schedule contained therein: "7.2. Resignation or Dismissal. In the case of any participant who resigns or is dismissed before retirement under subparagraph 5.1(a), (b) or (c), any income deferral contributions or participant contributions made by him previously but not credited to his appropriate account will be returned to him and the balances in his income deferral contribution account, participant contribution account and prior plan account, if any, on his termination date (after all adjustments required under the plan as of that date have been made) shall be nonforfeitable and shall be distributable to him under subsection 7.4 along with the vested balances in his employer 12 contribution account and his matched employer contribution account, if any, on his termination date (after all adjustments required under the plan as of that date have been made) determined in accordance with the following schedule:" 19. By substituting the following for subsection 7.3 of the plan: "7.3. Forfeitures. The amount by which a participant's employer contribution account and matched employer contribution account, if any, are reduced under subsection 7.2 shall be treated as a 'forfeiture' on the earlier of the date of distribution of such participant's account balances or the date such participant incurs five consecutive one-year breaks in employment. Prior to that date, such accounts will continue to be adjusted pursuant to the provisions of subsection 6.3. Forfeitures attributable to a participant's employer contribution account and matched employer contribution account, if any, will be credited to the employer contribution accounts of other participants in accordance with subsection 6.4 as soon as administratively possible after the end of the plan year in which such forfeiture occurs. If a participant is reemployed by the company or controlled group member before he incurs five consecutive one-year breaks in employment, any forfeitures attributable to such participant shall be recredited to such participant's appropriate account(s) as soon as administratively possible following such participant's reemployment if the participant repays the total amount of any previous distribution attributable to his employer contribution account and his matched employer contribution account, if any, within five years of his date of reemployment. Such participant's employer contribution account and matched employer contribution account, if any, shall be recredited from current unallocated forfeitures or, to the extent there are insufficient unallocated forfeitures for this purpose, from supplemental employer contributions necessary to restore such amount. The actual amount restored to such participant's account shall be the amount of such forfeitures, without investment adjustments." 13 20. By substituting the following for the final sentence of subparagraph 7.4(a)(ii) of the plan: "Such spouse may elect, in accordance with such procedures as the committee may establish, to have any amounts payable to the spouse paid in a lump sum." 21. By deleting the word "written" from subparagraph 7.4(a)(v)(4) of the plan and from the second sentence of subsection 7.5 of the plan. 22. By substituting the following for the first sentence of subparagraph 7.10(a) of the plan: "Subject to the provisions of this subsection, each participant may borrow from his accounts (other than his employer contribution account and his matched employer contribution account, if any) for general purposes or for residential purposes by making application to the trustee and recordkeeper requesting such loan." 23. By substituting the following for clause (iii) of subparagraph 7.10(b) of the plan: "(iii) the sum of a participant's income deferral contribution account, participant contribution account, and prior plan account (excluding any amounts in such account attributable to the Western IRA Plan)." 24. By substituting the following for the last sentence of subparagraph 7.10(d) of the plan: "Amounts repaid by the participant will be recredited to the participant's accounts and investment funds in 14 the same ratio that such participant's accounts are invested under subparagraph 6.8(d) of the plan at the time of repayment." 25. By substituting the following for subparagraph 7.10(f) of the plan: "(f) Interest paid by a participant on a loan made to him under this subsection 7.10 shall be credited to the accounts of the participant as soon as administratively possible after such interest payment was made." 26. By adding the following new subparagraph 7.10(h) to the plan immediately following subparagraph 7.10(g) thereof: "(h) For loans initiated on or after April 1, 1996, there shall be charges for setting up the loan, which charges shall be assessed against the borrowing participant's loan proceeds. There also shall be annual maintenance charges, which charges shall be applied to reduce the borrowing participant's accounts on a pro rata basis. The committee shall determine reasonable amounts for such charges from time to time." 27. By deleting the phrase "in writing" from the third sentence of subsection 7.12 of the plan. 28. By substituting the following for the penultimate sentence of subsection 7.12 of the plan: "Each such election shall be made at such time and in such manner as the committee shall determine and shall be effective in accordance with such rules as the committee may establish from time to time." 15 29. By substituting the following sentences for the final sentence of Section 8 of the plan: "Any accounts transferred to this plan in accordance with the provisions of subsection 2.6 shall also be subject to the provisions of Section 6. Withdrawals of any portion of a participant's prior plan account will not be permitted prior to distribution in accordance with Section 6 of the plan, unless such amounts are attributable to such participant's participation in the Western Publishing Company Employees' Savings and Security Plan or the Western IRA Plan, or unless such amounts are attributable to rollover amounts or transferred amounts as described in the first sentence of this Section 8. A participant may make such a withdrawal once each month." 30. By substituting the phrase "up to $150,000" for the phrase "up to $200,000" where the latter phrase occurs in subsection 12.5 of the plan. 31. By deleting subsection 12.6 of the plan and by renumbering subsections 12.7 and 12.8 as subsections 12.6 and 12.7, respectively. IT IS FURTHER RESOLVED that particulars 24, 30 and 31 above shall be effective as of January 1, 1994; particulars 7 and 19 shall be effective December 31, 1995; particulars 1 through 3, 10, 11, 18, 19 and 23 above shall be effective January 1, 1996; and the remaining particulars shall be effective April 1, 1996. 16 * * * I, James A. Cohen, Secretary of Penn Corporation, hereby certify that the foregoing is a correct copy of a resolution duly adopted by the Board of Directors of said corporation on January 15, 1996, and that said resolution has not been changed or repealed. Dated this 15 day of January, 1996. /s/ James A. Cohen -------------------------------- Secretary as Aforesaid (Corporate Seal) * * * The undersigned, as committee members under the Beach Products (Division of Penn Corporation) Retirement Savings Program, hereby acknowledge receipt of a certified copy of the foregoing amendment and hereby consent thereto, this 15 day of January, 1996. /s/ James A. Cohen --------------------------------- /s/ Steven M. Grossman --------------------------------- /s/ Hal B. Weiss --------------------------------- --------------------------------- As Committee Members As Aforesaid 17 EX-10.86 9 LETTER AGREEMENT Exhibit 10.86 By Hand As of May 9, 1995 Mr. John Moore 50 Central Park West Apartment 3-B New York, New York 10023 Dear John: We are pleased to offer you the executive position of President and CEO of Western Publishing Company, Inc. (WPC). This letter agreement sets forth our mutual understanding of the essential terms of your employment. 1. Title, Scope of Duties. President and chief executive officer of WPC, based in Racine, Wisconsin, with senior executive responsibility for all aspects of that company's day-to-day operations. Also, you will be nominated at the upcoming annual stockholders meeting to serve as a member of the Board of Directors of Western Publishing Group, Inc. (WPGI). As of your start date the Office of the President of WPC will be officially disbanded and the four Senior Vice Presidents will become your direct reports. During a transition period, spanning the next three months, the former members of the Office of the President (including me) will meet with you regularly to review current major issues, revise and finalize the budget for the current fiscal year, and plan future strategy with the objective of returning WPC to solid profitability (15% to 20% operating profit margin) and sustainable sales growth (10% to 15% annually). As President of WPC you will report directly to me as Chairman and CEO of WPGI. Realizing that it is difficult to delineate the precise details of our relationship, we have discussed some of my key areas of concern and focus. These include: personnel decisions for vice president level and above; designing and monitoring a budget and capital expenditure plan which lead to attainment of our profitability and sales growth goals; eliminating waste and inefficiencies in all aspects of WPC's operations, but particularly in product development, manufacturing and distribution; and cultivating and maintaining contact with key WPC relationships such as licensors and customers. While it is my intention to stay apprised of your progress, intentions and activities in these key areas, as you know it is also my objective to reverse the degree of day-to-day involvement I have had over the past year in WPC's management. I am confident, based on our discussions to date, that we will be able to forge a mutually beneficial partnership which fully utilizes our respective skills and attains our objectives and aspirations for WPC. 2. Term; Extensions. Commencing May 29, 1995 and extending until May 31, 1998, with one-year evergreen renewals thereafter assuming neither party has given notice of termination within six months of the ending date of any such term. 3. Salary and Bonus. $415,000 per year, payable in accordance with WPC's customary policies for senior executives and subject to annual review (and increase) based on those policies. You will participate in WPC's Management Incentive Plan and be eligible for bonuses in accordance with the provisions of that plan or its successor plans. At the end of your first year of employment you will receive a guaranteed bonus payment of at least $200,000. At the end of your fifth year of employment, you will receive a bonus payment of $75,000 (in addition to any other bonus amount you might otherwise be entitled to) if the price of the Company's common stock is not trading above $14.00 per share at that time. 4. Stock Options. A grant of options to purchase 300,000 shares of WPGI common stock, upon the endorsement of the Stock Option Committee of the Board of Directors. These options will be governed by the general terms and conditions of options granted under WPGI's Stock Option Plan, along with the following terms relating to exercise price and vesting schedule: Employment Exercise # of Shares Exercise # of Shares Total Share Year (End) Price Vesting Price Vesting Vesting - - ---------- -------- ----------- -------- ----------- ----------- 1 $9.50 30,000 $13.50 30,000 60,000 2 $9.50 30,000 $13.50 30,000 60,000 3 39.50 30,000 $13.50 30,000 60,000 4 $9.50 30,000 $13.50 30,000 60,000 5 $9.50 30,000 $13.50 30,000 60,000 ------- 300,000 5. Benefits. You will be entitled to participate in all of the current and future benefits and perquisites made available to senior executives of WPC in accordance with company policies, including those relating to relocation, health, disability, life insurance, pension, country club and entertainment. 6. Termination by WPC. In the event WPC terminates your employment for any reason other than "cause", you will receive (i) base salary continuation for twelve months, and (ii) the pro-rata share of any bonus which would have been earned by the end of that year under the Management Incentive Plan assuming your employment had not been terminated. If within this salary continuation period you obtain other employment, WPC's obligation to pay your base salary would be reduced by fifty percent of the new compensation earned over the balance of that period. 7. Termination in the Event of a Change of Control. If a "change of control" occurs, and (i) within six months of that event you elect to terminate your employment for "good reason", or (ii) within eighteen months of that event WPGI terminates your employment for any reason (including by WPC giving notice under Section 2 that it will not renew for an evergreen term), you will receive 24 months of base salary continuation. Furthermore, upon the occurrence of a change of control the WPGI options described in Section 4 would accelerate so that the entire 300,000 share grant would become immediately vested at the exercise prices scheduled above, and the period within which you may exercise those options shall be extended to two years regardless of the fact that you might no longer be an employee of WPGI. Recognizing that payments which should be made to you in the event of a change of control may qualify as "excess parachute payments" under Section 280G of the Internal Revenue Code of 1986, as amended, the parties agree to adjust, reduce or eliminate such payments so as to avoid any taxation under Section 4999 of the Code. 8. Definitions. "Cause" means (i) your willful and continued failure or disability to substantially perform your duties, (ii) insubordination, or willful failure to execute company plans and/or strategies, (iii) acts of dishonesty resulting or intending to result in personal gain or enrichment at the expense of WPGI (or its subsidiaries), or (iv) conviction for a felony "Change of control" means (i) the sale, merger, consolidation or any other extraordinary corporate transaction(s) involving WPGI or WPC which results in the then common stockholders of WPGI owning less than 50% of the common equity of the resulting company or its parent, or (ii) a change in composition of the Board of Directors of WPGI as the result of a proxy contest, corporate transaction or other agreement which results in the replacement, elimination or increase in membership such that the board members in office just prior to that event cease to constitute a majority of the new board. "Good reason" means (i) a change in location of employment outside a 75 mile radius from Racine, Wisconsin, (ii) a material change in the nature and scope of authority and duties from those exercised or performed just prior to the change of control, or (iii) a reduction in total compensation from what was in effect just prior to the change of control. If you agree that this letter agreement establishes the basic elements and provisions of your employment by WPC, please signify your acceptance by signing below and returning a copy to me. Sincerely, /s/ Richard A. Bernstein Richard A. Bernstein Agreed to and Accepted as of the date first written above /s/ John Moore John Moore EX-10.86A 10 LETTER AGREEMENT Exhibit 10.86a February 6, 1996 Mr. John Moore 3329 Michigan Boulevard Racine, Wisconsin 53402 RE: Resignation Dear John: Pursuant to our prior conversations, I acknowledge receipt and acceptance of your resignation, effective January 26, 1996, from your employment position with Western Publishing Company, Inc. and its subsidiaries (collectively, the "Company"). By your countersignature of the enclosed duplicate original of this letter agreement and the return thereof to the undersigned, you will acknowledge your acceptance of the within terms and conditions which apply to such resignation. 1. Agreement of May 1, 1995. (the "Employment Agreement"). You hereby recognize that your resignation is being offered and accepted with the knowledge on your part of a possible impending "change of control", as such term is defined in the Employment Agreement. Your release of the Company and others pursuant to Paragraph 10 below is hereby acknowledged by you to include, without limitation, any claim you might have for change of control benefits, salary beyond January 26, 1996, guaranteed or other bonus payments, and other benefits and perquisites available to senior executives of the Company payable after such date and as the same may be described in the Employment Agreement. The Company hereby acknowledges that you will use your best efforts to have your now-current employer fund your liability to the Company pursuant to that certain Employee Reimbursement Agreement by and between you and the Company dated May 30, 1995, but that failing agreement by Mindscape, Inc. to accept this liability, you shall not be personally liable for any portion of the expense thereof. 2. Stock Options. Effective January 25, 1996, all stock options previously granted to you and remaining outstanding as indicated in your existing Stock Option Certificate (the "Option Agreement") are canceled. Simultaneously with such cancellation, and with the already received approval of the Stock Option Committee of the Board of Directors of Western Publishing Group, Inc. ("Group"), a new Stock Option Certificate (the "New Certificate") will be issued to you in a form identical to the Option Agreement in all material respects except; (i) the New Certificate shall provide that the options shall vest immediately; and (ii) the New Certificate shall allow you to exercise all or any portion of such option rights on or before May 30, 1997. The New Certificate will be delivered to you within five business days of the full execution of this agreement, but shall be deemed immediately effective. Neither your resignation nor the issuance of the New Certificate shall relieve you of your continuing obligations to report your trading of such options and the derivative shares thereto on the appropriate forms issued from time to time by the Securities and Exchange Commission for the period prescribed by law. 3. Other Benefits. In lieu of all other benefits which may otherwise be due you, the Company hereby agrees to provide you with only the benefits required by law, including, without limitation, those described on the attached letter dated February 6, 1996 from Patrick A. Hoffman, the Company's Director of Corporate Benefits. 4. Vacation. You hereby agree that you shall be due no payments for accrued vacation pay. 5. Non-Compete and Co-Operation. In consideration of the Company's execution hereof, you agree that during the twenty-four (24) month period commencing with January 26, 1996 (the "Non-Compete Period"), you shall not, without the Company's express prior written consent, directly or indirectly, either as an employee, employer, consultant, agent, owner, lender or in any other individual or representative capacity, engage in the business of commercial printing services or the publication, development, distribution, sale or marketing of children's books or puzzles or children's toys with a significant element of publishing or printing attendant thereto, or any other product similar to those produced by the Company and intended primarily to provide entertainment for, or education of children. Further, neither you nor any of your successor employers will solicit or induce any Company employee or consultant to leave their employment or terminate their relationship with the Company during the twenty-four (24) month period commencing with the effective date of your resignation. Notwithstanding the above, the Company hereby acknowledges that during the Non-Compete Period you will, as part of your normal day-to-day duties with Mindscape, Inc., participate in the publication, distribution, sale and/or marketing of certain children's products that are in distribution by Mindscape, or by parent and/or sister subsidiary companies as of February 6, 1996. Your participation in activities involving properties already in distribution will not constitute a violation of this paragraph 5. 6. Trade Secrets and Proprietary Information. You agree that you will not hereafter disclose to anyone other than Company representatives, nor use in any way, the Company's trade secrets, records, processes, including without limitation, manufacturing processes, compilations of information, specifications, customer lists, product or product development information, marketing plans or any other confidential information or knowledge pertaining to the Company's business, or that of any of its affiliates or subsidiaries, obtained by you during your employment with the Company. You further represent that you will promptly return all Company equipment, documents and records in your possession. Nothing in this agreement shall be deemed to abridge or remove any of the Company's rights or your duties, arising by operation of law or a prior written agreement signed by you regarding non-disclosure of such trade secrets or confidential information. Further, you and the Company agree neither will disparage the other in any manner. 7. Injunctive Relief. You agree that any breach by you of the covenants contained in this agreement will result in material, irreparable and continuing injury to the Company for which there is no adequate remedy at law and, therefore, entitling it to injunctive relief without the necessity of posting a bond or other security including, but not limited to, a temporary restraining order, preliminary injunction and a permanent injunction restraining you from engaging in activities prohibited hereby. If a court determines that injunctive relief is appropriate, then you acknowledge that the duration of such injunctive relief may be extended by the court beyond the original dates stated in this agreement. Nothing herein shall be construed to prohibit the Company from availing itself of any other remedy and all remedies available to it are cumulative. It is further agreed that, upon the breach of any covenant of this agreement by you, the Company shall have the right to immediately revoke any or all of the stock options outstanding under the New Certificate. 8. Confidentiality. You agree that this letter agreement and all its terms and provisions are strictly confidential and shall not be divulged or disclosed in any way to any person other than your spouse, legal counsel or your successor employers ("New Employer") if you so desire, and that you will protect the confidentiality of the agreement in all regards. Should you choose to divulge the terms and conditions of this agreement to your spouse, legal counsel or New Employer, you shall insure that they will be similarly bound to protect its confidentiality. A breach of this paragraph by your spouse, counsel or New Employer, shall be considered a breach by you. These provisions regarding confidentiality shall not apply to those disclosures you are obligated to make pursuant to subpoena or similar process issued by a court, administrative body or similar tribunal of appropriate jurisdiction in connection with an action or proceeding pending before it, so long as you promptly advise us of such subpoena or inquiry so as to provide us with the opportunity to seek a protective order. 9. Other Claims. You represent that you have not filed any pending complaint, charge, claim or grievance against the Company with any local, state or federal agency, court or commission, that you will not do so at any time hereinafter, and that if any agency, commission or court assumes jurisdiction of any such complaint or charge on your behalf, you will request that agency, commission or court to dismiss such proceeding. 10. Release. As a material inducement to the Company and you to enter into this agreement, you and the Company hereby irrevocably and unconditionally release, acquit and forever discharge the other and its respective successors, assigns, agents, directors, officers, employees, representatives, divisions, departments, parent corporation and affiliates, if any, and all other persons acting by, through, or in concert with any of them (collectively "Releasees") from any and all charges, complaints, claims, liabilities, obligations, promises, agreements, actions, damages, expenses (including attorneys' fees and costs actually incurred), or rights of any and every kind or nature, accrued or unaccrued, known or unknown, which either may have or claim to have against the Releasees arising from your employment by the Company other than those continuing obligations explicitly set forth herein. This release pertains to but is in no way limited to all claims you may make for benefits under the Employment Agreement. This release further pertains to but is no way limited to rights and claims under the Age Discrimination In Employment Act of 1967 (29 U.S.C. Section 621 et.seq.), the Wisconsin Fair Employment Act, Title VII of the Civil Rights Act and the American With Disabilities Act. 11. Successors and Assigns. This agreement shall be binding upon you and upon your heirs, administrators, executors, successors and assigns and shall inure to the benefit of the Releasees and to their heirs, administrators, representatives, executors, successors and assigns. 12. Indemnity. As a further material inducement to each party to enter into this agreement, each hereby agrees to indemnify and hold the other party and all of the Releasees harmless from and against any and all loss, cost, damage or expense, including without limitation, reasonable attorneys' fees incurred by Releasees, arising directly or indirectly out of the breach of this agreement. 13. Construction and Venue. This letter agreement is to be interpreted under the laws of the State of New York, except without regard to such State's conflict of laws provisions. The parties hereto hereby agree to litigate any dispute pertaining to this letter agreement or the Employment Agreement or any other matter concerning your employment by the Company in the Federal District Court for the Southern District of New York or, should you hereafter become a resident of the State of New York, in the Supreme Court for the County of New York, State of New York. 14. Entire Agreement. The parties understand and agree that this agreement is final and binding and constitutes the complete and exclusive statement of the terms and conditions of the severance of your employment position with the Company, that no representations or commitments were made by the parties to induce this agreement other than as expressly set forth herein and that this agreement is fully understood by the parties. You further represent that you have had the opportunity and time to consult with legal counsel concerning the provisions of this agreement and that you have been given twenty-one (21) days within which to execute the agreement. This agreement may not be modified or supplemented except by subsequent written agreement by the parties hereto. 15. Severability. In the event that any provision of this agreement shall be found by a court of competent jurisdiction to be invalid or unenforceable, such court shall exercise its discretion in reforming such provision to the end that you shall be subject to covenants that are reasonable under the circumstances and enforceable by the Company, and it is the agreed-upon intent of the parties hereto that all remaining provisions of the agreement shall remain in full force and effect to the maximum extent permitted. 16. Ambiguities and Captions. Should a tribunal of competent jurisdiction determine that any ambiguities exist in this agreement, the agreement shall be interpreted as if each party had an equal hand in the drafting hereof. Captions are to be interpreted as supplied for the convenience of the parties with no effect on the meaning of this agreement or any part thereof. 17. Acknowledgement. You acknowledge that you have carefully read this document, that a copy of the document was available to you prior to execution, that you know and understand the provisions of the document and that you have signed the document as your own free act and deed. IN WITNESS WHEREOF, the parties herein executed this agreement as of the date appearing next to their signatures. Western Publishing Company, Inc. Date: 2/6/96 By: /s/ Dale C. Gordon ------------------------------ Dale C. Gordon, Vice President and General Counsel CAUTION; THIS IS A RELEASE. CONSULT WITH AN ATTORNEY AND READ IT BEFORE SIGNING. THIS AGREEMENT MAY BE REVOKED IN WRITING BY YOU WITHIN SEVEN (7) DAYS OF YOUR EXECUTION OF THE DOCUMENT /s/ John Moore --------------------------------- John Moore Dated: 2/29/96 State of California ) ) ss. County of Marin ) On this 29th day of February, 1996, John Moore appeared before me and, after being duly sworn, did say that he acknowledge this instrument to be his voluntary act. Megan Michele Samuelsen --------------------------- Notary Public for Mindscape My Commission: 1083878 EX-10.86B 11 AMENDMENT TO LETTER AGREEMENT Exhibit 10.86b February 7, 1996 Mr. John F. Moore 3329 Michigan Boulevard Racine, Wisconsin 53402 Dear John: Reference is made to that certain letter dated February 6, 1996 executed by both you and myself ("the Letter Agreement"). By your countersignature of the enclosed duplicate original below, you will indicate your approval of the within amendment to the Letter Agreement. All capitalized terms used herein shall have the meanings ascribed to them in the Letter Agreement unless otherwise indicated. 1. Change of Dates. In acknowledgment of the typographical errors made in the Letter Agreement, you hereby agree that the date of January 19, 1996, used in line 2 of the first page of the Letter Agreement, line 8 of paragraph 1 of the Letter Agreement, and line 3 of paragraph 5 of the Letter Agreement is hereby changed in each case to January 26, 1996. You also agree, that due to a further typographical error, the date of January 19, 1996 in the first line of paragraph 2 of the Letter Agreement is hereby changed to January 25, 1996. 2. Other Terms. All other terms and conditions of the Letter Agreement not explicitly revised in this Amendment shall remain in full force and effect. Very truly yours, WESTERN PUBLISHING COMPANY, INC. /s/ Dale C. Gordon Dale C. Gordon Vice President and General Counsel Agreed this 7th day of February, 1996. By: /s/ John F. Moore John F. Moore EX-10.98A 12 FIRST AMENDMENT TO CREDIT AGREEMENT Exhibit 10.98a 18 December 1995 Western Publishing Company, Inc. c/o Western Publishing Group, Inc. 444 Madison Avenue, Suite 601 New York, New York 10022 Attention: Mr. Steven M. Grossman Executive Vice President First Amendment to Credit Agreement Ladies and Gentlemen: We refer you to that certain Credit Agreement dated September 29, 1995 between Western Publishing Company, Inc. and Heller Financial, Inc. (the "Credit Agreement"). All capitalized terms utilized but not defined in this First Amendment to Credit Agreement shall have the meanings given them in the Credit Agreement. For valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Borrower and Heller hereby agree as follows: 1. For the purposes of that certain Lender Guaranty issued by Heller to Chemical Bank, dated December 18, 1995 and accepted by Chemical Bank on December 27, 1995 (the "Letters of Credit Guaranty to Chemical"), and only for the purposes of the Letters of Credit Guaranty to Chemical, the sentence which reads "... Thereafter, letters of credit may be issued by the bank if it promptly gives notice to Heller. ...." contained in Section 1.1(B) of the Credit Agreement shall not apply to the Letters of Credit Guaranty to Chemical. 2. Section 1.6 of the Credit Agreement is hereby amended to the effect that the third sentence of Section 1.6 is deleted and replaced by the following text: "... Within fifteen (15) days of the first of each calendar month, Heller shall provide a statement to Borrower for its loan account setting forth the principal of each account and interest due thereon. ..." Except as specifically modified or amended by this First Amendment to Credit Agreement, all of the terms and conditions contained in the Credit Agreement shall continue to remain in full force and effect. If the foregoing correctly sets forth Borrower's and Heller's understanding, please execute this First Amendment to Credit Agreement in the spaces provide below and return such fully executed First Amendment to Credit Agreement to Heller to the attention of the undersigned as soon as possible. Very truly yours, HELLER FINANCIAL, INC. By: /s/ John D Calabro John D. Calabro Senior Vice President CONSENTED AND AGREED TO this 26th day of December, 1995 WESTERN PUBLISHING COMPANY, INC. By: /s/ Steven M. Grossman Steven M. Grossman Executive Vice President JDC:BPB:df EX-27 13 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from Western Publishing Group, Inc. and Subsidiaries Consolidated Financial Statements as of and for the year ended February 3, 1996 and is qualified in its entirety by reference to such financial statements. 1000 YEAR FEB-03-1996 FEB-03-1996 45,223 0 68,037 7,004 84,354 223,023 134,016 58,566 321,965 57,714 149,845 9,985 0 219 74,149 321,965 369,572 374,257 281,392 129,020 0 1,440 12,859 (55,715) 11,332 (67,047) 0 0 0 (67,047) (3.23) 0
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