GOLDEN BOOKS FAMILY ENTERTAINMENT, INC.

                       1995 STOCK OPTION PLAN, AS AMENDED

Section 1.  Purpose

         The Plan authorizes the Committee to provide Employees and
Consultants of the Corporation and its Subsidiaries and Non-Employee Directors
of the Corporation, who are in a position to contribute materially to the
long-term success of the Corporation, with options to acquire Common Stock,
par value $.0l per share, of the Corporation. The Corporation believes that
this incentive program will cause those persons to increase their interest in
the Corporation's welfare, and aid in attracting and retaining Employees,
Consultants and Non-Employee Directors of outstanding ability.

Section 2.  Definitions

         Unless the context clearly indicates otherwise, the following terms,
when used in this Plan, shall have the meanings set forth in this Section:

         (a) "Board" shall mean the Board of Directors of the Corporation.

         (b) "Cause" shall mean failure to comply with any agreements with, or
policies of, the Corporation concerning disclosure of confidential or
proprietary information or competition with, or employment by, a competitor of
the Corporation; fraud or misappropriation with respect to the business of the
Corporation or intentional material damage to the property or business of the
Corporation; wilful failure to perform reasonable duties and responsibilities
consistent with the Grantee"s position; breach of fiduciary duty or wilful
material misrepresentation to the Corporation; wilful failure to act in
accordance with any specific, reasonable and lawful instructions consistent
with Grantee"s position; conviction of a felony or crime involving moral
turpitude; habitual abuse of alcohol, drugs or controlled substances; or other
proper cause as determined in the sole discretion of the Committee; provided,
however, that the Committee may in its sole discretion provide for a different
definition of Cause with respect to any particular Option grant and set forth
such definition in the related Stock Option Agreement.

         (c) "Code" shall mean the Internal Revenue Code of 1986 as it may be
amended from time to time.

         (d) "Committee" shall mean the Board, or any Committee of two or more
Directors that may be designated by the Board to administer the Plan.

         (e) "Consultant" shall mean any person who is engaged to perform
services for the Corporation or its Subsidiaries, other than as an Employee or
Director.

         (f) "Control Person" shall mean any person who, as of the date of
grant of an Option, owns (within the meaning of Section 422(b)(6) of the Code)
stock possessing more than ten percent (10%) of the total combined voting power
or value of all classes of stock of the Corporation or of an y parent or
Subsidiary.

         (g) "Corporation" shall mean Golden Books Family Entertainment, Inc.,
a Delaware corporation.


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         (h) "Director" shall mean any member of the Board.

         (i) "Employee" shall mean any full-time employee of the Corporation or
its Subsidiaries (including Directors who are otherwise employed on a full-time
basis by the Corporation or its Subsidiaries).

         (j) "Exchange Act" shall mean the Securities Exchange Act of 1934 as
it may be amended from time to time.

         (k) "Fair Market Value" of stock on a given date shall be based upon:
(i) if the Stock is listed on a national securities exchange or quoted in an
interdealer quotation system, the last sales price or, if unavailable, the
average of the closing bid and asked prices per share of the Stock on such
date (or, if there was not trading or quotation in the Stock on such date, on
the next preceding date on which there was trading or quotation) as provided
by one of such organizations; or (ii) if the Stock is not listed on a national
securities exchange or quoted in an interdealer quotation system, as
determined by the Committee in good faith in its sole discretion.

         (1) "Grantee" shall mean a person granted an option under the Plan.

         (m) "ISO" shall mean an Option granted pursuant to the Plan to
purchase shares of the Stock and intended to qualify as an incentive stock
option under Section 422 of the Code, as now or hereafter constituted.

         (n) "Non-Employee Director" shall mean a member of the Board who is
not an Employee of the Corporation, its Parent or any Subsidiaries.

         (o) "NQSO" shall mean an option granted pursuant to the Plan to
purchase shares of the Stock that is not an ISO.

         (p) "Options" shall refer collectively to ISOs and NQSOs issued under
and subject to the Plan.

         (q) "Parent" shall mean any parent corporation as defined in Section
424 of the Code.

         (r) "Plan" shall mean this 1995 Stock Option Plan as set forth herein
and as amended from time to time.

         (s) "Stock" shall mean shares of the Common Stock of the Corporation.

         (t) "Stock Option Agreement" shall mean a written agreement between
the Corporation and the Grantee, or a certificate accepted by the Grantee,
evidencing the grant of an Option hereunder and containing such terms and
conditions, not inconsistent with the Plan, as the Committee shall a pprove.

         (u) "Subsidiary" shall mean any corporation with respect to which the
Corporation owns, directly or indirectly, 50% or more of the total combined
voting power of all classes of stock of such corporation.

Section 3. Shares of Stock Subject to the Plan


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         Subject to the provisions of Section 9, the total amount of Stock with
respect to which options may be granted under the Plan shall not exceed
5,750,000. Stock issuable under the Plan may be authorized but unissued shares
or reacquired shares of Stock. If, prior to exercise, any options are
forfeited, lapse or terminate for any reason, the Stock covered thereby may
again be available for Option grants under the Plan.

Section 4. Administration of the Plan

         The Plan shall be administered by the Committee. Subject to the
express provisions of the Plan, the Committee shall have the authority to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan, to determine the terms and provisions of Stock Option
Agreements thereunder and to make all other determinations necessary or
advisable for the administration of the Plan. Any controversy or claim arising
out of or related to this Plan or the Options granted thereunder shall be
determined unilaterally by, and at the sole discretion of, the Committee. Any
action of the Committee with respect to the Plan shall be final, conclusive,
and binding on all persons, including the Corporation, subsidiaries of the
Corporation, Grantees, any person claiming any rights under the Plan from or
through any Grantee, and stockholders. The express grant of any specific power
to the Committee, and the taking of any action by the Committee, shall not be
construed as limiting any power or authority of the Committee. To the extent
necessary to comply with Rule 16b-3 under the Exchange Act, determinations
concerning Options granted to any person who is subject to Section 16(b) of
the Exchange Act shall be made by the Committee, all of whose members shall be
"disinterested persons" within the meaning of Rule 16b-3 under the Exchange
Act. The Committee may delegate to officers or managers of the Corporation or
any Subsidiary the authority, subject to such terms as the Committee shall
determine, to perform administrative functions and, with respect to persons
not subject to Section 16 of the Exchange Act, to perform such other functions
as the Committee may determine, to the extent permitted under Rule 16b-3, if
applicable, and other applicable law.

Section 5. Types of Options

         Options granted under the Plan may be of two types: ISOs or NQSOs. The
Committee shall have the authority and discretion to grant to an eligible
Employee either ISOs, NQSOs or both, but shall clearly designate the nature of
each Option at the time of grant in the Stock Option Agreement. Grantees who
are not Employees of the Corporation or a Subsidiary on the date an Option is
granted shall only receive NQSOs.

Section 6. Grant of Options to Employees, Consultants and Non-Employee
           Directors

         (a) Employees and Consultants of the Corporation and its Subsidiaries
and Non-Employee Directors of the Corporation shall be eligible to receive
Options under the Plan.

         (b) The exercise price per share of Stock subject to an Option
granted to an Employee or Consultant shall be determined by the Committee and
specified in the Stock Option Agreement, provided, however, that the exercise
price of each share subject to an Option shall be not less than (i) in the
case of an NQSO, 85%, (ii) in the case of an ISO granted to other than a
Control Person, 100%, and (iii) in the case of an ISO granted to a Control
Person, 110%, of the Fair Market Value of a share of the Stock on the date
such Option is granted.


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         (c) The term of each Option granted to an Employee or Consultant shall
be determined by the Committee and specified in a Stock Option Agreement,
provided that no Option shall be exercisable more than ten years from the date
such Option is granted, and provided further that no ISO gran ted to a Control
Person shall be exercisable more than five years from the date of Option grant.

         (d) Each Non-Employee Director who is elected or appointed as a
member of the Board on or after May 8, 1996, upon the date of such election or
appointment, shall receive an NQSO to purchase 5,000 shares of Stock, subject
to adjustment as provided in Section 9. Each year on the date of the annual
meeting of the stockholders of the Corporation subsequent to such election or
appointment, each Non-Employee Director shall automatically receive an NQSO to
purchase 3,000 shares of Stock, subject to adjustment as provided in Section
9. The exercise price per share of Stock subject to each NQSO granted under
this Section 6(d) shall equal 100% of the Fair Market Value of the Stock on
the date such NQSO is granted. No NQSO granted under this Section 6(d) shall
be exercisable after the expiration of ten years from the date such NQSO is
granted.

         (e) The Committee shall determine and designate from time to time
Employees or Consultants who are to be granted options, and shall specify in
the Stock Option Agreement the nature of each Option granted and the number of
shares of Stock subject to each such Option, provided, however, that in any
calendar year, no Employee or Consultant may be granted an Option to purchase
more than 1,500,000 shares of Stock (determined without regard to when such
Option is exercisable), subject to adjustment pursuant to Section 9.

         (f) Notwithstanding any other provisions hereof, the aggregate Fair
Market Value (determined at the time the ISO is granted) of the Stock with
respect to which ISOs are exercisable for the first time by any Employee during
any calendar year under all plans of the Corporation and any P arent or
Subsidiary corporation shall not exceed $100,000. To the extent the limitation
set forth in the preceding sentence is exceeded, the Options with respect to
such excess all be treated as NQSOs.

         (g) The Committee shall determine whether any Option granted to an
Employee or Consultant shall become exercisable in one or more installments
and specify the installment dates in the Stock Option Agreement and, with
respect to any outstanding option, the Committee may, at any time or upon the
occurrence of any event, accelerate the exercisability of any such
installment. The Committee may also specify in the Stock Option Agreement such
other provisions, not inconsistent with the terms of this Plan, as it may deem
desirable, including such provisions as it may deem necessary to qualify any
ISO under the provisions of Section 422 of the Code.

         (h) The Committee may, at any time, grant new or additional options
to any eligible Employee or Consultant who has previously received options
under this Plan, or options under other plans, whether such prior options or
other options are still outstanding, have been exercised previously in whole
or in part, or have been canceled. The exercise price of such new or
additional options may be established by the Committee, subject to Section
6(b) hereof, without regard to such previously granted Options or other
options.

Section 7. Exercise of Options

         (a) A Grantee shall exercise an Option by delivery of written notice
to the Corporation setting forth the number of shares with respect to which the
Option is to be exercised, together with cash, certified check, bank draft,
wire transfer, or postal or express money order payable to the order of the
Corporation

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for an amount equal to the Option price of such shares and any income tax
required to be withheld. The Committee may, in its sole discretion, permit a
Grantee to pay all or a portion of the exercise price by delivery of Stock or
other property (including notes or other contractual obligations of Grantees to
make payment on a deferred basis, such as through "cashless exercise"
arrangements, to the extent permitted by applicable law), and the methods by
which Stock will be delive red or deemed to be delivered to Grantees.

         (b) Except as provided pursuant to Section 8(a), no option granted to
an Employee or Consultant shall be exercised unless at the time of such
exercise the Grantee is then an Employee or Consultant of the Corporation or a
Subsidiary.

         (c) The number of shares of Stock which are issued pursuant to the
exercise of an Option shall be charged against the maximum limitation on shares
set forth in Section 3 hereof.

Section 8. Exercise of Options upon Termination

         (a) Unless otherwise determined by the Committee and specified in the
Stock Option Agreement, upon the termination of a Grantee"s relationship with
the Corporation and its Subsidiaries, the period during which such Grantee may
exercise any outstanding and then exercisable installments of his Options
shall not exceed: (i) if such termination is due to death, 90 days from the
date of such termination, and (ii) in all other cases, 30 days from the date
of such termination, provided, however, that in no event shall the period
extend beyond the expiration of the Option term. Notwithstanding the
foregoing, all Options shall immediately terminate upon a termination of a
Grantee"s employment if the Committee determines, in its sole discretion, that
such termination is for Cause.

         (b) Unless otherwise determined by the Committee and specified in the
Stock Option Agreement, in no event shall any Option be exercisable for more
than the maximum number of shares that the Grantee was entitled to purchase at
the date of termination of the relationship with the Corpor ation and its
Subsidiaries.

         (c) The sale of any Subsidiary shall be treated as a termination of
employment with respect to any Grantee employed by such Subsidiary.

         (d) Subject to the foregoing, in the event of death, Options may be
exercised by a Grantee"s legal representative.

Section 9. Adjustment Upon Changes in Capitalization

         In the event of any dividend or other distribution (whether in the
form of cash, Stock, or other property), recapitalization, forward or reverse
split, reorganization, merger, consolidation, spin-off, combination,
repurchase, or share exchange, or other similar corporate transaction or
event, affects the Stock such that an adjustment is appropriate in order to
prevent dilution or enlargement of the rights of Optionees under the Plan,
then the Committee shall, in such manner as it may deem equitable, adjust any
or all of (i) the number and kind of shares of Stock deemed to be available
thereafter for grants of Options under Section 3, (ii) the number and kind of
shares of Stock that may be delivered or deliverable in respect of outstanding
Options, (iii) the number of shares with respect to which Options may be
granted to a given Grantee in the specified period as set forth in Section
6(e), and (iv) the exercise price (or, if deemed appropriate, the Committee
may make provision for a cash payment with respect to any outstanding Option).
In addition, the Committee is authorized to make adjustments in the terms and
conditions of, and



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the criteria included in, Options (including, without limitation, cash payments
in exchange for an Option or substitution of Options using stock of a successor
or other entity) in recognition of unusual or nonrecurring events (including,
without limitation, events described in the preceding sentence) affecting the
Corporation or any Subsidiary or the financial statements of the Corporation or
any Subsidiary, or in response to changes in applicable laws, regulations, or
accounting principles.

Section 10. Restrictions on Issuing Shares

         The Corporation shall not be obligated to deliver Stock upon the
exercise or settlement of any Option or take other actions under the Plan until
the Corporation shall have determined that applicable federal and state laws,
rules, and regulations have been complied with and such approvals o f any
regulatory or governmental agency have been obtained and contractual
obligations to which the option may be subject have been satisfied. The
Corporation, in its discretion, may postpone the issuance or delivery of Stock
under any Option until completion of such stock exchange listing or
registration or qualification of such Stock or other required action under any
federal or state law, rule, or regulation as the Corporation may consider
appropriate, and may require any Grantee to make such repres entations and
furnish such information as it may consider appropriate in connection with the
issuance or delivery of Stock under the Plan.

Section 11. Tax Withholding

         The Corporation shall have the right to require that the Grantee make
such provision, or furnish the Corporation such authorization, necessary or
desirable so that the Corporation may satisfy its obligation, under applicable
laws, to withhold or otherwise pay for income or other taxes of the Grantee
attributable to the grant or exercise of Options granted under the Plan or the
sale of Stock issued with respect to Options. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Grantee"s tax obligations.

Section 12. Transferability

         No Option shall be subject to anticipation, sale, assignment, pledge,
encumbrance, charge or transfer except by will or the laws of descent and
distribution, and an Option shall be exercisable during the Grantee"s lifetime
only by the Grantee, provided, however, that the Committee may perm it a
Grantee to transfer an Option to a family member or a trust created for the
benefit of family members. In the case of such a transfer, the transferee"s
rights and obligations with respect to the Option shall be determined by
reference to the Grantee and the Grantee"s rights and obligations with respect
to the Option had no transfer been made. Notwithstanding such transfer, the
Grantee shall remain obligated pursuant to Section 11 if required by applicable
law.

Section 13. General Provisions

         (a) Each Option shall be evidenced by a Stock Option Agreement. The
terms and provisions of such Stock Option Agreements may vary among Grantees
and among different Options granted to the same Grantee.

         (b) The grant of an Option in any year shall not give the Grantee any
right to similar grants in future years, any right to continue such Grantee"s
employment relationship with the Corporation or its Subsidiaries, or, until
such Option is exercised and share certificates are issued, any rights as a
Stockholder

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of the Corporation. All Grantees shall remain subject to discharge to the same
extent as if the Plan were not in effect.

         (c) No Grantee, and no beneficiary or other persons claiming under or
through the Grantee shall have any right, title or interest by reason of any
Option to any particular assets of the Corporation or its Subsidiaries, or any
shares of Stock allocated or reserved for the purposes of t he Plan or subject
to any Option except as set forth herein. The Corporation shall not be required
to establish any fund or make any other segregation of assets to assure the
payment of any option.

         (d) The issuance of shares of Stock to Grantees or to their legal
representatives shall be subject to any applicable taxes and other laws or
regulations of the United States or of any state having jurisdiction thereof.

Section 14. Amendment or Termination

         The Board may, at any time, alter, amend, suspend, discontinue or
terminate this Plan; provided, however, that no such action shall adversely
affect the rights of Grantees to Options previously granted hereunder and,
provided further, however, that any shareholder approval necessary or
desirable in order to comply with Rule 16b-3 under the Exchange Act or with
Section 422 of the Code (or other applicable law or regulation) shall be
obtained in the manner required therein. The Committee may waive any
conditions or rights under, or amend, alter, suspend, discontinue, or
terminate, any Option theretofore granted and any Stock Option Agreement
relating thereto; provided, however, that, without the consent of an affected
Grantee, no such action may materially impair the rights of such Grantee under
such Option. Notwithstanding anything to the contrary herein, the provisions
of Section 6(d) shall not be amended more than once every six months other
than to comport with changes in the Code, ERISA, or the rules thereunder.

Section 15. Effective Date of Plan

         This Plan is effective upon its adoption by the Board, conditional
upon approval of the Corporation"s stockholders. No ISO may be granted more
than ten years after such date.