Document:

<PAGE>

                                                                   EXHIBIT 10.63

                             READ-RITE CORPORATION

                          WAIVER AND SEVENTH AMENDMENT
                              TO CREDIT AGREEMENT

     This WAIVER AND SEVENTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is
dated as of July 26, 2000 and entered into among Read-Rite Corporation, a
Delaware corporation (the "Borrower"), the financial institutions named on the
signature pages hereof (each a "Bank" and collectively the "Banks"), Canadian
Imperial Bank of Commerce, New York Agency, as agent for the Banks (the "Agent")
and issuer of Letters of Credit (the "Designated Issuer") and is made with
                                      ----------
reference to that certain Credit Agreement dated as of October 2, 1997 (as
amended by the First Amendment to Credit Agreement dated February 5, 1998, the
Second Amendment to Credit Agreement dated as of August 10, 1998, the Waiver and
Third Amendment to Credit Agreement dated as of September 27, 1999, the Waiver
and Fourth Amendment to Credit Agreement dated as of December 29, 1999, the
Waiver, Forebearance and Fifth Amendment to Credit Agreement dated as of January
28, 2000, and the Waiver and Sixth Amendment to Credit Agreement (the "Waiver
                                                                       ------
and Sixth Amendment") dated as of May 25, 2000 (the "Credit Agreement" and the
---------                                            ----------------
Credit Agreement, as amended by this Amendment, the "Amended Agreement") among
                                                     -------
the Borrower, the Banks, the Designated Issuer and the Agent. Capitalized terms
used herein without definition shall have the same meanings herein as set forth
in the Amended Agreement.

                                   RECITALS

     WHEREAS, the Borrower has requested that the Banks waive certain provisions
and amend certain other provisions set forth in Credit Agreement.

     NOW, THEREFORE, in consideration of the promises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:

Section 1. AMENDMENT TO THE CREDIT AGREEMENT

     A. The definition of the term "Waiver and Sixth Amendment Termination
Date" in Section 1.01 of the Credit Agreement shall be amended and restated in
its entirety as follows:

          "Waiver and Sixth Amendment Termination Date": September 15, 2000;
           --------------------------------------
     provided, however, that if prior to such date Foothill Capital Corporation
     --------
     shall terminate its commitment to refinance the Borrower's obligation under
     the Credit Agreement, then on and after such date, and without action of
     any party, the Waiver and Sixth Amendment Termination Date shall be the
     date of such commitment termination.
<PAGE>

Section 2. WAIVERS AND CONSENTS

     A.    By their execution hereof, the Banks hereby waive (i) compliance by
the Borrower with the covenant relating to the funding of Read-Rite SMI set
forth in Section 6.02(j)(viii) of the Credit Agreement to permit the funding of
up to an additional $15,000,000 during the period from September 30, 1999
through the Waiver and Sixth Amendment Termination Date; (ii) Section 6.02(g)(v)
and 6.02(o) to permit the Borrower to make the offer and consummate the
transactions contemplated by the Exchange Offer and the Exchange Note Purchase
Offer and (iii) compliance by the Borrower with Sections 6.02(b) to (e)
inclusive of the Credit Agreement for the period from September 30, 1999 through
and including the Waiver and Sixth Amendment Termination Date. Unless extended
by the Majority Banks, the waivers described in clauses (i) and (iii) of the
preceding sentence shall terminate on the Waiver and Sixth Amendment Termination
Date, and on the Waiver and Sixth Amendment Termination Date an Event of Default
will exist if the Borrower is not (and has not been) in compliance with Sections
6.02(j)(viii) and Sections 6.02(b) to (e) of the Credit Agreement for all
periods from and after September 30, 1999. The waivers granted herein shall be
limited precisely as provided for herein and shall not be deemed to be a waiver
or modification of any other term or provision of the Credit Agreement or to be
a consent to any other transaction or further action on the part of the Borrower
or any of its Subsidiaries which would require the consent o(Pounds) the Banks
under the Credit Agreement.

          Upon the effectiveness of this Amendment, the waivers granted pursuant
to the Waiver and Fifth Amendment shall terminate.

Section 3. CONDITIONS TO EFFECTIVENESS

     This Amendment shall become effective as of the first date (the "Seventh
                                                                      -------
Amendment Date") on or before July 30, 2000 upon which the following conditions
---------
have been satisfied:

     A.    The Agent shall have received for each Bank counterparts hereof duly
executed on behalf o(Pounds) the Borrower, the Agent, and the Majority Banks
(or, in lieu of execution by the Majority Banks, notice of the approval of this
Amendment by the Majority Banks satisfactory to the Agent); and

          An acknowledgment and amendment in the form o(Pounds) Exhibit A hereto
duly executed by each party to the Guaranty.

     C.    The Amendment Fee referred to in Section 5.C of the Waiver and Sixth
Amendment shall have been paid and all other fees and expenses payable by the
Borrower pursuant to the Loan Documents shall have been paid or provided for.

     D.    All the representations and warranties in Section 4 shall be true and
correct as of the date of this Amendment.
<PAGE>

     E.   No Potential Event of Default or Event of Default shall have occurred
and be continuing on the date of this Amendment or will result from the
consummation of this Amendment (after giving effect to this Amendment).

     F.   The Agent shall have received, in form and substance satisfactory to
it, a certificate dated on or before the date of this Amendment certifying that
the conditions in clauses (D) and (E) have been met.

Section 4. BORROWER'S REPRESENTATIONS AND WARRANTIES

     In order to induce the Agent and the Banks to enter into this Amendment and
to amend the Credit Agreement in the manner provided herein, the Borrower
represents and warrants to the Agent and each Bank that the following statements
are true, correct and complete:

     A.   Corporate Power and Authority. The Borrower has all requisite
corporate power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, this Amendment
and the Amended Agreement.

     B.   Authorization of Agreements. The execution and delivery of this
Amendment and the performance of the Amended Agreement have been duly authorized
by all necessary corporate action on the part of the Borrower.

     C.   No Conflict. The execution and delivery by the Borrower of this
Amendment does not and will not contravene (i) any law or any governmental rule
or regulation applicable to the Borrower or any of its Subsidiaries, (ii) the
Certificate of Incorporation or Bylaws of the Borrower, (iii) any order,
judgment or decree of any court or other agency of government binding on the
Borrower or any of its Subsidiaries or (iv) any material agreement or instrument
binding on the Borrower or any of its Subsidiaries.

     D.   Governmental Consents. The execution and delivery by the Borrower of
this Amendment and the performance by the Borrower of the Amended Agreement do
not and will not require any registration with, consent or approval of, or
notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body.

     E.   Binding Obligation. This Amendment has been duly executed and
delivered by the Borrower and is the binding obligation of the Borrower,
enforceable against the Borrower in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
liquidation, moratorium or other similar laws of general application and
equitable principles relating to or affecting creditors' rights.

     F.   Incorporation of Representations and Warranties From Credit
Agreement. The representations and warranties contained in Article V of the
Amended Agreement are and will be true, correct and complete in all material
respects on and as of the date of this Amendment to the same extent as though
made on and as of such date, except to the extent such
<PAGE>

representations and warranties specifically relate to an earlier date, in which
case they were true, correct and complete in all material respects on and' as of
such earlier date.

     G.   Absence of Default. No event has occurred and is continuing as of the
date of this Amendment or will result from the consummation of the transactions
contemplated by this Amendment that would constitute an Event of Default or a
Potential Event of Default (as determined after giving effect to the amendments
made by this Amendment).

     H.   Financial Condition. The unaudited consolidated balance sheet of the
Borrower for the Borrower's fiscal quarter ended December 31, 1999 and the
related consolidated statements of operations and cash flow of the Borrower for
the fiscal quarter then ended, which have been previously circulated to the
Banks, fairly present in all material respects the consolidated financial
condition of the Borrower as at such date and the consolidated results of the
operations of the Borrower for the period ended on such date, all in accordance
with GAAP, consistently applied, subject to year-end adjustments and the absence
of footnotes.

Section 5.  MISCELLANEOUS

     A.   Reference to and Effect on the Credit Agreement and the Other Loan
Agreements.

     (i)   On and after the Seventh Amendment Date, each reference in the
Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words
of like import referring to the Credit Agreement, and each reference in the
other Loan Agreements to the "Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement shall mean and be a
reference to the Amended Agreement.

     (ii)  Except as specifically amended by this Amendment, the Credit
Agreement and the other Loan Agreements shall remain in full force and effect
and are hereby ratified and confirmed.

     (iii) The execution, delivery and performance of this Amendment shall not,
except as expressly provided herein, constitute a waiver of any provision of, or
operate as a waiver of any right, power or remedy of the Agent or any Bank
under, the Credit Agreement or any of the other Loan Agreements nor to creme any
course of dealing or otherwise obligate the Agent or the Banks to forebear or
execute similar amendments or any waiver in similar circumstances in the future.

     B.   Costs and Expenses. The Borrower covenants to pay to or reimburse the
Agent, upon demand, for all costs and expenses (including allocated costs of in-
house counsel) incurred in connection with the development, preparation,
negotiation, execution and delivery of this Amendment, the Collateral Documents
and the documents and transactions contemplated hereby.
<PAGE>

     C.   Headings. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.

     D.   APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

     E.   Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. Each of
the parties hereto understands and agrees that this document (and any other
document required herein) may be delivered by any party thereto either in the
form of an executed original or an executed original sent by facsimile
transmission to be followed promptly by mailing of a hard copy original, and
that receipt by the Agent of a facsimile transmitted document purportedly
bearing the signature of a Bank or the Borrower shall bind such Bank or the
Borrower, respectively, with the same force and effect as the delivery of a hard
copy original. Any failure by the Agent to receive the hard copy executed
original of such document shall not diminish the binding effect of receipt of
the facsimile transmitted executed original of such document of the party whose
hard copy page was not received by the Agent.

                 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.

                              BORROWER'
                              ---------

                              READ-RITE CORPORATION

                              By:
                              Title:
<PAGE>

                              AGENT:
                              ------

                              CANADIAN IMPERIAL BANK OF
                              COMMERCE, NEW YORK AGENCY, as Agent

                              By:
                              Title:  Managing Director, CIBC World Markets
                                      Corp., AS AGENT
<PAGE>

                              BANKS:
                              ------

                              CIBC INC.

                              By:
                              Title:  Managing Director, CIBC World Markets
                                      Corp., AS AGENT

                              ABN AMRO BANK N.V.

                              By:
                              Title:

                              By:
                              Title:

                              KEYBANK, N.A.

                              By:
                              Title:

                              GENERAL ELECTRIC CAPITAL CORPORATION

                              By:
                              Title:

                              MELLON BANK

                              By:
                              Title:
<PAGE>

                              THE MITSUBISHI TRUST AND BANKING CORPORATION

                              By:
                              Title:

                              THE SUMITOMO BANK LIMITED,
                              SAN FRANCISCO BRANCH

                              By:
                              Title:

                              BANQUE NATIONALE DE PARIS

                              By:
                              Title:

                              By:
                              Title:

                              FOOTHILL PARTNERS III, L.P.

                              By:
                              Title:

                              CERBERUS PARTNERS, L.P.

                              By:
                              Title:
<PAGE>

                              WELLS FARGO BANK, N.A.

                              By:
                              Title:

                              WILLIAM E. SIMON & SONS SPECIAL SITUATION
                              PARTNERS, L.P.

                              By:
                              Title:

                              THE DESIGNATED ISSUER:
                              ----------------------

                              CANADIAN IMPERIAL BANK OF
                              COMMERCE, NEW YORK AGENCY

                              By:
                              Title:  Managing Director, CIBC World Markets
                                      Corp., AS AGENT
<PAGE>

                                                                       EXHIBIT A
                                                 TO WAIVER AND SEVENTH AMENDMENT
                                                             TO CREDIT AGREEMENT

                                 July 26, 2000

The parties listed on the acknowledgment page hereof:

     Re: Credit Agreement dated as of October 2, 1997

Ladies and Gentlemen:

     Please refer to (i) the Credit Agreement dated as of October 2, 1997 (the
"Credit Agreement") by and among Read-Rite Corporation (the "Borrower"), the
-------
financial institutions party thereto (the "Banks") and Canadian Imperial Bank of
Commerce, New York Agency, as agent (in such capacity, the "Agent") and (ii) the
Continuing Guaranty dated as of August 10, 1998 (the "Guaranty-", which was
executed by you on such date. Pursuant to a waiver and amendment of even date
herewith, certain terms of the Credit Agreement were amended and modified. We
hereby request that you (i) consent to the terms of the amendment, (ii)
acknowledge and reaffirm all of your obligations and undertakings under the
Guaranty and (iii) acknowledge and agree that the Guaranty is and shall remain
in full force and effect in accordance with the terms thereof.
<PAGE>

     We and you acknowledge and agree that the Guaranty is ratified and
confirmed in all respects.

                              Very truly yours,

                           CANADIAN IMPERIAL BANK OF COMMERCE, NEW
                           YORK AGENCY, as Agent

                           By:
                           Title: Managing Director, CIBC World Markets Corp.,
                                  AS AGENT

ACKNOWLEDGED AND AGREED AS
OF THE DATE FIRST ABOVE WRITTEN:

GUARANTORS
----------

SUNWARD TECHNOLOGIES, INC.

By:
Title:

SUNWARD TECHNOLOGIES, CALIFORNIA

By:
Title:
<PAGE>

     We and you acknowledge and agree that the Guaranty is ratified and
confirmed in all respects.

                               Very truly yours,

                             CANADIAN IMPERIAL BANK OF COMMERCE, NEW
                             YORK AGENCY, as AgeNT

                             By:
                             Title: Managing Director, CIBC World Markets Corp.,
                                    AS AGENT

ACKNOWLEDGED AND AGREED AS
OF THE DATE FIRST ABOVE WRITTEN:

GUARANTORS
----------

SUNWARD TECHNOLOGIES, INC.
By:
Title:

SUNWARD TECHNOLOGIES, CALIFORNIA
By:
Title:
<PAGE>

     We and you acknowledge and agree that the Guaranty is ratified and
confirmed in all respects.

                              Very truly yours,

                            CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY,
                            as Agent

                            By:
                            Title: Managing Director, CIBC World Markets Corp.,
                                   AS AGENT

ACKNOWLEDGED AND AGREED AS
OF THE DATE FIRST ABOVE WRITTEN:

GUARANTORS
----------

SUNWARD TECHNOLOGIES, INC.
By:
Title:

SUNWARD TECHNOLOGIES, CALIFORNIA
By:
Title:
<PAGE>

     We and you acknowledge and agree that the Guaranty is ratified and
confirmed in all respects.

                              Very truly yours,

                            CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY,
                            as Agem

                            By:
                            Title: Managing Director, CIBC World Markets Corp.,
                                   AS AGENT

ACKNOWLEDGED AND AGREED AS
OF THE DATE FIRST ABOVE WRITTEN:

GUARANTORS
----------

SUNWARD TECHNOLOGIES, INC.
By:
Title:

SUNWARD TECHNOLOGIES, CALIFORNIA
By:
Title:
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.

                                        BORROWER:
                                        ---------

                                        READ-RITE CORPORATION

                                        By:
                                        Title:
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.

                                        BORROWER:
                                        ---------

                                        READ-RITE CORPORATION

                                        By:
                                        Title:
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.

                                        BORROWER:
                                        ---------

                                        READ-RITE CORPORATION

                                        By:
                                        Title:
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.

                                        BORROWER:
                                        ---------

                                        READ-RITE CORPORATION

                                        By:
                                        Title:
<PAGE>

     We and you acknowledge and agree that the Guaranty is ratified and
confirmed in all respects.

                              Very truly yours,

                           CANADIAN IMPERIAL BANK OF COMMERCE, NEW
                           YORK AGENCY, as Agent

                           By:
                           Title: Managing Director, CIBC World Markets Corp.,
                                  AS AGENT

ACKNOWLEDGED AND AGREED AS
OF THE DATE FIRST ABOVE WRITTEN:

GUARANTORS
----------

SUNWARD TECHNOLOGIES, INC.

By:
Title:

SUNWARD TECHNOLOGIES, CALIFORNIA

By:
Title:

                                      A-2WARRANT TO PURCHASE

                                  COMMON STOCK

                                       OF

                            VIDKID DISTRIBUTION, INC.

         THIS IS TO CERTIFY THAT STEVEN  ADELSTEIN , (the  "Holder") is entitled
subject to the terms and conditions hereinafter set forth, to purchase,  150,000
shares of Common  Stock,  par value $.005 per share (the  "Common  Shares"),  of
VidKid  Distribution,  Inc.  a Florida  corporation  (the  "Company"),  from the
Company at the price per share and on the terms set forth  herein and to receive
a certificate for the Common Shares so purchased on  presentation  and surrender
to  the  Company  with  the  subscription  form  attached,   duly  executed  and
accompanied by payment of the purchase price of each share  purchased  either in
cash or by certified or bank cashier's check or other check payable to the order
of the Company.

         The  purchase  rights  represented  by  this  Warrant  are  exercisable
commencing  the date hereof  through and including  DECEMBER 31, 2005 at a price
per common share of $0.25.

         The purchase rights  represented by this Warrant are exercisable at the
option of the registered owner hereof in whole at any time, or in part from time
to time,  within the period  specified;  provided,  however,  that such purchase
rights shall not be exercisable with respect to a fraction of a Common Share. In
case of the purchase of less than all the Common Shares  purchasable  under this
Warrant,  the Company  shall cancel this  Warrant on surrender  hereof and shall
execute  and deliver a new Warrant of like tenor and date for the balance of the
shares purchasable hereunder.

         The Company  agrees at all times to utilize its best efforts to reserve
or hold  available a sufficient  number of Common  Shares to cover the number of
shares  issuable on  exercise of this and all other  Warrants of like tenor then
outstanding.

         This Warrant  shall not entitle the holder  hereof to any voting rights
or other rights as a stockholder of the Company, or to any other rights whatever
except the rights herein  expressed and such as are set forth,  and no dividends
shall  be  payable  or  accrue  in  respect  of  this  Warrant  or the  interest
represented hereby or the Common Shares  purchasable  hereunder until or unless,
and except to the extent that, this Warrant shall be exercised.

         In the event that the outstanding  Common Shares  hereafter are changed
into or exchanged for a different  number or kind of shares or other  securities
of the  Company or of another  corporation  by reason of merger,  consolidation,
other reorganization, recapitalization, reclassification, combination of shares,
stock split-up or stock dividend:

<PAGE>

                  A. The  aggregate  number,  price and kind  of  Common  Shares
subject  to this  Warrant  shall be  adjusted appropriately;

                  B. Rights under this Warrant, both as to the number of subject
Common  Shares and the Warrant exercise price,  shall be adjusted appropriately;
and

                  C. In the event of  dissolution  or liquidation of the Company
or  any  merger  or  combination  in  which  the  Company  is  not  a  surviving
corporation,  this Warrant shall  terminate,  but the  registered  owner of this
Warrant  shall  have  the  right,   immediately   prior  to  such   dissolution,
liquidation, merger or combination, to exercise this Warrant in whole or in part
to the extent that it shall not have been exercised.

         The  foregoing  adjustments  and  the  manner  of  application  of  the
foregoing  provisions  may  provide  for the  elimination  of  fractional  share
interests.

The Warrant and all rights hereunder are  transferable  subject to the terms and
conditions set forth herein.

         The Company  shall not be required to issue or deliver any  certificate
for Common Shares  purchased on exercise of this Warrant or any portion  thereof
prior to fulfillment of all the following conditions:

                  (a) The completion of any registration or other  qualification
of such  shares  under  any  federal  or  state  law or  under  the  rulings  or
regulations of the Securities  and Exchange  Commission or any other  government
regulatory body which is necessary;

                  (b) The obtaining  of any approval or other clearance from any
federal or state  government  agency which is necessary;

                  (c) The obtaining from the  registered  owner of the Warrant a
representation in writing that the owner is acquiring such Common Shares for the
owner's  own  account  for  investment  and not with a view  to,  or for sale in
connection with, the  distribution of any part thereof,  if the Warrants and the
related shares have not been registered under the Act; and

                  (d) The placing on the  certificate of an  appropriate  legend
and the issuance of stop transfer  instructions in connection  therewith if this
Warrant and the related  shares  have not been  registered  under the Act to the
following effect:

<PAGE>

         "THE  SECURITIES   REPRESENTED  BY  THIS   CERTIFICATE  HAVE  NOT  BEEN
REGISTERED  UNDER THE  SECURITIES  ACT OF 1933 OR THE LAWS OF ANY STATE AND HAVE
BEEN ISSUED  PURSUANT  TO AN  EXEMPTION  FROM  REGISTRATION  PERTAINING  TO SUCH
SECURITIES AND PURSUANT TO A REPRESENTATION  BY THE SECURITY HOLDER NAMED HEREON
THAT SAID  SECURITIES  HAVE BEEN ACQUIRED FOR PURPOSES OF INVESTMENT AND MAY NOT
BE  OFFERED,  SOLD,  TRANSFERRED,  PLEDGED  OR  HYPOTHECATED  IN THE  ABSENCE OF
REGISTRATION.  FURTHERMORE, NO OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION IS
TO TAKE PLACE WITHOUT THE PRIOR WRITTEN  APPROVAL OF COUNSEL OR THE ISSUER BEING
AFFIXED TO THIS  CERTIFICATE.  THE  TRANSFER  AGENT HAS BEEN  ORDERED TO EXECUTE
TRANSFERS OF THIS CERTIFICATE ONLY IN ACCORDANCE WITH THE ABOVE INSTRUCTIONS."

         IN WITNESS WHEREOF,  the Company has caused this Warrant to be executed
by the signature of its duly authorized officer.

VidKid Distribution, Inc.

By:
                Steven Adelstein, President

Dated:

<PAGE>

                                SUBSCRIPTION FORM

                                    (To be executed by the registered  holder to
                           exercise  the  rights  to  purchase   Common   Shares
                           evidenced by the within Warrant.)

                                            VidKid Distribution, Inc.
                                            4950 West Prospect Road
                                            Fort Lauderdale, FL 33309

         THE  UNDERSIGNED  HEREBY  IRREVOCABLY   SUBSCRIBES  FOR  Common  Shares
pursuant to and in accordance with the terms and conditions of this Warrant, and
herewith makes payment of $

 therefor,  and requests that a certificate  for such Common Shares be issued in
the name of the  undersigned  and be delivered to the undersigned at the address
stated  below,  and if such  number  of shares  shall  not be all of the  shares
purchasable  hereunder,  that a new Warrant of like tenor for the balance of the
remaining  Common  Shares  purchasable  hereunder  shall  be  delivered  to  the
undersigned at the address stated below.

Dated:

Signed:

Print Name:

Address:

                              WARRANT EXERCISE FORM

         The  undersigned  irrevocably  elects to exercise the within Warrant to
the  extent  of  purchasing  shares  of  Common  Stock of  VidKid  Distribution,
Incorporated,  a Florida  corporation,  and hereby makes payment of $ in payment
therefore.

Signature:

Signature, if jointly held:

Date:

                       INSTRUCTIONS FOR ISSUANCE OF STOCK
                       ----------------------------------
         (if other than to the registered holder of the within Warrant)

Name:

 Address:

Social Security or Taxpayer Identification Number:

TELEPHONE #:                                                            Fax #:
             -----------------------------------------------------------

                                 ASSIGNMENT FORM

                   (a) The  aggregate  number,  price and kind of Common  Shares
subject to this  Warrant  shall be adjusted appropriately;

                   (b)  Rights  under  this  Warrant,  both as to the  number of
subject  Common  Shares  and the  Warrant  exercise  price,  shall  be  adjusted
appropriately; and

                   (c) In the event of dissolution or liquidation of the Company
or  any  merger  or  combination  in  which  the  Company  is  not  a  surviving
corporation,  this Warrant shall  terminate,  but the  registered  owner of this
Warrant  shall  have  the  right,   immediately   prior  to  such   dissolution,
liquidation, merger or combination, to exercise this Warrant in whole or in part
to the extent that it shall not have been exercised.

         The  foregoing  adjustments  and  the  manner  of  application  of  the
foregoing  provisions  may  provide  for the  elimination  of  fractional  share
interests.

The Warrant and all rights hereunder are  transferable subject  to the terms and
conditions

         The Company  shall not be required to issue or deliver any  certificate
for Common Shares  purchased on exercise of this Warrant or any portion  thereof
prior to fulfillment of all the following conditions:

                   (a) The completion of any registration or other qualification
of such  shares  under  any  federal  or  state  law or  under  the  rulings  or
regulations of the Securities  and Exchange  Commission or any other  government
regulatory body which is necessary;

                   (b) The obtaining of any approval or other clearance from any
federal or state government  agency which is necessary;

                   (c) The obtaining from the registered  owner of the Warrant a
representation in writing that the owner is acquiring such Common Shares for the
owner's  own  account  for  investment  and not with a view  to,  or for sale in
connection with, the  distribution of any part thereof,  if the Warrants and the
related shares have not been registered under the Act; and

                   (d) The placing on the  certificate of an appropriate  legend
and the issuance of stop transfer  instructions in connection  therewith if this
Warrant and the related  shares  have not been  registered  under the Act to the
following effect:

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